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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
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 001-38485
Amneal Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware
32-0546926
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
400 Crossing Boulevard, Bridgewater, NJ
(Address of principal executive offices)
08807
(Zip Code)
(908) 947-3120
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share
AMRX
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
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.
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 ☒ 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. (Check one):
Large accelerated filer ☒
Non-accelerated filer
☐
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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s outstanding shares of common stock, other than shares held by persons who may be deemed affiliates of the
registrant, computed by reference to the price at which the registrant’s common stock was last sold on the New York Stock Exchange as of the last business day
of the registrant’s most recently completed second fiscal quarter (June 30, 2021), was approximately $750,794,557.
As of February 14, 2022, there were 149,424,272 shares of Class A common stock outstanding and 152,116,890 shares of Class B common stock outstanding,
both with a par value of $0.01.
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Certain information required to be furnished pursuant to Part III of this Form 10-K will be set forth in, and is hereby incorporated by reference herein from, the
registrant’s definitive proxy statement for its 2022 Annual Meeting of Stockholders, to be filed by the registrant with the Securities and Exchange Commission
pursuant to Regulation 14A no later than 120 days after December 31, 2021 (the “2022 Proxy Statement”).
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
Amneal Pharmaceuticals, Inc.
Table of Contents
PART I.
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Properties
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
Item 6.
of Equity Securities
[Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III.
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
PART IV.
Item 15. Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
EXHIBIT INDEX
SIGNATURES
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Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K and Amneal Pharmaceuticals, Inc.'s other publicly available documents contain “forward-
looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of
1995. Management and representatives of Amneal Pharmaceuticals, Inc. and its subsidiaries (“the Company”, “we”, “us” or
“our”) also may from time to time make forward-looking statements. Forward-looking statements do not relate strictly to
historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future.
Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates”
and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected
operating results and financial performance; impact of planned acquisitions and dispositions; our strategy for growth; product
development; regulatory approvals; market position and expenditures.
Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they
are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of our control.
Investors should realize that if underlying assumptions prove inaccurate, known or unknown risks or uncertainties materialize,
or other factors or circumstances change, our actual results and financial condition could vary materially from expectations and
projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these
forward-looking statements.
Risks and uncertainties that make an investment in the Company speculative or risky or that could cause our actual results to
differ materially from the forward-looking statements contained in this Annual Report on Form 10-K, include, but are not
limited to:
Summary of Material Risks
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our ability to successfully develop, license, acquire and commercialize new products on a timely basis;
the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the
impact of that competition on our ability to set prices;
our ability to obtain exclusive marketing rights for our products;
our ability to manage our growth through acquisitions and otherwise;
our dependence on the sales of a limited number of products for a substantial portion of our total revenues;
the continuing trend of consolidation of certain customer groups;
our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods;
legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives;
the impact of severe weather;
the impact of the ongoing COVID-19 pandemic;
risks related to federal regulation of arrangements between manufacturers of branded and generic products;
our reliance on certain licenses to proprietary technologies from time to time;
the significant amount of resources we expend on research and development;
the risk of product liability and other claims against us by consumers and other third parties;
risks related to changes in the regulatory environment, including U.S. federal and state laws related to healthcare fraud
abuse and health information privacy and security and changes in such laws;
changes to Food and Drug Administration (“FDA”) product approval requirements;
the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and
other third-party payers;
our dependence on third-party agreements for a portion of our product offerings;
the impact of global economic conditions;
our ability to identify, make and integrate acquisitions or investments in complementary businesses and products on
advantageous terms;
our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the
future, and the impact of interest rate fluctuations on such indebtedness;
our obligations under a tax receivable agreement may be significant;
the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal
Group; and
such other factors as may be set forth elsewhere in this Annual Report on Form 10-K, particularly in the section
entitled 1A. Risk Factors and our public filings with the SEC.
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Investors also should carefully read the Risk Factors described in Item 1A. Risk Factors for a description of certain risks that
could, among other things, cause our actual results to differ materially from those expressed in our forward-looking statements.
Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks
described above and in Item 1A. Risk Factors to be a complete statement of all potential risks and uncertainties. The Company
does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of
new information or future events or developments.
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Item 1. Business
PART I.
Overview
Amneal Pharmaceuticals, Inc. (the “Company”, “we,” “us,” or “our”) is a pharmaceutical company specializing in developing,
manufacturing, marketing and distributing generic and branded specialty pharmaceutical products across a broad array of
dosage forms and therapeutic areas. The Company operates principally in the United States, India, and Ireland, and sells to
wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly. The Company is a
holding company, whose principal assets are common units (“Amneal Common Units”) of Amneal Pharmaceuticals, LLC
(“Amneal”). In 2018, Amneal completed the acquisition of Impax Laboratories, Inc. (“Impax”), a generic and specialty
pharmaceutical company.
The group, together with their affiliates and certain assignees, who owned Amneal when it was a private company (the “Amneal
Group”) held 50.4% of Amneal Common Units and the Company held the remaining 49.6% as of December 31, 2021.
Although the Company has a minority economic interest in Amneal, it is Amneal’s sole managing member, having the sole
voting power to make all of Amneal’s business decisions and control its management. Therefore, the Company consolidates the
financial statements of Amneal and its subsidiaries. The Company records non-controlling interests for the portion of Amneal’s
economic interests that it does not hold.
Acquisitions
Baclofen Franchise
On December 30, 2021, we entered into an asset purchase agreement with certain entities affiliated with Saol International
Limited (collectively, “Saol”), a private specialty pharmaceutical company, pursuant to which we agreed to acquire Saol’s
baclofen franchise, including Lioresal®, LYVISPAH™, and a pipeline product under development (the “Saol Acquisition”).
The Saol Acquisition expands our commercial institutional and specialty portfolio in neurology while adding commercial
infrastructure in advance of our entry into the biosimilar institutional market. Consideration for the Saol Acquisition includes
approximately $85 million, paid at closing with cash on hand, and contingent royalty payments based on annual net sales for
certain acquired assets, beginning in 2023. The transaction closed on February 9, 2022.
Puniska Healthcare Pvt. Ltd.
On November 2, 2021, we entered into a definitive agreement to acquire Puniska Healthcare Pvt. Ltd. (“Puniska”), a privately
held manufacturer of parenteral and injectable drugs in India. Upon execution of the agreement, we acquired a 74% controlling
interest in the equity of Puniska and will acquire the remaining 26% of the equity upon approval of the transaction by the
government of India, which is expected during the first half of 2022.
Kashiv Specialty Pharmaceuticals, LLC
On April 2, 2021, the Company and Kashiv Biosciences, LLC (a related party, refer to Note 24. Related Party Transactions)
(“Kashiv”) closed on a transaction for Amneal to acquire a 98% controlling interest in Kashiv Specialty Pharmaceuticals, LLC
(“KSP”), a subsidiary of Kashiv focused on the development of innovative drug delivery platforms, novel 505(b)(2) drugs, and
complex generics.
AvKARE, LLC and R&S Northeast LLC
On January 31, 2020, we acquired a 65.1% controlling interest in both AvKARE Inc., a Tennessee corporation now a limited
liability company (“AvKARE, LLC”), and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability company
(“R&S”) (collectively, the “Rondo Acquisitions”). AvKARE, LLC is one of the largest private label providers of generic
pharmaceuticals in the U.S. federal agency sector, primarily focused on serving the Department of Defense and the Department
of Veterans Affairs. R&S is a national pharmaceutical wholesaler focused primarily on offering 340b-qualified entities products
to provide consistency in care and pricing.
For additional information about our acquisitions, refer to Note 3. Acquisitions and Divestitures and Note 29. Subsequent Event
in our consolidated financial statements.
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Segments of the Business
We have three reportable segments: Generics, Specialty, and AvKARE.
Generics
Prescription pharmaceutical products are sold either as branded or generic products. Generic pharmaceutical products have the
same active pharmaceutical ingredient (“API”), dosage form, potency, route of administration, and intended use as patented
branded pharmaceutical products and are usually marketed under their chemical (generic) names rather than brand names.
However, generic pharmaceutical products are intended to provide a cost-effective alternative for consumers while maintaining
the safety, efficacy and stability of the branded product, and as such are generally sold at prices below their branded
equivalents. Typically, a generic pharmaceutical may not be marketed until the expiration of applicable patent(s) on the
corresponding branded product, unless the resolution of patent litigation results in an earlier opportunity to enter the market.
Generic manufacturers are required to file and receive approval for an Abbreviated New Drug Application (“ANDA”) in order
to market a generic pharmaceutical product. In general, those companies that are able to prepare high quality ANDA
submissions are comparatively advantaged.
Our Generics segment includes approximately 250 product families covering an extensive range of dosage forms and delivery
systems, including both immediate and extended release oral solids, powders, liquids, sterile injectables, nasal sprays, inhalation
and respiratory products, ophthalmics (which are sterile pharmaceutical preparations administered for ocular conditions), films,
transdermal patches and topicals (which are creams or gels designed to administer pharmaceuticals locally through the skin).
We focus on developing products with substantial barriers-to-entry resulting from complex drug formulations or manufacturing,
or legal or regulatory challenges. Focusing on these opportunities allows us to offer first-to-file (“FTF”), first-to-market
(“FTM”) and other high-value products. A generic pharmaceutical product is considered a FTF product if the ANDA filed with
respect to such product is the first to be filed for such product. Pursuant to the Hatch-Waxman Act, FTF products may receive a
statutory 180-day exclusivity period, subject to certain conditions. For all reasons other than statutory exclusivity, a generic
product is considered an FTM product if it is the first marketed generic version of a branded pharmaceutical. We define high-
value products as products with three or fewer generic competitors at the time of launch. FTF, FTM and high-value products
tend to be more profitable and often have longer life cycles than other generic pharmaceuticals. As such, the timing of new
product introductions can have a significant impact on our financial results. Market entry by additional competition generally
has a negative impact on the volume and pricing of the affected products. Additionally, pricing is often affected by factors
outside of our control. Refer to “Pharmaceutical Approval Process in the United States,” below, for more information.
As of December 31, 2021, our Generics segment had 114 products with a pending ANDA and another 128 products in various
stages of development in our pipeline, 87% of which are non-oral solid products. Our generic pipeline consists of what we
believe to be potential FTF, FTM and high-value products. We have an integrated, team-based approach to product
development that combines our formulation, regulatory, legal, manufacturing and commercial capabilities.
Our Generics segment had net sales of $1.4 billion, $1.3 billion and $1.3 billion and operating income (loss) of $281 million,
$189 million and $(133) million, for the years ended December 31, 2021, 2020 and 2019, respectively.
Specialty
Our Specialty segment is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical
products, with a focus on products addressing central nervous system (“CNS”) disorders, including migraine and Parkinson’s
disease. Our portfolio of products includes Rytary®, an extended release oral capsule formulation of carbidopa-levodopa for the
treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide
intoxication or manganese intoxication. In addition to Rytary®, our promoted Specialty portfolio also includes Unithroid®
(levothyroxine sodium), for the treatment of hypothyroidism, which is sold under a license and distribution agreement with
Jerome Stevens Pharmaceuticals, Inc., and Emverm® (mebendazole) 100 mg chewable tablets, for the treatment of pinworm,
whipworm, common roundworm, common hookworm and American hookworm in single or mixed infections.
For Specialty products, the majority of the product’s commercial value is usually realized during the period in which the
product has market exclusivity. In the U.S., when market exclusivity expires and generic versions of a product are approved and
marketed, there can often be very substantial and rapid declines in the branded product’s sales. For example, the pediatric
exclusivity of the AstraZeneca patent licensed to Impax for Zomig® Nasal Spray expired in May 2021 and we lost market
exclusivity in the fourth quarter of 2021. Our sales of Zomig ® Nasal Spray for the year ended December 31, 2021 were $30
million, a decline of $10 million, from the prior year period. The year over year decline was, in part, due to the loss of market
exclusivity.
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Our Specialty segment had net sales of $378 million, $356 million and $318 million and operating income of $56 million, $57
million and $43 million, for the years ended December 31, 2021, 2020 and 2019, respectively.
AvKARE
Our AvKARE segment provides pharmaceuticals, medical and surgical products, and services primarily to governmental
agencies. AvKARE is a re-packager of bottle and unit dose pharmaceuticals under the registered names of AvKARE and
AvPAK, which service the Department of Defense and Department of Veterans Affairs as well as institutional customers.
AvKARE is also a wholesale distributor of pharmaceuticals, over the counter products and medical supplies to institutional
customers located throughout the United States of America focused primarily on offering 340b-qualified entities products to
provide consistency in care and pricing.
Our AvKARE segment had net sales of $349 million and $294 million and operating income (loss) of $7 million and ($8)
million for the years ended December 31, 2021 and 2020, respectively. We did not have an AvKARE segment prior to the
closing of the Rondo Acquisitions.
Geographic Areas
We operate in the United States, India, and Ireland. Investments and activities in some countries outside the U.S. are subject to
higher risks than comparable U.S. activities because the investment and commercial climate may be influenced by financial
instability in international economies, restrictive economic policies and political and legal system uncertainties. See further
discussion of this risk in Item 1A. Risk Factors.
Sales & Marketing and Customers
In the United States and the Commonwealth of Puerto Rico, we market our Generics and Specialty products primarily through
wholesalers and distributors, retail pharmacies, mail-order pharmacies and directly into hospitals and institutions. The majority
of our generic pharmaceutical products are marketed to large group purchasing organizations (“GPOs”) and sold through
wholesalers, directly to large chain retailers or to mail order customers. Our sterile injectable products are generally marketed
to GPOs and specialty distributors, and sold through wholesalers, and occasionally directly to large hospitals and institutions.
All of our wholesalers purchase products and warehouse them for retail drug stores, independent pharmacies and managed care
organizations, such as hospitals, nursing homes, health maintenance organizations, clinics, pharmacy benefit management
companies and mail-order customers. Our Specialty segment, which promotes branded pharmaceutical products, employs a
team of dedicated field based sales representatives to engage in the direct marketing and promotion of our branded products to
physicians and healthcare providers.
For the year ended December 31, 2021, on a consolidated basis, our three largest customers, AmerisourceBergen Corporation,
Cardinal Health, and McKesson Drug Co., accounted for approximately 65% of our net revenue. In total, we currently have
over 1,000 customers (including over 800 customers specific to our AvKARE segment), some of which are part of large
purchasing groups.
We have no long-term agreements that guarantee future business with any of our major customers and the loss of or substantial
reduction in orders from any one or more of these customers could have a material adverse effect on our operating results,
future prospects and financial condition.
Competition
The pharmaceutical industry is highly competitive and is affected by new technologies, new developments, government
regulations, health care legislation, availability of financing, and other factors. Many of our competitors have longer operating
histories and substantially greater financial, research and development, marketing, and other resources than we do. Competing
manufacturers of generic pharmaceutical products create value for our customers by offering substitutes for branded
pharmaceutical products at significantly lower prices, and at times we may not be able to differentiate our product offerings
from those of our competitors, successfully formulate and bring to market new products that are less expensive than those of
our competitors or offer commercial terms as favorable as those of our competitors. We compete with numerous other
companies that currently operate, or intend to operate, in the pharmaceutical industry, including companies that are engaged in
the development of controlled-release drug delivery technologies and products, and other manufacturers that may decide to
undertake development of such products. Our principal competitors in the generic pharmaceutical products market include Teva
Pharmaceutical Industries Ltd., Viatris Inc., Endo International plc, Sandoz International GmbH, Pfizer Inc., Fresenius Kabi
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KGaA, Sun Pharmaceutical Industries Ltd., Lupin Pharmaceuticals, Inc., Hikma Pharmaceuticals PLC, Dr. Reddy's
Laboratories Ltd., and Aurobindo Pharma Limited.
By focusing on our high-value products with complex dosage forms and high barriers to entry, as well as taking advantage of
our vertically integrated supply chain and selective use of internal API, we aim to manufacture more profitable products relative
to our competition. However, this or any future strategy may not enable us to compete successfully in the generic
pharmaceutical industry.
The Hatch-Waxman Act amended the Food, Drug and Cosmetic Act (“FDCA”) and provided for a period of 180 days of
generic marketing exclusivity for each applicant that is first-to-file an ANDA with a Paragraph IV certification. The holder of
the approved ANDA that successfully challenges the relevant innovator drug patent(s) usually enjoys higher market share and
sales during the 180-day period of exclusivity. When the exclusivity period concludes, other generic competitors may launch
their versions of the product, which may cause significant price erosion and loss of market share. In cases where we are the
holder of an ANDA for a FTF product, upon the expiration of the 180-day exclusivity period, we may adjust the price of such
product and provide price adjustments to our customers for the difference between the lower price and the price at which we
previously sold the product then held in inventory by our customers. These adjustments are commonly known as shelf stock
adjustments. In certain circumstances, we may decide not to provide price adjustments to certain customers and, as a result, we
may receive returns of unsold product from these customers and forego future sales volume as opposed to reducing pricing.
Authorized generic pharmaceutical products, which are generic labeled versions of pharmaceutical products introduced by
brand companies (directly or through a third party) under the brand’s new drug application (“NDA”), have also increased
competition in the generic pharmaceutical industry. Authorized generic pharmaceutical products may be sold prior to, during
and subsequent to the 180-day exclusivity period and are a significant source of competition, because brand companies do not
face any regulatory barriers to rapidly introducing generic versions of their pharmaceutical products.
Additionally, consolidation among wholesalers and retailers and the formation of GPOs has caused increased price competition
in the generic pharmaceutical market. The downward price adjustments demanded by distributors of generic pharmaceutical
products have reduced revenue and average product gross margin across the industry. Should these price reductions continue or
even increase, it could have a material adverse effect on our revenue and gross margin. Further, even if we reduce the prices we
charge our customers, that does not ensure that the prices consumers pay for those drugs will be similarly reduced.
The main competitive factors in the generic pharmaceutical market include:
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a generic pharmaceutical products manufacturer’s ability to rapidly develop and obtain regulatory approval
for and supply commercial quantities of generic pharmaceutical products;
the introduction of other generic pharmaceutical manufacturers’ products in direct competition with our
products;
the introduction of authorized generic pharmaceutical products in direct competition with our products;
consolidation among our customers and the formation of buyer consortia;
pricing pressures by competitors and customers, even if similar price savings are not passed on to consumers;
product quality of our generic pharmaceutical competitors;
our and our competitors’ breadth of product offerings across its portfolio;
our ability and the ability of our generic pharmaceutical competitors to quickly enter the market after the
expiration of patents or statutory exclusivity periods, limiting the extent and duration of profitability for our
products;
the willingness of our customers to switch their source of supply of products among various generic
pharmaceutical competitors;
the ability of our generic pharmaceutical competitors to identify and market niche products;
our and our competitors’ level of service (including maintenance of inventories for timely delivery) and
reputation as a reliable developer and manufacturer of generic pharmaceutical products; and
product appearance and labeling for our products and those of our competitors.
In the brand-name pharmaceutical market, our principal competitors are pharmaceutical companies that are focused on
Parkinson’s disease and other CNS disorders. In addition, with respect to products that we are developing internally and/or any
additional products we may in-license from third parties, we expect that we will face increased competition from large
pharmaceutical companies, drug delivery companies and other specialty pharmaceutical companies that have focused on the
same disorders as our branded products.
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Research and Development
Research and development (“R&D”) activities represent a significant part of our business. R&D expenditures relate to the
processes of discovering, testing and developing new products, upfront payments and milestones, improving existing products,
as well as demonstrating product efficacy, if applicable, and regulatory compliance prior to launch. We are committed to
investing in R&D with the aim of delivering high quality and innovative products. For the years ended December 31, 2021,
2020 and 2019, our R&D expense was $202 million, $180 million and $188 million, respectively.
Raw Materials
Raw materials, including APIs, essential to our business are generally readily available from multiple sources. We purchase raw
materials from distributors of bulk pharmaceutical chemicals and we also manufacture certain APIs at our facilities in India. In
some cases, however, the raw materials used to manufacture our products are available only from a single supplier. Further,
even if more than one supplier exists, we may choose, and have done so in the case of our API suppliers for a majority of our
products, to list only one supplier in our product applications submitted to the FDA. Generally, we would need as long as 18
months to find and qualify a new sole-source supplier. If we receive less than one year’s termination notice from a sole-source
supplier that it intends to cease supplying raw materials, it could result in disruption of our ability to produce the drug involved.
Although to date we have only experienced occasional interruptions in supplies, no assurance can be given that we will
continue to receive uninterrupted or adequate supplies of such raw materials. Any inability to obtain raw materials on a timely
basis, or any significant price increases not passed on to customers, could have a material adverse effect on our business.
Because legal and regulatory requirements mandate that our product marketing authorizations specify API and raw material
suppliers, if a specified supplier were for any reason unable to continue to supply us, we would need to seek FDA approval of a
new supplier. The resulting delay in the manufacture and marketing of the impacted pharmaceutical product during the FDA
process to qualify and approve the new supplier could, depending on the product, have a material adverse effect on our results
of operations and financial condition. We protect against the risk of such an event by generally providing for, where feasible,
two or more suppliers of raw materials for the pharmaceutical products we manufacture, including those for which we
manufacture API in-house. Additionally, we may enter into a contract with a raw material distributor in order to secure
adequate supply for specific products.
Manufacturing and Distribution
We have a network of manufacturing sites and co-located R&D centers within the United States, India and Ireland, with broad
dosage capabilities. We also have a distribution center for our Generics and Specialty products in Glasgow, Kentucky and a
packaging center in East Hanover, New Jersey. We manufacture the majority of our Generics products internally; of these
products, for the year ended December 31, 2021, those manufactured in our U.S. facilities contributed 48% of Generics product
net revenue compared to 28% for those manufactured in India. We rely on third-party manufacturers to supply a small number
of products in our Generics portfolio representing approximately 24% of our Generics net revenue for the year ended
December 31, 2021. Most of our Specialty products are manufactured by third-party manufacturers. In addition, we selectively
manufacture API for a subset of our products, which helps to reduce the overall cost of manufacturing for our products and
gives us greater control over our supply chain.
Our AvKARE distribution centers are located in Fountain Run, Kentucky and Philadelphia, Pennsylvania.
Government Regulation
The business of developing, manufacturing, selling, distributing, and marketing generic and branded products is subject to
significant health, safety, and environmental laws and regulations, including those governing the approval and pricing of
products, clinical trials, laboratory procedures, privacy of health information and the handling, use, storage, treatment and
disposal of hazardous materials and wastes. These regulatory regimes are overseen by governmental bodies, principally the
FDA and, as applicable, the Drug Enforcement Agency (the “DEA”), the Department of Health and Human Services (“HHS”),
the Federal Trade Commission (the “FTC”) and several state and local government agencies in the United States and abroad.
Failure to comply with the laws and regulations of these governmental agencies may result in legal or other enforcement
actions, including suspension of regulatory approval, delays in regulatory approval, clinical holds, orders to cease non-
compliant activities and potential civil and criminal actions against us. The regulatory environment, particularly enforcement
positions, statutes and legal interpretations applicable to the pharmaceutical industry are constantly in flux and not always clear.
Significant changes in this environment could have a material adverse effect on our financial condition and results of
operations.
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The FDCA, the Public Health Service Act (the “PHSA”), the Controlled Substances Act, the regulations that implement these
laws and other statutes and regulations govern the development, testing, manufacture, packaging, use, distribution, safety,
effectiveness, labeling, storage, record keeping, approval, marketing, sale, and promotion of our products, as well as post-
marketing requirements for safety surveillance and reporting. Failure to comply with these laws and regulations can result in
judicial and or administrative sanctions, such as warning letters, recalls, product seizures, injunctions, fines, total or partial
suspension of distribution or production, exclusion or debarment from government programs and contracts, restitution,
disgorgement and criminal prosecutions. The FDA has the authority to withdraw its approval of pharmaceuticals at any time, in
accordance with its regulatory due process procedures, and can enforce the recall of products.
Pharmaceutical Approval Process in the United States
In the United States, the FDA regulates pharmaceuticals under the FDCA and the PHSA. In order to market a drug or biologic,
considerable data demonstrating its safety, efficacy, quality, purity, and potency must be submitted to the FDA for review and
approval. Generally, the following types of applications are used to obtain FDA approval if the FDA determines that the drug or
biologic is safe and effective for its intended use.
New Drug Application
For a drug product containing an active ingredient not previously approved by the FDA, a prospective manufacturer must
submit a complete application containing the results of clinical studies supporting the drug product’s safety and efficacy. A
NDA is also required for a drug with a previously approved active ingredient if the drug will be used to treat an indication for
which the drug was not previously approved or if the dosage form, strength or method of delivery is changed. The process
required by the FDA before a pharmaceutical product may be approved for marketing in the U.S. generally involves the steps
listed below, which could take from approximately three to more than ten years to complete.
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Laboratory and clinical tests;
Submission of an Investigational New Drug (“IND”) application, which must become effective before clinical
studies may begin;
Adequate and well-controlled human clinical studies to establish the safety and efficacy of the proposed
product for its intended use;
Submission of a NDA containing the results of the preclinical tests and clinical studies establishing the safety
and efficacy of the proposed product for its intended use, as well as extensive data addressing such matters
such as manufacturing and quality assurance;
Scale-up to commercial manufacturing; and
FDA approval of a NDA.
As noted above, the submission of a NDA is not a guarantee that the FDA will find it complete and accept it for filing. The
FDA reviews all NDAs submitted before it accepts them for filing. It may refuse to file the application and instead request
additional information, in which case, the application must be resubmitted with the supplemental information. After the
application is deemed filed by the FDA, FDA staff will review a NDA to determine, among other things, whether a product is
safe and efficacious for its intended use.
If, after reviewing the NDA, the FDA determines that the application cannot be approved in its current form, the FDA sends the
NDA applicant a Complete Response Letter identifying all outstanding deficiencies that preclude final approval. The FDA then
halts its review until the applicant resubmits the NDA with new information designed to address the deficiencies. An applicant
receiving a Complete Response Letter may resubmit the application with data and information addressing the FDA’s concerns
or requirements, withdraw the application without prejudice to a subsequent submission of a related application or request a
hearing on whether there are grounds for denying approval of the application. If a product receives regulatory approval, the
approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, in
each case compared to the approval sought, which could restrict the commercial value of the product. In addition, the FDA may
require an applicant to conduct Phase 4 testing which involves clinical trials designed to further assess a drug’s safety and
effectiveness after NDA approval, and may require surveillance programs to monitor the safety of approved products which
have been commercialized. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not
met or if safety or efficacy questions are raised after the product reaches the market. The agency may also impose requirements
that the NDA holder conduct new studies, make labeling changes, implement Risk Evaluation and Mitigation Strategies, and
take other corrective measures.
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Abbreviated New Drug Application
For a generic version of an approved drug (in other words, a drug product that contains the same active ingredient as a drug
previously approved by the FDA and is in the same dosage form and strength, utilizes the same method of delivery and will be
used to treat the same indications as the approved product), the FDA requires only an abbreviated new drug application that
ordinarily need not include clinical studies demonstrating safety and efficacy. An ANDA typically requires only data
demonstrating that the generic formulation is bioequivalent to the previously approved “reference listed drug,” indicating that
the rate of absorption and levels of concentration of the generic drug in the body do not show a significant difference from those
of the reference listed drug. In July 2012, the Generic Drug User Fee Amendments (“GDUFA”) were enacted into law. The
GDUFA legislation implemented fees for new ANDA applications, Drug Master Files, product and establishment fees and a
one-time fee for back-logged ANDA applications pending approval as of October 1, 2012. In return, the program was intended
to provide faster and more predictable ANDA reviews by the FDA and increased inspections of drug facilities. Under GDUFA,
generic product companies face significant penalties for failure to pay the new user fees, including rendering an ANDA
application not “substantially complete” until the fee is paid. Prior to the implementation of GDUFA, the FDA took an average
of approximately 32-34 months to approve an ANDA. Following the implementation of GDUFA, the FDA’s stated internal
goal for ANDAs was to have a “first-action” goal date within 15 months of submission on 75% of submitted ANDAs. The
“first-action” goal date is referred to by the FDA as the date in which the FDA takes a first action on an application by either
granting approval or tentative approval or in the event of deficiencies, identifying those deficiencies in a complete response
letter or in a refusal to receive the application. Under the previous GDUFA authorization, the time required to obtain FDA
approval of ANDAs was on average approximately 32-34 months post-filing. In August 2017, GDUFA was reauthorized
through September 30, 2022. As a result of GDUFA II, we expect the average time required to achieve approval of a generic
pharmaceutical product after making an ANDA filing to decrease. In July 2020, FDA held a public meeting and started the
process for reauthorization of GDUFA II (“GDUFA III”), which requires consultations with certain congressional committees,
representatives of patient and consumer advocacy organizations, health care professionals, scientific and academic experts, and
the generic drug industry. The FDA’s commitment letter for GDUFA III, which sets forth performance goals and program
enhancements for the reauthorization of GDUFA for FY2023-2027, sets goals for FDA’s assessment and review of different
ANDA submissions and includes enhancements designed to reduce the number of assessment cycles for ANDAs and facilitate
access to generic drugs.
The Hatch-Waxman Act established the modern regulatory system for generic pharmaceutical products by creating a
standardized approach for generic pharmaceutical makers to file ANDAs and receive FDA approval for generic pharmaceutical
products. In order to gain FDA approval, there are various regulatory hurdles that a prospective generic manufacturer must
clear:
Current Good Manufacturing Practices
In order to obtain FDA approval for its products, a pharmaceutical manufacturer must demonstrate that its facilities comply
with current good manufacturing practices (“cGMP”) regulations. The manufacturer is required to comply with cGMP
standards at all times during the production and processing of pharmaceuticals, and the FDA may inspect the manufacturer’s
sites at any time to ensure compliance.
Safety and Efficacy
With respect to ANDA filings for generic pharmaceutical manufacturers, the FDA waives the requirement for certain clinical
trials because the manufacturer of the brand pharmaceutical product has already performed these studies and established the
safety and efficacy of the reference pharmaceutical product. However, an ANDA filer is still required to conduct
bioequivalence studies to test the generic pharmaceutical product against the brand pharmaceutical product. For most orally
administered pharmaceutical products, bioequivalence between brand and generic is established when there is no statistically
significant difference in the rate and extent to which the API from the product is absorbed into the bloodstream. For certain
pharmaceutical products, such as topical, locally acting pharmaceutical products, other means of establishing bioequivalence
may be required by the FDA. Additionally, an ANDA for a generic pharmaceutical product must contain other information,
such as patent certifications and stability, chemistry, manufacturing and labeling data.
Patent Provisions
A branded pharmaceutical product is usually protected under patents granted by the U.S. Patent and Trademark Office that
allow only the pharmaceutical company that developed the pharmaceutical product to market and sell such product. For a
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generic pharmaceutical manufacturer to introduce a generic version of a referenced branded pharmaceutical product, it must
submit to the FDA an ANDA with a certification stating one of the following:
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Paragraph I: That the required patent information relating to the patent for the referenced branded
pharmaceutical product has not been filed;
Paragraph II: That the patent for the referenced branded pharmaceutical product has expired;
Paragraph III: That the patent for the referenced branded pharmaceutical product will expire on a particular
date; or
Paragraph IV: That the patent for the referenced branded pharmaceutical product is invalid and/or will not be
infringed by the pharmaceutical product for which approval is being sought
Filing an ANDA with certifications under Paragraph I or II, referenced above, permits the ANDA to be approved immediately,
if it is otherwise eligible. Filing an ANDA with certifications under Paragraph III, referenced above, indicates that the ANDA
may be approved on the expiration date of the referenced branded pharmaceutical product’s patent. Under Paragraph IV,
referenced above, a generic pharmaceutical manufacturer can challenge the patent of the branded referenced pharmaceutical
product.
If the ANDA for a generic pharmaceutical product has a Paragraph IV certification, the filer must also notify the NDA and
patent holders upon acceptance of the ANDA filing by the FDA (the “PIV Notice”). The NDA and patent holders may initiate a
patent infringement lawsuit in response, the filing of which automatically prevents the FDA from approving the ANDA until
the earlier of (i) 30 months following receipt of the PIV Notice and/or (ii) a decision in the lawsuit that is favorable to the
ANDA filer.
Generic Pharmaceutical Pricing
The pricing of a generic pharmaceutical product generally correlates to the number of companies manufacturing generic
versions of such pharmaceutical product. A generic pharmaceutical product is usually at its highest price immediately after the
first generic launch of the product, either because a single manufacturer has been granted 180-day exclusivity or because only a
few manufacturers have entered the market due to other technical or operational obstacles to bringing such product to market,
such as raw materials shortages or complex formulation. As additional generic manufacturers enter the market, the price of a
generic pharmaceutical product typically falls as manufacturers compete on price to capture market share. Even if we reduce
the prices we charge our customers, the prices consumers pay for those drugs may not be similarly reduced. Additionally,
consolidation among wholesalers and retailers and the formation of GPOs has caused increased price competition in the generic
pharmaceutical market.
Healthcare Reform
In the United States, there have recently been multiple federal and state proposals related to the pricing of pharmaceuticals and
other changes to the healthcare system. It is currently unclear what, if any, legislative proposals may be adopted or how
governmental bodies and private payors will respond to such healthcare reform. As such, we cannot predict the impact of
potential legislation on our business and cannot guarantee that such legislation will not have a material adverse effect on our
financial condition and results of operations.
Pharmaceutical Pedigree Laws
Various pharmaceutical pedigree laws, such as the Drug Supply Chain Security Act enacted in 2014, require the tracking of all
transactions involving prescription pharmaceutical products from the manufacturer to the dispensary (e.g., pharmacy).
Compliance with such laws requires extensive tracking systems and tight coordination with customers and manufacturers.
While we believe that we comply with these laws and we intend to do so in the future, such legislation and government
enforcement regarding these laws is constantly evolving. Failure to comply could result in fines, penalties or loss of business
that could have a material adverse effect on our financial results.
Federal Regulation of Patent Litigation Settlements and Authorized Generic Arrangements
Pursuant to the Medicare Prescription Drug Improvement and Modernization Act of 2003, generic and brand pharmaceutical
companies must file with the United States Department of Justice ("DOJ") and FTC certain agreements entered into between
other brand and/or generic pharmaceutical companies in regards to the settlement of patent litigation and/or the manufacture
and marketing of generic versions of branded pharmaceutical products. This requirement impacts the ways in which generic
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pharmaceutical companies resolve intellectual property litigation and may result in an increase in private-party litigation against
pharmaceutical companies and/or additional investigations by the FTC or other governmental organizations.
Other Regulatory Requirements
We are subject to the Maximum Allowable Cost Regulations, which limit reimbursements for certain generic prescription drugs
under Medicare, Medicaid, and other programs to the lowest price at which these drugs are generally available. In many
instances, only generic prescription drugs fall within the regulations’ limits. Generally, the pricing and promotion of, method of
reimbursement and fixing of reimbursement levels for, and the reporting to federal and state agencies relating to drug products
is under active review by federal, state and local governmental entities, as well as by private third-party reimbursors and
individuals under whistleblower statutes. At present, the DOJ and U.S. Attorneys Offices and State Attorneys General have
initiated investigations, reviews, and litigation into industry-wide pharmaceutical pricing and promotional practices, and
whistleblowers have filed qui tam suits. We cannot predict the results of those reviews, investigations, and litigation, or their
impact on our business. For further detail, see Note 21. Commitments and Contingencies to our consolidated financial
statements.
Virtually every state, as well as the District of Columbia, has enacted legislation permitting the substitution of equivalent
generic prescription drugs for brand-name drugs where authorized or not prohibited by the prescribing physician, and some
states mandate generic substitution in Medicaid programs.
In addition, numerous state and federal requirements exist for a variety of controlled substances, such as narcotics, that may be
part of our product formulations. The DEA, which has authority similar to the FDA’s and may also pursue monetary penalties,
and other federal and state regulatory agencies have far reaching authority.
The State of California requires that any manufacturer, wholesaler, retailer or other entity in California that sells, transfers, or
otherwise furnishes certain so called precursor substances must have a permit issued by the California Department of Justice,
Bureau of Narcotic Enforcement. The substances covered by this requirement include ephedrine, pseudoephedrine,
norpseudoephedrine, and phenylpropanolamine, among others. The Bureau has authority to issue, suspend and revoke precursor
permits, and a permit may be denied, revoked or suspended for various reasons, including (i) failure to maintain effective
controls against diversion of precursors to unauthorized persons or entities; (ii) failure to comply with the Health and Safety
Code provisions relating to precursor substances, or any regulations adopted thereunder; (iii) commission of any act which
would demonstrate actual or potential unfitness to hold a permit in light of the public safety and welfare, which act is
substantially related to the qualifications, functions or duties of the permit holder; or (iv) if any individual owner, manager,
agent, representative or employee of the permit applicant/permit holder willfully violates any federal, state or local criminal
statute, rule, or ordinance relating to the manufacture, maintenance, disposal, sale, transfer or furnishing of any precursor
substances.
Environmental Laws
We are subject to comprehensive federal, state and local environmental laws and regulations that govern, among other things,
air polluting emissions, waste water discharges, solid and hazardous waste disposal, and the remediation of contamination
associated with current or past generation handling and disposal activities. We are subject periodically to environmental
compliance reviews by various environmental regulatory agencies. While it is impossible to predict accurately the future costs
associated with environmental compliance and potential remediation activities, compliance with environmental laws is not
expected to require significant capital expenditures and has not had, and is not expected to have, a material adverse effect on
our business, operations or financial condition.
Patents, Trademarks and Licenses
We own or license a number of patents in the U.S. and other countries covering certain products and product candidates and
have also developed brand names and trademarks for other products and product candidates.
Generally, the brand pharmaceutical business relies upon patent protection to ensure market exclusivity for the life of the
patent. We consider the overall protection of our patents, trademarks and license rights to be of material value and act to protect
these rights from infringement. However, our business is not dependent upon any single patent, trademark or license.
In the branded pharmaceutical industry, the majority of an innovative product’s commercial value is usually realized during the
period in which the product has market exclusivity. In the U.S. and some other countries, when market exclusivity expires and
generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded
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product’s sales. The rate of this decline varies by country and by therapeutic category; however, following patent expiration,
branded products often continue to have market viability based upon the goodwill of the product name, which typically benefits
from trademark protection.
An innovator product’s market exclusivity is generally determined by two forms of intellectual property: patent rights held by
the innovator company and any regulatory forms of exclusivity to which the innovator is entitled.
Patents are a key determinant of market exclusivity for most branded pharmaceuticals. Patents provide the innovator with the
right to exclude others from practicing an invention related to the medicine. Patents may cover, among other things, the active
ingredient(s), various uses of a drug product, pharmaceutical formulations, drug delivery mechanisms and processes for (or
intermediates useful in) the manufacture of products. Protection for individual products extends for varying periods in
accordance with the expiration dates of patents in the various countries. The protection afforded, which may also vary from
country to country, depends upon the type of patent, its scope of coverage and the availability of meaningful legal remedies in
the country.
Market exclusivity is also sometimes influenced by regulatory exclusivity rights. Many developed countries provide certain
non-patent incentives for the development of medicines. For example, the U.S., the European Union and Japan each provide for
a minimum period of time after the approval of a new drug during which the regulatory agency may not rely upon the
innovator’s data to approve a competitor’s generic copy. Regulatory exclusivity rights are also available in certain markets as
incentives for research on new indications, on orphan drugs and on medicines useful in treating pediatric patients. Regulatory
exclusivity rights are independent of any patent rights and can be particularly important when a drug lacks broad patent
protection. However, most regulatory forms of exclusivity do not prevent a competitor from gaining regulatory approval prior
to the expiration of regulatory data exclusivity on the basis of the competitor’s own safety and efficacy data on its drug, even
when that drug is identical to that marketed by the innovator.
We estimate the likely market exclusivity period for each of our branded products on a case-by-case basis. It is not possible to
predict the length of market exclusivity for any of our branded products with certainty because of the complex interaction
between patent and regulatory forms of exclusivity, and inherent uncertainties concerning patent litigation. We cannot assure
that a particular product will enjoy market exclusivity for the full period of time that we currently estimate or that the
exclusivity will be limited to the estimate.
In addition to patents and regulatory forms of exclusivity, we also market products with trademarks. Trademarks have no effect
on market exclusivity for a product, but are considered to have marketing value. Trademark protection continues in some
countries as long as used; in other countries, as long as registered. Registration is for fixed terms and may be renewed
indefinitely.
Seasonality
Consistent with the United States pharmaceutical industry trends, the first quarter of each year, excluding the impact of the
COVID-19 pandemic, is typically our lowest revenue quarter in the year. Certain products of our portfolio are specifically
affected by seasonality. For example, sales of oseltamivir correlate with flu seasonality and sales of Adrenaclick® (epinephrine
injection, USP auto-injector) correlate with allergy seasonality. The seasonal impact of these particular products may affect a
quarterly comparison within any fiscal year.
Human Capital
We have always operated the Company from a people-first mindset, recognizing that it is our people who generate ideas,
operate machinery and deliver success. Since our founding in 2002, we have focused on recruiting, empowering, incentivizing
and rewarding employees who are passionately engaged in our mission to make healthy possible and that commitment
remained steady in 2021.
Workforce Demographics and Commitment to Diversity and Inclusion
As of December 31, 2021, we had approximately 7,000 employees (“Amneal Employees”), excluding approximately 200
employees in our AvKARE segment. Of the Amneal Employees, approximately 2,300 employees were located in the United
States and approximately 4,700 employees were located outside of the United States, primarily in India and Ireland. As a
global employer, we hired 1,700+ Amneal Employees in 2021, and global turnover of those employees was approximately
19%.
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Diversity is essential to Amneal’s success. It starts at the top, with five out of ten of our executives identifying as diverse by
race, ethnicity, or gender, and permeates through the organization of Amneal Employees. Women represented 19% of our
global workforce of Amneal Employees. In the United States, women represented 39% of our workforce and held 27% of
leadership roles at the level of Director and above for Amneal Employees. Approximately 69% of our U.S. workforce of
Amneal Employees identified as diverse by race or ethnicity.
Programs for Amneal Employees
Workplace Safety and Employee Wellbeing During COVID-19
To ensure the health and safety of both our employees and patients, we mobilized a strategic task force of top leaders to guide
our COVID-19 preparedness and response. We immediately prioritized employee health, safety, and wellbeing through quick
and diligent planning, the implementation of extensive health and safety protocols aligned with CDC and WHO guidelines,
enhanced employee benefits, and remote/alternate work arrangements where possible. We continued operating with firm
commitments to social distancing and appropriate personal protective equipment. We also continued conducting thermo-
screenings at facility entrances, conducting contact tracing, and operating under well-defined universal cleaning protocols for
prevention and mitigation.
The Company’s focus on employee wellness was amplified in 2021 and exemplified by the launch of the AmWell Program,
powered by Virgin Pulse, encompassing free access to four applications that cover expanded financial wellness, nutrition,
fitness, and mental wellbeing content along with an incentive program to inspire participation by offering financial rewards and
prizes.
Culture
Our “Rise, Lead, Succeed” culture is central to uniting our global team and serving as a dynamic framework for driving,
celebrating and rewarding individual and team performance. Every day, we foster an environment that encourages colleagues to
bring their best selves to work and be actively engaged, offer new ideas, and deliver real results. Permeating our culture and
day-to-day business operations is a steadfast commitment to ethics and compliance, which is guided by our Code of Conduct
and championed by our executive management team.
Total Rewards
Our Total Rewards programs are industry competitive and designed to attract and retain the best and brightest talent. At the
heart of our Total Rewards commitment is a broad, flexible and competitive benefits program that enables employees to choose
the plans and coverage that meet their personal needs.
These robust programs, which vary by country, include basic and supplemental health and insurance benefits, health savings
and flexible spending accounts, access to a personal health advocate, paid parental leave for birth, adoption or foster placement,
family leave, employee assistance programs, travel assistance, tuition reimbursement assistance and retirement savings plans.
Our compensation program includes competitive base salaries, annual cash performance-based incentives and equity-based
long-term incentive awards for eligible employees. Together, these programs play a key role in attracting and retaining key
talent as well as rewarding performance and achievement.
Talent Development, Growth and Recognition
We groom employees to continuously elevate their careers by offering opportunities to expand skills through robust
experiences, organizational mentoring and a continuously evolving Learning and Development platform. In 2021, we launched
the Amneal Leadership Lab program to 200 senior and mid-level leaders to bolster social awareness and better prepare leaders
to navigate the modern challenges and opportunities of our time. The Amneal Leadership Lab program curriculum included
sessions on the following topics: Growth Mindset, Psychological Safety, Building Trust, Effective Decisions, Winning
Collaborations, Communicating with Presence, Direct Conversation and Feedback and Leading and Embracing Change. We
recognize that taking Amneal to the next level can be accelerated by upskilling all employees to think and act as leaders and
requires a significant investment in our people. To help cascade Amneal Leadership Lab principles to all colleagues, we have
extended our investment in people through the company-wide launch of LinkedIn Learning. The platform provides custom-
curated learning paths enabling all colleagues to engage in individual and organization-wide leadership growth curricula.
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We strongly believe that encouragement and recognition of employee success is pivotal to inspiring an engaged and high-
performing culture. In 2021, over 4,400 colleagues were recognized by their peers via Amneal Applause, our company’s online
and on-the-spot rewards and recognition program. We also launched our global CEO Awards program which recognized a
select group of employees for rising well above and beyond their regular job duties to advance Amneal’s success. 70+
nominations were submitted and 12 winners were selected by the Executive Leadership Team and selection committee.
Driving Impact through Corporate Responsibility
Prioritizing sustainability is essential to keeping Amneal resilient and able to meet future challenges and opportunities
effectively and has been embedded in Amneal’s mission to make healthy possible by delivering affordable essential medicines
since its founding.
At the start of 2021, the Company committed to building a formal environmental, social and governance (“ESG”) framework as
one of our corporate goals. As part of that commitment, we established an ESG function to guide our ESG programs and
ongoing reporting, published our inaugural Corporate Social Responsibility report highlighting six key areas of focus
(Company, People, Products, Governance, Planet and Impact), and added ESG oversight into our Nominating and Governance
Committee charter.
We are engaged in giving back and encourage employees to actively support the vitality of our communities through various
company-sponsored social and environmental impact opportunities including advocacy, employee volunteerism, fundraising
and product donations. Key company commitments include ongoing product donations to longstanding partners including
Americares, Dispensary of Hope, and Kingsway Charities.
These are just some of our many human capital initiatives. Every year, we aim to review and enhance these and other programs
to ensure that we are improving, staying competitive and putting our people at the center of our success.
Further information on our Responsibility program is available at https://www.amneal.com/about/responsibility. The
information on our website is not, and will not be deemed, a part of this Report or incorporated into any other filings we make
with the SEC.
For discussion of the risks relating to the attraction and retention of management and executive management employees, refer to
Part 1. Item 1A. Risk Factors.
Available Information
Our main corporate website address is www.amneal.com. Copies of our Quarterly Reports on Form 10-Q, Annual Reports on
Form 10-K, Current Reports on Form 8-K, proxy statements and any amendments to such reports filed with or furnished to the
U.S. Securities and Exchange Commission (“SEC”), are available free of charge on our website as soon as reasonably
practicable after having been filed with or furnished to the SEC. All SEC filings are also available at the SEC’s website at
www.sec.gov. In addition, the written charters of our Audit Committee, Compensation Committee, Nominating and
Governance Committee, and Conflicts Committee of the Board of Directors and our Code of Business Conduct, Corporate
Governance Guidelines and other corporate governance materials are available on our website. The information on our website
is not, and will not be deemed, a part of this Report or incorporated into any other filings we make with the SEC.
Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. In deciding whether to invest in our common stock, you
should consider carefully the following risk factors, as well as the other information included in this Annual Report on Form
10-K. The materialization of any of these risks could have a material adverse effect on our business, results of operations and
financial condition.
Operational and Competitive Risks
If we are unable to successfully develop or commercialize new products, our operating results will suffer.
Developing and commercializing a new product is time consuming, costly and subject to numerous factors that may delay or
prevent such development and commercialization. Our future results of operations will depend to a significant extent upon our
ability to successfully commercialize new products in a timely manner. We face several challenges when developing and
commercializing new products, including:
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our ability to develop products in a timely and cost-efficient manner and in compliance with regulatory requirements,
including delays associated with the FDA listing and approval process and our ability to obtain required regulatory
approvals in a timely manner, or at all, and maintain such approvals if obtained;
the success of our clinical testing process to ensure that new products are safe and effective or bioequivalent to the
reference listed drug;
the risk that any of our products presently under development, if and when fully developed and tested, will not perform
as expected;
the risk that legal action may be brought against our generic drug products by our branded drug product competitors,
including patent infringement claims among others;
the availability, on commercially reasonable terms, of raw materials, including APIs and other key ingredients
necessary to the development of our drug products; and
• Our ability to scale-up manufacturing methods to successfully manufacture commercial quantities of drug product in
compliance with regulatory requirements.
As a result of these and other difficulties, our products currently in development may or may not receive necessary regulatory
approvals on a timely basis or at all, which may result in unsuccessful development or commercialization of new products. If
any of our products, when acquired or developed and approved, cannot be successfully or timely commercialized, our operating
results could be adversely affected. We cannot guarantee that any investment we make in developing or marketing products will
be recouped, even if we are successful in commercializing those products.
We face intense competition in the pharmaceutical industry from both brand and generic drug product companies, which
could significantly limit our growth and materially adversely affect our financial results.
The pharmaceutical industry is highly competitive. The principal competitive factors in the pharmaceutical market include:
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introduction of other generic drug manufacturers’ products in direct competition with our generic drug products;
introduction of authorized generic drug products in direct competition with our products, particularly during
exclusivity periods;
the ability of generic drug product competitors to quickly enter the market after the expiration of patents or exclusivity
periods, diminishing the amount and duration of significant profits;
consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups;
the willingness of generic drug customers, including wholesale and retail customers, to switch among products of
different pharmaceutical manufacturers;
pricing pressures by competitors and customers, even if similar price savings are not passed on to consumers;
a company’s reputation as a manufacturer and distributor of quality products;
a company’s level of service (including maintaining sufficient inventory levels for timely deliveries);
product appearance and labeling; and
a company’s breadth of product offerings.
Many of our competitors have longer operating histories and greater financial, research and development, marketing and other
resources than we do. Consequently, some of our competitors may be able to develop products and/or processes competitive
with, or superior to, our products. Furthermore, we may not be able to (i) differentiate our products from those of our
competitors, (ii) successfully develop or introduce new products, on a timely basis or at all, that are less costly than those of our
competitors, or (iii) offer customers payment and other commercial terms as favorable as those offered by our competitors. The
markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and
significant change. We expect competition to intensify as technology advances and consolidation continues. New developments
by other manufacturers and distributors could render our products uncompetitive or obsolete.
We believe our principal competitors in the U.S. generic pharmaceutical products market, where we primarily compete, are
Teva Pharmaceutical Industries Ltd., Viatris Inc., Endo International plc, Sandoz International GmbH, Pfizer Inc., Fresenius
Kabi KGaA, Sun Pharmaceutical Industries Ltd., Lupin Pharmaceuticals, Inc., Hikma Pharmaceuticals PLC and Aurobindo
Pharma Limited.
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The products produced by these companies, among others, collectively compete with the majority of our products. We also face
price competition generally as other generic manufacturers enter the market. Any such price competition may be especially
pronounced where our competitors source their products from jurisdictions where production costs may be lower (sometimes
significantly) than our production costs, especially lower-cost foreign jurisdictions. Any of these factors could result in
reductions in our sales prices and gross margin. This price competition has led to an increase in demands for downward price
adjustments by generic pharmaceutical distributors. Our principal strategy in addressing our competition is to offer customers a
consistent supply of our generic drug products, as well as to pursue product opportunities with the potential for limited
competition, such as high-barrier-to-entry first-to-file or first-to-market products. We cannot provide assurance, however, that
this strategy will enable us to compete successfully in the generic drug product industry or that we will be able to develop and
implement any new or additional viable strategies.
