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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 001-31812
ANI PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
58-2301143
(I.R.S. Employer Identification No.)
210 Main Street West
Baudette, Minnesota
(Address of principal executive offices)
56623
(Zip Code)
(218) 634-3500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.0001 per share
Trading Symbol
ANIP
Name of each exchange on which registered
The Nasdaq Global Market
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 ☒
Securities registered pursuant to Section 12(g) of the Act:
None
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 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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2022 was $372.9 million (based upon the last
reported sale price of $29.67 per share on June 30, 2022, on The Nasdaq Global Market).
As of March 2, 2023, 17,493,224 shares of common stock and 10,864 shares of Class C Special stock of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the registrant’s 2023 annual meeting of stockholders to be filed within 120 days after the end of the period covered by this
Annual Report on Form 10-K are incorporated by reference into Part III of this Annual Report on Form 10-K.
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ANI PHARMACEUTICALS, INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2022
TABLE OF CONTENTS
Business
PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Item 15.
Item 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
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In this annual report, references to “ANI Pharmaceuticals,” “ANI,” the “Company,” “we,” “us,” and “our” refer, unless
the context requires otherwise, to ANI Pharmaceuticals, Inc., a Delaware corporation, and its consolidated subsidiaries.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements include, but are
not limited to, statements about future operations, strategies and growth potential, the revenue potential (licensing, royalty
and sales) of products we sell, development timelines, expected timeframe for submission of new drug applications,
abbreviated new drug applications, or supplemental new drug applications to the U.S. Food and Drug Administration (the
“FDA”), pipeline or potential markets for our products, selling and marketing strategies and associated costs to support
the sales of Purified Cortrophin® Gel (Repository Corticotropin Injection USP) (“Cortrophin Gel”), impact of accounting
principles, litigation expenses, liquidity and capital resources, the impact of the novel coronavirus (“COVID-19”) global
pandemic on our business, and other statements that are not historical in nature, particularly those that utilize terminology
such as “anticipates,” “will,” “expects,” “plans,” “potential,” “future,” “believes,” “intends,” “continue,” other words
of similar meaning, derivations of such words, and the use of future dates. Such forward-looking statements are based on
the reasonable beliefs of our management as well as assumptions made by and information currently available to our
management. Readers should not put undue reliance on these forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot be predicted or quantified; therefore, our actual results
may differ materially from those described in any forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in our periodic reports filed with the U.S. Securities and Exchange
Commission (the “SEC”), including those discussed in the “Risk Factors” section in Part I, Item 1A.of this Annual Report
on Form 10-K, and the following factors:
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risks that we may face with respect to importing raw materials and delays in delivery of raw materials and other
ingredients and supplies necessary for the manufacture of our products from both domestic and overseas sources
due to supply chain disruptions or for any other reason;
delays or failure in obtaining and maintaining approvals by the FDA of the products we sell;
changes in policy or actions that may be taken by the FDA and other regulatory agencies, including drug recalls;
the ability of our manufacturing partners to meet our product demands and timelines;
our dependence on single source suppliers of ingredients due to the time and cost to validate a second source of
supply;
acceptance of our products at levels that will allow us to achieve profitability;
our ability to develop, license or acquire, and commercialize new products;
the level of competition we face and the legal, regulatory and/or legislative strategies employed by our
competitors to prevent or delay competition from generic alternatives to branded products;
our ability to protect our intellectual property rights;
the impact of legislative or regulatory reform on the pricing for pharmaceutical products;
the impact of any litigation to which we are, or may become, a party;
our ability, and that of our suppliers, development partners, and manufacturing partners, to comply with laws,
regulations and standards that govern or affect the pharmaceutical and biotechnology industries;
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our ability to maintain the services of our key executives and other personnel;
whether we experience disruptions to our operations resulting from the anticipated closure of our Oakville,
Ontario manufacturing plant, including the transition of certain products manufactured there to our other facilities
which remains ongoing, or have difficulties finding a buyer for the plant and property; and
general business and economic conditions, such as inflationary pressures, geopolitical conditions including the
conflict between Russia and the Ukraine, and the effects and duration of outbreaks of public health emergencies,
such as COVID-19.
NOTE REGARDING TRADEMARKS
Apexicon®, Cortenema®, Purified Cortrophin® Gel, Inderal® LA, Inderal® XL, InnoPran XL®, Lithobid®,
Reglan®, Vancocin®, and Veregen® are registered trademarks subject to trademark protection and are owned by ANI
Pharmaceuticals, Inc. and its consolidated subsidiaries. Cortrophin-ZincTM is a trademark owned by ANI Pharmaceuticals,
Inc. and its consolidated subsidiaries pending registration. Atacand® and Atacand HCT® are the property of AstraZeneca
AB and are licensed to ANI Pharmaceuticals, Inc. for U.S. sales of those products. Arimidex® and Casodex® are the
property of AstraZeneca UK Limited and are licensed to ANI Pharmaceuticals, Inc. for U.S. sales of those products.
Oxistat® is the property of Fougera Pharmaceuticals Inc. and licensed to ANI Pharmaceuticals, Inc. for U.S. sales of
Oxistat® Lotion. Pandel® is property of Taisho Pharmaceutical Co, Ltd. and licensed to ANI Pharmaceuticals for U.S.
sales of Pandel® creme.
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Item 1. Business
PART I
ANI Pharmaceuticals, Inc. and its consolidated subsidiaries (together, “ANI,” the “Company,” “we,” “us,” or “our”) is
a diversified bio-pharmaceutical company serving patients in need by developing, manufacturing, and marketing high
quality branded and generic prescription pharmaceuticals, including for diseases with high unmet medical need. Our team
is focused on delivering growth by building a successful Purified Cortrophin Gel franchise, strengthening our generics
business with enhanced development capability, innovation in established brands and leveraging our manufacturing
capabilities. Our four current pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota,
one is located in East Windsor, New Jersey, and one is located in Oakville, Ontario, are together capable of producing oral
solid dose products, as well as semi-solids, liquids and topicals, controlled substances, and potent products that must be
manufactured in a fully-contained environment. On June 2, 2022, we announced that we intend to cease operations at our
Oakville, Ontario, Canada manufacturing plant by first quarter 2023. This action is part of ongoing initiatives to capture
operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021. We have
transitioned the majority of products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing
sites and are on track to cease operations by the end of the first quarter 2023. We are seeking to find potential buyers for the
Oakville site.
Through research and development, acquisitions of businesses, acquisitions of Abbreviated New Drug Applications
(“ANDAs”), New Drug Applications (“NDAs”), product rights, and entry into agreements to obtain the distribution rights
for various products, we have a commercial portfolio of 111 products with a wide variety of indications and a robust
portfolio of pipeline products as of December 31, 2022. Refer to our website at www.anipharmaceuticals.com for
information on our products, including indications/treatments.
On November 19, 2021, we completed the acquisition of Novitium. With operations in East Windsor, New Jersey, and
Chennai, India, Novitium is a pharmaceutical company that specializes in development, manufacturing, and distribution of
niche generic products. Founded in 2016, Novitium has since developed a growing commercial product portfolio spanning
a diverse range of dosage forms and therapeutic categories.
Unless otherwise required by the context, references in this Annual Report on Form 10-K to the “Company,” “we,”
“us,” and “our” refer to ANI Pharmaceuticals, Inc., a Delaware corporation formed in April 2001. Our principal executive
offices are located at 210 Main Street West, Baudette, Minnesota, 56623, our telephone number is (218) 634-3500, and our
website address is www.anipharmaceuticals.com.
Strategy
Our objective is to build a sustainable and growing biopharmaceutical company serving patients in need and creating
long-term value for our investors. Our growth strategy is driven by the following key growth drivers:
Building a successful Rare Disease platform
We have spent significant time, effort and resources in establishing our Rare Disease platform. We acquired the NDAs
for Cortrophin gel and Cortrophin-Zinc in January 2016 and executed long-term supply agreements with a supplier of our
primary raw material for corticotrophin active pharmaceutical ingredient (“API”), a supplier of corticotrophin API with
whom we have advanced the manufacture of commercial scale batches of API, and a Cortrophin gel fill/finish contract
manufacturer. During the second quarter of 2021, we submitted a Supplemental New Drug Application (“sNDA”) to the
FDA.
On October 29, 2021, the FDA approved the Company’s sNDA for Purified Cortrophin Gel (Repository Corticotropin
Injection USP) for the treatment of certain chronic autoimmune disorders, including acute exacerbations of
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multiple sclerosis (“MS”) and rheumatoid arthritis (“RA”), in addition to excess urinary protein due to nephrotic syndrome.
Cortrophin Gel is an adrenocorticotropic hormone (“ACTH”), also known as purified corticotropin.
During 2021 and 2022, we invested in leadership, expertise and infrastructure in the areas of commercialization of rare
disease therapies and developed a launch strategy and commercial plan for this product. During 2021 and throughout 2022,
we hired a significant number of new employees and assembled and trained our Rare Disease field force. On January 24,
2022, we announced the commercial launch of Cortrophin Gel in the U.S as our foundational Rare Disease asset. As a
result of the build out of our Rare Disease team, our expenditures in support of these efforts were significantly higher in
2022 as compared to 2021.
We plan to continue to invest behind Cortrophin Gel and our Rare Disease platform in 2023 and beyond.
Strengthening our Generics, Established Brands, and Other segment through continued investment in our generic
research and development capability and increased focus on niche opportunities
We have grown our generics business through a combination of market share gains on existing products and new
product launches. We have also successfully acquired numerous ANDAs through business and asset acquisitions. Our most
recent business acquisition was Novitium, including its portfolio of commercial and pipeline generic products,
manufacturing and development facilities and expert workforce. The Novitium acquisition significantly increased our
generic pharmaceutical research and development and manufacturing capabilities. We have begun to increase our focus on
niche lower competition opportunities such as injectables, Paragraph IV, and Competitive Generic Therapy designation
filings. Additionally, we will continue to seek opportunities to enhance our capabilities through strategic partnerships and
acquisitions of assets and businesses. On July 21, 2022, we completed an asset acquisition of four ANDAs from Oakrum
Pharma, including two that were commercial at the time of acquisition.
We have grown our established brand product offerings through acquisition. We have acquired the NDAs for and
market Atacand, Atacand HCT, Arimidex, Casodex, Lithobid, Vancocin, Inderal LA, Inderal XL, InnoPran XL, Oxistat,
Veregen, and Pandel. We are innovating in our go-to-market strategy through creative partnerships.
Our overall strategy is enabled by an empowered, collaborative, and purposeful team with a high performance-
orientation.
Generic Product Development Considerations
We consider a variety of criteria in determining which products to develop, all of which influence the level of
competition upon product launch. These criteria include:
● Formulation Complexity. Our development and manufacturing capabilities enable us to manufacture
pharmaceuticals that are difficult to produce, including highly potent, extended release, combination, and low
dosage products. This ability to manufacture a variety of complex products is a competitive strength that we
intend to leverage in selecting products to develop or manufacture.
● Patent Status. We seek to develop products whose branded bioequivalents do not have long-term patent
protection or existing patent challenges.
● Market Size. When determining whether to develop or acquire an individual product, we review the current and
expected market size for that product at launch, as well as forecasted price erosion upon conversion from branded
to generic pricing. We endeavor to manufacture products with sufficient market size to enable us to enter the
market with a strong likelihood of being able to price our products both competitively and at a profit.
● Profit Potential. We research the availability and cost of active pharmaceutical ingredients in determining which
products to develop or acquire. In determining the potential profit of a product, we forecast our
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anticipated market share, pricing, including the expected price erosion caused by competition from other generic
manufacturers, and the estimated cost to manufacture the products.
● Manufacturing. We generally seek to develop and manufacture products at our own manufacturing plants in
order to optimize the utilization of our facilities, ensure quality control in our products, and to more closely
control the economic inputs and outputs of our products.
● Competition. When determining whether to develop or acquire a product, we research existing and expected
competition. We seek to develop products for which we can obtain sufficient market share and may decline to
develop a product if we anticipate significant competition. Our specialized manufacturing facilities provide a
means of entering niche markets, such as hormone therapies, in which fewer generic companies are able to
compete.
In addition to laboratories that support the requirements of raw material, finished product, and stability testing, we
have a 1,000-square foot pilot laboratory offering liquid, suspension and solid dose development capabilities. This pilot
laboratory offers a full range of analytical capabilities, including method development, validation and de-formulation, and
is licensed by the Drug Enforcement Administration (“DEA”). Finally, a separate development suite located within our
high-potency manufacturing facility offers additional capabilities for product development.
We also lease a 968-square foot industrial space in Chennai, India where we perform research and development
activities.
Products and Markets
Products
A complete list of our generic and branded pharmaceutical products and descriptions is posted on our website,
www.anipharmaceuticals.com.
Markets
In determining which products to pursue for development, we target products that are complex to manufacture and
therefore have higher barriers to entry. These factors provide opportunities for growth, utilizing our competitive strengths
at the same time that they decrease the number of potential competitors in the markets for these products. These markets
currently include controlled substances, oncology products, hormones and steroids, injectables, and complex formulations,
including extended release and combination products.
Controlled Substances
Schedule II controlled substances are drugs considered to have a high abuse risk but that also have safe and accepted
medical uses. In addition to our Schedule II products currently on the market, our pipeline includes ANDAs in this market.
One of our manufacturing facilities in Baudette, Minnesota and our manufacturing facility in East Windsor, New Jersey is
licensed by the DEA for the manufacture of Schedule II controlled substances.
Oncology Products
Due to the capabilities of our containment facility and our expertise in manufacturing segregation, we are focused on
developing and manufacturing niche oncology products (anti-cancer). In particular, we are targeting products subject to
priority review by the FDA, more specifically those with no blocking patents and no generic competition. We currently
have a variety of oncology products on the market.
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Hormone and Steroid Drugs
The market for hormone and steroid drugs includes hormone therapy to alleviate menopausal symptoms in women,
contraceptives, testosterone replacement therapies for men, and therapies for treating hormone-sensitive cancers.
Hormone Therapy (“HT”) has been a long-accepted medical treatment for alleviating the symptoms of menopause.
Initially, HT consisted of estrogen only but has evolved to include combination therapies of estrogen, progesterone, and
androgens. We target niche products in the HT and steroid product market for several reasons, including:
● Hormone and steroid products are a core competency based on our manufacturing and product development
teams’ long history of manufacturing these types of products; and
● The aging “baby boomer” population, of which women represent a majority, is expected to support continued
growth in the HT market.
Injectables
Our burgeoning injectable portfolio contains injectable ANDA products encompassing several key therapeutic
areas. Cortrophin Gel is our first branded injectable product. We work with world-class manufacturing partners to support
these efforts.
Complex Formulations
We have a range of complex formulation products currently on the market and a pipeline that includes various
extended-release products and combination products.
Competitive Generic Therapy
The FDA Reauthorization Act of 2017, or (“FDARA”), created a new pathway by which FDA may, at the request of
the applicant, designate a drug with “inadequate generic competition” as a competitive generic therapy (“CGT”). At the
request of the applicant, the FDA may also expedite the review of an ANDA for a drug designated as a CGT. Under the
CGT pathway, the FDA provides a statutory provision for a 180-day exclusivity period for certain first to market applicants
whose ANDA received a CGT designation. Our Novitium subsidiary has developed a strong track record of obtaining CGT
approvals and we expect to continue to develop generic drugs under the CGT pathway.
Contract Manufacturing
We manufacture pharmaceutical products for several branded and generic companies, who outsource production in
order to:
● Free-up internal resources to focus on sales and marketing as well as research and development;
● Employ internal capacity to manufacture higher volume or more critical products; and
● Utilize our specialized equipment and expertise.
We currently anticipate that revenues from contract manufacturing arrangements will begin to decline as we focus our
efforts on Rare Disease and leveraging our generic R&D and manufacturing platform for ANI labeled products.
In conjunction with our acquisitions of WellSpring and Novitium, we acquired WellSpring’s and Novitium’s
pharmaceutical manufacturing facilities. As a result of these transactions, we perform contract manufacturing in our
Baudette, Minnesota and East Windsor, New Jersey facilities. On June 2, 2022, we announced that we intend to cease
operations at our Oakville, Ontario, Canada manufacturing plant by first quarter 2023. This action is part of ongoing
initiatives to capture operational synergies following our acquisition of Novitium in November 2021. We have
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transitioned the majority of products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing
sites and are on track to cease operations by the end of the first quarter 2023.
Manufacturing, Suppliers, and Raw Materials
We require a supply of quality raw materials, including active pharmaceutical ingredients (“API”), and components to
manufacture and package our pharmaceutical products. In order to manufacture certain of our products deemed controlled
substances, we must submit a request to the DEA for a quota to purchase the amount of API needed for manufacture.
Without approved quotas from the DEA, we would not be able to purchase these ingredients from our suppliers.
We source the raw materials for our products from both domestic and international suppliers, which we carefully
select. Generally, we qualify only a single source of API for use in each product due to the cost and time required to
validate and qualify a second source of supply. Any change in one of our API suppliers must usually be approved through a
Prior Approval Supplement (“PAS”) by the FDA. The process of obtaining an approval of such a PAS can require between
four and 18 months. While we also generally qualify a single source for non-API raw materials, the process required to
qualify an alternative source of a non-API raw material is typically much less rigorous. If we were to change the supplier of
a raw material for a product, the cost for the material could be greater than the amount we paid with the previous supplier.
Changes in suppliers are rare but could occur as a result of a supplier’s business failing, an issue arising from an FDA
inspection, or failure to maintain our required standards of quality. As a result, we selectively choose suppliers based on
various factors including quality, reliability of supply, and long-term financial stability.
Certain of the APIs for our drug products, including those that are marketed without approved NDAs or ANDAs, are
sourced from international suppliers. From time to time, we have experienced temporary disruptions in the supply of
certain of such imported API due to FDA inspections and customs delays. In addition, certain of our products are
manufactured, packaged, or manufactured and packaged by third parties.
Government Regulation
The pharmaceutical industry in the U.S. and Canada is highly regulated by multiple U.S. and Canadian government
agencies, such as the FDA, the DEA, the Centers for Medicare and Medicaid Services (“CMS”), and Health Canada. As a
result, we are subject to extensive and complex rules and regulations, which are subject to revision from time to time.
While we have experience with these regulations, there can be no assurance that we will be able to fully comply with all
applicable regulations.
Branded and Generic Pharmaceutical Products
All prescription pharmaceutical products distributed in the U.S., whether branded or generic, must be approved by the
FDA. All applications for FDA approval must contain information relating to product formulation, raw material suppliers,
stability, manufacturing processes, packaging, labeling, and quality control. Information to support the bioequivalence of
generic drug products or the safety and effectiveness of new drug products for their intended use is also required to be
submitted. There are generally two types of applications used for obtaining FDA approval of new products:
New Drug Application (“NDA”)—An NDA is filed when approval is sought to market a newly developed
branded product and, in certain instances, for a new dosage form, a new delivery system, or a new indication for an
approved drug.
Abbreviated New Drug Application (“ANDA”)—An ANDA is filed when approval is sought to market a generic
equivalent of a drug approved under an NDA.
The ANDA development process is generally less time-consuming and less complex than the NDA development
process. It typically does not require new preclinical and clinical studies, because it relies on the studies establishing safety
and efficacy conducted for the branded drug approved through the NDA process. The ANDA process, however,
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typically requires one or more bioequivalence studies to show that the ANDA drug is bioequivalent to the previously
approved reference listed drug (“RLD”).
The Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”) provides that
generic drugs may enter the market after the approval of an ANDA, which requires (1) that bioequivalence to the branded
product be demonstrated through clinical studies, and (2) either the expiration, invalidation or circumvention of any patents
or the end of any other relevant market exclusivity periods related to the branded drug.
Accordingly, generic products generally provide a safe, effective, and cost-efficient alternative to users of branded
products. Growth in the generic pharmaceutical industry has been driven by the increased market acceptance of generic
drugs, as well as the number of branded drugs for which patent terms and/or other market exclusivities have expired.
Generic products are generally commercialized after the expiration of patent protection for the branded product and
after the end of a period of non-patent market exclusivity. In addition to patent exclusivity, the holder of the NDA may be
entitled to a period of non-patent market exclusivity, during which the FDA cannot approve an application for a generic
product. Also, if the NDA is a new chemical entity (“NCE”), the FDA may not approve an ANDA for a generic product for
up to five years following approval of the NDA for the NCE. If an NDA is not an NCE, but the holder of the NDA
conducted clinical trials essential to approval of the NDA or a supplement thereto, the FDA may not approve a generic
equivalent to the NDA for three years. Certain other periods of exclusivity may be available if the branded drug is
indicated for treatment of a rare disease or is studied for pediatric indications.
In order to obtain FDA approval of NDAs and ANDAs, our manufacturing procedures and operations must conform to
FDA requirements and guidelines, generally referred to as “cGMP.” The requirements for FDA approval encompass all
aspects of the production process, including validation and recordkeeping, the standards around which are continuously
changing and evolving. As a result, we must consistently monitor and comply with these changes.
Our facilities, procedures, operations, and testing of products are subject to periodic inspection by the FDA, the DEA,
and other authorities. In addition, the FDA conducts pre-approval and post-approval reviews and plant inspections to
determine whether our systems and processes are in compliance with cGMP and other FDA regulations. Our suppliers are
subject to similar regulations and periodic inspections.
Post-approval Requirements
After FDA approval of an NDA or ANDA product is obtained, there are many post-approval requirements that must
be met. These include registering the manufacturing establishment and listing the product with the FDA, reporting and
keeping records of any adverse reactions or production problems, providing updated safety and efficacy information to the
agency, and complying with advertising and promotional labeling regulations. Additionally, FDA may approve an NDA
with post-marketing study requirements, meaning that additional clinical trials must be conducted after approval in order to
further monitor the drug’s safety and efficacy.
The FDA has the authority to require a Risk Evaluation and Mitigation Strategy (“REMS”) for any product they
approve. A REMS is designed to ensure that a drug's benefits outweigh its risks, and may include elements such as
medication guides, patient package inserts, communication plans to educate healthcare providers of the product's risks,
patient registries, or limitations on who can prescribe or dispense it. A REMS imposes numerous compliance obligations
on the NDA and ANDA manufacturers.
The FDA regulates the marketing, labeling, advertising and promotion of products that are placed on the market.
Manufacturers must adhere to strict guidelines when promoting their products; all statements regarding a product must be
consistent with its approved labeling and truthful in nature. Additionally, manufacturers may only promote their product for
approved indications outlined by the FDA. Physicians may prescribe drugs or biologics off-label but manufacturers cannot
promote such uses unless they have been previously authorized by the FDA. All claims made about a product should also
be adequately substantiated with evidence of both benefits and risks associated with use in order to ensure fair balance
between them.
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The Prescription Drug Marketing Act (“PDMA”) regulates the distribution of a manufacturer’s prescription drug
samples and requires a compliance program governing the storage, security, distribution and recordkeeping of samples, as
well as monitoring for loss or theft. The Drug Supply Chain Security Act (“DSCSA”) requires manufacturers and their
trading partners, such as repackagers, wholesale distributors, dispensers, and third-party logistics providers, to implement
product tracking and tracing technology at the package level to identify and trace certain prescription drugs as they are
distributed in the United States.
Controlled Substances
The DEA regulates certain drug products containing controlled substances, pursuant to the U.S. Controlled Substances
Act (“CSA”). Certain of our products contain significant components that are classified as controlled substances. CSA and
DEA regulations impose specific requirements on manufacturers and other entities that handle these substances including
registration, recordkeeping, reporting, storage, security, and distribution. Recordkeeping requirements include accounting
for the amount of product received, manufactured, stored, and distributed. Companies handling controlled substances also
are required to maintain adequate security and to report suspicious orders, thefts, and significant losses. The DEA
periodically inspects facilities for compliance with the CSA and its regulations. Failure to comply with current and future
regulations of the DEA could lead to a variety of sanctions, including revocation or denial of renewal of DEA registrations,
injunctions, or civil or criminal penalties.
In addition, we must submit a request to the DEA for a quota to purchase the amount of API needed to manufacture
certain of our products deemed controlled substances. Without approved quotas from the DEA, we would not be able to
purchase these ingredients from our suppliers. As a result, we are dependent upon the DEA to approve quotas large enough
to support our continued manufacture of our controlled substances at commercial level. See “Risk Factors ― We are
entirely dependent on periodic approval by the DEA for the supply of the API needed to manufacture our controlled
substances. An inability to obtain such approvals would reduce or eliminate our revenues for our controlled substances,
and could have a material adverse effect on our business, financial position, and operating results. In addition, we are
subject to strict regulation by the DEA and are subject to sanctions if we are unable to comply with related regulatory
requirements.”
Unapproved Products
Two of our products, EEMT and Opium Tincture, are marketed without approved NDAs or ANDAs. The FDA's policy
with respect to the continued marketing of unapproved products appears in the FDA's September 2011 Compliance Policy
Guide Sec. 440.100 titled “Marketed New Drugs without Approved NDAs or ANDAs.” Under this policy, the FDA has
stated that it will follow a risk-based approach with regard to enforcement against marketing of unapproved products. The
FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher priority to enforcement
action against products in certain categories, such as those with potential safety risks or that lack evidence of effectiveness.
We continue to believe that, so long as we comply with applicable manufacturing standards, the FDA will continue to
operate on a risk-based approach and will not take action against us. However, we can offer no assurance that the FDA will
continue to follow this approach or that it will not take a contrary position with any individual product or group of
products. See “Risk Factors – Two of our products, which together comprised less than 10% of our total revenue in
2022, are marketed without approved NDAs or ANDAs and we can offer no assurances that the FDA will not require us
to either seek approval for these products or withdraw them from the market. In either case, our business, financial
position, and operating results could be materially adversely affected.”
Medicaid/Medicare
Medicaid and Medicare, both of which are U.S. federal health care programs administered by CMS, are major payors
of pharmaceutical products, including those we produce.
Medicaid is administered by the states and jointly funded by the federal and state governments. Its focus is on low-
income populations. State drug coverage policies under Medicaid may vary significantly state by state. The Patient
Protection and Affordable Care Act (“PPACA”), as amended by the Health Care and Education and Reconciliation Act of
2010, together known as the Affordable Care Act (“ACA”), originally required states to expand their Medicaid
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programs to individuals with incomes up to 138% of the federal poverty level. Although the United States Supreme Court
in 2011 made the Medicaid expansion optional, many states have expanded their Medicaid programs.
The ACA also made changes to Medicaid law that has negatively impacted our business. Pharmaceutical
manufacturers that want their drug products covered by state Medicaid programs must enter into a rebate agreement with
CMS and pay rebates to state Medicaid agencies on utilization of their drugs dispensed to Medicaid beneficiaries. The
ACA raised the rebate percentages for both generic and branded pharmaceuticals effective January 1, 2010. The basic
rebate is currently 13% of the average manufacturer price for sales of Medicaid-reimbursed products marketed under
ANDAs. Sales of Medicaid-reimbursed products marketed under NDAs require manufacturers to rebate the greater of
23.1% of the average manufacturer price or the difference between the average manufacturer price and the “best price” (as
defined in the Medicaid statute) during a specific period. In addition, there is an additional rebate if the average
manufacturer price of the drug is rising faster than inflation. Federal and/or state governments may continue to enact
measures aimed at reducing the cost of drugs to the Medicaid program.
Medicare is run by the federal government and is largely focused on the elderly and disabled. The Medicare
Modernization Act of 2003 (“MMA”) created Medicare Part D to provide voluntary prescription drug coverage for
Medicare beneficiaries. The MMA has increased the amount of reimbursement for pharmaceuticals, a trend that we believe
will continue to benefit the generic pharmaceutical industry. The ACA made some changes to Part D to make it easier for
Medicare beneficiaries to obtain drugs, such as reducing coinsurance amounts. The ACA also required pharmaceutical
companies to provide discounts to Medicare Part D beneficiaries for the cost of branded prescription drugs. The ACA
created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased
to 70% pursuant to the Bipartisan Budget Act of 2018, or BBA, effective as of 2019) point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the
manufacturer’s outpatient drugs to be covered under Medicare Part D. Under the Medicare Coverage Gap Discount
Program, any pharmaceutical product marketed under an NDA, regardless of whether the product is marketed as a
“generic,” is subject to the discount requirement. Our Candesartan Hydrochlorothiazide, Fenofibrate, Fluvoxamine,
Hydrocortisone Enema, Lithium Carbonate ER, Mesalamine, Propranolol ER, Terbutaline, and Vancomycin products,
while marketed as “generics,” are sold under approved NDAs and, therefore, are subject to the discount requirement.
Since its enactment, there have been judicial, administrative, executive and Congressional legislative challenges to
certain aspects of the ACA. For example, the ACA is currently subject to a broad legal challenge in California vs. Azar
before the U.S. Supreme Court. Additionally, in November 2020, the U.S. Supreme Court heard argument in Texas v. Azar,
which challenges the constitutionality of the ACA. Pending resolution of the litigation, all of the ACA, except for the
individual mandate to buy health insurance remains in effect. Were the Supreme Court to invalidate the ACA, that could
have far-reaching consequences of an uncertain nature for our industry. There are a number of additional bills pending in
Congress and healthcare reform proposals at the state level that would affect drug pricing in the Medicare and Medicaid
programs. This changing federal landscape has both positive and negative impacts on the U.S. healthcare industry with
much remaining uncertain as to how various provisions of federal law, and potential modification or repeal of these laws,
will ultimately affect the industry.
Most of our products are covered by Medicaid and Medicare. 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, and we could be subject to federal or state false claims litigation.
There has also been recent heightened federal governmental scrutiny over the manner in which manufacturers set
prices for their marketed products. For example, there have been several recent Congressional inquiries and proposed and
enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the
relationship between pricing and manufacturer patient programs, and reform government program reimbursement
methodologies for drug products. For example, a recent Presidential administration released a “Blueprint”, or plan, to lower
drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer
competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the
list price of their products, and reduce the out of pocket costs of drug products
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paid by consumers. For example, the Inflation Reduction Act of 2022 imposes a requirement on manufacturers to negotiate
drug prices with Medicare, beginning in 2026, with negotiated prices subject to a cap. The negotiation provision focuses on
single-source drugs and biologics that represent the highest Medicare expenditure, while orphan drugs and certain other
drugs are exempt. Also, certain drugs with price increases that outpace inflation will become subject to additional rebates.
Under Medicare Part B, the rebate will first be due with respect to Q1 2023, and applies to single-source drugs and
biologicals, including biosimilars. Under Medicare Part D, the rebate will first be due with respect to the period from
October 1, 2022, to September 30, 2023, and applies to brand drugs and generics that are the sole drug on the market. The
law’s expansion of inflation-based rebates in the Medicare Part B and D space, and changes to the coverage gap discount
program, will further complicate pricing strategies, particularly as to the launch of new products.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations
designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care
authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products
and which suppliers will be included in their prescription drug and other health care programs. These measures could
reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that
additional state and federal health care reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for health care products and services, which could result in reduced demand for
our product candidates or additional pricing pressures.
Patents, Trademarks, and Licenses
We own the trademark names for most of our branded products, including Apexicon, Cortenema, Purified Cortrophin
Gel, Cortrophin-Zinc, Inderal LA, Inderal XL, InnoPran XL, Lithobid, Reglan, Vancocin, and Veregen. We license the
trademark names for Atacand, Atacand HCT, Arimidex, Casodex, Oxistat, and Pandel. With the exception of a license for
patent technology for Inderal XL, InnoPran XL, and Veregen, we do not own or license any patents associated with these
products. Further, patent protection and market exclusivity for these branded products have expired, with the exception of
the Veregen product, which has three patents. One patent expired in 2022 and the remaining two patents expire in 2025 and
2026. Therefore, we consider the trademark names to be of material value and we act to protect these rights from
infringement. However, our business is not dependent upon any single trademark. Trademark protection continues in some
countries as long as used, and in other countries, as long as registered. Registration is for fixed terms and may be renewed
indefinitely. We believe that sales of our branded products have benefited and will continue to benefit from the value of the
product name.
We formerly received royalties from a license for patent rights initially owned by Cell Genesys, Inc., which merged
with BioSante in 2009. The royalties were received as a result of sales and milestones related to the Yescarta® product.
These royalties ceased after a final payment in 2021. See Note 1. Description of Business and Summary of Significant
Accounting Policies, in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form
10-K for further information.
Distribution Agreements
In addition to selling products under our own NDAs and ANDAs, we enter into marketing and distribution agreements
with third parties in which we sell products under ANDAs or NDAs owned or licensed by these third parties. These
products are sold under our own label.
Customers
Our customers purchase and distribute our products. Our products are sold by three major retail pharmacy chains:
CVS, Rite Aid, and Walgreens. Our customers include five major national wholesalers: AmerisourceBergen, Cardinal
Health, McKesson, Smith Drug Company, and Morris Dickson. In addition, our customers include national mail order
houses, including CVS Caremark, Humana, and ExpressScripts, as well as group purchasing organizations.
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In recent years, the wholesale distributor network for pharmaceutical products has been subject to increasing
consolidation, which has increased the concentration of our wholesale customers. In addition, the number of retail market
chains and, in particular, the number of independent drug stores and small chains, has decreased as retail consolidation has
occurred, also increasing the concentration of our retail customers. As a result of this trend toward consolidation, a smaller
number of companies each control a larger share of pharmaceutical distribution channels. For the year ended December 31,
2022, approximately 59% of our net revenues were attributable to three wholesalers: AmerisourceBergen Corporation,
26%, McKesson Corporation, 18%, and Cardinal Health, Inc., 15%. For the years ended December 31, 2021 and 2020,
McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation, together accounted for approximately
68% and 74% of our net revenues, respectively. In addition, as noted below, our customers also distribute our products. The
loss of any of these customers, including in their role as distributors, could have a material adverse effect on our business.
Due to a strategic partnership between Amerisource Bergen and Walgreens, Amerisource Bergen handles product
distribution for Walgreens. Similarly, Cardinal Health and CVS established a partnership in which Cardinal performs some
product distribution for CVS. McKesson also entered into a strategic alliance with both Wal-Mart and Rite Aid. As a result
of these strategic partnerships between wholesalers and pharmacy chains, we have experienced, and expect to continue to
experience, increases in net sales to the wholesalers, with corresponding decreases in net sales to the pharmacy chains.
In the rare disease business there is a limited distribution network and a select group of specialty pharmacies which
can dispense product to appropriate patients. We are in the process of contracting with largest health insurance payers
across the appropriate channels and classes of trade.
Consistent with industry practice, we maintain a return policy that allows customers to return product within a
specified period prior to and subsequent to the expiration date. Generally, product may be returned for a period beginning
six months prior to its expiration date to up to one year after its expiration date. See “Management’s Discussion and
Analysis of Results of Operations and Financial Condition—Critical Accounting Estimates” for a discussion of our
accruals for chargebacks, rebates, returns, and other allowances.
Sales, Marketing, and Distribution
We market, sell, and distribute our products in the United States. Our products are distributed through the following
channels:
● Wholesalers. We conduct business with five major wholesalers in the United States: AmerisourceBergen,
Cardinal, McKesson, Smith Drug Company, and Morris Dickson.
● Retail Market Chains. We conduct business with three major retail chains in the United States: CVS, Rite Aid,
and Walgreens.
● Distributors and Mail Order Pharmacies. We have contracts with several major distributors and mail order
pharmacies in the United States, including Anda, CVS Caremark, Humana, and ExpressScripts.
● Group Purchasing Organizations. We have contracts with group purchasing organizations in the United States,
such as ClarusONE, Walgreens Boots Alliance Development Group, Red Oak Sourcing, Econdisc, Optisource,
Rx Sourcing Strategies, The Premier Group, Topco, The Buyer’s Consortium, Managed Health Care
Associates Inc., Asembia, Premier Inc, and Kaiser Permanente.
● Specialty Pharmacies. In our Rare Disease segment we contract with specialty pharmacies.
● Hospitals. In our Rare Disease segment we contract with certain hospital systems.
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Competition
Certain of our products face limited competition due to complexities in formulation, active pharmaceutical ingredient
sourcing, materials handling and manufacturing, and regulatory hurdles. Nevertheless, we compete with numerous other
pharmaceutical companies, including large, global pharmaceutical manufacturers capable of addressing these complexities
and hurdles with respect to products that we currently produce and products that are in our pipeline. In addition, our
products are subject to competition from other generic products and non-prescription alternative therapies.
Our established brand pharmaceutical products currently face competition from generic products and we expect them
to continue to face competition from generic products in the future. In order to launch a generic product, a manufacturer
must apply to the FDA for an ANDA showing that the generic product is therapeutically equivalent to the RLD. (See
“Government Regulation.”)
The primary means of competition among generic drug manufacturers are pricing, contract terms, service levels, and
reliability. To compete effectively, we seek to consistently produce high-quality, reliable, and effective products. We also
establish active working relationships with each of our customers, continually gather important market information in order
to respond successfully to requests for proposals, maintain sufficient inventories to assure high service levels, and work to
reduce product costs by sourcing and qualifying alternative suppliers whenever possible.
Over the past several years, the pharmaceutical industry has experienced significant consolidation, particularly in
distribution channels and among generic and brand drug companies.
The wholesale distributor network for pharmaceutical products has been subject to increasing consolidation, which has
increased the concentration of our wholesale customers. In addition, the number of retail market chains and, in particular,
the number of independent drug stores and small chains, has decreased as retail consolidation has occurred, also increasing
the concentration of our retail customers. As a result of this trend toward consolidation, a smaller number of companies
each control a larger share of pharmaceutical distribution channels, which results in pricing pressure on our business and
can result in a shift in sales to our competitors.
In addition, consolidation among pharmaceutical companies has created opportunities by reducing the number of
competitors. However, as competitors grow larger through consolidation, so do their resources. Larger competitors may be
able to aggressively decrease prices in order to gain market share on certain products and may have resources that would
allow them to market their products more effectively to potential customers.
Our sales can also be impacted by new studies that indicate that a competitor’s product has greater efficacy than one of
our products. If competitors introduce new products with therapeutic or cost advantages, our products can be subject to
progressive price reductions and/or decreased volume of sales.
Principal competitors for the pharmaceutical market in which we do business include Amneal Pharmaceuticals, Inc.,
Alvogen, Inc., Apotex Inc., Glenmark Pharmaceuticals Ltd, Hikma Pharmaceuticals plc, Mallinckrodt Pharmaceuticals, Par
Pharmaceutical, Inc., Padagis LLC., Rising Pharmaceuticals, Inc., Sun Pharmaceutical Industries Ltd., and Teva
Pharmaceuticals USA, Inc., and Viatris Inc.
Product Liability
Product liability litigation represents an inherent risk to all firms in the pharmaceutical industry. We utilize traditional
third-party insurance policies with regard to our product liability claims. Such insurance coverage at any given time reflects
current market conditions, including cost and availability, when the policy is written.
Human Capital
As of January 2023, we have 600 employees, of which 496 are located in the United States, including Puerto Rico, 48
are located in Canada, and 56 are located in India. We occasionally use a small number of part-time and consultant
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resources to meet our operational needs and our turnover is in line with similar businesses in our industry and locations. We
are committed to creating a diverse and inclusive work environment within all levels of the business.
Attracting and retaining talented employees is critical to the success of our business, especially at our manufacturing
operations in Baudette, Minnesota, which is located in a sparsely populated area of Northern Minnesota, with a population
of approximately 1,100. As a result, it can be challenging to find sufficiently qualified personnel in all functional areas. To
address this, we support remote working arrangements for a number of employees in several functions throughout the
business, including at the executive level. In September 2023, we opened a corporate office in Princeton, NJ which houses
certain employees in our corporate, legal, and business functions. Additionally, our compensation plans are designed to be
competitive within the pharmaceuticals industry as well as competitive with local employers for jobs of a cross-industry
nature. Our approach provides ANI with the resources to recognize and reward employee performance, productivity, and
quality commitment. Our total compensation program includes competitive base salaries, comprehensive benefits, and
employee equity programs.
Our U.S. and India facilities are committed to the safety and health of our employees, patient-customers, and the
general public. It is critical within our mission to ensure we keep our employees and customers safe while accomplishing
our business goals. We accomplish these initiatives through the following:
Health and Safety Management and Training
ANI has established a health and safety program with a focus on continuous improvement and employee engagement.
ANI personnel are encouraged to take corrective actions where appropriate and to communicate concerns to management
with a “see something, say something” approach. We recognize and reward personnel for contributing to the safety system
within our working environment. The overall program continually evolves to reflect regulatory changes and compliance
standard industry best practices. As part of onboarding new employees, we provide health and safety training and periodic
training programs to maintain and improve employee awareness of safety issues. The goal of the safety training programs
is to ensure that our staff are well informed on the subject matters and have the appropriate tools to make sound health and
safety decisions in our day-to-day operations.
Environmental Stewardship
ANI is committed to minimizing waste and emissions, promoting reuse and recycling and conserving resources, where
feasible, to reduce our environmental footprint on our environment.
Available Information
We file annual, quarterly and current reports, proxy statements and other information required by the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (“SEC”). We
make available free of charge on our website (www.anipharmaceuticals.com) our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to those filings as soon as
reasonably practicable after such material is electronically filed with or furnished to the SEC. Also posted on our website in
the “Investors – Corporate Governance” section are our Corporate Governance Guidelines, Code of Ethics and the charters
for the Audit and Finance, Compensation, and Nominating and Corporate Governance Committees. Information on, or
accessible through, our website is not a part of, and is not incorporated into, this report or any other SEC filing. Copies of
our SEC filings or corporate governance materials are available without charge upon written request to Investor Relations,
c/o ANI Pharmaceuticals, Inc., 210 Main Street West, Baudette, Minnesota, 56623.
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Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider all information in this Annual
Report on Form 10-K prior to investing in our common stock. These risks are discussed more fully in the section titled “Risk
Factors.” These risks and uncertainties include, but are not limited to, the following:
Risk Factor Summary
● We may not achieve the anticipated benefits from our acquisition of Novitium Pharma LLC (“Novitium”);
●
●
●
●
●
●
●
The obligations and liabilities of Novitium, some of which may be unanticipated or unknown, may be greater than
we have anticipated, which may diminish the value of Novitium to us;
The uncertain impact that novel coronavirus (“COVID-19”) will have on our business and results of operations,
including the emergence of variants of the virus;
The continuing trend toward consolidation of customer groups that could result in declines in the sales volume and
prices of our products, and increased fees charged by customers;
Pharmaceutical product quality standards are steadily increasing on all products, and if we cannot meet these
standards, we may be required to discontinue marketing and/or recall products from the market;
Federal and state false claims litigation brought against us by private individuals and the government could result
in civil and criminal penalties, damages, fines and other related actions;
The use of legal, regulatory, and legislative strategies by competitors could result in increased costs to develop and
market our products, delay new product introductions and reduce profit potential;
Third-party payer actions may prevent us from effectively marketing our products or cause us to decrease pricing;
● Continuing studies of our products could produce results that could have a negative impact on our business;
● Healthcare reform legislation could have a material adverse effect on our business, financial position, and
operating results;
● Barriers in achieving anticipated revenue growth and profitability could have a material adverse effect on our
business, financial position, and operating results;
● Cortrophin Gel is our first rare disease pharmaceutical product. To the extent we are not able to achieve
commercial success with this product, including gaining market share, our business, financial condition, and results
of operations will be negatively impacted;
●
●
●
●
The limited number of suppliers for our active pharmaceutical ingredients (“API”) could result in lengthy delays in
production if we need to change suppliers;
Several of the products we have acquired cannot be manufactured in our facilities and we must secure and maintain
qualified and compliant contract manufacturers. Noncompliance by these contract manufacturers or our inability to
find qualified contract manufacturers could result in us being unable to commercialize these products; Several of
our products are manufactured and/or packaged by third parties, which we cannot control and could result in us
being unable to market and distribute products;
The Food and Drug Administration (“FDA”) does not provide guidance on safety labeling for products that are
marketed without approved New Drug Applications (“NDAs”) or Abbreviated New Drug Applications
(“ANDAs”), which could increase our potential liability with respect to failure-to-warn claims for these products;
If the Drug Enforcement Administration (“DEA”) does not approve supply of the API we need to manufacture our
controlled substances, we may be unable to manufacture controlled substances, which would eliminate our revenue
on these products.
● Acquisitions and investments could disrupt our business and harm our financial position and operating results;
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● Our Medicaid rebate accruals have increased and continue to increase due to our acquisitions and subsequent sales
of branded products and authorized generics of branded products;
● Our accruals for the Medicare Coverage Gap Discount Program have increased due to growth and acquisitions;
● We face vigorous competition from other pharmaceutical manufacturers that threatens the commercial acceptance
and pricing of our products;
● Our approved products, including Cortrophin Gel, may not achieve commercialization at levels of market
acceptance that allow us to achieve profitability;
● We expect to spend a significant amount of resources on research and development efforts, and such efforts may
not result in marketable products;
●
Production at any or all of our four current manufacturing facilities could be interrupted, which could cause us to
fail to deliver product on a timely basis;
● We rely on third parties to assist with our clinical studies. If these parties do not perform or are non-compliant, it
could negatively impact the clinical trial and potential of regulatory approval; Further, we may be required to audit
or redo previously completed trials or recall already-approved commercial products;
●
Inability to protect our intellectual property in the U.S. and foreign countries could negatively affect sales of our
branded products;
● We have very limited staffing and are dependent upon key employees, the loss of whom could adversely affect our
operations;
● We rely significantly on information technology and any failure, inadequacy, interruption, or security lapse of that
technology could harm our ability to operate the business effectively;
● We are involved in and may become involved in legal proceedings from time to time, which may result in
substantial losses, government enforcement actions, damage to our business and reputation, and place a strain on
our internal resources;
● We are susceptible to product liability claims that may not be covered by insurance, which, if successful, could
require us to pay substantial sums;
● Our policies regarding returns, allowances and chargebacks, and marketing programs adopted by wholesalers may
reduce revenues in future fiscal periods;
● Making interest and principal payments under our Credit Agreement with Truist requires a significant amount of
cash;
● We identified material weaknesses in our internal control over financial reporting. If we do not effectively
remediate these material weaknesses or if we otherwise fail to maintain effective internal control over
financial reporting, we may not be able to accurately report our financial results or prevent fraud;
● Our Credit Facility contains restrictive and financial covenants and if are not in compliance with these covenants,
our outstanding indebtedness under this facility could be accelerated and the lenders could terminate their
commitments under the facility;
● Raising additional funds by issuing additional equity securities may cause dilution to our current stockholders.
Raising additional funds by entering into additional credit or other borrowing facilities or issuing debt may subject
us to covenants and other requirements that may restrict our operations; and
● Our international operations, including those resulting from our acquisition of Novitium and the global nature of its
operations, will subject us to political and economic risks, increase our exposure to potential liability under anti-
corruption, trade protection, tax, and other laws and regulations.
The following are significant factors known to us that could materially harm our business, financial position, or
operating results or could cause our actual results to differ materially from our anticipated results or other expectations,
including those expressed in any forward-looking statement made in this report. The risks described are not the only risks
facing us. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial,
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also may adversely affect our business, financial position, and operating results. If any of these risks actually occur, our
business, financial position, and operating results could suffer significantly. As a result, the market price of our common
stock could decline and investors could lose all or part of their investment.
Risks Related to our Business
We may not achieve the anticipated benefits from our acquisition of Novitium, which could have a material adverse
effect on our business, financial position, and operating results.
On November 19, 2021, the Company completed its previously announced acquisition (the “Acquisition”) of
Novitium pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 2021 (the “Merger
Agreement”), by and among the Company, Novitium, Nile Merger Sub LLC, a Delaware limited liability company, and
certain other parties, with Novitium becoming a wholly owned subsidiary of ANI.
We may not realize the potential benefits from the Acquisition that we or the market expects. Risks associated with the
Acquisition include:
•
•
•
•
failure to effectively manage our expanded operations, which were materially increased by the Acquisition;
diversion of management’s attention, the disruption or interruption of, or the loss of momentum in, the businesses
of ANI and Novitium or inconsistencies in standards, controls, procedures, and policies, any of which could
adversely affect our ability to maintain relationships with customers, partners, and employees or our ability to
achieve the anticipated benefits of the acquisition;
loss of key employees; and
failure to maintain relationships with third parties, including Novitium’s and our pre-existing customers,
which relationships may be affected by customer preferences or public attitudes about the Acquisition. Any
adverse changes in these relationships could adversely affect our business, financial condition, and results of
operations.
The obligations and liabilities of Novitium, some of which may be unanticipated or unknown, may be greater than we
have anticipated, which may diminish the value of Novitium to us.
Novitium’s obligations and liabilities, some of which may not have been disclosed to us or may not be reflected
or reserved for in Novitium’s historical financial statements, may be greater than we have anticipated. The
obligations and liabilities of Novitium could have a material adverse effect on Novitium’s business or Novitium’s
value to us or on our business, financial condition, or results of operations. Under the Merger Agreement relating to
the Novitium acquisition, we have only limited indemnification with respect to obligations or liabilities of Novitium,
whether known or unknown. In addition, even in cases where we are able to obtain indemnification, we may discover
liabilities greater than the contractual limits or the financial resources of the indemnifying party. In the event that we
are responsible for liabilities substantially in excess of any amounts recovered through rights to indemnification or
alternative remedies that might be available to us, or any applicable insurance, we could suffer severe consequences
that would substantially reduce our earnings and cash flows or otherwise materially and adversely affect our
business, financial condition, or results of operations.
Our anticipated revenue growth and profitability, if achieved, is dependent upon our ability to develop, license or
acquire, and commercialize new products on a timely basis in relation to our competitors’ product introductions, and to
address all regulatory requirements applicable to the development and commercialization of new products. Our failure
to do so successfully could impair our growth strategy and plans and could have a material adverse effect on our
business, financial position, and operating results.
Our future revenues and profitability are dependent upon our ability to successfully develop, license or acquire, and
commercialize pharmaceutical products in a timely manner. Product development is inherently risky and time-consuming.
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 the supply of
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product meeting specifications and terms such as license scope or termination rights. The development and
commercialization process also requires substantial time, effort, and financial resources. Additionally, we have entered
profit-sharing arrangements with third parties in which we sell products under ANDAs or NDAs owned or licenses by
these third parties. Under these agreements, we pay these third parties a specified percentage of the gross profit earned on
sales of the products, and such percentages in certain cases increase as additional gross profit is earned. Any increases in
these percentages would impact our future profitability. We may not be successful in commercializing products on a timely
basis, if at all, which could adversely affect our business, financial position, and operating results.
The FDA must approve any new prescription product before it can be marketed in the U.S. The process of obtaining
regulatory approval to manufacture and market branded and generic pharmaceutical products is rigorous, time consuming,
costly, and largely unpredictable. We may be unable to obtain requisite approvals on a timely basis for branded or generic
products that we may develop, license, or acquire. Moreover, if we obtain regulatory approval for a drug, we may be
limited with respect to the indicated uses and delivery methods for which the drug may be marketed, which in turn could
restrict the potential market for the drug. Also, for products pending approval, we may obtain raw materials or produce
batches of inventory. In the event that regulatory approval is denied or delayed, we could be exposed to the risk of any such
inventory becoming obsolete. The timing and cost of obtaining regulatory approvals could adversely affect our product
introduction plans, business, financial position, and operating results.
The approval process for generic pharmaceutical products often results in the FDA granting simultaneous final
approval to a number of generic pharmaceutical products at the time a patent claim for a corresponding branded product or
other market exclusivity expires. This often forces a generic firm to face immediate competition when it introduces a
generic product into the market. Additionally, further generic approvals often continue to be granted for a given product
subsequent to the initial launch of the generic product. These circumstances generally result in significantly lower prices,
as well as reduced margins, for generic products compared to branded products. New generic market entrants generally
cause continued price and margin erosion over the generic product life cycle. As a result, we could be unable to grow or
maintain market share with respect to our generic pharmaceutical products, which could have a material adverse effect on
our ability to market that product profitably and on our business, financial position, and operating results.
Furthermore, if we are unable to address all regulatory requirements applicable to the development and
commercialization of new products in a timely manner, our product introduction plans, business, financial position, and
operating results could be materially adversely affected.
The FDA regulates and monitors all promotion and advertising of prescription drugs after approval. All promotion
must be consistent with the conditions of approval and submitted to the agency. Failure to adhere to FDA promotional
requirements can result in enforcement letters, warning letters, changes to existing promotional material, and corrective
notices to healthcare professionals. Promotion of a prescription drug for uses not approved by the FDA can have serious
consequences and result in lawsuits by private parties, state governments and the federal government, significant civil and
criminal penalties, and compliance agreements that require a company to change current practices and prevent unlawful
activity in the future.
Cortrophin Gel is our first rare disease pharmaceutical product. To the extent our efforts to commercialize this
product are unsuccessful, our business, financial condition and results of operations will be negatively impacted.
On October 29, 2021, we received approval from the FDA for our Cortrophin Gel product for the treatment of certain
chronic autoimmune disorders, including acute exacerbations of multiple sclerosis (“MS”) and rheumatoid arthritis (“RA”),
in addition to excess urinary protein due to nephrotic syndrome. We have devoted significant time and money over the past
five years to the development of this product since we acquired the rights to the product in 2016. We have invested and
continue to invest significantly in the commercialization of this product in the U.S, including building out a sales force and
developing a patient support program, with a full-scale launch in January 2022. The ability for us to generate significant
net product revenues from Cortrophin Gel will depend upon our ability to successfully sell the product and numerous other
factors, including:
● successfully establishing and maintaining effective sales, marketing, and distribution systems in jurisdictions in
which Cortrophin Gel is approved for sale;
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● successfully establishing and maintaining manufacturing capabilities and manufacturing adequate commercial
quantities of Cortrophin Gel at acceptable cost and quality levels, including maintaining current good
manufacturing practice (“cGMP”) and quality systems regulation standards required by various regulatory
agencies;
● broad acceptance of Cortrophin Gel by physicians, patients, and gaining market access share in the healthcare
community;
● the acceptance of pricing and placement of Cortrophin Gel on payers’ formularies and the associated tiers;
● effectively competing with the only other competitor that has an approved adrenocorticotropic hormone
(“ACTH”) therapy product on the market, as well as other products that are in development or may be developed
in the future as a treatment option;
● continued demonstration of safety and efficacy of Cortrophin Gel in comparison to competing products or
treatment options;
● our ability to comply with ongoing regulatory obligations and continued regulatory review which may result in
significant additional expense and may require labeling changes based on new safety information, post-market
studies or clinical trials to evaluate safety risks related to the use of Cortrophin Gel; and
● obtaining, maintaining, enforcing, and defending intellectual property rights and claims.
If we do not achieve one or more of these factors, we could experience an inability to successfully commercialize
Cortrophin Gel, which would negatively impact our business, financial condition and results of operations. In addition,
sales of Cortrophin Gel could be negatively affected by discovery of previously unknown problems with the product, such
as adverse events of unanticipated severity or frequency, problems with the facilities where the product is manufactured, or
imposition of restrictions on Cortrophin Gel, including requiring withdrawal of the product from the market, by a
regulatory agency if it disagrees with the promotion, marketing, or labeling of the product.
We are continuing to develop our marketing and sales organization to support Cortrophin Gel and have no
experience in marketing prescription rare disease drug products. If we are unable to successfully establish marketing
and sales capabilities for Cortrophin Gel, our business will suffer.
We have only recently established rare disease sales, marketing or distribution capabilities and have no institutional
experience in marketing rare disease products. We intend to continue to develop an in-house marketing organization and
sales force, which will require significant expenditures, management resources and time. We will have to compete with
other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
We depend on a limited number of suppliers for API. Generally, only a single source of API is qualified for use in
each product due to the costs and time required to validate a second source of supply. We may experience lengthy delays
if we need to change an API supplier, which could have a material impact on business and results of operations.
Our ability to manufacture and distribute products is dependent, in part, upon ingredients and components supplied by
others, including entities based outside the U.S. During the year ended December 31, 2022, we purchased approximately
19% of our inventory from one supplier. During the year ended December 31, 2021, no single vendor represented at least
10% of inventory purchases. During the year ended December 31, 2020, we purchased approximately 10% of our
inventory from one supplier. Any disruption in the supply of these ingredients or components or any problems in their
quality could materially affect our ability to manufacture and distribute our products and could result in legal liabilities that
could materially affect our ability to realize profits or otherwise harm our business, financial, and operating results.
Virtually all of our generic contracts for the supply of pharmaceutical products to customers contain "failure to supply"
clauses. Under these clauses, if we are unable to supply the requested quantity of product within a certain period after
receipt of a customer’s purchase order, the customer is entitled to procure a substitute product elsewhere and we must
reimburse the customer for the difference between our contract price and the price the customer was forced to pay to
procure the substitute product. Therefore, our ability to source sufficient quantities of API for manufacturing is critical. We
source the raw materials for our products from both domestic and international suppliers. Generally, we qualify only a
single source of API for use in each product due to the cost and time required to validate and qualify a second source of
supply. Any change in one of our API suppliers must usually be approved through a Prior Approval Supplement (“PAS”)
by the FDA. The process of obtaining an approval of such a
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PAS can require between four and 18 months. While we also generally qualify a single source for non-API raw materials,
the process required to qualify an alternative source of a non-API raw material is typically much less rigorous. If we were
to change the supplier of a raw material for a product, the cost for the material could be greater than the amount we paid
with the previous supplier. Changes in suppliers are rare but could occur as a result of a supplier’s business failing, an issue
arising from an FDA inspection, or failure to maintain our required standards of quality. As a result, we carefully select
suppliers, based on various factors including quality, reliability of supply, and long-term financial stability. Certain of the
APIs for our drug products, including those that are marketed without approved NDAs or ANDAs, are sourced from
international suppliers. From time to time, we have experienced temporary disruptions in the supply of certain of such
imported API due to FDA inspections. In addition, the COVID-19 pandemic and associated workforce factors has
disrupted certain supply chains and generally led to longer lead times for the procurement of goods that are essential to the
manufacture of our products.