Competition in the generic drug industry has also increased due to the proliferation of authorized generic pharmaceutical
products. Authorized generic drug products are generic drug products that are introduced by brand companies, either directly or
through third parties, under the brand’s NDA approval for our own branded drug. Authorized generics do not face any
regulatory barriers to introduction and are not prohibited from sale during the 180-day marketing exclusivity period granted to
the first-to-file ANDA applicant. The sale of authorized generics adversely impacts the market share of a generic drug product
that has been granted 180 days of marketing exclusivity. This is a significant source of competition for us, because an
authorized generic drug product can materially decrease the profits that we could receive as an otherwise exclusive marketer of
a generic drug product. Such actions have the effect of reducing the potential market share and profitability of our generic drug
products and may inhibit us from developing and introducing generic pharmaceutical drug products corresponding to certain
branded drugs.
If we fail to obtain exclusive marketing rights for our products or fail to introduce our products on a timely basis, our
revenues, gross margin and operating results may decline significantly.
The Hatch-Waxman amendments to the FDCA provide for a period of 180 days of generic marketing exclusivity for any
applicant that is first to file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a
patent listed with respect to the corresponding branded drug (commonly referred to as a “Paragraph IV certification”). "First
filers" are often able to price the applicable generic drug to yield relatively high gross margins during this 180-day marketing
exclusivity period.
With respect to our generic products, ANDAs containing Paragraph IV certifications generally become the subject of patent
litigation that can be both lengthy and costly. There is no certainty that we will prevail in any such litigation, that we will be the
first to file and thus granted the 180-day marketing exclusivity period, or, if we are granted the 180-day marketing exclusivity
period, that we will not forfeit such period. Even where we are awarded marketing exclusivity, we may be required to share our
exclusivity period with other first filers. In addition, branded drug product companies often authorize a generic version of the
corresponding branded drug product to be sold during any period of marketing exclusivity that is awarded (described further
below), which reduces gross margins during the marketing exclusivity period. Branded drug product companies may also
reduce the price of their branded drug product to compete directly with generic drug products entering the market, which would
similarly have the effect of reducing gross margins. Furthermore, timely commencement of the litigation by the patent owner
imposes an automatic stay of ANDA approval by the FDA for 30 months, unless the case is decided in the ANDA applicant’s
favor during that period. Finally, if the court decision is adverse to the ANDA applicant, the ANDA approval will be delayed
until the challenged patent expires, and the applicant forfeits the 180-day marketing exclusivity.
Our future profitability depends, to a significant extent, upon our ability to introduce, on a timely basis, new generic drug
products that are either the first-to-market (or among the first-to-market) or that otherwise can gain significant market share.
The timeliness of our product introductions is dependent upon, among other things, the timing of regulatory approval of our
products, which to a large extent is outside of our control, as well as the timing of the introduction of competing products. As
additional distributors introduce comparable generic pharmaceutical products, price competition intensifies, market access
narrows, and product sales prices and gross margins decline, often significantly and rapidly, regardless of whether consumers
ultimately pay less for the drug. Accordingly, our revenues and future profitability are dependent, in large part, upon our ability
or the ability of our development partners to file ANDAs with the FDA in a timely and effective manner or, alternatively, to
enter into contractual relationships with other parties that have obtained marketing exclusivity. We cannot provide any
assurance that we will be able to develop and introduce successful products in the future within the time constraints necessary
to be successful. If we or our development partners are unable to continue to timely and effectively file ANDAs with the FDA
or to partner with other parties that have obtained marketing exclusivity, our revenues, gross margin and operating results may
decline significantly, and our prospects and business may be materially adversely affected.
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With respect to our branded products, generic equivalents for branded pharmaceutical products are typically sold at lower prices
than the branded products. The regulatory approval process in the United States and European Union exempts generic products
from costly and time-consuming clinical trials to demonstrate their safety and efficacy and relies instead on the safety and
efficacy of prior products. After the introduction of a competing generic product, a significant percentage of the prescriptions
previously written for the branded product are often written for the generic version. In addition, legislation enacted in most
U.S. states allows, or in some instances mandates, a pharmacist to dispense an available generic equivalent when filling a
prescription for a branded product, in the absence of specific instructions from the prescribing physician. Pursuant to the
provisions of the Hatch-Waxman Act, manufacturers of branded products often bring lawsuits to enforce their patent rights
against generic products released prior to the expiration of branded products’ patents, but it is possible for generic
manufacturers to offer generic products while such litigation is pending. As a result, branded products typically experience a
significant loss in revenues following the introduction of a competing generic product, even if subject to an existing patent. Our
branded pharmaceutical products are or may become subject to competition from generic equivalents because there is no
proprietary protection for some of the branded pharmaceutical products we sell, because our patent protection expired or
because our patent protection is not sufficiently broad or enforceable.
If we are unable to execute acquisitions or other strategic transactions, or manage our growth therefrom, our business will
suffer.
We may seek to expand our business through complementary or strategic acquisitions of other businesses, products or assets, or
through joint ventures, strategic agreements or other arrangements. Any such acquisitions, joint ventures or other business
combinations may involve significant integration challenges, operational complexities and time consumption and require
substantial resources and effort. It may also disrupt our ongoing businesses, which may adversely affect our relationships with
customers, employees, regulators and others with whom we have business or other dealings. Further, if we are unable to realize
synergies or other benefits expected to result from any acquisitions, joint ventures or other business combinations, or to
generate additional revenue to offset any unanticipated inability to realize these expected synergies or benefits, our growth and
ability to compete may be impaired, which would require us to focus additional resources on the integration of operations rather
than other profitable areas of our business, and may otherwise cause a material adverse effect on our business, results of
operations and financial condition. Acquisitions may also have hidden costs, including unforeseen pre-acquisition liabilities or
the impairment of customer relationships or certain acquired assets such as goodwill. We may also incur costs and inefficiencies
to the extent an acquisition expands the industries, markets or geographies in which we operate due to our limited exposure to
and experience in a given industry, market or region. Finally, acquisitions can also involve litigation and/or post-transaction
disputes, including with the counterparty regarding purchase price or other working capital adjustment or liabilities for which
we believe we were indemnified under the relevant transaction agreements, among other matters.
As our competitors introduce their own generic equivalents of our generic drug products, our revenues and gross margin
from such products generally decline, often rapidly.
Revenues and gross margin derived from generic pharmaceutical products often follow a pattern based on regulatory and
competitive factors that we believe are unique to the generic pharmaceutical industry. As the patent(s) for a brand name product
or the statutory marketing exclusivity period (if any) expires, the first generic manufacturer to receive regulatory approval for a
generic equivalent of the product is often able to capture a substantial share of the market. However, as other generic
manufacturers receive regulatory approvals for their own generic versions, that market share, and the price of that product, will
typically decline depending on several factors, including the number of competitors, the price of the branded product and the
pricing strategy of the new competitors. During the year ended December 31, 2021, we experienced significant competition
with many of our generic products, and as a result, our revenue and gross margin from such products declined significantly.
We cannot provide assurance that we will be able to continue to develop such products or that the number of our competitors
for any given product will not increase to such an extent that we may stop marketing a generic drug product for which we
previously obtained approval, which may have a material adverse impact on our revenues and gross margin.
The illegal distribution and sale by third parties of counterfeit versions of our products or of stolen products could have a
negative impact on our reputation and a material adverse effect on our business, results of operations and financial
condition.
Third parties could illegally distribute and sell counterfeit versions of our products, which do not meet the rigorous
manufacturing and testing standards that our products undergo. Counterfeit products are frequently unsafe or ineffective and
can be life-threatening. Counterfeit medicines may contain harmful substances, the wrong dose of the active pharmaceutical
ingredient or no active pharmaceutical ingredients at all. However, to distributors and users, counterfeit products may be
visually indistinguishable from the authentic version.
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Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence
in the authentic product. It is possible that adverse events caused by unsafe counterfeit products will mistakenly be attributed to
the authentic product. In addition, thefts of inventory at warehouses, plants or while in-transit, which are not properly stored
and which are sold through unauthorized channels, could adversely impact patient safety, our reputation and our business.
Public loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting or theft could have a material
adverse effect on our business, results of operations and financial condition.
Our business is highly dependent on market perceptions of us and the safety and quality of our products. Our business,
products or product pricing could be subject to negative publicity, which could have a material adverse effect on our
business, results of operations and financial condition.
Market perceptions of our business are very important to us, especially market perceptions of the safety and quality of our
products. If any of our products or similar products that other companies distribute are subject to market withdrawal or recall or
are proven to be, or are claimed to be, harmful to consumers, then this could have a material adverse effect on our business,
results of operations and financial condition. Also, because our business is dependent on market perceptions, negative publicity
associated with product quality, illness or other adverse effects resulting from, or perceived to be resulting from, our products
could have a material adverse impact on our business, results of operations and financial condition.
The generic pharmaceutical industry has also in recent years been the subject of significant publicity regarding the pricing of
pharmaceutical products more generally, including publicity and pressure resulting from prices charged by competitors and peer
companies for new products as well as price increases by competitors and peer companies on older products that the public has
deemed excessive. Even if we may have reduced the prices we charge our customers for certain products, often consumers do
not see similar reductions in the prices they paid. Any downward pricing pressure on the price of certain of our products arising
from social or political pressure to lower the cost of pharmaceutical products could have a material adverse impact on our
business, results of operations and financial condition.
Accompanying the press and media coverage of pharmaceutical pricing practices and public complaints about the same, there
has been increasing U.S. federal and state legislative and enforcement interest with respect to drug pricing. For instance, the
DOJ issued subpoenas to pharmaceutical companies, including to the Company, seeking information about the sales, marketing
and pricing of certain generic drugs. See Note 21. Commitments and Contingencies for additional information on the DOJ
investigation. In addition to the effects of any investigations or claims brought against us, our business, results of operations and
financial condition could also be adversely affected if any such inquiries, of us or of other pharmaceutical companies or the
industry more generally, were to result in legislative or regulatory proposals that limit our ability to increase the prices of our
products.
A substantial portion of our total revenues is expected to be derived from sales of a limited number of products.
We expect that we will continue to derive a substantial portion of our revenue from sales of a limited number of products. For
the year ended December 31, 2021, our significant product families accounted for 23% of our consolidated net revenue. The
sale of our products may be significantly influenced by market conditions, as well as regulatory actions. We may experience
decreases in the sale of our products in the future as a result of actions taken by our competitors, such as price reductions, or as
a result of regulatory actions related to our products or to competing products, which could have a material impact on our
results of operations. Actions which could be taken by our competitors, which may materially and adversely affect our business,
results of operations and financial condition, may include, without limitation, pricing changes and entering or exiting the market
for specific products.
Our ability to develop or license, or otherwise acquire, and introduce new products on a timely basis in relation to our
competitors’ product introductions involves inherent risks and uncertainties.
Product development is inherently risky, especially for new drugs for which safety and efficacy have not been established and
the market is not yet proven. Likewise, product licensing involves inherent risks including uncertainties due to matters that may
affect the achievement of milestones, as well as the possibility of contractual disagreements with regard to terms such as license
scope or termination rights. The development and commercialization process, particularly with regard to new drugs, also
requires substantial time, effort and financial resources. The process of obtaining FDA approval to manufacture and market new
pharmaceutical products is rigorous, time consuming, costly and largely unpredictable. We, or a partner, may not be successful
in obtaining FDA approval or in commercializing any of the products that we are developing or licensing.
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Our approved products may not achieve expected levels of market acceptance.
Even if we are able to obtain regulatory approvals for our new products, the success of those products is dependent upon market
acceptance. Levels of market acceptance for our new products could be affected by several factors, including:
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the availability of alternative products from our competitors;
the prices of our products relative to those of our competitors;
the timing of our market entry;
the ability to market our products effectively at the retail level;
the perception of patients and the healthcare community, including third-party payers, regarding the safety, efficacy
and benefits of our drug products compared to those of competing products; and
the acceptance of our products by government and private formularies.
Some of these factors will not be in our control, and our products may not achieve expected levels of market acceptance.
Additionally, continuing and increasingly sophisticated studies of the proper utilization, safety and efficacy of pharmaceutical
products are being conducted by the industry, government agencies and others which can call into question the utilization,
safety and efficacy of products currently or previously marketed by us. In some cases, studies have resulted, and may in the
future result, in the discontinuance of product marketing or other risk management programs such as the need for a patient
registry.
We may discontinue the manufacture and distribution of certain existing products, which may adversely impact our
business, results of operations and financial condition.
We continually evaluate the performance of our products and may determine that it is in our best interest to discontinue the
manufacture and distribution of certain of our products. We cannot guarantee that we have correctly forecasted, or will correctly
forecast in the future, the appropriate products to discontinue or that our decision to discontinue various products is prudent if
market conditions change. In addition, we cannot assure you that the discontinuance of products will reduce our operating
expenses or will not cause us to incur material charges associated with such a decision. Furthermore, the discontinuance of
existing products entails various risks, including, in the event that we decide to sell the discontinued product, the risk that we
will not be able to find a purchaser for such products or that the purchase price obtained will not be equal to at least the book
value of the net assets for such products. Other risks include managing the expectations of, and maintaining good relations with,
our customers who previously purchased products from among our discontinued products, which could prevent us from selling
other products to them in the future. Moreover, we may incur other significant liabilities and costs associated with our
discontinuance of products, which could have a material adverse effect on our business, results of operations and financial
condition.
Manufacturing or quality control problems may damage our reputation for quality production, demand costly remedial
activities and negatively impact our business, results of operations and financial condition.
As a pharmaceutical company, we are subject to substantial regulation by various governmental authorities. For instance, we
must comply with requirements of the FDA, DEA and other healthcare regulators with respect to the manufacture, labeling,
sale, distribution, marketing, advertising, promotion and development of pharmaceutical products. We must register our
facilities, whether located in the United States or elsewhere, with the FDA as well as regulators outside the United States, and
our products must be made in a manner consistent with cGMP, or similar standards in each territory in which we manufacture.
The failure of one of our facilities, or a facility of one of our third-party suppliers, to comply with applicable laws and
regulations may lead to breach of representations made to our customers or to regulatory or government action against us
related to products made in that facility.
In addition, the FDA, DEA and other agencies periodically inspect our manufacturing facilities. Following an inspection, an
agency may issue a notice listing conditions that are believed to violate cGMP or other regulations, or a warning letter for
violations of "regulatory significance" that may result in enforcement action if not promptly and adequately corrected. We
remain committed to continuing to improve our quality control and manufacturing practices; however, we cannot be assured
that the FDA will continue to be satisfied with our corrective actions and with our quality control and manufacturing systems
and standards. Failure to comply strictly with these regulations and requirements may damage our reputation and lead to
financial penalties, compliance expenditures, the recall or seizure of products, total or partial suspension of production and/or
distribution, withdrawal or suspension of the applicable regulator’s review of our submissions, enforcement actions, injunctions
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and criminal prosecution. Further, other federal agencies, our customers and partners in our alliance, development,
collaboration and other partnership agreements with respect to our products and services may take any such FDA observations
or warning letters into account when considering the award of contracts or the continuation or extension of such partnership
agreements. Because regulatory approval to manufacture a drug is site-specific, the delay and cost of remedial actions, or
obtaining approval to manufacture at a different facility, could negatively impact our business. Any failure by us to comply
with applicable laws and regulations and/or any actions by the FDA and other agencies as described above could have a
material adverse effect on our business, financial position and results of operations.
The majority of our products are produced at a few locations, and a business interruption at one or more of these locations
or within our supply chain could have a material adverse effect on our business, financial position and results of operations.
We produce the majority of the products that we manufacture at our manufacturing facilities in New York, New Jersey and
India, as well as at certain third-party suppliers, one of which is located in Taiwan. Disruptions at these facilities or within our
supply chain can occur for many reasons, including events unrelated to us or beyond our control, such as fires and other
industrial accidents, floods and other severe weather events, natural disasters, environmental incidents or other catastrophes,
utility and transportation infrastructure disruptions, shortages of raw materials, pandemic diseases or viral contagions such as
COVID-19, and acts of war or terrorism. Natural disasters and adverse weather conditions can be caused or exacerbated by
climate change, and the spate of extreme weather events experienced during 2021 presents an alarming trend. During 2021, for
example, Tropical Storm Ida brought extreme rainfall and flash flooding to New Jersey that caused damage to two of the
Company’s facilities, compromising the Company’s inventory and equipment and resulting in significant costs to repair both
facilities. Furthermore, work stoppages, whether union-organized or not, can also disrupt operations. Business interruption
could also be caused by compliance failures. A significant disruption at any of these facilities or otherwise within our supply
chain, even on a short-term basis, could impair our ability to produce and ship products to the market on a timely basis or at all,
which could have a material adverse effect on our business, financial position and results of operations.
Our profitability depends on our major customers. If these relationships do not continue as expected, our business,
condition (financial and otherwise), prospects and results of operations could materially suffer.
Our three largest customers, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Drug Co., accounted for
approximately 65%, 63% and 65% of total net sales of products for the years ended December 31, 2021, 2020 and 2019,
respectively. The loss of any one or more of these or any other major customer or the substantial reduction in orders from any
one or more of our major customers could have a material impact on our future operating results and financial condition. In
total, we currently have over 1,000 customers (including over 800 customers specific to our AvKARE segment), some of which
are part of large purchasing groups.
We may experience declines in the sales volume and prices of our products as a result of the continuing trend of
consolidation of certain customer groups, which could have a material adverse effect on our business, financial position and
results of operations.
Our ability to successfully commercialize any generic or branded pharmaceutical product depends in large part upon the
acceptance of the product by third parties, including pharmacies, government formularies, other retailers, physicians and
patients. Therefore, our success will depend in large part on market acceptance of our products. We make a significant amount
of our sales to a relatively small number of drug wholesalers and retail drug chains. These customers represent an essential part
of the distribution chain of our pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are
continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing
leverage and, consequently, increasing the product pricing pressures facing our business. Additionally, the emergence of large
buying groups representing independent retail pharmacies and other drug distributors, and the prevalence and influence of
managed care organizations and similar institutions, potentially enable such groups to demand larger price discounts on our
products. For example, there has been a recent trend of large wholesalers and retailer customers forming partnerships, such as
the alliance between Walgreens and AmerisourceBergen Corporation, the alliance between Rite Aid and McKesson Drug
Company, and the alliance between CVS Caremark and Cardinal Health. The result of these developments may have a material
adverse effect on our business, financial position and results of operations.
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We depend to a large extent on third-party suppliers and distributors for the raw materials for our products, particularly the
chemical compounds comprising the APIs that we use to manufacture our products, as well as for certain finished goods. A
prolonged interruption in the supply of such products could have a material adverse effect on our business, financial
position and results of operations.
The bulk of the raw materials essential to our manufacturing business are purchased from third parties. If we experience supply
interruptions or delays, or if a supplier discontinues the sale of certain products, we may have to obtain substitute materials or
products, which in turn would require us to obtain amended or additional regulatory approvals, subjecting us to additional
expenditures of significant time and resources. In addition, changes in our raw material suppliers could result in significant
delays in production, higher raw material costs and loss of sales and customers, because regulatory authorities must generally
approve raw material sources for pharmaceutical products, which may be time consuming. For example, we may need as long
as 18 months to find and qualify a new sole-source supplier. If we receive less than one year’s termination notice from a sole-
source supplier that intends to cease supplying raw materials, it could result in disruption of our ability to produce the drug
involved. Any significant supply interruption could have a material adverse effect on our business, condition (financial and
otherwise), prospects and results of operations. To date, although we have experienced occasional interruptions in supplies, we
have experienced no significant difficulties in obtaining raw materials. However, because the federal drug application process
requires specification of raw material suppliers, if raw materials from a specified supplier were to become unavailable, FDA
approval of a new supplier would be required. The amount of time required for the FDA to qualify a new supplier and confirm
that our manufacturing processes meet the necessary standards could cause delays in the manufacturing and marketing of one or
more of our products and could, depending on the particular product, have a material adverse effect on our results of operations
and financial condition.
The time necessary to develop generic and branded drugs may adversely affect whether, and the extent to which, we receive
a return on our capital.
We generally begin our development activities for a new generic drug product several years in advance of the patent expiration
date of the brand-name drug equivalent. The development process, including drug formulation, testing, and FDA review and
approval, often takes three or more years. This process requires that we expend considerable capital to pursue activities that do
not yield an immediate or near-term return. Also, because of the significant time necessary to develop a product, the actual
market for a product at the time it is available for sale may be significantly less than the originally projected market for the
product. If this were to occur, our potential return on our investment in developing the product, if approved for marketing by the
FDA, would be adversely affected and we may never receive a return on our investment in the product. It is also possible for
the manufacturer of the brand-name product for which we are developing a generic drug to obtain approvals from the FDA to
switch the brand-name drug from the prescription market to the OTC market. If this were to occur, we would be prohibited
from marketing our product other than as an OTC drug, in which case revenues could be substantially less than we anticipated.
Developing and commercializing branded pharmaceutical products is generally more costly than developing and
commercializing generic products. In order to grow and achieve success in our branded product business, we must continually
identify, develop, acquire and license new products that we can ultimately market. There are many difficulties and uncertainties
inherent in pharmaceutical research and development, and there is a high rate of failure inherent in new drug discovery and
development. Failure can occur at any point in the process, including late in the process after substantial investment. New
product candidates that appear promising in development may fail to reach the market or may have only limited commercial
success because of efficacy or safety concerns, inability to obtain necessary regulatory approvals and payer reimbursement,
limited scope of approved uses, difficulty or excessive costs to manufacture, or infringement of the patents or intellectual
property rights of others. Products that do reach the market may ultimately be subject to recalls or other suspensions in sales.
Delays and uncertainties in the FDA approval process and the approval processes in other countries can result in delays in
product launches and lost market opportunity. Because there is a high rate of failure inherent in the research and development
process of new products, there is a significant risk that funds invested in research and development will not generate financial
returns. We cannot be certain when or whether any of our products currently under development will be approved or launched
or whether, once launched, such products will be commercially successful. We may be required to spend several years and
incur substantial expense in completing certain clinical trials. The length of time, number of trial sites and patients required for
clinical trials vary substantially, and we may have difficulty finding a sufficient number of sites and subjects to participate in
our trials. Delays in planned clinical trials can result in increased development costs, delays in regulatory approvals and delays
in product candidates reaching the market. We rely on independent third-party clinical investigators to recruit subjects and
conduct clinical trials in accordance with applicable study protocols and laws and regulations. If regulatory authorities
determine that we have not complied with regulations in the development of a product candidate, they may refuse to accept trial
data from the site and/or not approve the product candidate, and we would not be able to market and sell that product. If we are
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not able to market and sell our products after significant expenditures to develop and test them, our business and results of
operations could be materially and adversely affected.
The use of legal, regulatory and legislative strategies by brand competitors, including authorized generics and citizen’s
petitions, as well as the potential impact of proposed legislation, may have an adverse effect on our business.
Brand drug companies often pursue strategies that may serve to prevent or delay competition from our generic alternatives to
their branded products. These strategies include, but are not limited to:
• marketing an authorized generic version of a branded product, directly or through agreement with a generic
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competitor, at the same time that we introduce a generic equivalent of that product;
filing “citizen’s petitions” with the FDA to thwart generic competition by causing delays of our product approvals;
using risk evaluation and mitigation strategies ("REMS"), related distribution restrictions or other means of limiting
access to their branded products, to prevent us from obtaining product samples needed to conduct bioequivalence
testing required for ANDA approval, thereby delaying or preventing us from obtaining FDA approval of a generic
version of such branded products;
seeking to secure patent protection of certain "Elements to Assure Safe Use" of a REMS program, which are required
medical interventions or other actions healthcare professionals need to execute prior to prescribing or dispensing the
drug to the patient, in an attempt to thwart our ability to avoid infringement of the patents in question or secure
approval;
seeking to establish regulatory and legal obstacles that would make it more difficult for us to demonstrate a generic
product’s bioequivalence or “sameness” to the related branded product;
initiating legislative and administrative efforts in various states to limit the substitution of generic versions of branded
pharmaceutical products for the corresponding branded products;
filing suits for patent infringement that automatically delay FDA approval of our generic products;
introducing “next-generation” products prior to the expiration of market exclusivity for their branded product, which
often materially reduces the demand for the generic product for which we may be seeking FDA approval;
obtaining extensions of market exclusivity by conducting clinical trials of branded drugs in pediatric populations or by
other methods as discussed below;
persuading the FDA to withdraw the approval of branded drugs for which the associated patents are about to expire,
thus allowing the brand company to develop and launch new patented products serving as substitutes for the
withdrawn products;
seeking to obtain new patents on drugs for which patent protection is about to expire;
filing patent applications that are more complex and costly to challenge;
seeking temporary restraining orders and injunctions against selling a generic equivalent of their branded product
based on alleged misappropriation of trade secrets or breach of confidentiality obligations;
seeking temporary restraining orders and injunctions against us after we have received final FDA approval for a
product for which we are attempting to launch at-risk prior to resolution of related patent litigation;
reducing the marketing of the branded product to healthcare providers, thereby reducing the branded drug’s
commercial exposure and market size, which in turn adversely affects the market potential of the equivalent generic
product; and
converting branded prescription drugs that are facing potential generic competition to over-the-counter products,
thereby significantly impeding the growth of the generic prescription market for such drugs.
These and other strategies by brand competitors, as well as the potential impact of proposed legislation, may increase our costs
associated with the introduction or marketing of our generic products, delay or prevent such introduction and/or significantly
reduce the profit potential of our products.
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The risks and uncertainties inherent in conducting clinical trials could delay or prevent the development and
commercialization of our own branded products, which could have a material adverse effect on our business, results of
operations and financial condition.
With respect to our branded products which do not qualify for the FDA’s abbreviated application procedures, we must
demonstrate through clinical trials that these products are safe and effective for use. We have only limited experience in
conducting and supervising clinical trials. The process of completing clinical trials and preparing a NDA may take several years
and requires substantial resources. Our studies and filings may not result in FDA approval to market our new drug products and,
if the FDA grants approval, we cannot predict the timing of any approval. There are substantial filing fees for NDAs that are not
refundable if FDA approval is not obtained.
There are a number of risks and uncertainties associated with clinical trials. The results of clinical trials may not be indicative of
results that would be obtained from large scale testing. Clinical trials are often conducted with patients having advanced stages
of disease and, as a result, during the course of treatment these patients can die or suffer adverse medical effects for reasons that
may not be related to the pharmaceutical agents being tested, but which nevertheless affect the clinical trial results. In addition,
side effects experienced by the patients may cause delay of approval or limit the profile of an approved product. Moreover, our
clinical trials may not demonstrate sufficient safety and efficacy to obtain approval from the FDA or foreign regulatory
authorities. The FDA or foreign regulatory authorities may not agree with our assessment of the clinical data or they may
interpret it differently. Such regulatory authorities may require additional or expanded clinical trials. Even if the FDA or foreign
regulatory authorities approve certain products developed by us, we cannot provide assurance that such regulatory authorities
will not subject marketing of such products to certain limits on indicated use.
Failure can occur at any time during the clinical trial process; in addition, the results from early clinical trials may not be
predictive of results obtained in later and larger clinical trials, and product candidates in later clinical trials may fail to show the
desired safety or efficacy despite having progressed successfully through earlier clinical testing. A number of companies in the
pharmaceutical industry, including us, have suffered significant setbacks in clinical trials, even in advanced clinical trials after
showing positive results in earlier clinical trials. The completion of clinical trials for our product candidates may be delayed or
halted for the reasons noted above in addition to many other reasons, including:
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delays in patient enrollment, and variability in the number and types of patients available for clinical trials;
regulators or institutional review boards may not allow us to commence or continue a clinical trial;
our inability, or the inability of our partners, to manufacture or obtain from third parties materials sufficient to
complete our clinical trials;
delays or failure in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with prospective
clinical trial sites;
risks associated with trial design, which may result in a failure of the trial to show statistically significant results even
if the product candidate is effective;
difficulty in maintaining contact with patients after treatment commences, resulting in incomplete data;
poor effectiveness of product candidates during clinical trials;
safety issues, including adverse events associated with product candidates;
the failure of patients to complete clinical trials due to adverse side effects, dissatisfaction with the product candidate,
or other reasons;
governmental or regulatory delays or changes in regulatory requirements, policy and guidelines; and
varying interpretation of data by the FDA or foreign regulatory authorities.
In addition, our product candidates could be subject to competition for clinical study sites and patients from other therapies
under development which may delay the enrollment in or initiation of our clinical trials.
The FDA or foreign regulatory authorities may require us to conduct unanticipated additional clinical trials, which could result
in additional expense and delays in bringing our product candidates to market. Any failure or delay in completing clinical trials
for our product candidates would prevent or delay the commercialization of our product candidates. We cannot assure you that
our expenses related to clinical trials will lead to the development of brand-name drugs that will generate revenues in the near
future. Delays or failure in the development and commercialization of our own branded products could have a material adverse
effect on our business, results of operations and financial condition.
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We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including
cybersecurity and data leakage risks.
Significant disruptions to our information technology systems or breaches of information security could adversely affect our
business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is
critical that we do so in a secure manner to maintain the confidentiality and integrity of such information. Additionally, our
information technology systems are critical to our ability to store electronic and financial information and to manage a variety
of business processes and activities, including manufacturing, financial, logistics, sales, marketing and administrative functions.
We depend on our information technology infrastructure to communicate internally and externally with employees, customers,
suppliers and others. We also use information technology networks and systems to comply with regulatory, legal and tax
requirements. We have outsourced significant elements of our information technology infrastructure; as a result we manage
independent vendor relationships with third-parties who are responsible for maintaining significant elements of our information
technology systems and infrastructure and who may or could have access to our confidential information. The size and
complexity of our information technology systems, and those of our third party vendors, make such systems potentially
vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or
vendors. These systems are also vulnerable to attacks by malicious third parties, such as phishing or ransomware attacks, and
may be susceptible to intentional or accidental physical damage to the infrastructure maintained by us or by third parties,
including as a result of extreme weather events, such as fires, floods, hurricanes, or tornadoes. For example, from mid-
December 2021 to late January 2022, our operations were affected by the shutdown of the UKG, Inc.’s Kronos cloud-based
employee work time keeping system, which certain of our operations and corporate functions use to record employee hours
worked and manage paid time off. Our human resources and operations management teams quickly implemented alternate
procedures until the Kronos system was restored. We do not believe that we have incurred a material loss due to the outage.
UKG, Inc. reported their forensic investigation found no evidence that Amneal employee data was compromised.
Maintaining the secrecy of confidential, proprietary, and/or trade secret information is important to our competitive business
position. We continually assess these threats and make investments to increase internal protection, detection, and response
capabilities, as well as ensure our third-party providers have required capabilities and controls, to address these risks. Like other
public companies, our computer systems and those of our third-party vendors and service providers are regularly subject to, and
will continue to be the target of, computer viruses, malware or other malicious codes (including ransomware), unauthorized
access, cyber-attacks or other computer-related penetrations, which have caused, and may continue to cause, disruptions to our
operations. For example, we have been the victim of phishing attempts, some of which have been successful. While we have
experienced threats to our data and systems, to date, we are not aware that we have experienced a material cyber-security
breach. Over time, however, the sophistication of these threats continues to increase. The preventative actions we take to
reduce the risk of cyber incidents and protect our information may be insufficient. Our efforts may not prevent service
interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential
information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or
sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved
dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether
as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce
competing products, use our proprietary technology or information, and/or adversely affect our business position. Further, any
such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business, and
reputational harm to us and could have a material adverse effect on our business, financial position, results of operations and/or
cash flow.
Our future success depends on our ability to attract and retain talented employees and consultants.
Our future success depends, to a substantial degree, upon the continued service of the members of our management team. The
loss of the services of members of our management team, or their inability to perform services on our behalf, could have a
material adverse effect on our business, condition (financial and otherwise), prospects and results of operations. Our success
also depends, to a large extent, upon the contributions of our sales, marketing, scientific and quality assurance staff. We
compete with brand and generic pharmaceutical manufacturers for qualified personnel, and our competitors may offer more
favorable employment opportunities than we do. If we are not able to attract and retain the necessary personnel to accomplish
our business objectives we could experience constraints that would adversely affect our ability to sell and market our products
effectively, to meet the demands of our strategic partners in a timely fashion, and to support our research and development
programs. In particular, our sales and marketing efforts depend on the ability to attract and retain skilled and experienced sales,
marketing and quality assurance representatives. Although we believe that we have been successful in attracting and retaining
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skilled personnel in all areas of our business, we cannot provide assurance that we can continue to attract, train and retain such
personnel. Any failure in this regard could limit the rates at which we generate sales and develop or acquire new products.
Severe weather or legal, regulatory or market measures to address severe weather may negatively affect our business and
results of operations.
Severe weather, such as a hurricane, tornado, earthquake, wildfire or flooding, may pose physical risks to our facilities and
disrupt the operation of our supply chain. For example, on September 1, 2021, Tropical Storm Ida brought extreme rainfall and
flash flooding to New Jersey that caused damage to two of our facilities. The impacts of the changing weather on water
resources may result in water scarcity, limiting our ability to access sufficient high-quality water in certain locations, which
may increase operational costs.
Concern over severe weather may also result in new or additional legal or regulatory requirements designed to mitigate the
effects of severe weather on the environment. If such laws or regulations are more stringent than current legal or regulatory
obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and
distribution of our products, which may adversely affect our business, results of operations or financial condition.
The spread of the novel coronavirus (“COVID-19”) pandemic and other adverse public health developments could adversely
affect our business and results of operations.
In March 2020, the World Health Organization designated the outbreak of a novel strain of coronavirus (“COVID-19”) as a
global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of
COVID-19, including imposing restrictions on movement and travel, and restricting or prohibiting outright some or all
commercial and business activity, including the manufacture and distribution of certain goods and the provision of non-
essential services. These measures, though currently temporary in nature, may become more severe and continue indefinitely
depending on the evolution of the outbreak.
We observed lost sales and some supply interruptions during the year ended December 31, 2020 in our New York, New Jersey
and India manufacturing plants. Additionally, decreased influenza activity during the year ended December 31, 2021 drove
significantly lower sales volume and increased returns related to Oseltamivir as compared to the prior year.
While manufacturing has resumed to around pre-COVID-19 levels, we may again experience supply chain constraints during
subsequent waves of COVID-19 infections. Although not currently expected, any supply chain disruptions may significantly
impact our future results of operations and cash flows.
To the extent that the COVID-19 pandemic continues or worsens, national, state, local and international governments may
impose additional restrictions or extend the restrictions already in place. The worsening of the pandemic and the related safety
and business operating restrictions could result in a number of adverse impacts to our business, including, but not limited to,
additional disruption to the economy and our customers, additional work restrictions, supply chains being interrupted or slowed,
and rising supply prices. Also, governments may impose other laws, regulations, or taxes that could adversely impact our
business, financial condition, or results of operations. Further, depending on the extent to which our customers are affected,
they could delay or reduce purchases of products we provide. The potential effects of the COVID-19 pandemic also could
impact us in a number of other ways including, but not limited to, reductions to our profitability, fluctuations in foreign
currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties,
and potential impairment of the carrying amount of goodwill or other definite-lived assets.
We continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by
national, state, or local authorities or that we determine are in the best interest of our employees customers, partners, suppliers,
and shareholders. Until the ultimate extent and duration of the pandemic is known, we cannot predict the ultimate effects the
pandemic may have on our business, in particular with respect to demand for our products, our strategy, our prospects, the
effects on our customers, or the impact on our financial results or financial position.
Additionally, on September 9, 2021, President Biden issued an executive order (the “Executive Order”) requiring all employers
with U.S. Government contracts to require that their U.S.-based employees, contractors, and certain subcontractors, that work
on or in support of U.S. Government contracts, are fully vaccinated as set forth in the Executive Order, except for any
employees with a medical or religious exemption. We have established policies to help ensure compliance with the applicable
requirements of the Executive Order. The implementation of these requirements may result in employee attrition, which could
be material as a substantial number of our employees are based in areas of the country where vaccination rates are below the
national average. If we were to lose employees, it may be difficult or very costly in the current competitive labor market to find
and recruit replacement employees, and this could have a material adverse effect on our business, future results of operations
and cash flows. Additional vaccine mandates may also be implemented in other jurisdictions in which we operate.
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Intellectual Property and Licensing Risks
Federal regulation of arrangements between manufacturers of branded and generic products could adversely affect our
business.
We are involved in numerous patent litigations in which we challenge the validity or enforceability of innovator companies'
listed patents and/or their applicability to our generic pharmaceutical products, as well as patent infringement litigation in which
generic companies challenge the validity or enforceability of our patents and/or their applicability to their generic
pharmaceutical products, and therefore settling patent litigations has been and is likely to continue to be an important part of our
business. As part of the Medicare Prescription Drug and Modernization Act of 2003, companies, including us, are required to
file with the FTC and the DOJ agreements entered into between branded and generic pharmaceutical companies related to the
manufacture, marketing and sale of generic versions of branded drugs for their review. In June 2013, the U.S. Supreme Court in
its decision in FTC v. Actavis determined that “reverse payment” patent settlement agreements between brand and generic
companies could violate the antitrust laws. The Supreme Court held that such settlement agreements are neither immune from
antitrust attack nor presumptively illegal but rather should be analyzed under the “Rule of Reason” test to determine whether
they violate the federal antitrust laws. This holding has resulted in heightened scrutiny of such settlement agreements by the
FTC and state and local authorities, and has increased the risk of liability in pending antitrust litigation brought by private
plaintiffs. The FTC has brought actions against parties to such settlement agreements, including us, and we have become
subject to increased FTC investigations or enforcement actions arising from such settlement agreements. Further, private
plaintiffs, including direct and indirect purchasers of our products, have also become more active in bringing private litigation
claims against us and other brand and generic pharmaceutical companies alleging that such settlement agreements violate the
antitrust laws. Accordingly, we have in the past received and may receive formal or informal requests from the FTC for
information about a particular settlement agreement, and there is a risk that the FTC, state and local authorities, or private
plaintiffs, may commence an action against us alleging violations of the antitrust laws. We have been and are currently involved
in private antitrust actions involving certain settlement agreements as described in Note 21. Commitments and Contingencies -
Other Litigation Related to the Company's Business.
Antitrust investigations and claims are generally expensive and time consuming, and we can give no assurance as to the timing
or outcome of such investigations or claims or of any future private litigation or government action alleging that one of our
settlement agreements violates antitrust laws. The impact of federal regulation of arrangements between manufacturers of brand
and generic products, further legislation and the potential for private-party lawsuits associated with such arrangements could
adversely affect our business.
From time to time we may need to rely on licenses to proprietary technologies, which may be difficult or expensive to obtain.
We may need to obtain licenses to patents and other proprietary rights held by third parties to develop, manufacture and market
products. If we are unable to timely obtain these licenses on commercially reasonable terms, our ability to commercially market
our products may be inhibited or prevented, which could have a material adverse effect on our business, results of operations
and financial condition.
Our competitors or other third parties may allege that we are infringing upon their intellectual property, forcing us to
expend substantial resources in litigation, the outcome of which is uncertain. Any unfavorable outcome of such litigation,
including losses related to "at-risk" product launches, could have a material adverse effect on our business, financial
position and results of operations.
Companies that produce branded pharmaceutical products routinely bring litigation against ANDA filers or similar applicants
that seek regulatory approval to manufacture and market generic forms of their branded products alleging patent infringement
or other violations of intellectual property rights. Patent holders may also bring patent infringement suits against companies that
are currently marketing and selling approved generic products. Litigation often involves significant expense and can delay or
prevent introduction or sale of our generic products. If valid and enforceable patents are infringed by our products, we would
need to delay selling the infringing generic product unless we could obtain a license from the patent holder, and, if we were
already selling the infringing product, cease selling and potentially destroy existing product stock.
There may be situations in which we may make business and legal judgments to market and sell products that are subject to
claims of alleged patent infringement prior to final resolution of those claims by the courts, based upon our belief that such
patents are invalid, unenforceable, or are not infringed by our marketing and sale of such products. This is referred to in the
pharmaceutical industry as an "at-risk" launch. The risk involved in an at-risk launch can be substantial because, if a patent
holder ultimately prevails against us, the remedies available to such holder may include, among other things, damages measured
by the profits lost by the patent holder or treble damages, which can be significantly higher than the profits we make from
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selling the generic version of the product. We may also be harmed by the loss of any value of such inventory that we are unable
to market or sell.
We expend a significant amount of resources on research and development, including milestones on in-licensed products,
which may not lead to successful product introductions.
Much of our development effort is focused on technically difficult-to-formulate products and/or products that require advanced
manufacturing technology. We expend significant resources on research and development primarily to enable us to manufacture
and market FDA-approved pharmaceuticals in accordance with FDA regulations. We have entered into, and may in the future
enter into, agreements that require us to make significant milestone payments upon achievement of various research and
development events and regulatory approvals. As we continue to develop and in-license new products, we will likely incur
increased research and licensing expenses. Because of the inherent risk associated with research and development efforts in the
industry, particularly with respect to new drugs, our research and development expenditures may not result in the successful
introduction of FDA-approved pharmaceutical products. Additionally, after we or our development partners submit an ANDA,
the FDA may request that additional studies be conducted. As a result, we may be unable to reasonably determine the total
research and development costs required to develop a particular product. Finally, we cannot be certain that any investment
made in developing products will be recovered, even if we are successful in commercialization. To the extent that we expend
significant resources on research and development efforts and are not ultimately able to successfully introduce new products as
a result of those efforts, our business, financial position and results of operations may be materially adversely affected.
We depend on our ability to protect our intellectual property and proprietary rights.
Our success depends on our ability to protect and defend the intellectual property rights associated with our current and future
products. If we fail to protect our intellectual property adequately, competitors may manufacture and market products similar to,
or that may be confused with, our products, and our generic competitors may obtain regulatory approval to make and distribute
generic versions of our branded products. Some patent applications in the United States are maintained in secrecy or are not
published until the resulting patents issue. We also cannot be certain that patents will be issued with respect to any of our patent
applications or that any existing or future patents issued to or licensed by us will provide competitive advantages for our
products or will not be challenged, invalidated, circumvented or held unenforceable in proceedings commenced by our
competitors or other third parties. Furthermore, our patent rights may not prevent or limit our present and future competitors
from developing, making, importing, using or commercializing products that are functionally similar to our products. We rely
particularly on trade secrets, trademarks, unpatented proprietary expertise and continuing innovation that we seek to protect, in
part, by registering and using marks; and by entering into confidentiality agreements with licensees, suppliers, employees,
consultants and other parties. We use this approach to protecting our intellectual property in large part because few of our
products are protected by patents. We cannot provide assurance that these agreements will not be breached or circumvented.
We also cannot be certain that we will have recourse to adequate remedies in the event of a breach of such agreements. Disputes
may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. We cannot be
sure that our trade secrets and proprietary technology will not be independently developed or otherwise become known by our
competitors or, if patents are not issued with respect to our internally developed products, that we will be able to maintain the
confidentiality of information relating to these products. In addition, efforts to ensure our intellectual property rights may be
costly, time-consuming and/or ultimately unsuccessful. We cannot be sure that we will have the resources to protect our own
rights against infringement by third parties. Our inability to protect our intellectual property and proprietary rights could have a
material adverse effect on our business, results of operations, financial condition and cash flows.
Legal and Regulatory Risks
We are involved in various legal proceedings and may be involved in future legal proceedings, all of which are uncertain,
and existing and future proceedings may require us to incur substantial expense to defend and/or expose us to substantial
liability.
The development, manufacture and sale of our drug products involves an inherent risk of product liability and other claims and
the associated adverse publicity, and insurance against such potential claims is expensive and may be difficult to obtain.
Litigation is inherently subject to uncertainties and we may be required to expend substantial amounts in the defense or
resolution of this and similar matters. We regularly monitor the use of our products for trends or increases in reports of adverse
events or product complaints, and regularly report such matters to the FDA. In some cases, an increase in adverse event reports
may be an indication that there has been a change in a product’s specifications or efficacy. Such changes could lead to a recall
of the product in question or, in some cases, increases in product liability claims related to the product in question. If the
coverage limits for product liability and other insurance policies are not adequate, or if certain of our products are excluded
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from coverage, a claim brought against us, whether covered by insurance or not, could have a material adverse effect on our
business, results of operations, financial condition and cash flows. We also rely on self-insurance to cover product liability and
other claims, and these claims may exceed the amounts we have reserved under our self-insurance program.
In the ordinary course of our business, we may also be subject to a variety of other types of claims, proceedings, investigations
and litigation initiated by government agencies or third parties. These matters may include compliance matters, product
regulation or safety, taxes, employee benefit plans, employment discrimination, health and safety, environmental, antitrust,
securities law, customs, import/export, government contract compliance, financial controls or reporting, intellectual property,
allegations of misrepresentation, false claims or false statements, commercial claims, claims regarding promotion of our
products and services, or other similar matters. In addition, government investigations related to the use of our generic drug
products may cause reputational harm to us. Negative publicity, whether accurate or inaccurate, about the efficacy, safety or
side effects of our generic drug products or product categories, whether involving us or a competitor, could materially reduce
market acceptance of our products, cause consumers to seek alternatives to our products, result in product withdrawals and
cause our stock price to decline. Negative publicity could also result in an increased number of product liability claims, whether
or not these claims have a basis in scientific fact. Any such claims, proceedings, investigations or litigation, regardless of the
merits, might result in substantial costs to defend or settle, restrictions on product use or sales, or otherwise injure our business.
We manufacture and derive a portion of our revenue from the sale of pharmaceutical products in the opioid class of drugs. The
U.S. Department of Health and Human Services has declared the wide spread addiction to and abuse of such products a public
health emergency, and in recent months, the federal government has also announced plans to increase federal oversight on
opioid sale and consumption. These plans, along with changing public and clinical perceptions of opioid products and the risks
relating to their use may result in the imposition of even stricter regulation of such products and further restrictions on their sale
and use. For instance, the DEA has recently increased its scrutiny and regulation over the manufacture, distribution and sale of
opioid products, which may require us to incur significant expenses to comply with such regulations. State governments have
also taken steps to impose surcharges or taxes on opioid manufacturers or distributors. Any new or stricter regulations imposed
by governmental authorities such as the DEA related to opioid products, as well as a potential increase in opioid-related
litigation involving us, could result in material adverse effects on our business and results of operations. Refer to Note 21.
Commitments and Contingencies - Prescription Opioid Litigation for more information regarding opioid-related litigation
involving the Company.
We are subject to United States federal and state laws related to healthcare fraud and abuse and health information privacy
and security, and the failure to comply with such laws may adversely affect our business.
In the United States, many of our products are eligible for reimbursement under federal and state health care programs such as
Medicaid, Medicare, TRICARE, and/or state pharmaceutical assistance programs, and as a result, certain federal and state
healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are, and will be, applicable to our business.
We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states
in which we conduct our business. The laws that may affect our ability to operate include, but are not limited to: (i) the U.S.
Anti-Kickback Statute, which applies to our marketing and research practices, educational programs, pricing policies and
relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or
paying remuneration, directly or indirectly, as a means of inducing, or in exchange for, either the referral of an individual or the
purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and
Medicaid programs; (ii) federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among
other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare,
Medicaid or other third-party payers that are false or fraudulent; (iii) the U.S. Health Insurance Portability and Accountability
Act of 1996, ("HIPAA"), which among other things created new federal criminal statutes that prohibit executing a scheme to
defraud any healthcare benefit program or making false statements relating to healthcare matters, and HIPAA, as amended by
the Health Information Technology for Economic and Clinical Health Act of 2009, and our implementing regulations, which
impose certain requirements relating to the privacy, security and transmission of individually identifiable health information
and place restrictions on the use of such information for marketing communications; (iv) the U.S. Physician Payments Sunshine
Act, which among other things, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is
available under a federal healthcare program to report annually information related to "payments or other transfers of value"
made to physicians and teaching hospitals, and ownership and investment interests held by certain healthcare professionals and
their immediate family members, and similar state laws; (v) the government pricing rules applicable to the Medicaid, Medicare
Part B, 340B Drug Pricing Program, the U.S. Department of Veterans Affairs program, the TRICARE program, and state price
reporting laws; and (vi) state and foreign law equivalents of each of the above U.S. laws, such as anti-kickback and false claims
laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and
foreign laws governing the privacy and security of health information in certain circumstances, such as the requirements under
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the European Union General Data Protection Regulation which became effective in May 2018, many of which differ from each
other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Violations of the fraud
and abuse laws may result in severe penalties against us and/or our responsible employees, including jail sentences, large fines,
and the exclusion of our products from reimbursement under federal and state programs. Defense of litigation claims and
government investigations can be costly, time-consuming, and distract management, and it is possible that we could incur
judgments or enter into settlements that would require us to change the way we operate our business. We are committed to
conducting the sales and marketing of our products in compliance with the healthcare fraud and abuse laws, but certain
applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity,
a governmental authority may take a position contrary to a position we have taken, or should an employee violate these laws
without our knowledge, a governmental authority may impose civil and/or criminal sanctions.
Any adverse outcome in these types of actions, or the imposition of penalties or sanctions for failing to comply with fraud and
abuse laws, could adversely affect us and may have a material adverse effect on our business, results of operations, financial
condition and cash flows. Some of the statutes and regulations that govern our activities, such as federal and state anti-kickback
and false claims laws, are broad in scope, and while exemptions and safe harbors protecting certain common activities exist,
they are often narrowly drawn. While we manage our business activities to comply with these statutory provisions, due to their
breadth, complexity and, in certain cases, uncertainty of application, it is possible that our activities could be subject to
challenge by various government agencies. In particular, the FDA, the DOJ and other agencies have increased their
enforcement activities with respect to the sales, marketing, research and similar activities of pharmaceutical companies in recent
years, and many pharmaceutical companies have been subject to government investigations related to these practices. A
determination that we are in violation of these and/or other government regulations and legal requirements may result in civil
damages and penalties, criminal fines and prosecution, administrative remedies, the recall of products, the total or partial
suspension of manufacturing and/or distribution activities, seizure of products, injunctions, whistleblower lawsuits, failure to
obtain approval of pending product applications, withdrawal of existing product approvals, exclusion from participation in
government healthcare programs and other sanctions.
Any of these types of investigations or enforcement actions could affect our ability to commercially distribute our products and
could materially and adversely affect our business, financial condition, results of operations and cash flows.
Approvals for our new generic drug products may be delayed or become more difficult to obtain if the FDA institutes
changes to its approval requirements.
The FDA may institute changes to its ANDA approval requirements, such as implementing new or additional fees similar to the
fees imposed by the GDUFA and its second iteration (GDUFA II), which may make it more difficult or expensive for us to
obtain approval for our new generic products. The FDA may also implement other changes that may directly affect some of our
ANDA filings pending approval from the FDA, such as changes to guidance from the FDA regarding bioequivalency
requirements for particular drugs. Such changes may cause our development of such generic drugs to be significantly more
difficult or result in delays in FDA approval or result in our decision to abandon or terminate certain projects. Any changes in
FDA requirements may make it more difficult for us to file ANDAs or obtain approval of our ANDAs and generate revenues
and thus have a material adverse effect on our business, results of operations and financial condition.
Healthcare reform and a reduction in the coverage and reimbursement levels by governmental authorities, HMOs, MCOs or
other third-party payers may adversely affect our business.
As part of commercializing our products, we have obtained authorization to receive reimbursement at varying levels for the cost
of certain products and related treatments from governmental authorities and private health insurers and other organizations,
such as health maintenance organizations ("HMOs") and managed care organizations ("MCOs"). The trend toward managed
healthcare in the United States, the growth of organizations such as HMOs and MCOs, and legislative proposals to reform
healthcare and government insurance programs could significantly influence the purchase of pharmaceutical products, resulting
in lower prices and a reduction in product demand. The Patient Protection and Affordable Care Act and the Health Care and
Education Reconciliation Act of 2010 were signed into law on March 23, 2010 and March 30, 2010, respectively. These laws
are referred to herein as "healthcare reform." A number of provisions of the healthcare reform laws continue to have a negative
impact on the price of our products sold to U.S. government entities. For example, the legislation includes measures that (i)
significantly increase Medicaid rebates through both the expansion of the program; (ii) substantially expand the Public Health
System (340B) program to allow other entities to purchase prescription drugs at substantial discounts; (iii) extend the Medicaid
rebate rate to a significant portion of Managed Medicaid enrollees; (iv) apply a 75% discount to Medicare Part D beneficiary
spending in the coverage gap for branded and authorized generic prescription drugs; and (v) levy a significant excise tax on the
industry to fund healthcare reform. Such cost containment measures and healthcare reform affect our ability to sell our products
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and have a material adverse effect on our business, results of operations and financial condition. Additionally, the Medicare Part
D Prescription Drug Benefit established a voluntary outpatient prescription drug benefit for Medicare beneficiaries (primarily
the elderly over 65 and the disabled). These beneficiaries may enroll in private drug plans. There are multiple types of Part D
plans and numerous plan sponsors, each with its own formulary and product access requirements. The plans have considerable
discretion in establishing formularies and tiered co-pay structures and in placing prior authorization and other restrictions on the
utilization of specific products. In addition, Part D plan sponsors are permitted and encouraged to negotiate rebates with
manufacturers. The Medicare Part D program, which went into effect January 1, 2006, is administered by the Centers for
Medicare & Medicaid Services ("CMS") within the Department of Health and Human Services.
The CMS has issued extensive regulations and other sub-regulatory guidance documents implementing the Medicare Part D
benefit, and the OIG has issued regulations and other guidance in connection with the Medicare Part D program. The federal
government can be expected to continue to issue guidance and regulations regarding the obligations of Part D sponsors and
their subcontractors. Participating drug plans may establish drug formularies that exclude coverage of specific drugs and
payment levels for drugs negotiated with Part D drug plans may be lower than reimbursement levels available through private
health plans or other payers. Moreover, beneficiary co-insurance requirements could influence which products are
recommended by physicians and selected by patients. There is no guarantee that any drug that we market will be offered by
drug plans participating under the Medicare Part D program or of the terms of any such coverage, or that covered drugs will be
reimbursed at amounts that reflect current or historical levels. Additionally, any reimbursement granted may not be maintained,
or limits on reimbursement available from third-party payers may reduce the demand for, or negatively affect the price of those
products, which could significantly harm our business, results of operations, financial condition and cash flows. We may also
be subject to lawsuits relating to reimbursement programs that could be costly to defend, divert management’s attention and
adversely affect our operating results. Most state Medicaid programs have established preferred drug lists, and the process,
criteria and timeframe for obtaining placement on the preferred drug list varies from state to state. Under the Medicaid drug
rebate program, a manufacturer must pay a rebate for Medicaid utilization of a product. The rebate for single source products
(including authorized generics) is based on the greater of (i) a specified percentage of the product’s average manufacturer price
or (ii) the difference between the product’s average manufacturer price and the best price offered by the manufacturer. The
rebate for multiple source products is a specified percentage of the product’s average manufacturer price. In addition, many
states have established supplemental rebate programs as a condition for including a drug product on a preferred drug list. The
profitability of our products may depend on the extent to which they appear on the preferred drug lists of a significant number
of state Medicaid programs and the amount of the rebates that must be paid to such states. In addition, there is significant fiscal
pressure on the Medicaid program, and amendments to lower the pharmaceutical costs of the program are possible. Such
amendments could materially adversely affect our anticipated revenues and results of operations. Due to the uncertainties
regarding the outcome of future healthcare reform initiatives and their enactment and implementation, we cannot predict which,
if any, of the future reform proposals will be adopted or the effect such adoption may have on our business. Future rulemaking
and reform, including repeal of existing law, with respect to the healthcare and pharmaceutical industries, could increase
rebates, reduce prices or the rate of price increases for healthcare products and services, or require additional reporting and
disclosure. We cannot predict the timing or impact of any future rule making, reform or repeal of healthcare laws.
We depend on third-party agreements for a portion of our product offerings and any failure to maintain these arrangements
or enter into similar arrangements with new partners could result in a material adverse effect.
We have broadened our product offering by entering into a variety of third-party agreements covering any combination of joint
development, supply, marketing and/or distribution of products. We cannot provide assurance that the development, supply,
marketing and/or distribution efforts of our contractual partners will continue to be successful, that we will be able to renew
such agreements or that we will be able to enter into new agreements for additional products. Any alteration to, or termination
of, our current distribution and marketing agreements, failure to enter into new and similar agreements, or interruption of our
product supply under the such agreements, could have a material adverse effect on our business, condition (financial and
otherwise), prospects or results of operations.
The testing required for the regulatory approval of our products is conducted primarily by independent third parties. Any
failure by any of these third parties to perform this testing properly and in a timely manner may have an adverse effect upon
our ability to obtain regulatory approvals.
Our applications for regulatory approval of our products, including both internally developed and in-licensed products,
incorporate the results of testing and other information that is conducted or gathered primarily by independent third parties
(including, for example, manufacturers of raw materials, testing laboratories, contract research organizations or independent
research facilities). Our ability to obtain and maintain regulatory approval of the products being tested is dependent upon the
quality of the work performed by these third parties, the quality of the third parties’ facilities, and the accuracy of the
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information provided by third parties. We have little or no control over any of these factors. If this testing is not performed
properly, our ability to obtain or maintain regulatory approvals, and to launch or continue selling products, could be restricted
or delayed.
Our reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate
programs are complex and may involve subjective decisions. Any determination that we have failed to comply with those
obligations could subject us to penalties and sanctions, which could have a material adverse effect on our business.
The regulations applicable to us regarding reporting and payment obligations with respect to Medicaid reimbursement and
rebates and other governmental programs are complex. Our calculations and methodologies are subject to review and challenge
by the applicable governmental agencies, and it is possible that such reviews could adversely affect us and our business. In
addition, because our processes for these calculations and the judgments involved in making these calculations involve, and will
continue to involve, subjective decisions and complex methodologies, these calculations are subject to the risk of error and
misjudgment. Any governmental agencies that have commenced (or that may commence) an investigation of us could impose,
based on a claim of violation of anti-fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines,
penalties and possible exclusion from federal health care programs (including Medicaid and Medicare). Some of the applicable
laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with respect
to how to properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority may
take a position contrary to a position that we have taken and may impose civil and/or criminal sanctions on us. Any such
penalties, sanctions, or exclusion from federal health care programs could have a material adverse effect on our business,
financial position and results of operations. From time to time we conduct routine reviews of our government pricing
calculations. These reviews may have an impact on government price reporting and rebate calculations used to comply with
various government regulations regarding reporting and payment obligations.
Investigations and litigation concerning the calculation of average wholesale prices may adversely affect our business.
Many government and third-party payers, including Medicare, Medicaid, HMOs and others, reimburse doctors and others for
the purchase of certain prescription drugs based on a drug’s average wholesale price ("AWP"). In the past several years, state
and federal government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to
AWP, as a result of which certain agencies have suggested that reporting of inflated AWPs by manufacturers has led to
excessive payments for prescription drugs. Numerous pharmaceutical companies have been named as defendants in actions
brought by various State Attorneys General and have faced state law qui tam actions brought on behalf of various states,
alleging generally that the defendants defrauded state Medicaid systems by purportedly reporting or causing the reporting of
AWP and/or "Wholesale Acquisition Costs" that exceeded the actual selling price of the defendants’ prescription drugs. These
cases generally seek some combination of actual damages, and/or double damages, treble damages, compensatory damages,
statutory damages, civil penalties, disgorgement of excessive profits, restitution, disbursements, counsel fees and costs,
litigation expenses, investigative costs, injunctive relief, punitive damages, imposition of a constructive trust, accounting of
profits or gains derived through the alleged conduct, expert fees, interest and other relief that the court may have deemed
proper.
We can give no assurance that we will be able to settle current or future actions on terms that we deem reasonable, or that such
settlements or adverse judgments, if entered, will not exceed the amount of any reserve. Accordingly, such actions could
adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash
flows.
Failure to comply with our government contracting regulations could adversely affect our business and results of
operations.
In January 2020, we completed the acquisition of AvKARE, Inc. and Dixon Shane, LLC d/b/a R&S Northeast LLC. For
further details, refer to Note 3. Acquisitions and Divestitures. AvKARE generates a substantial amount of its net revenue from
government contracts. Contracts with federal, state, and local governmental customers are subject to various procurement
regulations, contract provisions and other requirements relating to their formation, administration and performance, and are
subject to regular audits and investigations. Any failure by us to comply with the government contracting regulations could
result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits,
suspension of payments, fines and suspension or debarment from future government business. Such failures could also cause
reputational damage to our business. In addition, some of AvKARE’s contracts provide for termination by the government,
without cause. If one or more of our government contracts is suspended or terminated or if we are suspended, debarred or
otherwise restricted from future government work, our business, results of operations and financial condition could suffer.
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Economic, Political and Financial Risks
Global economic conditions could harm us.
Global efforts to contain health care costs continue to exert pressure on product pricing and market access to pharmaceutical
products. In many international markets, government-mandated pricing actions have reduced prices of patented drugs, and it is
possible that the United States may adopt similar measures to reduce drug prices to consumers. Some countries may be subject
to periods of financial instability, may have reduced resources to spend on healthcare or may be subject to economic sanctions,
and our business in these countries may be disproportionately affected by these changes. Continued concerns about the systemic
impact of potential geopolitical issues and economic policy uncertainty, particularly in areas in which we operate, could
potentially cause economic and market instability in the future and could adversely affect our business, including our financial
performance.
Challenging economic conditions could also result in tighter credit conditions. The cost and availability of credit may be
adversely affected by illiquid credit markets and wider credit spreads, which could adversely affect the ability of our third-party
distributors, partners, manufacturers and suppliers to buy inventory or raw materials and to perform their obligations under
agreements with us, which could disrupt our operations and adversely affect our financial performance.
We may make acquisitions of, or investments in, complementary businesses or products, which may be on terms that may
not turn out to be commercially advantageous, or may require additional debt or equity financing, which could increase our
leverage and dilute equity holders.
While we regularly review the potential acquisition of technologies, products, product rights and complementary businesses and
are currently evaluating, and intend to continue to evaluate, potential product and/or company acquisitions and other business
development opportunities, we may not be able to identify suitable acquisition or investment candidates. In addition, to the
extent that we do identify candidates that we believe to be suitable, we cannot provide any assurance that we will be able to
reach an agreement with the selling party or parties or consummate the transaction on terms that are commercially
advantageous to us or at all. If we make any acquisitions or investments, we may finance such acquisitions or investments
through our cash reserves, debt financing, which may increase our leverage, or by issuing additional equity interests, which
could dilute the holdings of our then-existing shareholders. If we require financing, we cannot provide any assurance that we
will be able to obtain such financing when needed on acceptable terms or at all.
Our operations in, and potential expansion into additional, international markets subjects us to increased regulatory
oversight both in those international markets and domestically and regulatory, economic, social and political uncertainties,
which could cause a material adverse effect on our business, financial position and results of operations.
We are subject to certain risks associated with having assets and operations located in foreign jurisdictions, including our
operations in India and Ireland. We may also in the future expand our international business and operations into jurisdictions in
which we have limited operating experience, including with respect to seeking regulatory approvals, marketing or selling
products.
Our operations in these jurisdictions may be adversely affected by general economic conditions and economic and fiscal policy,
including changes in exchange rates and controls, interest rates and taxation policies, increased government regulation, and,
with respect to India, any reversal of India’s recent economic liberalization and deregulation policies, as well as social
instability and other political, economic or diplomatic developments in the future. Certain jurisdictions have, from time to time,
experienced instances of civil unrest and hostilities, both internally and with neighboring countries. Rioting, military activity,
terrorist attacks, or armed hostilities could cause our operations in such jurisdictions to be adversely affected or suspended. We
generally do not have insurance for losses and interruptions caused by terrorist attacks, military conflicts and wars. In addition,
our international operations may subject us to heightened scrutiny under the Foreign Corrupt Practices Act ("FCPA") or similar
anti-bribery laws, and could subject us to liability under such laws despite our efforts to comply. Further, notwithstanding our
compliance programs, there can be no assurances that our policies will prevent our employees or agents from violating these
laws or protect us from any such violations. Additionally, we cannot predict the nature, scope or impact of any future regulatory
requirements that may apply to our international operations or how foreign governments will interpret existing or new laws.
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We have increased exposure to tax liabilities, including foreign tax liabilities.
As a U.S. company with subsidiaries in, among other countries, India, Switzerland, Ireland and the U.K., we are subject to, or
potentially subject to, income and other taxes in these jurisdictions as well as the United States. Significant judgment is required
in determining our worldwide provision for income taxes and other tax liabilities. Changes in tax laws or tax rulings may have a
significant adverse impact on our effective tax rate. In addition, we have potential tax exposures resulting from the varying
application of statutes, regulations and interpretations, which include exposures on intercompany terms of cross-border
arrangements among foreign subsidiaries in relation to various aspects of our business, including research and development
activities and manufacturing. Tax authorities in various jurisdictions may disagree with, and subsequently challenge, the
amount of profits taxed in such jurisdictions. Any such challenges may result in increased tax liability, including accrued
interest and penalties, which would cause our tax expense to increase and may have a material adverse effect on our business,
financial position and results of operations and our ability to satisfy our debt obligations.
In certain circumstances, we issue price adjustments and other sales allowances to our customers. Although we may
establish reserves based on our estimates of these amounts, if estimates are incorrect and the reserves are inadequate, it may
result in adjustments to these reserves that may have a material adverse effect on our financial position and results of
operations.
As described above, the first company to file an ANDA containing a Paragraph IV certification that successfully challenges the
patent(s) on a branded product may be granted 180 days of generic market exclusivity by the FDA for such generic product. At
the expiration of such exclusivity period, other generic distributors may enter the market, resulting in a significant price decline
for the drug (in some instances, price declines have exceeded 90%). When we experience price declines following a period of
generic marketing exclusivity, or at any time when a competitor enters the market or offers a lower price with respect to a
product we are selling, we may, at our discretion, decide to lower the price of our product to retain market share and provide
price adjustments to our customers for the difference between our new (lower) price and the price at which we previously sold
the product which is still held in inventory by such customers. The Company accrues for these adjustments when its expected
value of an adjustment is greater than zero, based on contractual pricing, actual net sales, accrual rates based on historical
average rates, and estimates of the level of inventory of its products in the distribution channel that remain subject to these
adjustments. There are also circumstances under which we may decide not to provide price adjustments to certain customers,
and consequently, as a matter of business strategy, we may risk a greater level of sale returns of products in a customer’s
existing inventory and lose future sales volume to competitors rather than reduce our pricing.
Based on estimates, we establish reserves for sales allowances including, but not limited to: sales discounts and returns,
chargebacks, sales volume rebates, shelf stocks, re-procurement charges, cash discounts, and Medicaid rebate obligations at the
time of sale. Although we believe our reserves are adequate as of the date of this report, we cannot provide assurances that our
reserves will ultimately prove to be adequate. Increases in sales allowances may exceed our estimates for a variety of reasons,
including unanticipated competition or an unexpected change in one or more of our contractual relationships. We will continue
to evaluate the effects of competition and will record a price adjustment reserve if and when we deem it necessary. Any failure
to establish adequate reserves with respect to sales allowances may result in a material adverse effect on our financial position
and results of operations.
If we determine that our goodwill and other intangible assets have become impaired, we may record significant impairment
charges, which would adversely affect our results of operations.
Goodwill and other intangible assets represent a significant portion of our assets. Goodwill is the excess of cost over the fair
market value of net assets acquired in business combinations. In the future, goodwill and intangible assets may increase as a
result of future acquisitions. We review our goodwill and indefinite lived intangible assets at least annually for impairment. We
review our intangible assets with finite lives for recoverability whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. Impairment may result from, among other things, deterioration in
the performance of acquired businesses, adverse market conditions and adverse changes in applicable laws or regulations,
including changes that restrict the activities of an acquired business.
Generic pharmaceuticals have faced regular and increasing price erosion each year, placing even greater importance on our
ability to continually introduce new products. If these trends continue or worsen, or if we experience further difficulty in this
market or the specialty market, our revenues and profits in our Generics and Specialty segments may continue to be affected
adversely. A decline in our market capitalization, even if otherwise due to macroeconomic or industry-wide factors, could put
pressure on the carrying value of our goodwill in both our Generics and Specialty segments and cause the Company to conduct
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an interim impairment test. A determination that all or a portion of our goodwill or other intangible assets is impaired, although
a non-cash charge against earnings, could have a material adverse effect on our results of operations and financial condition.
Risks Relating to Our Indebtedness
We have a substantial amount of indebtedness, which could adversely affect our financial health.
We have a substantial amount of indebtedness. In order to finance the acquisition of Impax, during the year ended December
31, 2018, we borrowed an aggregate principal amount of $2.7 billion under a senior secured term loan (the “Term Loan”) due
May 2025 and entered into a new senior secured asset based revolving credit facility, which matures on May 4, 2023
(“Revolving Credit Facility”) with borrowing capacity of up to $489 million, under which no amounts were drawn and
outstanding as of December 31, 2021. The net proceeds from the term loan were used to finance in part the Combination, to pay
off certain existing indebtedness of Amneal and Impax and to pay fees and expenses related to the foregoing. For additional
details of our debt, refer to Note 17. Debt.
Our substantial level of indebtedness could have important consequences. For example, it could:
•
•
•
•
increase our vulnerability to adverse economic and industry conditions;
limit our ability to obtain additional financing for future working capital, capital expenditures, raw materials, strategic
acquisitions and other general corporate requirements;
expose us to interest rate fluctuations because the interest on certain debt under the credit facilities is imposed at
variable rates;
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing
the availability of cash flow for operations and other purposes;
• make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration
•
•
•
•
of such indebtedness;
limit our ability to refinance indebtedness or increase the associated costs;
require us to sell assets to reduce debt or influence the decision about whether to do so;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or
prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to
improve operating margins or our business; and
place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more
favorable interest rates and that, as a result, may be better positioned to withstand economic downturn.
In addition, our borrowings under our Term Loan and Revolving Credit Facility bear a variable interest rate based on the
London Inter-bank Offered Rate (“LIBOR”) as a benchmark for establishing the rate of interest. LIBOR is the subject of
national, international and other regulatory guidance and proposals for reform. In 2017, the United Kingdom's Financial
Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR. On November 30,
2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal
Reserve and the FCA, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one
week and two month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors. While this announcement extends the
transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new
LIBOR issuances by the end of 2021. In light of these recent announcements, the future of LIBOR at this time is uncertain and
any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause
LIBOR to perform differently than in the past or cease to exist. The United States Federal Reserve has also advised banks to
cease entering into new contracts that use USD LIBOR as a reference rate. The Federal Reserve, in conjunction with the
Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants,
has identified the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements,
backed by Treasury securities, as its preferred alternative rate for LIBOR. There are significant differences between LIBOR and
SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate
while LIBOR reflects term rates at different maturities. We continue to monitor to take steps to assess LIBOR exposure and
mitigate potential impacts of the transition. The consequences of these developments cannot be entirely predicted but could
include an increase in the cost of our borrowings under the Term Loan and Revolving Credit Facility.
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We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to
satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating
performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative,
regulatory and other factors which may be beyond our control. We may be unable to maintain a level of cash flows from
operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. As of
December 31, 2021, we had approximately $2.7 billion of total indebtedness. Accordingly, we expect to make $27 million in
principal payments and make interest payments totaling $105 million during 2022 related to our Term Loan. Related to our
Rondo Term Loan (as defined below), we expect to make $9 million in principal payments and make interest payments totaling
$3 million during 2022. Refer to Note 17. Debt and “Commitments and Contractual Obligations” under Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity
problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or
operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any
such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not
allow us to meet our scheduled debt service obligations. Our credit agreements restrict our ability to dispose of assets and use
the proceeds from those dispositions and also restrict our ability to raise debt or equity capital to be used to repay other
indebtedness when it becomes due. We may not be able to consummate those dispositions or obtain proceeds in an amount
sufficient to meet any debt service obligations when due.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially
reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability
to satisfy our obligations, including our indebtedness.
If we cannot make scheduled payments on our debt, we will be in default and, as a result:
our debt holders could declare all outstanding principal and interest to be due and payable;
the lenders under our credit agreements could terminate their commitments to lend us money; and
•
•
• we could be forced into bankruptcy or liquidation.
The terms of our credit agreements restrict our operations, particularly our ability to respond to changes or to take certain
actions.
Our credit agreements contain a number of restrictive covenants that impose operating and financial restrictions on us and may
limit our ability to engage in acts that may be in our long-term best interest, including restrictions on the ability to:
incur additional indebtedness;
pay dividends or make other distributions or repurchase or redeem capital stock;
prepay, redeem or repurchase certain debt;
•
•
•
• make loans and investments;
•
•
•
•
•
•
sell assets;
incur liens;
enter into transactions with affiliates;
alter the businesses conducted by us;
enter into agreements restricting subsidiaries’ ability to pay dividends; and
consolidate, merge or sell all or substantially all of our assets.
A breach of the covenants under such credit agreements could result in an event of default under the applicable indebtedness.
Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to
which a cross-acceleration or cross-default provision applies which could have a material adverse effect on our business,
operations and financial results. Furthermore, if we were unable to repay the amounts due and payable under our credit
agreements, those lenders could proceed against the collateral granted to them to secure that indebtedness which could force us
into bankruptcy or liquidation. In the event our lenders accelerated the repayment of the borrowings, we and our subsidiaries
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may not have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the credit agreements would
likely have a material adverse effect on us. As a result of these restrictions, we may be:
•
•
•
limited in how we conduct business;
unable to raise additional debt or equity financing to operate during general economic or business downturns; or
unable to compete effectively or to take advantage of new business opportunities.
These restrictions may affect our ability to grow in accordance with our strategy.
Risks Related to Our Deferred Tax Assets and Tax Receivable Agreement
Although we have no net deferred tax assets as of December 31, 2021, if we determine in the future that we will not be able
to fully utilize all or part of any net deferred tax assets recognized, we would record a valuation allowance through earnings
in the period the determination was made, which could have an adverse effect on our results of operations and earnings.
We record valuation allowances against our deferred tax assets (“DTAs”) when it is more likely than not that all or a portion of
a DTA will not be realized. We routinely evaluate the realizability of our DTAs by assessing the likelihood that our deferred tax
assets will be recovered based on all available positive and negative evidence, including scheduled reversals of deferred tax
liabilities, estimates of future taxable income, tax planning strategies and results of operations. Estimating future taxable income
is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and
incorporate certain assumptions, including projected new product launches, revenue growth, and operating margins, among
others.
In assessing the need for a valuation allowance, we considered all available objective and verifiable evidence both positive and
negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis,
legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible
tax planning strategies. We estimated that as of December 31, 2019 we had generated a cumulative consolidated three-year pre-
tax loss, which continued through December 31, 2021. As a result of the initial analysis and the continued quarterly and year-
end analyses through December 31, 2021, we determined that it is more likely than not that we will not realize the benefits of
our gross DTAs and therefore, we have recorded and maintained a valuation allowance. As of December 31, 2021, this
valuation allowance amounts to $417 million, and it reduces the carrying value of these gross DTAs, net of the impact of the
reversal of taxable temporary differences, to zero.
We are required under a tax receivable agreement to make cash payments in respect of certain tax benefits to which we may
become entitled, and we expect that the payments we will be required to make will be substantial.
We are a party to a tax receivable agreement (“TRA”) with each of the members of the the group, together with their affiliates
and certain assignees, who owned Amneal when it was a private company (“Members” or the “Amneal Group”), dated May 4,
2018. Under the TRA, we will be required to make cash payments to the Members and their permitted transferees equal to 85%
of certain tax benefits, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of
redemptions or exchanges of Amneal common units and the corresponding number of shares of Class B Common Stock for
Class A Common Stock by the Members and their permitted transferees as set forth in the agreement. We expect that the
amount of the cash payments that we will be required to make under the TRA will be significant. Any payments made by us to
the Members and their permitted transferees under the TRA will generally reduce the amount of overall cash flow that might
have otherwise been available to us.
As discussed in Note 8, Income Taxes we have determined it is more-likely-than-not we will be unable to utilize all of our
DTAs subject to the TRA and, therefore, reversed the liability under the TRA related to the tax savings we may realize from
common units sold or exchanged through December 31, 2019 and continued to record no liability through December 31, 2021.
If utilization of these DTAs becomes more-likely- than-not in the future, at such time, we will record liabilities under the TRA
of up to an additional $206 million as a result of basis adjustments under Internal Revenue Code Section 754, which will be
recorded through charges to our consolidated statement of operations. We reversed the accrued TRA liability of $193 million,
which resulted in a gain recorded in other (expense) income, net for the year ended December 31, 2019. As of December 31,
2021, no additional TRA liability has been accrued. However, if the tax attributes are not utilized in future years, it is
reasonably possible no amounts would be paid under the TRA. Should we determine that a DTA with a valuation allowance is
realizable in a subsequent period, the related valuation allowance will be released and if a resulting TRA payment is determined
to be probable, a corresponding liability will be recorded. As a result, our future results of operations and earnings could be
significantly impacted as results of these matters.
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The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing
and number of Amneal common units sold or exchanged for our Class A Common stock, the price of our Class A Common
Stock on the date of sale or exchange, the timing and amount of our taxable income, and the tax rate in effect at the time of
realization of the taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from the
use of the TRA’s attributes). Further sales or exchanges occurring subsequent to December 31, 2021 could result in future
Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal common units.
In certain cases, payments under the TRA to the Members or their permitted transferees may be accelerated or significantly
exceed the actual benefits we realize in respect of the tax attributes subject to the TRA.
The TRA provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control or if,
at any time, we elect an early termination of the TRA, then our obligations under the TRA to make payments would be based
on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential
future tax benefits that are subject to the TRA.
As a result of the foregoing, we could be required to make payments under the TRA that (i) are greater than the actual benefits
we ultimately realize in respect of the tax benefits that are subject to the TRA and (ii) are based on the present value of the
anticipated future tax benefits that are the subject of the TRA, which payment may be required to be made significantly in
advance of the actual realization, if any, of such future tax benefits. In these situations, our obligations under the TRA could
have a substantial negative impact on our liquidity and could have the effect of delaying or preventing certain mergers, asset
sales, other forms of business combinations or other changes of control. There can be no assurance that we will be able to fund
or finance our obligations under the TRA.
We will not be reimbursed for any payments made to the Members or their permitted transferees under the TRA in the event
that any tax benefits are disallowed.
Payments under the TRA will be based on the tax reporting positions that we determine, and the Internal Revenue Service or
another tax authority may challenge all or part of the tax benefits we claim, as well as other related tax positions we take, and a
court could sustain such challenge. If the outcome of any such challenge would reasonably be expected to materially adversely
affect a recipient’s rights or obligations (including the amount or timing of payments) under the TRA, then we will not be
permitted to settle or fail to contest such challenge without the consent of the Members. We will not be reimbursed for any cash
payments previously made to the Members or their permitted transferees under the TRA in the event that any tax benefits
initially claimed by us and for which payment has been made to the Members or their permitted transferees are subsequently
challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by us to the Members
or their permitted transferees will be netted against any future cash payments that we might otherwise be required to make to
Holdings or its permitted transferees under the terms of the TRA. However, we might not determine that we have effectively
made an excess cash payment to the Members or their permitted transferees for a number of years following the initial time of
such payment. As a result, payments could be made under the TRA in excess of the tax savings that we ultimately realize in
respect of the tax attributes with respect to the Members or their permitted transferees.
Risks Related to Our Class A Common Stock
We are controlled by the Amneal Group. The interests of the Amneal Group may differ from the interests of our other
stockholders.
As of December 31, 2021, the Amneal Group controlled the majority of the voting power of all of our outstanding shares of
common stock. Accordingly, the Amneal Group has substantial influence over the outcome of corporate actions requiring
stockholder approval, including the election of directors, any merger, consolidation, or sale of all or substantially all of our
assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of the
Company, even if such a change of control would benefit our other stockholders. This concentrated control could discourage a
potential investor from seeking to acquire Class A Common Stock and, as a result, might harm the market price of that Class A
Common Stock.
Through its control of a majority of our voting power and the provisions set forth in our charter, bylaws and the Company’s
Second Amended and Restated Stockholders Agreement, dated December 16, 2017 (as amended to date, the “Stockholders
Agreement”), the Amneal Group has the ability to designate and elect a majority of our board of directors. As of December 31,
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2020, six out of ten members of our board of directors, have been designated by the Amneal Group. The Amneal Group has
control over all matters submitted to our stockholders for approval, including changes in capital structure, transactions requiring
stockholder approval under Delaware law and corporate governance, subject to the terms of the Stockholders Agreement
relating to the Amneal Group's agreement to vote in favor of directors not designated by the Amneal Group and such other
matters that are set forth in the Stockholders Agreement. The Amneal Group may have different interests than our other
stockholders and may make decisions adverse such interests.
In the ordinary course of their business activities, the Amneal Group may engage in activities where their interests conflict with
our interests or those of our other stockholders. Our certificate of incorporation provides that the Amneal Group have no duty to
refrain from engaging in the same business activities or similar business activities or lines of business in which we operate. The
Amneal Group also may pursue business opportunities with any of our clients, customers or vendors. that may be
complementary to our business and, as a result, those acquisition opportunities may not be available to us.
The Amneal Group could also transfer control of us to a third party by transferring its shares. In addition, the Company believes
members of the Amneal Group have pledged Amneal Common Units and the corresponding shares of Class B Common Stock
to secure borrowings, and other members of the Amneal Group could enter into similar arrangements. In connection with these
arrangements, the Company has entered into agreements with certain Amneal Group members and the lending institutions to
whom their securities may be pledged. The voluntary or forced sale of some or all of these units or shares pursuant to a margin
call or otherwise could cause our stock price to decline and negatively impact our business. Similarly, a voluntary or forced sale
could cause the Company to lose its “controlled company” status under the New York Stock Exchange listing requirements,
which would require us to comply over a transition period with certain corporate governance requirements from which we are
currently exempt, including having a fully independent compensation committee. If all of the Amneal Common Units and
corresponding shares of Class B stock were pledged to secure borrowings, a complete foreclosure could result in a change of
control.
Future sales of shares by the Amneal Group could cause our Class A Common Stock price to decline.
The majority of our Common Stock is held by the Amneal Group and is eligible for sale or transfer (subject to certain
continuing restrictions). The Amneal Group may elect to sell their shares. If some or all of these shares are sold, or if it is
perceived that they will be sold, the trading price of our Class A Common Stock could decline.
We are a holding company with nominal net worth and depend on dividends and distributions from our subsidiaries.
We are a holding company with nominal net worth and will not have any material assets or conduct any business operations
other than our investments in our subsidiaries. Our business operations are conducted primarily out of our direct operating
subsidiary, Amneal, and its subsidiaries. As a result, our ability to satisfy our financial obligations and, notwithstanding any
restrictions on payment of dividends under our existing indebtedness, our ability to pay dividends, if any, is dependent upon
cash dividends and distributions or other transfers from our subsidiaries, including from Amneal.
Our charter provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for
substantially all disputes between us and our stockholders, which could limit the ability of our stockholders to obtain a
favorable judicial forum for disputes with us or our current or former directors, officers or employees.
Our charter provides that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the
State of Delaware (or, if such court does not have jurisdiction, the Superior Court of the State of Delaware or the federal district
court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on
behalf of the Company, any action asserting a claim of breach of fiduciary duty owed by any of our current or former director
or officer to us or our stockholders, any action asserting a claim arising pursuant to any provision of the Delaware General
Corporate Law (“DGCL”), our charter or bylaws or any action asserting a claim governed by the internal affairs doctrine. The
choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our current or former directors, officers or other employees, which may discourage such lawsuits against us
and our current or former directors, officers and other employees. Alternatively, if a court were to find the choice of forum
provision contained in our charter to be inapplicable or unenforceable in an action, we may incur additional costs associated
with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
The choice of forum provision in our charter will not preclude or contract the scope of exclusive federal or concurrent
jurisdiction for actions brought under the federal securities laws, including the Securities Exchange Act of 1934, as amended, or
the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.
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Anti-takeover provisions under Delaware law could make an acquisition of the Company more difficult and may prevent
attempts by our stockholders to replace or remove our management.
Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the DGCL, which prohibits
stockholders owning in excess of 15% of the outstanding voting stock of the Company from merging or combining with us.
Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential
acquirers to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some
stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove then
current management by making it more difficult for stockholders to replace members of our board of directors, which is
responsible for appointing the members of management.
We do not anticipate that we will pay any cash dividends in the foreseeable future.
The current expectation is that we will retain our future earnings to fund the development and growth of our business. As a
result, capital appreciation, if any, of our Class A Common Stock will be the sole source of gain for our stockholders for the
foreseeable future. The payment of future cash dividends, if any, will be at the discretion of our Board of Directors and will be
dependent upon our earnings, financial condition, capital requirements and other factors as our Board of Directors may deem
relevant.
General Risk Factors
We may need to raise additional funds in the future which may not be available on acceptable terms or at all.
We may consider issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to
refinance existing debt, or for general corporate purposes. If we issue equity, convertible preferred equity or convertible debt
securities to raise additional funds, our stockholders may experience dilution, and the new equity or debt securities may have
rights, preferences and privileges senior to those of our stockholders. If we incur additional debt, we may increase our leverage
relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses and potentially lowering
our credit ratings. We may not be able to market such issuances on favorable terms, or at all, in which case, we may not be able
to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive
pressures or unanticipated customer requirements.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report
our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud.
We are required to comply with Section 404 of the Sarbanes-Oxley Act, which requires public companies to conduct an annual
review and evaluation of their internal controls and attestations of the effectiveness of such internal controls by independent
auditors. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can
produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated
frequently. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the
Sarbanes-Oxley Act or the inability of our independent registered public accounting firm to express an opinion as to the
effectiveness of our internal control over financial reporting could have a material adverse effect on our business. We could lose
investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price
of our common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the
activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate
legal proceedings against us and our business may be harmed.
Our management or our independent registered public accounting firm may also identify material weaknesses in our internal
control over financial reporting in the future. The existence of material weaknesses in internal control may result in current and
potential stockholders and alliance and collaboration agreement partners losing confidence in our financial reporting, which
could harm our business, the market price of our common stock, and our ability to retain our current, or obtain new, alliance
and collaboration agreement partners.
In addition, our internal controls over financial reporting may not prevent or detect misstatements because of their inherent
limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective
internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial
statements. If we fail to maintain adequate internal controls, including any failure to implement required new or improved
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controls, or if we experience difficulties in their implementation, we could fail to meet our financial reporting obligations and
our business, financial results and reputation could be harmed.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Amneal owns or leases numerous properties in domestic and foreign locations. Amneal’s principal properties include
manufacturing facilities, R&D laboratories, warehouses, and corporate offices. Our properties are generally used to support the
operations of our Generics, Specialty and AvKARE segments.
Our significant properties are as follows:
Property Address
Bridgewater, New Jersey
Glasgow, Kentucky
Glasgow, Kentucky
Yaphank, New York
Glasgow, Kentucky
Piscataway, New Jersey
Piscataway, New Jersey
Piscataway, New Jersey
Branchburg, New Jersey
Branchburg, New Jersey
Piscataway, New Jersey
Branchburg, New Jersey
East Hanover, New Jersey
Bridgewater, New Jersey
Bridgewater, New Jersey
Yaphank, New York
Pulaski, Tennessee
Philadelphia, Pennsylvania
Fountain Run, Kentucky
Cashel Co, Tipperary, Ireland
Ahmedabad, Gujarat, India
Ahmedabad, Gujarat, India
Ahmedabad, Gujarat, India
Ahmedabad, Gujarat, India
Ahmedabad, Gujarat, India
Mahabubnagar, Telangana, India
Visakhapatam, Apandhra Pradesh, India
Bharuch, Gujarat, India
Ahmedabad, Gujarat, India
Mehsana, Gujarat, India
Ahmedabad, Gujarat, India
Ahmedabad, Gujarat, India
Ahmedabad, Gujarat, India
Purpose
Executive Office
Administrative, Distribution and Warehouse
Warehouse
Warehouse
Warehouse
Warehouse
Manufacturing
R&D, manufacturing
Manufacturing
Manufacturing
Manufacturing
Warehouse
Packaging
R&D
R&D
Manufacturing, R&D, Quality and Regulatory
Warehouse and office space
Warehouse and office space
Warehouse and office space
R&D, Manufacturing
Oral Solids Manufacturing and R&D
Oral Solids and Injectables Manufacturing and R&D
R&D (Injectables), Corporate Office
Corporate Office
Warehouse
Oncology R&D and Manufacturing
API Manufacturing and R&D
API Manufacturing
R&D
Injectables Manufacturing
Office space
Biologics manufacturing
Injectables Manufacturing
Legal
Status
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Owned
Leased
Owned
Owned
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Item 3. Legal Proceedings
Information pertaining to legal proceedings can be found in Note 21. Commitments and Contingencies and is incorporated by
reference herein.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information and Holders
The principal market for our Class A Common Stock is the New York Stock Exchange ("NYSE"). Our Class A Common Stock
has been traded on the NYSE under the symbol "AMRX" since it began trading on May 7, 2018. According to the records of
our transfer agent, we had 171 holders of record of our Class A Common Stock as of February 14, 2022. A substantially greater
number of holders of our Class A Common Stock are "street name" or beneficial holders, whose shares of record are held by
banks, brokers, and other financial institutions. As of February 14, 2022, there were 32 record holders of our Class B Common
Stock. All of our issued and outstanding Class B Common Stock is held by the Amneal Group. Our Class B Common Stock is
not listed or traded on any stock exchange.
Performance Graph
Set forth below is a line graph comparing the change in the cumulative total shareholder return on our Class A Common Stock
with the cumulative total returns of the NYSE Composite Index, the Russell 2000 Index and the Dow Jones U.S.
Pharmaceuticals Index for the period from May 7, 2018, to December 31, 2021, assuming the investment of $100 on May 7,
2018, and the reinvestment of dividends. The Class A Common Stock price performance shown on the graph only reflects the
change in our Class A Common Stock price relative to the noted indices and is not necessarily indicative of future price
performance.
44
DOLLARSCOMPARISON OF CUMULATIVE RETURN SINCE THE COMBINATIONAMONG AMNEAL PHARMACEUTICALS, INC., RUSSELL 2000 INDEX,NEW YORK STOCK EXCHANGE COMPOSITE TOTAL RETURNS AND DOW JONESPHARMACEUTICALS INDEXAmneal Pharmaceuticals, Inc.NYSE Composite Total ReturnsRussell 2000 IndexDJ US Pharmaceuticals Index5/7/20186/30/20189/30/201812/31/20183/31/20196/30/20199/30/201912/31/20193/31/20206/30/20209/30/202012/31/20203/31/20216/30/20219/30/202112/31/2021020406080100120140160180 Table of Contents
Dividends
We have never paid cash dividends on any class of our common stock and have no present plans to do so. Our current policy is
to retain all earnings, if any, for use in the operation of our business or to reduce our debt.
Issuer Purchases of Equity Securities
We did not purchase any shares of our Class A Common Stock during the three months ended December 31, 2021.
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Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Amneal Pharmaceuticals, Inc. (the “Company”, “we,” “us,” or “our”) is a pharmaceutical company specializing in developing,
manufacturing, marketing and distributing high-value generic and branded specialty pharmaceutical products across a broad
array of dosage forms and therapeutic areas. The Company operates principally in the United States, India, and Ireland, and
sells to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly. The
Company is a holding company, whose principal assets are common units (“Amneal Common Units”) of Amneal
Pharmaceuticals, LLC (“Amneal”). In 2018, Amneal completed the acquisition of Impax Laboratories, Inc. (“Impax”), a
generic and specialty pharmaceutical company.
The group, together with their affiliates and certain assignees, who owned Amneal when it was a private company (the “Amneal
Group”) held 50.4% of Amneal Common Units and the Company held the remaining 49.6% as of December 31, 2021.
Although the Company has a minority economic interest in Amneal, it is Amneal’s sole managing member, having the sole
voting power to make all of Amneal’s business decisions and control its management. Therefore, the Company consolidates the
financial statements of Amneal and its subsidiaries. The Company records non-controlling interests for the portion of Amneal’s
economic interests that it does not hold.
The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including
those set forth under Item 1A. Risk Factors and under the heading Forward-Looking Statements in this Annual Report on Form
10-K. The following discussion and analysis, as well as other sections in this report, should be read in conjunction with the
consolidated financial statements and related notes to consolidated financial statements included elsewhere herein.
For a discussion of our financial condition and results of operations for the year ended December 31, 2020 compared to the year
ended December 31, 2019, see “Results of Operations” and “Liquidity and Capital Resources” under Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form
10-K, which discussion is incorporated herein by reference.
Overview
Segments
We have three reportable segments: Generics, Specialty, and AvKARE.
Generics
Our Generics segment includes approximately 250 product families covering an extensive range of dosage forms and delivery
systems, including both immediate and extended release oral solids, powders, liquids, sterile injectables, nasal sprays, inhalation
and respiratory products, ophthalmics (which are sterile pharmaceutical preparations administered for ocular conditions), films,
transdermal patches and topicals (which are creams or gels designed to administer pharmaceuticals locally through the skin).
We focus on developing products with substantial barriers-to-entry resulting from complex drug formulations or manufacturing,
or legal or regulatory challenges. Generic products, particularly in the U.S., generally contribute most significantly to revenues
and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic
competition. As such, the timing of new product introductions can have a significant impact on the Company’s financial results.
The entrance into the market of additional competition generally has a negative impact on the volume and / or pricing of the
affected products. Additionally, pricing is determined by market place dynamics and is often affected by factors outside of the
Company’s control.
Specialty
Our Specialty segment is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical
products, with a focus on products addressing CNS disorders, including migraine and Parkinson’s disease. Our portfolio of
products includes Rytary®, an extended release oral capsule formulation of carbidopa-levodopa for the treatment of
Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or
manganese intoxication. In addition to Rytary®, our promoted Specialty portfolio also includes Unithroid® (levothyroxine
sodium), for the treatment of hypothyroidism, which is sold under a license and distribution agreement with Jerome Stevens
Pharmaceuticals, Inc., and Emverm® (mebendazole) 100 mg chewable tablets, for the treatment of pinworm, whipworm,
common roundworm, common hookworm and American hookworm in single or mixed infections. Effective during the three
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months ended September 2019, the operating results for oxymorphone were reclassified from Generics to Specialty, where it is
sold as a non-promoted product.
For Specialty products, the majority of the product’s commercial value is usually realized during the period in which the
product has market exclusivity. In the U.S. when market exclusivity expires and generic versions of a product are approved and
marketed, there can often be very substantial and rapid declines in the branded product’s sales. For example, the pediatric
exclusivity of the AstraZeneca patent licensed to Impax for Zomig® Nasal Spray expired in May 2021 and we lost market
exclusivity in the fourth quarter of 2021.
AvKARE
Our AvKARE segment provides pharmaceuticals, medical and surgical products and services primarily to governmental
agencies. AvKARE is a re-packager of bottle and unit dose pharmaceuticals under the registered names of AvKARE and
AvPAK, which service the Department of Defense and Department of Veteran Affairs as well as institutional customers.
AvKARE is also a wholesale distributor of pharmaceuticals, over the counter products and medical supplies to institutional
customers which are located throughout the United States of America focused primarily on offering 340b-qualified entities
products to provide consistency in care and pricing.
The Pharmaceutical Industry
The pharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific
factors and challenges, which can significantly impact our results. For a more detailed explanation of our business and its risks,
refer to Item 1. Business and Item 1A. Risk Factors in this Form 10-K.
COVID-19 Pandemic
In March 2020, the World Health Organization designated the outbreak of a novel strain of coronavirus (“COVID-19”) as a
global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of
COVID-19, including imposing restrictions on movement and travel such as quarantines and shelter-in-place requirements, and
restricting or prohibiting outright some or all commercial and business activity, including the manufacture and distribution of
certain goods and the provision of non-essential services. These measures, though currently temporary in nature, may become
more severe and continue indefinitely depending on the evolution of the outbreak.
As a result of the pandemic, we observed lost sales and some supply interruptions during the year ended December 31, 2020 in
our New York, New Jersey and India manufacturing plants. Additionally, decreased influenza activity during the year ended
December 31, 2021, drove significantly lower sales volumes and increased returns related to Oseltamivir as compared to the
prior year.
While manufacturing has resumed to around pre-pandemic levels, we may again experience supply chain constraints during
subsequent waves of COVID-19 infections. Although not currently expected, any supply chain disruptions may significantly
impact our 2022 results of operations and cash flows. Increasing infection rates and the introduction of new and more easily
transmitted variants of COVID-19, such as the Delta and Omicron variants, could further disrupt our global supply chains and
cause labor shortages, as well as reduce the number of physician visits in general.
To the extent that the pandemic continues or worsens, national, state, local and international governments may impose
additional restrictions or extend the restrictions already in place. The worsening of the pandemic and the related safety and
business operating restrictions could result in a number of adverse impacts to our business, including, but not limited to,
additional disruption to the economy and our customers, additional work restrictions, supply chains being interrupted or slowed,
and rising supply prices. Also, governments may impose other laws, regulations, or taxes that could adversely impact our
business, financial condition, or results of operations. Further, depending on the extent to which our customers are affected,
they could delay or reduce purchases of products we provide. The potential effects of the pandemic also could impact us in a
number of other ways including, but not limited to, reductions to our profitability, fluctuations in foreign currency markets, the
availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential
impairment of the carrying amount of goodwill or other definite-lived assets.
We continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by
national, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers,
and shareholders. Until the ultimate extent and duration of the pandemic is known, we cannot predict the ultimate effects the
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pandemic may have on our business, in particular with respect to demand for our products, our strategy, and our prospects, the
effects on our customers, or the impact on our financial results.
Inflation
While it is difficult to accurately measure the impact of inflation, we estimate our business experienced an increase in costs due
to inflation of approximately $10 million for the year ended December 31, 2021. We expect an inflationary impact of
approximately $20 million for the year ending December 31, 2022. However, rising inflationary pressures due to higher input
costs, including higher material, transportation, labor and other costs, could exceed our expectations and may adversely impact
our operating results in future periods.
Results of Operations
Consolidated Results
The following table sets forth our summarized, consolidated results of operations (in thousands):
Years Ended December 31,
2021
2020
Net revenue
Cost of goods sold
Cost of goods sold impairment charges
Gross profit
Selling, general and administrative
Research and development
In-process research and development impairment charges
Intellectual property legal development expenses
Acquisition, transaction-related and integration expenses
Charges related to legal matters, net
Restructuring and other charges
Change in fair value of contingent consideration
Property losses and associated expenses, net
Operating income
Total other expense, net
Income (loss) before income taxes
Provision for (benefit from) income taxes
Net income
Net Revenue
$ 2,093,669 $ 1,992,523
1,329,551
34,579
628,393
326,727
179,930
2,680
10,655
8,988
5,860
2,398
—
—
91,155
(126,935)
(35,780)
(104,358)
68,578
1,302,004
22,692
768,973
365,504
201,847
710
7,716
8,055
25,000
1,857
200
5,368
152,716
(121,350)
31,366
11,196
20,170 $
$
Net revenue for the year ended December 31, 2021 increased by 5%, or $101 million, to $2.1 billion as compared to $2.0
billion for the year ended December 31, 2020. The increase from the prior year period was attributable to growth in all three
segments as follows:
•
•
•
AvKARE segment revenues for the year ended December 31, 2021 increased $55 million, as compared to the prior
year, due to the timing of the acquisition in 2020 and organic growth. We completed the acquisitions of the businesses
that comprise our AvKARE segment on January 31, 2020 (the “Rondo Acquisitions”). Refer to Note 3. Acquisitions
and Divestitures for additional information.
Generics segment revenues for the year ended December 31, 2021 increased $23 million, as compared to the prior
year, primarily due to new products launched in 2020 and 2021 that contributed net revenue growth of $176 million, as
well as volume growth in products launched prior to 2020. This increase was partially offset by a $48 million decline
in Oseltamivir (generic Tamiflu®) sales from lower demand and increased returns activity above historical levels that
were due to decreased influenza activity during the COVID-19 pandemic, and price erosion.
Specialty segment revenues for the year ended December 31, 2021 increased $23 million, as compared to the prior
year, reflecting growth in our promoted products including Rytary® and Unithroid® of 7% and 24%, respectively,
partially offset by declines in Zomig® nasal spray.
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Cost of Goods Sold and Gross Profit
Cost of goods sold, including impairment charges, decreased 3%, or $39 million, to $1.32 billion for the year ended
December 31, 2021 as compared to $1.36 billion for the year ended December 31, 2020. The decrease in cost of goods sold,
including impairment charges, compared to the prior year was primarily attributable to lower impairment charges and gross
margin improvement, partially offset by an additional month of expenses from the timing of the Rondo Acquisitions and an
increase in revenues. Gross margin improvement compared to the prior year was driven by procurement savings on material
costs, better plant utilization, including manufacturing a higher percentage of the Company’s products, and favorable product
mix.
Gross profit for the year ended December 31, 2021 was $769 million (37% of net revenue) as compared to gross profit of $628
million (32% of net revenue) for the year ended December 31, 2020. Our gross profit as a percentage of net revenue increased
as compared to the prior year primarily as a result of the factors noted above.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2021 were $366 million, as compared
to $327 million for the year ended December 31, 2020. The $39 million increase from the prior year was primarily due to an
increase in employee compensation, an additional month of expenses from the timing of the Rondo Acquisitions, an increase in
indirect taxes, and higher freight costs due to increased volume and rising costs.
Research and Development
Research and development expenses for the year ended December 31, 2021 were $202 million, as compared to $180 million for
the year ended December 31, 2020. The $22 million increase compared to the prior year was primarily attributable to $11
million related to the acquisition of Kashiv Specialty Pharmaceuticals, LLC (the “KSP Acquisition”) on April 2, 2021, an
increase in in-licensing and upfront milestone payments of $3 million to grow our Specialty pipelines, and increased project
spend for ongoing project costs associated with complex generic product candidates. Refer to Note 3. Acquisitions and
Divestitures for additional information.
In-Process Research and Development Impairment Charges
We recognized in-process research and development (“IPR&D”) impairment charges of $1 million for the year ended
December 31, 2021, as compared to $3 million for the year ended December 31, 2020. The charge for the year ended
December 31, 2021 was associated with one product in our Generics segment which experienced a delay in its estimated launch
date.
For the year ended December 31, 2020, the impairment charges were associated with four products in our Generics segment,
three of which experienced significant price erosion, resulting in significantly lower than expected future cash flows, and the
other of which was canceled due to the withdrawal of our development partner.
Intellectual Property Legal Development Expense
Intellectual property legal development expenses include, but are not limited to, costs associated with formulation assessments,
patent challenge opinions and strategy, and litigation expenses to defend our intellectual property. For the year ended
December 31, 2021, these expenses were $8 million as compared to $11 million for the year ended December 31, 2020. The
$3 million decrease from the prior year was due to the timing of specific cases. Expenses may vary based upon the number of
individual cases and corresponding litigation outstanding in a particular period.