Several of the products we have acquired cannot be manufactured in our facilities and are manufactured and/or
packaged by third parties, which we cannot control. If we are unable to secure or maintain qualified contract
manufacturers for those products or if a contract manufacturer fails to comply with federal, state, and local laws and
regulations, our business, financial position, and operating results could be materially, adversely affected.
We have acquired, and may continue to acquire, a variety of products that we seek to commercialize. Some of these
products, including injectables, softgel capsules, and Purified Cortrophin Gel, are products that we cannot currently
manufacture in our facilities. As a result, we may seek partners to contract manufacture the products on our behalf, and we
rely on third parties to manufacture and/or package many of our products. Like our company, these firms must comply with
cGMPs and other federal, state, and local laws and regulations regarding pharmaceutical manufacturing. Noncompliance
by those firms may result in warning letters, fines, product recalls, and partial or total suspension of production and
distribution. If we are unable to find qualified contract manufacturers or if a contract manufacturer fails to comply with
federal, state, and local laws and regulations, we may be unable to commercialize these products, which could have a
material adverse effect on our business, financial position, and operating results, including an impairment of the acquired
product.
We expect our reliance on third party manufacturers to continue to increase in the future as we receive approvals for
new products to be manufactured through our collaborative arrangements, and as we seek additional growth opportunities
outside of the capabilities of our current manufacturing facilities. If we are unable to secure third-party manufacturers for
these products on commercially acceptable terms, we may not be able to market and distribute such products at a profit.
Any delays or difficulties with third-party manufacturers could adversely affect the marketing and distribution of these
products, or future products, which could have a material adverse effect on our business, financial position, and operating
results.
Our branded products may become subject to increased generic competition.
Many of our branded products have not been patent-protected for several years and no longer have market exclusivity.
As a result, they face competition from lower priced generic products which may reduce and limit the sales of our mature
brand products. Additionally, increased focus by the FDA on approval of generic products may accelerate this trend. If
generic products are substituted for these branded products, our revenue from these products will decrease, which could
have an adverse effect on our business, financial position, and operating results.
Future acquisitions and investments could disrupt our business and harm our financial position and operating
results.
Our growth will depend, in part, on our continued ability to develop, commercialize, and expand our products,
including in response to changing regulatory and competitive pressures. In some circumstances, we have and may continue
to grow our business through the acquisition of complementary businesses and technologies rather than through internal
development. The identification of suitable acquisition candidates or products can be difficult, time-consuming,
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and costly, and we may not be able to successfully complete or successfully execute strategies for identified acquisitions.
The risks faced in connection with acquisitions include:
● diversion of management time and focus from operating our business to addressing acquisition and/or product
integration challenges;
● coordination of research and development and sales and marketing functions;
● retention of key employees from the acquired company;
● integration of the acquired company’s accounting information, management, human resources, and other
administrative systems;
● the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition
may have lacked effective controls, procedures and policies;
● difficulties relating to integrating the acquired business;
● liability for activities of the acquired company and/or products before the acquisition, including patent
infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown
liabilities;
● unanticipated write-offs or charges; and
● litigation or other claims in connection with the acquired company or product, including claims from product
users, former stockholders, or other third parties.
In any acquisition that we may undertake, our failure to address these risks or other problems encountered in
connection with any acquisitions and investments could cause us to fail to realize the anticipated benefits of these
acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally.
Our Medicaid rebate accruals have increased and continue to increase due to our acquisitions and subsequent sales
of branded products and authorized generics of branded products, and the estimates on which our accruals are based
are subject to change. Any such change could have a material adverse effect on our business, financial position, and
operating results.
Our Medicaid rebate accruals have increased significantly due to our acquisitions and subsequent sales of branded
products and authorized generics of branded products. We accrue for these rebates at the time of sale based on our
estimates of the amount of our product that will be prescribed to Medicaid beneficiaries. The resulting accruals are
significant, and as Medicaid utilization trends change, we may need to change our estimates accordingly. We cannot
guarantee that actual results will not differ from our estimates. In addition, the Patient Protection and Affordable Care Act
(“PPACA”) included a significant expansion of state Medicaid programs. As more individuals become eligible for
coverage under these programs, Medicaid utilization of our products could increase, resulting in a corresponding increase
in our rebate payments. Increases in Medicaid rebate payments could decrease our revenues from product sales, which in
turn could adversely affect our business, financial position, and operating results.
Our accruals for the Medicare Coverage Gap Discount Program have increased due to growth and acquisitions.
Any such change could have a material adverse effect on our business, financial position, and operating results.
Our accruals for the rebates under the Medicare Coverage Gap Discount Program have increased due to growth and
acquisitions. We accrue for these rebates at the time of sale based on our estimates of the amount of product that will be
prescribed to patients in the Medicare Coverage Gap Discount program, which is primarily for the benefit of persons aged
65 years and over. As we acquire and launch additional products, many of which, are often used by patients in the 65 and
older age range, our estimates of these rebates have grown. Increases in Medicare Coverage Gap Discount rebates, and
legislative changes to the Medicare Coverage Gap Discount Program, could decrease our revenues from product sales,
which in turn could adversely affect our business, financial position, and operating results.
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We have entered into distribution agreements under which we market products under ANDAs and NDAs owned by
third parties. Any changes to these agreements could have a material adverse effect on our business, financial position,
and operating results.
We have entered into several distribution agreements to market and distribute products under our own label that are
sold under ANDAs and NDAs owned by third parties, over which we have no control. Generally, the responsibility for
maintaining the ANDAs and NDAs lies with these third parties. If any regulatory issues were to arise with the underlying
ANDA or NDA for one of these products, we could be required to discontinue sales of the product, which could have an
adverse effect on our business, financial position, and operating results.
We face vigorous competition from other pharmaceutical manufacturers that may adversely impact commercial
acceptance and pricing of our products. If we are unable to successfully compete, such competition could have a
material adverse effect on our business, financial position, and operating results.
The generic pharmaceutical industry is highly competitive. We face intense competition from U.S. and foreign
manufacturers, many of whom are significantly larger than us and operate in lower cost geographies. Our competitors may
be able to develop products and processes competitive with or superior to ours for many reasons, including but not limited
to the possibility that they may have:
● greater financial resources;
● proprietary processes or delivery systems;
● larger research and development and marketing staffs;
● larger production capabilities;
● more products;
● access to lower cost wages; or
● more experience in developing new drugs.
Any of our significant competitors, due to one or more of these and other factors, could have a material adverse effect
on our business, financial position, and operating results.
Our approved products may not achieve commercialization at levels of market acceptance that allow us to achieve
profitability, which could have a material adverse effect on our business, financial position, and operating results.
We seek to develop, license, or acquire products that we can commercialize at levels of market acceptance that would
allow us to recoup our costs, grow market share, and achieve profitability. Even if we are able to obtain regulatory
approvals for our pharmaceutical products, if we fail to predict accurately demand for such products, our business,
financial position, and operating results could be adversely affected. Levels of market acceptance for our products could be
impacted by several factors, including but not limited to:
● availability of alternative products from our competitors;
● our products’ pricing relative to that of our competitors;
● our marketing effectiveness relative to that of our competitors;
● timing of our market entry;
● our ability to market our products effectively to the retail level; and
● acceptance of our products by government and private formularies.
Some of these factors are outside of our control and, if any arise, our profitability, business, financial position, and
operating results could be materially adversely affected.
We have entered into several collaborative arrangements that may not result in marketable products.
We have entered into several collaborative arrangements to develop generic products for us to market in the U.S. We
can offer no assurances that these arrangements will result in additional approved products, or that we will be able to
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market the products at a profit. In addition, any expenses related to clinical trials, or additional studies required by the
FDA, that we may incur in connection with these collaborative arrangements may negatively affect our business, financial
position, and operating results. Specifically:
● clinical trials could be more costly than we anticipate;
● formulation development could take longer and be more costly than we expect;
● we may be required to obtain specialized equipment in order to manufacture products on a commercial scale; and
● we may be subject to milestone payments to collaborative partners, the timing of which we may be unable to
predict.
Any of these events could have a material adverse effect on our business, financial position, and operating results.
We expect to spend a significant amount of resources on research and development efforts, and such efforts may
not result in marketable products. Failure to successfully introduce products into the market could have a material
adverse effect on our business, financial position, and operating results.
We conduct research and development primarily to enable us to manufacture and market approved products in
accordance with applicable regulations. Research and development is expensive and time-consuming. As we seek to
develop new products, or re-commercialize products that were previously approved, our research expenses will increase,
potentially significantly, and we cannot be certain that we will recover our investment in a product, even if that product is
commercialized. If we spend significant resources on research and development efforts and are not able to introduce new
products, our business, financial position, and operating results may be materially adversely affected.
We produce the majority of our products in three manufacturing facilities. Production at any or all of these
facilities could be interrupted, which could cause us to fail to deliver sufficient product to customers on a timely basis
and have a material adverse effect on our business, financial position, and operating results.
Our manufacturing operations are currently based in four facilities. We have transitioned the majority of products
manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites, and we are seeking to find
potential buyers for the Oakville site. While these three remaining facilities are sufficient for our current needs, the
facilities are highly specialized and any damage to or need for replacement of all or any significant function of our facilities
could be very costly and time-consuming and could impair or prohibit production and shipping. A significant disruption at
any of the facilities, even on a short-term basis, whether due to a labor strike, adverse quality or compliance observation,
vandalism, natural disaster, fire, storm or other environmental damage, or other events could impair our ability to produce
and ship products on a timely basis and, among other consequences, could subject us to “failure to supply” claims from our
customers, as discussed below. Although we believe we carry commercially reasonable business interruption and liability
insurance, we might suffer losses because of business interruptions that exceed the coverage available under our insurance
policies or for which we do not have coverage. Any of these events could have a material adverse effect on our business,
financial position, and operating results.
Virtually all our contracts for the supply of generic products to our customers contain "failure to supply" clauses which
require us to reimburse the customer for the difference between our contract price and the price the customer was forced to
pay to procure the substitute product in the event we failed to deliver the requested quantity within a specified period of
time. This difference can be substantial because of the much higher spot price at which the customer must cover its
requirements and can be far in excess of the revenue that we would otherwise have received on the sale of our own
product. Therefore, our ability to produce and ship a sufficient quantity of product on a consistent basis is critical. Failure
to deliver products could have a material adverse effect on our business, financial position, and operating results.
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We rely on third parties to assist with our clinical studies. If these third parties do not perform as required or
expected, or if they are not in compliance with FDA rules and regulations, our clinical studies may be extended, delayed
or terminated, or may need to be repeated, and we may not be able to obtain regulatory approval for or commercialize
the products being tested in such studies. Further, we may be required to audit or redo previously completed trials or
recall already-approved commercial products.
We rely on third parties, such as medical institutions, clinical investigators, and contract laboratories, to assist with our
clinical studies. We are responsible for confirming that our studies are conducted in accordance with applicable regulations
and that each of our clinical studies is conducted in accordance with our general investigational plan and protocol. The
FDA requires us to comply with regulations and standards, commonly referred to as good clinical practices for conducting,
monitoring, recording, and reporting the results of clinical studies, to assure that data and reported results are accurate and
that the clinical study participants are adequately protected. Our reliance on these third parties does not relieve us of these
responsibilities. If the third parties assisting us with our clinical studies do not perform their contractual duties or
obligations, do not meet expected deadlines, fail to comply with the FDA’s good clinical practice regulations, do not adhere
to our protocols or otherwise fail to generate reliable clinical data, we may need to enter into new arrangements with
alternative third parties and our clinical studies may be extended, delayed or terminated or may need to be repeated, and we
may not be able to obtain regulatory approval for or commercialize the products being tested in such studies. For our
already-approved commercial products, we may be required to audit or redo previously completed trials or recall our
products from the market, which could have a material adverse effect on our business, financial position, and operating
results.
With the exception of a license of patent technology for Veregen we do not own or license any material patents
associated with our products, and our ability to protect and control unpatented trade secrets, know-how, and other
technological innovation is limited.
Generally, the branded pharmaceutical business relies upon patent protection to ensure market exclusivity for the life
of the patent. Except for a license for patent technology for Veregen we do not own or license any material patents
associated with our products and therefore do not enjoy the same level of intellectual property protection with respect to
such products as would a pharmaceutical manufacturer that markets a patented product. We have limited ability to protect
and control trade secrets, know-how, and other technological innovation, all of which are unpatented. Others independently
may develop similar or better proprietary information and techniques and disclose them publicly. In addition, others may
gain access to our trade secrets, and we may not be able to protect our rights to our unpatented trade secrets. In addition,
confidentiality agreements and other measures may not provide protection for our trade secrets in the event of unauthorized
use or disclosure of such information. Failure to protect and control such trade secrets, know-how and innovation could
harm the value of our trade secrets, know-how and other technological innovation, which could have a material adverse
effect on our business, financial position, and operating results.
Inability to protect our intellectual property in the U.S. and foreign countries could negatively affect sales of our
branded products.
We own the trademark names for most of our branded products, including, Apexicon, Cortenema, Purified Cortrophin
Gel, Cortrophin-Zinc, Inderal LA, Inderal XL, InnoPran XL, Lithobid, Reglan, Vancocin, and Veregen. We license the
trademark names for Atacand, Atacand HCT, Arimidex, Casodex, Oxistat, and Pandel. While we will seek to protect those
trademarks through timely renewal in applicable jurisdictions, we may not be able to renew our trademarks in a timely
manner or to prevent third parties from using our trademarks, which could have a material adverse effect on our business,
financial position, and operating results.
We have very limited staffing and are dependent upon key employees, the loss of whom could adversely affect our
operations. Competition for talent is intense, especially in northern Minnesota, where the population is small. If we
cannot attract and retain qualified personnel, the growth and success of our business could be adversely affected.
Our success is dependent upon the efforts of a relatively small management team and staff. We have employment
arrangements in place with our executive and other officers, but none of these executive and other officers are bound
legally to remain employed with ANI for any specific term. We do not have key person life insurance policies covering our
executive and other officers or any of our other employees. If key individuals were to leave ANI, our business could
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be affected adversely if suitable replacement personnel are not recruited quickly. The population in northern Minnesota,
where two of our four current manufacturing facilities are located, is small, and as a result, there is a limited number of
qualified personnel available in all functional areas, which could make it difficult to retain and attract the qualified
personnel necessary for the development and growth of our business. If we were unable to attract and retain qualified
personnel, our business, financial position, and operating results could be materially adversely affected.
We rely significantly on information technology and any failure, inadequacy, interruption, or security lapse of that
technology, including any cybersecurity incidents, could harm our ability to operate the business effectively.
We rely significantly on our information technology and manufacturing infrastructure to effectively manage and
maintain inventory and financial reports, manufacture and ship products, and invoice customers in a timely manner. While
we have invested in the protection of data and information technology, any failure, accidents, inadequacy, or interruption of
that infrastructure or security lapse of that technology, including cybersecurity incidents, could harm our ability to operate
our business effectively. Our ability to manage and maintain inventory and financial reports, manufacture and ship
products, and invoice customers timely depends significantly on our general ledger, our contracted electronic data interface
system, and other information systems. Cybersecurity attacks in particular are evolving and include, but are not limited to,
malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to
disruptions in systems, misappropriation of confidential or otherwise protected information and corruption of data.
Cybersecurity incidents resulting in the failure of our information systems to operate effectively or to integrate with other
systems, or a breach in security or other unauthorized access of these systems, may affect our ability to manage and
maintain inventory and financial reports, and result in delays in product fulfillment and reduced efficiency of operations. A
breach in security, unauthorized access resulting in misappropriation, theft, or sabotage with respect to proprietary and
confidential information, including research or clinical data, could require significant capital investments to remediate any
such failure, problem or breach, all of which could adversely affect our business, financial position, and operating results.
We are currently involved in and may from time to time become involved in legal proceedings, some of which may
result in substantial losses, government enforcement actions, damage to our business and reputation, and place a strain
on our internal resources.
We are currently involved in and in the future may become involved in legal proceedings in the ordinary course of our
business, as a party or non-party witness, with both private parties and certain government agencies. We may incur
substantial time and expenses participating in these types of lawsuits and investigations, which could also divert
management’s attention from ongoing business concerns and normal operations. In addition, these matters and any other
substantial litigation may result in verdicts against us or government enforcement actions, which may include significant
monetary awards, and preventing the manufacture, marketing and sale of our products. Any dispute resolved unfavorably,
could have a material adverse effect on our business, financial position, and operating results. For a description of legal
proceedings which are currently pending, see Note 13. Commitments and Contingencies, in the notes to the consolidated
financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
We are susceptible to product liability claims that may not be covered by insurance, which, if successful, could
require us to pay substantial sums.
Like all pharmaceutical companies, we face of the risk of loss resulting from, and the adverse publicity associated
with, product liability lawsuits, whether or not such claims are valid. We likely cannot avoid such claims. Unanticipated
side effects or unfavorable publicity concerning any of our products or product candidates would likely have an adverse
effect on our ability to achieve acceptance by prescribing physicians, managed care providers, pharmacies and other
retailers, customers, patients and clinical trial participants. Even unsuccessful product liability claims could require us to
spend money on litigation, divert management’s time, damage our reputation and impair the marketability of our products.
In addition, although we believe that we have adequate product liability insurance coverage, we cannot be certain that our
insurance will, in fact, be sufficient to cover such claims or that we will be able to obtain or maintain adequate insurance
coverage in the future at acceptable prices. A successful product liability claim that is excluded from coverage or exceeds
our policy limits could require us to pay substantial sums. Additionally, insurance coverage for product liability may
become prohibitively expensive in the future or may not be available at all, and as a result, we may
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not be able to maintain adequate product liability insurance coverage to mitigate the risk of large claims, or we may be
required to maintain a larger self-insured retention that we would otherwise choose.
Currency fluctuations and changes in exchange rates could have a material adverse effect on our business,
financial position, and operating results.
A portion of our transactions are denominated in a foreign currency, the Canadian dollar and the Indian rupee. Because
we engage in certain transactions in a foreign currency, we are subject to the effects of exchange rate fluctuations. If the
U.S. dollar depreciates against the Canadian dollar and the Indian rupee, the expenses we recognize from Canadian-
denominated and Indian-denominated transactions made by our Canadian and Indian subsidiaries could be translated at an
unfavorable rate, leading to foreign exchange losses. Foreign exchange gains or losses as a result of exchange rate
fluctuations in any given period could harm our operating results and negatively impact our financial position and results of
operations.
Risks Related to our Industry
The COVID-19 pandemic is ongoing and its impact on the global economy and our operations remains uncertain.
A continuation of the pandemic could have a material adverse impact on our business, results of operations and
financial condition and on the market price of our common stock.
On March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic. In an effort to contain and
mitigate the spread of COVID-19, many countries, including the United States and Canada, imposed unprecedented
restrictions on travel, and there were business closures and a substantial reduction in economic activity in countries that
have had significant outbreaks of COVID-19. While restrictions and impacts eased in 2021, significant uncertainty remains
as to the continued potential impact of the COVID-19 pandemic on our operations and on the global economy as a whole.
Demand for the products we sell was negatively impacted by COVID-19 during the years ended December 31, 2021
and 2020, as fewer patients visited physicians for conditions treated by our products, fewer elective surgeries occurred and
visits to pharmacies declined due to government orders and closures of or restrictions placed on visits to medical offices
and facilities. Additionally, we have experienced disruptions to our supply chain, including increased lead times on the
procurement of materials. While most government orders, closures and restrictions have now lapsed, this situation could
continue or worsen depending on the duration and severity of the COVID-19 pandemic, the level of success in
implementing mitigation measures, such as vaccines, the continued emergence of new variants of COVID-19, the length of
time it takes for normal economic and operating conditions to resume, the impact of the pandemic on inflation, additional
governmental actions that may be taken, and numerous other uncertainties.
It is currently not possible to predict how long the pandemic will continue, whether new government restrictions will
be reinstituted, the effectiveness of mitigation efforts such as vaccines, the emergence of new variants of the virus, and the
related impact on economic activity, including inflation. A disruption in the financial markets and volatility, as seen in
2020, 2021, and 2022, could have an adverse effect on our ability to access capital, our pharmaceutical supply chain, our
business, results of operations and financial condition, and the market price of our common stock.
The continuing trend toward consolidation of customer groups could result in declines in the sales volume and
prices of our products, and increased fees charged by customers, each of which could have a material adverse effect on
our business, financial position, and operating results.
Consolidation and the formation of strategic partnerships among and between wholesale distributors, chain drug
stores, and group purchasing organizations has resulted in a smaller number of companies, each controlling a larger share
of pharmaceutical distribution channels. For example, our net revenues are concentrated among three customers
representing 26%, 18%, and 15% of net revenues, respectively, during the year ended December 31, 2022. As of
December 31, 2022, accounts receivable from these three customers was approximately 82% of our accounts receivable,
net. Drug wholesalers and retail pharmacy chains, which represent an essential part of the distribution chain for generic
pharmaceutical products, have undergone, and are continuing to undergo, significant consolidation. This consolidation may
result in declines in our sales volumes if a customer is consolidated into another company that purchases products
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from a competitor. In addition, the consolidation of drug wholesalers and retail pharmacy chains could result in these
groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing our
business and enabling those groups to charge us increased fees. Additionally, the emergence of large buying groups
representing independent retail pharmacies and the prevalence and influence of managed care organizations and similar
institutions potentially enable those groups to extract price discounts on our products. The result of these developments or
the loss of our relationship with one or more of these wholesalers, may have a material adverse effect on our business,
financial position, and operating results.
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 adversely affect our business,
financial position, and operating results.
The regulations regarding reporting and payment obligations with respect to Medicaid rebates and other governmental
programs are complex. Because our processes for these calculations and the judgments involved in making these
calculations involve subjective decisions and complex methodologies, these calculations are subject to the risk of errors.
Our calculations and methodologies are subject to review and challenge by governmental agencies, and it is possible that
such reviews could result in changes. Any determination by governmental agencies that we have failed to comply with our
reporting and payment obligations could subject us to penalties and sanctions, which could have a material adverse effect
on our business, financial position, and operating results.
Two of our products, which together comprised less than 10% of our total revenue in 2022, are marketed without
approved NDAs or Abbreviated New Drug Applications (“ANDAs”) and we can offer no assurances that the U.S. Food
and Drug Administration (“FDA”) will not require us to either seek approval for these products or withdraw them from
the market. In either case, our business, financial position, and operating results could be materially adversely affected.
Two of our products, Esterified Estrogen with Methyltestosterone (“EEMT”) and Opium Tincture, are marketed
without approved NDAs or ANDAs.
The FDA's policy with respect to the continued marketing of unapproved products appears in the FDA's September
2011 Compliance Policy Guide Sec. 440.100 titled “Marketed New Drugs without Approved NDAs or ANDAs.” Under
this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against marketing of
unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher
priority to enforcement action against products in certain categories, such as those with potential safety risks or that lack
evidence of effectiveness.
We continue to believe that, so long as we comply with applicable manufacturing standards, the FDA will continue to
operate on a risk-based approach and will not take action against us. However, we can offer no assurance that the FDA will
continue to follow this approach or that it will not take a contrary position with any individual product or group of
products.
Additionally, our EEMT products are related to an outstanding Notice of Opportunity for Hearing on estrogen-
androgen products. The hearing relates to the FDA's intent to reclassify certain estrogen-androgen combination drugs as
lacking substantial evidence of their effectiveness for the treatment of moderate to severe vasomotor symptoms associated
with the menopause in those patients not improved by estrogen alone.
If the FDA were to move away from the risk-based approach to enforcement against marketing of unapproved
products, we may be required to seek FDA approval for these products or withdraw such products from the market. If we
decide to withdraw the products from the market, our net revenues for generic pharmaceutical products would decline
materially, and if we decide to seek FDA approval, we would face increased expenses and might need to suspend sales of
the products until such approval was obtained, and there are no assurances that we would receive such approval.
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Imported API are subject to inspection by the FDA and the FDA can refuse to permit the importation of API for
use in products that are marketed without approved NDAs or ANDAs. We are dependent on imported API to make
certain of our products. If the FDA detained or refused to allow the importation of such API, our revenues from certain
of our products would be reduced or eliminated and our business, financial position, and operating results could be
materially adversely affected.
We source some of the API for our products, including those that are marketed without approved NDAs or ANDAs,
from international suppliers. From time to time, due to FDA inspections, we have experienced temporary disruptions in the
supply of imported API. Any prolonged disruption in the supply of imported API could materially affect our ability to
manufacture and distribute our products, reduce or eliminate our revenues, and have a material adverse effect on our
business, financial position, and operating results. In addition, as regulatory fees and compliance oversight of API
manufacturers increase, this could result in certain companies discontinuing their supply of API to us, which would
materially affect our ability to manufacture our products.
The FDA does not provide guidance on safety labeling for products that are marketed without approved NDAs or
ANDAs. As a result, we are dependent on our internal post-approval drug safety surveillance program to identify
necessary safety-related changes to the labels for EEMT and Opium Tincture.
Pharmaceutical product labels contain important safety information including Black Box warnings, contraindications,
dosing and administration, adverse reactions, drug interactions, use in specific populations such as pregnant women,
pediatric, and geriatric patients, and other warnings and precautions. Pharmaceutical manufacturers may change product
labels when post-approval drug safety surveillance programs identify previously unknown side-effects, drug interactions,
and other risks. Manufacturers may also change product labels after conducting post-approval clinical studies and may
receive or seek guidance from the FDA regarding updating safety labeling information. However, the FDA does not
provide guidance on labeling for products that are marketed without approved NDAs or ANDAs. As a result, we are
dependent on our internal post-approval drug safety surveillance program to identify necessary safety-related changes to
the labels for EEMT and Opium Tincture. Additionally, because the FDA does not review and approve labeling for the
products without approved NDAs or ANDAs, it would be difficult to make a claim for preemption due to the FDA’s
approval of the labeling and this could increase our potential liability with respect to failure-to-warn claims for these
products. Such claims, even if successfully defended, could have an adverse impact on our business, financial position, and
operating results.
We are entirely dependent on periodic approval by the DEA for the supply of the API needed to manufacture our
controlled substances. An inability to obtain such approvals would reduce or eliminate our revenues for our controlled
substances, and could have a material adverse effect on our business, financial position, and operating results. In
addition, we are subject to strict regulation by the DEA and are subject to sanctions if we are unable to comply with
related regulatory requirements.
The DEA regulates products containing controlled substances, such as opiates, pursuant to the U.S. Controlled
Substances Act (“CSA”). The CSA and DEA regulations impose specific requirements on manufacturers and other entities
that handle these substances including registration, recordkeeping, reporting, storage, security, and distribution.
Recordkeeping requirements include accounting for the amount of product received, manufactured, stored, and distributed.
Companies handling controlled substances also are required to maintain adequate security and to report suspicious orders,
thefts and significant losses. The DEA periodically inspects facilities for compliance with the CSA and its regulations.
Failure to comply with current and future regulations of the DEA could lead to a variety of sanctions, including revocation
or denial of renewal of DEA registrations, injunctions, or civil or criminal penalties.
In addition, each year, we must submit a request to the DEA for a procurement quota in order to purchase the amount
of API needed to manufacture our Schedule II controlled substances. Without approved procurement quotas from the DEA,
we would not be able to purchase these ingredients from our suppliers. As a result, we are entirely dependent upon the
DEA to approve, on an annual basis, a quota of API that is sufficiently large to support our plans for the continued
manufacture of our controlled substances at commercial levels. In 2017, the DEA announced that the administration would
decrease the total quotas approved for Schedule II opioid painkillers. In 2018, the DEA decreased quotas approved for
Schedule II opioid painkillers. The DEA continues to closely monitor quotas of certain opioids and as a result there may be
a reduction from what was requested; however, firms may file an application for a quota
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adjustment at any time during the calendar year. If the DEA does not approve our requested procurement quotas, we may
be unable to obtain sufficient API to manufacture these products at levels required by our customers, which could have an
adverse impact on our business, financial position, and operating results.
Pharmaceutical product quality standards are steadily increasing and all products, including those already
approved, may need to meet current standards or enhanced standards in the future. If our products are not able to meet
these standards, we may be required to discontinue marketing and/or recall such products from the market.
Steadily increasing quality standards are applicable to pharmaceutical products still under development and those
already approved and on the market. These standards result from product quality initiatives implemented by the FDA, such
as criteria for residual solvents, periodic guidance from the FDA regarding testing for impurities, such as nitrosamines, in
our products, and updated U.S. Pharmacopeial Convention (“USP”) Reference Standards. The USP is a scientific nonprofit
organization that sets standards for the identity, strength, quality, and purity of medicines, food ingredients, and dietary
supplements manufactured, distributed, and consumed worldwide. Pharmaceutical products approved prior to the
implementation of new or revised quality standards, including those produced or sold by us, may not meet these standards,
which could require us to discontinue marketing and/or recall such products from the market, either of which could
adversely affect our business, financial position, and operating results. In addition, results of periodic testing we conduct on
our products may indicate the presence of substances at levels greater than those deemed acceptable under FDA or other
standards, which will require a recall of the product. For example, during the fourth quarter of 2019, testing of the API
used in our ranitidine drug product, as well as testing of the drug product itself, indicated a level of a nitrosamine impurity
called N-nitrosdimethylamine (“NDMA”) above acceptable thresholds. NDMA is classified as a probable human
carcinogen. Appco Pharma, LLC, with whom we had partnered to develop and market the product, initiated a voluntary
recall, and we elected to exit the market for Ranitidine in 2019. For a description of legal proceedings which are currently
pending relating to ranitidine, see Note 13. Commitments and Contingencies, in the notes to the consolidated financial
statements in Part II, Item 8 of this Annual Report on Form 10-K.
Another example of evolving standards occurred in December of 2021, when the FDA issued an information request
to manufacturers of propranolol products, including Inderal LA (Propranolol ER) currently being marketed in the United
States to evaluate their product for the presence and level of a nitrosamine impurity known as N-nitroso-propranolol
(“NNP”), which is distinct from NDMA. Pfizer, Inc. and its affiliates (“Pfizer”), our contract manufacturer for both our
Inderal LA brand product and our authorized generic product, Propranolol ER, initiated that evaluation and shared its
analysis and test results with the Company in February 2022. Pfizer also manufactures and markets Inderal LA in Canada.
On March 1, 2022, Pfizer announced that it was recalling all lots and strengths (60 mg, 80 mg, 120 mg, and 160 mg) of
Inderal LA in the Canadian market after engagement with Health Canada. We are currently undertaking our own review
and analysis of the nitrosamine impurity at issue, working with testing and toxicology experts, and are in active
communication with the FDA on the appropriate acceptable daily intake for NNP and the appropriate approach for the
product in the U.S. The FDA has not provided public notification for a final NNP acceptable intake. After briefly halting
and then resuming further sales of the product to our trade customers, there has been no recall in the United States of
Inderal LA and Propranolol ER, and the necessity for any recall has not been determined.
The discussion above illustrates the potential risk of a recall of a product due to enhanced standards, at the initiation of
the Company and/or the FDA. The loss of sales of this product would have an adverse effect on our results of operations,
as revenues from Inderal LA and Propranolol ER are anticipated to contribute approximately 4% of our forecasted total
2023 ex-Cortrophin Net Revenues. In addition, Pfizer’s decision to withdraw the product in Canada creates uncertainties as
to the future supply of our product from Pfizer which could have an adverse effect on our operating results if we are unable
to supply the product pursuant to existing contracts with our customers.
We may become subject to federal and state false claims litigation brought by private individuals and the
government.
We are subject to state and federal laws that govern the submission of claims for reimbursement. The Federal False
Claims Act (“FFCA”), also known as Qui Tam, imposes civil liability and criminal fines on individuals or entities that
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knowingly submit, or cause to be submitted, false or fraudulent claims for payment to the government. Violations of the
FFCA and other similar laws may result in criminal fines, imprisonment, and civil penalties for each false claim submitted
and exclusion from federally funded health care programs, including Medicare and Medicaid. The FFCA also allows
private individuals to bring a suit on behalf of the government against an individual or entity for violations of the FFCA.
These suits, also known as Qui Tam actions, may be brought, with only a few exceptions, by any private citizen who has
material information of a false claim that has not yet been previously disclosed. These suits have increased significantly in
recent years because the FFCA allows an individual to share in any amounts paid to the federal government from a
successful Qui Tam action. If our past or present operations are found to be in violation of any of such laws or other
applicable governmental regulations, we may be subject to civil and criminal penalties, damages, fines, exclusion from
federal health care programs, and/or the curtailment or restructuring of our operations, any of which could materially
adversely affect our business, financial position, and operating results. Actions brought against ANI for violations of these
laws, even if successfully defended, could also have a material adverse effect on our business, financial position, and
operating results.
The use of legal, regulatory, and legislative strategies by competitors, both branded and generic, including
"authorized generics," citizen’s petitions, and legislative proposals, may increase the costs to develop and market our
generic products, could delay or prevent new product introductions, and could significantly reduce our profit potential.
These factors could have a material adverse effect on our business, financial position, and operating results.
Our competitors, both branded and generic, often pursue legal, regulatory, and/or legislative strategies to prevent or
delay competition from generic alternatives to branded products. These strategies include, but are not limited to:
● entering into agreements whereby other generic companies will begin to market an authorized generic, a generic
equivalent of a branded product, at the same time generic competition initially enters the market;
● launching a generic version of their own branded product at the same time generic competition initially enters
the market;
● filing citizen petitions with the FDA or other regulatory bodies, including timing the filings so as to thwart
generic competition by causing delays of generic product approvals;
● seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate
bioequivalence or meet other approval requirements;
● initiating legislative and regulatory efforts to limit the substitution of generic versions of branded
pharmaceuticals;
● filing suits for patent infringement that may delay regulatory approval of generic products;
● introducing "next-generation" products prior to the expiration of market exclusivity for the reference product,
which often materially reduces the demand for the first generic product;
● obtaining extensions of market exclusivity by conducting clinical trials of branded drugs in pediatric populations
or by other potential methods;
● persuading regulatory bodies to withdraw the approval of branded name drugs for which the patents are about to
expire, thus allowing the branded company to obtain new patented products serving as substitutes for the
products withdrawn; and
● seeking to obtain new patents on drugs for which patent protection is about to expire.
If we cannot compete with such strategies, our business, financial position, and operating results could be adversely
impacted.
If third-party payers deny coverage, substitute another company’s product for our product, or offer inadequate
levels of reimbursement, we may not be able to market our products effectively or we may be required to offer our
products at prices lower than anticipated.
Third-party payers are increasingly challenging the prices charged for medical products and services. For example,
third-party payers may deny coverage, choose to provide coverage for a competitor’s bioequivalent product rather than our
product, or offer limited reimbursement if they determine that a prescribed product has not received appropriate
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clearances from the FDA, is not used in accordance with cost-effective treatment methods as determined by the third-party
payer, or is experimental, unnecessary, or inappropriate. Prices also could be driven down by health maintenance
organizations that control or significantly influence purchases of healthcare services and products. If third-party payers
deny coverage or limit reimbursement, we may not be able to market our products effectively or we may be required to
offer our products at prices lower than anticipated.
We are subject to federal, state, and local laws and regulations, and complying with these may cause us to incur
significant additional costs.
The pharmaceutical industry is subject to regulation by various federal authorities, including the FDA, the DEA, and
state governmental authorities. Federal and state statutes and regulations govern or influence the testing, manufacturing,
packing, labeling, storing, record keeping, safety, approval, advertising, promotion, sale, and distribution of our products.
Noncompliance with applicable legal and regulatory requirements can have a broad range of consequences, including
warning letters, fines, seizure of products, product recalls, total or partial suspension of production and distribution, refusal
to approve NDAs or other applications or revocation of approvals previously granted, withdrawal of product from
marketing, injunctions, withdrawal of licenses or registrations necessary to conduct business, disqualification from supply
contracts with the government, civil penalties, debarment, and criminal prosecution.
All U.S. facilities where prescription drugs are manufactured, tested, packaged, stored, or distributed must comply
with FDA current good manufacturing practices (“cGMPs”). All of our products are manufactured, tested, packaged,
stored, and distributed according to cGMP regulations. The FDA performs periodic audits to ensure that our facilities
remain in compliance with all applicable regulations. If it finds violations of cGMP, the FDA could make its concerns
public and could impose sanctions including, among others, fines, product recalls, total or partial suspension of production
and/or distribution, suspension of the FDA’s review of product applications, injunctions, and civil or criminal prosecution.
If imposed, enforcement actions could have a material adverse effect on our business, financial position, and operating
results. Under certain circumstances, the FDA also has the authority to revoke previously granted drug approvals. Although
we have internal compliance programs in place that we believe are adequate, the FDA may conclude that these programs
do not meet regulatory standards. If compliance is deemed deficient in any significant way, it could have a material adverse
effect on our business.
The U.S. government has enacted the Federal Drug Supply Chain Security Act ("DSCSA") that requires development
of an electronic pedigree to track and trace each prescription drug at the salable unit level through the distribution system,
which will be effective incrementally over a 10-year period. All prescription pharmaceutical products distributed in the
U.S. must be serialized with unique product identifiers. ANI started manufacturing serialization-compliant products in
November 2018. The final requirement for tracking the products will commence on November 27, 2023. Compliance with
DSCSA and future U.S. federal or state electronic pedigree requirements may increase the Company’s operational
expenses and impose significant administrative burdens. In addition, if we are unable to comply with DSCSA as of the
required dates, we could face penalties or be unable to sell our products.
Our research, product development, and manufacturing activities involve the controlled use of hazardous materials,
and we may incur significant costs in complying with numerous laws and regulations. We are subject to laws and
regulations enforced by the FDA, the DEA, and other regulatory statutes including the Occupational Safety and Health Act
(“OSHA”), the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery
Act, and other current and potential federal, state, local, and foreign laws and regulations governing the use, manufacture,
storage, handling, and disposal of our products, materials used to develop and manufacture such products, and resulting
waste products.
We cannot completely eliminate the risk of contamination or injury, by accident or as the result of intentional acts,
from these materials. In the event of an accident, we could be held liable for any damages that result, and any resulting
liability could exceed our resources. We may also incur significant costs in complying with environmental laws and
regulations in the future. We are also subject to laws generally applicable to businesses, including but not limited to,
federal, state, and local regulations relating to wage and hour matters, employee classification, mandatory healthcare
benefits, unlawful workplace discrimination, and whistle-blowing. Any actual or alleged failure to comply with any
regulation applicable to our business or any whistle-blowing claim, even if without merit, could result in costly litigation,
regulatory action or otherwise harm our business, financial position, and operating results.
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Our operations in an international market subject us to additional regulatory oversight both in the international
market and in the U.S., as well as, social, and political uncertainties, which could cause a material adverse effect on our
business, financial position, and operating results.
We are subject to certain risks associated with having assets and operations located in a foreign jurisdiction, including
our operations in Canada and India. Our Canadian operations are subject to regulation by Health Canada and other federal,
provincial, and local regulatory authorities. Health Canada regulates the testing, manufacture, labeling, marketing, and sale
of pharmaceutical products manufactured and distributed in Canada. Our operations in Canada and India 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, and increased government regulation, which could have a material adverse effect on our
business, financial position, and operating results.
Additionally, involvement in a war or other military action or international acts of terrorism may cause significant
disruption to commerce throughout the world. To the extent that such disruptions result in (i) delays or cancellations of
customer orders, (ii) a general decrease in consumer spending on healthcare technology, (iii) our inability to effectively
market and distribute our products globally (iv) our inability to timely engage with and collect payment from our customers
or (v) our inability to access capital markets, our business and results of operations could be materially and adversely
affected. For example, in response to the rapidly developing conflict between Russia and Ukraine, the United States has
imposed and may further impose, and other countries may additionally impose, broad sanctions or other restrictive actions
against governmental and other entities in Russia. Additionally, further escalation of geopolitical tensions could have a
broader impact that extends into other markets where we do business. We are unable to predict whether acts of
international terrorism or the involvement in a war or other military actions by the United States and/or the countries in
which we sell or distribute our products will result in any long-term commercial disruptions or if such involvement or
responses will have any long-term material adverse effect on our business, results of operations, or financial condition.
Continuing studies of our products could produce negative results, which could require us to implement risk
management programs, or discontinue product marketing. In addition, ongoing post-approval drug safety surveillance
of our products could result in the submission of adverse event reports to the FDA.
Studies of the proper utilization, safety, and efficacy of pharmaceutical products are being conducted by the industry,
government agencies, and others on a continuous basis. Such studies, which increasingly employ sophisticated methods
and techniques, can call into question the utilization, safety, and efficacy of current and previously marketed products,
including those that we produce. In addition, we are required by the FDA to submit reports of adverse events involving the
use of our products. In some cases, studies and safety surveillance programs have resulted, and in the future may result, in
the one or more of the following:
● product label changes including FDA-mandated Black Box warnings;
● risk management programs such as patient registries;
● reduced product sales due to concerns among patients and physicians; and
● discontinuance of product marketing.
These situations, should they occur with respect to any of our products, could have a material adverse effect on our
business, financial position, and operating results.
Healthcare reform and changes in pharmaceutical pricing, reimbursement and coverage, by governmental
authorities and third-party payors may materially affect our business, financial position and operating results.
In recent years, there have been numerous initiatives on the federal and state levels for comprehensive reforms
affecting the payment for, the availability of, and reimbursement for healthcare services in the U.S. generally and
prescription drug coverage, reimbursement and pricing specifically, and it is likely that federal and state legislatures will
continue to advocate change to the healthcare system generally and to prescription drug coverage, reimbursement and
pricing specifically.
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At the federal level, the American Rescue Plan Act eliminated the cap on Medicaid Drug Rebate Program rebates
beginning January 1, 2023. As such, we could end up owing additional rebates to state Medicaid programs related to
utilization of our drug products negatively impacting profitability. States continue to look for ways to save on Medicaid
spend specifically related to prescription drugs. As such, states are increasingly expanding or change supplemental rebates
programs to secure additional rebates from manufacturers in exchange for drug coverage and to limit coverage of certain
drugs for certain Medicaid patients or to all Medicaid patients. To the extent the Centers for Medicare & Medicaid Services
entertains waivers to federal requirements under the Medicaid program to allow states Medicaid programs such flexibility,
coverage of and payment for our drugs utilized by Medicaid beneficiaries could be negatively impacted.
Significant developments that may adversely affect pricing in the United States include proposed drug pricing and
Medicare reforms by Congress and regulatory changes to Medicare Part B (physician administered drugs) and Medicare
Part D (prescription drug benefit) could financially impact us. On November 19, 2021, the U.S. House of Representatives
passed the Build Back Better Act, which includes several provisions aimed at lowering prescription drug costs and
reducing spending by the federal government and private payers by, among other things, allowing the U.S. federal
government to negotiate prices for certain high-cost drugs covered under Medicare, imposing rebates on manufacturers of
single-source drugs and biologics covered by Medicare Part B and nearly all drugs covered under Part D, if drug prices
increase faster than the rate of inflation, based on the Consumer Price Index for All Urban Consumers (“CPI-U”). Build
Back Better would also re-structure the Part D benefit and replace the existing Coverage Gap Discount Program with
another manufacturer-imposed rebate or discount program, which could result in additional rebates to Medicare Part D
plans in order to obtain Medicare Part D coverage. These concepts were included in the Inflation Reduction Act, which
was signed into law on August 16, 2022. We are actively evaluating how this legislation will impact our business and
operations.
Certain U.S. states have implemented statutes aimed at prescription drug price transparency and some of those laws
would permit state run boards or agencies to cap reimbursement for certain prescription drugs in the states. Such laws
could negatively impact our financial performance and could result in us terminating distribution of certain products in
certain states or regions.
Inflation could have a material adverse effect on our business, financial position, and operating results.
Inflationary pressures are currently being experienced and may continue to exist in the U.S. and key worldwide
markets. The rate of inflation may significantly increase input costs for our products and, given the competitive nature of
the generic markets in which we compete, we may not be able to pass those costs on to our generic customers.
Risks Related to Accounting, Tax, and SEC Rules and Regulations
We have increased exposure to tax liabilities, including foreign tax liabilities.
As a company based in the U.S. with subsidiaries in Canada and India, we are subject to, or potentially subject to,
income taxes as well as non-income based taxes in these jurisdictions as well as the U.S. Significant judgment is required
in determining our international provision for income taxes and other tax liabilities. Changes in tax laws or tax rulings may
have a significantly 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 between our U.S. operations and our Canadian and Indian subsidiaries in relation to various aspects of
our business, including research and development services, tech transfers, and contract manufacturing. Tax authorities in
various jurisdictions may disagree with, and subsequently challenge, the amount of profits taxed in such jurisdictions; such
challenges may result in increased tax liability, including accrued interest and penalties, which would cause our tax expense
to increase and which could have a material adverse effect on our business, financial position and results of operations and
our ability to satisfy our debt obligations.
Our expanded international operations from the Novitium acquisition increased our exposure to potential liability under
anti-corruption, trade protection, tax, and other laws and regulations.
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The Foreign Corrupt Practices Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”)
prohibit corrupt payments by our employees, vendors, or agents. From time to time, we receive inquiries from
authorities in the U.S. and elsewhere about our business activities outside of the U.S. and our compliance with Anti-
Corruption Laws. While we devote substantial resources to our global compliance programs and have implemented
policies, training, and internal controls designed to reduce the risk of corrupt payments, our employees, vendors or
agents may violate our policies and with the acquisition of Novitium, our expanded international operations would
significantly increase our exposure to potential liability. Our failure to comply with Anti-Corruption Laws could
result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on
the conduct of our business, and damage to our reputation. Operations outside of the U.S. may be affected by changes
in trade production laws, policies, and measures, and other regulatory requirements affecting trade and investment.
We are also subject to Indian foreign tax regulations. Such regulations may not be clear, not consistently applied
and subject to sudden change, particularly with regard to international transfer pricing. Our earnings could be
reduced by the uncertain and changing nature of such tax regulations.
The global nature of Novitium’s operations (including those of its Indian subsidiary Novitium Labs Private Limited) will
subject us to political and economic risks that could adversely affect our business, results of operations, or financial condition.
The risks presented by global operations include:
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limitations on ownership or participation in local enterprises;
price controls, exchange controls, and limitations on repatriation of earnings;
transportation delays and interruptions;
the application of additional legal, regulatory and taxation regimes to our operations;
political, social, and economic instability and disruptions in applicable regions, including as a result of war,
such as the evolving conflict between Russia and the Ukraine;
acts of terrorism;
government embargoes or foreign trade restrictions;
imposition of duties and tariffs and other trade barriers;
import and export controls;
labor unrest and current and changing regulatory environments;
fluctuations in foreign current exchange and interest rates;
difficulties in staffing and managing multi-national operations;
limitations on our ability to enforce legal rights and remedies; and
the severity and duration of the COVID-19 pandemic and its impacts where we operate globally.
If we are unable to successfully manage these and other risks associated with managing the expansion of our
business to the jurisdictions in which Novitium operates, including India, the risks could have a material adverse
effect on our business, results of operations, or financial condition.
Failure to comply with applicable transfer pricing and similar regulations could have a material adverse effect on
our financial position and operating results.
We are subject to complex transfer pricing and other tax regulations in the United States, Canada, and India designed
to ensure that appropriate levels of income are reported as earned and are taxed in the appropriate taxing
jurisdictions. Although we believe that we are in substantial compliance with all applicable regulations and restrictions, we
are subject to the risk that governmental authorities could audit our transfer pricing and related practices and assert that
additional taxes are owed. In the event that the audits or assessments are concluded adversely against us, we may or may
not be able to offset or mitigate the consolidated effect of any such assessments.
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Changes in estimates regarding the fair value of goodwill or intangible assets may result in an adverse impact to
our business, financial position, and operating results.
We test goodwill for impairment annually, or more frequently if changes in circumstances indicate that the carrying
amount of goodwill might not be recoverable. Judgment is used in determining when these events and circumstances arise.
We perform our review of goodwill based on our one reporting unit. If we determine that the carrying value of our assets
may not be recoverable, we assess, using judgment and estimates, the fair value of our assets and to determine the amount
of any impairment loss, if any. Changes in judgments and estimates may result in the recognition of an impairment loss,
which could have a material negative impact on our business, financial position, and operating results. While our testing in
fiscal 2022 did not result in an impairment charge related to goodwill, there can be no assurances that our goodwill will not
be impaired in the future.
Our material definite-lived intangible assets consist of ANDAs for previously marketed generic products, NDAs and
product rights for our branded products, product rights related to certain generic products, and a non-compete agreement.
These assets are being amortized over their useful lives of seven to 10 years. For these definite-lived intangible assets, we
perform an impairment analysis when events or circumstances indicate that the carrying value of the assets may not be
recoverable. An impairment loss is recognized if, based on our impairment analysis, the carrying amount of the asset is not
recoverable and its carrying amount exceeds its fair value. Any significant change in market conditions, estimates or
judgments used to determine expected future cash flows that indicate a reduction in carrying value may give rise to
impairment in the period that the change becomes known. An impairment charge could have a material negative impact on
our business, financial position, and operating results. We recognized an impairment of $0.1 million in the year ended
December 31, 2022, in relation to an ANDA asset, and there can be no assurances that our remaining intangible assets will
not be impaired in the future.
Our management is required to devote substantial time to comply with public company regulations. If we are
unable to comply with these regulations, investors could lose confidence in us, which could have a material adverse
effect on our stock price, business, financial position, and operating results.
As a public company, we are required to comply with significant legal, accounting, and other requirements, and as a
result, we incur significant regulatory compliance-related expenses. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall
Street Reform and Consumer Protection Act as well as rules implemented by the SEC and The Nasdaq Stock Market,
impose various requirements on public companies, including those related to corporate governance practices. Our
management and other personnel devote a substantial amount of time to these requirements. Some members of
management do not have significant experience in addressing these requirements. Moreover, these rules and regulations
have increased our legal and financial compliance costs relative to those of previous years and make some activities more
time consuming and costly.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial
reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing
of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls
over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. The Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) provides a framework for companies to assess and improve their
internal control systems. Our compliance with these requirements has required that we incur substantial accounting and
related expenses and expend significant management efforts. Moreover, if we are not able to comply with the requirements
of Section 404 of the Sarbanes-Oxley Act, are unable to assert that our internal controls over financial reporting are
effective, or identify deficiencies that are deemed to be material weaknesses, investors could lose confidence in the
accuracy and completeness of our financial reports, the market price of our common stock could decline and we could be
subject to sanctions or investigations by The Nasdaq Stock Market, the SEC, or other regulatory authorities, which would
require additional financial and management resources and could damage our reputation. Further, if we identify any
material weaknesses or deficiencies that aggregate to a material weakness in our internal controls, we will have to
implement appropriate changes to these controls, which may require specific compliance training for our directors, officers
and employees, require the hiring of additional finance, accounting, legal and other personnel, entail substantial costs to
modify our existing accounting systems and take a significant period of time to complete. Such changes may not, however,
be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent
inability to produce accurate financial statements on a timely basis,
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could increase our operating costs and could materially impair our ability to operate our business. Any of these events
could have a material adverse effect on our business, financial position, and operating results.
We identified material weaknesses in our internal control over financial reporting. If we do not effectively
remediate these material weaknesses or if we otherwise fail to maintain effective internal control over financial
reporting, we may not be able to accurately report our financial results or prevent fraud.
Management identified material weaknesses in our internal control over financial reporting as of December 31, 2022.
See Item 9A, “Controls and Procedures,” in this Annual Report on Form 10-K for information regarding the identified
material weaknesses and our actions to date to remediate the material weaknesses. If we do not effectively remediate these
material weaknesses or if we otherwise fail to maintain effective internal control over financial reporting, we may not be
able to accurately report our financial results or prevent fraud.
Our policies regarding returns, allowances and chargebacks, and marketing programs adopted by wholesalers may
reduce revenues in future fiscal periods.
We, like other generic drug manufacturers, have agreements with customers allowing chargebacks, product returns,
administrative fees, and other rebates. Under many of these arrangements, we may match lower prices offered to customers
by competitors. If we choose to lower our prices, we generally give the customer a credit on the products that the customer
is holding in inventory, which could reduce sales revenue for the period the credit is provided. Like our competitors, we
also give credits for chargebacks to wholesalers with whom we have contracts for their sales to hospitals, group purchasing
organizations, pharmacies, or other customers. A chargeback is the difference between the price at which we invoice the
wholesaler and the price that the wholesaler’s end-customer pays for a product. Although we establish reserves based on
prior experience and our best estimates of the impact that these policies may have in subsequent periods, we cannot ensure
that our reserves are adequate or that actual product returns, allowances, and chargebacks will not exceed our estimates.
Risks Related to our Debt
Making interest and principal payments under our Credit Facility consisting of $300.0 million term loan and a
$40.0 million revolving credit facility, requires a significant amount of cash.
In connection with the completion of the Novitium acquisition, we entered into a new $300.0 million term loan and a
$40.0 million revolving credit facility. The Credit Facility, which is secured by all our assets and the assets of our
subsidiaries, was used to finance the cash consideration of the acquisition of Novitium and terminate and repay our
previous senior credit facilities. In order to service the debt we incur under this facility, we will require a significant
amount of cash. Our ability to make scheduled payments of principal and interest depends on our future performance,
which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not
continue to generate cash flow from operations in the future sufficient to service our debt. If we are unable to
generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring
debt, or obtaining additional debt or equity financing on terms that may not be favorable to us or available to us at
all. Our ability to refinance any such debt will depend on the capital markets and our financial condition at that time.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could
result in a default under our current or future indebtedness. Any event of default or inability to otherwise satisfy our
obligations could have a material adverse effect on our future operating results and financial condition.
Our Credit Agreement contains restrictive and financial covenants and if we are not in compliance with these
covenants, our outstanding indebtedness under this facility could be accelerated and the lenders could terminate their
commitments under the facility.
The Credit Agreement contains customary covenants that require maintenance of a leverage ratio at or below specified
thresholds and restricts our ability to make certain distributions with respect to our capital stock, prepay other debt, make
certain investments, encumber our assets, incur additional indebtedness, make capital expenditures, engage in certain
business combinations, transfer, lease or dispose of our assets, alter the character of our business in any material
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respect or undertake various other corporate activities. Therefore, as a practical matter, these covenants restrict our ability
to engage in or benefit from such activities. In addition, we pledged our assets in order to secure our repayment obligations
under the Credit Agreement. This pledge may reduce our operating flexibility because it restricts our ability to dispose of
our assets or engage in other transactions that may be beneficial to us.
If we are unable to comply with the covenants in the Credit Agreement, we will be in default, which could result in the
acceleration of our outstanding indebtedness and termination of funding commitments by the lenders. If such an
acceleration occurs, we may not be able to repay our debt and we may not be able to borrow sufficient additional funds to
refinance our debt, which would have a material adverse effect on our business, financial position, and operating results.
Changes in the method of determining London Interbank Offered Rate ("LIBOR"), or the replacement of LIBOR
with an alternative reference rate, may adversely affect interest expense related to outstanding debt.
Amounts drawn under the New Credit Facility may bear interest rates in relation to LIBOR, depending on our
selection. On July 27, 2017, the Financial Conduct Authority (“FCA”) in the United Kingdom announced that it would
phase out LIBOR as a benchmark by the end of 2021. Subsequently, recent actions taken by the U.K. Financial Conduct
Authority, which regulates LIBOR, indicate that the continuation of LIBOR on the current basis cannot and will not be
guaranteed after June 30, 2023. Moreover, it is possible that the U.S. LIBOR will be discontinued or modified prior to June
30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee
comprised of large U.S. financial institutions, is recommending replacing U.S.-dollar LIBOR with the Secured Overnight
Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities. At
this time, it is not possible to predict the effect any discontinuance, modification, or other reforms to LIBOR, or the
establishment of alternative reference rates such as SOFR, or any other reference rate, will have on the Company or its
borrowing costs. Our credit agreement allows for a change to an alternate benchmark rate, including SOFR, as defined in
the Credit Agreement, but no change has been made yet. In December 2022, the Financial Accounting Standards Board
issued ASU 2022-06, which extended the sunset date of the reference rate reform in ASU 848 from December 31, 2022, to
December 31, 2024. We have not adopted the guidance and are currently evaluating the impact, if any, that the adoption of
this guidance will have on our consolidated financial statements.
Risks Related to our Common Stock
Our principal stockholders, directors, and executive officers own a significant percentage of our stock and will be
able to exercise meaningful influence over our business.
Our current principal stockholders, directors, and executive officers beneficially own approximately 28% of our
outstanding capital stock entitled to vote as of December 31, 2022. As a result, these stockholders, if acting together, would
be able to influence or control matters requiring approval by our stockholders, including the election of directors and the
approval of mergers, acquisitions, or other extraordinary transactions. They may also have interests that differ from
stockholders generally and may vote in a way with which other stockholders disagree and which may be adverse to their
interests. This concentration of ownership may have the effect of delaying, preventing, or deterring a change of control of
ANI, could deprive stockholders of an opportunity to receive a premium for their common stock as part of a sale of ANI,
and might ultimately affect the market price of our common stock.
Raising additional funds by issuing additional equity securities may cause dilution to our current stockholders.
Raising additional funds by entering into additional credit or other borrowing facilities or issuing debt may subject us to
covenants and other requirements that may restrict our operations.
We may seek to raise additional funds through the issuance of equity or equity-linked securities. If we were to raise
funds through the issuance of equity or equity-linked securities, the percentage ownership of our stockholders could be
diluted, potentially significantly, and these newly issued securities may have rights, preferences, or privileges senior to
those of our existing stockholders. In addition, the issuance of any equity securities could be at a discount to the then-
prevailing market price of our common stock.