Acquisition, Transaction-Related and Integration Expenses
Acquisition, transaction-related and integration expenses were $8 million for the year ended December 31, 2021, as compared
to $9 million for the year ended December 31, 2020. For the year ended December 31, 2021, acquisition, transaction-related
and integration expenses of $8 million primarily consisted of professional services fees (e.g. legal, investment banking and
consulting) associated with the acquisition and integration of Puniska Healthcare Pvt. Ltd. (acquired on November 2, 2021) and
the KSP Acquisition, and integration of the Rondo Acquisitions. Refer to Note 3. Acquisitions and Divestitures for additional
information.
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For the year ended December 31, 2020, acquisition, transaction-related and integration expenses of $9 million primarily
consisted of professional services fees associated with the then pending KSP Acquisition, the Rondo Acquisitions, and systems
integrations associated with the acquisition of Impax.
Charges Related to Legal Matters, Net
For the year ended December 31, 2021, we recorded charges of $25 million for Corporate commercial legal proceedings and
claims. For the year ended December 31, 2020, we recorded a net charge of $6 million for legal proceedings and claims,
primarily related to our Generics segment. For further details, refer to Note 21. Commitments and Contingencies.
Restructuring and Other Charges
We recorded $2 million of restructuring and other charges for each of the years ended December 31, 2021 and 2020. Refer to
Note 6. Restructuring and Other Charges for additional information.
Property Losses and Associated Expenses, Net
We recorded net charges for property losses and associated expenses in our Generics segment of $5 million for the year ended
December 31, 2021. On September 1, 2021, Tropical Storm Ida brought extreme rainfall and flash flooding to New Jersey that
caused damage to two of our facilities. Operations at these facilities were closed for the majority of September in order to
assess the damage, make repairs and restore operations. Although, as a result of the significant recovery effort and sufficient
safety stock, we did not incur a material business disruption for the year ended December 31, 2021, we concluded that all
inventory on-hand at the time of the flooding was damaged and unsellable and that a majority of the equipment was damaged
beyond repair. In addition, we incurred significant costs to repair both facilities. Accordingly, we recorded $10 million of
charges for property losses and associated expenses in our Generics segment for the year ended December 31, 2021.
The Company has insurance policies for property damage, inventory losses and business interruption. Insurance recoveries are
recorded in the periods when it is probable they will be realized. For the year ended December 31, 2021, insurance recoveries
of $5 million associated with property and equipment were received and recorded as a reduction of property losses and
associated expenses in our Generics segment. Refer to Note 28. Property Losses and Associated Expenses for additional
information.
Other Expense, Net
Other expense, net was $121 million for the year ended December 31, 2021, as compared to $127 million for the year ended
December 31, 2020. Overall, the decrease of $6 million from the prior year period was primarily due to a $10 million decline in
interest expense due to a reduction in interest rates and a $13 million benefit related to a previously outstanding contingent
liability, net of $17 million in year-over-year unfavorable net foreign exchange gains and losses.
Provision For (Benefit From) Income Taxes
The provision for (benefit from) income taxes was $11 million and ($104) million for the years ended December 31, 2021 and
2020, respectively. The effective tax rates for the years ended December 31, 2021 and 2020 were 35.7% and 291.7%,
respectively.
The benefit from income taxes and effective tax rate for the year ended December 31, 2020 was primarily impacted by a $110
million carryback of U.S. Federal net operating losses under the Coronavirus Aid, Relief and Economic Security Act (“CARES
Act”). The CARES Act was an emergency economic stimulus package in response to the COVID-19 pandemic which, among
other things, includes provisions relating to income and non-income-based tax laws. For further details, refer to Note 8. Income
Taxes.
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Generics
The following table sets forth the results of operations for our Generics segment (in thousands):
Years Ended December 31,
2021
2020
Net revenue
Cost of goods sold
Cost of goods sold impairment charges
Gross profit
Selling, general and administrative
Research and development
In-process research and development impairment charges
Intellectual property legal development expenses
Acquisition, transaction-related and integration expenses
Charges related to legal matters, net
Restructuring and other charges
Property losses and associated expenses, net
Operating income
$ 1,366,338 $ 1,343,210
894,422
34,579
414,209
56,134
150,068
2,680
10,647
328
5,610
(614)
—
189,356
825,568
22,692
518,078
64,500
158,365
710
7,562
—
—
80
5,368
281,493 $
$
Net Revenue
Generics net revenue for the year ended December 31, 2021 increased by 2%, or $23 million, to $1.37 billion as compared to
$1.34 billion for the year ended December 31, 2020. The increase from the prior year was primarily due to new products
launched in 2020 and 2021 that contributed net revenue growth of $176 million, as well as volume growth in products launched
prior to 2020. This increase was partially offset by a $48 million decline in Oseltamivir (generic Tamiflu®) sales from lower
demand and increased returns activity above historical levels that were due to decreased influenza activity during the
COVID-19 pandemic, and price erosion.
Cost of Goods Sold and Gross Profit
Generics cost of goods sold, including impairment charges decreased 9%, or $81 million, to $848 million for the year ended
December 31, 2021 as compared to $929 million for the year ended December 31, 2020. The decrease in cost of goods sold,
including impairment charges, was primarily attributable to lower impairment charges of $12 million and operational gross
margin improvement due to procurement savings on material costs, better plant utilization, including manufacturing a higher
percentage of the Company’s products, and favorable product mix.
Generics gross profit for the year ended December 31, 2021 was $518 million (38% of net revenue) as compared to gross profit
of $414 million (31% of net revenue) for the year ended December 31, 2020 as a result of the factors described above.
Selling, General, and Administrative
Generics selling, general and administrative expense for the year ended December 31, 2021 was $65 million, an increase of
15%, or $8 million, as compared to the year ended December 31, 2020. The increase was primarily attributable to increased
employee compensation, increased shipping costs and an increase in indirect taxes, partially offset by a reduction in costs to exit
redundancies in connection with Company’s integration efforts of recent business acquisitions.
Research and Development
Generics research and development expense for the year ended December 31, 2021 was $158 million, an increase of 6%, or $8
million, as compared to the year ended December 31, 2020. The increase was primarily related to higher ongoing project costs
associated with complex generic product candidates of $7 million.
In-Process Research and Development Impairment Charges
We recognized Generics IPR&D impairment charges of $1 million for the year ended December 31, 2021, as compared to $3
million for the year ended December 31, 2020. The charge for the year ended December 31, 2021 was associated with one
product in our Generics segment which experienced a delay in its estimated launch date.
For the year ended December 31, 2020, we recognized IPR&D impairment charges of $3 million associated with four products
in our Generics segment, three of which experienced significant price erosion, resulting in significantly lower than expected
future cash flows, and the other of which was canceled due to the withdrawal of our development partner
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Intellectual Property Legal Development Expenses
Generics intellectual property legal development expenses for the year ended December 31, 2021 were $8 million as compared
to $11 million for the year ended December 31, 2020. These costs include, but are not limited to, formulation assessments,
patent challenge opinions and strategy, and litigation expenses to defend our intellectual property. The $3 million decrease from
the prior year was due to the timing of specific cases. Expenses may vary based upon the number of individual cases and
corresponding litigation outstanding in a particular period.
Charges Related to Legal Matters, Net
There were no charges related to legal matters in our Generics segment for the year ended December 31, 2021. For the year
ended December 31, 2020, we recorded a net charge of $6 million for Generics legal proceedings and claims. For further
details, see Note 21. Commitments and Contingencies.
Property Losses and Associated Expenses, Net
We recorded net charges for property losses and associated expenses of $5 million in our Generics segment for the year ended
December 31, 2021. On September 1, 2021, Tropical Storm Ida brought extreme rainfall and flash flooding to New Jersey that
caused damage to two of our facilities. Operations at these facilities were closed for the majority of September in order to
assess the damage, make repairs and restore operations. Although, as a result of the significant recovery effort and sufficient
safety stock, we did not incur a material business disruption for the year ended December 31, 2021, we concluded that all
inventory on-hand at the time of the flooding was damaged and unsellable and that a majority of the equipment was damaged
beyond repair. In addition, we incurred significant costs to repair both facilities. Accordingly, we recorded $10 million of
charges for property losses and associated expenses in our Generics segment for the year ended December 31, 2021.
The Company has insurance policies for property damage, inventory losses and business interruption. Insurance recoveries are
recorded in the periods when it is probable they will be realized. For the year ended December 31, 2021, insurance recoveries
of $5 million associated with property and equipment were received and recorded as a reduction of property losses and
associated expenses in our Generics segment. Refer to Note 28. Property Losses and Associated Expenses for additional
information.
Specialty
The following table sets forth the results of operations for our Specialty segment (in thousands):
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative
Research and development
Intellectual property legal development expenses
Acquisition, transaction-related and integration expenses
Charges related to legal matters, net
Change in fair value of contingent consideration
Operating income
Years Ended December 31,
2021
378,319 $
193,562
184,757
84,481
43,482
154
16
—
200
56,424 $
2020
355,567
192,910
162,657
75,917
29,862
8
85
250
—
56,535
$
$
Net Revenue
Specialty net revenue for the year ended December 31, 2021 increased 6%, or $23 million to $378 million as compared to $356
million for the year ended December 31, 2020. The increase reflected growth in our promoted products including Rytary® and
Unithroid® of 7% and 24%, respectively, partially offset by declines in Zomig® nasal spray.
Cost of Goods Sold and Gross Profit
Specialty cost of goods sold for the year ended December 31, 2021 increased 0.3%, or $1 million, to $194 million as compared
to $193 million for the year ended December 31, 2020. Specialty gross profit for the year ended December 31, 2021 was $185
million (49% of net revenue) as compared to gross profit of $163 million (46% of net revenue) for the year ended December 31,
2020. The increase in gross profit primarily related to the mix of revenues, including the impact of non-promoted products.
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Additionally, the increase in gross margin was due to growth in higher margin products which offset declines in Zomig® nasal
spray, which has a higher cost structure than the overall Specialty portfolio.
Selling, General, and Administrative
Specialty selling, general and administrative expense was $84 million for the year ended December 31, 2021, an increase of $9
million or 11% compared to $76 million for the year ended December 31, 2020. The increase was driven by an increase in
indirect taxes and payroll-related expenses, primarily attributable to the expansion of our sales force, and an increase in third
party spend and promotional efforts as the Company began to resume activities and in-person meetings in the current year.
Research and Development
Specialty research and development expenses for the year ended December 31, 2021 were $43 million, as compared to $30
million for the year ended December 31, 2020. The $13 million increase from the prior year was primarily attributable to $10
million related to the KSP Acquisition on April 2, 2021 (refer to Note 3. Acquisitions and Divestitures for additional
information) and an increase in in-licensing and upfront milestone payments of $3 million to grow our Specialty pipeline.
AvKARE
The following table sets forth the results of operations for our AvKARE segment (in thousands):
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative
Acquisition, transaction-related and integration expenses
Operating income (loss)
Years Ended December, 31
2021
2020
$
349,012 $
293,746
282,874
242,219
66,138
57,918
1,422
51,527
58,544
641
$
6,798 $
(7,658)
We completed the Rondo Acquisitions on January 31, 2020. Therefore, the results of operations of our AvKARE segment
reflect a full year of activity in 2021 as compared to eleven months of activity in 2020. Refer to Note 3. Acquisitions and
Divestitures for additional information.
Net Revenue
AvKARE net revenue for the year ended December 31, 2021 increased 19%, or $55 million, to $349 million for the year ended
December 31, 2021 from $294 million for the year ended December 31, 2020. The increase in net revenue as compared to the
prior year was due to the timing of the Rondo Acquisitions in 2020 and organic growth.
Cost of Goods Sold and Gross Profit
AvKARE cost of goods sold increased 17%, or $41 million, to $283 million for the year ended December 31, 2021 as compared
to $242 million for the year ended December 31, 2020. The increase in cost of goods sold as compared to the prior year was
due to the timing of the Rondo Acquisitions in 2020 and organic growth.
AvKARE gross profit for the year ended December 31, 2021 was $66 million (19% of net revenue) as compared to gross profit
of $52 million (18% of net revenue) for the year ended December 31, 2020. The increase in gross profit and gross profit
percentage over the prior year primarily related to organic growth which more than offset a decrease in less profitable revenues.
The increase in gross profit over the prior year was also due to the timing of the Rondo Acquisitions in 2020.
Selling, General, and Administrative
AvKare selling, general and administrative expense for the year ended December 31, 2021 was $58 million as compared to $59
million for the year ended December 31, 2020, as an additional month of expense due to the timing of the Rondo Acquisition
and an increase in indirect taxes was offset by a decrease in amortization.
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Liquidity and Capital Resources
Our primary source of liquidity is cash generated from operations, available cash and borrowings under debt financing
arrangements, including $489 million of available capacity on our revolving credit facility as of December 31, 2021, as defined
in Note 17. Debt. We believe these sources are sufficient to fund our planned operations, meet our interest and contractual
obligations and provide sufficient liquidity over the next 12 months. However, our ability to satisfy our working capital
requirements and debt obligations will depend upon economic conditions, the impact of the COVID-19 pandemic, and demand
for our products, which are factors that may be out of our control.
Our primary uses of capital resources are to fund operating activities, including research and development expenses associated
with new product filings, and pharmaceutical product manufacturing expenses, license payments, spending on production
facility expansions, capital equipment, and acquisitions. As the impact of the COVID-19 pandemic on the economy and our
operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our
future access to sources of liquidity, particularly our cash flows from operations, and financial condition. In the event of a
sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and
take appropriate actions.
We estimate that we will invest approximately $75 to $85 million during 2022 for capital expenditures to support and grow our
existing operations, primarily related to investments in manufacturing equipment, information technology and facilities.
As discussed in Note 3, Acquisitions and Divestitures, we paid $73 million for approximately 74% of the equity interests of
Puniska Healthcare Pvt. Ltd. (“Puniska”) on November 2, 2021 and $4 million for land held by one of the sellers during
December 2021. We will pay an additional $16 million, which we plan to fund with cash on hand, for the remaining 26% of
the equity interests of Puniska and to satisfy a preexisting payable to the sellers, upon approval by the government of India
which we expect during the first half of 2022. Also, as discussed in Note 3. Acquisitions and Divestitures, the KSP Acquisition
closed on April 2, 2021. In addition to $74 million of cash we paid at closing, we made a payment of $30 million to satisfy
deferred consideration, funded with cash on hand, on January 11, 2022. Additionally, as discussed in Note 29. Subsequent
Event, we made a payment of $85 million, funded with cash on hand, on February 9, 2022 to acquire the baclofen franchise of
certain entities affiliated with Saol International Limited.
Over the next 12 months, we expect to make substantial payments for monthly interest and quarterly principal amounts due for
our debt instruments, including our Term Loan and Rondo Term Loan, as well as contractual payments for leased premises.
Annually, we are also required to calculate the amount of excess cash flows, as defined in the Term Loan agreement. Based on
the results of the excess cash flows calculation for the year ended December 31, 2020, the Company made a $14 million
additional principal payment in March 2021. Based on the results of the excess cash flows calculation for the year ended
December 31, 2021, no excess cash flows principal payments are due in 2022. Related to our Rondo Term Loan, we made a
prepayment of $25 million towards the outstanding principal during the year ended December 31, 2021, in addition to planned
principal payments. Refer to Note 17. Debt for additional information.
We are party to a tax receivable agreement (“TRA”) that requires us to make cash payments to the Members other than the
Company, in respect of certain tax benefits that we may realize or may be deemed to realize as a result of sales or exchanges of
Amneal common units by the Members. The timing and amount of any payments under the TRA will also vary, depending
upon a number of factors including the timing and number of Amneal common units sold or exchanged for our class A
Common Stock, the price of our class A Common Stock on the date of sale or exchange, the timing and amount of our taxable
income, and the tax rate in effect at the time of realization of our taxable income. The tax receivable agreement also requires
that we make an accelerated payment to the Members equal to the present value of all future payments due under the agreement
upon certain change of control and similar transactions. Further sales or exchanges occurring subsequent to December 31, 2021
could result in future Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal common
units. These obligations could be incremental to and substantially larger than the approximate $206 million contingent liability
as of December 31, 2021. As a result of the foregoing, our obligations under the tax receivable agreement could have a
substantial negative impact on our liquidity. For further information, refer to Item 1A. Risk Factors and Note 8. Income Taxes.
In addition, pursuant to the limited liability operating agreement of Amneal, as amended, in connection with any tax period, we
are required to make distributions to Amneal's members, on a pro rata basis in proportion to the number of Amneal Common
Units held by each member, of cash until each member (other than Amneal) has received an amount at least equal to its
assumed tax liability and Amneal has received an amount sufficient to enable it to timely satisfy all of its U.S. federal, state and
local and non-U.S. tax liabilities, and meet its obligations pursuant to the tax receivable agreement. During the year ended
December 31, 2021, we made tax distributions of $53 million to Amneal's members.
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At December 31, 2021, our cash and cash equivalents consist of cash on deposit and highly liquid investments. A portion of our
cash flows are derived outside the United States. As a result, we are subject to market risk associated with changes in foreign
exchange rates. We maintain cash balances at both U.S. based and foreign country based commercial banks. At various times
during the year, our cash balances held in the United States may exceed amounts that are insured by the Federal Deposit
Insurance Corporation. We make our investments in accordance with our investment policy. The primary objectives of our
investment policy are liquidity and safety of principal.
Cash Flows
For a discussion comparing of our cash flows for the fiscal years 2020 to 2019, see Cash Flows under Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form 10-K.
The following table sets forth our summarized, consolidated cash flows for the years ended December 31, 2021 and 2020 (in
thousands):
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash Flows from Operating Activities
Years Ended December 31,
2021
2020
$
$
241,820 $
(194,182)
(138,122)
102
(90,382) $
379,001
(317,546)
131,807
1,037
194,299
Net cash provided by operating activities was $242 million for the year ended December 31, 2021 as compared to $379 million
for the year ended December 31, 2020. Excluding the Federal tax refund and related interest of $110 million received in
August 2020 (refer to Note 8. Income taxes for additional information), cash provided by operating activities for the year ended
December 31, 2021 decreased $27 million as compared to the prior year. The year-over-year decrease was primarily a result of
increased rebate payments and other pricing adjustments as well as other working capital movements, which more than offset
an increase in net income, excluding the Federal tax refund mentioned above.
Cash Flows from Investing Activities
Net cash used in investing activities was $194 million for the year ended December 31, 2021 compared to $318 million for the
year ended December 31, 2020. The $123 million decrease in net cash used in investing activities for the year ended December
31, 2021 as compared to the prior year was primarily due to $254 million of net cash paid for the Rondo Acquisitions in 2020
as compared to $147 million paid for the Puniska Acquisition and the KSP Acquisition in 2021, and a decrease in purchases of
property, plant and equipment in 2021.
Cash Flows from Financing Activities
Net cash provided used in financing activities was $138 million for the year ended December 31, 2021 as compared to net cash
provided by financing activities of $132 million for the year ended December 31, 2020. The $269 million year-over-year
change was primarily attributable to net proceeds from the $180 million term loan associated with the Rondo Acquisitions
(“Rondo Term Loan”) in 2020, an increase in year-over-year tax distributions made to non-controlling interests of $54 million,
and an increase in year-over-year payments on debt, primarily the $25 million prepayment on the Rondo Term Loan and $14
million paid to satisfy the excess cash flow requirements of Amneal’s term loan. Refer to Note 17. Debt for additional
information about our indebtedness.
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Commitments and Contractual Obligations
Our contractual obligations as of December 31, 2021 were as follows (in thousands):
Contractual Obligations
Term Loan and other (1)
Payments Due by Period
Less
Than 1
Year
Total
1-3
Years
3-5
Years
$ 2,591,500 $
27,624 $
54,000 $ 2,509,876 $
Interest payments on Term Loan and other (1)
Operating lease obligations (2)
Financing lease obligation (3)
Rondo Term Loan (4)
Interest payments on Rondo Term Loan (4)
Kashiv Specialty Pharmaceuticals, LLC acquisition (5)
318,720
76,238
120,600
139,250
10,411
30,500
105,463
183,603
16,136
7,492
9,000
3,461
30,500
31,627
12,298
18,000
6,223
—
29,654
18,763
10,948
112,250
727
—
More
Than 5
Years
—
—
9,712
89,862
—
—
—
Total
$ 3,287,219 $ 199,676 $ 305,751 $ 2,682,218 $
99,574
(1) A description of our Term Loan, and related debt service and interest requirements is contained in Note 17. Debt.
Interest on our Term Loan was calculated based on applicable rates at December 31, 2021, including any impact from
our interest rate swap.
(2) Amounts represent future minimum rental payments under non-cancelable leases for certain facilities. A discussion of
our operating lease obligations is contained in Note 12. Leases.
(3) Amounts primarily represent future minimum rental payments under non-cancelable financing lease obligation for a
production facility in New York. A discussion of our financing lease obligations is contained in Note 12. Leases.
(4) Rondo Term Loan relates to the Rondo Acquisitions. Interest on the Rondo Term Loan was calculated based on the
applicable rate at December 31, 2021. A discussion of the Rondo Term Loan, and related debt service and interest
requirements is contained in Note 17. Debt.
(5) Amount represents deferred consideration for the acquisition of Kashiv Specialty Pharmaceuticals, LLC, which closed
on April 2, 2021. The deferred consideration consists of $30 million, which was paid on January 11, 2022 and
$0.5 million which is due on March 10, 2022. Refer to Note 3. Acquisitions and Divestitures for additional information.
The foregoing table does not include milestone payments potentially payable by the Company under its collaboration
agreements and licenses. Such milestone payments are dependent upon the occurrence of specific and contingent events, and
not the passage of time. A discussion of our significant contingent milestones is contained in Note 5. Alliance and
Collaboration and Note 24. Related Party Transactions. Additionally, the foregoing table does not include $44 million of
aggregate principal and the related interest due on the long-term promissory notes. Refer to the section Acquisition Financing –
Notes Payable-Related Party in Note 17. Debt for a discussion of this indebtedness.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2021.
Critical Accounting Policies
Our significant accounting policies are described in Note 2. Summary of Significant Accounting Policies.
Included within these policies are certain policies which contain critical accounting estimates and, therefore, have been deemed
to be “critical accounting policies.” Critical accounting estimates are those which require management to make assumptions
about matters that were uncertain at the time the estimate was made and for which the use of different estimates, which
reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur from period to
period could have a material impact on our financial condition or results of operations. We have identified the following to be
our critical accounting policies: sales-related deductions, impairment of goodwill and intangible assets, income taxes and
contingencies.
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Sales-Related Deductions
Our gross product revenue is subject to a variety of deductions, which are estimated and recorded in the same period that the
revenue is recognized, and primarily represent chargebacks, rebates, group purchasing organization fees, prompt payment
(cash) discounts, consideration payable to the customer, billbacks, Medicaid and other government pricing programs, price
protection and shelf stock adjustments, and sales returns. Those deductions represent estimates of rebates and discounts related
to gross sales for the reporting period and, as such, knowledge and judgment of market conditions and practice are required
when estimating the impact of these revenue deductions on gross sales for a reporting period.
Historically, our changes of estimates reflecting actual results or updated expectations have not been material to our overall
business. If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our
future experience, our results could be materially affected. The sensitivity of our estimates can vary by program, type of
customer and geographic location. However, estimates associated with governmental allowances, Medicaid and other
performance-based contract rebates are most at risk for material adjustment because of the extensive time delay between the
recording of the accrual and its ultimate settlement, an interval that can generally range up to one year. Because of this time lag,
in any given quarter, our adjustments to actual can incorporate revisions of several prior quarters.
Business Combinations
We account for acquired businesses using the acquisition method of accounting, which requires that assets acquired and
liabilities assumed be recorded at the date of acquisition at their respective fair values. The consolidated financial statements
and results of operations reflect an acquired business after the completion of the acquisition. The fair value of the consideration
paid is assigned to the underlying net assets of the acquired business based on their respective fair values as determined using a
market participant concept. Any excess of the purchase price over the fair value of net assets and other identifiable intangible
assets acquired is recorded as goodwill.
Intangible assets are amortized over the estimated useful life of the asset. Significant judgments are used in determining the
estimated fair values assigned to the assets acquired and liabilities assumed and in determining estimates of useful lives of long-
lived assets. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future
net cash flows, estimates of appropriate discount rates used to present value expected future net cash flow streams, the
assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream, as well as other factors.
These judgments can materially impact the estimates used to allocate acquisition date fair values to assets acquired and
liabilities assumed and the future useful lives. For these and other reasons, actual results may vary significantly from estimated
results.
Impairment of Goodwill and Intangible Assets
Goodwill
Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is
not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. We test goodwill
for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying
amount may not be recoverable.
In order to test goodwill for impairment, an entity is permitted to first assess qualitative factors to determine whether a
quantitative assessment of goodwill is necessary. The qualitative factors considered by the Company may include, but are not
limited to, general economic conditions, the Company’s outlook, market performance of the Company’s industry and recent
and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative
assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further
impairment testing is required. If a quantitative assessment is required, the Company determines the fair value of its reporting
unit using a combination of the income and market approaches. If the net book value of the reporting unit exceeds its fair
value, the Company recognizes a goodwill impairment charge for the reporting unit equal to the lesser of (i) the total goodwill
allocated to that reporting unit and (ii) the amount by which that reporting unit’s carrying amount exceeds its fair value.
Goodwill is allocated and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one
level below an operating segment. As a result of the Rondo Acquisitions, we added a third reportable segment, AvKARE, to our
existing reportable segments, Generics and Specialty. Our reportable segments are the same as the respective operating
segments and reporting units. As of December 31, 2021, $363 million, $160 million, and $70 million of goodwill was allocated
to the Specialty, Generics, and AvKARE segments, respectively. During the fourth quarter of 2021, we tested each of the
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reporting units for impairment using a quantitative assessment. The determination of fair value in the quantitative assessment
required us to make significant estimates and assumptions. These estimates and assumptions primarily included, but were not
limited to: the selection of appropriate peer group companies, the discount rate, terminal growth rates, and forecasts of revenue,
operating income, depreciation and amortization, restructuring charges and capital expenditures. For more information see Note
15. Goodwill and Other Intangible Assets. There was no impairment of goodwill in any reporting unit for the year ended
December 31, 2021.
Significant judgment is employed in determining the assumptions utilized in our quantitative assessment. Accordingly, any
changes in assumptions described above could have a material impact on our consolidated results of operations. Additionally,
for each of our reporting units, there are a number of future events and factors that may impact future results and the outcome of
subsequent goodwill impairment testing. For a list of these factors, see Item 1A. Risk Factors.
Intangible Assets
We review our long-lived assets, including intangible assets with finite lives, for recoverability whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully recoverable. We evaluate assets for potential
impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. If the carrying
amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference
between the carrying amount of the assets and fair value which is generally an expected present value cash flow technique. Our
policy in determining whether an impairment indicator exists comprises measurable operating performance criteria as well as
other qualitative measures. Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be
predicted. Factors that we consider in deciding when to perform an impairment review include significant under-performance of
a product in relation to expectations, significant negative industry or economic trends, and significant changes or planned
changes in our use of the assets. If our assumptions are not correct, there could be an impairment loss in subsequent periods or,
in the case of a change in the estimated useful life of the asset, a change in amortization expense.
Intangible assets with indefinite lives, including in-process research and development (“IPR&D”), are tested for impairment if
impairment indicators arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to
determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the
qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying
amount. Otherwise, no further impairment testing is required. The indefinite-lived intangible asset impairment test consists of a
one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an
intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We consider many
factors in evaluating whether the value of its intangible assets with indefinite lives may not be recoverable, including, but not
limited to the discount rate, terminal growth rates, general economic conditions, our outlook and market performance of our
industry and recent and forecasted financial performance.
The impairment charges for the year ended December 31, 2021 were primarily related to seven currently marketed products and
one IPR&D product. For the currently marketed products, five products experienced significant price erosion during 2021,
without an offsetting increase in customer demand, resulting in significantly lower than expected future cash flows and negative
margins. Of the five currently marketed products that experienced significant price erosion during 2021, Levothyroxine
contributed $17.7 million of the $23.4 million in cost of goods sold impairment charges (refer to Note 5. Alliance and
Collaboration for additional information about the Company’s Levothyroxine license with JSP). Additionally, the supply
agreements for two currently marketed products will be terminated early due to market conditions. The IPR&D charge was
associated with one product which experienced a delay in its estimated launch date. Refer to Note 15. Goodwill and Other
Intangible Assets for additional information.
Contingent Consideration
Business acquisitions may include future payments that are contingent upon the occurrence of certain pharmaceutical regulatory
milestones or net sales of pharmaceutical products. For acquisitions that are accounted for as a business combination, the
obligations for such contingent consideration payments are recorded at fair value on the acquisition date. For contingent
milestone payments, the Company uses a probability-weighted income approach utilizing an appropriate discount rate. For
contingent tiered royalties on net sales, the Company uses a Monte Carlo simulation model. Contingent consideration liabilities
are revalued to fair value at the end of each reporting period. Changes in the fair value of contingent consideration, other than
changes due to payments, are recognized as a gain or loss and recorded within change in fair value of contingent consideration
in the consolidated statements of operations.
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The fair value measurement of the contingent consideration liabilities was determined based on significant unobservable inputs,
including the discount rate, estimated probabilities of success, timing of achieving specified regulatory milestones and the
estimated amount of future sales of the acquired products. The contingent consideration liability is estimated by applying a
probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for
contingent royalty payments, which are then discounted to present value. Changes to fair value of the contingent consideration
liabilities can result from changes to one or a number of the aforementioned inputs. If different assumptions were used for
various inputs, the estimated fair value could be higher or lower than what the Company determined.
For the year ended December 31, 2021, the change in the fair value of contingent consideration was $0.2 million. As of
December 31, 2021, contingent consideration of $6 million was accrued in related party payable-long term.
Income Taxes
We record valuation allowances against our DTAs when it is more likely than not that all or a portion of a DTA will not be
realized. We routinely evaluate the realizability of our DTAs by assessing the likelihood that our DTAs will be recovered based
on all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, estimates of future
taxable income, tax planning strategies and results of operations. Estimating future taxable income is inherently uncertain and
requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions,
including projected new product launches, revenue growth, and operating margins, among others.
A valuation allowance, if needed, reduces DTAs to the amount expected to be realized. When determining the amount of net
DTAs that are more likely than not to be realized, we assess all available positive and negative evidence. This evidence
includes, but is not limited to, prior earnings history, projected future earnings, carryback and carry-forward periods and the
feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a DTA. The weight given
to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is
generally difficult for positive evidence regarding projected future taxable income to outweigh objective negative evidence of
recent financial reporting losses.
As of December 31, 2021, based upon all available objective and verifiable evidence both positive and negative, including
historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments,
expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies, we
determined that it is more likely than not that we will not realize the benefits of our gross DTAs. Accordingly, as of December
31, 2021, this valuation allowance was $417 million and reduced the carrying value of these gross DTAs, net of the impact of
the reversal of taxable temporary differences, to zero.
As described in Note 8. Income Taxes, we are a party to a TRA under which we are generally required to pay to the other
holders of Amneal Common Units 85% of the applicable tax savings, if any, in U.S. federal and state income tax that we are
deemed to realize as a result of certain tax attributes of their Amneal Common Units sold to us (or exchanged in a taxable sale)
and that are created as a result of (i) the sales of their Amneal Common Units for shares of Class A common stock and (ii) tax
benefits attributable to payments made under the TRA.
The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing
and number of Amneal common units sold or exchanged for our Class A Common Stock, the price of our Class A Common
Stock on the date of sale or exchange, the timing and amount of our taxable income, and the tax rate in effect at the time of
realization of the our taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from
the use of the TRA's attributes). Further sales or exchanges occurring subsequent to December 31, 2021 could result in future
Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal common units.
The projection of future taxable income involves significant judgment. Actual taxable income may differ materially from our
estimates, which could significantly impact our liabilities under the TRA. As noted above, we have determined it is more-
likely-than-not we will be unable to utilize all of our DTAs subject to the TRA; therefore, as of December 31, 2021, we had not
recognized the contingent liability under the TRA related to the tax savings we may realize from common units sold or
exchanged. If utilization of these DTAs becomes more-likely-than-not in the future, at such time, these TRA liabilities (which
amount to approximately $206 million as of December 31, 2021, as a result of basis adjustments under Internal Revenue Code
Section 754) will be recorded through charges to our statements of operations. However, if the tax attributes are not utilized in
future years, it is reasonably possible no amounts would be paid under the TRA. Should we determine that a DTA with a
valuation allowance is realizable in a subsequent period, the related valuation allowance will be released and if a resulting TRA
payment is determined to be probable, a corresponding TRA liability will be recorded.
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Contingencies
We are involved in various litigation, government investigations and other legal proceedings that arise from time to time in the
ordinary course of business. Our legal proceedings are complex, constantly evolving and subject to uncertainty. As such, we
cannot predict the outcome or impact of our legal proceedings.
While we believe we have valid claims and/or defenses for the matters described in Note 21. Commitments and Contingencies,
the nature of litigation is unpredictable and the outcome of the following proceedings could include damages, fines, penalties
and injunctive or administrative remedies. For any proceedings where losses are probable and reasonably capable of estimation,
we accrue for a potential loss. When we have a probable loss for which a reasonable estimate of the liability is a range of losses
and no amount within that range is a better estimate than any other amount, we record the loss at the low end of the range.
While these accruals have been deemed reasonable by our management, the assessment process relies heavily on estimates and
assumptions that may ultimately prove inaccurate or incomplete. Additionally, unforeseen circumstances or events may lead us
to subsequently change our estimates and assumptions. The process of analyzing, assessing and establishing reserve estimates
relative to legal proceedings involves a high degree of judgment.
Although the outcome and costs of the asserted and unasserted claims is difficult to predict, based on the information presently
known to management, we do not currently expect the ultimate liability, if any, for such matters to have a material adverse
effect on our business, financial condition, results of operations, or cash flows.
For further details, see Note 21. Commitments and Contingencies.
Recently Issued Accounting Standards
Recently issued accounting standards are discussed in Note 2. Summary of Significant Accounting Policies.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our cash is held on deposit in demand accounts at large financial institutions in amounts in excess of the FDIC insurance
coverage limit of $250,000 per depositor, per FDIC-insured bank, per ownership category. Our cash equivalents are comprised
of highly rated money market funds. We had no short-term investments as of December 31, 2021 or December 31, 2020.
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents and
accounts receivable. We limit our credit risk associated with cash equivalents by placing investments with high credit quality
securities, including U.S. government securities, treasury bills, corporate debt, short-term commercial paper and highly rated
money market funds. As discussed in Note 17. Debt, we are party to a term loan with a principal amount of $2.7 billion and an
asset backed revolving credit facility under which loans and letters of credit up to a principal amount of $489 million are
available as of December 31, 2021 (principal amount of up to $25 million is available for letters of credit). The proceeds for
any loans made under our asset backed revolving credit facility are available for capital expenditures, acquisitions, working
capital needs and other general corporate purposes.
We limit our credit risk with respect to accounts receivable by performing credit evaluations when deemed necessary. We do
not require collateral to secure amounts owed to us by our customers.
By the nature of our global operations, we are exposed to cash flow and earnings fluctuations resulting from foreign exchange
rate variation. These exposures are transactional and translational in nature. Since we manufacture and sell our products
throughout the world, we believe our foreign currency risk is diversified. Principal drivers of this diversified foreign exchange
exposure include the European Euro, Indian Rupee, and the Swiss Franc. Our transactional exposure arises from the purchase
and sale of goods and services in currencies other than the functional currency of our operational units. We also have exposure
related to the translation of financial statements of our foreign divisions into U.S. dollars, our functional currency. The financial
statements of our operations outside the U.S. are measured using the local currency as the functional currency. Adjustments to
translate the assets and liabilities of these foreign operations into U.S. dollars are accumulated as a component of other
comprehensive income/(loss). Transaction gains and losses are included in the determination of our net income in our
statements of operations. Such foreign currency transaction gains and losses include fluctuations related to long term
intercompany loans that are payable in the foreseeable future.
While it is difficult to accurately measure the impact of inflation, we estimate our business experienced an increase in costs due
to inflation of approximately $10 million for the year ended December 31, 2021. We expect an inflationary impact of
approximately $20 million for the year ending December 31, 2022. However, rising inflationary pressures due to higher input
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costs, including higher material, transportation, labor and other costs, could exceed our expectations and may adversely impact
our operating results in future periods.
In the normal course of operations, we are exposed to market risks relating to our long-term debt arising from adverse changes
in interest rates. Market risk is defined for these purposes as the potential change in the fair value of a financial asset or liability
resulting from an adverse movement in interest rates. Changes in interest rates impact fixed and variable rate debt
differently. For fixed rate debt, a change in interest rates will impact only the fair value of the debt, whereas for variable rate
debt, a change in the interest rates will impact interest expense and cash flows.
At December 31, 2021 and 2020, we had $2.7 billion and $2.8 billion, respectively, of variable rate debt. Our debt as of
December 31, 2021 comprised of our Term Loan, with principal outstanding of $2.6 billion, and our Rondo Term Loan, with
principal outstanding of $139 million. We estimated the fair values of the Term Loan and Rondo Term loan using quoted
prices in active markets and yields for the same or similar types of borrowings, taking into account the underlying terms of the
debt instruments. At both December 31, 2021 and 2020, we estimated the fair value of the Term Loan to be $2.6 billion. We
estimated the fair value of the Rondo Term loan to be $139 million and $172 million at December 31, 2021 and 2020,
respectively. A hypothetical 100 basis point increase in market interest rates would potentially reduce the estimated fair value
of our Term Loan by approximately $77 million and the Rondo Term Loan by approximately $4 million as of December 31,
2021.
In October 2019, we entered into an interest rate lock agreement for a total notional amount of $1.3 billion whereby we
exchanged floating for fixed rate interest payments for our LIBOR based borrowing under our Term Loan. At inception and
at year end, we assessed hedge effectiveness and determined it to continue to be highly effective. We also reviewed the credit
standing of the counterparty at year end and deemed the counterparties to have the ability to honor their obligations. The fair
value of the variable-to-fixed interest rate swap was a liability of $11 million as of December 31, 2021. We estimated that a
hypothetical 100 basis point increase in the forward one-month LIBOR curve would potentially change the fair value of the
variable-to-fixed interest rate swap from a liability of $11 million to an asset of $29 million as of December 31, 2021. We
estimated that a hypothetical 100 basis point decrease in the forward one-month LIBOR curve would potentially change the fair
value of the variable-to-fixed interest rate swap from a liability of $11 million to a liability of $40 million as of December 31,
2021.
Increases or decreases in interest rates would affect our annual interest expense. Based on the principal amount of the Term
Loan outstanding as of December 31, 2021, a hypothetical 100 basis point increase or decrease in interest rates would have
affected our annual interest expense by approximately $26 million (before the impact of the interest rate lock agreement
discussed above). Based on the principal amount of the Rondo Term Loan outstanding as of December 31, 2021, a hypothetical
100 basis point increase or decrease in interest rates would have affected our annual interest expense by approximately
$1 million.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements listed in Item 15. Exhibits, Financial Statement Schedules are filed as part of this Annual
Report on Form 10-K and incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) that are designed to ensure information required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief
Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this
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Annual Report on Form 10-K. Based upon that evaluation, our Co-Chief Executive Officers and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of December 31, 2021.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of our internal control
over financial reporting based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment, management has
concluded that our internal control over financial reporting was effective as of December 31, 2021. Ernst & Young has
independently assessed the effectiveness of our internal control over financial reporting and its report is included below.
Changes in Internal Control over Financial Reporting
In October 2021, as part of our ongoing efforts to increase efficiencies we implemented new software and updated various
business processes related to sales deductions. Except as noted above, there were no changes in internal control over financial
reporting which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitation on Effective Controls
Management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure
controls and procedures or its system of internal control over financial reporting will prevent or detect all errors and all fraud. A
control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the
objectives of the system of internal control are met. The design of our control system reflects the fact that there are resource
constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and
instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood
of future events, and there can be no assurance that the design of any particular control will always succeed in achieving its
objective under all potential future conditions.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Amneal Pharmaceuticals, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Amneal Pharmaceuticals Inc.’s internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Amneal Pharmaceuticals, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated
statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2021, and the related notes and our report dated March 1, 2022 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Iselin, New Jersey
March 1, 2022
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Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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Item 10. Directors, Executive Officers and Corporate Governance
PART III.
The information required in this Item 10 will be included in the following sections in the 2022 Proxy Statement, which sections
are incorporated in this Item 10 by reference: “Proposal No. 1-Election of Directors”, “Our Management”, “Committees of the
Board of Directors”, “Audit Committee” and, if included in the 2022 Proxy Statement, “Delinquent Section 16(a) Reports”.
Code of Business Conduct for Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. We
have adopted a Code of Business Conduct that applies to all of our employees, officers and directors. The full text of our Code
of Business Conduct is available at the investors section of our website, http://investors.amneal.com. We intend to disclose any
amendment to, or waiver from, a provision of the Code of Business Conduct that applies to our principal executive officer,
principal financial officer or principal accounting officer in the investors section of our website.
Item 11. Executive Compensation
The information required in this Item 11 will be included in the following sections in the 2022 Proxy Statement, which sections
are incorporated in this Item 11 by reference: “Compensation Discussion and Analysis,” “Executive Compensation,” “Director
Compensation,” “The Board’s Role in Risk Oversight,” “Compensation Committee Interlocks and Insider Participation” and
“Report of the Compensation Committee.” Notwithstanding the foregoing, the information in the section entitled “Report of the
Compensation Committee” is only “furnished” herein and shall not be deemed “filed” for purposes of Section 18 of the
Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except as set forth below, the information required in this Item 12 will be included in the section entitled “Beneficial
Ownership” in the 2022 Proxy Statement, which section is incorporated in this Item 12 by reference.
Securities Authorized for Issuance Under Equity Compensation Plans. The following table summarizes information, as of
December 31, 2021, relating to the Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan, which was approved by the
Company’s stockholders and which authorizes the grant of stock options, stock appreciation rights, restricted stock awards,
restricted stock unit awards, other stock or cash-based awards and dividend equivalent awards to employees, non-employee
directors and consultants.
Equity Compensation Plan Information
Number of securities
to
be issued upon
exercise
of outstanding
options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining available
for
future issuance
under
equity compensation
plans (excluding
securities reflected
in
column (a))
(c)
16,235,100 (1)
4.17 (2)
17,251,992
—
16,235,100
—
4.17
—
17,251,992
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
(1)
Equity compensation plans approved by security holders which are included in column (a) of the table are the 2018
Incentive Award Plan (including 3,023,124 shares of Class A Common Stock to be issued upon exercise of
outstanding options and 13,183,600 shares of Class A Common Stock to be issued upon vesting and settlement of
outstanding RSUs subject to continued employment) and 28,376 of options remaining from the Impax option
conversion associated with the acquisition of Impax on May 4, 2018. RSUs included in column (a) of the table
represent the full number of RSUs awarded and outstanding whereas the number of shares of Class A Common Stock
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to be issued upon vesting will be lower than what is reflected on the table because the value of shares required to meet
employee tax withholding requirements are not issued.
(2)
Column (b) relates to stock options and does not include any exercise price for RSUs because an RSU’s value is
dependent upon attainment of continued employment or service and they are settled for shares of Class A Common
Stock on a one-for-one basis.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required in this Item 13 will be included in the following sections in the 2022 Proxy Statement, which sections
are incorporated in this Item 13 by reference: “Certain Related Parties and Related Party Transactions,” “Controlled Company
Status” and “Committees of the Board of Directors.”
Item 14. Principal Accounting Fees and Services
The independent registered public accounting firm is Ernst & Young LLP, Iselin, NJ, PCAOB ID 42 .
The information required in this Item 14 will be included in the section entitled “Independent Registered Public Accounting
Firm Fees” in the 2022 Proxy Statement, which section is incorporated in this Item 14 by reference.
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PART IV.
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Consolidated Financial Statements
Index to financial statements and supplementary data filed as part of this Report.
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
F-1
F-5
F-6
F-7
F-8
F-11
F-12
All schedules are omitted because they are not required or because the required information is included in the Consolidated
Financial Statements or notes thereto.
(a)(3) Exhibits
See the "Exhibit Index" prior to the signature page of this Annual Report on Form 10-K.
Item 16. Form 10-K Summary
None.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Amneal Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Amneal Pharmaceuticals, Inc. (the Company) as of
December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in
stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
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Description of the Matter
How We Addressed the
Matter in Our Audit
Description of the Matter
Medicaid Rebates
As discussed in Note 4 to the consolidated financial statements, the Company recognizes
revenue from product sales based on amounts due from customers net of allowances for
variable consideration, which include, among others, rebates mandated by law under
Medicaid and other government pricing programs. The Company includes an estimate of
variable consideration in its transaction price at the time of sale, when control of the
product transfers to the customer. The Company estimates its Medicaid and other
government pricing accruals based on monthly sales, historical experience of claims
submitted by the various states and jurisdictions, historical rebate rates and estimated lag
time of the rebate invoices. At December 31, 2021, the Company had $86 million in
accrued Medicaid and commercial rebates, which are presented within accounts payable
and accrued expenses on the consolidated balance sheet.
Auditing the allowances for Medicaid rebates was complex and challenging due to the
significant estimation involved in management’s assumptions to calculate expected future
claims and the amount of projected shipments from wholesalers that will be dispensed to
eligible benefit plan participants, as well as the complexity of governmental pricing
calculations. The allowances for Medicaid rebates are sensitive to these significant
assumptions and calculations.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over management’s review of the allowances for Medicaid
rebates. For example, we tested controls over management’s review of the significant
assumptions including the completeness and accuracy of inputs utilized in significant
assumptions as well as controls over management’s review of the application of the
government pricing regulations.
To test the allowances for Medicaid rebates, we performed audit procedures that
included, among others, evaluating the methodologies used and testing the significant
assumptions discussed above. We compared the significant assumptions used by
management to historical trends, evaluated the change in the accruals from prior periods,
and assessed the historical accuracy of management’s estimates against actual results. We
also tested the completeness and accuracy of the underlying data used in the Company’s
calculations through third-party invoices, claims data and actual cash payments. In
addition, we involved our government pricing subject matter professionals to assist in
evaluating management’s methodology and calculations used to measure certain
estimated rebates.
Sales Returns
As discussed in Note 4 of the consolidated financial statements, the Company permits the
return of product under certain circumstances, including product expiration, shipping
errors, damaged product, and product recalls. The Company accrues for the customer’s
right to return as part of its variable consideration at the time of sale, when control of the
product transfers to the customer. The Company’s product returns accrual is primarily
based on estimates of future product returns, estimates of the level of inventory of its
products in the distribution channel that remain subject to returns, estimated lag time of
returns and historical return rates. At December 31, 2021, the Company had $162 million
in accrued returns allowance, which are presented within accounts payable and accrued
expenses on the consolidated balance sheet.
Auditing the allowance for sales returns was complex due to the significant estimation
required in determining inventory in the distribution channel that will not ultimately be
sold to the end user and returned. The allowances for sales returns is sensitive to the level
of inventory and turnover of inventory in the distribution channel, which could exceed
future market demand and be subject to return.
F-2
Table of Contents
How We Addressed the
Matter in Our Audit
Description of the Matter
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of the Company's controls over the estimation of sales returns. For example,
we tested controls over management’s review of the significant assumptions including
review of the inventory on hand in the distribution channel, estimated lag time of returns,
and the completeness and accuracy of inputs utilized in the estimate of sales returns.
To test the estimated sales return reserve, we performed audit procedures that included,
among others, testing the historical return rate and estimated lag time of returns and
verifying the completeness and accuracy of sales data and sales returns data used in
calculating the historical return rate and lag time. In addition, we tested the Company’s
quarterly analysis of inventory in the distribution channel, analytically reviewed daily
sales at period end for unusual activity, performed confirmations with significant
distributors regarding contract terms and side arrangements. We also performed direct
inquiries with management including the Sales and Legal departments, obtained
representations confirming key contract terms at period end from the executive sales
representatives, and agreed representations obtained to executed contracts and reserve
calculations.
Impairment of Intangible Assets with Finite Lives
At December 31, 2021, the Company’s net intangible assets with finite lives were $761
million. As discussed in Notes 2 and 15 to the consolidated financial statements, net
intangible assets with finite lives are assessed for recoverability whenever events or
changes in circumstances indicate that the carrying amount of the assets may not be fully
recoverable. The Company evaluates assets for potential impairment by comparing
estimated future undiscounted net cash flows to the carrying amount of the asset. If the
carrying amount of the assets exceeds the estimated future undiscounted cash flows,
impairment is measured based on the difference between the carrying amount of the
assets and fair value.
Auditing the Company’s impairment tests for intangible assets with finite lives was
complex and highly judgmental due to the significant estimation in management’s
assumptions to calculate the undiscounted cash flows and the fair value estimate. These
assumptions can significantly affect the undiscounted cash flows and fair value of the
intangible asset with finite lives.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over the Company's impairment assessment for intangible assets
with finite lives. For example, we tested controls over management's review of the
significant inputs and assumptions used in the calculations of undiscounted cash flows
and fair value.
To test the Company’s impairment assessment for intangible assets with finite lives, we
performed audit procedures that included, among others, testing the significant
assumptions discussed above, including the completeness and accuracy of the underlying
data used by the Company in its analyses. We compared the significant assumptions used
by management to current industry and economic trends, historical financial results and
other relevant factors. We involved our valuation specialists to assist in the assessment of
the Company’s discount rate for the fair value estimate of intangible assets with finite
lives when the carrying amount of the assets exceeds the estimated future undiscounted
cash flows. We performed sensitivity analyses related to the discount rate to evaluate the
change in the fair value relative to the carrying value when measuring the resulting
impairment. We also assessed the historical accuracy of management's projections.
F-3
Table of Contents
Description of the Matter
Impairment of Goodwill and Other Indefinite-lived Intangible Assets
At December 31, 2021, the Company’s goodwill was $593 million and indefinite-lived
intangible assets, consisting of in-process research and development (IPR&D) was $405
million. As discussed in Notes 2 and 15 of the consolidated financial statements,
goodwill and IPR&D are tested by the Company’s management for impairment at least
annually, during the fourth quarter, unless events or circumstances indicate the carrying
amount may not be recoverable. Goodwill is tested for impairment at the reporting unit
level.
Auditing the Company’s impairment tests for goodwill and IPR&D was complex and
highly judgmental due to the significant estimation required in determining the fair value
of the reporting units for goodwill and the fair value of IPR&D assets. Specifically, the
fair value estimates of the reporting units are sensitive to assumptions such as net sales
growth rates, discount rate, and long-term growth rates. The fair value estimate for
IPR&D is sensitive to significant assumptions including the probability of successful
product completion, expected cash flows and cost of capital. The fair value estimates of
goodwill and IPR&D are affected by such factors as industry, market performance, and
financial forecasts.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over the Company's goodwill and IPR&D impairment
assessment. For example, we tested controls over management's review of the significant
inputs and assumptions used in the reporting unit and IPR&D valuations.