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If we require new debt financing, there is no assurance that such a transaction will be available on terms acceptable to
us, or at all. In addition, we could be subject to onerous repayment terms or covenants that restrict our ability to operate our
business and make distributions to our stockholders. These restrictive covenants may include limitations on additional
borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay
dividends, redeem our stock, or make investments. We can offer no assurance that any equity or debt financing transaction
will be available on terms acceptable to us, or at all.
Provisions in our charter documents and Delaware law could discourage or prevent a takeover, even if such a
transaction would be beneficial to our stockholders.
Provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more
difficult for a third party to acquire ANI, even if doing so would be beneficial to our stockholders. These provisions
include:
● authorizing the issuance of “blank check” preferred shares that could be issued by our board of directors to
increase the number of outstanding shares and thwart a takeover attempt;
● prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of
stockholders to elect director candidates;
● advance notice provisions in connection with stockholder proposals and director nominations that may prevent or
hinder any attempt by our stockholders to bring business to be considered by our stockholders at a meeting or
replace our board of directors; and
● as a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the
Delaware General Corporation law, which prevents certain stockholders holding more than 15% of our outstanding
common stock from engaging in certain business combinations without approval of the holders of at least two-
thirds of our outstanding common stock not held by such 15% or greater stockholder.
Any provision of our certificate of incorporation and bylaws or Delaware law that has the effect of delaying,
preventing, or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their
shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
General Risk Factors
We use a variety of estimates, judgments, and assumptions in preparing our consolidated financial statements.
Estimates, judgments, and assumptions are inherently subject to change, and any such changes could result in
corresponding changes to the amounts of assets, liabilities, revenues, expenses, and income. Any such changes could
have a material adverse effect on our business, financial position, and operating results.
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) requires us to make estimates, judgments, and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the period. There are inherent uncertainties involved in estimates,
judgments and assumptions, and any changes in estimates, judgments and assumptions used could have a material adverse
effect on our business, financial position, and operating results.
In the consolidated financial statements included in the periodic reports filed with the SEC, estimates, judgments, and
assumptions are used for, but not limited to, revenue recognition, allowance for credit losses, accruals for chargebacks,
rebates, returns and other allowances, allowance for inventory obsolescence, stock-based compensation, valuation of
financial instruments and intangible assets, allowances for contingencies and litigation, deferred tax assets and liabilities,
deferred tax valuation allowance, contingent consideration, and the depreciable lives of fixed and intangible assets. Actual
results could differ from those estimates. Estimates, judgments, and assumptions are inherently subject to change in the
future, and any such changes could result in corresponding changes to the amounts of assets, liabilities, revenues, expenses,
and income. Any such changes could have a material adverse effect on our business, financial position, and operating
results.
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The market price of our common stock has been volatile, and an investment in our common stock could decline in
value.
The market price of our common stock has increased and decreased significantly and is likely to continue to fluctuate
in the future. From time to time, the securities of small capitalization pharmaceutical companies, including ANI,
experience significant market price fluctuations, often unrelated to these companies’ operating performance. In particular,
the market price of our common stock may fluctuate significantly due to a variety of factors, including, but not limited to,
regulatory or legal developments with respect to our industry, variations in our financial results or those of companies that
are perceived to be similar to us, and rumors or new announcements by third parties, many of which are beyond our control
and that may not be related to our operating performance.
In addition, the occurrence of any of the risks described in this report or in subsequent reports we file with the SEC
could have a material adverse impact on the market price of our common stock. Securities class action litigation is
sometimes brought against a company following periods of volatility in the market price of its securities or for other
reasons. Securities litigation, whether with or without merit, could result in substantial costs and divert management’s
attention and resources, which could harm our business, financial position, and operating results, as well as the market
price of our common stock.
Shares of our common stock are relatively illiquid which may affect the market price of our common stock.
For the twelve months ended December 31, 2022, the average daily trading volume of our common stock on the
NASDAQ Global Market was approximately 97,535 shares. Because of our relatively small public float, our common
stock may be less liquid than the stock of companies with broader public ownership and trading of a relatively small
volume of our common stock may have a greater impact on the market price for our shares than would be the case if our
public float were larger.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate offices are located at 210 Main Street West, Baudette, Minnesota 56623. The facility, which we own,
includes oral solid dose and liquid manufacturing and packaging, warehouse facilities, analytical, stability, and
microbiological laboratory space, and employee office and mechanical space. We also own a manufacturing facility that
includes oral solid dose manufacturing and packaging for pharmaceutical products that must be manufactured in a fully
contained environment, warehouse facilities, and employee office and mechanical space. This facility is also located in
Baudette, Minnesota. We also own a cold storage facility located in Baudette, Minnesota. In addition, we also own a
facility in East Windsor, New Jersey, which includes manufacturing, warehousing, laboratory, product development, and
employee office space.
In addition, we own a manufacturing facility located in Oakville, Ontario that includes oral solid dose, semi-solids, and
non-sterile liquid manufacturing and packaging, warehouse facilities, analytical, stability, and microbiological laboratory
space, and employee office and mechanical space. On June 2, 2022, we announced that we intend to cease operations at our
Oakville, Ontario, Canada manufacturing plant by the first quarter of 2023. This action is part of ongoing initiatives to
capture operational synergies following our acquisition of Novitium in November 2021. We have transitioned the majority
of products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites and are on track to
cease operations by the end of the first quarter 2023. We are seeking to find potential buyers for the Oakville site, though
there can be no assurance as to when or if that will occur or the amount of any net proceeds that may be received.
We lease spaces for warehouse and packaging activities in Baudette, Minnesota, office space in Minnetonka,
Minnesota and East Windsor, New Jersey, and for research and development activities in Chennai, India. The leases will
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expire between 2025 and 2027. We recently purchased additional warehouse space in Baudette, Minnesota to support our
ongoing operations.
We consider our leased and owned properties suitable and adequate for our current and foreseeable needs.
Item 3. Legal Proceedings
Our legal proceedings are discussed in Note 13. Commitments and Contingencies, in the notes to the consolidated
financial statements in Part II, Item 8. of this Annual Report on Form 10-K.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock trades on the Nasdaq Global Market under the symbol “ANIP.”
Stockholder Information
As of March 2, 2023, there were approximately 232 shareholders of record of our common stock, which does not
include stockholders that beneficially own shares held in a “nominee” or in “street” name, and six holders of record of
Class C stock.
Dividends
We have never declared or paid cash dividends on our common stock. We do not anticipate paying any cash dividends
on our common stock in the foreseeable future. Our shares of Series A convertible preferred stock (the “PIPE Shares”),
accrue dividends at 6.50% per year on a cumulative basis, payable in cash or in-kind, and will also participate, on a pro-
rata basis, in any dividends that may be declared with respect to our common stock. We currently intend to retain all
remaining available funds and any future earnings to fund the development and growth of our business.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
Period
October 1 - October 31, 2022
November 1 - November 30, 2022
December 1 - December 31, 2022
Total
Total Number
of Shares
Purchased(1) Paid per Share
Average Price
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
— $
$
$
$
2,024
1,156
3,180
—
36.60
39.24
37.56
40
Maximum Number (or
approximate dollar
value) of Shares
that may yet be
Purchased Under the
Plans or Programs
—
—
—
— $
— $
— $
—
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(1) Shares purchased during the period were transferred to the Company from employees in satisfaction of minimum tax withholding obligations
associated with the vesting of restricted stock awards during the period.
Performance Graph
The graph below compares the five-year cumulative total stockholder return on our common stock, the Nasdaq Stock
Market (US) Index, the Nasdaq Pharmaceuticals Index, and the S&P 600 Pharmaceuticals, Biotechnology & Life Sciences
Index, assuming the investment of $100.00 on December 31, 2017, with dividends being reinvested. The stock price
performance in the graph below is not necessarily indicative of future price performance.
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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
Please read the following discussion in conjunction with Item 1A. (“Risk Factors”) and our audited consolidated
financial statements included elsewhere in this Annual Report on Form 10-K. Some of the statements in the following
discussion are forward-looking statements. See the discussion about forward-looking statements on page 1 of this Annual
Report on Form 10-K.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons
between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not
included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2021, filed with the SEC on March 15, 2022.
Executive Overview
ANI Pharmaceuticals, Inc. and its consolidated subsidiaries (together, “ANI,” the “Company,” “we,” “us,” or “our”) is
a diversified bio-pharmaceutical company serving patients in need by developing, manufacturing, and marketing high
quality branded and generic prescription pharmaceuticals, including for diseases with high unmet medical need. Our team
is focused on delivering sustainable growth by building a successful Cortrophin Gel franchise, strengthening our generics
business with enhanced development capability, innovation in established brands and leveraging our North American
manufacturing capabilities. Our four pharmaceutical manufacturing facilities, of which two are located in Baudette,
Minnesota, one is located in East Windsor, New Jersey, and one is located in Oakville, Ontario, are together capable of
producing oral solid dose products, as well as semi-solids, liquids and topicals, controlled substances, and potent products
that must be manufactured in a fully-contained environment. On June 2, 2022, we announced that we intend to cease
operations at our Oakville, Ontario, Canada manufacturing plant by first quarter 2023. This action is part of ongoing
initiatives to capture operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November
2021. We have transitioned the majority of products manufactured or packaged in Oakville to one of our three U.S.-based
manufacturing sites.
Strategy
Our objective is to build a sustainable and growing biopharmaceutical company serving patients in need and creating
long-term value for our investors. Our growth strategy is driven by the following key growth drivers:
Building a successful Rare Disease platform
We have spent significant time, effort and resources in establishing our Rare Disease platform. We acquired the NDAs
for Cortrophin gel and Cortrophin-Zinc in January 2016 and executed long-term supply agreements with a supplier of our
primary raw material for corticotrophin active pharmaceutical ingredient (“API”), a supplier of corticotrophin API with
whom we have advanced the manufacture of commercial scale batches of API, and a Cortrophin gel fill/finish contract
manufacturer. During the second quarter of 2021, we submitted a Supplemental New Drug Application (“sNDA”) to the
FDA.
On October 29, 2021, the FDA approved the Company’s sNDA for Purified Cortrophin Gel (Repository Corticotropin
Injection USP) for the treatment of certain chronic autoimmune disorders, including acute exacerbations of multiple
sclerosis (“MS”) and rheumatoid arthritis (“RA”), in addition to excess urinary protein due to nephrotic syndrome.
Cortrophin Gel is an adrenocorticotropic hormone (“ACTH”), also known as purified corticotropin.
During 2021 and 2022, we invested in leadership, expertise and infrastructure in the areas of commercialization of rare
disease therapies and developed a launch strategy and commercial plan for this product. During 2021 and throughout 2022,
we hired a significant number of new employees and assembled and trained our Rare Disease field force. On January 24,
2022, we announced the commercial launch of Cortrophin Gel in the U.S as our foundational Rare Disease asset. As a
result of the build out of our Rare Disease team, our expenditures in support of these efforts were significantly higher in
2022 as compared to 2021.
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We plan to continue to invest behind Cortrophin Gel and our Rare Disease platform in 2023 and beyond.
Strengthening our Generics, Established Brands, and Other segment through continued investment in our generic
research and development capability and increased focus on niche opportunities
We have grown our generics business through a combination of market share gains on existing products and new
product launches. We have also successfully acquired numerous ANDAs through business and asset acquisitions. Our most
recent business acquisition was Novitium, including its portfolio of commercial and pipeline generic products,
manufacturing and development facilities and expert workforce. The Novitium acquisition significantly increased our
generic pharmaceutical research and development and manufacturing capabilities. We have begun to increase our focus on
niche lower competition opportunities such as injectables, Paragraph IV, and Competitive Generic Therapy designation
filings. Additionally, we will continue to seek opportunities to enhance our capabilities through strategic partnerships and
acquisitions of assets and businesses. On July 21, 2022, we completed an asset acquisition of four ANDAs from Oakrum
Pharma, including two that were commercial at the time of acquisition.
We have grown our established brand product offerings through acquisition. We have acquired the NDAs for and
market Atacand, Atacand HCT, Arimidex, Casodex, Lithobid, Vancocin, Inderal LA, Inderal XL, InnoPran XL, Oxistat,
Veregen, and Pandel. We are innovating in our go-to-market strategy through creative partnerships.
Our overall strategy is enabled by an empowered, collaborative, and purposeful team with a high performance-
orientation.
Generic Product Development Considerations
We consider a variety of criteria in determining which products to develop, all of which influence the level of
competition upon product launch. These criteria include:
● Formulation Complexity. Our development and manufacturing capabilities enable us to manufacture
pharmaceuticals that are difficult to produce, including highly potent, extended release, combination, and low
dosage products. This ability to manufacture a variety of complex products is a competitive strength that we
intend to leverage in selecting products to develop or manufacture.
● Patent Status. We seek to develop products whose branded bioequivalents do not have long-term patent
protection or existing patent challenges.
● Market Size. When determining whether to develop or acquire an individual product, we review the current and
expected market size for that product at launch, as well as forecasted price erosion upon conversion from branded
to generic pricing. We endeavor to manufacture products with sufficient market size to enable us to enter the
market with a strong likelihood of being able to price our products both competitively and at a profit.
● Profit Potential. We research the availability and cost of active pharmaceutical ingredients in determining which
products to develop or acquire. In determining the potential profit of a product, we forecast our anticipated market
share, pricing, including the expected price erosion caused by competition from other generic manufacturers, and
the estimated cost to manufacture the products.
● Manufacturing. We generally seek to develop and manufacture products at our own manufacturing plants in
order to optimize the utilization of our facilities, ensure quality control in our products, and to more closely
control the economic inputs and outputs of our products.
● Competition. When determining whether to develop or acquire a product, we research existing and expected
competition. We seek to develop products for which we can obtain sufficient market share and may decline to
develop a product if we anticipate significant competition. Our specialized manufacturing facilities provide a
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means of entering niche markets, such as hormone therapies, in which fewer generic companies are able to
compete.
Fiscal 2022 Developments
Restructuring Update
On June 2, 2022, we announced that we intend to cease operations at our Oakville, Ontario, Canada manufacturing
plant by the first quarter of 2023. This action is part of ongoing initiatives to capture operational synergies following our
acquisition of Novitium in November 2021. We have transitioned the majority of products manufactured or packaged in
Oakville to one of our three U.S.-based manufacturing sites and are on track to cease operations by the end of the first
quarter 2023. We are seeking to find potential buyers for the Oakville site, though there can be no assurance as to when or
if that will occur or the amount of any net proceeds that may be received.
Operating Segment Update
Prior to 2022, we had concluded that we had one operating segment. Effective in the first quarter of 2022 and
prospectively, in conjunction with the principal completion of our buildout of infrastructure in the areas of
commercialization of rare disease therapies and the launch of Cortrophin Gel, we determined that we now have two
operating segments as follows:
● Generics, Established Brands, and Other – Consists of operations related to the development,
manufacturing, and marketing of generic and established brand pharmaceuticals, including those sold
through traditional channels, contract manufactured products, product development services, royalties, and
other.
● Rare Disease – Consists of operations related to the development, manufacturing and marketing of
pharmaceuticals used in the treatment of patients with rare conditions. The rare disease segment currently
consists of operations related to Cortrophin Gel.
Asset Acquisitions
On July 21, 2022, we acquired four ANDAs from Oakrum Pharma, LLC for a purchase price of $8.0 million plus an
immaterial amount for the purchase of API and finished goods inventory. The transaction was funded from cash on hand.
Product Launches
Refer to our website at www.anipharmaceuticals.com for information on the products, including
indications/treatments.
Purified Cortrophin Gel Approval and Launch
Purified Cortrophin Gel became available to our customers in late 2021, and we recognized an immaterial amount of
revenues during the year ended December 31, 2021. On January 24, 2022, we announced the full-scale U.S. commercial
availability and launch of Purified Cortrophin Gel.
COVID-19 Impact
We continue to closely monitor the impact of the novel coronavirus (“COVID-19”) pandemic on our business and the
geographic regions where we operate. While total market generic and brand prescriptions were depressed in earlier parts of
2021 as subsequent waves and variants of the virus impacted patient and customer behavior, prescriptions returned to pre-
pandemic levels in late 2021 and into 2022. We continued to see disruptions to our supply chain from the
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COVID-19 pandemic during 2022, including significant lead times for purchases of materials. The pandemic has not
impacted our access to capital and has not significantly impacted our use of funds.
We are unable to predict the impact that the COVID-19 pandemic will continue to have on our future financial
condition, results of operations and cash flows due to numerous uncertainties, including the continued duration of the
pandemic, the appearance of additional variants of the virus, the level of success of continued actions taken to contain the
pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures,
among others.
General
Impacts to our 2022 and 2021 results of operations, including to net revenues, operating expenses, interest and other
expense, net, and income taxes are described below. Our results of operations for the year ended December 31, 2022 were
impacted by the November 19, 2021 acquisition of Novitium and related activity subsequent to that date. The acquisition
provides additional revenues and the incurrence of increased costs, including but not limited to the amortization of
intangible assets acquired, other operating costs, and increased interest costs on borrowings used to finance the transaction.
During the year ended December 31, 2022, Novitium operations generated $90.3 million in net revenues.
The following table summarizes our results of operations for the periods indicated:
(in thousands)
Net revenues
Operating expenses
Cost of sales (exclusive of depreciation and amortization)
Research and development
Selling, general, and administrative
Depreciation and amortization
Contingent consideration fair value adjustment
Legal settlement expense
Purified Cortrophin Gel pre-launch charges
Restructuring activities
Intangible asset impairment charge
Operating loss
Interest expense, net
Other income/(expense), net
Loss before benefit for income taxes
Benefit for income taxes
Net loss
46
Year Ended
December 31,
2022
316,385
$
2021
216,136
$
138,785
22,318
124,044
56,972
3,758
—
—
5,679
112
(35,283)
(28,052)
670
(62,665)
14,769
(47,896)
$
$
100,610
11,369
84,294
47,252
500
8,750
780
—
2,374
(39,793)
(11,922)
(4,343)
(56,058)
13,455
(42,603)
Table of Contents
The following table sets forth, for the periods indicated, items in our consolidated statements of operations as
a percentage of net revenues.
Net revenues
Operating expenses
Cost of sales (exclusive of depreciation and amortization)
Research and development
Selling, general, and administrative
Depreciation and amortization
Contingent consideration fair value adjustment
Legal settlement expense
Purified Cortrophin Gel pre-launch charges
Restructuring activities
Intangible asset impairment charge
Operating loss
Interest expense, net
Other income/(expense), net
Loss before benefit for income taxes
Benefit for income taxes
Net loss
Results of Operations for the Years Ended December 31, 2022 and 2021
Net Revenues
Year Ended
December 31,
2022
100.0 %
2021
100.0 %
43.9 %
7.1 %
39.2 %
18.0 %
1.2 %
— %
— %
1.8 %
— %
(11.2)%
(8.9)%
0.2 %
(19.9)%
4.7 %
(15.2)%
46.5 %
5.3 %
39.0 %
21.9 %
0.2 %
4.0 %
0.4 %
— %
1.1 %
(18.4)%
(5.5)%
(2.0)%
(25.9)%
6.2 %
(19.7)%
(in thousands)
Generics, Established Brands, and Other Segment
Generic pharmaceutical products
Established brand pharmaceutical products
Contract manufacturing
Royalty and other
Generics, established brands, and other segment total net
revenues
Rare Disease Segment
Rare disease pharmaceutical products
Total net revenues
Year Ended December 31,
2022
2021
Change
% Change
$ 210,121
39,463
16,106
9,009
$ 143,571
47,561
10,042
14,962
$ 66,550
(8,098)
6,064
(5,953)
46.4 %
(17.0)%
60.4 %
(39.8)%
$ 274,699
$ 216,136
$ 58,563
27.1 %
$
41,686
$ 316,385
$
$ 216,136
— $ 41,686
$ 100,249
NM (1)
46.4 %
We derive substantially all of our revenues from sales of generic, established brand, and rare disease pharmaceutical
products, contract manufacturing, royalties on net sales of certain products, and other services, including development
services, and laboratory services. Many of our established brand products as well as our generic products face competition
from generic products and we expect them to continue to face competition from generic products in the future. The primary
means of competition among generic manufacturers are pricing, contract terms, service levels, and reliability. Increased
competition generally results in decreased average selling prices of generic and brand products over time. In addition, due
to strategic partnerships between wholesalers and pharmacy chains, we have experienced, and expect to continue to
experience, increases in net sales to the wholesalers, with corresponding decreases in net sales to the pharmacy chains.
47
Table of Contents
Net revenues for the year ended December 31, 2022 were $316.4 million compared to $216.1 million for the same
period in 2021, an increase of $100.2 million, or 46.4%, primarily as a result of the following factors:
● Net revenues for generic pharmaceutical products were $210.1 million during the year ended December 31, 2022,
an increase of 46.4% compared to $143.6 million for the same period in 2021. From a product perspective, the
increase was principally driven by revenues from products acquired in our acquisition of Novitium, which
increased $70.1 million, including Prazosin, Famotidine, Oxybutynin Chloride, Dapsone, Prednisone Rifabutin,
and various other products. The increase was also due to increased revenues of Nebivolol, which ANI launched in
September 2021. Increases were tempered by a decrease in revenues of Penicillamine, EEMT, Propranolol
Extended Release, and Bexarotene. The increase in net generic revenues was principally due to the acquisition of
Novitium, which drove an increase in volumes, and was tempered by a decrease in average selling prices.
During the year ended December 31, 2022, generic prescriptions have returned to essentially pre-pandemic levels.
During the year ended December 31, 2021, generic prescription levels continued to be suppressed when compared
to pre-pandemic levels, most significantly during the three months ended March 31, 2021, and the revenues for
many of our generic pharmaceutical products continued to be negatively impacted. Per IQVIA/IMS data, total
generic market prescriptions increased sequentially during periods in 2021 and approached pre-pandemic levels
near the end of the year.
● Net revenues for branded pharmaceutical products were $39.5 million during the year ended December 31, 2022,
a decrease of 17.0% compared to $47.6 million for the same period in 2021. From a product perspective, the net
decrease was driven primarily by a decrease in sales of Casodex, InnoPran XL, Inderal XL and Veregen. These
decreases were tempered primarily by an increase in sales of Lipofen, Atacand, and Vancocin. The decrease in
branded pharmaceutical product revenues for the year ended December 31, 2022 was principally due to lower
unit volume sales on key branded products in addition to higher levels of returns and rebates.
As of the end of the 2021 fiscal year, brand prescription levels returned to pre-pandemic levels.
● Contract manufacturing revenues were $16.1 million during the year ended December 31, 2022, an increase of
60.4% compared to $10.0 million for the same period in 2021, due to an increase in the volume of orders,
primarily related to Novitium contract manufacturing revenues in 2022.
● Royalty and other were $9.0 million during the year ended December 31, 2022, a decrease of $6.0 million from
$15.0 million for the same period in 2021, primarily due to the one-time recognition of the final royalty of $11.2
million under the Kite Pharma, Inc. license agreement (Yescarta®) pursuant to the Tripartite Agreement in the
year ended December 31, 2021. Royalty revenue for the year ended December 31, 2022 includes $5.2 million
related to Novitium arrangements.
● Net revenues of rare disease pharmaceutical products, which consists entirely of sales of Purified Cortrophin Gel,
were $41.7 million during the year ended December 31, 2022, as the product was launched in late January 2022.
There were no sales of rare disease pharmaceutical products during 2021.
Cost of Sales (Excluding Depreciation and Amortization)
(in thousands)
Cost of sales (excl. depreciation and amortization)
Year Ended December 31,
2022
$ 138,785
2021
$ 100,610
Change
$ 38,175
% Change
37.9 %
Cost of sales consists of direct labor, including manufacturing and packaging, active and inactive pharmaceutical
ingredients, freight costs, packaging components, and royalties related to profit-sharing arrangements. Cost of sales does
not include depreciation and amortization expense, which is reported as a separate component of operating expenses on our
consolidated statements of operations.
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Table of Contents
For the year ended December 31, 2022, cost of sales increased to $138.8 million from $100.6 million for the same
period in 2021, an increase of $38.2 million or 37.9%. The increase is primarily due to increased volumes of generic
products, including $34.7 million of costs related to activities of Novitium during the year ended December 31, 2022,
compared to $4.0 million in the prior year period, and $5.3 million in costs representing the excess of fair value over cost
for inventory acquired in an asset acquisition and a business combination, of which $3.2 million relates to inventory
acquired from Novitium. Charges for the excess of fair value over cost for inventory acquired in an asset acquisition were
$5.4 million for the comparable period in 2021. Sales of products subject to profit sharing arrangements also accounted for
a $3.0 million increase in the current year period.
Cost of sales as a percentage of net revenues, exclusive of the impacts related to excess of fair value over the cost of
inventory sold during the period, increased to 42.2% during the year ended December 31, 2022, from 43.1% during the
same period in 2021, primarily as a result of increased volumes in a period of declining average selling prices across
generic and brand products, $11.2 million in royalty revenue during the comparable 2021 period with no associated cost of
goods sold, and higher costs related to sales of products subject to profit sharing arrangements.
During the year ended December 31, 2022, we purchased 19% of our inventory from one supplier. As of December 31,
2022, the amount payable to this supplier was $10.9 million. During the year ended December 31, 2021, no single vendor
represented at least 10% of inventory purchases.
Other Operating Expenses
(in thousands)
Research and development
Selling, general, and administrative
Depreciation and amortization
Contingent consideration fair value adjustment
Legal settlement expense
Purified Cortrophin Gel pre-launch charges
Restructuring activities
Intangible asset impairment charge
Total other operating expenses
(1) Not meaningful
Year Ended December 31,
2022
$ 22,318
124,044
56,972
3,758
—
—
5,679
112
$ 212,883
2021
$ 11,369
84,294
47,252
500
8,750
780
—
2,374
$ 155,319
Change
$ 10,949
39,750
9,720
3,258
(8,750)
(780)
5,679
(2,262)
$ 57,564
% Change
96.3 %
47.2 %
20.6 %
NM (1)
(100.0)%
(100.0)%
NM (1)
NM (1)
37.1 %
For the year ended December 31, 2022, other operating expenses increased to $212.9 million from $155.3 million for
the same period in 2021, an increase of $57.6 million, or 37.1%, primarily as a result of the following factors:
● Research and development expenses increased from $11.4 million to $22.3 million, an increase of 96.3%,
primarily due to expenses related to Novitium activities during the year ended December 31, 2022, in-process
research and development charges of $1.2 million recognized in the current year, tempered by a $1.5 million
decrease in expense associated with our Cortrophin development efforts due to approval of the launch of the
product.
● Selling, general, and administrative expenses increased from $84.3 million to $124.0 million, an increase of
47.2%, primarily due to a $37.6 million increase in sales and marketing expenses related to our launch of Purified
Cortrophin Gel, increases related to the addition of Novitium headcount and activities during the year ended
December 31, 2022, tempered by a $8.1 million decrease in transaction expenses related to the Novitium
acquisition.
● Depreciation and amortization expense was $57.0 million for the year ended December 31, 2022, compared to
$47.3 million for the year ended December 31, 2021. The increase is primarily due to the amortization of
intangible assets acquired in the Novitium acquisition.
● As described in Note 9, Fair Value Disclosures, in the notes to the consolidated financial statements included in
Part II, Item 8. of this Annual Report on Form 10-K, we recognized a contingent consideration fair value
49
Table of Contents
adjustment related to the Novitium acquisition of $3.8 million and $0.5 million in the year ended December 31,
2022 and 2021, respectively. The expense is principally due to the passage of time (i.e. moving closer to the
ultimate payment date of the consideration, rather than the change in any other variables).
● As described in Note 13, Commitments and Contingencies, in the notes to the consolidated financial statements
included in Part II, Item 8. of this Annual Report on Form 10-K, we recognized legal settlement expense of $8.8
million in the year ended December 31, 2021, principally related to settlement of the Arbor matter. No legal
settlement expenses were recognized in the year ended December 31, 2022.
● As described in Note 14, Purified Cortrophin Gel Pre-Launch Charges, in the notes to the consolidated financial
statements in Part II, Item 8. of this Annual Report on Form 10-K, we recognized Cortrophin pre-launch charges
related to purchases of materials of $0.8 million in the year ended December 31, 2021. No Cortrophin pre-launch
charges related to purchases of materials were recognized in the year ended December 31, 2022.
● We recognized restructuring activities of $5.7 million of expense in the year ended December 31, 2022, in
relation to the anticipated closure of our Oakville, Ontario, Canada facility. Costs included $2.1 million in
termination benefits, $3.1 million in fixed asset impairments and accelerated depreciation, and $0.4 million of
other costs. No restructuring activities were recognized in the year ended December 31, 2021.
● We recognized an impairment of $0.1 million in the year ended December 31, 2022, in relation to an ANDA
asset. We recognized an impairment of $2.4 million in the year ended December 31, 2021, in relation to an
ANDA asset.