To test the estimated fair value of the Company's reporting units and IPR&D, we
performed audit procedures that included, among others, assessing the methodologies
used and testing the significant assumptions discussed above, including the completeness
and accuracy of the underlying data used by the Company in its analyses. We compared
the significant assumptions used by management to current industry and economic trends,
historical financial results and other relevant factors. We performed sensitivity analyses
of significant assumptions to evaluate the change in the fair value of the reporting units
and IPR&D resulting from changes in the inputs and assumptions. We also assessed the
historical accuracy of management's projections. In addition, we involved our valuation
specialists to assist in our evaluation of the valuation methodology and significant
assumptions described above used to develop the fair value estimates. We also performed
inquiries of the R&D personnel that oversee the on-going IPR&D projects to assess
whether there were any indicators that the IPR&D project had been abandoned or
significantly delayed that may suggest the IPR&D intangible asset may be impaired. In
addition, we evaluated the reconciliation of the estimated aggregate fair value of the
reporting units to the market capitalization of the Company.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
Iselin, New Jersey
March 1, 2022
F-4
Table of Contents
Amneal Pharmaceuticals, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Net revenue
Cost of goods sold
Cost of goods sold impairment charges
Gross profit
Selling, general and administrative
Research and development
In-process research and development impairment charges
Intellectual property legal development expenses
Acquisition, transaction-related and integration expenses
Charges related to legal matters, net
Restructuring and other charges
Change in fair value of contingent consideration
Property losses and associated expenses, net
Operating income (loss)
Other (expense) income:
Interest expense, net
Foreign exchange (loss) gain, net
Gain on sale of international businesses
Gain from reduction of tax receivable agreement liability
Other income, net
Total other (expense) income, net
Income (loss) before income taxes
Provision for (benefit from) income taxes
Net income (loss)
Less: Net (income) loss attributable to non-controlling interests
Net income (loss) attributable to Amneal Pharmaceuticals, Inc.
Net income (loss) per share attributable to Amneal Pharmaceuticals, Inc.’s
common stockholders:
Class A and Class B-1 basic
Class A and Class B-1 diluted
Weighted-average common shares outstanding:
Class A and Class B-1 basic
Class A and Class B-1 diluted
2021
2019
Years Ended December 31,
2020
$ 2,093,669 $ 1,992,523 $ 1,626,373
1,147,214
126,162
352,997
289,598
188,049
46,619
14,238
16,388
12,442
34,345
—
—
(248,682)
1,329,551
34,579
628,393
326,727
179,930
2,680
10,655
8,988
5,860
2,398
—
—
91,155
1,302,004
22,692
768,973
365,504
201,847
710
7,716
8,055
25,000
1,857
200
5,368
152,716
(136,325)
(355)
—
—
15,330
(121,350)
31,366
11,196
20,170
(9,546)
10,624 $
(145,998)
16,350
123
—
2,590
(126,935)
(35,780)
(104,358)
68,578
22,481
91,059 $
(168,205)
(4,962)
7,258
192,884
1,465
28,440
(220,242)
383,331
(603,573)
241,656
(361,917)
0.07 $
0.07 $
0.62 $
0.61 $
(2.74)
(2.74)
148,922
151,821
147,443
148,913
132,106
132,106
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
Amneal Pharmaceuticals, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Net income (loss)
Less: Net (income) loss attributable to non-controlling interests
Net income (loss) attributable to Amneal Pharmaceuticals, Inc.
Other comprehensive income (loss):
Foreign currency translation adjustments
Foreign currency translation adjustments arising during the period
Less: Reclassification of foreign currency translation adjustment included in
net loss
Foreign currency translation adjustments, net
Unrealized gain (loss) on cash flow hedge, net of tax
Less: Other comprehensive (income) loss attributable to non-controlling
interests
Other comprehensive income (loss) attributable to Amneal Pharmaceuticals,
Inc.
Comprehensive income (loss) attributable to Amneal Pharmaceuticals,
Inc.
Years Ended December 31,
2020
2021
$
20,170 $
(9,546)
10,624
68,578 $
22,481
91,059
2019
(603,573)
241,656
(361,917)
(8,618)
(13,500)
(1,233)
—
(8,618)
42,430
—
(13,500)
(70,276)
3,413
2,180
16,373
(17,095)
42,573
(10,058)
16,717
(41,203)
8,495
$
27,341 $
49,856 $
(353,422)
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
Amneal Pharmaceuticals, Inc.
Consolidated Balance Sheets
(in thousands)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Trade accounts receivable, net
Inventories
Prepaid expenses and other current assets
Related party receivables
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets, net
Operating lease right-of-use assets
Operating lease right-of-use assets - related party
Financing lease right-of-use assets
Financing lease right-of-use assets - related party
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
Current portion of long-term debt, net
Current portion of operating lease liabilities
Current portion of operating and financing lease liabilities - related party
Current portion of financing lease liabilities
Current portion of note payable - related party
Related party payables - short term
Total current liabilities
Long-term debt, net
Note payable - related party
Operating lease liabilities
Operating lease liabilities - related party
Financing lease liabilities
Financing lease liabilities - related party
Related party payable - long term
Other long-term liabilities
Total long-term liabilities
Commitments and contingencies (Notes 5 & 21)
Redeemable non-controlling interests
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,000 shares authorized; none issued at both December 31, 2021 and
2020
Class A common stock, $0.01 par value, 900,000 shares authorized at both December 31, 2021 and
2020; 149,413 and 147,674 shares issued at December 31, 2021 and 2020, respectively
Class B common stock, $0.01 par value, 300,000 shares authorized at both December 31, 2021 and
2020; 152,117 shares issued at both December 31, 2021 and 2020
Additional paid-in capital
Stockholders’ accumulated deficit
Accumulated other comprehensive loss
Total Amneal Pharmaceuticals, Inc. stockholders’ equity
Non-controlling interests
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2021
December 31,
2020
$
$
$
247,790 $
8,949
662,583
489,389
110,218
1,179
1,520,108
514,158
593,017
1,166,922
39,899
20,471
64,475
—
20,614
3,939,664 $
583,345 $
30,614
9,686
2,636
3,101
—
47,861
677,243
2,680,053
38,038
32,894
18,783
60,251
—
9,619
38,903
2,878,541
341,378
5,743
638,895
490,649
73,467
1,407
1,551,539
477,754
522,814
1,304,626
33,947
24,792
9,541
58,676
22,344
4,006,033
611,867
44,228
6,474
3,978
1,794
1,000
7,561
676,902
2,735,264
36,440
30,182
23,049
2,318
60,193
1,584
83,365
2,972,395
16,907
11,804
—
—
1,492
1,475
1,522
658,350
(276,197)
(24,827)
360,340
6,633
366,973
3,939,664 $
1,522
628,413
(286,821)
(41,318)
303,271
41,661
344,932
4,006,033
$
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
Amneal Pharmaceuticals, Inc.
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands)
Balance at January 1, 2021
147,674
$
1,475
152,117
$
1,522
$
628,413
$
(286,821) $
(41,318) $
41,661
$
344,932
$
11,804
Class A Common Stock
Class B Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Stockholders’
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
Controlling
Interests
Total
Equity
Redeemable
Non-
Controlling
Interests
Net income
Foreign currency translation adjustments
Stock-based compensation
Exercise of stock options
Restricted stock unit vesting, net of shares withheld
to cover payroll taxes
Tax distribution
Unrealized gain on cash flow hedge, net of tax
Non-controlling interests from KSP Acquisition
Non-controlling interests from Puniska Acquisition
—
—
—
342
1,397
—
—
—
—
—
—
—
3
14
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
28,412
901
624
—
—
—
—
10,624
—
2,539
13,163
7,007
—
—
—
—
—
—
—
—
(4,255)
(4,363)
(8,618)
—
(44)
—
(7)
28,412
853
(182)
(3,169)
(2,713)
—
—
—
—
(53,486)
(53,486)
(3,646)
20,972
21,458
42,430
2,000
2,000
—
—
—
—
1,742
—
—
Balance at December 31, 2021
149,413
$
1,492
152,117
$
1,522
$
658,350
$
(276,197) $
(24,827) $
6,633
$
366,973
$
16,907
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
Amneal Pharmaceuticals, Inc.
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands)
Class A Common Stock
Class B Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Stockholders’
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
Controlling
Interests
Total
Equity
Redeemable
Non-
Controlling
Interests
Balance at January 1, 2020
147,070
$
1,470
152,117
$
1,522
$
606,966
$
(377,880) $
(68) $
114,778
$
346,788
$
Net income
Foreign currency translation adjustments
Stock-based compensation
Exercise of stock options
Restricted stock unit vesting, net of shares withheld
to cover payroll taxes
Tax distribution
Unrealized loss on cash flow hedge, net of tax
Distribution of earnings to and acquisition of non-
controlling interests
Non-controlling interests from Rondo Acquisition
—
—
—
117
487
—
—
—
—
—
—
—
1
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,750
323
268
—
—
106
—
91,059
—
(23,268)
67,791
—
—
—
—
—
—
—
—
(6,643)
(6,857)
(13,500)
—
(15)
(32)
—
—
12
(1,103)
(2,779)
20,750
321
(863)
(34,560)
(35,716)
(70,276)
(2,779)
(458)
—
—
(3,406)
(3,300)
—
—
11,475
—
787
—
—
—
—
—
—
Balance at December 31, 2020
147,674
$
1,475
152,117
$
1,522
$
628,413
$
(286,821) $
(41,318) $
41,661
$
344,932
$
11,804
The accompanying notes are an integral part of these consolidated financial statements.
F-9
Table of Contents
Amneal Pharmaceuticals, Inc.
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands)
Class A Common Stock
Class B Common Stock
Class B-1
Common Stock
Shares
Amount
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Stockholders’
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-
Controlling
Interests
Total
Equity
Balance at January 1, 2019
115,047
$
1,151
171,261
$
1,713
12,329
$
123
$
530,438
$
(20,920) $
(7,755) $
391,613
$
896,363
Net loss
Cumulative-effective adjustment from adoption of
Topic 842
Foreign currency translation adjustments
Stock-based compensation
Exercise of stock options
Restricted stock unit vesting, net of shares withheld
to cover payroll taxes
Redemption of Class B Common Stock
Conversion of Class B-1 Common Stock
Tax distribution
Unrealized gain on cash flow hedge, net of tax
Reclassification of foreign currency translation
adjustment included in net loss
—
—
—
—
211
339
19,144
12,329
—
—
—
—
—
—
—
2
3
191
123
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(19,144)
(191)
—
—
—
—
—
—
—
—
Balance at December 31, 2019
147,070
$
1,470
152,117
$
1,522
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12,329)
(123)
—
—
—
—
$
—
—
—
—
—
—
—
21,679
937
54
53,858
—
—
—
—
(361,917)
4,957
—
—
—
—
—
—
—
—
—
—
—
(729)
—
(7)
(7)
(795)
—
—
7,764
1,461
(241,656)
(603,573)
8,604
(504)
—
468
(1,163)
(53,063)
—
(82)
13,561
(1,233)
21,679
1,400
(1,113)
—
—
(82)
8,609
16,373
1,952
3,413
$
606,966
$
(377,880) $
(68) $
114,778
$
346,788
The accompanying notes are an integral part of these consolidated financial statements.
F-10
Table of Contents
Amneal Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
2021
Years Ended December 31,
2020
2019
$
20,170
$
68,578
$
(603,573)
Gain from reduction of tax receivable agreement liability
Depreciation and amortization
Amortization of Levothyroxine Transition Agreement asset
Unrealized foreign currency loss (gain)
Amortization of debt issuance costs
Gain on sale of international businesses, net
Intangible asset impairment charges
Non-cash restructuring and asset-related (benefit) charges
Deferred tax provision
Change in fair value of contingent consideration
Stock-based compensation
Inventory provision
Insurance recoveries for property and equipment losses
Non-cash property and equipment losses
Other operating charges and credits, net
Changes in assets and liabilities:
Trade accounts receivable, net
Inventories
Prepaid expenses, other current assets and other assets
Related party receivables
Accounts payable, accrued expenses and other liabilities
Related party payables
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Acquisition of product rights and licenses
Deposits for future acquisition of property, plant, and equipment
Acquisitions, net of cash acquired
Proceeds from insurance recoveries for property and equipment losses
Proceeds from sale of international businesses, net of cash sold
Net cash used in investing activities
Cash flows from financing activities:
Payments of deferred financing costs and debt extinguishment costs
Proceeds from issuance of debt
Payments of principal on debt, financing leases and other
Proceeds from exercise of stock options
Employee payroll tax withholding on restricted stock unit vesting
Distribution of earnings to and acquisition of non-controlling interest
Tax distribution to non-controlling interest
Payments of principal on financing lease - related party
Repayment of related party notes
Net cash (used in) provided by financing activities
Effect of foreign exchange rate on cash
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash - beginning of period
Cash, cash equivalents, and restricted cash - end of period
Cash and cash equivalents - end of period
Restricted cash - end of period
Cash, cash equivalents, and restricted cash - end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash (paid) received for income taxes, net
Supplemental disclosure of non-cash investing and financing activity:
Notes payable for acquisitions - related party
Deferred consideration for acquisition - related party
Contingent consideration for acquisition - related party
Payable for acquisition of product rights and licenses
—
233,406
—
175
9,203
—
23,402
—
—
200
28,412
54,660
(5,000)
5,152
5,633
(23,621)
(49,015)
(21,981)
7,311
(43,932)
(2,355)
241,820
(47,728)
(1,700)
(3,211)
(146,543)
5,000
—
(194,182)
—
—
(78,086)
853
(2,664)
—
(57,132)
(93)
(1,000)
(138,122)
102
(90,382)
347,121
256,739
247,790
8,949
256,739
$
$
$
$
121,747
$
(15,558) $
14,162
30,099
5,700
300
$
$
$
$
—
235,387
—
(16,728)
8,678
(123)
37,259
(536)
—
—
20,750
75,236
—
—
11,818
16,787
(113,782)
33,312
412
307
1,646
379,001
(56,445)
(4,350)
(5,391)
(251,360)
—
—
(317,546)
(4,102)
180,000
(35,933)
321
(863)
(3,300)
(3,237)
(1,079)
—
131,807
1,037
194,299
152,822
347,121
341,378
5,743
347,121
130,186
100,141
36,033
—
—
—
$
$
$
$
$
$
$
$
$
$
(192,884)
207,235
36,393
7,342
6,478
(7,258)
172,781
12,459
371,716
—
21,679
82,245
—
—
7,309
(132,726)
(20,393)
38,870
(939)
(10,257)
5,228
1,705
(47,181)
(50,250)
—
—
43,017
34,834
(19,580)
—
—
(27,000)
1,400
(926)
(3,543)
(13,494)
(2,270)
—
(45,833)
(2,249)
(65,957)
218,779
152,822
151,197
1,625
152,822
158,568
10,255
—
—
—
—
$
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-11
Table of Contents
1. Nature of Operations
Amneal Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
Amneal Pharmaceuticals, Inc. (the “Company”) is a pharmaceutical company specializing in developing, manufacturing,
marketing and distributing high-value generic and branded specialty pharmaceutical products across a broad array of dosage
forms and therapeutic areas. The Company operates principally in the United States, India, and Ireland, and sells to wholesalers,
distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly. The Company is a holding
company, whose principal assets are common units (“Amneal Common Units”) of Amneal Pharmaceuticals, LLC (“Amneal”).
The group, together with their affiliates and certain assignees, who owned Amneal when it was a private company (the
“Members” or the “Amneal Group”) held 50.4% of Amneal Common Units and the Company held the remaining 49.6% as of
December 31, 2021.
In 2018, Amneal completed the acquisition of Impax Laboratories, Inc. (“Impax”), a generic and specialty pharmaceutical
company.
2. Summary of Significant Accounting Policies
Accounting Principles
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated.
Principles of Consolidation
Although the Company has a minority economic interest in Amneal, it is Amneal’s sole managing member, having the sole
voting power to make all of Amneal’s business decisions and controls its management. Therefore, the Company consolidates
the financial statements of Amneal and its subsidiaries. The Company records non-controlling interests for the portion of
Amneal’s economic interests that it does not hold.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company's management to make estimates
and assumptions that affect the reported financial position at the date of the financial statements and the reported results of
operations during the reporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities,
revenues and expenses, and disclosure of contingent assets and liabilities in the consolidated financial statements and
accompanying notes. The following are some, but not all, of such estimates: the determination of chargebacks, sales returns,
rebates, billbacks, valuation of intangible and other assets acquired in business combinations, allowances for accounts
receivable, accrued liabilities, contingent liabilities, initial and subsequent valuation of contingent consideration recognized in
business combinations, stock-based compensation, valuation of inventory balances, the determination of useful lives for product
rights and the assessment of expected cash flows used in evaluating goodwill and other long-lived assets for impairment. Actual
results could differ from those estimates.
Revenue Recognition
When assessing its revenue recognition, the Company performs the following five steps: (i) identify the contract with a
customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies the
performance obligation. The Company recognizes revenue when it transfers control of its products to customers, in an amount
that reflects the consideration to which the Company expects to be entitled to receive in exchange for those products. For
further details on the Company’s revenue recognition policies, refer to Note 4. Revenue Recognition.
Stock-Based Compensation
The Company’s stock-based compensation consists of stock options, restricted stock units ("RSUs") and market performance-
based restricted stock units (“MPRSUs”) awarded to employees and non-employee directors. Stock options are measured at
their fair value on the grant date or date of modification, as applicable. RSUs, including MPRSUs, are measured at the stock
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price on the grant date or date of modification, as applicable. The Company recognizes compensation expense on a straight-line
basis over the requisite service and/or performance period, as applicable. Forfeitures of awards are accounted for as a reduction
in stock-based compensation expense in the period such awards are forfeited. The Company's policy is to issue new shares upon
option exercises and the vesting of RSUs and MPRSUs.
Contingent consideration
Business acquisitions may include future payments that are contingent upon the occurrence of certain pharmaceutical regulatory
milestones or net sales of pharmaceutical products. For acquisitions that are accounted for as a business combination, the
obligations for such contingent consideration payments are recorded at fair value on the acquisition date. For contingent
milestone payments, the Company uses a probability-weighted income approach utilizing an appropriate discount rate. For
contingent tiered royalties on net sales, the Company uses a Monte Carlo simulation model. Contingent consideration liabilities
are revalued to fair value at the end of each reporting period. Changes in the fair value of contingent consideration, other than
changes due to payments, are recognized as a gain or loss and recorded within change in fair value of contingent consideration
in the consolidated statements of operations. Refer to Note 3. Acquisitions and Divestitures and Note 19. Fair Value
Measurements for additional information.
Foreign Currencies
The Company has operations in the U.S., India, Ireland, and other foreign jurisdictions. Generally, the Company’s foreign
operating subsidiaries’ functional currency is the local currency. The results of its non-U.S. dollar based operations are
translated to U.S. dollars at the average exchange rates during the period. Assets and liabilities are translated at the rate of
exchange prevailing on the balance sheet date. Translation adjustments are included in accumulated other comprehensive loss
and non-controlling interests in the consolidated balance sheets and are included in comprehensive income (loss). Transaction
gains and losses are included in net income (loss) in the Company’s consolidated statements of operations as a component of
foreign exchange (loss) gain, net. Such foreign currency transaction gains and losses include fluctuations related to long term
intercompany loans that are payable in the foreseeable future. Translation gains and losses on intercompany balances of a long-
term investment nature are included in foreign currency translation adjustments in accumulated other comprehensive income
(loss) and non-controlling interests, and comprehensive income (loss).
Business Combinations
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, the
acquiring entity in a business combination records the assets acquired and liabilities assumed at the date of acquisition at their
fair values. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is
recorded as goodwill. Acquisition-related costs, primarily professional fees, are expensed as incurred.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on deposit and highly liquid investments with original maturities of three months or
less. A portion of the Company’s cash flows are derived outside the U.S. As a result, the Company is subject to market risk
associated with changes in foreign exchange rates. The Company maintains cash balances at both U.S.-based and international-
based commercial banks. At various times during the year, cash balances in the U.S. may exceed amounts that are insured by
the Federal Deposit Insurance Corporation.
Restricted Cash
At December 31, 2021 and 2020, respectively, the Company had restricted cash balances of $9 million and $6 million in its
bank accounts primarily related to the purchase of certain land and equipment in India.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company limits its credit risk with
respect to accounts receivable by performing credit evaluations when deemed necessary. The Company does not require
collateral to secure amounts owed to it by its customers.
Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects the best estimate of
expected credit losses of the accounts receivable portfolio determined on the basis of historical experience, current information,
and forecasts of future economic conditions. The Company determines its allowance methodology by pooling receivable
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balances at the customer level. The Company consider various factors, including its previous loss history, individual credit risk
associated to each customer, and the current and future condition of the general economy. These credit risk factors are
monitored on a quarterly basis and updated as necessary. To the extent that any individual debtor is identified whose credit
quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such customer. The
Company makes concerted efforts to collect all outstanding balances due from customers; however, account balances are
charged off against the allowance when management believes it is probable the receivable will not be recovered. The Company
does not have any off-balance-sheet credit exposure related to customers.
Chargebacks Received from Manufacturers
When a sale occurs on a contracted item, the difference between the cost the Company pays to the manufacturer of that item
and the contract price that the end customer has with the manufacturer is rebated to the Company by the manufacturer as a
chargeback. Chargebacks are recorded as a reduction to cost of sales and either a reduction in the amount due to the
manufacturer (if there is a right of offset) or as a receivable from the manufacturer.
Inventories
Inventories consist of finished goods held for sale, raw materials, and work in process. Inventories are stated at net realizable
value, with cost determined using the first-in, first-out method. Adjustments for excess and obsolete inventories are established
based upon historical experience and management’s assessment of current product demand. These assessments include
inventory obsolescence based on its expiration date, damaged or rejected product, and slow-moving products.
Property, Plant, and Equipment
Property, plant, and equipment are stated at historical cost less accumulated depreciation. Depreciation expense is computed
primarily using the straight-line method over the estimated useful lives of the assets, which are as follows:
Asset Classification
Buildings
Computer equipment
Furniture and fixtures
Leasehold improvements
Machinery and equipment
Vehicles
Estimated Useful Life
30 years
5 years
7 years
Shorter of asset's useful life or remaining life of lease
5 - 10 years
5 years
Upon retirement or disposal, the cost of the asset disposed and the accumulated depreciation are removed from the accounts,
and any gain or loss is reflected as part of operating income (loss) in the period of disposal. Expenditures that significantly
increase value or extend useful lives of property, plant, and equipment are capitalized, whereas those for normal maintenance
and repairs are expensed. The Company capitalizes interest on borrowings during the construction period of major capital
projects as part of the related asset and amortizes the capitalized interest into earnings over the related asset’s remaining useful
life.
Leases
All significant lease arrangements are recognized as right-of-use (“ROU”) assets and lease liabilities at lease commencement.
ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent its
obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date
based on the present value of the future lease payments using the Company's incremental borrowing rate, which is assessed
quarterly.
Operating lease expense is recognized on a straight-line basis over the lease term. At each balance sheet date, operating and
financing lease liabilities continue to represent the present value of the future payments. Financing lease ROU assets are
expensed using the straight-line method, unless another basis is more representative of the pattern of economic benefit, to lease
expense. Interest on financing lease liabilities is recognized in interest expense.
Leases with an initial term of 12 months or less (short-term leases) are not recognized in the balance sheet and the related lease
payments are recognized as incurred over the lease term. The Company separates lease and non-lease components. A portion of
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the Company's real estate leases are subject to periodic changes in the Consumer Price Index ("CPI"). The changes to the CPI
are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.
For further details regarding the Company's leases, refer to Note 12. Leases.
In-Process Research and Development
The fair value of in-process research and development (“IPR&D”) acquired in a business combination is determined based on
the present value of each research project’s projected cash flows using an income approach. Revenues are estimated based on
relevant market size and growth factors, expected industry trends, individual project life cycles and the life of each research
project’s underlying marketability. In determining the fair value of each research project, expected cash flows are adjusted for
certain risks of completion, including technical and regulatory risk.
The value attributable to IPR&D projects at the time of acquisition is capitalized as an indefinite-lived intangible asset and
tested for impairment until the project is completed or abandoned. Upon completion of the project, the indefinite-lived
intangible asset is then accounted for as a finite-lived intangible asset and amortized over the estimated useful life of the asset
based on the pattern in which the economic benefits are expected to be consumed or otherwise used up or, if that pattern is not
readily determinable, on a straight-line basis. If the project is abandoned, the indefinite-lived intangible asset is charged to
expense.
Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators arise and, at a
minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a quantitative impairment
test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more
likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. Otherwise, no further
impairment testing is required. The indefinite-lived intangible asset impairment test consists of a one-step analysis that
compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to that excess. The Company considers many factors in
evaluating whether the value of its intangible assets with indefinite lives may not be recoverable, including, but not limited to,
expected growth rates, the cost of equity and debt capital, general economic conditions, the Company's outlook and market
performance of the Company's industry and recent and forecasted financial performance.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is
not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. The Company
reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that
the carrying amount may not be recoverable.
In order to test goodwill for impairment, an entity is permitted to first assess qualitative factors to determine whether a
quantitative assessment of goodwill is necessary. The qualitative factors considered by the Company may include, but are not
limited to, general economic conditions, the Company’s outlook, market performance of the Company’s industry and recent
and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative
assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further
impairment testing is required. If a quantitative assessment is required, the Company determines the fair value of its reporting
unit using a combination of the income and market approaches. If the net book value of the reporting unit exceeds its fair
value, the Company recognizes a goodwill impairment charge for the reporting unit equal to the lesser of (i) the total goodwill
allocated to that reporting unit and (ii) the amount by which that reporting unit’s carrying amount exceeds its fair value. See
Note 15. Goodwill and Other Intangible Assets, for further discussion of the Company's quantitative assessment of goodwill.
Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could
result in impairment charges in future periods. Such assumptions include projections of future cash flows and the current fair
value of the asset.
Amortization of Intangible Assets with Finite Lives
Intangible assets, other than indefinite-lived intangible assets, are amortized over the estimated useful life of the asset based on
the pattern in which the economic benefits are expected to be consumed or otherwise used up or, if that pattern is not readily
determinable, on a straight-line basis. The useful life is the period over which the assets are expected to contribute directly or
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indirectly to future cash flows. Intangible assets are not written-off in the period of acquisition unless they become impaired
during that period.
The Company regularly evaluates the remaining useful life of each intangible asset that is being amortized to determine whether
events and circumstances warrant a revision to the remaining period of amortization. If the estimate of the intangible asset’s
remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over that
revised remaining useful life. See Note 15. Goodwill and Other Intangible Assets, for further discussion of the Company's
intangible assets.
Impairment of Long-Lived Assets (Including Intangible Assets with Finite Lives)
The Company reviews its long-lived assets, including intangible assets with finite lives, for recoverability whenever events or
changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company evaluates
assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset.
If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the
difference between the carrying amount of the assets and fair value which is generally an expected present value cash flow
technique. Management’s policy in determining whether an impairment indicator exists comprises measurable operating
performance criteria as well as other qualitative measures. See Note 15. Goodwill and Other Intangible Assets, for further
discussion of the Company's assessment of intangible asset impairment.
Financial Instruments
The Company minimizes its risks from interest fluctuations through its normal operating and financing activities and, when
deemed appropriate through the use of derivative financial instruments. Derivative financial instruments are used to manage
risk and are not used for trading or other speculative purposes. The Company does not use leveraged derivative financial
instruments. Derivative financial instruments that qualify for hedge accounting must be designated and effective as a hedge of
the identified risk exposure at the inception of the contract. Accordingly, changes in fair value of the derivative contract must be
highly correlated with changes in fair value of the underlying hedged item at inception of the hedge and over the life of the
hedge contract.
All derivatives are recorded on the balance sheet as assets or liabilities and measured at fair value. For derivatives designated
as cash flow hedges, the effective portion of the changes in fair value of the derivatives are recorded in accumulated other
comprehensive loss, net of income taxes and subsequently amortized as an adjustment to interest expense over the period
during which the hedged forecasted transaction affects earnings, which is when the Company recognizes interest expense on the
hedged cash flows. Cash flows of such derivative financial instruments are classified consistent with the underlying hedged
item.
Highly effective hedging relationships that use interest rate swaps as the hedging instrument and that meet criteria under ASC
815, Derivatives and Hedging, may qualify for the “short-cut method” of assessing effectiveness. The short-cut method allows
the Company to make the assumption of no ineffectiveness, which means that the change in fair value of the hedged item can be
assumed to be equal to the change in fair value of the derivative. Unless critical terms change, no further evaluation of
effectiveness is performed for these hedging relationships unless a critical term is changed.
For a hedging relationship that does not qualify for the short-cut method, the Company measures its effectiveness using the
“hypothetical derivative method”, in which the change in fair value of the hedged item must be measured separately from the
change in fair value of the derivative. At inception and quarterly thereafter, the Company formally assesses whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair value or cash flows of the
hedged item. The Company compares the change in the fair value of the actual interest rate derivative to the change in the fair
value of a hypothetical interest rate derivative with critical terms that match the hedged interest rate payments. After the initial
quantitative assessment, this analysis is performed on a qualitative basis and, if it is determined that the hedging relationship
was and continues to be highly effective, no further analysis is required.
All components of each derivative financial instrument's gain or loss are included in the assessment of hedge effectiveness. If it
is determined that a derivative ceases to be a highly effective hedge, the Company discontinues hedge accounting and any
deferred gains or losses related to a discontinued cash flow hedge shall continue to be reported in accumulated other
comprehensive income (loss) net of income taxes, unless it is probable that the forecasted transaction will not occur. If it is
probable that the forecasted transaction will not occur by the originally specified time period, the Company discontinues hedge
accounting, and any deferred gains or losses reported in accumulated other comprehensive income (loss) are classified into
earnings immediately.
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The Company is subject to credit risk as a result of nonperformance by counterparties to the derivative agreements. Upon
inception and quarterly thereafter, the Company makes judgments on each counterparty’s creditworthiness for nonperformance
by counterparties.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, which requires the
recognition of tax benefits or expenses on temporary differences between the financial reporting and tax bases of its assets and
liabilities by applying the enacted tax rates in effect for the year in which the differences are expected to reverse. Such net tax
effects on temporary differences are reflected on the Company’s consolidated balance sheets as deferred tax assets and
liabilities. Deferred tax assets are reduced by a valuation allowance when the Company believes that it is more-likely-than-not
that some portion or all of the deferred tax assets will not be realized.
ASC 740-10 prescribes a two-step approach for the recognition and measurement of tax benefits associated with the positions
taken or expected to be taken in a tax return that affect amounts reported in the financial statements. The Company has
reviewed and will continue to review the conclusions reached regarding uncertain tax positions, which may be subject to review
and adjustment at a later date based on ongoing analyses of tax laws, regulations and interpretations thereof. To the extent that
the Company’s assessment of the conclusions reached regarding uncertain tax positions changes as a result of the evaluation of
new information, such change in estimate will be recorded in the period in which such determination is made. The Company
reports income tax-related interest and penalties relating to uncertain tax positions, if applicable, as a component of income tax
expense.
Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and all changes in stockholders’ equity (except those arising from
transactions with stockholders) including foreign currency translation adjustments resulting from the consolidation of foreign
subsidiaries’ financial statements and unrealized gains on cash flows hedges, net of income taxes.
Research and Development
Research and development ("R&D") activities are expensed as incurred. R&D expenses primarily consist of direct and allocated
expenses incurred with the process of formulation, clinical research, and validation associated with new product development.
Upfront and milestone payments made to third parties in connection with R&D collaborations are expensed as incurred up to
the point of regulatory approval or when there is no alternative future use.
Intellectual Property Legal Development Expenses
The Company expenses external intellectual property legal development expenses as incurred. These costs relate to legal
challenges of innovator’s patents for invalidity or non-infringement, which are customary in the generic pharmaceutical
industry, and are incurred predominately during development of a product and prior to regulatory approval. Associated costs
include, but are not limited to, formulation assessments, patent challenge opinions and strategy, and litigation expenses to
defend the intellectual property supporting the Company's regulatory filings.
Shipping Costs
The Company records the costs of shipping product to its customers as a component of selling, general, and administrative
expenses as incurred. Shipping costs were $18 million, $17 million and $15 million for the years ended December 31, 2021,
2020 and 2019, respectively.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04,
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which
provides elective amendments for entities that have contracts, hedging relationships and other transactions that reference
LIBOR or another reference rate expected to be discontinued because of reference rate reform. These amendments are effective
immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or
evaluated on or before December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic
848), to expand and clarify the scope of Topic 848 to include derivative instruments on discounting transactions. The
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amendments in this ASU are effective in the same timeframe as ASU 2020-04. The Company is currently evaluating the impact
this guidance will have on its consolidated financial statements.
Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and
contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.
The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those
recorded by the acquiree immediately before the acquisition date rather than at fair value. The new standard is effective on a
prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently
evaluating the impact this guidance will have on its consolidated financial statements.
Government Assistance (Topic 832): Disclosures by Business Entities About Government Assistance
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities
About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for
annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting
policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and
any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is
effective for the Company on January 1, 2022 and only impacts annual financial statement footnote disclosures. The Company
is currently evaluating the impact this guidance will have on its consolidated financial statements.
Reclassification
Prior period balances related to (i) financing lease right-of-use assets of $10 million formerly included in other assets, (ii)
current portion of financing lease liabilities of $2 million formerly included in accounts payable and accrued expenses, and (iii)
long-term lease liabilities of $2 million formerly included in other long-term liabilities as of December 31, 2020 have been
reclassified to their respective balance sheet captions to conform to the current period presentation in the consolidated balance
sheets.
3. Acquisitions and Divestitures
Acquisitions
Puniska Healthcare Pvt. Ltd.
On November 2, 2021, the Company entered into a definitive agreement to acquire Puniska Healthcare Pvt. Ltd. (“Puniska”), a
privately held manufacturer of parenteral and injectable drugs in India, and land in a transaction valued at $93 million (the
"Puniska Acquisition"). Upon execution of the agreement, the Company paid $73 million with cash on hand for approximately
74% of the equity interests of Puniska. Upon approval of the transaction by the government of India, the Company will pay
with cash on hand an additional $2 million for the remaining 26% of the equity interests of Puniska (included in redeemable
non-controlling interests in the Company’s consolidated balance sheet as of December 31, 2021) and $14 million for the
satisfaction of a preexisting payable to the sellers (included in related party payables-short term in the Company’s consolidated
balance sheet as of December 31, 2021). The Company expects approval from the government of India in the first half of 2022.
During December 2021, the Company paid $4 million with cash on hand for land associated with the Puniska Acquisition.
For the year ended December 31, 2021, the Company incurred $1 million in transaction costs associated with the Puniska
Acquisition, which were recorded in acquisition, transaction-related and integration expenses.
The Puniska Acquisition, excluding the land acquired in December 2021, was accounted for under the acquisition method of
accounting, with Amneal as the accounting acquirer. The preliminary purchase price was calculated as follows (in thousands):
Cash (1)
Payable to sellers (2)
Fair value of consideration transferred
$
$
72,880
14,162
87,042
(1)
(2)
Cash includes the payment made upon execution of the agreement.
Due to the short-term nature of the payable to the sellers, the principal amount approximates fair value.
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The following is a summary of the preliminary purchase price allocation for the Puniska Acquisition (in thousands):
Cash
Trade accounts receivable, net
Inventories
Prepaid expenses and other current assets
Property, plant and equipment
Goodwill
Operating lease-right-of-use assets
Other assets
Total assets acquired
Accounts payable and accrued expenses
Operating lease liabilities
Other long-term liabilities
Total liabilities assumed
Redeemable non-controlling interests
Fair value of consideration transferred
Fair Values as of
November 1, 2021
165
$
232
1,092
4,473
56,498
27,016
234
1,303
91,013
1,732
234
263
2,229
1,742
87,042
$
Goodwill is calculated as the excess of the consideration transferred and fair value of the redeemable non-controlling interests
over the net assets recognized. All of the goodwill acquired in connection with the Puniska Acquisition was allocated to the
Company’s Generics segment.
From the acquisition date of November 2, 2021 to December 31, 2021, the Puniska Acquisition contributed an operating loss of
$2 million.
Kashiv Specialty Pharmaceuticals, LLC Acquisition
On January 11, 2021, the Company and Kashiv Biosciences, LLC (a related party, see Note 24. Related Party Transactions)
(“Kashiv”) entered into a definitive agreement for Amneal to acquire a 98% interest in Kashiv Specialty Pharmaceuticals, LLC
(“KSP”), a subsidiary of Kashiv focused on the development of innovative drug delivery platforms, novel 505(b)(2) drugs and
complex generics (the “KSP Acquisition”).
On April 2, 2021, the Company completed the KSP Acquisition. Under the terms of the transaction, the cash portion of the
consideration was $104 million, comprised of a purchase price of $100 million (including initial and deferred consideration)
and a working capital adjustment of $4 million. The cash purchase price was funded by cash on hand. For further detail of the
purchase price, refer to the table below.
For the year ended December 31, 2021, the Company incurred $3 million in transaction costs associated with the KSP
Acquisition, which were recorded in acquisition, transaction-related and integration expenses.
The KSP Acquisition was accounted for under the acquisition method of accounting, with Amneal as the accounting acquirer.
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The purchase price was calculated as follows (in thousands):
Cash, including working capital payments
Deferred consideration (1)
Contingent consideration (regulatory milestones) (2)
Contingent consideration (royalties) (2)
Settlement of Amneal trade accounts payable due to KSP (3)
Fair value of consideration transferred
$
$
74,440
30,099
500
5,200
(7,117)
103,122
(1)
(2)
(3)
The deferred consideration is stated at the fair value estimate of $30.1 million, which is the $30.5 million contractually
stated amount less a $0.4 million discount. The deferred consideration consists of $30 million which was paid on
January 11, 2022 and $0.5 million which is due on March 10, 2022. As the deferred consideration is non-interest
bearing, the Company, using guideline companies and market borrowings with comparable risk profiles, discounted
the deferred consideration at 1.7% over the period from April 2, 2021 to the maturity dates, for a fair value of
$30.1 million on the date of acquisition. This discount will be amortized to interest expense over the life of the
deferred consideration utilizing the effective interest rate method.
Kashiv is eligible to receive up to an additional $8 million in contingent payments upon the achievement of certain
regulatory milestones and potential royalty payments from high single-digits to mid double-digits, depending on the
amount of aggregate annual net sales for certain future pharmaceutical products. The estimated fair value of contingent
consideration on the acquisition date was $6 million and was based on significant Level 3 inputs that were not
observable in the market. Key assumptions included the discount rate, probability of achievement of milestones,
projected year of payments and expected net product sales. Refer to Note 19. Fair Value Measurements, for additional
information on the methodology and determination of this liability.
Represents trade accounts payable due to KSP that were effectively settled upon closing of the KSP Acquisition.
The following is a summary of the purchase price allocation for the KSP Acquisition (in thousands):
Cash
Restricted cash
Prepaid expenses and other current assets
Property, plant and equipment
Goodwill
Intangible assets
Operating lease right-of-use assets
Total assets acquired
Accounts payable and accrued expenses
Operating lease liability
Related party payable
Total liabilities assumed
Non-controlling interests
Fair value of consideration transferred
Final Fair Values
as of
April 2, 2021
$
$
112
500
381
5,375
43,530
56,400
9,367
115,665
1,239
9,177
127
10,543
2,000
103,122
Total acquired intangible assets of $56 million were comprised of marketed product rights of $29 million and in-process
research and development (“IPR&D”) of $27 million.
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The acquired intangible assets are being amortized over their estimated useful lives as follows (in thousands):
Marketed product rights
Fair Value
$
29,400
Weighted-Average
Useful Life (in
years)
5.9
The estimated fair value of the in-process research and development and identifiable intangible assets was determined using the
"income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market
participant expectations of the cash flows an asset would generate over its remaining useful life. The assumptions, including the
expected projected cash flows, utilized in the purchase price allocation and in determining the purchase price were based on
management's best estimates as of the closing date of the KSP Acquisition on April 2, 2021.
Some of the more significant assumptions inherent in the development of those asset valuations included the estimated net cash
flows for each year for each asset or product (including net revenues, cost of sales, R&D, selling and marketing costs and
working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each
future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks,
competitive trends impacting the asset and each cash flow stream, as well as other factors. The underlying assumptions used to
prepare the discounted cash flow analysis may change; accordingly, for these and other reasons, actual results may vary
significantly from estimated results.
Goodwill is calculated as the excess of the consideration transferred and fair value of the non-controlling interests over the net
assets recognized. Of the total goodwill acquired in connection with the KSP Acquisition, $41 million was allocated to the
Company’s Generics segment and $3 million was allocated to the Specialty segment, based on the probability weighted cash
flows of the assets acquired as of the date of acquisition.
From the acquisition date of April 2, 2021, to December 31, 2021, the KSP Acquisition contributed an operating loss to the
Company’s consolidated statements of operations of $21 million, which included approximately $6 million of amortization
expense from intangible assets acquired in the KSP Acquisition. Offsetting the operating loss was a reduction of third-party
consulting services and the elimination of royalties due to KSP.
AvKARE and R&S Acquisitions
On December 10, 2019, the Company, through its investment in Rondo Partners, LLC (“Rondo”), entered into an equity
purchase agreement (“Rondo Equity Purchase Agreement”) and an operating agreement to acquire a 65.1% controlling
financing interest in both AvKARE Inc., a Tennessee corporation, and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a
Kentucky limited liability company (“R&S”) (collectively the “Rondo Acquisitions”). Prior to closing, AvKARE, Inc.
converted to a limited liability company, AvKARE, LLC. AvKARE, LLC is one of the largest private label providers of generic
pharmaceuticals in the U.S. federal agency sector, primarily focused on serving the Department of Defense and the Department
of Veterans Affairs. R&S is a national pharmaceutical wholesaler focused primarily on offering 340b-qualified entities products
to provide consistency in care and pricing.
On January 31, 2020, the Company completed the Rondo Acquisitions. The purchase price of $294 million included cash of
$254 million, the issuance of long-term promissory notes to the sellers with an aggregate principal amount of $44 million
(estimated fair value of $35 million) (the “Sellers Notes”) and a short-term promissory note (the “Short-Term Seller Note”)
with a principal amount of $1 million to the sellers. The cash purchase price was funded by $76 million of cash on hand and
debt of $178 million of proceeds from a $180 million term loan. The remaining $2 million consisted of working capital costs.
The Company is not party to or a guarantor of the term loan, the Sellers Notes or the Short-Term Seller Note. (Refer to Note 17.
Debt). For further details of the purchase price, refer to the table below.
For the year ended December 31, 2020, the Company incurred $1 million in transaction costs associated with the Rondo
Acquisitions, which was recorded in acquisition, transaction-related and integration expenses (none in 2020 and 2019).
The Rondo Acquisitions were accounted for under the acquisition method of accounting, with Amneal as the accounting
acquirer of AvKARE, LLC and R&S.
F-21
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The purchase price was calculated as follows (in thousands):
Cash
Sellers Notes (1)
Settlement of Amneal trade accounts receivable from R&S (2)
Short-Term Seller Note (3)
Working capital adjustment (4)
Fair value consideration transferred
$
254,000
35,033
6,855
1,000
(2,640)
$
294,248
(1)
(2)
(3)
(4)
In accordance with ASC 805, Business Combinations, all consideration transferred was measured at its acquisition-
date fair value. The Sellers Notes were stated at the fair value estimate of $35 million, which is the $44 million
aggregate principal amount less a $9 million discount. The fair value of the Sellers Notes was estimated using the
Monte-Carlo simulation approach under the option pricing framework.
Represents trade accounts receivable from R&S that was effectively settled upon closing of the Rondo Acquisitions.
Represents the principal amount due on the Short-Term Seller Note, which approximates fair value.
Represents a working capital adjustment pursuant to the terms of the purchase agreement. The entire amount was
received in cash by the Company in September 2020.
The following is a summary of the purchase price allocation for the Rondo Acquisitions (in thousands):
Trade accounts receivable, net
Inventories
Prepaid expenses and other current assets
Related party receivables
Property, plant and equipment
Goodwill
Intangible assets, net
Operating lease right-of-use assets - related party
Total assets acquired
Accounts payable and accrued expenses
Related party payables
Operating lease liabilities - related party
Total liabilities assumed
Redeemable non-controlling interests
Fair value of consideration transferred
Final Fair Values
as of
January 31, 2020
$
46,702
71,908
11,316
61
5,278
103,679
130,800
5,544
375,288
62,489
1,532
5,544
69,565
11,475
294,248
$
F-22
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The acquired intangible assets are being amortized over their estimated useful lives as follows (in thousands):
Government licenses
Government contracts
National contracts
Customer relationships
Trade name
Final Fair
Values
Weighted-
Average
Useful Life
$
66,700
22,000
28,600
13,000
500
$
130,800
7 years
4 years
5 years
10 years
6 years
The estimated fair value of the government licenses was determined using the “with-and-without method,” which is a valuation
technique that provides an estimate of the fair value of an intangible asset that is equal to the difference between the present
value of the prospective revenues and expenses for the business with and without the subject intangible asset in place. The
estimated fair values of the government contracts, national contracts, and customer relationships were determined using the
“income approach,” which is a valuation technique that provides an estimate of the fair value of an intangible asset based on
market participant expectations of the cash flows that an intangible asset would generate over its remaining useful life. The
estimated fair value of the trade name was determined using the “relief from royalty method,” which is a valuation technique
that provides an estimate of the fair value of an intangible asset equal to the present value of the after-tax royalty savings
attributable to owning the intangible asset. The assumptions, including the expected projected cash flows, utilized in the
purchase price allocation and in determining the purchase price were based on management's best estimates as of the closing
date of the Rondo Acquisitions on January 31, 2020.
Some of the more significant assumptions inherent in the development of those asset valuations included the estimated net cash
flows for each year for each asset (including net revenues, cost of sales, selling and marketing costs and working capital /
contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow
stream, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream, as well as
other factors. The underlying assumptions used to prepare the discounted cash flow analysis may change; accordingly, for these
and other reasons, actual results may vary significantly from estimated results.
The Sellers Notes and redeemable non-controlling interests were estimated using the Monte-Carlo simulation approach under
the option pricing framework. The non-controlling interests are redeemable at the option of either the non-controlling interest
holder or Amneal. The fair value of the redeemable non-controlling interests considers these redemption rights.
Of the $104 million of goodwill acquired in connection with the Rondo Acquisitions, approximately $70 million was allocated
to the Company’s AvKARE segment and approximately $34 million was allocated to the Generics segment (refer to Note 26.
Segment Information). Goodwill was allocated to the Generics segment as net revenue of products manufactured by Amneal
and distributed by the Rondo Acquisitions is reflected in Generics’ segment results. Goodwill is calculated as the excess of the
fair value of the consideration transferred and the fair value of the redeemable non-controlling interests over the fair value of
the net assets recognized. Factors that contributed to the recognition of goodwill include Amneal’s intent to diversify its
business and open growth opportunities in the large, complex and growing federal healthcare market.
From the acquisition date of January 31, 2020 to December 31, 2020, the Rondo Acquisitions contributed total net revenue of
approximately $311 million and operating income of $4 million, which included approximately $32 million of amortization
expense from intangible assets acquired in the Rondo Acquisitions, to the Company’s consolidated statements of operations.
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Unaudited Pro Forma Information
The unaudited pro forma combined results of operations for the years ended December 31, 2021 and 2020 (assuming the
closing of the Rondo Acquisitions occurred on January 1, 2019 and the closing of the KSP Acquisition occurred on January 1,
2020) are as follows (in thousands):
Net revenue
Net income
Net income attributable to Amneal Pharmaceuticals, Inc.
Year Ended December 31,
2021
2,093,861 $
22,523 $
11,802 $
2020
2,023,609
54,083
80,643
$
$
$
The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results
of operations had the closing of the Rondo Acquisitions taken place on January 1, 2019 and the closing of the KSP Acquisition
taken place on January 1, 2020. Furthermore, the pro forma results do not purport to project the future results of operations of
the Company.
Adjustments to arrive at the unaudited pro forma information primarily related to increases in selling, general and
administrative expenses for amortization of acquired intangible assets, net of the applicable tax impact.
Divestitures
UK Divestiture
On March 30, 2019, the Company sold 100% of the stock of its Creo Pharma Holding Limited subsidiary, which comprised
substantially all of the Company's operations in the United Kingdom, to AI Sirona (Luxembourg) Acquisition S.a.r.l (“AI
Sirona”) for net cash consideration of approximately $32 million which was received in April 2019. The carrying value of the
net assets sold was $22 million, including intangible assets of $7 million and goodwill of $5 million. As a result of the sale, the
Company recognized a pre-tax gain of $9 million, inclusive of transaction costs and the recognition of accumulated foreign
currency translation adjustment losses of $3 million, within gain on sale of international businesses for the year ended
December 31, 2019. For the year ended December 31, 2020, the Company made a $0.5 million payment to AI Sirona, and
recognized a $0.1 million gain within sale of international businesses for final settlement of the divestiture. As part of the
disposition, the Company entered into a supply and license agreement with AI Sirona to supply certain products for a period of
up to two years.
Germany Divestiture
On May 3, 2019, the Company sold 100% of the stock of its Amneal Deutschland GmbH subsidiary, which comprised
substantially all of the Company's operations in Germany, to EVER Pharma Holding Ges.m.b.H. (“EVER”) for net cash
consideration of approximately $3 million which was received in May 2019. The carrying value of the net assets sold was $7
million, including goodwill of $0.5 million. As a result of the sale, the Company recognized a pre-tax loss of $2 million,
inclusive of transaction costs and the recognition of accumulated foreign currency translation adjustment losses, within gain on
sale of international businesses for the year ended December 31, 2019. As part of the disposition, the Company also entered
into a license and supply agreement with EVER to supply certain products for an 18-month period.
Acquisition, Transaction-Related and Integration Expenses
For the year ended December 31, 2021, acquisition, transaction-related and integration expenses of $8 million primarily
consisted of professional services fees (e.g. legal, investment banking and consulting) associated with the Puniska Acquisition,
the KSP Acquisition, and the Rondo Acquisitions.
For the year ended December 31, 2020, acquisition, transaction-related and integration expenses of $9 million primarily
consisted of professional services fees associated with the then pending KSP Acquisition, the Rondo Acquisitions, and systems
integrations associated with the acquisition of Impax.
For the year ended December 31, 2019, acquisition, transaction-related and integration expenses of $16 million primarily
consisted of integration costs associated with the acquisition of Impax.
F-24
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4. Revenue Recognition
Performance Obligations
The Company’s performance obligation is the supply of finished pharmaceutical products to its customers. The Company’s
customers consist primarily of major wholesalers, retail pharmacies, managed care organizations, purchasing co-ops, hospitals,
government agencies, institutions and pharmaceutical companies. The Company’s customer contracts generally consist of both
a master agreement, which is signed by the Company and its customer, and a customer submitted purchase order, which is
governed by the terms and conditions of the master agreement. Customers purchase product by direct channel sales from the
Company or by indirect channel sales through various distribution channels.
Revenue is recognized when the Company transfers control of its products to the customer, which typically occurs at a point-in-
time, upon shipment or delivery. Substantially all of the Company’s net revenues relate to products which are transferred to the
customer at a point-in-time.
The Company offers standard payment terms to its customers and has elected the practical expedient to not adjust the promised
amount of consideration for the effects of a significant financing, since the period between when the Company transfers the
product to the customer and when the customer pays for that product is one year or less. Taxes collected from customers
relating to product sales and remitted to governmental authorities are excluded from revenues. The consideration amounts due
from customers as a result of product sales are subject to variable consideration, as described further below.
The Company offers standard product warranties which provide assurance that the product will function as expected and in
accordance with specifications. Customers cannot purchase warranties separately and these warranties do not give rise to a
separate performance obligation.
The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping
errors or where product is damaged in transit. The Company accrues for the customer’s right to return as part of its variable
consideration. See below for further details.