Other Expense, net
(in thousands)
Interest expense, net
Other income/(expense), net
Total other expense, net
Year Ended December 31,
2022
$ (28,052)
670
$ (27,382)
2021
$ (11,922)
(4,343)
$ (16,265)
Change
% Change
$ (16,130)
5,013
$ (11,117)
135.3 %
(115.4)%
68.3 %
For the year ended December 31, 2022, we recognized other expense, net of $27.4 million versus other expense, net of
$16.3 million for the same period in 2021, an increase of $11.1 million. Interest expense, net for 2022 consisted primarily
of interest expense on our Term Facility. Interest expense, net for 2021 consisted primarily of interest expense on our Term
Loan, DDTL, and Revolver under our Prior Credit Facility, and interest expense on our new Term Facility subsequent to
the termination of our Prior Credit Facility and entry into new Credit Facility on November 19, 2021. The increase in
interest expense is due to an increase in the debt outstanding during the year ended December 31, 2022, coupled with an
increased borrowing rate on the $300.0 million Term Facility, as compared to the borrowing rate on the Prior Credit
Agreement borrowings and an increase in amortization of finance fees. The $5.0 million change in other income/(expense),
net is primarily related to the $0.8 million gain on the sale of an ANDA in the year ended December 31, 2022 and the non-
recurrence of $4.2 million ticking fee expense related to our Credit Facility that was syndicated on May 24, 2021, a $1.5
million loss on the extinguishment of debt related to our Prior Credit Facility, and $1.8 million in net gains on the sale of
ANDAs in the year ended December 31, 2021. For the year ended December 31, 2022 and 2021, there was $0.1 million of
interest capitalized into construction in progress.
Benefit for Income Taxes
(in thousands)
Benefit for income taxes
Year Ended December 31,
2022
14,769
2021
13,455
$
$
Change
% Change
$
1,314
9.8 %
50
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Our benefit for income taxes consists of current and deferred components, which include changes in our deferred tax
assets, our deferred tax liabilities, and our valuation allowance. We measure our deferred tax assets and liabilities using the
tax rates that we believe will apply in the years in which the temporary differences are expected to be recovered or paid.
See Note 12. Income Taxes, in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on
Form 10-K for further information.
For the year ended December 31, 2022, we recognized an income tax benefit of $14.8 million, an effective benefit rate
of 23.6% of consolidated pre-tax losses reported in the period, as well as the net effects of certain discrete items occurring
in 2022 which impact our income tax provision in the period in which they occur. There were no material discrete items
occurring during the year ended December 31, 2022.
For the year ended December 31, 2021, we recognized an income tax benefit of $13.5 million, an effective benefit rate
of 24.0% of consolidated pre-tax losses reported in the period. Our effective tax rate for 2021 was impacted by changes in
state tax rates due to our increased presence in certain states, certain non-deductible expenses, and the impact of current
period stock-based compensation, among other items.
Liquidity and Capital Resources
The following table highlights selected liquidity and working capital information from our consolidated balance
sheets.
(in thousands)
Cash and cash equivalents
Current restricted cash
Accounts receivable, net
Inventories, net
Prepaid income taxes
Assets held for sale
Prepaid expenses and other current assets
Total current assets
Current debt, net of deferred financing costs
Accounts payable
Accrued expenses and other
Accrued royalties
Accrued compensation and related expenses
Accrued government rebates
Returned goods reserve
Deferred revenue
Total current liabilities
$
December 31,
2022
48,228
5,006
165,438
105,355
3,827
8,020
8,387
344,261
$
$
December 31,
2021
100,300
—
128,526
81,693
3,667
—
7,589
321,775
$
$
$
850
29,305
5,394
9,307
10,312
10,872
33,399
—
$
99,439
$
850
22,967
7,563
6,225
8,522
5,492
35,831
87
87,537
On December 31, 2022, we had $48.2 million in unrestricted cash and cash equivalents. On December 31, 2021, we
had $100.3 million in unrestricted cash and cash equivalents. In 2022 and 2021, we invested in leadership, expertise, and
infrastructure in the areas of commercialization of rare disease therapies and in 2022 commercialized our Cortrophin Gel
product.
In 2021, we financed the acquisition of Novitium in part with borrowings under the Credit Facility described below
under “Sources and Uses of Cash – Debt Financing,” and by a $25.0 million PIPE Investment by Ampersand 2020 Limited
Partnership (“Ampersand”).
We are focused on expanding our business and product pipeline through collaborations, and also through acquisitions
of products and companies. We are continually evaluating potential asset acquisitions and business combinations. To
finance such acquisitions, we might raise additional equity capital, incur additional debt, or both.
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Our working capital ratio, defined as total current assets divided by total current liabilities, is 3.5 as of December 31,
2022. Despite a use of cash of $31.2 million by operating activities, we believe that our financial resources, consisting of
net current working capital of approximately $244.8 million, anticipated future operating revenue and corresponding
collections from customers, and our Credit Facility, under which $40.0 million remains available for borrowing as of
December 31, 2022, will be sufficient to enable us to meet our working capital requirements and debt obligations for at
least the next 12 months. If our assumptions underlying estimated revenue and expenses are wrong, or if our cash
requirements change materially as a result of shifts in our business or strategy, we could require additional financing. If we
are not profitable or do not generate cash from operations as anticipated and additional capital is needed to support
operations, we may be unable to obtain such financing, or obtain it on favorable terms, in which case we may be required
to curtail development of new products, limit expansion of operations, or accept financing terms that are not as attractive as
desired.
Consolidation among wholesale distributors, chain drug stores, and group purchasing organizations has resulted in a
smaller number of companies each controlling a larger share of pharmaceutical distribution channels. Our net revenues
were concentrated among three customers representing 26%, 18%, and 15% of net revenues during the year ended
December 31, 2022. As of December 31, 2022 accounts receivable from these three customers totaled approximately 82%
of accounts receivable, net. Our net revenues were concentrated among three customers representing 29%, 23%, and 16%
of net revenues during the year ended December 31, 2021. As a result, negotiated payment terms with these customers
have a material impact on our liquidity and working capital.
Our Cortrophin Gel product accounted for approximately 13% of our net revenues in 2022. None of our products
accounted for 10% or more of our net revenues in 2021.
Sources and Uses of Cash
Debt Financing
On November 19, 2021, the Company, as borrower, entered into a credit agreement (the “Credit Agreement”) with
Truist Bank and other lenders, which provides for credit facilities consisting of (i) a senior secured term loan facility in an
aggregate principal amount of $300.0 million (the “Term Facility”) and (ii) a senior secured revolving credit facility in an
aggregate commitment amount of $40.0 million, which may be used for revolving credit loans, swingline loans and letters
of credit (the “Revolving Facility,” and together with the Term Facility, the “Credit Facility”). The Credit Facility is
secured by substantially all our assets and the assets of our domestic subsidiaries.
The Term Facility proceeds were used to finance the cash portion of the consideration for the Novitium acquisition,
repay borrowings under our Prior Credit Agreement, and pay fees, costs and expenses incurred in connection with the
acquisition of Novitium. Proceeds from the Revolving Facility are expected to be used, subject to certain limitations, for
working capital and other general corporate purposes.
The Term Facility matures in November 2027 and the Revolving Facility in November 2026. Each permits both base
rate borrowings (“ABR Loans”) and Eurodollar rate borrowings (“Eurodollar Loans”), plus a spread of (a) 5.00% above
the base rate in the case of ABR Loans under the Term Facility and 6.00% above the LIBOR Rate (or alternate benchmark
rate as defined in the Credit Agreement, which includes a floor of 0.75%) in the case of loans under the Term Facility and
(b) 3.75% above the base rate in the case of ABR Loans under the Revolving Facility and 4.75% above the LIBOR Rate
(as defined in the Credit Agreement) in the case of loans under the Revolving Facility. The Credit Facility has a subjective
acceleration clause in case of a material adverse effect. The Term Facility includes a repayment schedule, pursuant to
which $750 thousand of the loan will be paid in quarterly installments during the 12 months ending December 31, 2023. As
of December 31, 2022, $3.0 million of principal of the loan was recorded as current borrowings, net of deferred financing
costs, in the consolidated balance sheet. As of December 31, 2022, we had not drawn on the Revolving Facility and $40.0
million remained available for borrowing subject to certain conditions.
Equity Financing
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Concurrently with the execution of the merger agreement related to the Novitium acquisition, on March 8, 2021, we
entered into that certain Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership (the
“PIPE Investor”) pursuant to which, on November 19, 2021, we issued and sold to the PIPE Investor, and the PIPE
Investor purchased, 25,000 shares of our Series A Convertible Preferred Stock, for a purchase price of $1,000 per share and
an aggregate purchase price of $25.0 million, in a private placement issued in reliance on the exemption from registration
provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.
In November 2021, through a public offering, we completed the issuance and sale of 1,500,000 shares of ANI common
stock, resulting in net proceeds after issuance costs of $69.7 million. The proceeds are being used to fund our Purified
Cortrophin Gel commercialization efforts, including sales and marketing and consulting expenses related thereto, and for
general corporate purposes.
Customer Payments
In addition to the financings in prior years, payments from customers are a significant source of cash in 2022, 2021,
and 2020 and were our primary source of cash in 2022 and 2021.
Uses of Cash
Our primary cash requirements are to fund operations, including Purified Cortrophin Gel commercialization efforts,
research and development programs and collaborations, to support general and administrative activities, to purchase
equipment and machinery to expand our manufacturing capabilities as our product lines grow, and to expand our business
and product pipeline through acquisitions of products and companies. We are continually evaluating potential asset
acquisitions and business combinations. Our future capital requirements will depend on many factors, including, but not
limited to:
● product mix and pricing for product sales and contract manufacturing;
● pricing and payment terms with customers;
● costs of raw materials and payment terms with suppliers;
● capital expenditures and equipment purchases to support product launches; and
● business and product acquisitions.
On November 19, 2021, we completed our previously announced acquisition of all of the interests of Novitium
pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”), dated as of March 8, 2021, for cash
consideration, 2,466,654 restricted shares of our common stock valued at $91.2 million based on our closing stock price of
$43.54 on the date of closing and discounted for lack of marketability due to restrictions on shares, and up to $46.5 million
in additional contingent consideration. Additionally, we agreed to pay certain debts of Novitium in the amount of $8.5
million, which we deemed to be paid in consummation of the transaction closing, and not assumed liabilities, and thus were
included as additional cash consideration. This acquisition was accounted for as a business combination. The contingent
consideration is based on the achievement of certain milestones, including milestones on gross profit of Novitium portfolio
products over a 24-month period, regulatory filings completed during this 24-month period, and a percentage of net profits
on certain products that are launched in the future. As of the closing of the acquisition, the contingent consideration had a
fair value of $30.8 million. Refer to Note 9 for changes in contingent consideration and changes in fair value. Total
consideration including cash, restricted shares and contingent consideration was valued at $206.5 million.
In connection with entry into the Credit Facility, on November 19, 2021, we terminated our existing Amended and
Restated Credit Agreement, dated as of December 27, 2018 (the “Prior Credit Agreement”), among the Company, as
borrower, and Citizens Bank with other lenders. In connection with the termination of the Prior Credit Agreement, on
November 19, 2021, we used borrowings under the Credit Facility to prepay the full amount of indebtedness under the
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Prior Credit Agreement, and to pay related accrued and unpaid interest, legal fees, and expenses. We made a reacquisition
payment of $200.1 million, representing the remaining principal balance on the debt of $200.1 million plus certain legal
fees.
In the second quarter 2021, we drew $24.0 million under the Revolver of our Prior Credit Agreement, of which $20.7
million was used to fund the acquisition of three NDAs and an ANDA and certain related inventories from Sandoz Inc. In
the third quarter 2021, we utilized $8.4 million of cash on hand to settle litigation with Arbor.
Discussion of Cash Flows
The following table summarizes the net cash and cash equivalents provided by/(used in) operating activities, investing
activities and financing activities for the periods indicated:
(in thousands)
Operating Activities
Investing Activities
Financing Activities
Net Cash (Used in) / Provided by Operating Activities
Year Ended December 31,
2022
(31,203)
(15,738)
(5,126)
$
$
$
2021
3,322
(105,483)
194,595
$
$
$
Net cash used in operating activities was $31.2 million for the year ended December 31, 2022, compared to $3.3
million provided by operating activities during the same period in 2021, a change of $34.5 million. The use of cash was
driven by our net loss and changes in working capital, including increases to accounts receivable and inventory of $31.4
million and $26.9 million, respectively, since December 31, 2021, due in part to a number of new product launches during
the year ended December 31, 2022.
Net Cash Used in Investing Activities
Net cash used in investing activities for the year ended December 31, 2022 was $15.7 million, principally due to the
acquisition of four ANDAs from Oakrum Pharma LLC for $8.0 million consisting of $7.2 million of cash and $0.8 million
of other consideration, and $8.9 million of capital expenditures partially offset by $0.8 million proceeds from sale of long-
lived assets during the period.
Net Cash (Used in) / Provided by Financing Activities
Net cash used in financing activities was $5.1 million for the year ended December 31, 2022 compared to $194.6
million in cash provided by financing activities for the year ended December 31, 2021, principally due to the $3.0 million
maturity payments on the Term Facility, $2.0 million of treasury stock purchased in relation to restricted stock vests, and
$1.6 million convertible stock dividends paid.
Contractual Obligations
We believe our available cash and cash equivalents along with our ability to generate operating cash flow and
continued access to debt markets are sufficient to fund existing and planned cash requirements. Our contractual obligations
and commitments as of December 31, 2022 are comprised of principal payments on debt, interest payments on debt,
operating leases, purchase obligations, dividends, and contingent consideration.
Our largest contractual obligation relates to our principal payments on our interest payments on our debt. As of
December 31, 2022, the principal amount of our Term Facility was $297.0 million. The interest rate on our Term Facility is
currently 1-month LIBOR plus 6.00%, subject to a 0.75% floor. The interest rate under the Term Facility as of December
31, 2022 is 6.75%. See Note 4, Indebtedness, in the notes to the consolidated financial statements in Part II, Item 8. of this
Annual Report on Form 10-K for additional information and timing on our principal payments on debt. We also have an
interest rate swap used to manage changes in LIBOR-based interest rates underlying a portion of the
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borrowing under the Term Facility. Under the swap agreement, ANI pays the counterparty a fixed rate of 2.26% and
receives variable 1-month LIBOR, subject to a 0.75% floor, on the outstanding notional value. As of December 31, 2022,
the notional value of the interest rate swap was $151.5 million. See Note 5, Derivative Financial Instruments and Hedging
Activity, in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for
additional information.
Our operating leases are for facilities and office equipment. As leases expire, we do not anticipate difficulty in
negotiating renewals or finding other satisfactory space if the premise becomes unavailable. See Note 13, Commitments
and Contingencies, in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on
Form 10-K for additional discussion and timing of payments related to these operating lease obligations.
Purchase obligations primarily includes contractual obligation for inventory/material purchase minimums and service
agreements. We have a supply agreement with one vendor that includes purchase minimums. Pursuant to this agreement,
we will be required to purchase a total of $0.1 million of API from this vendor during the year ended December 31, 2023.
Most of our other purchase obligations are related to purchases of information technology services, marketing
arrangements, or other service contracts.
Our convertible preferred stock (“PIPE Shares”) also accrue dividends at 6.50% per year on a cumulative basis,
payable in cash or in-kind. Dividends are payable until the preferred stock is converted, either at the option of the PIPE
investor, at any time, or the option of ANI, beginning two years after the November 19, 2021 issuance provided ANI’s
stock price reaches a certain level. See Note 10, Mezzanine and Stockholders’ Equity, in the notes to the consolidated
financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional discussion of dividends.
Consideration of the Novitium acquisition includes $46.5 million in contingent future earn-out payments. The
contingent consideration is based on the achievement of certain milestones, including milestones on gross profit of
Novitium portfolio products over a 24-month period, regulatory filings completed during this 24-month period, and a
percentage of net profits on certain products that are launched in the future. Payments of $25.0 million would be due if
gross profit and regulatory milestones are achieved by November 30, 2023, and up to $21.5 million of payments may be
made for up to ten years based on a percentage of net profits on products launched in the future. See Note 2, Business
Combination, in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K
for additional information on our contingent consideration.
We expect to continue to incur significant expenditures in support of our commercial launch of Cortrophin, including
costs related to service contracts and increased headcount.
Critical Accounting Estimates
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our
consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues
and expenses during the reporting period. The SEC has defined a company’s critical accounting policies as the ones that are
most important to the portrayal of the company’s financial condition and results of operations, and which require the
company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that
are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments
addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and
assumptions that are significant to understanding our results.
Our significant accounting policies are discussed in Note 1. Description of Business and Summary of Significant
Accounting Policies, in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on
Form 10-K. On an ongoing basis, we evaluate these estimates and assumptions, including those described below. We base
our estimates on historical experience and on various other assumptions that we believe to be reasonable under the
circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets
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and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Due to the
estimation processes involved, the following summarized accounting policies and their application are considered to be
critical to understanding our business operations, financial condition, and operating results.
Revenue Recognition
We recognize revenue using the following steps:
● Identification of the contract, or contracts, with a customer;
● Identification of the performance obligations in the contract;
● Determination of the transaction price, including the identification and estimation of variable consideration;
● Allocation of the transaction price to the performance obligations in the contract; and
● Recognition of revenue when we satisfy a performance obligation.
We derive our revenues primarily from sales of generic and branded pharmaceutical products. Revenue is recognized
when our obligations under the terms of our contracts with customers are satisfied, which generally occurs when control of
the products we sell is transferred to the customer. We estimate variable consideration after considering applicable
information that is reasonably available. We generally do not have incremental costs to obtain contracts that would
otherwise not have been incurred. We do not adjust revenue for the promised amount of consideration for the effects of a
significant financing component because our customers generally pay us within 100 days.
Our revenue recognition accounting methodologies contain uncertainties because they require management to make
assumptions and to apply judgment to estimate the amount of discounts, rebates, promotional adjustments, price
adjustments, returns, chargebacks, and other potential adjustments, which are accounted for as reductions to revenue. We
make these estimates based on historical experience. In addition, for our product development services revenue, we
recognize revenue on a percentage of completion basis, which requires judgments related to how much work has been
completed on various components our projects.
Revenue from Sales of Generic and Branded Pharmaceutical Products
Product sales consists of sales of our generic and brand pharmaceutical products. Our sole performance obligation in
our contracts is to provide pharmaceutical products to customers. Our products are sold at pre-determined standalone
selling prices and our performance obligation is considered to be satisfied when control of the product is transferred to the
customer. Control is generally transferred to the customer upon delivery of the product to the customer, as our
pharmaceutical products are generally sold on an FOB destination basis and because inventory risk and risk of ownership
passes to the customer upon delivery. Payment terms for these sales are generally fewer than 100 days. We recognized
$249.6 million and $191.1 million of revenue related to sales of generic and branded pharmaceutical products in 2022 and
2021, respectively.
Revenue from Distribution Agreements
From time to time, we enter into marketing and distribution agreements with third parties in which we sell products
under ANDAs or NDAs owned or licensed by these third parties. These products are sold under our own label. We have
assessed and determined that we control the products sold under these marketing and distribution agreements and therefore
are the principal for sales under each of these marketing and distribution agreements. As a result, we recognize revenue on
a gross basis when control has passed to the customer and we have satisfied our performance obligation. Under these
agreements, we pay these third parties a specified percentage of the gross profit earned on sales of the products. These
profit-sharing percentages are recognized in cost of sales in our consolidated statements of operations and are accrued in
accrued royalties in our consolidated balance sheets until payment has occurred.
Chargebacks
As discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, we estimate the amount of
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chargebacks based our actual historical experience. A number of factors influence current period chargebacks by impacting
the average selling price (“ASP”) of products, including customer mix, negotiated terms, volume of off-contract purchases,
and wholesale acquisition cost (“WAC”).
If actual results were not consistent with our estimates, we could be exposed to losses or gains that could be material,
as changes to chargeback estimates could cause an increase or decrease in revenue recognized during the year and increase
or decrease accounts receivable. If there were a 10% change in the chargeback estimates throughout the year, our net
revenues would be affected by $64.2 million for the year ended December 31, 2022.
Government Rebates
As discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, our estimates for government
rebates are based upon several factors. Our estimates for Medicaid rebates are based upon our average manufacturer price,
best price, product mix, levels of inventory in the distribution channel that we expect to be subject to Medicaid rebates, and
historical experience, which are invoiced in arrears by state Medicaid programs. Our estimates for Medicare rebates are
based on historical experience. While such experience has allowed for reasonable estimation in the past, history may not
always be an accurate indicator of future rebate experience, and trends in Medicaid and Medicare enrollment and which
products are covered by Medicaid and Medicare could change.
If actual results were not consistent with our estimates, we could be exposed to losses or gains that could be material,
as changes to government rebate estimates could cause an increase or decrease in revenue recognized during the year and
decrease or increase the government rebate reserve. If there were a 10% change in the government rebate estimates
throughout the year, our net revenues would be affected by $2.1 million for the year ended December 31, 2022.
Returns
As discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, our estimate for returns is based
upon our historical experience with actual returns. While such experience has allowed for reasonable estimation in the past,
history may not always be an accurate indicator of future returns.
If actual results were not consistent with our estimates, we could be exposed to losses or gains that could be material,
as changes to returns estimates could cause an increase or decrease in revenue recognized during the year and decrease or
increase the returned goods reserve. If there were a 10% change in the returns estimates throughout the year, our net
revenues would be affected by $2.3 million for the year ended December 31, 2022.
Administrative Fees and Other Rebates
As discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, we accrue for fees and rebates by
product by wholesaler, at the time of sale based on contracted rates, ASPs, and on-hand inventory counts obtained from
wholesalers.
If actual results were not consistent with our estimates, we could be exposed to losses or gains that could be material,
as changes to these estimates could cause an increase or decrease in revenue recognized during the year and increase or
decrease accounts receivable. If there were a 10% change in the administrative fees estimates throughout the year, our net
revenues would be affected by $4.2 million for the year ended December 31, 2022.
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Prompt Payment Discounts
As discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, we reserve for sales discounts
based on invoices outstanding, assuming, based on past experience, that 100% of available discounts will be taken.
If customers do not take 100% of available discounts as we estimate, we could need to re-adjust our methodology for
calculating the prompt payment discount reserve. If there were a 10% decrease in the prompt payment discounts estimates
throughout the year, our net revenues would increase by $2.1 million for the year ended December 31, 2022.
Contract Manufacturing Product Sales Revenue
Contract manufacturing arrangements consist of agreements in which we manufacture a pharmaceutical product on
behalf of third party. Our performance obligation is to manufacture and provide pharmaceutical products to customers,
typically pharmaceutical companies. The contract manufactured products are sold at pre-determined standalone selling
prices and our performance obligations are considered to be satisfied when control of the product is transferred to the
customer. Control is transferred to the customer when the product leaves our dock to be shipped to the customer, as our
contract manufacturing products are sold on an FOB shipping point basis and the inventory risk and risk of ownership
passes to the customer at that time. Payment terms for these sales are generally fewer than two months. We estimate returns
based on historical experience. Historically, we have not had material returns for contract manufactured products. We
recognized $16.1 million and $10.0 million of revenue related to sales of contract manufactured products in 2022 and
2021, respectively.
Royalties from Licensing Agreements
From time to time, we enter into transition agreements with the sellers of products we acquire, under which we license
to the seller the right to sell the acquired products. Therefore, we recognize the revenue associated with sales of the
underlying products as royalties. Because these royalties are sales-based, we recognize the revenue when the underlying
sales occur, based on sales and gross profit information received from the sellers. Upon full transition of the products and
upon launching the products under our own labels, we recognize revenue for the products as sales of generic or branded
pharmaceutical products, as described above. From time to time, we enter into supply and distribution agreements with
contract manufacturing customers, under which we license to the contract manufacturing customer the right to sell our
products, and we are entitled to a royalty on sales made by the contract manufacturing customer under these arrangements.
Therefore, we recognize the revenue associated with sales of the underlying products as royalties. Because these royalties
are sales-based, we recognize the revenue when the underlying sales occur, based on sales and gross profit information
received from the contract manufacturing customers.
Pursuant to a 2012 Tripartite Agreement (the “Tripartite Agreement”) between the Company, The Regents of the
University of California (“The Regents”), and Cabaret Biotech Ltd., an Israeli corporation (“Cabaret”) (as assignee of Dr.
Zelig Eshhar’s rights under the Tripartite Agreement), and subsequent amendments thereto and assignments thereof, we
were entitled to receive a percentage of the milestone and sales royalty payments paid to Cabaret by Kite Pharma, Inc.
(“Kite”), a subsidiary of Gilead Sciences, Inc., under a license agreement. Under such license agreement, Kite licensed
from Dr. Eshhar and Cabaret the patent rights covered by the Tripartite Agreement and agreed to make certain payments to
Cabaret based on, among other things, Kite’s sales of Yescarta®. Under the Tripartite Agreement, portions of these
payments were to be distributed to The Regents and to us.
Historically, we recorded royalty income related to Yescarta® on an accrual basis utilizing our best estimate of
royalties earned based upon information available in the public domain, our understanding of the various agreements
governing the royalty, and other information received from time to time from the relevant parties. Generally, cash was
received directly from Cabaret once a year. The agreements governing this royalty were subject to multiple actions in
multiple jurisdictions, including litigation between Cabaret and Kite, and separately, ANI and Cabaret. In the first quarter
of 2021, we became aware that the litigation between Cabaret and Kite was dismissed. In April 2021, Cabaret and the
Company settled all amounts due for amounts actually received by Cabaret or Eshhar for the licensing or use of the patent
rights governed by the Kite license agreement. As a result, we recognized $11.2 million as royalties from
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licensing agreements in our net revenues during the three month period ended March 31, 2021. In addition, during the three
month period ended March 31, 2021, we agreed to reimburse Cabaret $0.4 million, which has been recorded as other
expense, net in the accompanying unaudited interim condensed consolidated statement of operations, related to certain
legal expenditures incurred. We received final payment from Cabaret in May 2021. Based upon the events that led to the
dismissal of the litigation between Cabaret and Kite, we do not expect to receive any future royalty income related to the
Kite license agreement. In conjunction with payment of amounts due to us, all outstanding litigation between the Company
and Cabaret was dismissed.
Product Development Services Revenue
We provide product development services to customers, which are performed over time. These are services primarily
performed at our facility in East Windsor, New Jersey. As we intend to cease operations at the Oakville, Ontario facility by
the first quarter of 2023, we have transitioned the product development services at the facility to one of our three U.S.-
based manufacturing sites.
The duration of these technical transfer projects can be up to three years. Deposits received from these customers are
recorded as deferred revenue until revenue is recognized. For contracts with no deposits and for the remainder of contracts
with deposits, we invoice customers as our performance obligations are satisfied. We recognize revenue on a percentage of
completion basis, which results in contract assets on our balance sheet. We recognize revenue on a proportional basis,
which results in contract assets on our balance sheet. We recognized $2.9 million and $1.3 million of revenue related to
product development services in 2022 and 2021, respectively.
Intangible Assets
As discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, our definite-lived intangible
assets have a carrying value of $225.1 million as of December 31, 2022. These assets include ANDAs, NDAs and product
rights, marketing and distribution rights, customer relationships, and a non-compete agreement. These intangible assets
were originally recorded at fair value for business combinations and at relative fair value based on the purchase price for
asset acquisitions and are stated net of accumulated amortization. During the third quarter of 2022, we added $7.2 million
in ANDA intangible assets related to the July 21, 2022 transaction with Oakrum Pharma, LLC. These assets will be
amortized over a seven-year useful life.
The ANDAs, NDAs and product rights, marketing and distribution rights, customer relationships, and non-compete
agreement are amortized over their remaining estimated useful lives, ranging from seven to 10 years, generally based on
the straight-line method unless a pattern reflecting consumption of their economic benefits is readily available. The
estimated useful lives directly impact the amount of amortization expense recorded for these assets on a quarterly and
annual basis.
We test for impairment of definite-lived intangible assets when events or circumstances indicate that the carrying value
of the assets may not be recoverable. Judgment is used in determining when these events and circumstances arise. If we
determine that the carrying value of the assets may not be recoverable, judgment and estimates are used to assess the fair
value of the assets and to determine the amount of any impairment loss. If the fair value of an intangible asset is
determined to be lower than its carrying value, we could be exposed to an impairment charge that could be material.
Our indefinite-lived intangible assets other than goodwill have a carrying value of $26.6 million as of December 31,
2022. These assets include in-process research and development projects (“IPR&D”) acquired in the Novitium acquisition.
When an IPR&D project is completed (generally upon receipt of regulatory approval), the asset is then accounted for as a
definite-lived intangible asset. During the year ended December 31, 2022, $20.3 million was reclassified from IPR&D to
ANDA intangible assets upon completion of projects and launch of related products.
We test for impairment of indefinite-lived intangible assets at least annually, as of October 31, and whenever events or
changes in circumstances indicate that the carrying amount of the asset might not be recoverable. Judgment is used in
determining when these events and circumstances arise. If we determine that the carrying value of the assets may not be
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recoverable, judgment and estimates are used to assess the fair value of the assets and to determine the amount of any
impairment loss.
If the fair value of an intangible asset is determined to be lower than its carrying value, we could be exposed to an
impairment charge that could be material. During the year ended December 31, 2022, we recognized a full impairment of a
definite-lived ANDA asset with a remaining carrying value of $0.1 million. During the year ended December 31, 2021, we
recognized a full impairment of a definite-lived ANDA asset with a remaining carrying value of $2.4 million.
Goodwill
As discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, in the notes to the
consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, our goodwill balance relates to
our 2013 merger with BioSante Pharmaceuticals, Inc., the acquisition of WellSpring, and the acquisition of Novitium and
represents the excess of the total purchase consideration over the fair value of acquired assets and assumed liabilities, using
the purchase method of accounting. Goodwill is not amortized, but is subject to periodic review for impairment. As a
result, the amount of goodwill is directly impacted by the estimates of the fair values of the assets acquired and liabilities
assumed.
Goodwill is tested for impairment annually, as of October 31, and whenever events or changes in circumstances
indicate that the carrying amount of the goodwill might not be recoverable. Judgment is used in determining when these
events and circumstances arise. We perform our review of goodwill on our one reporting unit. If we determine that the
carrying value of the assets may not be recoverable, judgment and estimates are used to assess the fair value of the assets
and to determine the amount of any impairment loss.
The carrying value of goodwill at December 31, 2022 was $28.2 million. As part of the Novitium acquisition on
November 19, 2021, we acquired goodwill of $24.6 million. We believe it is unlikely that there will be a material change in
the future estimates or assumptions used to test for impairment losses on goodwill. However, if actual results are not
consistent with our estimates or assumptions, we could be exposed to an impairment charge that could be material.
Contingent Consideration
The fair value of our contingent consideration was $35.1 million and $31.0 million at December 31, 2022 and 2021,
respectively. The fair value of contingent consideration is remeasured to the estimated fair value each reporting period with
the change recognized as an operating expense in our consolidated statements of operations. Changes in fair value can
result from changes in assumptions such as discount rates, probabilities or estimates of revenue and profits, and probability
of achieving regulatory milestones, as well as the passage of time. These changes resulted in charges of $3.8 million and
$0.5 million during the years ended December 31, 2022 and 2021, respectively.
Stock-Based Compensation
Our Amended and Restated 2022 Stock Incentive Plan (the “2022 Plan”) includes stock options and restricted stock,
which are awarded in exchange for employee and non-employee director services. In July 2016, we commenced
administration of our Employee Stock Purchase Plan (“ESPP”). We recognize the estimated fair value of stock-based
awards and classify the expense where the underlying salaries are classified.
From time to time, we may grant stock options to employees through an inducement grant outside of our 2022 Plan to
induce prospective employees to accept employment with us (the “Inducement Grants”). The options are granted at an
exercise price equal to the fair market value of a share of our common stock on the respective grant date and are generally
exercisable in four equal annual installments beginning on the first anniversary of the respective grant date. The grants are
made pursuant to inducement grants outside of our stockholder approved equity plan as permitted under the Nasdaq Stock
Market listing rules.
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The following table summarizes stock-based compensation expense incurred under the Stock Incentive Plan,
Inducement Grant, and 2016 Employee Stock Purchase Plan and included in our consolidated statements of operations:
(in thousands)
Cost of sales
Research and development
Selling, general, and administrative
Years Ended December 31,
2021
2022
$
$
532
751
13,316
14,599
$
20
564
9,905
$ 10,489
$
$
2020
137
597
12,202
12,936
Stock-based compensation cost for stock options is determined at the grant date using an option pricing model and
stock-based compensation cost for restricted stock is based on the closing market price of the stock at the grant date. The
value of the award is recognized as expense on a straight-line basis over the employee’s requisite service period.
Valuation of stock awards requires us to make assumptions and to apply judgment to determine the fair value of the
awards. These assumptions and judgments include estimating the future volatility of our stock price and dividend yields.
Changes in these assumptions can affect the fair value estimate.
Changes in estimates could affect compensation expense within individual periods. If there were to be a 10% change
in our stock-based compensation expense for the year, our Loss before Benefit for Income Taxes would be affected by $1.5
million for the year ended December 31, 2022.
Income Taxes
We use the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.
We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. We have not identified any uncertain income
tax positions that could have a material impact to the consolidated financial statements. We are subject to taxation in
various U.S. jurisdictions, Canada, and India and remain subject to examination by taxing jurisdictions for the years 1998
and all subsequent periods due to the availability of net operating loss carryforwards. To the extent we prevail in matters
for which a liability has been established, or are required to pay amounts in excess of our established liability, our effective
income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement generally
would require use of our cash and may result in an increase in our effective income tax rate in the period of resolution. A
favorable tax settlement may reduce our effective income tax rate and would be recognized in the period of resolution.
We consider potential tax effects resulting from discontinued operations and gains and losses included in other
comprehensive income and record intra-period tax allocations, when those effects are deemed material. Our effective
income tax rate is also affected by changes in tax law, our level of earnings, and the results of tax audits.
Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and
we may be exposed to losses or gains that could be material.
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Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
In December 2022, the Financial Accounting Standards Board issued ASU 2022-06, which extended the sunset date of
the reference rate reform in ASU 848 from December 31, 2022, to December 31, 2024. We have not adopted the guidance
and are currently evaluating the impact, if any, that the adoption of this guidance will have on our
consolidated financial statements.
We have evaluated all other issued and unadopted Accounting Standards Updates and believe the adoption of these
standards will not have a material impact on our consolidated statements of operations, comprehensive income, balance
sheets, or cash flows.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risks include interest rate risk, equity risk, foreign currency exchange rate risk, commodity price risk, and other
relevant market rate or price risks. Of these risks, interest rate risk, equity risk, and foreign currency exchange rate risk
could have a significant impact on our results of operations.
On November 19, 2021, we entered into the Credit Agreement, which is secured by substantially all of the personal
property and certain material real property owned by ANI and our wholly-owned domestic subsidiaries, and obligations
under the Credit Agreement are guaranteed by certain of our wholly-owned domestic subsidiaries.
The Term Facility proceeds were used to finance a portion of the consideration for the Novitium acquisition, repay our
existing credit facility, and pay fees, costs and expenses incurred in connection with the acquisition. Proceeds from the
Revolving Facility are expected to be used, subject to certain limitations, for working capital and other general corporate
purposes.
The Term Facility matures on the six-year anniversary of November 19, 2021 (the “Closing Date”) and the Revolving
Facility matures on the five-year anniversary of the Closing Date. The Revolving Facility and the Term Facility each
permit both base rate borrowings (“ABR Loans”) and Eurodollar rate borrowings (“Eurodollar Loans”), plus a spread of (a)
5.00% above the base rate in the case of ABR Loans under the Term Facility and 6.00% above the LIBOR Rate (as defined
in the Credit Facility) in the case of Eurodollar Loans under the Term Facility and (b) 3.75% above the base rate in the case
of ABR Loans under the Revolving Facility and 4.75% above the LIBOR Rate (as defined in the Credit Facility) in the
case of Eurodollar Loans under the Revolving Facility.
The Credit Agreement contains usual and customary representations and warranties of the parties for credit facilities of
this type, subject to customary exceptions and materiality standards. In addition, we are required to maintain, a total net
leverage ratio not to exceed 4.75:1.00 and, solely with respect to the Revolving Facility, (a) during the period beginning on
October 1, 2022 and ending on September 30, 2023, a total net leverage ratio not to exceed 4.50:1.00 and (b) for all periods
thereafter, a total net leverage ratio not to exceed 4.25:1.00.
The Credit Agreement also contains certain customary covenants and events of default, as well as, in the event of an
occurrence of an event of default under the Credit Agreement, customary remedies for the lenders, including the
acceleration of any amounts outstanding under the Credit Agreement.
In April 2020, we entered into an interest rate swap with Citizens Bank, N.A. to manage our exposure to changes in
LIBOR-based interest rates underlying total borrowings under term facilities related to our Prior Credit Agreement. The
interest rate swap matures in December 2026. Concurrent with the termination of the Prior Credit Agreement and entry into
the Credit Facility with Truist Bank, the interest rate swap with a notional value of $168.6 million at origin on November
19, 2021 was novated and is now with Truist Bank and is used to manage changes in LIBOR-based interest rates
underlying a portion of the borrowing under the Term Facility. The notional value of the swap was $151.5 million
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and $165.8 million at December 31, 2022 and 2021, respectively. We are exposed to interest rate risk on the unhedged
portion of our Term Facility and if interest rates increased or decreased by 1%, interest expense would have increased or
decreased by approximately $1.4 million. If our Revolving Facility were fully drawn and interest rates increased or
decreased by 1%, interest expense would have increased or decreased by approximately $0.4 million. The interest rate
swap provides an effective fixed interest rate of 2.26% and has been designated as an effective cash flow hedge and
therefore qualifies for hedge accounting. As a result of the interest rate swap, our exposure to interest rate volatility is
minimized.
We are exposed to risks associated with changes in interest rates. The returns from certain of our cash and cash
equivalents will vary as short-term interest rates change. A 100 basis-point adverse movement (decrease) in short-term
interest rates would decrease the interest income earned on our cash balance in the year ended December 31, 2022 by
approximately $37,000.
We are exposed to risks associated with foreign currency exchange rate risks as we remeasure certain Canadian dollar-
denominated and Indian rupee-denominated transactions from ANI Pharmaceuticals Canada Inc. and our Indian subsidiary
from the Canadian dollar to the U.S. dollar and the Indian-rupee to the U.S. dollar. Changes in exchange rates can
positively or negatively impact our revenue, income, assets, liabilities, and equity. Currency exchange rates did not have a
material impact on our revenue, income, assets, liabilities, or equity during the quarter ended December 31, 2022.
We are exposed to risks associated with foreign currency exchange rate risks as we remeasure certain Canadian dollar-
denominated and Indian rupee-denominated transactions from ANI Pharmaceuticals Canada Inc. and our Indian subsidiary
from the Canadian dollar to the U.S. dollar and the Indian-rupee to the U.S. dollar. Changes in exchange rates can
positively or negatively impact our revenue, income, assets, liabilities, and equity. Currency exchange rates did not have a
material impact on our revenue, income, assets, liabilities, or equity during the year ended December 31, 2022.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
ANI Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ANI Pharmaceuticals, Inc. and Subsidiaries (the
“Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive
(loss)/income, mezzanine equity and stockholders’ equity, and cash flows for each of the years in the three-year period
ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022,
and the results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2022, in conformity with accounting principles generally accepted in the United States of America.
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, 2022, based on criteria
established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”), and our report dated March 9, 2023 expressed an adverse opinion.
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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was 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 financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the
critical audit matter or on the accounts or disclosures to which they relate.
Evaluation of Certain Assumptions Impacting the Chargeback Accrual
As described in Note 1 to the consolidated financial statements, the Company records certain variable consideration
including discounts, which are estimated at the time of sale generally using the expected value method. Amounts accrued
for chargebacks as of December 31, 2022, are approximately $148.6 million and are evaluated on a quarterly basis.
Management's estimate of chargebacks is based on the inventory levels in the distribution channel as provided by
wholesalers, as well as the actual average selling price for each product which is impacted by changes in customer mix,
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changes in negotiated terms with customers, changes in the volume of off-contract purchases, and changes in the
wholesaler acquisition cost, in order to estimate the expected provision.
The principal consideration for our determination that performing procedures relating to the chargeback reserve is a critical
audit matter is that there was significant judgment required by management with respect to measurement uncertainty, as the
calculation of the chargeback reserve includes assumptions such as average selling price, purchasing trends of distributors
and historical product sales used to predict future sales. This in turn led to a high degree of auditor judgment, subjectivity
and effort in applying the procedures related to those assumptions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included assessing the design and
testing the effectiveness of controls relating to the chargeback reserve, including management's control over the
assumptions used to estimate the corresponding accruals. We recalculated the chargeback accrual for a selection of
products, based on a combination of Company internal data, historical actual information, and executed third-party
contract. We performed a sensitivity analysis of the Company's accrual by recalculating the accrual using our independent
assumptions. We evaluated the Company's ability to accurately estimate the accrual for chargebacks by comparing
historically recorded accruals to the actual amount that was ultimately claimed by the wholesalers. We analyzed year over
year trends in the reserve in comparison with revenue trends to further evaluate reasonableness of the estimate and
consistency with expectations.
/s/ EisnerAmper LLP
We have served as the Company’s auditor since 2013.
EISNERAMPER LLP
Philadelphia, Pennsylvania
March 9, 2023
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
ANI Pharmaceuticals, Inc.
Opinion on the Internal Control over Financial Reporting
We have audited ANI Pharmaceuticals, Inc. and Subsidiaries’ (the “Company”) internal control over financial reporting as
of December 31, 2022, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, because of the effect of
the material weaknesses described in the following paragraph on the achievement of the objectives of the control criteria,
ANI Pharmaceuticals, Inc. and Subsidiaries has not maintained effective internal control over financial reporting as of
December 31, 2022, based on criteria established in the Internal Control - Integrated Framework (2013) issued by COSO.
A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and
included in management’s assessment.
The Company did not maintain an effective control environment in the Novitium subsidiary as a result of the following:
● Lack of adequate personnel resources in Novitium team to implement appropriate process controls addressing
Novitium activity.
● Turnover in key finance personnel at Corporate that were tasked with driving / managing implementation of
internal controls at Novitium, including the Corporate Controller. While the Company hired seasoned temporary
personnel in these corporate positions, the Company did not have adequate bandwidth to maintain focus on
compliance with internal controls.
● Delays in execution of the extraction of the Procure to Pay cycle integration plan for the subsidiary, including
creation of the Accounts Payable centers of excellence whereby processes at Novitium would be combined with
legacy processes.
These factors contributed to the weaknesses in control activities, specifically, the following process areas related to activity
at Novitium did not have effective controls in place and were not operating effectively for a sufficient amount of time:
● Purchase to Pay (Purchasing, Accounts Payable and Cash Disbursements)
● Manufacturing and Inventory
● Human Resources/Payroll
● Financial Statement Close (limited to those pertaining to the Novitium subsidiary level that were not
incorporated into overall Company controls)
● Information technology general controls
The areas noted above had one or more of the following specific compliance exceptions:
● Certain controls were not implemented as designed.
● Documented controls not being performed consistently for all applicable transactions.
● Control performance not being adequately documented and evidenced.
● Materiality thresholds used in certain control performance were not consistent with documented control design.
● Controls not in place nor operating for a sufficient amount of time/number or instances.
● Changes to control performance upon employee turnover.
● Information technology general controls (“ITGC”) which could result in misstatements potentially impacting all
financial statement accounts or disclosures. Specifically, Novitium user access controls were not appropriately
designed and maintained to adequately restrict user and privileged access to financial applications and data to the
appropriate personnel.
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The Company also identified a material weakness related to the control activities prescribed in ITGC. Specifically, the
evaluation of the ITGC’s identified that user access controls were not operating effectively to adequately restrict user
access to the network and financial applications and data.
These material weaknesses were considered in determining the nature, timing, and extent of the audit tests applied in our
audit of the December 31, 2022 financial statements, and this report does not affect our report dated March 9, 2023, on
those financial statements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated balance sheets of ANI Pharmaceuticals, Inc. and Subsidiaries as of December 31,
2022 and 2021, and the related consolidated statements of operations, comprehensive (loss)/income, mezzanine equity and
stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the
related notes, and our report dated March 9, 2023 expressed an unqualified opinion.
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
Annual 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, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included 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
An entity’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. An entity’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the entity; (ii) 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 entity are being made only in accordance with authorizations of management and
directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the entity’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/ EisnerAmper LLP
EISNERAMPER LLP
Philadelphia, Pennsylvania
March 9, 2023
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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
Assets
Current Assets
Cash and cash equivalents
Current restricted cash
Accounts receivable, net of $161,052 and $105,260 of adjustments for chargebacks and other allowances at
December 31, 2022 and 2021, respectively
Inventories, net
Prepaid income taxes
Assets held for sale
Prepaid expenses and other current assets
Total Current Assets
Non-current Assets
Property and equipment
Accumulated depreciation
Property and equipment, net
Non-current restricted cash
Deferred tax assets, net of deferred tax liabilities and valuation allowance
Intangible assets, net
Goodwill
Derivatives and other non-current assets
Total Assets
Current Liabilities
Liabilities, Mezzanine Equity, and Stockholders’ Equity
Current debt, net of deferred financing costs
Accounts payable
Accrued royalties
Accrued compensation and related expenses
Accrued government rebates
Returned goods reserve
Accrued expenses and other
Total Current Liabilities
Non-current Liabilities
Non-current debt, net of deferred financing costs and current component
Non-current contingent consideration
Derivatives and other non-current liabilities
Total Liabilities
Commitments and Contingencies (Note 13)
Mezzanine Equity
December 31,
2022
December 31,
2021
$
48,228
5,006
$
165,438
105,355
3,827
8,020
8,387
344,261
75,958
(32,712)
43,246
—
81,363
251,635
28,221
11,361
760,087
850
29,305
9,307
10,312
10,872
33,399
5,394
99,439
285,669
35,058
1,381
421,547
$
$
$
$
$
$
100,300
—
128,526
81,693
3,667
—
7,589
321,775
75,627
(22,956)
52,671
5,001
67,936
294,122
27,888
2,205
771,598
850
22,967
6,225
8,522
5,492
35,831
7,650
87,537
286,520
31,000
7,801
412,858
Convertible Preferred Stock, Series A, $0.0001 par value, 1,666,667 shares authorized; 25,000 shares issued and
outstanding at December 31, 2022 and December 31, 2021
24,850
24,850
Stockholders’ Equity
Common Stock, $0.0001 par value, 33,333,334 shares authorized; 17,643,497 shares issued and 17,494,466 outstanding at
December 31, 2022; 16,912,401 shares issued and 16,829,739 shares outstanding at December 31, 2021
Class C Special Stock, $0.0001 par value, 781,281 shares authorized; 10,864 shares issued and outstanding at
December 31, 2022 and December 31, 2021, respectively
Preferred Stock, $0.0001 par value, 1,666,667 shares authorized; 0 shares issued and outstanding at December 31, 2022 and
December 31, 2021, respectively
Treasury stock, 149,031 shares of common stock, at cost, at December 31, 2022 and 82,662 shares of common stock, at
cost, at December 31, 2021
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income/(loss), net of tax
Total Stockholders’ Equity
1
—
—
(5,094)
403,901
(97,286)
12,168
313,690
1
—
—
(3,135)
387,844
(47,765)
(3,055)
333,890
Total Liabilities, Mezzanine Equity, and Stockholders’ Equity
$
760,087
$
771,598
The accompanying notes are an integral part of these consolidated financial statements.
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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amounts)
Net Revenues
Operating Expenses
Cost of sales (excluding depreciation and amortization)
Research and development
Selling, general, and administrative
Depreciation and amortization
Contingent consideration fair value adjustment
Legal settlement expense
Purified Cortrophin Gel pre-launch charges
Restructuring activities
Intangible asset impairment charge
Total Operating Expenses
Operating Loss
Other Expense, net
Interest expense, net
Other income/(expense), net
Loss Before Benefit for Income Taxes
Benefit for income taxes
Net Loss
Dividends on Series A Convertible Preferred Stock
Net Loss Available to Common Shareholders
Basic and Diluted Loss Per Share:
Basic Loss Per Share
Diluted Loss Per Share
Basic Weighted-Average Shares Outstanding
Diluted Weighted-Average Shares Outstanding
$
$
$
$
$
$
Years Ended December 31,
2021
$ 216,136
2022
316,385
2020
$ 208,475
138,785
22,318
124,044
56,972
3,758
—
—
5,679
112
100,610
11,369
84,294
47,252
500
8,750
780
—
2,374
87,157
16,001
64,986
44,638
—
—
11,263
—
446
351,668
255,929
224,491
(35,283)
(39,793)
(16,016)
(28,052)
670
(11,922)
(4,343)
(9,452)
(494)
(62,665)
(56,058)
(25,962)
14,769
13,455
3,414
(47,896) $ (42,603) $ (22,548)
(1,625) $
(190) $
—
(49,521) $ (42,793) $ (22,548)
(3.05) $
(3.05) $
(3.40) $
(3.40) $
(1.88)
(1.88)
16,260
16,260
12,596
12,596
11,964
11,964
The accompanying notes are an integral part of these consolidated financial statements.
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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive (Loss)/Income
(in thousands)
Net loss
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustment
Gains/(losses) on interest rate swap
Total other comprehensive income/(loss), net of tax
Total comprehensive loss, net of tax
Years Ended December 31,
2021
$ (47,896) $ (42,603) $ (22,548)
2020
2022
(112)
15,335
15,223
—
(6,566)
(6,566)
$ (32,673) $ (34,221) $ (29,114)
12
8,370
8,382
The accompanying notes are an integral part of these consolidated financial statements.
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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity
For the Years Ended December 31, 2022, 2021, and 2020
(in thousands)
Mezzanine
Equity
Series A
Convertible
Preferred
Stock
Mezzanine
Equity
Series A
Convertible
Preferred
Stock
Shares
Balance, December 31, 2019 $
Cumulative Effect of Change
in Accounting Principle, Net
of Tax
Stock-based Compensation
Expense
Treasury Stock Purchases for
Restricted Stock Vests
Issuance of Common Shares
upon Stock Option and ESPP
Exercise
Issuance of Restricted Stock
Awards
Other comprehensive income
Net Loss
Balance, December 31, 2020 $
Stock-based Compensation
Expense
Treasury Stock Purchases for
Restricted Stock Vests
Issuance of Common Shares
upon Stock Option and ESPP
Exercise
Issuance of Restricted Stock
Awards
Restricted Stock Awards
Forfeitures
Issuance of Common Stock
for Novitium Acquisition
Issuance of Common Stock
in Public Offering
Dividends on Convertible
Preferred Stock
Issuance of Series A
Convertible Preferred Stock
from Mezzanine Equity
Other comprehensive income
Net Loss
Balance, December 31, 2021 $
Stock-based Compensation
Expense
Treasury Stock Purchases for
Restricted Stock Vests
Issuance of Common Shares
upon Stock Option and ESPP
Exercise
Issuance of Restricted Stock
Awards
Restricted Stock Awards
Forfeitures
Dividends on Convertible
Preferred Stock
Other comprehensive income
Net Loss
Balance, December 31, 2022 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
24,850
—
—
24,850
—
—
—
—
—
—
—
—
24,850
Total
Mezzanine
Equity
and
Stockholders'
Equity
Accumulated
Deficit
Common Common Class C Additional Treasury
Comprehensive
Accumulated
Other
Stock
Par Value
1
Stock
Shares
12,105 $
Special
Stock
— $
Paid-in
Capital
Stock
Shares
15
Treasury
Stock
(Loss)/Gain,
Net of Tax
— $ 200,800
$
(723)
$
(4,871)
$
17,584 $
212,791
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
25
—
—
25
$
—
—
—
—
—
—
—
—
25
$
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
12,936
—
—
—
—
61
(1,523)
21
—
618
—
—
304
—
—
12,430 $
—
—
—
— $ 214,354
—
—
—
—
—
—
76
—
—
—
$ (2,246)
$
—
—
—
10,489
—
—
—
—
28
(889)
56
—
2,069
—
—
541
—
(81)
2,467
1,500
—
—
—
—
—
—
(1)
91,199
69,734
—
—
—
(21)
—
—
—
—
—
—
—
—
—
—
16,913 $
—
—
—
— $ 387,844
—
—
—
—
—
—
83
—
—
—
$ (3,135)
$
—
—
—
14,599
—
—
—
—
66
(1,959)
52
—
1,458
—
—
748
—
(69)
—
—
—
—
—
—
—
—
—
—
17,644 $
—
—
—
—
—
—
— $ 403,901
—
—
—
149
—
—
—
$ (5,094)
$
—
—
—
—
—
(6,566)
—
(11,437)
$
(8)
—
—
—
—
—
(22,548)
(4,972)$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(190)
—
8,382
—
(3,055)
$
—
—
(42,603)
(47,765)$
—
—
—
—
—
—
—
—
—
—
(8)
12,936
(1,523)
618
—
(6,566)
(22,548)
195,700
10,489
(889)
2,069
—
(1)
91,199
69,734
(190)
24,850
8,382
(42,603)
358,740
14,599
(1,959)
1,458
—
—
—
15,223
—
12,168
$
(1,625)
—
(47,896)
(97,286)$
(1,625)
15,223
(47,896)
338,540
The accompanying notes are an integral part of these consolidated financial statements.
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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Cash Flows From Operating Activities
Net loss
Adjustments to reconcile net loss to net cash and cash equivalents (used in)/provided by operating activities:
2022
Year Ended December 31,
2021
2020
$
(47,896)
$
(42,603)
$
(22,548)
Stock-based compensation
Deferred taxes
Depreciation and amortization
Acquired in-process research and development ("IPR&D")
Non-cash interest
Contingent consideration fair value adjustment
Loss on extinguishment of debt
Asset impairment charges
Gain on sale of ANDAs
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net
Inventories, net
Prepaid expenses and other current assets
Accounts payable
Accrued royalties
Current income taxes payable, net
Accrued government rebates
Returned goods reserve
Accrued expenses, accrued compensation, and other
Net Cash and Cash Equivalents (Used in)/Provided by Operating Activities
Cash Flows From Investing Activities
Acquisition of Novitium Pharma LLC, net of cash acquired
Acquisition of product rights, IPR&D, and other related assets
Acquisition of property and equipment, net
Proceeds from the sale of long-lived assets
Net Cash and Cash Equivalents Used in Investing Activities
Cash Flows From Financing Activities
Payments on Term Loan and Delayed Draw Term Loan agreements
Payments on borrowings under credit agreements
Payments on Revolver agreement
Borrowings under Prior Revolver agreement
Repayment of Prior Credit Facility
Borrowings under the Credit Facility
Proceeds from issuance of convertible preferred stock
Series A convertible preferred stock dividends paid
Proceeds from issuance of common stock in public offering
Cash paid for costs of share issuances
Proceeds from stock option exercises and ESPP purchases
Payments of debt issuance costs
Treasury stock purchases for restricted stock vests
Net Cash and Cash Equivalents (Used in)/Provided by Financing Activities
Net Change in Cash and Cash Equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Reconciliation of cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Reconciliation of cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash, end of period
Supplemental disclosure for cash flow information:
Cash paid for interest, net of amounts capitalized
Cash paid for income taxes
Supplemental non-cash investing and financing activities:
14,599
(15,253)
59,653
1,151
3,961
4,058
—
574
(750)
(36,912)
(23,626)
(798)
5,038
3,082
(160)
5,380
(2,399)
(905)
(31,203)
(33)
(7,579)
(8,876)
750
(15,738)
—
(3,000)
—
—
—
—
—
(1,625)
—
—
1,458
—
$
(1,959)
(5,126)
(52,067)
105,301
53,234
100,300
5,001
105,301
48,228
5,006
53,234
10,489
(16,754)
47,252
—
2,512
500
1,458
2,374
(1,822)
(5,548)
3,224
127
10,166
(267)
(7,573)
(3,078)
6,503
(3,638)
3,322
(84,494)
(21,081)
(2,557)
2,649
(105,483)
(10,862)
—
—
24,000
(200,148)
300,000
25,000
(190)
75,000
(5,416)
2,069
(13,968)
(890)
194,595
$
92,434
12,867
105,301
7,864
5,003
12,867
100,300
5,001
105,301
21,477
288
$
$
9,705
10,371
$
$
$
$
$
Fair value of contingent consideration in a business combination
Fair value of equity issued as consideration in a business combination
Acquisition of product rights included in accounts payable
Property and equipment purchased and included in accounts payable
$
$
— $
$
152
The accompanying notes are an integral part of these consolidated financial statements.
— $
— $
$
$
30,500
91,199
1,000
452
$
$
$
$
12,936
(13,205)
44,638
3,753
1,876
—
—
445
—
(23,664)
(2,759)
(1,866)
(2,294)
1,323
4,982
(1,075)
10,369
2,356
15,267
—
(62,187)
(6,135)
—
(68,322)
—
(8,034)
(7,500)
15,000
—
—
—
—
—
—
618
—
(1,523)
(1,439)
(54,494)
67,361
12,867
62,332
5,029
67,361
7,864
5,003
12,867
6,931
4,984
—
—
391
172
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
ANI Pharmaceuticals, Inc. and its consolidated subsidiaries (together, “ANI,” the “Company,” “we,” “us,” or “our”) is
a diversified bio-pharmaceutical company serving patients in need by developing, manufacturing, and marketing high
quality branded and generic prescription pharmaceuticals, including for diseases with high unmet medical need. Our team
is focused on delivering growth by building a successful Purified Cortrophin Gel franchise, strengthening our generics
business with enhanced development capability, innovation in established brands and leveraging our manufacturing
capabilities. Our four pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, one is
located in East Windsor, New Jersey, and one is located in Oakville, Ontario, are together capable of producing oral solid
dose products, as well as semi-solids, liquids and topicals, controlled substances, and potent products that must be
manufactured in a fully-contained environment. On June 2, 2022, we announced that we intend to cease operations at our
Oakville, Ontario, Canada manufacturing plant by first quarter 2023. This action is part of ongoing initiatives to capture
operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021. We have
transitioned the majority of products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing
sites and are on track to cease operations by the end of the first quarter 2023. We are seeking to find potential buyers for
the Oakville site.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”).