Variable Consideration
The Company includes an estimate of variable consideration in its transaction price at the time of sale, when control of the
product transfers to the customer. Variable consideration includes but is not limited to: chargebacks, distribution fees, rebates,
group purchasing organization ("GPO") fees, prompt payment (cash) discounts, consideration payable to the customer,
billbacks, Medicaid and other government pricing programs, price protection and shelf stock adjustments, sales returns, and
profit shares.
The Company assesses whether or not an estimate of its variable consideration is constrained and has determined that the
constraint does not apply, since it is probable that a significant reversal in the amount of cumulative revenue will not occur in
the future when the uncertainty associated with the variable consideration is subsequently resolved. The Company’s estimates
for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a
change in the amount of total consideration it expects to receive.
Chargebacks
In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and
the contract price charged to the indirect customer is lower than the wholesaler pricing, the Company pays the direct customer
(wholesaler) a chargeback for the price differential. The Company estimates its chargeback accrual based on its estimates of the
level of inventory of its products in the distribution channel that remain subject to chargebacks and historical chargeback rates.
The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.
Rebates
The Company pays fixed or volume-based rebates to its customers based on a fixed amount, fixed percentage of product sales
or based on the achievement of a specified level of purchases. The Company’s rebate accruals are based on actual net sales,
contractual rebate rates negotiated with customers, and expected purchase volumes / corresponding tiers based on actual sales to
date and forecasted amounts.
F-25
Table of Contents
Group Purchasing Organization Fees
The Company pays fees to GPOs for administrative services that the GPOs perform in connection with the purchases of product
by the GPO participants who are the Company’s customers. The Company’s GPO fee accruals are based on actual net sales,
contractual fee rates negotiated with GPOs and the mix of the products in the distribution channel that remain subject to GPO
fees.
Prompt Payment (Cash) Discounts
The Company provides customers with prompt payment discounts which may result in adjustments to the price that is invoiced
for the product transferred, in the case that payments are made within a defined period. The Company’s prompt payment
discount accruals are based on actual net sales and contractual discount rates.
Consideration Payable to the Customer
The Company pays administrative and service fees to its customers based on a fixed percentage of the product price. These fees
are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. The
Company accrues for these fees based on actual net sales, contractual fee rates negotiated with the customer and the mix of the
products in the distribution channel that remain subject to fees.
Billbacks
In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and
the contract price charged to the indirect customer is higher than contractual pricing, the Company pays the indirect customer a
billback for the price differential. The Company estimates its billback accrual based on its estimates of the level of inventory of
its products in the distribution channel that remain subject to billbacks and historical billback rates. The estimate of the level of
products in the distribution channel is based primarily on data provided by key customers.
Medicaid and Other Government Pricing Programs
The Company complies with required rebates mandated by law under Medicaid and other government pricing programs. The
Company estimates its government pricing accruals based on monthly sales, historical experience of claims submitted by the
various states and jurisdictions, historical rates and estimated lag time of the rebate invoices.
Price Protection and Shelf Stock Adjustments
The Company provides customers with price protection and shelf stock adjustments which may result in an adjustment to the
price charged for the product transferred, based on differences between old and new prices which may be applied to the
customer’s on-hand inventory at the time of the price change. The Company accrues for these adjustments when its expected
value of an adjustment is greater than zero, based on contractual pricing, actual net sales, accrual rates based on historical
average rates, and estimates of the level of inventory of its products in the distribution channel that remain subject to these
adjustments. The estimate of the level of products in the distribution channel is based primarily on data provided by key
customers.
Sales Returns
The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping
errors or where product is damaged in transit, and occurrences of product recalls. The Company’s product returns accrual is
primarily based on estimates of future product returns based generally on actual net sales, estimates of the level of inventory of
its products in the distribution channel that remain subject to returns, estimated lag time of returns and historical return rates.
The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.
Profit Shares
For certain product sale arrangements, the Company earns a profit share upon the customer’s sell-through of the product
purchased from the Company. The Company estimates its profit shares based on actual net sales, estimates of the level of
inventory of its products in the distribution channel that remain subject to profit shares, and historical rates of profit shares
earned. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.
F-26
Table of Contents
Concentration of Revenue
The following table summarizes the percentages of net revenues from each of the Company's customers which individually
accounted for 10% or more of its net revenues:
Customer A
Customer B
Customer C
Disaggregated Revenue
For the year ended December 31,
2021
2020
2019
24 %
21 %
20 %
23 %
23 %
17 %
20 %
26 %
19 %
The Company's significant therapeutic classes for each of its reportable segments, as determined based on net revenue for each
of the years ended December 31, 2021, 2020 and 2019 are set forth below (in thousands):
Generics
Specialty
AvKARE (3)
Anti-Infective
Hormonal/Allergy
Antiviral (1)
Central Nervous System (2)
Cardiovascular System
Gastroenterology
Oncology
Metabolic Disease/Endocrine
Respiratory
Dermatology
Other therapeutic classes
International and other
Total Generics net revenue
Hormonal/Allergy
Central Nervous System (2)
Gastroenterology
Metabolic Disease/Endocrine
Other therapeutic classes
Total Specialty net revenue
Distribution
Government Label
Institutional
Other
Total AvKARE net revenue
Total net revenue
Year ended December 31,
2021
2020
2019
$
30,501 $
427,077
4,832
381,110
141,866
76,497
103,327
38,462
35,965
55,474
69,928
1,299
1,366,338
40,381 $
355,581
25,724
422,405
114,226
78,165
61,113
45,004
37,389
58,168
102,721
2,333
1,343,210
68,397
277,196
78
50
32,598
378,319
54,631
285,737
1,597
646
12,956
355,567
36,320
364,658
27,488
423,416
117,065
42,783
62,721
55,786
34,920
60,186
60,041
23,459
1,308,843
45,547
235,846
4,223
894
31,020
317,530
192,921
118,379
25,176
12,536
349,012
2,093,669 $
161,673
104,054
18,546
9,473
293,746
1,992,523 $
—
—
—
—
—
1,626,373
$
(1)
Antiviral net revenue for the year ended December 31, 2021 decreased from the prior year, primarily due to a decline
in Oseltamivir (generic Tamiflu®) sales from lower demand and increased returns activity above historical levels as a
result of decreased influenza activity during the COVID-19 pandemic.
F-27
Table of Contents
(2)
(3)
During the three months ended September 30, 2019, net revenue and operating results for Oxymorphone were
reclassified from Generics to Specialty, where it is sold as a non-promoted product. Prior period results have not
been restated to reflect the reclassification.
The AvKARE segment consists of the businesses acquired in the Rondo Acquisitions on January 31, 2020. Net
revenue for the year ended December 31, 2020 represents eleven months of activity.
A rollforward of the major categories of sales-related deductions for the years ended December 31, 2021, 2020 and 2019 is as
follows (in thousands):
Contract
Charge-
backs and
Sales
Volume
Allowances
Cash
Discount
Allowances
Accrued
Returns
Allowance
Accrued
Medicaid and
Commercial
Rebates
$
829,596 $
4,628,084
(4,627,873)
829,807
12,444
3,930,682
(4,144,129)
628,804
3,164,331
(3,289,233)
503,902 $
$
36,157 $
136,005
(137,854)
34,308
944
118,525
(131,087)
22,690
107,810
(106,858)
23,642 $
154,503 $
104,664
(108,806)
150,361
11,606
110,556
(97,539)
174,984
105,127
(118,133)
161,978 $
74,202
202,635
(161,877)
114,960
10
133,748
(117,630)
131,088
137,452
(182,803)
85,737
Balance at January 1, 2019
Provision related to sales recorded in the period
Credits/payments issued during the period
Balance at December 31, 2019
Impact from the Rondo Acquisitions
Provision related to sales recorded in the period
Credits/payments issued during the period
Balance at December 31, 2020
Provision related to sales recorded in the period
Credits/payments issued during the period
Balance at December 31, 2021
5. Alliance and Collaboration
The Company has entered into several alliance, collaboration, license, distribution and similar agreements with respect to
certain of its products and services with third-party pharmaceutical companies. The consolidated statements of operations
include revenue recognized under agreements the Company has entered into to develop marketing and/or distribution
relationships with its partners to fully leverage the technology platform and revenue recognized under development agreements
which generally obligate the Company to provide research and development services over multiple periods. The Company's
significant arrangements are discussed below.
Levothyroxine License and Supply Agreement; Transition Agreement
On August 16, 2018, the Company entered into a license and supply agreement with Jerome Stevens Pharmaceuticals, Inc.
(“JSP”) for levothyroxine sodium tablets (“Levothyroxine”). This agreement designated the Company as JSP's exclusive
commercial partner for Levothyroxine in the U.S. market for a 10-year term commencing on March 22, 2019. Under this
license and supply agreement with JSP, the Company accrued the up-front license payment of $50 million on March 22, 2019,
which was paid in April 2019. The agreement also provides for the Company to pay a profit share to JSP based on net profits of
the Company's sales of Levothyroxine, after considering product costs.
On November 9, 2018, the Company entered into a transition agreement ("Transition Agreement") with Lannett Company
(“Lannett”) and JSP. Under the terms of the agreement, the Company assumed the distribution and marketing of Levothyroxine
from Lannett beginning December 1, 2018 through March 22, 2019 (the “Transition Period”), ahead of the commencement date
of the license and supply agreement with JSP described above.
In accordance with the terms of the Transition Agreement, the Company made $47 million of non-refundable payments to
Lannett in November 2018. For the year ended December 31, 2019, $37 million, was expensed to costs of goods sold, as the
company sold Levothyroxine.
Additionally, during the year ended December 31, 2019, the Company recorded $1 million in cost of sales related to
reimbursement due to Lannett for certain of its unsold inventory at the end of the Transition Period, which was fully settled in
March 2020.
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Table of Contents
As a result of significant price erosion associated with the Levothyroxine products licensed from JSP, the Company recorded a
$17.7 million cost of goods sold impairment charge for the year ended December 31, 2021 to recognize an impairment on the
entire unamortized balance of the up-front license payment (refer to Note 15. Goodwill and Other Intangible Assets for
additional information).
Biosimilar Licensing and Supply Agreement
On May 7, 2018, the Company entered into a licensing and supply agreement with Mabxience S.L., for its biosimilar candidate
for Avastin® (bevacizumab). The supply agreement was subsequently amended on March 2, 2021 and the licensing agreement
was amended on March 4, 2021. The Company will be the exclusive partner in the U.S. market. The Company will pay up-
front, development and regulatory milestone payments as well as commercial milestone payments on reaching pre-agreed sales
targets in the market to Mabxience, up to $78 million. For the years ended December 31, 2021, 2020, and 2019, the Company
recognized $12 million, $5 million, and $5 million, respectively, of milestones in research and development expenses,
respectively, related to the agreement.
Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited
In January 2012, Impax entered into an agreement with AstraZeneca UK Limited (“AstraZeneca”) to distribute branded
products under the terms of a distribution, license, development and supply agreement (the “AZ Agreement”). The parties
subsequently entered into a First Amendment to the AZ Agreement dated May 31, 2016 (as amended, the “AZ Amendment”).
Under the terms of the AZ Agreement, AstraZeneca granted to Impax an exclusive license to commercialize the tablet, orally
disintegrating tablet and nasal spray formulations of Zomig® (zolmitriptan) products for the treatment of migraine headaches in
the United States and in certain U.S. territories, except during an initial transition period when AstraZeneca fulfilled all orders
of Zomig® products on Impax’s behalf and AstraZeneca paid to Impax the gross profit on such Zomig® products. Pursuant to
the AZ Amendment, under certain conditions, and depending on the nature and terms of the study agreed to with the FDA,
Impax agreed to conduct, at its own expense, the juvenile toxicity study and pediatric study required by the FDA under the
Pediatric Research Equity Act (“PREA”) for approval of the nasal formulation of Zomig ® for the acute treatment of migraine
in pediatric patients ages six through eleven years old, as further described in the study protocol mutually agreed to by the
parties (the “PREA Study”). In consideration for Impax conducting the PREA Study at its own expense, the AZ Amendment
provided for the total royalty payments payable by Impax to AstraZeneca on net sales of Zomig ® products under the AZ
Agreement to be reduced by an aggregate amount of $30 million to be received in quarterly amounts specified in the
Amendment beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020. In the event
the royalty reduction amounts exceeded the royalty payments payable by Impax to AstraZeneca pursuant to the AZ Agreement
in any given quarter, AstraZeneca was required to pay Impax an amount equal to the difference between the royalty reduction
amount and the royalty payment payable by Impax to AstraZeneca. Impax’s commitment to perform the PREA Study could
have been terminated, without penalty, under certain circumstances as set forth in the AZ Amendment. The Company
recognized the amounts received from AstraZeneca for the PREA Study as a reduction to research and development expense.
The PREA study was completed during March 2021.
In May 2013, Impax’s exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and Impax
launched authorized generic versions of those products in the United States. The pediatric exclusivity of the AstraZeneca patent
licensed to Impax for Zomig Spray expired in May 2021 and the Company lost market exclusivity in the fourth quarter of 2021.
As discussed above, pursuant to the AZ Amendment, the total royalty payments payable by Impax to AstraZeneca on net sales
of Zomig ® products under the AZ Agreement was reduced by certain specified amounts beginning from the quarter ended
June 30, 2016 through the quarter ended December 31, 2020, with such reduced royalty amounts totaling an aggregate amount
of $30 million. The Company recorded cost of goods sold for royalties under this agreement of $13 million, $17 million, and
$19 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Agreements with Kashiv Biosciences, LLC
For detail on the Company’s related party agreements with Kashiv Biosciences, LLC, refer to Note 24. Related Party
Transactions.
6. Restructuring and Other Charges
In 2018, in connection with the acquisition of Impax, the Company committed to a restructuring plan to achieve cost savings.
The Company expected to integrate its operations and reduce its combined cost structure through workforce reductions that
eliminated duplicative positions and consolidated certain administrative, manufacturing and research and development
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facilities. In connection with this plan, the Company announced on May 10, 2018 that it intended to close its Hayward,
California-based operations.
On July 10, 2019, the Company announced a plan to restructure its operations that is intended to reduce costs and optimize its
organizational and manufacturing infrastructure. Pursuant to the restructuring plan as revised, the Company expects to reduce
its headcount over the course of this multi-year program by approximately 300 to 350 employees through September 30, 2022,
primarily by ceasing to manufacture at its facility located in Hauppauge, NY. Through December 31, 2021, the Company
reduced headcount by 280 employees under this plan. Other cash expenditures associated with this restructuring plan, including
decommissioning and dismantling the sites and other third party costs cannot be estimated at this time.
The following table sets forth the components of the Company's employee and asset-related restructuring charges (credit) and
other employee severance charges for the years ended December 31, 2021, 2020 and 2019 (in thousands):
Employee restructuring separation charges (credit) (1)
Asset-related (credit) charges (2)
Total employee and asset-related restructuring charges (credit)
Other employee severance charges (3)
Total restructuring and other charges
Years Ended December 31,
2020
2019
2021
$
$
425 $
—
425
1,432
1,857 $
(119) $
(536)
(655)
3,053
2,398 $
11,121
12,459
23,580
10,765
34,345
(1)
(2)
(3)
Employee restructuring separation charges (credit) were associated with benefits provided pursuant to the Company's
severance programs for employees impacted by the plans at the Company's Hauppauge, NY, Hayward, CA and other
facilities.
For the year ended December 31, 2020, the asset-related credit was primarily associated with the contractual
cancellation of an asset retirement obligation related to a lease in Hayward, CA that was terminated during August
2020. For the year ended December 31, 2019, asset-related charges were primarily associated with the impairment of
property, plant and equipment and right of use asset in connection with the planned closing of the Company’s
Hauppauge, NY facility.
For the years ended December 31, 2021, 2020 and 2019, other employee severance charges were primarily associated
with the cost of benefits for former executives and employees.
The charges (credit) related to restructuring impacted segment earnings as follows (in thousands):
Generics
Specialty
Corporate
Total employee and asset-related restructuring (credit) charges
Years Ended December 31,
2020
2021
2019
$
$
— $
—
425
425 $
(655) $
—
—
(655) $
20,101
391
3,088
23,580
The following table shows the change in the employee separation-related liability, included in accounts payable and accrued
expenses, associated with the plan to cease manufacturing at its facility located in Hauppauge, NY (in thousands):
Balance at December 31, 2020
Expense
Payments
Balance at December 31, 2021
Employee
Restructuring
1,592
$
425
—
2,017
$
As of December 31, 2021 and 2020, there were no remaining employee separation liabilities associated with the restructuring
plan to close the Company’s Hayward, California-based operations.
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7. Government Grants
In November 2021, Amneal Pharmaceuticals Private Limited, a subsidiary of the Company in India, was selected as one of 55
companies to participate in the Production Linked Incentive Scheme for the Pharmaceutical sector (“PLI Scheme”). The
Government of India established the PLI Scheme to make India’s domestic manufacturing more globally competitive and to
create global champions within the pharmaceutical sector by encouraging investment and product diversification with a focus
on manufacturing complex and high value goods.
Under the PLI Scheme, the Company is eligible to receive up to 10 billion Indian rupees, or approximately $134 million (based
on conversion rates as of December 31, 2021), over a maximum six-year period, starting in 2022. To be eligible to receive the
cash incentives, Amneal must achieve (i) minimum cumulative expenditures towards developmental and/or capital investments;
and (ii) a minimum percentage growth in sales of eligible products. The Company will recognize the related grant incentives in
the consolidated statements of operations on a systematic basis over the term of the grant starting in 2022.
8. Income Taxes
Amneal is a limited liability company that is treated as a partnership for U.S. federal and most applicable state and local income
tax purposes. As a partnership, Amneal is not subject to U.S. federal and certain state and local income taxes. Any taxable
income or loss generated by Amneal is passed through to and included in the taxable income or loss of its members, including
the Company, on a pro rata basis subject to applicable tax regulations. The Company is subject to U.S. federal income taxes, in
addition to state and local income taxes with respect to its allocable share of any taxable income or loss of Amneal, as well as
any stand-alone income or loss generated by the Company. Amneal provides for income taxes in the various foreign
jurisdictions in which it operates.
The Company recorded a deferred tax asset for its outside basis difference in its investment in Amneal on May 4, 2018. The
Company recorded a deferred tax asset related to the net operating loss of Impax from January 1, 2018 through May 4, 2018 as
well as certain federal and state credits and interest carryforwards of Impax that were attributable to the Company.
The Company records its valuation allowances against its deferred tax assets (“DTAs”) when it is more likely than not that all
or a portion of a DTA will not be realized. The Company routinely evaluates the realizability of its DTAs by assessing the
likelihood that its DTAs will be recovered based on all available positive and negative evidence, including scheduled reversals
of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. Estimating future
taxable income is inherently uncertain and requires judgment. In projecting future taxable income, the Company considers its
historical results and incorporates certain assumptions, including projected new product launches, revenue growth, and
operating margins, among others.
A valuation allowance, if needed, reduces DTAs to the amount expected to be realized. When determining the amount of net
DTAs that are more likely than not to be realized, the Company assesses all available positive and negative evidence. This
evidence includes, but is not limited to, prior earnings history, projected future earnings, carryback and carry-forward periods
and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a DTA. The
weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified.
As such, it is generally difficult for positive evidence regarding projected future taxable income to outweigh objective negative
evidence of recent financial reporting losses.
The Company established a valuation allowance based upon all available objective and verifiable evidence both positive and
negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis,
legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible
tax planning strategies. Since first establishing a valuation allowance, the Company has continued to estimate that it has
generated a cumulative consolidated three year pre-tax loss through December 31, 2021. As a result of the analysis through
December 31, 2021, the Company determined that it is more likely than not that it will not realize the benefits of its gross DTAs
and therefore maintained its valuation allowance. As of December 31, 2021, this valuation allowance was $417 million, and it
reduced the carrying value of these gross DTAs, net of the impact of the reversal of taxable temporary differences, to zero.
In connection with the acquisition of Impax, the Company entered into a tax receivable agreement (“TRA”) for which it is
generally required to pay the other holders of Amneal Common Units 85% of the applicable tax savings, if any, in U.S. federal
and state income tax that it is deemed to realize as a result of certain tax attributes of their Amneal Common Units sold to the
Company (or exchanged in a taxable sale) and that are created as a result of (i) the sales of their Amneal Common Units for
shares of Class A Common Stock and (ii) tax benefits attributable to payments made under the TRA. In conjunction with the
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valuation allowance recorded on the DTAs, the Company reversed the accrued TRA liability of $193 million, which resulted in
a gain recorded in other (expense) income, net for the year ended December 31, 2019. As of December 31, 2021, no additional
TRA liability has been accrued.
The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing
and number of Amneal common units sold or exchanged for the Company's Class A Common Stock, the price of the
Company's Class A Common Stock on the date of sale or exchange, the timing and amount of the Company's taxable income,
and the tax rate in effect at the time of realization of the Company's taxable income (the TRA liability is determined based on a
percentage of the corporate tax savings from the use of the TRA's attributes). Further sales or exchanges occurring subsequent
to December 31, 2021 could result in future Amneal tax deductions and obligations to pay 85% of such benefits to the holders
of Amneal Common Units. These obligations could be incremental to and substantially larger than the approximate $206
million contingent liability as of December 31, 2021 described below. Under certain conditions, such as a change of control or
other early termination event, the Company could be obligated to make TRA payments in advance of tax benefits being
realized.
As noted above, the Company has determined it is more-likely-than-not we will be unable to utilize all of its DTAs subject to
TRA; therefore, as of December 31, 2021, the Company has not recognized the contingent liability under the TRA related to the
tax savings it may realize from common units sold or exchanged. If utilization of these DTAs becomes more-likely- than-not in
the future, at such time, these TRA liabilities (which amounted to approximately $206 million at December 31, 2021, as a result
of basis adjustments under Internal Revenue Code Section 754) will be recorded through charges in the Company’s
consolidated statements of operations. However, if the tax attributes are not utilized in future years, it is reasonably possible no
amounts would be paid under the TRA. Should the Company determine that a DTA with a valuation allowance is realizable in
a subsequent period, the related valuation allowance will be released and if a resulting TRA payment is determined to be
probable, a corresponding TRA liability will be recorded.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”). The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic which, among
other things, includes provisions relating to income and non-income-based tax laws. As a result of the CARES Act, the
Company carried back approximately $345 million in NOLs generated in 2018 to prior taxable income years. In carrying back
the 2018 loss to an earlier year, the Company is able to benefit the losses at a 35% tax rate rather than the current U.S. corporate
tax rate of 21%. Accordingly, the Company recorded a discrete income tax benefit of $110 million for the year ended
December 31, 2020. During July 2020, the Company received a cash refund for $106 million of the $110 million NOL
carryback, plus interest of approximately $4 million, with an additional $2 million received in February of 2021. The
remainder of the NOL carryback is expected to be received before December 31, 2022.
For the years ended December 31, 2021, 2020 and 2019 the Company's provision for (benefit from) income taxes and effective
tax rates were $11 million and 35.7%, $(104) million and 291.7%, and $383 million and 174%, respectively.
The change in income taxes for the year ended December 31, 2021 compared to the prior year was primarily associated with the
$110 million benefit from the carryback of U.S. Federal DTAs under the CARES Act for the year ended December 31, 2020
described above. The change in income taxes for the year ended December 31, 2020 compared to the prior year was primarily
due to the provision to record the valuation allowance against the Company’s DTAs.
The Company and its subsidiaries file income tax returns in the U.S. federal, and various state, local and foreign jurisdictions.
The Company is currently under income tax audit by IRS for the 2018 tax return, the year when the Company filed the CARES
Act carryback. Impax's federal tax filings for the 2015, 2016 and 2017 tax years are currently under audit, and the IRS statute
of limitations has been extended for these Impax federal tax returns until 2023. If there were adjustments to the attributes of
Impax for any of the 2015, 2016 or 2017 tax years, they could impact the carryforward losses at the Company, which is the
successor in interest to Impax. The Amneal partnership was audited for the tax year ended December 31, 2015 without any
adjustments to taxable income. Income tax returns are generally subject to examination for a period of three years in the U.S.
However, Impax’s 2013 and 2014 tax years remain open to adjustment to the extent of the 2018 NOL carryback as described
above. Neither the Company nor any of its other affiliates is currently under audit for state income tax.
The components of the Company's income (loss) before income taxes were as follows (in thousands):
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United States
International
Total income (loss) before income taxes
Years Ended December 31,
2020
2021
$
$
(10,540) $
41,906
31,366 $
(99,966) $
64,186
(35,780) $
2019
(291,608)
71,366
(220,242)
The provision for (benefit from) income taxes was comprised of the following (in thousands):
Current:
Domestic
Foreign
Total current income tax
Deferred:
Domestic
Foreign
Total deferred income tax
Total provision for (benefit from) income tax
The effective tax rate was as follows:
Federal income tax at the statutory rate
State income tax, net of federal benefit
Income not subject to tax (losses for which no benefit has been recognized)
Foreign rate differential
Permanent book/tax differences
TRA revaluation
CARES Act
Valuation allowance
Other
Effective income tax rate
Years Ended December 31,
2020
2021
2019
$
$
1,311 $
9,885
11,196
(113,754) $
9,396
(104,358)
(2,760)
14,375
11,615
—
—
—
11,196 $
—
—
—
(104,358) $
365,546
6,170
371,716
383,331
Years Ended December 31,
2020
2021
2019
21.0 %
21.0 %
21.0 %
4.2
6.4
17.3
4.8
—
—
(13.5)
(4.5)
35.7 %
(2.0)
(29.8)
(7.1)
—
—
139.9
163.2
6.5
(15.1)
(25.8)
(5.5)
—
18.4
—
(168.2)
1.2
291.7 %
(174.0) %
The change in effective income tax rate for the year ended December 31, 2021 compared to the year ended December 31, 2020
was primarily due to the benefit to record the NOL carryback resulting from the CARES Act.
The change in effective income tax rate for the year ended December 31, 2020 compared to the year ended December 31, 2019
was primarily due to the benefit to record the NOL carryback resulting from the CARES Act in 2020, and the provision to
record the valuation allowance against the Company’s DTAs in 2019.
The following table summarizes the changes in the Company's valuation allowance on deferred tax assets (in thousands):
Years Ended December 31,
2020
2019
2021
Balance at the beginning of the period
$
422,812 $
470,193 $
(Decrease) increase due to net operating losses and temporary differences
(10,828)
(54,971)
Increase due to stock-based compensation
Increase (decrease) recorded against additional paid-in capital
(Decrease) increase recorded against other comprehensive income
5,513
2,842
(3,751)
—
(1,631)
9,221
41,235
424,692
—
4,266
—
Balance at the end of the period
$
416,588 $
422,812 $
470,193
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At December 31, 2021, the Company had approximately $107 million of foreign net operating loss carry forwards. These net
operating loss carry forwards will partially expire, if unused, between 2029 and 2030. At December 31, 2021, the Company
had approximately $227 million of federal and $172 million of state net operating loss carry forwards. The federal net operating
losses are generally allowed to be carried forward indefinitely, and the majority of the state net operating losses will expire, if
unused, between 2035 and 2041. At December 31, 2021, the Company had approximately $12 million of federal R&D credit
carry forwards and $10 million of state R&D credit carry forwards. The majority of the federal R&D credit carry forwards will
expire if unused, between 2034 and 2041 and the majority of state credits can be carried forward indefinitely.
The tax effects of temporary differences that give rise to deferred taxes were as follows (in thousands):
Deferred tax assets:
Partnership interest in Amneal
Projected imputed interest on TRA
Net operating loss carryforward
IRC Section 163(j) interest carryforward
Capitalized costs
Accrued expenses
Stock-based compensation
Intangible assets
Tax credits and other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
December 31,
2021
December 31,
2020
$
200,872 $
212,402
25,615
73,861
46,407
1,300
498
5,513
28,380
34,142
416,588
25,539
77,255
45,425
1,502
410
—
28,400
31,879
422,812
(416,588)
(422,812)
$
— $
—
The Company updated its analysis with respect to stock-based compensation. Accordingly, the Company recorded a deferred
tax asset for its allocable share of stock-based compensation cost that would ordinarily result in future tax deductions when the
compensation vests. As stock options are exercised, the deferred tax asset recorded is reversed, and generally a current tax
benefit is taken unless it would create additional net operating losses, which would then be evaluated for the potential need for a
valuation allowance.
The Company's Indian subsidiaries are primarily export-oriented and in some cases are eligible for certain limited income tax
holiday benefits granted by the government of India for export activities conducted within Special Economic Zones, or SEZs,
for periods of up to 15 years. Amneal’s SEZ income tax holiday benefits are currently scheduled to expire in whole or in part
during the years 2028 to 2030. Indian profits ineligible for SEZ benefits are subject to corporate income tax at the rate of
34.9%. In addition, all Indian profits, including those generated within SEZs, are subject to the Minimum Alternate Tax (MAT),
at the rate of 21.5%. The Company established a full valuation allowance against its deferred tax assets in India due to its
reliance on intercompany sales for U.S. distribution. For the years ended December 31, 2021, 2020 and 2019, the effect of
income tax holidays granted by the Indian government reduced the overall provision for income taxes/ increased the benefit
from income taxes and increased net income/ decreased net loss by approximately $3 million, $3 million, and $4 million,
respectively.
The Company accounts for income tax contingencies using the benefit recognition model. The Company will recognize a
benefit if a tax position is more likely than not to be sustained upon audit, based solely on the technical merits. The benefit is
measured by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax
position is examined by the appropriate taxing authority that has full knowledge of all relevant information. The amount of
unrecognized tax benefits at December 31, 2021, 2020, and 2019, was $5 million, $5 million and $6 million, respectively, of
which $5 million, $5 million and $6 million would impact the Company’s effective tax rate if recognized. The Company
currently does not believe that the total amount of unrecognized tax benefits will increase or decrease significantly over the next
12 months. Interest expense related to income taxes is included in provision for (benefit from) income taxes. Net interest
expense (benefit) related to unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 was $0.1 million
$(0.3) million, and $0.4 million, respectively. Accrued interest expense as of December 31, 2021, 2020, and 2019 was $0.8
million, $0.8 million, and $1.0 million, respectively. Income tax penalties are included in provision for (benefit from) income
taxes. Accrued tax penalties as of December 31, 2021, 2020 and 2019 were immaterial.
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A rollforward of unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands):
Unrecognized tax benefits at the beginning of the period
Gross change for current period positions
Gross change for prior period positions
Decrease due to settlements and payments
Unrecognized tax benefits at the end of the period
Years Ended December 31,
2020
2019
2021
$
$
5,368 $
131
(10)
—
5,489 $
6,176 $
125
443
(1,376)
5,368 $
7,206
83
(732)
(381)
6,176
In India, the income tax return for fiscal year ending March 31, 2018 is currently being reviewed by tax authorities as part of
the normal procedures, and the Company is not expecting any material adjustments. There are no other income tax returns in
the process of examination, administrative appeal, or litigation. Income tax returns are generally subject to examination for a
period of 3 years, 5 years, 2 years and 4 years after the tax year in India, Switzerland, United Kingdom and Ireland,
respectively.
Applicable foreign taxes (including withholding taxes) have not been provided on the approximately $93 million of
undistributed earnings of foreign subsidiaries as at December 31, 2021. These earnings have been and currently are considered
to be indefinitely reinvested. Quantification of additional taxes that may be payable on distribution is not practicable.
The Company continuously monitors government proposals to make changes to tax laws, including comprehensive tax reform
in the United States and proposed legislation in certain foreign jurisdictions resulting from the adoption of the Organization for
Economic Cooperation and Development policies. If legislative changes are enacted in other countries, any of these proposals
may include increasing or decreasing existing statutory tax rates. A change in statutory tax rates in any country would result in
the revaluation of Amneal’s deferred tax assets and liabilities related to that particular jurisdiction in the period in which the
new tax law is enacted.
9. Earnings (Loss) per Share
Basic earnings (loss) per share of Class A Common Stock and Class B-1 Common Stock is computed by dividing net earnings
(loss) attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of Class A Common Stock and
Class B-1 Common Stock outstanding during the period. Diluted earnings per share of Class A Common Stock and Class B-1
Common Stock is computed by dividing net earnings (loss) attributable to Amneal Pharmaceuticals, Inc. by the weighted-
average number of shares of Class A Common Stock and Class B-1 Common Stock outstanding during the period, adjusted to
give effect to potentially dilutive securities.
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings
(loss) per share of Class A Common Stock and Class B-1 Common Stock (in thousands, except per share amounts):
Years Ended December 31,
2020
2021
2019
Numerator:
Net income (loss) attributable to Amneal Pharmaceuticals, Inc.
$
10,624 $
91,059 $
(361,917)
Denominator:
Weighted-average shares outstanding - basic (1)
Effect of dilutive securities
Stock options
Restricted stock units
Weighted-average shares outstanding - diluted
Net earnings (loss) per share attributable to Amneal Pharmaceuticals, Inc.'s
common stockholders:
Class A and Class B-1 basic
Class A and Class B-1 diluted
148,922
147,443
132,106
767
2,132
151,821
348
1,122
148,913
—
—
132,106
$
$
0.07 $
0.07 $
0.62 $
0.61 $
(2.74)
(2.74)
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Table of Contents
(1)
During the year ended December 31, 2019, pursuant to the Company's certificate of incorporation, the Company
converted all 12.3 million of its issued and outstanding shares of Class B-1 Common Stock to Class A Common Stock
and such shares of Class B-1 Common Stock have been retired and may not be reissued by the Company. The
weighted-average shares for the years ended December 31, 2021 and December 31, 2020 do not include Class B-1
Common Stock.
The allocation of net income (loss) to the holders of shares of Class A Common Stock and Class B-1 Common Stock began
following the closing of the Combination on May 4, 2018. Shares of the Company's Class B Common Stock do not share in the
earnings or losses of the Company and, therefore, are not participating securities. As such, separate presentation of basic and
diluted earnings (loss) per share of Class B Common Stock under the two-class method has not been presented.
The following table presents potentially dilutive securities excluded from the computations of diluted earnings (loss) per share
of Class A Common Stock and Class B-1 Common Stock (in thousands).
Stock options (1)(4)
Restricted stock units (4)
Performance stock units (2)(4)
Shares of Class B Common Stock (3)
Years Ended December 31,
2020
2021
2019
347
—
5,055
152,117
671
—
2,973
152,117
6,177
2,478
159
152,117
(1)
(2)
(3)
(4)
Excluded from the computation of diluted earnings per share of Class A Common Stock for the years ended
December 31, 2021 and December 31, 2020 because the exercise price of the stock options exceeded the average
market price of the Class A Common Stock during the period (out-of-the-money).
Excluded from the computation of diluted earnings per share of Class A Common Stock for the years ended
December 31, 2021 and December 31, 2020 because the performance vesting conditions were not met.
Shares of Class B Common Stock are considered potentially dilutive shares of Class A and Class B-1 Common Stock.
Shares of Class B Common Stock have been excluded from the computations of diluted earnings (loss) per share of
Class A and Class B-1 Common Stock for each of the years ended December 31, 2021, 2020 and 2019 because the
effect of their inclusion would have been anti-dilutive under the if-converted method. As noted above, the weighted-
average shares for the year ended December 31, 2021 do not include Class B-1 Common Stock.
Excluded from the computation of diluted loss per share of Class A Common Stock and Class B-1 Common Stock for
the years ended December 31, 2019 because the effect of their inclusion would have been anti-dilutive since there was
a net loss attributable to the Company for the year ended December 31, 2019. As noted above, the weighted-average
shares for the years ended December 31, 2021 and 2020 do not include Class B-1 Common Stock.
10. Trade Accounts Receivable, Net
Trade accounts receivable, net is comprised of the following (in thousands):
Gross accounts receivable
Allowance for credit losses
Contract charge-backs and sales volume allowances
Cash discount allowances
Subtotal
Trade accounts receivable, net
$
December 31,
2021
1,191,792 $
(1,665)
(503,902)
(23,642)
(529,209)
662,583 $
December 31,
2020
1,291,785
(1,396)
(628,804)
(22,690)
(652,890)
638,895
$
Receivables from customers representing 10% or more of the Company’s net trade accounts receivable reflected three
customers at December 31, 2021, equal to 37%, 25%, and 24%, of receivables, respectively. Receivables from customers
representing 10% or more of the Company’s net trade accounts receivable reflected three customers at December 31, 2020,
equal to 39%, 26%, and 20%, of receivables, respectively.
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11. Inventories
Inventories are comprised of the following (in thousands):
Raw materials
Work in process
Finished goods
Total inventories
12. Leases
December 31,
2021
December 31,
2020
$
$
214,508 $
47,802
227,079
489,389 $
209,180
40,937
240,532
490,649
The majority of the Company's operating and financing lease portfolio consists of corporate offices, manufacturing sites,
warehouse space, research and development facilities, and land. The Company's leases have remaining lease terms of 1 year to
23 years (excluding international land easements with remaining terms of 29 - 98 years). Rent expense for the years ended
December 31, 2021, 2020 and 2019 was $20 million, $26 million, and $26 million, respectively.
During the year ended December 31, 2020 and 2019, the Company recorded $1 million and $2 million, respectively, in
impairment charges associated operating lease right-of-use assets. For the year ended December 31, 2020, the impairment
charge was associated with the closure of the Company’s Blue Bell, PA facility. For the year ended December 31, 2019, the
impairment charges were primarily associated with the Company’s Hauppauge, NY facility because the Company’s forecasts
did not support recoverability of the assets. There were no impairments of operating lease right-of-use assets for the year ended
December 31, 2021. For further details, see Note 6. Restructuring and Other Charges.
The components of total lease costs were as follows (in thousands):
Operating lease cost (1)
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Total finance lease cost
Total lease cost
(1)
Includes variable and short-term lease costs.
Years Ended December 31,
2021
2020
2019
$
15,057 $
21,664
22,544
4,713
4,601
9,314
4,487
4,773
9,260
3,468
4,641
8,109
$
24,371 $
30,924 $
30,653
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Supplemental balance sheet information related to the Company's leases was as follows (in thousands):
Operating leases
Operating lease right-of-use assets
Operating lease right-of-use assets - related party
Total operating lease right-of-use assets
Operating lease liabilities
Operating lease liabilities - related party
Current portion of operating lease liabilities
Current portion of operating lease liabilities - related party
Total operating lease liabilities
Financing leases (1)
Financing lease right of use assets
Financing lease right of use assets - related party(2)
Total financing lease right-of-use assets
Financing lease liabilities
Financing lease liabilities - related party(2)
Current portion of financing lease liabilities
Current portion of financing lease liabilities - related party(2)
Total financing lease liabilities
December 31,
2021
December 31,
2020
$
$
$
$
$
$
$
$
39,899 $
20,471
60,370 $
32,894 $
18,783
9,686
2,636
63,999 $
64,475 $
—
64,475 $
60,251 $
—
3,101
—
63,352 $
33,947
24,792
58,739
30,182
23,049
6,474
2,820
62,525
9,541
58,676
68,217
2,318
60,193
1,794
1,158
65,463
(1) As noted in Note 2. Summary of Significant Accounting Policies, prior period balances related to (i) financing lease
right-of-use assets, (ii) current portion of financing lease liabilities, and (iii) long-term financing lease liabilities as of
December 31, 2020 have been reclassified to their respective balance sheet captions to conform to the current period
presentation in the consolidated balance sheet and the supplemental balance sheet information above.
(2) Refer to Note 24. Related Party Transactions, for additional details.
Supplemental cash flow information related to leases was as follows (in thousands):
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases
Operating cash flows from operating leases
Financing cash flows from finance leases
Non-cash activity:
Years Ended December 31,
2021
2020
$
4,601 $
15,006
3,179
4,773
18,780
2,768
Right-of-use assets obtained in exchange for new operating lease liabilities
$
12,006 $
3,305
The table below reflects the weighted average remaining lease term and weighted average discount rate for the Company's
operating and finance leases:
Weighted average remaining lease term - operating leases
Weighted average remaining lease term - finance leases
Weighted average discount rate - operating leases
Weighted average discount rate - finance leases
December 31,
2021
5 years
21 years
6.9%
7.1%
December 31,
2020
6 years
21 years
7.1%
7.1%
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Maturities of lease liabilities as of December 31, 2021 were as follow (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: Imputed interest
Total
Maturities of lease liabilities as of December 31, 2020 were as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Imputed interest
Total
Operating
Leases
Financing
Leases
16,136 $
16,412
15,215
11,363
7,400
9,712
76,238
(12,239)
63,999 $
7,492
6,726
5,572
5,474
5,474
89,862
120,600
(57,248)
63,352
Operating
Leases
Financing
Leases
13,473
13,402
13,446
12,246
8,961
16,822
78,350
(15,825)
62,525 $
7,428
6,992
6,381
5,488
5,474
95,336
127,099
(61,636)
65,463
$
$
$
For additional information regarding lease transactions with related parties, refer to Note 24. Related Party Transactions.
13. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets are comprised of the following (in thousands):
Deposits and advances
Prepaid insurance
Prepaid regulatory fees
Income and other tax receivable
Prepaid taxes
Other current receivables (1)
Other prepaid assets
Chargeback receivable (2)
Total prepaid expenses and other current assets
December 31,
2021
December 31,
2020
$
$
1,174 $
7,962
3,710
8,850
16,085
42,770
17,309
12,358
110,218 $
1,696
6,916
3,565
11,882
5,542
17,117
21,836
4,913
73,467
(1)
(2)
As discussed in Note 21. Commitments and Contingencies, the Company recorded receivables from insurers of
$33 million and $6 million as of December 31, 2021 and 2020, respectively, associated with an insured securities
class action lawsuit.
When a sale occurs on a contract item, the difference between the cost paid to the manufacturer by the Company and
the contract cost that the end customer has with the manufacturer is rebated back to the Company by the manufacturer.
The Company establishes a chargeback (rebate) receivable and a reduction to cost of goods sold in the same period as
the related sale.
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14. Property, Plant, and Equipment, Net
Property, plant, and equipment, net was comprised of the following (in thousands):
Land
Buildings
Leasehold improvements
Machinery and equipment
Furniture and fixtures
Vehicles
Computer equipment
Construction-in-progress
Total property, plant, and equipment
Less: Accumulated depreciation
Property, plant, and equipment, net
December 31,
2021
December 31,
2020
$
$
11,540 $
230,994
123,508
414,098
12,745
1,485
56,087
58,263
908,720
(394,562)
514,158 $
4,937
210,122
108,698
354,599
10,992
1,360
47,729
71,456
809,893
(332,139)
477,754
Depreciation recognized by the Company was as follows (in thousands):
Depreciation
15. Goodwill and Other Intangible Assets
Year Ended December 31,
2020
2019
2021
$
60,705 $
60,420 $
63,283
The changes in goodwill for the years ended December 31, 2021 and 2020 were as follows (in thousands):
Balance, beginning of period
Goodwill acquired during the period
Currency translation
Balance, end of period
December 31,
2021
December 31,
2020
$
$
522,814 $
70,584
(381)
593,017 $
419,504
103,679
(369)
522,814
As of December 31, 2021, $363 million, $160 million, and $70 million of goodwill was allocated to the Specialty, Generics,
and AvKARE segments, respectively. As of December 31, 2020, $361 million, $92 million, and $70 million of goodwill was
allocated to the Specialty, Generics, and AvKARE segments, respectively. For the year ended December 31, 2021, the addition
to goodwill was associated with the Puniska Acquisition and the KSP Acquisition. For the year ended December 31, 2020, the
adjustment to goodwill acquired was associated with the Rondo Acquisitions. Refer to Note 3. Acquisitions and Divestitures
for additional information about the Puniska Acquisition, the KSP Acquisition, and the Rondo Acquisitions.
Annual Goodwill Impairment Test
The Company performed a quantitative annual goodwill impairment test for each reporting unit on October 1, 2021, the
measurement date. The analysis performed included estimating the fair value of each reporting unit using both the income and
market approaches. Based on the results of the annual impairment test, the Company determined that the estimated fair values
of the Generics, Specialty and AvKARE reporting units exceeded their respective carrying amounts as of the measurement date;
therefore, the Company did not record an impairment charge for the year ended December 31, 2021. There were no indicators
of goodwill impairment during the year ended December 31, 2021, including the period subsequent to the measurement date.
In performing the annual goodwill impairment test, the Company utilized long-term growth rates for its reporting units ranging
from no growth to 1.0% and discount rates ranging from 9.0% to 10.5% in its estimation of fair value. As of December 31,
2021, the estimated fair value of the Generics reporting unit was in excess of its carrying value by approximately 97%, the
estimated fair value of the Specialty reporting unit was in excess of its carrying value by approximately 68% and the estimated
fair value of the AvKARE reporting unit was in excess of its carrying value by approximately 86%. A 500-basis point increase
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in the assumed discount rates utilized in each test would not have resulted in a goodwill impairment charge in any of the
Company's reporting units.
While management believes the assumptions used were reasonable and commensurate with the views of a market participant,
changes in key assumptions for these reporting units, including increasing the discount rate, lowering forecasts for revenue and
operating margin or lowering the long-term growth rate, could result in a future impairment.
Intangible assets were comprised of the following (in thousands):
December 31, 2021
December 31, 2020
Weighted-
Average
Amortization
Period
(in years)
Cost
Accumulated
Amortization
Net
Cost
Accumulated
Amortization
Net
Amortizing
intangible assets:
Product rights
Other intangible
assets
Total
In-process research
and development
Total intangible
assets
8.1 $ 1,122,612 $
(436,902) $ 685,710 $ 1,153,096 $
(328,587) $ 824,509
4.9
133,800
(58,013)
75,787
133,800
(33,078)
100,722
1,256,412
(494,915)
761,497
1,286,896
(361,665)
925,231
405,425
—
405,425
379,395
—
379,395
$ 1,661,837 $
(494,915) $ 1,166,922 $ 1,666,291 $
(361,665) $ 1,304,626
For the year ended December 31, 2021, the Company recognized a total of $23.4 million of intangible asset impairment
charges, of which $22.7 million was recognized in cost of goods sold and $0.7 million was recognized in in-process research
and development.
The impairment charges for the year ended December 31, 2021 were primarily related to seven currently marketed products and
one IPR&D product. For the currently marketed products, five products experienced significant price erosion during 2021,
without an offsetting increase in customer demand, resulting in significantly lower than expected future cash flows and negative
margins. Of the five currently marketed products that experienced significant price erosion during 2021, Levothyroxine
contributed $17.7 million of the $23.4 million in cost of goods sold impairment charges (refer to Note 5. Alliance and
Collaboration for additional information about the Company’s Levothyroxine license with JSP). Additionally, the supply
agreements for two currently marketed products will be terminated early due to market conditions. The IPR&D charge was
associated with one product which experienced a delay in its estimated launch date.
For the year ended December 31, 2020, the Company recognized a total of $37.3 million of intangible asset impairment
charges, of which $34.6 million was recognized in cost of goods sold and $2.7 million was recognized in in-process research
and development.
The impairment charges for the year ended December 31, 2020 were primarily related to six currently marketed products and
four IPR&D products. For the currently marketed products, four products experienced significant price erosion during 2020,
without an offsetting increase in customer demand, resulting in significantly lower than expected future cash flows and negative
margins, one product had its contract terminated and one product’s supply agreement ended under an early termination due to
market conditions. The IPR&D charges were associated with four products, three of which experienced significant price erosion
for the products, resulting in significantly lower than expected future cash flows, and the other of which was canceled due to the
withdrawal of the Company’s development partner.
Amortization expense related to intangible assets recognized was as follows (in thousands):
Amortization
Years Ended December 31,
2020
2021
2019
$
172,701 $
174,967 $
143,952
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The following table presents future amortization expense for the next five years and thereafter, excluding $405 million of
IPR&D intangible assets (in thousands).
2022
2023
2024
2025
2026
Thereafter
Total
16. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses were comprised of the following (in thousands):
Accounts payable
Accrued returns allowance (1)
Accrued compensation
Accrued Medicaid and commercial rebates (1)
Accrued royalties
Commercial chargebacks and rebates
Accrued professional fees
Taxes payable
Liabilities for legal proceedings and claims (2)
Accrued other
Total accounts payable and accrued expenses
Refer to Note 4. Revenue Recognition for additional information.
Refer to Note 21. Commitments and Contingencies for additional information.
(1)
(2)
17. Debt
The following is a summary of the Company's total indebtedness (in thousands):
Future
Amortization
158,907
$
146,196
136,300
97,526
53,192
169,376
761,497
$
December 31,
2021
December 31,
2020
$
$
131,084 $
161,978
62,098
85,737
20,893
10,226
9,926
2,523
58,000
40,880
583,345 $
153,140
174,984
58,922
131,088
21,777
10,226
10,748
5,538
11,000
34,444
611,867
Term Loan due May 2025
Rondo Term Loan due January 2025
Other
Total debt
Less: debt issuance costs
Total debt, net of debt issuance costs
Less: current portion of long-term debt
Total long-term debt, net
$
December 31,
2021
2,590,876 $
139,250
624
2,730,750
(20,083)
2,710,667
(30,614)
2,680,053 $
December 31,
2020
2,631,876
173,250
624
2,805,750
(26,258)
2,779,492
(44,228)
2,735,264
$
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Senior Secured Credit Facilities
On May 4, 2018 the Company entered into a senior credit agreement that provided a term loan ("Term Loan") with a principal
amount of $2.7 billion and an asset backed revolving credit facility ("Revolving Credit Facility") under which loans and letters
of credit up to a principal amount of $500 million are available (principal amount of up to $25 million is available for letters of
credit) (collectively, the "Senior Secured Credit Facilities").
The Term Loan is repayable in equal quarterly installments at a rate of 1.00% of the original principal amount annually, with
the balance payable at maturity on May 4, 2025. The Term Loan bears a variable annual interest rate, which is one-month
LIBOR plus 3.5% at December 31, 2021. In October 2019, the Company entered into an interest rate lock agreement for a total
notional amount of $1.3 billion to hedge part of the Company's interest rate exposure associated with the variability in future
cash flows from changes in the one-month LIBOR associated with its Term Loan. For further details, refer to Note 20.
Financial Instruments.
The Term Loan requires regular principal payments of $6.75 million quarterly in 2022, 2023, 2024, and 2025, with the balance
of the Term Loan payable at maturity on May 4, 2025. Annually, the Company is also required to calculate the amount of
excess cash flows, as defined in the Term Loan agreement. Based on the results of the excess cash flows calculation for the
year ended December 31, 2020, the Company made a $14 million additional principal payment in March 2021. Based on the
results of the excess cash flows calculation for the year ended December 31, 2021, no additional principal payments are due in
2022.
The Revolving Credit Facility bears an annual interest rate of one-month LIBOR plus 1.25% at December 31, 2021 and matures
on May 4, 2023. The annual interest rate for the Revolving Credit Facility may be reduced or increased by 0.25% based on
step-downs and step-ups determined by the average historical excess availability. At December 31, 2021, the Company had no
outstanding borrowings and $489 million of availability under the Revolving Credit Facility.
The proceeds from the Term Loan were used to finance, in part, the cost of the acquisition of Impax and to pay off Amneal’s
debt and substantially all of Impax’s debt at the close of the acquisition of Impax.
The proceeds of any loans made under the Senior Secured Credit Facilities can be used for capital expenditures, acquisitions,
working capital needs and other general purposes, subject to covenants as described below. The Company pays a commitment
fee based on the average daily unused amount of the Revolving Credit Facility at a rate based on average historical excess
availability, between 0.25% and 0.375% per annum. At December 31, 2021, the Revolving Credit Facility commitment fee rate
was 0.375% per annum.
During March 2020, as a precautionary measure to mitigate the uncertainty surrounding overall market liquidity due to the
COVID-19 pandemic, the Company borrowed $300 million on the Revolving Credit Facility. As the financial markets
stabilized following a period of high volatility due to the COVID-19 pandemic, the Company repaid all borrowings under the
Revolving Credit Facility as of June 30, 2020.
The Company incurred costs associated with the Term Loan due May 2025 of $38 million and the Revolving Credit Facility of
$5 million, which have been capitalized and are being amortized over the life of the applicable debt agreement to interest
expense using the effective interest method. The Term Loan has been recorded in the balance sheet net of issuance costs. Costs
associated with the Revolving Credit Facility have been recorded in other assets because there were no borrowings outstanding
on the effective date of the Revolving Credit Facility. For each of the years ended December 31, 2021, 2020 and 2019,
amortization of deferred financing costs related to the Term Loan and the Revolving Credit Facility was $6 million.
The Senior Secured Credit Facilities contain a number of covenants that, among other things, create liens on Amneal’s and its
subsidiaries’ assets. The Senior Secured Credit Facilities contain certain negative covenants that, among other things and
subject to certain exceptions, restrict Amneal’s and its subsidiaries’ ability to incur additional debt or guarantees, grant liens,
make loans, acquisitions or other investments, dispose of assets, merge, dissolve, liquidate or consolidate, pay dividends or
other payments on capital stock, make optional payments or modify certain debt instruments, modify certain organizational
documents, enter into arrangements that restrict the ability to pay dividends or grant liens, or enter into or consummate
transactions with affiliates. The Revolving Credit Facility also includes a financial covenant whereby Amneal must maintain a
minimum fixed charge coverage ratio if certain borrowing conditions are met. The Senior Secured Credit Facilities contain
customary events of default, subject to certain exceptions. Upon the occurrence of certain events of default, the obligations
under the Senior Secured Credit Facilities may be accelerated and the commitments may be terminated. At December 31, 2021,
Amneal was in compliance with all covenants.
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Acquisition Financing - Revolving Credit and Term Loan Agreement
On January 31, 2020, in connection with the Rondo Acquisitions, Rondo Intermediate Holdings, LLC (“Rondo Holdings”), a
wholly-owned subsidiary of Rondo, entered into a revolving credit and term loan agreement (“Rondo Credit Facility”) that
provided a term loan (“Rondo Term Loan”) with a principal amount of $180 million and a revolving credit facility (“Rondo
Revolving Credit Facility”) which loans up to a principal amount of $30 million. The Rondo Term Loan is repayable in equal
quarterly installments at a rate of 5.0% of the original principal amount annually, with the balance payable at maturity on
January 31, 2025. The Rondo Credit Facility bears a variable annual interest rate, which originated as one-month LIBOR plus
3.0%. During September 2021, the Company prepaid $25 million of outstanding principal of the Rondo Term Loan, which
permitted the variable rate to be repriced. At December 31, 2021, the variable annual interest rate is one-month LIBOR plus
2.5%. Additionally, the annual interest rate for borrowings under the Rondo Credit Facility may be reduced or increased by
0.25% based on step-downs and step-ups determined by the total net leverage ratio, as defined in that agreement. At
December 31, 2021, the Company had no outstanding borrowings under the Rondo Revolving Credit Facility.
A commitment fee based on the average daily unused amount of the Rondo Credit Facility is assessed at a rate based on total
net leverage ratio, between 0.25% and 0.50% per annum. At December 31, 2021, the Rondo Credit Facility commitment fee
rate was 0.25% per annum.
Costs associated with the Rondo Term Loan of $3 million and the Rondo Credit Facility of $1 million have been capitalized
and are being amortized over the life of the applicable debt instrument to interest expense using the effective interest method.
The Rondo Term Loan has been recorded in the balance sheet net of issuance costs. Costs associated with the Rondo
Revolving Credit Facility have been recorded in other assets. For the year ended December 31, 2021, amortization of deferred
financing costs associated with the Rondo Credit Facility was less than $1 million.
The Rondo Credit Facility contains a number of covenants that, among other things, create liens on the equity securities and
assets of Rondo Holdings, Rondo, AvKARE, LLC and R&S. The Rondo Credit Facility contains certain negative, affirmative
and financial covenants that, among other things, restrict the ability to incur additional debt, grant liens, transact in mergers and
acquisitions, make certain investments and payments or engage in certain transactions with affiliates. The Rondo Credit
Facility also contains customary events of default. Upon the occurrence of certain events of default, the obligations under the
Rondo Credit Facility may be accelerated and/or the interest rate may be increased. At December 31, 2021, Rondo was in
compliance with all covenants. The Company is not party to the Rondo Credit Facility and is not a guarantor of any debt
incurred thereunder. The Rondo Term Loan requires principal payments of $9 million per year for the next three years and the
balance payable at maturity on January 31, 2025.
Acquisition Financing – Notes Payable-Related Party
On January 31, 2020, the closing date of the Rondo Acquisitions, Rondo or its subsidiary, Rondo Top Holdings, LLC, issued
the Sellers Notes with a stated aggregate principal amount of $44 million and the Short-Term Sellers Note with a stated
principal amount of $1 million. The Sellers Notes are unsecured and accrue interest at a rate of 5% per annum, not
compounded, until June 30, 2025. The Sellers Notes are subject to prepayment at the option of Rondo, as the obligor, without
premium or penalty. Mandatory payment of the outstanding principal and interest is due on June 30, 2025 if certain financial
targets are achieved, the borrowers’ cash flows are sufficient (as defined in the Sellers Notes) and repayment is not prohibited
by senior debt. If repayment of all outstanding principal and accrued interest on the Sellers Notes is not made on June 30,
2025, the requirements for repayment are revisited on June 30 of each subsequent year until all principal and accrued interest
are satisfied no later than January 31, 2030 or earlier, upon a change in control. The Short-Term Sellers Note was also
unsecured, accrued interest at a rate of 1.6%, and was paid during February 2021.
In accordance with ASC 805, Business Combinations, all consideration transferred was measured at its acquisition-date fair
value. The Sellers Notes were stated at the fair value estimate of $35 million, which was estimated using the Monte-Carlo
simulation approach under the option pricing framework. The Short-Term Sellers Note of $1 million was recorded at the stated
principal amount of $1 million, which approximated fair value. The $9 million discount on the Sellers Notes will be amortized
to interest expense using the effective interest method from January 31, 2020 to June 30, 2025 and the carrying value of the
Sellers Notes will accrete to the stated principal amount of $44 million. During the year ended December 31, 2021,
amortization of the discount related to the Sellers Notes was $1 million.
The Company is not party to or a guarantor of the Sellers Notes. The Sellers Notes were recorded in notes payable-related
party within long-term liabilities as of December 31, 2021 and 2020. The Short-Term Sellers Note was recorded in current
portion of note payable - related party as of December 31, 2020.
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18. Other Long-Term Liabilities
Other long-term liabilities were comprised of the following (in thousands):
Interest rate swap (1)
Uncertain tax positions
Long-term compensation (2)
Other long-term liabilities (3)
Total other long-term liabilities
December 31, 2021
December 31, 2020
$
$
11,473
$
3,177
21,589
2,664
38,903
$
53,903
3,065
20,542
5,855
83,365
(1)
(2)
(3)
Refer to Note 19. Fair Value Measurements and Note 20. Financial Instruments for information about the Company’s
interest rate swap.
Includes $12 million of long-term deferred compensation plan liabilities (refer to Note 19. Fair Value Measurements)
and $8 million of long-term employee benefits for the Company’s international employees.
As noted in Note 2. Summary of Significant Accounting Policies and Note 12. Leases, the prior period balance of
$2 million related to long-term financing lease liabilities as of December 31, 2020 has been reclassified to its own
balance sheet caption to conform to the current period presentation in the consolidated balance sheet.
19. Fair Value Measurements
Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based
measurement that should be determined using assumptions that market participants would use in pricing an asset or liability.
Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of
unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of
inputs, of which the first two are considered observable and the last unobservable:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as
quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar
assets or liabilities in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data by correlation or other means.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair
value of the assets or liabilities. Value is determined using pricing models, discounted cash flow
methodologies, or similar techniques and also includes instruments for which the determination of fair
value requires significant judgment or estimation.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine
the appropriate level of classification for each reporting period. The following table sets forth the Company’s financial assets
and liabilities that were measured at fair value on a recurring basis (in thousands):
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Table of Contents
December 31, 2021
Total
Fair Value Measurement Based on
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Liabilities
Interest Rate Swap (1)
Deferred compensation plan liabilities (2)
Contingent consideration liability (3)
December 31, 2020
Liabilities
Interest Rate Swap (1)
Deferred compensation plan liabilities (2)
$
$
$
$
$
11,473 $
13,883 $
5,900 $
— $
— $
— $
11,473 $
13,883 $
—
—
— $
5,900
53,903 $
14,007 $
— $
— $
53,903 $
14,007 $
—
—
(1)
(2)
(3)
The fair value measurement of the Company’s interest rate swap classified within Level 2 of the fair value hierarchy is
a model-derived valuation as of a given date in which all significant inputs are observable in active markets including
certain financial information and certain assumptions regarding past, present, and future market conditions. Refer to
Note 20. Financial Instruments for information about the Company’s interest rate swap.
As of December 31, 2021 and 2020, deferred compensation plan liabilities of $2 million and $12 million were
recorded in current and non-current liabilities, respectively. These liabilities are recorded at the value of the amount
owed to the plan participants, with changes in value recognized as compensation expense. The calculation of the
deferred compensation plan obligation is derived from observable market data by reference to hypothetical
investments selected by the participants.
The fair value measurement of contingent consideration liability has been classified as a Level 3 recurring liability as
its valuation requires judgment and estimation of factors that are not currently observable in the market. If different
assumptions were used for various inputs, the estimated fair value could be higher or lower than what the Company
determined. As of December 31, 2021, the contingent consideration liability of $6 million was recorded within related
party payable-long term. Refer to Note 3. Acquisitions and Divestitures for additional information related to the KSP
Acquisition.
There were no transfers between levels in the fair value hierarchy during the year ended December 31, 2021.
Contingent consideration
On April 2, 2021, the Company completed the KSP Acquisition, which provided for contingent milestone payments of up to an
aggregate of $8 million (undiscounted) upon the achievement of certain regulatory milestones, as well as contingent royalty
payments that are tiered depending on the net sales amount of aggregate annual net sales for certain future pharmaceutical
products.
The following table provides a reconciliation of the contingent consideration liability measured at fair value on a recurring basis
using significant unobservable inputs (Level 3) through December 31, 2021 (in thousands):
Balance, beginning of period
Addition due to the KSP Acquisition
Change in fair value during period
Balance, end of period
Year Ended
December 31, 2021
—
$
5,700
200
5,900
$
The fair value measurement of the contingent consideration liabilities was determined based on significant unobservable inputs,
including the discount rate, estimated probabilities of success, timing of achieving specified regulatory milestones and the
estimated amount of future sales of the acquired products. The contingent consideration liability is estimated by applying a
probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for
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contingent royalty payments, which are then discounted to present value. Changes to fair value of the contingent consideration
liabilities can result from changes to one or a number of the aforementioned inputs. If different assumptions were used for
various inputs, the estimated fair value could be higher or lower than what the Company determined.
The following table summarizes the significant unobservable inputs used in the fair value measurement of our contingent
consideration liabilities as of December 31, 2021:
Contingent
Consideration
Liability
Fair Value as of
December 31, 2021
(in thousands)
Regulatory
Milestones
Royalties
$
$
500
5,400
Unobservable input
Discount rate
Probability of payment
Projected year of payment
Discount rate
Probability of payment
Projected year of payment
Range
2.2 % - 4.4%
1.8 % - 20.0%
2023 - 2027
11.5 % - 11.5%
1.8 % - 20.0%
2023 - 2032
Weighted Average(1)
2.4%
16.7%
2023
11.5%
18.0%
2029
(1) Unobservable inputs were weighted by the relative fair value of each product candidate acquired.
Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
The carrying amounts of cash, accounts receivable and accounts payable approximate their fair values due to the short-term
maturity of these instruments.
The Term Loan is in the Level 2 category within the fair value level hierarchy. The fair value was determined using market data
for valuation. The fair value of the Term Loan at both December 31, 2021 and 2020 was approximately $2.6 billion.
The Rondo Term Loan is in the Level 2 category within the fair value level hierarchy. The fair value of the Rondo Term Loan
at December 31, 2021 and 2020 was approximately $139 million and $172 million, respectively.
The Sellers Notes are in the Level 2 category within the fair value level hierarchy. At December 31, 2021 and 2020 the fair
value of the Sellers Notes of $38 million and $36 million, respectively, approximated their carrying value.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
There were no non-recurring fair value measurements during the years ended December 31, 2021 and 2020.
20. Financial Instruments
The Company uses an interest rate swap to manage its exposure to market risks for changes in interest rates.
Interest Rate Risk
The Company is exposed to interest rate risk on its debt obligations. Interest income earned on cash and cash equivalents may
fluctuate as interest rates change; however, due to their relatively short maturities, the Company does not hedge these assets or
their investment cash flows and the impact of interest rate risk is not material. The Company's debt obligations consist of
variable-rate and fixed-rate debt instruments (for further details, refer to Note 17. Debt). The Company's primary objective is to
achieve the lowest overall cost of funding while managing the variability in cash outflows within an acceptable range. In order
to achieve this objective, the Company has entered into an interest rate swap on the Term Loan.
Interest Rate Derivative – Cash Flow Hedge
The interest rate swap involves the periodic exchange of payments without the exchange of underlying principal or notional
amounts. In October 2019, the Company entered into an interest rate lock agreement for a total notional amount of $1.3 billion
to hedge part of the Company's interest rate exposure associated with the variability in future cash flows from changes in the
one-month LIBOR associated with its Term Loan.
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As of December 31, 2021, the total loss, net of income taxes, related to the Company’s cash flow hedge was $11.5 million, of
which $6.0 million was recognized in accumulated other comprehensive loss and $5.5 million was recognized in non-
controlling interests. As of December 31, 2020, the total loss, net of income taxes, related to the Company’s cash flow hedge
was $54 million, of which $27 million was recognized in each of accumulated other comprehensive loss and non-controlling
interests.
A summary of the fair values of derivative instruments in the consolidated balance sheets was as follows (in thousands):
Derivatives Designated as Hedging Instruments
Variable-to-fixed interest rate swap
December 31, 2021
December 31, 2020
Balance Sheet
Classification
Other long-term
liabilities
Fair Value
Balance Sheet
Classification
Other long-
Fair Value
$
11,473
term liabilities $
53,903
21. Commitments and Contingencies
Commitments
Commercial Manufacturing, Collaboration, License, and Distribution Agreements
The Company continues to seek to enhance its product line and develop a balanced portfolio of differentiated products through
product acquisitions and in-licensing. Accordingly, the Company, in certain instances, may be contractually obligated to make
potential future development, regulatory, and commercial milestone, royalty and/or profit sharing payments in conjunction with
collaborative agreements or acquisitions that the Company has entered into with third parties. The Company has also licensed
certain technologies or intellectual property from various third parties. The Company is generally required to make upfront
payments as well as other payments upon successful completion of regulatory or sales milestones. The agreements generally
permit the Company to terminate the agreement with no significant continuing obligation. The Company could be required to
make significant payments pursuant to these arrangements. These payments are contingent upon the occurrence of certain future
events and, given the nature of these events, it is unclear when, if ever, the Company may be required to pay such amounts.
Further, the timing of any future payment is not reasonably estimable. Refer to Note 5. Alliance and Collaboration for
additional information. Certain of these arrangements are with related parties. Refer to Note 24. Related Party Transactions
for additional information.
Contingencies
Legal Proceedings
The Company's legal proceedings are complex, constantly evolving and subject to uncertainty. As such, the Company cannot
predict the outcome or impact of the legal proceedings set forth below. Additionally, the Company is subject to legal
proceedings that are not set forth below. While the Company believes it has valid claims and/or defenses to the matters
described below, the nature of litigation is unpredictable, and the outcome of the following proceedings could include damages,
fines, penalties and injunctive or administrative remedies. For any proceedings where losses are probable and reasonably
capable of estimation, the Company accrues for a potential loss. When the Company has a probable loss for which a reasonable
estimate of the liability is a range of losses and no amount within that range is a better estimate than any other amount, the
Company records the loss at the low end of the range. While these accruals have been deemed reasonable by the Company’s
management, the assessment process relies heavily on estimates and assumptions that may ultimately prove inaccurate or
incomplete. Additionally, unforeseen circumstances or events may lead the Company to subsequently change its estimates and
assumptions. Unless otherwise indicated below, the Company is unable at this time to estimate the possible loss or the range of
loss, if any, associated with such legal proceedings and claims.
The Company currently intends to vigorously prosecute and/or defend these proceedings as appropriate. From time to time,
however, the Company may settle or otherwise resolve these matters on terms and conditions that it believes to be in its best
interest. For the years ended December 31, 2021, 2020, and 2019, the Company recorded net charges of $25 million, $6
million, and $12 million, respectively, for commercial legal proceedings and claims. The Company had total liabilities for legal
proceedings and claims of $58 million and $11 million as of December 31, 2021 and 2020, respectively, of which $33 million
and $6 million, respectively, were recorded for a securities class action covered by insurance (refer to Securities Class Actions
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below and Note 13. Prepaid Expenses and Other Current Assets for additional information). An insurance recovery will be
recorded in the period in which it is probable the recovery will be realized.
The ultimate resolution of any or all claims, legal proceedings or investigations could differ materially from our estimate and
have a material adverse effect on the Company's results of operations and/or cash flows in any given accounting period, or on
the Company's overall financial condition.
Additionally, the Company manufactures and derives a portion of its revenue from the sale of pharmaceutical products in the
opioid class of drugs and may therefore face claims arising from the regulation and/or consumption of such products.
The Company believes it has meritorious claims and defenses in these matters and intends to vigorously prosecute and defend
them. However, because the ultimate outcome and costs associated with litigation are inherently uncertain and difficult to
predict, except as otherwise stated, the Company is not in a position to predict the likelihood of an unfavorable outcome or
provide an estimate of the amount or range of potential loss in the event of an unfavorable outcome in any of these matters, and
any adverse outcome could negatively affect the Company and could have a material adverse effect on the Company's results of
operations, cash flows and/or overall financial condition.
Medicaid Reimbursement and Price Reporting Matters
The Company is required to provide pricing information to state agencies, including agencies that administer federal Medicaid
programs. Certain state agencies have alleged that manufacturers have reported improper pricing information, which allegedly
caused them to overpay reimbursement costs. Other agencies have alleged that manufacturers have failed to timely file required
reports concerning pricing information. Liabilities are periodically established by the Company for any potential claims or
settlements of overpayment. The Company intends to vigorously defend against any such claims. The ultimate settlement of
any potential liability for such claims may be higher or lower than estimated.
Patent Litigation
There is substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture,
use, and sale of new products which are the subject of conflicting patent and intellectual property claims. One or more patents
often cover the brand name products for which the Company is developing generic versions and the Company typically has
patent rights covering the Company’s branded products.
Under federal law, when a drug developer files an Abbreviated New Drug Application (“ANDA”) for a generic drug seeking
approval before expiration of a patent which has been listed with the FDA as covering the brand name product, the developer
must certify its product will not infringe the listed patent(s) and/or the listed patent is invalid or unenforceable (commonly
referred to as a “Paragraph IV” certification). Notices of such certification must be provided to the patent holder, who may file a
suit for patent infringement within 45 days of the patent holder’s receipt of such notice. If the patent holder files suit within the
45-day period, the FDA can review and tentatively approve the ANDA, but generally is prevented from granting final
marketing approval of the product until a final judgment in the action has been rendered in favor of the generic drug developer,
or 30 months from the date the notice was received, whichever is sooner. The Company’s Generics segment is typically subject
to patent infringement litigation brought by branded pharmaceutical manufacturers in connection with the Company’s
Paragraph IV certifications seeking an order delaying the approval of the Company’s ANDA until expiration of the patent(s) at
issue in the litigation.
The uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict. For the Company’s
Generics segment, the potential consequences in the event of an unfavorable outcome in such litigation include delaying launch
of its generic products until patent expiration. If the Company were to launch its generic product prior to successful resolution
of a patent litigation, the Company could be liable for potential damages measured by the profits lost by the branded product
manufacturer rather than the profits earned by the Company if it is found to infringe a valid, enforceable patent, or enhanced
treble damages in cases of willful infringement. For the Company’s Specialty segment, an unfavorable outcome may
significantly accelerate generic competition ahead of expiration of the patents covering the Company’s branded products. All
such litigation typically involves significant expense.
The Company is generally responsible for all of the patent litigation fees and costs associated with current and future products
not covered by its alliance and collaboration agreements. The Company has agreed to share legal expenses with respect to third-
party and Company products under the terms of certain of the alliance and collaboration agreements. The Company records the
costs of patent litigation as expense in the period when incurred for products it has developed, as well as for products which are
the subject of an alliance or collaboration agreement with a third-party.
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Patent Defense Matter
Biogen International GMBH, et al. v. Amneal Pharmaceuticals LLC, et al. (Dimethyl Fumarate)
In June 2017, Biogen International GMBH (“Biogen”) filed suit against Amneal and various other generic manufacturers in the
United States District Court for the District of Delaware (“D. Del.”) alleging patent infringement based on the filing of ANDAs
by Amneal and others for generic alternatives to Biogen’s Tecfidera® (dimethyl fumarate) capsules product (Biogen
International GMBH, et al. v. Amneal Pharmaceuticals LLC, et al., No. 1:17-cv-00823-MN). Biogen also filed suit in June
2017 against Mylan Pharmaceuticals Inc. (“Mylan”) in the United States District Court for the Northern District of West
Virginia (“N.D. W. Va.”) relating to Mylan’s own ANDA for Tecfidera®. On June 18, 2020, the N.D. W. Va. court issued an
order finding the sole Biogen patent at issue invalid. Biogen has appealed the order to the United States Court of Appeals for
the Federal Circuit. On September 22, 2020, the D. Del. court entered judgment in favor of defendants (including Amneal),
adopting the finding of invalidity made by the N.D. W. Va. court but ordering that claims could be reinstated based on the result
of the appeal of the N.D. W. Va. court’s order. Amneal, like Mylan and a number of other generic manufacturers, has now
launched its generic dimethyl fumarate capsules product “at-risk,” pending the outcome of Biogen’s appeal of the N.D. W. Va.
court’s order before the Federal Circuit. On November 30, 2021, a panel of three Federal Circuit judges affirmed the N.D. W.
Va. court’s order that Biogen’s patent is invalid. On December 30, 2021, Biogen filed a petition to request “en banc” review by
the full court. Amneal’s D.Del. case continues to be held in abeyance until the Federal Circuit issues a mandate in the Mylan
case.
Other Litigation Related to the Company’s Business
Opana ER® FTC Matters
On February 25, 2014, Impax received a Civil Investigative Demand (“CID”) from the Federal Trade Commission (“FTC”)
concerning its investigation into the drug Opana® ER and its generic equivalents. On March 30, 2016, the FTC filed a
complaint against Impax, Endo Pharmaceuticals Inc. (“Endo”), and others in the United States District Court for the Eastern
District of Pennsylvania, alleging that Impax and Endo violated antitrust laws when they entered into a June 2010 settlement
agreement that resolved patent litigation in connection with the submission of Impax’s ANDA for generic original Opana® ER.
In October 2016, the Court granted Impax’s motion to sever, formally terminating the suit against Impax. In January 2017, the
FTC filed a Part 3 Administrative Complaint against Impax with similar allegations regarding the 2010 settlement. Following
trial, in May 2018, the Administrative Law Judge ruled in favor of Impax and dismissed the Complaint in its entirety. FTC
Complaint Counsel appealed the decision to the full Commission, and in March 2019, the FTC issued an Opinion & Order
reversing the Administrative Law Judge’s decision. The Opinion & Order did not provide for any monetary damages but
enjoined Impax from entering into future agreements containing certain terms. Impax filed a Petition for Review of the FTC’s
Opinion & Order with the United States Court of Appeals for the Fifth Circuit, and on April 13, 2021, the Fifth Circuit issued a
decision denying Impax’s Petition for Review, effectively affirming the FTC’s Opinion & Order. On September 10, 2021,
Impax filed a petition for writ of certiorari in the U.S. Supreme Court, which was denied in December 2021.
On July 12, 2019, the Company received a CID from the FTC concerning an August 2017 settlement agreement between Impax
and Endo, which resolved a subsequent patent infringement and breach of contract dispute between the parties regarding the
above-referenced June 2010 settlement agreement related to Opana® ER. The Company cooperated with the FTC regarding the
CID. On January 25, 2021, the FTC filed a complaint against Endo, Impax and Amneal in the United States District Court for
the District of Columbia, alleging that the 2017 settlement violated antitrust laws. In April 2021, the Company filed a motion to
dismiss the FTC’s complaint, and that motion is currently pending. The Company believes it has strong defenses to the FTC’s
allegations and intends to vigorously defend the action, however, no assurance can be given as to the timing or outcome of the
litigation.
Opana ER® Antitrust Litigation
From June 2014 to April 2015, a number of complaints styled as class actions on behalf of direct purchasers and indirect
purchasers (or end-payors) and several separate individual complaints on behalf of certain direct purchasers (the “opt-out
plaintiffs”) of Opana ER® were filed against Endo and Impax.
In December 2014, the United States Judicial Panel on Multidistrict Litigation (the “JPML”) transferred the actions to the
United States District Court for the Northern District of Illinois (“N.D. Ill.”) for coordinated pretrial proceedings, as In Re:
Opana ER Antitrust Litigation (MDL No. 2580) (“MDL”). In each case, the complaints allege that Endo engaged in an
anticompetitive scheme by, among other things, entering into an anticompetitive settlement agreement with Impax to delay
generic competition of Opana ER® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things,
unspecified monetary damages and equitable relief, including disgorgement and restitution. On March 25, 2019, plaintiffs filed
motions for class certification and served expert reports. Defendants’ oppositions to class certification and expert reports were
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filed and served on August 29, 2019. On April 15, 2020, defendants filed motions for summary judgment and each side moved
to exclude certain opposing experts. On June 4, 2021, the MDL court granted the end-payor plaintiffs’ and direct purchaser
plaintiffs’ class certification motions. Defendants appealed certification of the end-payor plaintiffs’ class, and on July 13, 2021,
the Seventh Circuit granted defendants’ petition and remanded the case to the MDL to consider specific issues regarding
uninjured class members. On August 11, 2021, the MDL court entered an order certifying end-payor plaintiffs’ class with an
amended class definition. On June 4, 2021, the MDL also denied defendants’ summary judgment motion except as to certain
state law claims and issued an opinion excluding certain experts of both sides. Trial is currently scheduled for June 2022.
Sergeants Benevolent Association Health & Welfare Fund v. Actavis, PLC, et. al.
In August 2015, a complaint styled as a class action was filed against Forest Laboratories (a subsidiary of Actavis plc) and
numerous generic drug manufacturers, including Amneal, in the United States District Court for the Southern District of New
York involving patent litigation settlement agreements between Forest Laboratories and the generic drug manufacturers
concerning generic versions of Forest’s Namenda IR product. The complaint (as amended on February 12, 2016) asserts federal
and state antitrust claims on behalf of indirect purchasers, who allege in relevant part that during the class period they indirectly
purchased Namenda® IR or its generic equivalents in various states at higher prices than they would have absent the
defendants’ allegedly unlawful anticompetitive conduct. Plaintiffs seek, among other things, unspecified monetary damages and
equitable relief, including disgorgement and restitution. On September 13, 2016, the Court stayed the indirect purchaser
plaintiffs’ claims pending factual development or resolution of claims brought in a separate, related complaint by direct
purchasers (in which the Company is not a defendant). On September 10, 2018, the Court lifted the stay, referred the case to the
assigned Magistrate Judge for supervision of supplemental, non-duplicative discovery in advance of mediation to be scheduled
in 2019. The parties thereafter participated in supplemental discovery, as well as supplemental motion-to-dismiss briefing. On
December 26, 2018, the Court granted in part and denied in part motions to dismiss the indirect purchaser plaintiffs’ claims. On
January 7, 2019, Amneal, its relevant co-defendants, and the indirect purchaser plaintiffs informed the Magistrate Judge that
they had agreed to mediation, which occurred in April 2019. In June 2019, the Company reached a settlement with plaintiffs,
subject to Court approval. On September 10, 2019, the Court entered an order preliminarily approving the settlement and
indefinitely staying the case as to the settling defendants (including the Company). The settlement is now subject to final
approval from the Court. The amount of the settlement was not material to the Company's consolidated financial statements.
Attorney General of the State of Connecticut Interrogatories and Subpoena Duces Tecum
On July 14, 2014, Impax received a subpoena and interrogations from the State of Connecticut Attorney General (“Connecticut
AG”) concerning its investigation into sales of Impax's generic product, digoxin. According to the Connecticut AG, the
investigation concerned whether anyone engaged in a contract, combination or conspiracy in restraint of trade or commerce
which had the effect of (i) fixing, controlling or maintaining prices or (ii) allocating or dividing customers or territories relating
to the sale of digoxin. Impax cooperated in the investigation and produced documents and information in response to the
subpoena in 2014 and 2015. However, no assurance can be given as to the timing or outcome of this investigation.
United States Department of Justice Investigations
On November 6, 2014, Impax disclosed that one of its sales representatives received a grand jury subpoena from the Antitrust
Division of the United States Department of Justice (the “DOJ”). On March 13, 2015, Impax received a grand jury subpoena
from the DOJ requesting the production of information and documents regarding the sales, marketing, and pricing of four
generic prescription medications. Impax has cooperated in the investigation and produced documents and information in
response to the subpoenas from 2014 to 2016. However, no assurance can be given as to the timing or outcome of the
investigation.
On April 30, 2018, Impax received a CID from the Civil Division of the DOJ (the “Civil Division”). The CID requests the
production of information and documents regarding the pricing and sale of Impax’s pharmaceuticals and interactions with other
generic pharmaceutical manufacturers regarding whether generic pharmaceutical manufacturers engaged in market allocation
and price-fixing agreements, paid illegal remuneration, and caused false claims to be submitted to the Federal government.
Impax has cooperated with the Civil Division’s investigation. However, no assurance can be given as to the timing or outcome
of the investigation.
Texas State Attorney General Civil Investigative Demand
On May 27, 2014, a CID was served on Amneal by the Office of the Attorney General for the state of Texas (the “Texas AG”)
relating to products distributed by Amneal under a specific Amneal labeler code. Shortly thereafter, Amneal received a second
CID with respect to the same products sold by Interpharm Holding, Inc. (“Interpharm”), the assets of which had been acquired
by Amneal in June 2008. Amneal completed its production of the direct and indirect sales transaction data in connection with
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the products at issue and provided this information to the Texas AG in November 2015. In May 2016, the Texas AG delivered
two settlement demands to Amneal in connection with alleged overpayments made by the State of Texas for such products
under its Medicaid programs. For the Amneal and Interpharm products at issue, the Texas AG’s initial demand was for an
aggregate total of $36 million based on $16 million in alleged overpayments. After analyzing the Texas AG’s demand, Amneal
raised certain questions regarding the methodology used in the Texas AG’s overpayment calculations, including the fact that the
calculations treated all pharmacy claims after 2012 for the products at issue as claims for over-the-counter (“OTC”) drugs, even
though the products were prescription pharmaceuticals. This had the effect of increasing the alleged overpayment because the
dispensing fee for OTC drugs was lower than that for prescription drugs. Therefore, the Texas AG’s calculations were derived
by subtracting a lower (and incorrect) OTC dispensing fee from the higher (and correct) prescription dispensing fee. The Texas
AG later acknowledged this discrepancy. In March 2019, the Texas AG provided Amneal with a re-calculation of the alleged
overpayment. In October 2019, Amneal reached an agreement in principle with the Texas AG to settle the matter. The parties
executed a settlement agreement and release as of March 5, 2020, and the matter is now closed.
In Re Generic Pharmaceuticals Pricing Antitrust Litigation
Since March 2016, multiple putative antitrust class action complaints have been filed on behalf of direct purchasers, indirect
purchasers (or end-payors), and indirect resellers, as well as individual complaints on behalf of certain direct and indirect
purchasers, and municipalities (the “opt-out plaintiffs”) against manufacturers of generic drugs, including Impax and the
Company. The complaints allege a conspiracy to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or
customers for various generic drugs in violation of federal and state antitrust and consumer protection laws. Plaintiffs seek
unspecified monetary damages and equitable relief, including disgorgement and restitution. The lawsuits have been
consolidated in an MDL in the United States District Court for the Eastern District of Pennsylvania (In re Generic
Pharmaceuticals Pricing Antitrust Litigation, No. 2724, (E.D. Pa.)).
On May 10, 2019, Attorneys General of 43 States and the Commonwealth of Puerto Rico filed a complaint in the United States
District Court for the District of Connecticut against various manufacturers and individuals, including the Company, alleging a
conspiracy to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or customers for multiple generic drugs.
On November 1, 2019, the State Attorneys General filed an Amended Complaint on behalf of nine additional states and
territories. On June 10, 2020, Attorneys General of 46 States, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Territory of Guam, the U.S. Virgin Islands, and the District of Columbia filed a new complaint
against various manufacturers and individuals, including the Company, alleging a conspiracy to fix prices, rig bids, and allocate
markets or customers for additional generic drugs. Plaintiff States seek unspecified monetary damages and penalties and
equitable relief, including disgorgement and restitution. On September 9, 2021, the State Attorneys General filed an Amended
Complaint on behalf of California in addition to the original Plaintiff States. These lawsuits have been incorporated into MDL
No. 2724. Fact and document discovery in MDL No. 2724 are proceeding. In May, 2021, the Court issued a revised order
designating certain plaintiffs’ complaints regarding two generic drug products to proceed as bellwether cases, along with the
Plaintiff States’ June 10, 2020 complaint. No final scheduling order has yet been issued for this matter. In May, 2021 the Court
issued a revised order designating certain plaintiffs’ complaints regarding two generic drug products to proceed as bellwether
cases, along with the Plaintiff States’ June 10, 2020 complaint involving the Company.
There is another action in Canada alleging price fixing, among other claims, which has not progressed to date.
Prescription Opioid Litigation
The Company and certain of its affiliates have been named as defendants in various matters filed in state and federal courts
relating to the sale of prescription opioid pain relievers. Plaintiffs in these actions include state Attorneys General, county and
municipal governments, hospitals, Indian tribes, pension funds, third-party payors and individuals. Plaintiffs seek unspecified
monetary damages and other forms of relief based on various causes of action, including negligence, public nuisance, unjust
enrichment, and civil conspiracy, as well as alleged violations of the Racketeer Influenced and Corrupt Organizations Act
(“RICO”), state and federal controlled substances laws and other statutes. All cases involving the Company also name other
manufacturers, distributors and retail pharmacies as defendants, and. there are numerous other cases involving allegations
relating to prescription opioid pain relievers against other manufacturers, distributors and retail pharmacies in which the
Company and its affiliates are not named.
Nearly all cases pending in federal district courts have been consolidated for pre-trial proceedings in an MDL in the United
States District Court for the Northern District of Ohio (In re: National Prescription Opiate Litigation, Case No. 17-mdl-2804).
There are approximately 920 cases in the MDL in which the Company or its affiliates have been named as defendants. The
Company also is named in approximately 120 state court cases pending in 11 states. The Company has filed motions to dismiss
in many of these cases. No firm trial dates have been set except one case in New Mexico (September 2022). Following a
decision by the West Virginia Supreme Court of Appeals in June 2021, the trial court in West Virginia set trial dates for April
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(manufacturers), July (distributors), and September (pharmacies) 2022, but the Company is not a defendant in the manufacturer
trial and it is unclear if the Company will be involved in the trial of any case currently selected by the court.
Securities Class Actions
On April 17, 2017, New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund filed an
amended putative class action complaint in the United States District Court for the Northern District of California against
Impax and four former Impax officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10b-5 (Fleming v. Impax Laboratories Inc., et al., No. 4:16-cv-6557-HSG). Plaintiff alleges that Impax (1) concealed
collusion with competitors to fix the price of the generic drug digoxin; (2) concealed anticipated erosion in the price of generic
drug diclofenac; and (3) overstated the value of the generic drug budesonide. In August 2019, the Court granted Impax’s
motion to dismiss Plaintiff’s second amended complaint in its entirety. Plaintiff appealed to the United States Court of Appeals
for the Ninth Circuit, and on January 11, 2021, the Ninth Circuit issued an unpublished opinion affirming in part and reversing
in part the District Court’s decision. Defendants subsequently filed a motion for rehearing with the Ninth Circuit, and Plaintiff
filed a motion to intervene seeking to add Sheet Metal Workers’ Pension Fund of Southern California, Arizona and Nevada
(“Sheet Metal Workers”) as an additional named Plaintiff. The Ninth Circuit denied the motions, and on April 1, 2021, the case
was remanded to the District Court. On April 19, 2021, the Company filed a motion to dismiss the remaining claims and an
opposition to Sheet Metal Workers’ renewed motion to intervene. In June 2021, the parties reached a tentative agreement to
settle all claims in the case for $33 million, subject to certain terms and conditions and subject to court approval. The proposed
settlement is covered in full by insurance (refer to Note 13. Prepaid Expenses and Other Current Assets). The district court
entered an order granting preliminary approval of the settlement on November 22, 2021 and scheduled a fairness hearing for
March 21, 2022.
On December 18, 2019, Cambridge Retirement System filed a putative class action complaint in the Superior Court of New
Jersey, Somerset County against the Company and certain current or former officers alleging violations of Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933 (Cambridge Retirement System v. Amneal Pharmaceuticals, Inc., et al., No. SOM-
L-1701-19). Plaintiffs allege that the May 7, 2018 amended registration statement and prospectus issued in connection with the
Amneal/Impax business combination was materially false and/or misleading because it failed to disclose that Amneal allegedly
engaged in anticompetitive conduct to fix generic drug prices. Plaintiffs filed a motion for class certification on October 30,
2020 and in April 2021 filed a second amended complaint including similar allegations with regard to a November 2017
registration statement and prospectus issued in connection with the Amneal/ Impax business combination. The Company’s
motion to dismiss and Plaintiff’s motion for class certification are currently pending. In February 2022, the parties reached a
tentative agreement to settle the claims, subject to, among other things, the negotiation and court approval of a definitive
settlement agreement.
Teva v. Impax Laboratories, LLC.
On February 15, 2017, plaintiffs Teva Pharmaceuticals USA, Inc. and Teva Pharmaceuticals Curacao N.V. (“Teva”) filed a
Praecipe to Issue Writ of Summons and Writ of Summons in the Philadelphia County Court of Common Pleas against Impax
alleging that Impax breached the Strategic Alliance Agreement between the parties by not indemnifying Teva in its two
litigations with GlaxoSmithKline LLC regarding Wellbutrin ® XL (and therefore that Impax is liable to Teva for the amounts it
paid to settle those litigations). Impax filed a Motion to Disqualify Teva’s counsel related to the matter, and on August 23,
2017, the trial court denied Impax's motion. Following the trial court’s order, Teva filed its complaint. On September 6, 2017,
Impax appealed the trial court’s decision to the Pennsylvania Superior Court. On September 20, 2017, the Superior Court
stayed the trial court action pending the outcome of Impax’s appeal. On November 2, 2018, the Superior Court affirmed the
trial court’s decision. On November 16, 2018, Impax filed an application for reargument with the Superior Court, which was
denied on December 28, 2018. On February 13, 2019, the Superior Court remitted the record to the trial court. On February 15,
2019, Impax filed its answer with new matter to Teva’s complaint. On February 19, 2019, the trial court issued a revised case
management order providing that, absent any extensions or amendments thereto, discovery was to have closed on July 1, 2019
and the case is expected to be ready for trial by February 3, 2020. On or about March 4, 2019, Teva filed a motion for judgment
on the pleadings. Impax filed its answer and brief in opposition to Teva’s motion for judgment on the pleadings on March 25,
2019. On April 4, 2019, the trial court denied Teva’s motion. On April 16, 2019, Impax filed a motion to stay the proceedings
and compel Teva to arbitrate the dispute pursuant to an Indemnification Release Agreement negotiated and executed by the
parties in 2012. Teva’s opposition to the motion was filed on May 7, 2019. On June 11, 2019, the trial court denied Impax’s
motion. On June 24, 2019, Impax noticed its intent to appeal to the Superior Court the trial court’s denial of the motion to
compel arbitration, and moved both to stay the trial court proceedings pending that appeal and for an extension of case
management deadlines. On July 12, 2019, the trial court denied both motions. On July 24, 2019, Impax moved the Superior
Court to stay all trial court proceedings pending the outcome of Impax’s appeal of the trial court’s denial of the motion to
compel arbitration and, on August 13, 2019, the Superior Court granted Impax’s motion. Impax filed its opening appellate brief
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with the Superior Court on September 3, 2019 and Teva filed its response brief on October 3, 2019. In October 2019, the
parties reached an agreement in principle to resolve the matter, and in November 2019, the parties executed a settlement
agreement and general release. On December 16, 2019, Teva filed with the trial court a praecipe to mark the action settled,
discontinued and ended with prejudice.
United States Department of Justice / Drug Enforcement Administration Subpoenas
On July 7, 2017, Amneal Pharmaceuticals of New York, LLC received an administrative subpoena issued by the Long Island,
NY District Office of the Drug Enforcement Administration (the “DEA”) requesting information related to compliance with
certain recordkeeping and reporting requirements. On or about April 12, 2019 and May 28, 2019, the Company received grand
jury subpoenas from the U.S. Attorney’s Office for the Eastern District of New York (the “USAO”) relating to similar topics
concerning the Company’s suspicious order monitoring program and its compliance with the Controlled Substances Act. The
Company is cooperating with the USAO in responding to the subpoenas and has entered civil and criminal tolling agreements
with the USAO through approximately May 12, 2022. It is not possible to determine the exact outcome of these investigations
at this time.
On March 14, 2019, Amneal received a subpoena (the “Subpoena”) from an Assistant U.S. Attorney (“AUSA”) for the
Southern District of Florida. The Subpoena requests information and documents generally related to the marketing, sale, and
distribution of oxymorphone. The Company intends to cooperate with the AUSA regarding the Subpoena. However, no
assurance can be given as to the timing or outcome of its underlying investigation.
On October 7, 2019, Amneal received a subpoena from the New York State Department of Financial Services seeking
documents and information related to sales of opioid products in the state of New York. The Company is cooperating with the
request and providing responsive information. It is not possible to determine the exact outcome of this investigation at this
time.
Ranitidine Litigation
The Company and its affiliates have been named as defendants, along with numerous other pharmaceutical manufacturers,
wholesale distributors, and retail pharmacy chains, in In re Zantac/Ranitidine NDMA Litigation (MDL No. 2924), pending in
the Southern District of Florida. Plaintiffs allege that defendants failed to disclose and/or concealed the alleged inherent
presence of N-Nitrosodimethylamine (or “NDMA”) in brand-name Zantac® or generic ranitidine and the alleged associated
risk of cancer. Consolidated groups of (a) personal injury plaintiffs, (b) economic loss/medical monitoring class action
plaintiffs, and (c) third-party payor plaintiffs have each filed master complaints against brand and generic pharmaceutical
manufacturers, distributors, retailers, and repackagers of ranitidine-containing products. The Company or its affiliates have
been named in the three master complaints and approximately 313 personal injury short form complaints. On December 31,
2020, the Court dismissed in full the three master complaints against the generic manufacturers, including the Company and its
affiliates, with leave to file amended complaints on certain claims relating to manufacturing, storage and transportation.
Plaintiffs filed amended complaints in February 2021, and Defendants filed various motions to dismiss the amended complaints
in March 2021. On July 8, 2021, the MDL dismissed all claims against the generic drug manufacturers, including the Company
and its affiliates, without leave to file further amended complaints. Plaintiffs have appealed the MDL court’s dismissal to the
11th Circuit Court of Appeals, which has consolidated the appeals of the personal injury cases.
On June 18, 2020, Amneal Pharmaceuticals LLC was named in a lawsuit filed in New Mexico brought by the New Mexico
Attorney General alleging claims of public nuisance, negligence, and violations of consumer protection laws against various
brand and generic manufacturers and store-brand distributors of Zantac®/Ranitidine. Plaintiff seeks unspecified compensatory
and punitive damages, as well as abatement, medical monitoring, restitution and injunctive relief. The Company filed a motion
to dismiss on May 17, 2021, and filed a notice of supplemental authority based on the MDL court’s July 2021 dismissal order.
The Court denied the motion on August 17, 2021. The Company filed a motion to dismiss based on lack of personal jurisdiction
on January 26, 2022. On November 12, 2020, Amneal Pharmaceuticals LLC was named in a public nuisance and consumer
protection lawsuit filed in state court in Baltimore, Maryland, on behalf of the Mayor and City Council of Baltimore.
Defendants removed the case to federal court and on April 1, 2021, the case was remanded to state court. On August 23, 2021,
the Company filed a motion to dismiss, which was granted.
On October 1, 2021, Amneal Pharmaceuticals, LLC, and Amneal Pharmaceuticals of New York, LLC, were named in a lawsuit
filed in Pennsylvania state court along with 25 other defendants, including brand-name manufacturers, generic manufacturers,
and one Pennsylvania-based pharmacy. The Complaint largely tracks the dismissed master personal injury complaint from the
MDL, and was removed and subsequently transferred to the MDL on November 9, 2021.
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Metformin Litigation
Amneal and AvKARE, Inc. were named as defendants, along with numerous other manufacturers, retail pharmacies, and
wholesalers, in several putative class action lawsuits pending in the United States District Court for the District of New Jersey
(“D.N.J.”), consolidated as In Re Metformin Marketing and Sales Practices Litigation (No. 2:20-cv-02324-MCA-MAH). The
lawsuits all allege that defendants made and sold to putative class members generic metformin products that were “adulterated”
or “contaminated” with NDMA.
An economic loss complaint filed on behalf of consumers and third-party payors who purchased or paid or made
reimbursements for metformin alleges that plaintiffs suffered economic losses in connection with their purchases or
reimbursements due to the purported contamination. On May 20, 2021, the Court granted Defendants’ motion to dismiss the
economic loss complaint, and Plaintiffs filed an amended complaint on June 21, 2021. Defendants again moved to dismiss, and
the motion was fully briefed on October 18, 2021. Additionally, medical monitoring class action complaints were filed on
behalf of consumers who consumed allegedly contaminated metformin allege “cellular damage, genetic harm, and/or are at an
increased risk of developing cancer” and seek medical monitoring, including evaluation and treatment. These cases are
currently stayed.
On March 29, 2021, a plaintiff filed a complaint in the United States District Court for the Middle District of Alabama asserting
claims against manufacturers of Valsartan, Losartan, and Metformin based on the alleged presence of nitrosamines in those
products. The only allegations against Amneal concern Metformin. (Davis v. Camber Pharmaceuticals, Inc., et al., C.A. No.
2:21-00254 (M.D. Ala.) (the “Davis Action”)). On May 5, 2021, the JPML transferred the Davis Action into the In re:
Valsartan, Losartan, and Irbesartan Products Liability Litigation multi-district litigation for pretrial proceedings.
On October 29, 2021, three plaintiffs filed a complaint in the District Court of Douglas County, Nebraska asserting claims
against Amneal based on the alleged presence of nitrosamines in metformin. On January 10, 2022, Amneal removed the case to
the United States District Court for the District of Nebraska. (Conrad et al v. Amneal Pharmaceuticals, Inc., No. 22-cv-00011-
BCB-SMB (D. Neb.)). Amneal’s response to the complaint is due March 3, 2022.
Xyrem® (Sodium Oxybate) Antitrust Litigation
Amneal has been named as a defendant, along with Jazz Pharmaceuticals, Inc. (“Jazz”) and numerous other manufacturers of
generic versions of Jazz’s Xyrem® (sodium oxybate), in several putative class action lawsuits filed in the United States District
Court for the Northern District of California and the United States District Court for the Southern District of New York,
alleging that the generic manufacturers entered into anticompetitive agreements with Jazz in connection with settling patent
litigation related to Xyrem®. Plaintiffs seek unspecified monetary damages and penalties as well as equitable relief, including
disgorgement and restitution. On December 16, 2020, the JPML transferred the actions to the United States District Court for
the Northern District of California for consolidated pretrial proceedings consolidated as In re Xyrem (Sodium Oxybate)
Antitrust Litigation (No. 5:20-md-02966-LHK). Plaintiffs filed a consolidated amended class complaint in March 2021, which
Defendants moved to dismiss. On August 13, 2021, the District Court granted in part and denied in part Defendants’ motion,
dismissing the federal damages claims and a number of state-law claims, while permitting the remaining claims to proceed.
Discovery is currently ongoing.
Value Drug Company v. Takeda Pharmaceuticals U.S.A., Inc.
On August 5, 2021, Value Drug Company filed a purported class action lawsuit in the United States District Court for the
Eastern District of Pennsylvania against Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”) and numerous other manufacturers of
generic versions of Takeda’s Colcrys® (colchicine), including Amneal Pharmaceuticals LLC, alleging that the generic
manufacturers conspired with Takeda to restrict output of generic Colcrys in order to maintain higher prices, in violation of the
antitrust laws. The Company, along with the other defendants, moved to dismiss for failure to state a claim, and on December
28, 2021 the Court granted the motion in full, with leave to amend. On January 18, 2022 Plaintiff filed its amended complaint,
making substantively the same antitrust allegations, but alleging that the violations were effectuated by either a single
overarching conspiracy or a series of bilateral conspiracies. The Company intends to move to dismiss the amended complaint
for failure to state a claim.
Galeas v. Amneal Pharmaceuticals, Inc.
On July 27, 2021, Cesy Galeas filed a purported class action lawsuit in the U.S. District Court for the Eastern District of New
York against Amneal Pharmaceuticals, Inc., alleging that the payment schedule for certain workers violated New York Labor
Law. Specifically, the purported class, which presently consists of one named plaintiff, contends that the Company paid the
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employees all owed wages, but did so bi-weekly, instead of weekly. The Company has not yet responded to the complaint, but
it has notified the Court that it intends to file a motion to dismiss the claims on various grounds.
22. Stockholders' Equity
Class B-1 Stock
During the year ended December 31, 2019, pursuant to the Company's certificate of incorporation, the Company converted all
12.3 million of its issued and outstanding shares of Class B-1 Common Stock to Class A Common Stock and such shares of
Class B-1 Common Stock have been retired and may not be reissued by the Company.
Voting Rights
Holders of Class A Common Stock and Class B Common Stock are entitled to one vote for each share of stock held, except as
required by law. Holders of Class A Common Stock and Class B Common Stock vote together as a single class on each matter
submitted to a stockholder vote. Holders of Class A Common Stock and Class B Common Stock are not entitled to vote on any
amendment to the Company's Charter that relates solely to the terms of one or more outstanding series of preferred stock if the
holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to
vote on such terms pursuant to the Company's Charter or law.
Dividend Rights
The holders of Class A Common Stock are entitled to receive dividends, if any, payable in cash, property, or securities of the
Company, as may be declared by the Company's board of directors, out of funds legally available for the payment of dividends,
subject to any preferential or other rights of the holders of any outstanding shares of preferred stock. The holders of Class B
Common Stock will not be entitled to receive any dividends.
Participation Rights
Under the Company's Charter, the holders of Class A Common Stock and Class B Common Stock have no participation rights.
However, the Company's Second Amended and Restated Stockholders Agreement dated as of December 31, 2017 (the
“Stockholders Agreement”) provides that if the Company proposes to issue any securities, other than in certain issuances, the
Members will have the right to purchase its pro rata share of such securities, based on the number of shares of common stock
owned by the Members before such issuance.
Issuance and Restrictions on Company Common Stock
Pursuant to the Third Amended and Restated Limited Liability Company Agreement of Amneal dated May 4, 2018 (the
“Limited Liability Company Agreement”), Amneal will issue to the Company an additional Amneal common unit for each
additional share of Class A Common Stock issued by the Company. Additionally, pursuant to the Charter, shares of Class B
Common Stock will be issued to the Members and their permitted transferees only to the extent necessary in certain
circumstances to maintain a one-to-one ratio between the number of Amneal Common Units and the number of shares of
Class B Common Stock held by such members. Shares of Class B Common Stock are transferable only for no consideration to
the Company for automatic retirement or in accordance with the Stockholders Agreement and the Limited Liability Company
Agreement.
Liquidation Rights
On the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Class A
Common Stock are entitled to share equally in all assets of the Company available for distribution among the stockholders of
the Company after payment to all creditors and subject to any preferential or other rights of the holders of any outstanding
shares of preferred stock. The holders of Class B Common stock are not entitled to share in such net assets.
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Redemption
The Limited Liability Company Agreement provides that holders of Amneal Common Units may, from time to time, require the
Company to redeem all or a portion of their interests for newly issued shares of Class A Common Stock on a one-for-one basis.
Upon receipt of a redemption request, the Company may, instead, elect to effect an exchange of Amneal Common Units
directly with the holder. Additionally, the Company may elect to settle any such redemption or exchange in shares of Class A
Common stock or in cash. In the event of a cash settlement, the Company would issue new shares of Class A Common Stock
and use the proceeds from the sale of these newly issued shares of Class A Common Stock to fund the cash settlement, which,
in effect, limits the amount of the cash payments to the redeeming member. In connection with any redemption, the Company
will receive a corresponding number of Amneal Common Units, increasing the Company's total ownership interest in Amneal.
Additionally, an equivalent number of shares of Class B Common Stock will be surrendered and canceled.
Preferred Stock
Under the Company’s certificate of incorporation, the Company's Board of Directors has the authority to issue preferred stock
and set its rights and preferences. As of December 31, 2021, no preferred stock had been issued.
Non-Controlling Interests
As discussed in Note 2. Summary of Significant Accounting Policies, the Company consolidates the financial statements of
Amneal and its subsidiaries and records non-controlling interests for the portion of Amneal’s economic interests that is not held
by the Company. Non-controlling interests are adjusted for capital transactions that impact the non-publicly held economic
interests in Amneal.
Under the terms of Amneal's limited liability company agreement, as amended, Amneal is obligated to make tax distributions to
its members. For the years ended December 31, 2021, 2020, and 2019, tax distributions of $53 million, $3 million, and
$0.1 million, respectively, were recorded as reductions of non-controlling interests. As of both December 31, 2021 and 2020, no
liability was included in related-party payables for tax distributions.
During September 2020, the Company made a $3 million payment to the non-controlling interest holders in one of Amneal's
non-public subsidiaries, Gemini Laboratories, LLC, to distribute earnings of $1 million and acquire their ownership interests in
the non-public subsidiary for $2 million.
As discussed in Note 3. Acquisitions and Divestitures, the Company acquired a 98% interest in KSP on April 2, 2021. The
sellers of KSP, a related party, hold the remaining interest. The Company will attribute 2% of the net income or loss of KSP to
the non-controlling interests.
Redeemable Non-Controlling Interests - AvKARE, LLC and R&S
As discussed in Note 3. Acquisitions and Divestitures, the Company acquired a 65.1% interest in Rondo on January 31,
2020. The sellers of AvKARE, LLC and R&S hold the remaining 34.9% interest (“Rondo Class B Units”). Beginning on
January 1, 2026, the holders of the Rondo Class B Units have the right (“Put Right”) to require the Company to acquire the
Rondo Class B Units for a purchase price that is based on a multiple of Rondo’s earnings before income taxes, depreciation,
and amortization (EBITDA) if certain financial targets and other conditions are met. Additionally, beginning on January 31,
2020, the Company has the right to acquire the Rondo Class B Units based on the same value and conditions as the Put
Right. The Rondo Class B Units are also redeemable by the holders upon a change in control.
Since the redemption of the Rondo Class B Units is outside of the Company's control, the units have been presented outside of
stockholders' equity as redeemable non-controlling interests. Upon closing of the Acquisitions on January 31, 2020, these
redeemable non-controlling interests were recorded at an estimated fair value of $11 million. The fair value of the redeemable
non-controlling interests was estimated using the Monte-Carlo simulation approach under the option pricing framework, which
considers the redemption rights of both the Company and the holders of the Rondo Class B Units.
The Company will attribute 34.9% of the net income of Rondo to the redeemable non-controlling interests. The Company will
also accrete the redeemable non-controlling interests to redemption value upon an event that makes redemption certain. For the
years ended December 31, 2021 and 2020, tax distributions of $4 million and $0.5 million, respectively, were recorded as
reductions of redeemable non-controlling interests. As of December 31, 2021 and 2020, there were no amounts due for tax
distributions related to these redeemable non-controlling interests.
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Redeemable Non-Controlling Interests - Puniska
As discussed in Note 3. Acquisitions and Divestitures, the Company acquired a 74% interest in Puniska on November 2, 2021.
Also as discussed in Note 3. Acquisitions and Divestitures, upon approval of the transaction by the Government of India, the
Company will pay $2 million for the remaining 26% of the equity interests in Puniska which are held by the sellers as of
December 31, 2021.
Since approval of the Government of India is outside of the Company’s control, upon closing of the Puniska Acquisition the
equity interests of Puniska that the Company does not own have been presented outside of stockholders' equity as redeemable
non-controlling interests at an estimated fair value of $2 million.
The Company will attribute 26% of the net income or loss of Puniska to these non-controlling interests. The Company will also
accrete the redeemable non-controlling interests to redemption value upon Government of India approval, which makes
redemption certain.
Changes in Accumulated Other Comprehensive Loss by Component (in thousands):
Foreign
currency
translation
adjustment
Unrealized
gain (loss) on
cash
flow hedge, net
of tax
Accumulated
other
comprehensive
loss
$
(7,832) $
(6,643)
7,764 $
(68)
(34,560)
(41,203)
(22)
(14,497)
(4,255)
(93)
(25)
(26,821)
20,972
(133)
(47)
(41,318)
16,717
(226)
$
(18,845) $
(5,982) $
(24,827)
Balance December 31, 2019
Other comprehensive income before reclassification
Reallocation of ownership interests
Balance December 31, 2020
Other comprehensive income before reclassification
Reallocation of ownership interests
Balance December 31, 2021
23. Stock-Based Compensation
Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan
In May 2018, the Company adopted the Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan (“2018 Plan”) under which
the Company may grant stock options, restricted stock units and other equity-based awards to employees and non-employee
directors providing services to the Company and its subsidiaries. The stock option, RSU and MPRSU award grants are made in
accordance with the Company’s 2018 Plan and are subject to forfeiture if the vesting conditions are not met. On May 5, 2020,
the stockholders of the Company approved an amendment to the 2018 Plan which authorized an additional 14 million shares of
Class A common stock available for issuance under the 2018 Plan.
The aggregate number of shares of Class A Common Stock authorized for issuance pursuant to the Company's 2018 Plan is 37
million shares. As of December 31, 2021, the Company had 17,251,992 shares available for issuance under the 2018 Plan.
The Company recognizes the grant date fair value of each option and share of restricted stock unit over its vesting period. Stock
options and restricted stock unit awards are granted under the Company’s 2018 Plan and generally vest over a four year period
and, in the case of stock options, have a term of 10 years.
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The following table summarizes all of the Company's stock option activity for the years ended December 31, 2021, 2020, and
2019:
Stock Options
Outstanding at December 31, 2018
Options granted
Options exercised
Options forfeited
Outstanding at December 31, 2019
Options granted
Options exercised
Options forfeited
Outstanding at December 31, 2020
Options granted
Options exercised
Options forfeited
Outstanding at December 31, 2021
Options exercisable at December 31, 2021
Number of
Shares
Under Option
Weighted-
Average
Exercise
Price
per Share
Weighted-
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
(in millions)
5,814,581 $
4,559,820
(210,806)
(3,986,469)
6,177,126 $
—
(116,681)
(2,249,216)
3,811,229 $
—
(342,350)
(417,379)
3,051,500 $
1,930,911 $
17.73
11.29
6.64
15.07
8.87
—
2.75
16.09
4.80
—
2.76
11.09
4.17
4.99
8.2 $
8.0
7.9 $
5.6
7 $
7 $
5.3
3.0
The intrinsic value of options exercised during the year ended December 31, 2021 was approximately $1.1 million. On
November 14, 2019, the Company repriced 3.6 million of outstanding options by reducing the exercise price to $2.75. The
repricing resulted in $0.9 million of incremental expense being incurred during 2019.
The following table summarizes all of the Company's restricted stock unit activity for the years ended December 31, 2021,
2020, and 2019:
Restricted Stock Units
Non-vested at December 31, 2018
Granted
Vested
Forfeited
Non-vested at December 31, 2019
Granted
Vested
Forfeited
Non-vested at December 31, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Number of
Restricted
Stock Units
Weighted-
Average
Grant Date
Fair Value
Weighted-
Average
Remaining
Years
Aggregate
Intrinsic
Value
(in millions)
1,330,624 $
3,327,308
(479,299)
(1,541,275)
2,637,358 $
8,414,762
(692,868)
(1,226,700)
9,132,552 $
6,870,481
(1,906,607)
(912,826)
13,183,600 $
17.15
11.81
16.10
14.46
12.16
3.67
12.33
6.48
5.09
5.86
5.97
6.68
5.25
1.7 $
12.7
1.7 $
41.7
1.4 $
63.7
The table above includes 2,331,211 MPRSUs granted to executives during 2021. Vesting of these awards is contingent upon the
Company’s achievement of stock price hurdles over the performance period starting March 1, 2021 and requires the employee’s
continued employment or service through February 29, 2024. The MPRSUs cliff vest at the end of the three-year period and
have a maximum potential to vest at 200% (4,662,422 shares) based on the Company's stock price performance. The related
share-based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant
and is recognized straight-line over the vesting term. The estimated fair value per share of the MPRSUs ranged from $5.31 and
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$8.58 and was calculated using a Monte Carlo simulation model. 2,331,211 of these MPRSUs remain outstanding and unvested
at December 31, 2021.
The table above also includes 2,977,711 MPRSUs granted to executives during the first quarter of 2020. Vesting of these
awards is contingent upon the Company’s achievement of stock price hurdles over the performance period starting March 1,
2020 and requires the employee’s continued employment or service through February 28, 2023. The MPRSUs cliff vest at the
end of the three-year period and have a maximum potential to vest at 200% (5,955,422 shares) based on the Company's stock
price performance. The related share-based compensation expense is determined based on the estimated fair value of the
underlying shares on the date of grant and is recognized straight-line over the vesting term. The estimated fair value per share of
the MPRSUs ranged from $2.13 and $3.63 and was calculated using a Monte Carlo simulation model. 2,723,689 of these
MPRSUs remained outstanding and unvested at December 31, 2021.
In addition, the table above includes 519,754 MPRSUs granted to executives on March 1, 2019. Vesting of these awards was
contingent upon the Company meeting certain total shareholder return ("TSR") levels as compared to a select peer group over
the three years starting January 1, 2019 and required the employee’s continued employment or service through December 31,
2021. None of the MPRSUs granted in 2019 vested because the minimum TSR level was not met. The related share-based
compensation expense was determined based on the estimated fair value of the underlying shares on the date of grant and was
recognized straight-line over the vesting term. The estimated fair value per share of the MPRSUs was $14.67 and was
calculated using a Monte Carlo simulation model. All of the MPRSUs granted in 2019 were canceled and none remained
outstanding at December 31, 2021.
As of December 31, 2021, the Company had total unrecognized stock-based compensation expense of $51 million related to all
of its stock-based awards, which is expected to be recognized over a weighted average period of 1.7 years.
The Company estimated the fair value of each stock option award on the grant date using the Black-Scholes option pricing
model, wherein expected volatility is based on historical volatility of the publicly traded common stock of a peer group of
companies. The expected term calculation is based on the "simplified" method described in SAB No. 107, Share-Based
Payment, and SAB No. 110, Share-Based Payment, as the result of the simplified method provides a reasonable estimate in
comparison to actual experience. The risk-free interest rate is based on the U.S. Treasury yield at the date of grant for an
instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is
based on the fact that the Company has never paid cash dividends on its common stock, and has no present intention to pay cash
dividends. Options granted under each of the above plans generally vest over four years and have a term of 10 years. The
following table presents the weighted-average assumptions used in the option pricing model for options granted under the 2018
Plan in the years ended December 31, 2019. There were no options granted in the years ended December 31, 2021 and
December 31, 2020.
Volatility
Risk-free interest rate
Dividend yield
Weighted-average expected life (years)
Weighted average grant date fair value
December 31,
2019
48.6 %
2.4 %
— %
6.17
$5.54
The amount of stock-based compensation expense recognized by the Company was as follows (in thousands):
Cost of goods sold
Selling, general and administrative
Research and development
Total
Year Ended December 31,
2020
2019
2021
$
$
4,688 $
5,006
18,718
28,412 $
4,166 $
13,343
3,241
20,750 $
3,166
15,729
2,784
21,679
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24. Related Party Transactions
The Company has various business agreements with certain third-party companies in which there is some common ownership
and/or management between those entities, on the one hand, and the Company, on the other hand. The Company has no direct
ownership or management in any of such related party companies. The related party relationships that generated income and/or
expense and the respective reporting periods are described below.
Financing Lease - Related Party
The Company had a financing lease with LAX Hotel, LLC for two buildings located in Long Island, New York, which are used
as an integrated manufacturing and office facility. The Company leased these buildings from LAX Hotel, LLC from 2012 until
January 2021. LAX Hotel, LLC had been controlled by a member of the Amneal Group, who also serves as observer on the
Company's Board of Directors. As a result, this lease had been historically accounted for as a related party financing lease.
During January 2021, LAX Hotel, LLC sold its interests in the leased buildings to an unrelated third party. Therefore, this lease
is no longer a related party transaction, and the corresponding financing lease right-of-use asset and liability have been
reclassified in the consolidated balance sheet as of December 31, 2021 to reflect this change. Related party lease costs and
interest expense associated with this lease were $0.2 million and $0.4 million, respectively, for the year ended December 31,
2021, $2.6 million and $4.4 million, respectively, for the year ended December 31, 2020 and $2.6 million and $4.5 million,
respectively, for the year ended December 31, 2019.
For annual payments required under the terms of the non-cancelable lease agreement over the next five years and thereafter,
refer to Note 12. Leases.
Kanan, LLC
Kanan, LLC (“Kanan”) is a real estate company which owns Amneal’s manufacturing facilities located at 65 Readington Road,
Branchburg, New Jersey, 131 Chambers Brook Road, Branchburg, New Jersey and 1 New England Avenue, Piscataway, New
Jersey. Certain executive officers of the Company beneficially own, through certain revocable trusts, equity securities of Kanan.
In addition, they serve on the Board of Managers of Kanan. Amneal leases these facilities from Kanan under two separate
triple-net lease agreements that expire in 2027 and 2031, respectively, at an annual rental cost of approximately $2 million
combined, subject to CPI rent escalation adjustments as provided in the lease agreements. Rent expense paid to the related party
for each of the years ended December 31, 2021, 2020 and 2019 was $2 million.
Asana Biosciences, LLC
Asana Biosciences, LLC (“Asana”) is an early stage drug discovery and research and development company focusing on
several therapeutic areas, including oncology, pain and inflammation. Certain executive officers of the Company beneficially
own, directly and through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity
securities of Asana. In addition, they serve on the Board of Managers of Asana. From time to time, Amneal provides research
and development services to Asana under a development and manufacturing agreement. The total amount of income earned
from this arrangement for the year ended December 31, 2019 was $1 million. At December 31, 2019, $1 million was due from
Asana. There was no income earned from this arrangement during the years ended December 31, 2021 and 2020, and there was
no amount due from Asana at December 31, 2021 and 2020.
Industrial Real Estate Holdings NY, LLC and Sutaria Family Realty, LLC
Industrial Real Estate Holdings NY, LLC ("IRE") is a real estate management entity, which was the sub-landlord of Amneal’s
leased manufacturing facility located at 75 Adams Avenue, Hauppauge, New York. IRE is controlled by a member of the
Amneal Group who also serves as an observer on our Board of Directors. Effective June 1, 2020, the lease was assigned to the
Company with the consent of the landlord, Sutaria Family Realty, LLC., which is also a related party because a member of
Company management is a beneficial owner. Concurrently with the assignment of the lease, the Company exercised a renewal
option for $0.1 million to extend the lease by 5 years until March 31, 2026. Monthly rent payments are $0.1 million and
increase by 3% annually. Rent paid to the related parties for each of the years ended December 31, 2021, 2020 and 2019 was $1
million.
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Kashiv BioSciences LLC
Kashiv is an independent contract development organization focused primarily on the development of 505(b)(2) NDA products.
Amneal has various business agreements with Kashiv. Certain executive officers of the Company beneficially own, directly and
through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity securities of
Kashiv. In addition, they serve on the Board of Managers of Kashiv.
On January 11, 2021, the Company and Kashiv entered into a definitive agreement for Amneal to acquire a 98% interest in
KSP, a subsidiary of Kashiv focused on the development of complex generics, innovative drug delivery platforms and novel
505(b)(2) drugs. The acquisition closed on April 2, 2021. Certain of the contracts between Amneal and Kashiv were acquired in
this transaction and have become transactions among Amneal’s consolidated subsidiaries subsequent to the transaction closing.
Refer to Note 3. Acquisitions and Divestitures for further details on the KSP acquisition.
Agreements with Kashiv Not Affected by the Acquisition of KSP
The parties entered into a lease for parking spaces in Piscataway, NJ. The total amount of expense paid to Kashiv from this
agreement for each of the years ended December 31, 2021, 2020 and 2019 was less than $0.1 million.
Amneal also has various consulting arrangements with Kashiv to collaborate on the development and commercialization of
certain generic pharmaceutical products. The total expenses associated with these arrangements for the years ended
December 31, 2021 and 2020 were $0.6 million and $0.2 million, respectively (none for 2019).
The table below includes the terms and expenses recognized for each of the product specific contracts with Kashiv.
(Amounts in millions)
Research and development expenses
Products
Agreement Date
2021
For the year
ended December 31
2020
2019
Filgrastim and PEG-Filgrastim (1)
Ganirelix Acetate and Cetrorelix Acetate (2)
October 2017
August 2020
$
$
— $
1 $
1
2
—
—
(1) Kashiv granted Amneal an exclusive license, under its New Drug Application, to distribute and sell two bio-similar
products in the U.S. Kashiv is responsible for development, regulatory filings, obtaining FDA approval, and
manufacturing, and Amneal is responsible for marketing, selling and pricing activities. The term of the agreement is 10
years from the respective product’s launch date. The agreement provides for potential future milestone payments to
Kashiv of (i) up to $21 million relating to regulatory approval, (ii) up to $43 million for successful delivery of
commercial launch inventory, (iii) between $20 million and $50 million relating to number of competitors at launch
for one product, and (iv) between $15 million and $68 million for the achievement of cumulative net sales for both
products. The milestones are subject to certain performance conditions which may or may not be achieved, including
FDA filing, FDA approval, launch activities and commercial sales volume objectives. In addition, the agreement
provides for Amneal to pay a profit share equal to 50% of net profits, after considering manufacturing and marketing
costs.
(2) Amneal and Kashiv entered into a product development agreement for the development and commercialization of two
generic peptide products, Ganirelix Acetate and Cetrorelix Acetate. Under the agreement, the intellectual property and
ANDA for these products are owned by Amneal, and Kashiv is to receive a profit share for all sales of the products
made by Amneal. In connection with the agreement, Amneal made an upfront payment for $1 million during August
2020. The agreement also provides for potential future milestone payments to Kashiv of (i) up to $2 million relating to
development milestones, and (ii) up to $0.3 million relating to regulatory filings. The milestones are subject to certain
performance conditions which may or may not be achieved, including FDA filings. In addition, Amneal is to pay
$3 million of development fees to Kashiv as the development work is completed.
Agreements with Kashiv Included in the Acquisition of KSP
The following contracts between Amneal and Kashiv were acquired with KSP and have become transactions among Amneal’s
consolidated subsidiaries subsequent to the transaction closing on April 2, 2021. The disclosures below relate to the historical
agreements as related party transactions through April 2, 2021.
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Amneal had various development, commercialization and consulting arrangements with Kashiv to collaborate on the
development and commercialization of certain generic pharmaceutical products. The total reimbursable expenses associated
with these arrangements for the years ended December 31, 2021, 2020 and 2019, was $0.2 million, $0.2 million and $5 million,
respectively. Kashiv receives a percentage of net profits with respect to Amneal’s sales of these products. The total profit share
paid to Kashiv for the years ended December 31, 2021, 2020 and 2019 was $3 million, $11 million and $4 million,
respectively.
On February 20, 2020, the Company and Kashiv entered into a master services agreement covering certain services that Kashiv
provides the Company for commercial product support related to EluRyng and other products, including Ranitidine and
Nitrofurantoin. For the years ended December 31, 2021 and December 31, 2020, the Company recorded a combined $1 million
and $6 million, respectively, to cost of goods sold and research and development related to compensation to Kashiv for services
performed (none in 2019).
The following table includes the expenses recognized for each of the product specific contracts with Kashiv prior to the
acquisition of these contracts as part of the KSP Acquisition.
(Amounts in millions)
Products
Levothyroxine Sodium(1)
K127 (2)
Posaconazole (3)
Research and development expenses
For the year
ended December 31
Agreement Date
2021
2020
2019
June 2019
November 2019
May 2020
$
$
— $
3 $
— $
2
2
1
2
2
—
(1) Pursuant to a product development agreement, Amneal and Kashiv agreed to collaborate on the development and
commercialization of Levothyroxine Sodium. Under the agreement, the intellectual property and ANDA for this
product is owned by Amneal, and Kashiv received a profit share for all sales of the product made by Amneal. Amneal
is precluded from selling the product made by Kashiv during the term of the license and supply agreement with Jerome
Stevens Pharmaceuticals (refer to Note 5. Alliances and Collaboration). Under the terms of the amended agreement
with Kashiv, Amneal paid $2 million in July 2019 and may be required to pay up to an additional $18 million upon
certain regulatory milestones being met.
(2) Amneal and Kashiv entered into a licensing agreement for the development and commercialization of Kashiv’s orphan
drug K127 (pyridostigmine) for the treatment of Myasthenia Gravis. Under the terms of the agreement, Kashiv will be
responsible for all development and clinical work required to secure Food and Drug Administration approval and
Amneal will be responsible for filing the NDA and commercializing the product. The Company made an upfront
payment of approximately $2 million to Kashiv in December 31, 2019, which was recorded in research and
development, and Kashiv is eligible to receive development and regulatory milestones totaling approximately $17
million. Kashiv is also eligible to receive tiered royalties from the low double-digits to mid-teens on net sales of
K127.
(3) Amneal and Kashiv entered into a product development agreement for the development and commercialization of
Posaconazole. Under this agreement, the intellectual property and ANDA for this product is owned by Amneal and
Kashiv is to receive a profit share for all sales of the product made by Amneal. In connection with the agreement,
Amneal paid an upfront amount of $0.3 million in May 2020 for execution of the agreement which was expensed in
research and development. The agreement also provides for potential future milestone payments to Kashiv of (i) up
$0.8 million relating to development milestones, (ii) up to $0.3 million relating to regulatory approval, and (iii) up to
$1 million for the achievement of cumulative net sales. The milestones were subject to certain performance conditions
which may or may not be achieved, including FDA filing, FDA approval and commercial sales volume objectives.
As discussed in Note 3. Acquisitions and Divestitures, the purchase price for the KSP Acquisition included a contractually
stated amount of deferred consideration of $30.5 million. As of December 31, 2021, deferred consideration of $30.5 million
was recorded in related party payable-short term. The deferred consideration consists of $30 million which was paid on
January 11, 2022, and $0.5 million, which is due on March 10, 2022. Additionally, as of December 31, 2021, a contingent
consideration liability of $5.9 million associated with the KSP Acquisition was recorded in related party payable-long term.
For the year ended December 31, 2021, the Company recorded $0.3 million of expenses for transition services associated with
the KSP Acquisition provided by Kashiv.
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At December 31, 2021 and 2020, payables of approximately $0.3 million and $5 million, respectively, were due to Kashiv for
these transactions. Additionally, as of December 31, 2021 and 2020, receivables of less than $0.1 million and $0.1 million were
due from Kashiv, respectively.
PharmaSophia, LLC
PharmaSophia, LLC (“PharmaSophia”) is a joint venture formed by Nava Pharma, LLC (“Nava”) and Oakwood Laboratories,
LLC for the purpose of developing certain products. Certain executive officers of the Company beneficially own, directly and
through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity securities of Nava.
Nava beneficially owns 50% of the outstanding equity securities of PharmaSophia. In addition, these executive officers also
serve on the Board of Managers of PharmaSophia.
Currently PharmaSophia is actively developing one injectable product. PharmaSophia and Nava are parties to a research and
development agreement pursuant to which Nava provides research and development services to PharmaSophia. Nava
subcontracted this obligation to Amneal, entering into a subcontract research and development services agreement pursuant to
which Amneal provides research and development services to Nava in connection with the products being developed by
PharmaSophia. The total amount of income earned from these agreements for the years ended December 31, 2021, 2020 and
2019 was $0.3 million, $0.5 million and $1 million, respectively. At December 31, 2021 and 2020, receivables of $1.1 million
and $0.8 million, respectively, were due from the related party.
Gemini Laboratories, LLC
During September 2020, the Company made a $3 million payment to the non-controlling interest holders in one of Amneal's
non-public subsidiaries, Gemini Laboratories, LLC, to distribute earnings of $1 million and acquire their ownership interests in
the non-public subsidiary for $2 million.
Fosun International Limited
Fosun International Limited (“Fosun”) is a Chinese international conglomerate and investment company that is a shareholder of
the Company. On June 6, 2019, the Company entered into a license and supply agreement with a subsidiary of Fosun, which is
a Chinese pharmaceutical company. Under the terms of the agreement, the Company will hold the imported drug license
required for pharmaceutical products manufactured outside of China and will supply Fosun with finished, packaged products
for Fosun to then sell in the China market. Fosun will be responsible for obtaining regulatory approval in China and for
shipping the product from Amneal’s facility to Fosun’s customers in China. In consideration for access to the Company's U.S.
regulatory filings to support its China regulatory filings and for the supply of product, Fosun paid the Company a $1 million
non-refundable fee, net of tax, in July 2019 and will be required to pay the Company $0.3 million for each of eight products
upon the first commercial sale of each in China in addition to a supply price and a profit share. The Company has not
recognized any revenue from this agreement.
On August 12, 2021, the Company entered into an active pharmaceutical ingredient (“API”) co-development agreement with a
subsidiary of Fosun. Under the terms of the agreement, the Company provided Fosun a license to manufacture and sell two
pharmaceutical products outside of the United States. Fosun will be responsible for obtaining regulatory approval outside the
United States. Fosun paid the Company a $0.2 million non-refundable fee which was recognized in 2021 as revenue and will be
required to pay the Company $0.1 million for each of the two products upon the first commercial sale of each in China in
addition to a profit share.
Apace KY, LLC d/b/a Apace Packaging LLC
Apace KY, LLC d/b/a Apace Packaging LLC (“Apace”) provides packaging solutions pursuant to an exclusive packaging
agreement. Apace markets its services which include bottling and blistering for the pharmaceutical industry. A member of
Company management beneficially owns outstanding equity securities of Apace. The total amount of expenses from this
arrangement for the years ended December 31, 2021 and 2020 was $11 million and $12 million, respectively (none in 2019). At
December 31, 2021 and December 31, 2020, payables of $1 million and $1 million, respectively, were due to Apace for
packaging services. Additionally, at December 31, 2021 and December 31, 2020, receivables of less than $0.1 million and $1
million, respectively, were due from Apace relating to product recalls.
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Tracy Properties LLC
R&S leases operating facilities, office and warehouse space from Tracy Properties LLC (“Tracy”). A member of Company
management beneficially owns outstanding equity securities of Tracy. The total amount of expenses associated with this lease
for both the years ended December 31, 2021 and 2020 was $0.5 million (none in 2019).
AzaTech Pharma LLC
R&S purchases inventory from AzaTech Pharma LLC (“AzaTech”) for resale. A member of Company management
beneficially owns outstanding equity securities of AzaTech. The total amount of purchases from this arrangement for both the
years ended December 31, 2021 and 2020 was $5 million (none in 2019). At December 31, 2021 and 2020, payables of $2
million and $1 million, respectively, were due to AzaTech for inventory purchases.
AvPROP, LLC
AvKARE LLC leases its operating facilities from AvPROP, LLC (“AvPROP”). A member of Company management
beneficially owns outstanding equity securities of AvPROP. Rent expense associated with this lease for the years ended
December 31, 2021 and 2020 was $0.2 million and $0.1 million, respectively (none in 2019).
Tarsadia Investments, LLC
Tarsadia Investments, LLC (“Tarsadia”) is a private investment firm that provides financial services and is a significant
shareholder of the Company. A member of Amneal Group, and an observer to the Board, is the Chairman and Founder of
Tarsadia. Another member of the Amneal Group, and a member of the Board, is a Managing Director of Tarsadia. Tarsadia
offers capital and strategic support for companies with substantial growth potential primarily in the healthcare, financial
services, real estate, and clean technology sectors. The Company entered into an agreement in which Tarsadia will provide
financial consulting services. The services are not expected to have a material impact to the Company’s financial statements.
Avtar Investments, LLC
Avtar Investments, LLC (“Avtar”) is a private investment firm. Certain executive officers of the Company beneficially own,
directly and through certain revocable or irrevocable trusts for the benefit of their immediate families, outstanding equity
securities of Avtar. During April 2020, the Company entered into an agreement in which Avtar will provide consulting services.
The total amount of consulting expense incurred for the years ended December 31, 2021 and 2020, respectively, was $0.4
million and $1 million (none in 2019). As of both December 31, 2021 and 2020, less than $0.1 million was due to Avtar.
Zep Inc.
Zep Inc. (“Zep”) is a producer, and distributor of maintenance and cleaning solutions for retail, food & beverage, industrial &
institutional, and vehicle care customers. An executive officer of the Company serves as a director of Zep. During May 2020,
AvKARE entered into an agreement to supply cleaning products to Zep. The amount of revenue recorded for the year ended
December 31, 2020 was $0.6 million (none for the year ended December 31, 2021). As of December 31, 2020, $0.1 million
was recorded in related party receivables (none at December 31, 2021).
AvKARE
Refer to Note. 3 Acquisitions and Divestitures and Note 22. Stockholders’ Equity for related party transactions associated with
the Rondo Acquisitions.
Puniska
Refer to Note. 3 Acquisitions and Divestitures for related party transactions associated with the Puniska Acquisition.
Tax Distributions
Under the terms of the Limited Liability Company Agreement, Amneal is obligated to make tax distributions to its members,
which are also holders of non-controlling interests in the Company. For further details, refer to Note 22. Stockholders' Equity.
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Additionally, under the terms of the limited liability company agreement between the Company and the holders of the Rondo
Class B Units, Rondo is obligated to make tax distributions to those holders, subject to certain limitations as defined in the
Rondo Credit Facility. For further details, refer to Note 22. Stockholders' Equity.
Tax Indemnification – Rondo Acquisitions
In accordance with the Rondo Equity Purchase Agreement, the Company will be indemnified by the sellers of AvKARE, LLC
and R&S for $0.1 million of state taxes paid on behalf of the sellers for a tax period prior to the closing of the Rondo
Acquisition. As a result, the Company recorded $0.1 million of related party receivables - short term as of December 31, 2021.
Notes Payable – Related Party
Certain holders of the Rondo Class B Units are also holders of the Sellers Notes and the Short-Term Sellers Note. For
additional information, refer to Note 17. Debt.
25. Employee Benefit Plans
The Company has voluntary defined contribution plans covering eligible employees in the United States which provide for a
Company match. For the years ended December 31, 2021, 2020 and 2019, the Company made matching contributions of $9
million, $8 million and $7 million, respectively.
The Company also has a deferred compensation plan for certain former executives and employees of Impax, some of whom are
currently employed by the Company. In January 2019, the Company announced that it will no longer accept contributions from
employees or make matching contributions for the deferred compensation plan. Deferred compensation liabilities are recorded
at the value of the amount owed to the plan participants, with changes in value recognized as compensation expense. The
calculation of the deferred compensation plan obligation is derived by reference to hypothetical investments selected by the
participants and is included in accounts payable and accrued expenses and other long-term liabilities. Refer to Note 19. Fair
Value Measurements for additional information.
26. Segment Information
The Company has three reportable segments: Generics, Specialty, and AvKARE.
Generics
Generics develops, manufactures and commercializes complex oral solids, injectables, ophthalmics, liquids, topicals, softgels,
inhalation products and transdermals across a broad range of therapeutic categories. Generics’ retail and institutional portfolio
contains approximately 250 product families, many of which represent difficult-to-manufacture products or products that have a
high barrier-to-entry, such as oncologics, anti-infectives and supportive care products for healthcare providers.
Specialty
Specialty delivers proprietary medicines to the U.S. market. The Company offers a growing portfolio in core therapeutic
categories including central nervous system disorders, endocrinology, parasitic infections and other therapeutic areas. The
Company's specialty products are marketed through skilled specialty sales and marketing teams, who call on neurologists,
movement disorder specialists, endocrinologists and primary care physicians in key markets throughout the U.S. Specialty also
has a number of product candidates that are in varying stages of development.
AvKARE
AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily
focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a wholesale
distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, as well as medical and
surgical products. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and
institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities
products to provide consistency in care and pricing.
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Chief Operating Decision Makers
The Company’s chief operating decision makers evaluate the financial performance of the Company’s segments based upon
segment operating income (loss). Items below operating income (loss) are not reported by segment, since they are excluded
from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general
and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are
included in “Corporate and Other.” The Company does not report balance sheet information by segment since it is not reviewed
by the Company’s chief operating decision makers.
The tables below present segment information reconciled to total Company financial results, with segment operating income or
loss, including gross profit less direct selling expenses, research and development expenses, and other operating expenses to the
extent specifically identified by segment (in thousands):
Year Ended December 31, 2021
Net revenue
Cost of goods sold
Cost of goods sold impairment charges
Gross profit
Selling, general and administrative
Research and development
In-process research and development
impairment charges
Intellectual property legal development
expenses
Acquisition, transaction-related and
integration expenses
Charges related to legal matters, net
Restructuring and other charges
Change in fair value of contingent
consideration
Property losses and associated expenses, net
Operating income (loss)
Generics (1)
$ 1,366,338 $
825,568
22,692
518,078
64,500
158,365
Specialty
AvKARE (1)
Corporate
and Other
Total
Company
378,319 $
193,562
—
184,757
84,481
43,482
349,012 $
282,874
—
66,138
57,918
—
— $ 2,093,669
1,302,004
—
22,692
—
768,973
—
365,504
158,605
201,847
—
710
7,562
—
—
80
—
154
16
—
—
—
—
1,422
—
—
—
5,368
281,493 $
$
200
—
56,424 $
—
—
6,798 $
—
—
6,617
25,000
1,777
—
—
(191,999) $
710
7,716
8,055
25,000
1,857
200
5,368
152,716
Year Ended December 31, 2020
Net revenue
Cost of goods sold
Cost of goods sold impairment charges
Gross profit
Selling, general and administrative
Research and development
In-process research and development
impairment charges
Intellectual property legal development
expenses
Acquisition, transaction-related and
integration expenses
Charges related to legal matters, net
Restructuring and other (credit) charges
Operating income (loss)
$
Generics (1)
$ 1,343,210 $
894,422
34,579
414,209
56,134
150,068
Specialty
AvKARE (1)
Corporate
and Other
Total
Company
355,567 $
192,910
—
162,657
75,917
29,862
293,746 $
242,219
—
51,527
58,544
—
— $ 1,992,523
1,329,551
—
34,579
—
628,393
—
326,727
136,132
179,930
—
2,680
10,647
—
8
—
—
—
—
328
5,610
(614)
189,356 $
85
250
—
56,535 $
641
—
—
(7,658) $
7,934
—
3,012
(147,078) $
2,680
10,655
8,988
5,860
2,398
91,155
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Year Ended December 31, 2019
Net revenue
Cost of goods sold
Cost of goods sold impairment charges
Gross profit
Selling, general and administrative
Research and development
In-process research and development impairment charges
Intellectual property legal development expenses
Acquisition, transaction-related and integration expenses
Charges related to legal matters, net
Restructuring and other (credit) charges
Operating (loss) income
Generics (2)
$ 1,308,843 $
984,782
119,145
204,916
68,883
172,196
46,619
13,193
4,633
12,442
20,101
(133,151) $
$
Specialty (2)
Corporate
and Other
Total
Company
317,530 $
162,432
7,017
148,081
79,665
15,853
—
1,045
8,346
—
391
42,781 $
— $ 1,626,373
1,147,214
—
126,162
—
352,997
—
289,598
141,050
188,049
—
46,619
—
14,238
—
16,388
3,409
12,442
—
34,345
13,853
(248,682)
(158,312) $
(1)
(2)
Operating results for the sale of Amneal products by AvKARE were included in Generics effective with the closing of
the Rondo Acquisitions on January 31, 2020.
During the three months ended September 30, 2019, operating results for Oxymorphone were reclassified from
Generics to Specialty, where it is sold as a non-promoted product. Prior period results have not been restated to reflect
the reclassification.
27. Other Assets
Other assets are comprised of the following (in thousands):
Deferred Revolving Credit Facility costs
Security deposits
Long-term prepaid expenses
Other long-term assets
Total
December 31,
2021
December 31,
2020
$
$
1,603 $
3,895
5,896
9,220
20,614 $
2,648
2,240
10,598
6,858
22,344
The prior period balance related to financing lease right-of-use assets of $10 million was reclassified from other assets as of
December 31, 2020 to the financing lease right-of-use assets balance sheet caption to conform to the current period presentation
in the consolidated balance sheets.
28. Property Losses and Associated Expenses, Net
On September 1, 2021, Tropical Storm Ida brought extreme rainfall and flash flooding to New Jersey that caused damage to
two of the Company’s facilities. Operations at these facilities were closed for the majority of September in order to assess the
damage, make repairs and restore operations. As a result of the significant recovery effort and sufficient safety stock, the
Company did not incur a material business disruption for the year ended December 31, 2021.
The Company nevertheless concluded that all inventory on-hand at the time of the flooding was damaged and unsellable, and
that a majority of the equipment was damaged beyond repair. In addition, the Company incurred significant costs to repair both
facilities. Accordingly, the Company recorded $10 million of charges for property losses and associated expenses for the year
ended December 31, 2021.
The Company has insurance policies for property damage, inventory losses and business interruption. Insurance recoveries are
recorded in the periods when it is probable they will be realized. During the year ended December 31, 2021, insurance
recoveries of $5 million associated with property and equipment were received and recorded as a reduction of property losses
and associated expenses.
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Property losses and associated expenses, net of insurance recoveries, for the year ended December 31, 2021 was comprised of
the following (in thousands):
Impairment of equipment
Impairment of inventory
Repairs and maintenance expenses
Salaries and benefits for cleaning and repairing facilities
Total property losses and associated expenses
Less: Insurance recoveries received
Property losses and associated expenses, net of insurance recoveries
29. Subsequent Event
Baclofen Franchise Acquisition
$
$
4,202
950
3,716
1,500
10,368
(5,000)
5,368
On December 30, 2021, the Company entered into an asset purchase agreement with certain entities affiliated with Saol
International Limited (collectively, “Saol”), a private specialty pharmaceutical company, pursuant to which it agreed to acquire
Saol’s baclofen franchise, including Lioresal®, LYVISPAH™, and a pipeline product under development (the “Saol
Acquisition”). The Saol Acquisition expands the Company’s commercial institutional and specialty portfolio in neurology
while adding commercial infrastructure in advance of its entry into the biosimilar institutional market. The transaction closed
on February 9, 2022.
Consideration for the Saol Acquisition includes $85 million, paid at closing with cash on hand, and contingent royalty payments
based on annual net sales for certain acquired assets, beginning in 2023. Cash paid at closing included $1 million for inventory
acquired in excess of the normalized level, as defined in the asset purchase agreement. The Company is evaluating the
accounting for the transaction. As such, the Company is not able to disclose certain information relating to the acquisition,
including the preliminary fair value of assets acquired and liabilities assumed.
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Exhibit No.
EXHIBIT INDEX
Description of Document
2.1
2.1.1
2.1.2
2.2
2.3
2.4
2.5
2.6
3.1
3.2
4.1
4.2
10.1
10.2
10.3
Business Combination Agreement, dated as of October 17, 2017, by and among Amneal Pharmaceuticals
LLC, Impax Laboratories, Inc., Atlas Holdings, Inc. and K2 Merger Sub Corporation (incorporated by
reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-1, filed on May 7, 2018).
Amendment No. 1, dated as of November 21, 2017, to the Business Combination Agreement, dated as of as of
October 17, 2017, by and among Amneal Pharmaceuticals LLC, Impax Laboratories, Inc., Atlas Holdings,
Inc. and K2 Merger Sub Corporation (incorporated by reference to Exhibit 2.2 to the Company’s Registration
Statement on Form S-1, filed on May 7, 2018).
Amendment No. 2, dated as of December 16, 2017, to the Business Combination Agreement, dated as of as of
October 17, 2017, as amended by Amendment No. 1 dated as of November 21, 2017 by and among Amneal
Pharmaceuticals LLC, Impax Laboratories, Inc., Atlas Holdings, Inc. and K2 Merger Sub Corporation
(incorporated by reference to Exhibit 2.3 to the Company’s Registration Statement on Form S-1 filed on May
7, 2018).
Purchase and Sale Agreement, dated as of May 7, 2018, by and between Amneal Pharmaceuticals LLC,
Gemini Laboratories, LLC, the parties signatory thereto and the Sellers’ Representative (incorporated by
reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on May 7, 2018).
Equity Purchase Agreement, dated December 10, 2019, by and among the Jerry Brian Shirley Business Trust,
the Darren Thomas Shirley Business Trust, the Steve Shirley Business Trust, the Jerry Shirley Business Trust,
Troy Mizell, Darrell Calvert, AvKARE, Dixon-Shane, LLC d/b/a R&S Northeast LLC and Rondo Acquisition
LLC. In accordance with the instructions to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to
the Equity Purchase Agreement are not filed herewith. The Equity Purchase Agreement identifies such
schedules and exhibits, including the general nature of their content. The Company undertakes to provide such
schedules and exhibits to the SEC upon request (incorporated by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K filed on December 10, 2019).
Membership Interest Purchase Agreement, dated January 11, 2021, by and among Kashiv BioSciences, LLC
and Amneal Pharmaceuticals LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report
on Form 8-K filed on January 12, 2021).
Share Purchase Agreement, dated November 2, 2021, by and among Puniska Healthcare Pvt. Ltd. and Amneal
Pharmaceuticals Private Limited. * ***
Asset Purchase Agreement, dated December 30, 2021, by and among Amneal Pharmaceuticals LLC and Saol
Therapeutics (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on
January 5, 2022).
Second Amended and Restated Certificate of Incorporation of Amneal Pharmaceuticals, Inc. adopted as of
May 5, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2021, filed on May 7, 2021).
Amended and Restated Bylaws of Amneal Pharmaceuticals, Inc. adopted as of February 12, 2021
(incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on February 16,
2021).
Second Supplemental Indenture dated as of May 4, 2018 to the Indenture dated as of June 30, 2015 by and
between Impax Laboratories, LLC and Wilmington Trust, N.A. (incorporated by reference to Exhibit 4.1 to
the Company’s Current Report on Form 8-K filed on May 7, 2018).
Description of Registrant’s Securities (incorporated by reference to Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2019 filed on March 2, 2020).
Term Loan Credit Agreement, dated as of May 4, 2018, by and among Amneal Pharmaceuticals LLC, as the
borrower, JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders and other
parties party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on May 7, 2018).
Revolving Credit Agreement, dated as of May 4, 2018, by and among Amneal Pharmaceuticals LLC, as the
borrower, the other loan parties from time to time, JP Morgan Chase Bank, N.A., as administrative agent and
collateral agent and the lenders and other parties party thereto (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on May 7, 2018).
Term Loan Guarantee and Collateral Agreement, dated as of May 4, 2018, by and among the loan parties from
time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent
(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 7,
2018).
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10.4
10.5
10.5.1
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.13.1
10.14
10.15
10.15.1
10.16
Revolving Loan Guarantee and Collateral Agreement, dated as of May 4, 2018, by and among the loan parties
from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent
(incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 7,
2018).
Third Amended and Restated Limited Liability Company Agreement of Amneal Pharmaceuticals LLC
adopted as of May 4, 2018 (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on
Form 8-K filed on May 7, 2018).
Amendment No. 1 to Third Amended and Restated Limited Liability Company Agreement of Amneal
Pharmaceuticals LLC, dated as of February 14, 2019, with effect as of May 4, 2018 incorporated by reference
to Exhibit 10.5.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed
on March 1, 2019.
Tax Receivable Agreement, dated as of May 4, 2018, by and among Amneal Pharmaceuticals, Inc., Amneal
Pharmaceuticals LLC and the Members of Amneal Pharmaceuticals LLC from time to time party thereto
(incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed on May 7,
2018).
Form of Indemnification and Advancement Agreement for the directors and officers of the Company
(incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed on May 7,
2018). †
Form of Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan Stock Option Grant Notice and Stock
Option Agreement (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K,
filed on May 7, 2018). †
Form of Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan Restricted Stock Unit Grant Notice and
Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.10 to the Company’s Current
Report on Form 8-K, filed on May 7, 2018). †
Form of Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan Performance Restricted Stock Unit Grant
Notice and Performance Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.11 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 1, 2019). †
Amneal Pharmaceuticals Inc. 2018 Incentive Award Plan (amended and restated) (incorporated by reference
to Exhibit 99.1 to the Company's Registration Statement on Form S-8, filed on August 17, 2020). †
Form of Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan Performance Restricted Stock Unit Grant
Notice and Performance Restricted Stock Unit Agreement (2020) (incorporated by reference to Exhibit 10.12
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 1,
2021).†
Employment Agreement, dated January 24, 2018, by and among Amneal Pharmaceuticals LLC, Amneal
Holdings, LLC and Andrew Boyer (incorporated by reference to Exhibit 10.10 to the Company's Registration
Statement on Form S-1, filed on May 7, 2018).†
Modification No. 1 to Employment Agreement, dated July 29, 2020, by and among Amneal Pharmaceuticals
Inc. and Andrew Boyer (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2020, filed on November 6, 2020).†
Unsecured Promissory Note, dated as of May 7, 2018, issued by Amneal Pharmaceuticals LLC to the Sellers
(as defined therein) (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-
K, filed on May 7, 2018).
Impax Laboratories, Inc. Executive Non-Qualified Deferred Compensation Plan, amended and restated
effective January 1, 2008 (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement
on Form S-1, filed on May 7, 2018).†
Amendment to Impax Laboratories, Inc. Executive Non-Qualified Deferred Compensation Plan, effective as
of January 1, 2009 (incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on
Form S-1, filed on May 7, 2018).†
Second Amended and Restated Stockholders Agreement, dated as of December 16, 2017, among Atlas
Holdings, Inc., Amneal Pharmaceuticals Holdings Company LLC, AP Class D Member, LLC, AP Class E
Member, LLC and AH PPU Management, LLC (incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-1, filed on May 7, 2018).
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10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
21.1
23.1
31.1
31.2
31.3
32.1
32.2
32.3
101
104
Amendment No. 1, dated as of August 2, 2019, to Second Amended and Restated Stockholders Agreement, by
and among Amneal Pharmaceuticals Holding Company, LLC, a Delaware limited liability company, AP Class
D Member, LLC, a Delaware limited liability company, AP Class E Member, LLC, a Delaware limited
liability company, AH PPU Management, LLC, a Delaware limited liability company, and Amneal
Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2019, filed on August 5, 2019).
Form of Tripartite Letter Agreement Credit Suisse (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 5, 2019).
Form of Tripartite Acknowledgment and Agreement Morgan Stanley (incorporated by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 5,
2019).
Employment Agreement dated March 11, 2020, by and among Amneal Pharmaceuticals LLC, Amneal
Pharmaceuticals, Inc. and Anastasios (Tasos) G. Konidaris (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on March 12, 2020). †
Amended and Restated Operating Agreement of Rondo Partners, LLC (incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K, filed on February 3, 2020).
Revolving Credit and Term Loan Agreement, dated as of January 31, 2020, by and among Rondo Intermediate
Holdings and LLC and Rondo Holdings, LLC, the lenders from time to time party thereto, and Trust Bank, as
Administrative Agent (incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-
K, filed on February 3, 2020).
Guaranty and Security Agreement, dated as of January 31, 2020, by and among Rondo Intermediate Holdings,
LLC, and Rondo Holdings, LLC, AvKARE, R&S Northeast, and the Administrative Agent (incorporated by
reference to Exhibit 2.3 to the Company's Current Report on Form 8-K, filed on February 3, 2020).
Amneal Pharmaceuticals LLC Severance Plan and Summary Plan Description (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed on
August 6, 2020). †
Employment Agreement by and among Amneal Pharmaceuticals, Inc. and Joseph Todisco, dated as of July 29,
2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2021, filed on May 7, 2021).†
Employment Agreement by and among Amneal Pharmaceuticals, Inc. and Nikita Shah, dated as of July 29,
2020 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2021, filed on May 7, 2021).†
Amneal Pharmaceuticals, Inc. Non-Employee Director Compensation Policy, as amended and restated on May
5, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2021, filed on August 9, 2021).†
Subsidiaries of the registrant.*
Consent of Independent Registered Public Accounting Firm.
Certification of Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of the Co-Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.* **
Certification of the Co-Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.* **
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.* **
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31,
2021, formatted in inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income
(Loss), (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of
Cash Flows, and (vi) Notes to Consolidated Financial Statements.
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
71
Table of Contents
*
**
Filed herewith
This certificate 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.
***
Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
†
Denotes management compensatory plan or arrangement.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or
other disclosure other than the terms of the agreements or other documents themselves, and you should not rely on
them for that purpose. In particular, any representations and warranties made by the Company in these agreements or
other documents were made solely within the specific context of the relevant agreement or document and may not
describe the actual state of affairs at the date they were made or at any other time.
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 1, 2022
Amneal Pharmaceuticals, Inc.
By:
/s/ Anastasios Konidaris
Anastasios Konidaris
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Chirag Patel
Chirag Patel
/s/ Chintu Patel
Chintu Patel
/s/ Anastasios Konidaris
Anastasios Konidaris
/s/ Paul M. Meister
Paul M. Meister
/s/ Jeffrey P. George
Jeffrey P. George
/s/ Emily Peterson Alva
Emily Peterson Alva
/s/ J. Kevin Buchi
J. Kevin Buchi
/s/ John J. Kiely, Jr.
John J. Kiely, Jr.
/s/ Ted Nark
Ted Nark
/s/ Gautam Patel
Gautam Patel
/s/ Shlomo Yanai
Shlomo Yanai
Title
President, Co- Chief Executive Officer and Director
(Co-Principal Executive Officer)
Co- Chief Executive Officer and Director
(Co-Principal Executive Officer)
Date
March 1, 2022
March 1, 2022
Executive Vice President, Chief Financial Officer
March 1, 2022
(Principal Financial and Accounting Officer)
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
Chairman of the Board and Director
Director
Director
Director
Director
Director
Director
Director
73