Principles of Consolidation
The consolidated financial statements include the accounts of ANI Pharmaceuticals, Inc. and its subsidiaries. All
intercompany accounts and transactions are eliminated in consolidation.
Foreign Currency
We have subsidiaries located in Canada and India. The Canada-based subsidiary conducts its transactions in U.S.
dollars and Canadian dollars, but its functional currency is the U.S. dollar. The Indian-based subsidiary generally conducts
its transactions in Indian rupees, which is also its functional currency. The results of any non-U.S. dollar transactions and
balances are remeasured in U.S. dollars at the applicable exchange rates during the period and resulting foreign currency
transaction gains and losses are included in the determination of net income. Our gain or loss on transactions denominated
in foreign currencies and the translation impact of local currencies to U.S. dollars was immaterial for the years ended
December 31, 2022, 2021, and 2020. Unless otherwise noted, all references to “$” or “dollar” refer to the U.S. dollar.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses during the reporting period. In the consolidated
financial statements, estimates are used for, but not limited to, variable consideration determined based on accruals for
chargebacks, administrative fees and rebates, government rebates, returns and other allowances, income tax provision or
benefit, deferred taxes and valuation allowance, stock-based compensation, revenue recognition, allowance for inventory
obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, including
contingent consideration in acquisitions, fair value of long-lived assets, determination of right-of-use assets and lease
liabilities, allowance for credit losses, purchase price allocations, and the depreciable lives of long-lived assets. Because of
the uncertainties inherent in such estimates, actual results may differ from those estimates. Management periodically
evaluates estimates used in the preparation of the financial statements for reasonableness.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
We are subject to risks and uncertainties as a result of the novel coronavirus (“COVID-19”) pandemic. We are unable
to predict the impact that the COVID-19 pandemic will continue to have on our future business, financial condition, and
results of operations due to numerous uncertainties. These uncertainties include the occurrence of recurring outbreaks and
their severity and the duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the
direct and indirect economic effects of the pandemic and containment measures, among others. We remain unable to
predict the future impact on our estimates and assumptions. There was no material impact to these estimates or
assumptions in our consolidated financial statements as of and for the years ended December 31, 2022 and 2021. Actual
results could differ from those estimates, which may change our estimates in future periods. We continue to closely
monitor the impact of the COVID-19 pandemic on our business.
Leases
At the inception of a contract we determine if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets
represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based
on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the
lease term.
We have made certain accounting policy elections whereby we (i) do not recognize ROU assets or lease liabilities for
short-term leases (those with original terms of 12-months or less) and (ii) combine lease and non-lease elements of our
operating leases. Operating lease ROU assets are included in other non-current assets and operating lease liabilities are
included in accrued expenses and other and derivatives and other non-current liabilities in our consolidated balance sheets.
As of December 31, 2022, we did not have any finance leases.
Comprehensive Income/(Loss)
Comprehensive (loss)/income, which is reported in the statement of comprehensive (loss)/income, consists of net
(loss)/income, changes in fair value of our interest rate swap, and other comprehensive (loss)/income, net of tax, which
consists of foreign currency translation.
Credit Concentration
Our customers are primarily wholesale distributors, chain drug stores, group purchasing organizations, and other
pharmaceutical companies.
During the years ended December 31, 2022 and 2021 we had three customers that accounted for 10% or more of net
revenues. As of December 31, 2022, accounts receivable from these customers totaled 82% of accounts receivable, net.
The three customers represent the total percentage of net revenues as follows:
Customer 1
Customer 2
Customer 3
Vendor Concentration
2022
Years Ended December 31,
2021
2020
26 %
18 %
15 %
29 %
23 %
16 %
31 %
24 %
19 %
We source the raw materials for products, including active pharmaceutical ingredients (“API”), from both domestic
and international suppliers. Generally, only a single source of API is qualified for use in each product due to the costs and
time required to validate a second source of supply. As a result, we are dependent upon our current vendors to supply
reliably the API required for on-going product manufacturing. During the year ended December 31, 2022, we purchased
approximately 19% of our inventory from one supplier. As of December 31, 2022, our amount payable to this supplier
was $10.9 million. During the year ended December 31, 2021, no single vendor
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
represented at least 10% of inventory purchases. During the year ended December 31, 2020, we purchased approximately
10% of our inventory from one supplier.
Revenue Recognition
We recognize revenue using the following steps:
● Identification of the contract, or contracts, with a customer;
● Identification of the performance obligations in the contract;
● Determination of the transaction price, including the identification and estimation of variable consideration;
● Allocation of the transaction price to the performance obligations in the contract; and
● Recognition of revenue when we satisfy a performance obligation.
We derive our revenues primarily from sales of generic and branded pharmaceutical products. Revenue is
recognized when our obligations under the terms of our contracts with customers are satisfied, which generally occurs
when control of the products we sell is transferred to the customer. We estimate variable consideration after
considering applicable information that is reasonably available. We generally do not have incremental costs to obtain
contracts that would otherwise not have been incurred. We do not adjust revenue for the promised amount of
consideration for the effects of a significant financing component because our customers generally pay us within
100 days.
All revenue recognized in our consolidated statements of operations is considered to be revenue from contracts with
customers. The following table depicts the disaggregation of revenue:
Products and Services
(in thousands)
Sales of generic pharmaceutical products
Sales of established brand pharmaceutical
products
Sales of rare disease pharmaceutical
products
Sales of contract manufactured products
Royalties from licensing agreements
Product development services
Other
Total net revenues
$
$
Timing of Revenue Recognition
(in thousands)
Performance obligations transferred at a point
in time
Performance obligations transferred over time
Total
Years Ended December 31,
2021
143,571
$
$
2022
210,121
2020
147,257
39,463
47,561
47,960
41,686
16,106
5,367
2,949
693
316,385
$
—
10,042
11,795
1,310
1,857
216,136
$
—
9,221
1,396
1,858
783
208,475
Years Ended December 31,
2021
2020
2022
$
$
313,436
2,949
316,385
$
$
214,826
1,310
216,136
$
$
206,617
1,858
208,475
During the year ended December 31, 2022, we did not incur, and therefore did not defer, any material incremental
costs to fulfill contracts. We recognized a decrease of $2.2 million of net revenue from performance obligations satisfied
in prior periods during the year ended December 31, 2022, consisting primarily of revised estimates for variable
consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales. As of December
31, 2022, we did not have any contract assets related to revenue recognized based on percentage of completion but not yet
billed. We did not have deferred revenue at December 31, 2022. We had less than $0.1 million
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
of deferred revenue at December 31, 2021. For the years ended December 31, 2022 and 2021, we recognized less than
$0.1 million of revenue that was included in deferred revenue as of December 31, 2021 and 2020.
Revenue from Sales of Generic and Branded Pharmaceutical Products
Product sales consists of sales of our generic and branded pharmaceutical products, including rare disease
pharmaceutical products. Our sole performance obligation in our contracts is to provide pharmaceutical products to
customers. Our products are sold at pre-determined standalone selling prices and our performance obligation is considered
to be satisfied when control of the product is transferred to the customer. Control is generally transferred to the customer
upon delivery of the product to the customer, as our pharmaceutical products are generally sold on an FOB destination
basis and because inventory risk and risk of ownership passes to the customer upon delivery. Payment terms for these
sales are generally less than 100 days.
Revenue from Distribution Agreements
From time to time, we enter into marketing and distribution agreements with third parties in which we sell products
under Abbreviated New Drug Applications (“ANDAs”) or New Drug Applications (“NDAs”) owned or licensed by these
third parties. These products are sold under our own label. We have assessed and determined that we control the products
sold under these marketing and distribution agreements and therefore are the principal for sales under each of these
marketing and distribution agreements. As a result, we recognize revenue on a gross basis when control has passed to the
customer and we have satisfied our performance obligation. Under these agreements, we pay these third parties a
specified percentage of the gross profit earned on sales of the products. These profit-sharing percentages are recognized in
cost of sales in our consolidated statements of operations and are accrued in accrued royalties in our consolidated balance
sheets until payment has occurred.
Sales of our pharmaceutical products are subject to variable consideration due to chargebacks, government rebates,
returns, administrative and other rebates, and cash discounts. Estimates for these elements of variable consideration
require significant judgment.
Chargebacks
Chargebacks, primarily from wholesalers, result from arrangements we have with indirect customers establishing
prices for products which the indirect customer purchases through a wholesaler. Alternatively, we may pre-authorize
wholesalers to offer specified contract pricing to other indirect customers. Under either arrangement, we provide a
chargeback credit to the wholesaler for any difference between the contracted price with the indirect customer and the
wholesaler’s invoice price, typically Wholesale Acquisition Cost (“WAC”).
Chargeback credits are calculated as follows:
Prior period chargebacks claimed by wholesalers are analyzed to determine the actual average selling price (“ASP”)
for each product. This calculation is performed by product by wholesaler. ASPs can be affected by several factors such as:
● A change in customer mix
● A change in negotiated terms with customers
● A change in the volume of off-contract purchases
● Changes in WAC
As necessary, we adjust ASPs based on anticipated changes in the factors above.
The difference between ASP and WAC is recorded as a reduction in both gross revenues in our consolidated
statements of operations and accounts receivable in the consolidated balance sheets, at the time we recognize revenue
from the product sale.
To evaluate the adequacy of our chargeback accruals, we obtain on-hand inventory counts from the wholesalers. This
inventory is multiplied by the chargeback amount, the difference between ASP and WAC, to arrive at total
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
expected future chargebacks, which is then compared to the chargeback accruals. We continually monitor chargeback
activity and adjust ASPs when we believe that actual selling prices will differ from current ASPs.
Government Rebates
Our government rebates reserve consists of estimated payments due to governmental agencies for purchases made by
third parties under various governmental programs. The two largest government programs that impact our net revenue and
our government rebates reserve are federal and state Medicaid rebate programs and Medicare.
We participate in certain qualifying federal and state Medicaid rebate programs whereby discounts and rebates are
provided to participating programs after the final dispensing of the product by a pharmacy to a Medicaid plan participant.
Medicaid rebates are typically billed up to 120 days after the product is shipped. Medicaid rebate amounts per product unit
are established by law, based on the Average Manufacturer Price (“AMP”), which is reported on a monthly and quarterly
basis, and, in the case of branded products, best price, which is reported on a quarterly basis. Our Medicaid reserves are
based on expected claims from state Medicaid programs. Estimates for expected claims are driven by patient usage, sales
mix, calculated AMP or best price, as well as inventory in the distribution channel that will be subject to a Medicaid
rebate. As a result of the delay between selling the products and rebate billing, our Medicaid rebate reserve includes both
an estimate of outstanding claims for end-customer sales that have occurred but for which the related claim has not been
billed, as well as an estimate for future claims that will be made when inventory in the distribution channel is sold through
to plan participants.
Many of our products are also covered under Medicare. We, like all pharmaceutical companies, must provide a
discount for any products sold under NDAs to Medicare Part D participants. This applies to all products sold under NDAs,
regardless of whether the products are marketed as branded or generic. Our estimates for these discounts are based on
historical experience with Medicare rebates for our products. While such experience has allowed for reasonable
estimations in the past, history may not always be an accurate indicator of future rebates. Medicare rebates are typically
billed up to 120 days after the product is shipped. As a result of the delay between selling the products and rebate billing,
our Medicare rebate reserve includes both an estimate of outstanding claims for end-customer sales that have occurred but
for which the related claim has not been billed, as well as an estimate for future claims that will be made when inventory
in the distribution channel is sold through to Medicare Part D participants.
To evaluate the adequacy of our government rebate reserves, we review the reserves on a quarterly basis against
actual claims data to ensure the liability is fairly stated. We continually monitor our government rebate reserve and adjust
our estimates if we believe that actual government rebates may differ from our established accruals. Accruals for
government rebates are recorded as a reduction to gross revenues in our consolidated statements of operations and as an
increase to accrued government rebates in the consolidated balance sheets.
Returns
We maintain a return policy that allows customers to return product within a specified period prior to and subsequent
to the expiration date. Generally, product may be returned for a period beginning six months prior to its expiration date to
up to one year after its expiration date. Our product returns are settled through the issuance of a credit to the customer. Our
estimate for returns is based upon historical experience with actual returns. While such experience has allowed for
reasonable estimation in the past, history may not always be an accurate indicator of future returns. We continually
monitor our estimates for returns and make adjustments when we believe that actual product returns may differ from the
established accruals. Accruals for returns are recorded as a reduction to gross revenues in our consolidated statements of
operations and as an increase to the return goods reserve in the consolidated balance sheets.
Administrative Fees and Other Rebates
Administrative fees or rebates are offered to wholesalers, group purchasing organizations, and indirect customers. We
accrue for fees and rebates, by product by wholesaler, at the time of sale based on contracted rates and ASPs.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
To evaluate the adequacy of our administrative fee accruals, we obtain on-hand inventory counts from the
wholesalers. This inventory is multiplied by the ASPs to arrive at total expected future sales, which is then multiplied by
contracted rates. The result is then compared to the administrative fee accruals. We continually monitor administrative fee
activity and adjust our accruals when we believe that actual administrative fees will differ from the accruals. Accruals for
administrative fees and other rebates are recorded as a reduction in both gross revenues in our consolidated statements of
operations and accounts receivable in the consolidated balance sheets.
Prompt Payment Discounts
We often grant sales discounts for prompt payment. The reserve for prompt payment discounts is based on invoices
outstanding. We assume, based on past experience, that all available discounts will be taken. Accruals for prompt payment
discounts are recorded as a reduction in both gross revenues in our consolidated statements of operations and accounts
receivable in the consolidated balance sheets.
The following table summarizes activity in the consolidated balance sheets for accruals and allowances for the years
ended December 31, 2022, 2021, and 2020:
Accruals for Chargebacks, Returns, and Other Allowances
Government
Administrative
Prompt
Fees and Other
Payment
(in thousands)
Balance at December 31, 2020 (1)
Accruals/Adjustments
Credits Taken Against Reserve
Balance at December 31, 2021 (1)
Accruals/Adjustments
Credits Taken Against Reserve
Balance at December 31, 2022 (1)
Chargebacks Rebates
Returns
Rebates
$
$
88,746
492,374
(487,054)
94,066
642,409
(587,913)
$ 148,562
$
$
7,826
15,308
(17,642)
5,492
20,657
(15,277)
$ 10,872
$ 27,155
24,081
(15,405)
$ 35,831
23,252
(25,684)
$ 33,399
$
$
$
8,906
35,225
(31,031)
13,100
42,044
(45,702)
9,442
$
Discounts
3,839
15,633
(14,830)
4,642
21,302
(19,456)
6,488
$
$
(1) Chargebacks are included as an offset to accounts receivable, net of chargebacks and other allowances in the
consolidated balance sheets. Administrative Fees and Other Rebates and Prompt Payment Discounts are included as a
reduction to accounts receivable, net of chargebacks and other allowances or accrued expenses and other in the
consolidated balance sheets. Returns are included in returned goods reserve in the consolidated balance sheets.
Government Rebates are included in accrued government rebates in the consolidated balance sheets.
Contract Manufacturing Product Sales Revenue
Contract manufacturing arrangements consist of agreements in which we manufacture a pharmaceutical product on
behalf of a third party. Our performance obligation is to manufacture and provide pharmaceutical products to customers,
typically pharmaceutical companies. The contract manufactured products are sold at pre-determined standalone selling
prices and our performance obligations are considered to be satisfied when control of the product is transferred to the
customer. Control is transferred to the customer when the product leaves our dock to be shipped to the customer, as our
contract manufactured pharmaceutical products are sold on an FOB shipping point basis and the inventory risk and risk of
ownership passes to the customer at that time. Payment terms for these sales are generally fewer than two months. We
estimate returns based on historical experience. Historically, we have not had material returns for contract manufactured
products.
As of December 31, 2022, the aggregate amount of the transaction price allocated to the remaining performance
obligations for all open contract manufacturing customer contracts was $4.3 million, which consists of firm orders for
contract manufactured products. We will recognize revenue for these performance obligations as they are satisfied, which
is anticipated within six months.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Royalties from Licensing Agreements
From time to time, we enter into transition agreements with the sellers of products we acquire, under which we
license to the seller the right to sell the acquired products. Therefore, we recognize the revenue associated with sales of the
underlying products as royalties. Because these royalties are sales-based, we recognize the revenue when the underlying
sales occur, based on sales and gross profit information received from the sellers. Upon full transition of the products and
upon launching the products under our own labels, we recognize revenue for the products as sales of generic or branded
pharmaceutical products, as described above. From time to time, we enter into supply and distribution agreements with
contract manufacturing customers, under which we license to the contract manufacturing customer the right to sell our
products, and we are entitled to a royalty on sales made by the contract manufacturing customer under these arrangements.
Therefore, we recognize the revenue associated with sales of the underlying products as royalties. Because these royalties
are sales-based, we recognize the revenue when the underlying sales occur, based on sales and gross profit information
received from the contract manufacturing customers.
Pursuant to a 2012 Tripartite Agreement (the “Tripartite Agreement”) between the Company, The Regents of the
University of California (“The Regents”), and Cabaret Biotech Ltd., an Israeli corporation (“Cabaret”) (as assignee of Dr.
Zelig Eshhar’s rights under the Tripartite Agreement), and subsequent amendments thereto and assignments thereof, we
were entitled to receive a percentage of the milestone and sales royalty payments paid to Cabaret by Kite Pharma, Inc.
(“Kite”), a subsidiary of Gilead Sciences, Inc., under a license agreement. Under such license agreement, Kite licensed
from Dr. Eshhar and Cabaret the patent rights covered by the Tripartite Agreement and agreed to make certain payments
to Cabaret based on, among other things, Kite’s sales of Yescarta®. Under the Tripartite Agreement, portions of these
payments were to be distributed to The Regents and to us.
Historically, we recorded royalty income related to Yescarta® on an accrual basis utilizing our best estimate of
royalties earned based upon information available in the public domain, our understanding of the various agreements
governing the royalty, and other information received from time to time from the relevant parties. Generally, cash was
received directly from Cabaret once a year. The agreements governing this royalty were subject to multiple actions in
multiple jurisdictions, including litigation between Cabaret and Kite, and separately, ANI and Cabaret. In the first quarter
of 2021, we became aware that the litigation between Cabaret and Kite was dismissed. In April 2021, Cabaret and the
Company settled all amounts due for amounts actually received by Cabaret or Eshhar for the licensing or use of the patent
rights governed by the Kite license agreement. As a result, we recognized $11.2 million as royalties from licensing
agreements in our net revenues during the three month period ended March 31, 2021. In addition, during the three month
period ended March 31, 2021, we agreed to reimburse Cabaret $0.4 million, which has been recorded as other expense,
net related to certain legal expenditures incurred. We received final payment from Cabaret in May 2021. Based upon the
events that led to the dismissal of the litigation between Cabaret and Kite, we do not expect to receive any future royalty
income related to the Kite license agreement. In conjunction with payment of amounts due to us, all outstanding litigation
between the Company and Cabaret was dismissed.
Product Development Services Revenue
We provide product development services to customers, which are performed over time. These are services primarily
performed at our facility in East Windsor, New Jersey. As of December 31, 2022, we have ceased all manufacturing and
packaging and clinical operations at our Oakville, Ontario facility. We have transitioned the product development services
at the facility to one of our three U.S.-based manufacturing sites.
The duration of these development projects can be up to three years. Deposits received from these customers are
recorded as deferred revenue until revenue is recognized. For contracts with no deposits and for the remainder of contracts
with deposits, we invoice customers as our performance obligations are satisfied. We recognize revenue on a percentage
of completion basis, which results in contract assets on our balance sheet and that revenue is recognized over time. As of
December 31, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations for
all open product development services contracts was immaterial.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid instruments with maturities of three months or less when purchased to be cash
equivalents. All interest bearing and non-interest bearing accounts are guaranteed by the Federal Deposit Insurance
Corporation (“FDIC”) up to $250 thousand. The majority of our cash balances are in excess of FDIC coverage. We
consider this to be a normal business risk.
In April 2016, we purchased the rights, title, and interest in the NDA for Inderal LA, as well as certain
documentation, trademark rights, and finished goods from Cranford Pharmaceuticals, LLC for $60.0 million in cash and
milestone payments based on future gross profits from sales of products under the NDA. Additionally, we transferred $5.0
million to an escrow account as security for future milestone payments. This escrow account balance is included in
restricted cash in our consolidated balance sheet as of December 31, 2022.
Accounts Receivable
We extend credit to customers on an unsecured basis. We measure expected credit losses on our financial assets at
amortized cost, including trade and unbilled receivables, on a collective basis, based on their similar risk characteristics.
Expected credits losses are based on historical credit loss experience, review of the current aging or status of accounts
receivable and current and forward-looking views from an economic and industry perspective. We determine trade
receivables to be delinquent when greater than 30 days past due. Receivables are written off when it is determined that
amounts are uncollectible. Our allowance for credit losses was immaterial as of December 31, 2022 and 2021.
Inventories
Inventories consist of raw materials, packaging materials, work-in-progress, and finished goods. Inventories are stated
at the lower of standard cost or net realizable value. We periodically review and adjust standard costs, which generally
approximate weighted average cost.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for repairs and maintenance are charged to expense as
incurred. Depreciation is recorded on a straight-line basis over estimated useful lives as follows:
Buildings and improvements
Machinery, furniture, and equipment
20 -
1 -
40 years
10 years
Construction in progress consists of multiple projects, primarily related to new equipment to expand our
manufacturing capability as our product lines grow. Construction in progress includes the cost of construction and other
direct costs attributable to the construction, along with capitalized interest. Depreciation is not recorded on construction in
progress until such time as the assets are placed in service.
We review property and equipment for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of
the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount
of the assets exceeds the estimated fair value of the assets. No impairment loss related to property and equipment was
recognized during the years ended December 31, 2022, 2021, and 2020. Assets held for disposal are reportable at the
lower of the carrying amount or fair value, less costs to sell. No assets were held for disposal as of December 31, 2022 and
2021.
Intangible Assets
Definite-lived intangible assets consist of acquired ANDAs for previously commercialized and marketed drug
products, acquired approved ANDAs for generic products yet to be commercialized, an acquired development package for
a generic drug product, a license, supply and distribution agreement for a generic drug product, acquired
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
product rights for generic products, acquired NDAs and product rights for branded products, acquired marketing and
distribution rights, acquired customer relationships, and a non-compete agreement. They are stated at cost, net of
amortization, generally using the straight-line method over the expected useful lives of the intangible assets.
The definite-lived ANDAs, NDAs and product rights, marketing and distribution rights, customer relationships, and
non-compete agreement are stated at cost, net of amortization, and generally amortized over their remaining estimated
useful lives, ranging from seven to 10 years, based on the straight-line method. In the case of certain NDA and product
rights, we use an accelerated amortization method to better match the anticipated economic benefits expected to be
provided. Management reviews definite-lived intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable, in a manner similar to that for property and
equipment. During the year ended December 31, 2022, we recognized a full impairment of a definite-lived ANDA asset
with a remaining carrying value of $0.1 million. During the year ended December 31, 2021, we recognized an impairment
charge of $2.4 million related to a definite-lived ANDA intangible asset. During the year ended December 31, 2020, we
recognized an impairment charge of $0.4 million relating to a marketing and distribution right asset. No events or
circumstances arose in 2022, 2021, or 2020 that indicated that the carrying value of any of our other definite-lived
intangible assets may not be recoverable.
Our indefinite-lived intangible assets other than goodwill include in-process research and development (“IPR&D”)
projects. IPR&D intangible assets represent the fair value of technology acquired in a business combination for which the
technology projects are incomplete but have substance. When an IPR&D project is completed (generally upon receipt of
regulatory approval), the asset is then accounted for as a definite-lived intangible asset. We test for impairment of
indefinite-lived intangible assets at least annually, as of October 31, and whenever events or changes in circumstances
indicate that the carrying amount of the asset might not be recoverable. Judgment is used in determining when these
events and circumstances arise. If we determine that the carrying value of the assets may not be recoverable, judgment and
estimates are used to assess the fair value of the assets and to determine the amount of any impairment loss. No events or
circumstances arose in 2022 that indicated that the carrying value of any of our other indefinite-lived intangible assets
may not be recoverable.
Goodwill
Goodwill relates to the 2013 merger with BioSante Pharmaceuticals, Inc. and the acquisitions of WellSpring and
Novitium, and represents the excess of the total purchase consideration over the fair value of acquired assets and assumed
liabilities, using the purchase method of accounting. Goodwill is not amortized, but is subject to periodic review for
impairment. Goodwill is reviewed for impairment annually, as of October 31, and whenever events or changes in
circumstances indicate that the carrying amount of the goodwill might not be recoverable. We have determined that
goodwill resides in one reporting unit, Generics, Established Brands, and Other.
Before employing detailed impairment testing methodologies, we first evaluate the likelihood of impairment by
considering qualitative factors relevant to our reporting unit. When performing the qualitative assessment, we evaluate
events and circumstances that would affect the significant inputs used to determine the fair value of the goodwill. Events
and circumstances evaluated include macroeconomic conditions that could affect us, industry and market considerations
for the generic pharmaceutical industry that could affect us, cost factors that could affect our performance, our financial
performance (including share price), and consideration of any company-specific events that could negatively affect us, our
business, or the fair value of our business. If we determine that it is more likely than not that goodwill is impaired, we will
then apply detailed testing methodologies. Otherwise, we will conclude that no impairment has occurred.
Detailed impairment testing involves comparing the fair value of our Generics, Established Brands, and Other
reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing
to pay in a potential sale of ANI. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment
has occurred. If the carrying value of the reporting unit were to exceed its fair value, we would recognize an impairment
charge for the amount by which the carrying amount exceeded the reporting unit’s fair value. The loss recognized would
not exceed the total amount of goodwill allocated to that reporting unit. Based on our evaluations, described in the
preceding paragraph, it was more likely than not that the fair value of our Generics, Established Brands, and Other
reporting unit is greater than its carrying value as of October 31, 2022 and 2021, and
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
therefore no quantitative testing for impairment was required. No impairment loss related to goodwill was recognized in
the years ended December 31, 2022, 2021, and 2020.
Collaborative Arrangements
At times, we have entered into arrangements with various commercial partners to further business opportunities. In
collaborative arrangements such as these, when we are actively involved and exposed to the risks and rewards of the
activities and are determined to be the principal participant in the collaboration, we classify third party costs incurred and
revenues in our consolidated statements of operations on a gross basis. Otherwise, third party revenues and costs
generated by collaborative arrangements are presented on a net basis. Payments between us and the other participants are
recorded and classified based on the nature of the payments.
Royalties
We have entered profit-sharing arrangements with third parties in which we sell products under ANDAs or NDAs
owned or licensed by these third parties. Under these agreements, we pay these third parties a specified percentage of the
gross profit earned on sales of the products. These profit-sharing percentages are recorded in cost of sales in our
consolidated statements of operations when the associated revenue is recognized and are recorded in accrued royalties in
our consolidated balance sheets when the associated revenue is recognized and until payment has occurred.
Research and Development Expenses
Research and development costs are expensed as incurred and primarily consist of expenses relating to product
development. Research and development costs totaled $22.3 million, $11.4 million, and $16.0 million for the years ended
December 31, 2022, 2021, and 2020, respectively.
Stock-Based Compensation
We have a stock-based compensation plan that includes stock options and restricted stock, which are awarded in
exchange for employee and non-employee director services. From time to time, we may make awards through an
inducement grant outside of our plan to induce prospective employees to accept employment with us. These grants are
made pursuant to inducement grants outside of our shareholder approved equity plan as permitted under the Nasdaq Stock
Market listing rules. Stock-based compensation cost for stock options is determined at the grant date using an option
pricing model and stock-based compensation cost for restricted stock is based on the closing market price of the stock at
the grant date. The value of the award is recognized as expense on a straight-line basis over the employee’s requisite
service period and classified where the underlying salaries are classified. We also account for forfeitures as they occur. We
recognize excess tax benefits or tax deficiencies as a component of our current period provision for income taxes.
In addition, in July 2016, we commenced administration of our Employee Stock Purchase Plan (“ESPP”). We
recognize the estimated fair value of stock-based compensation awards and classify the expense where the underlying
salaries are classified.
We incurred $14.3 million, $10.4 million, and $12.8 million of non-cash, stock-based compensation cost for the years
ended December 31, 2022, 2021, and 2020, respectively, and $313 thousand, $123 thousand, and $180 thousand of the
2022, 2021, and 2020 expense related to the ESPP, respectively. In 2020, we recognized $3.4 million of stock
compensation expense related to the modification of awards of our former President and Chief Executive Officer, pursuant
to his termination without good cause.
Valuation of stock awards requires us to make assumptions and to apply judgment to determine the fair value of the
awards. These assumptions and judgments include estimating the future volatility of our stock price and dividend yields.
Changes in these assumptions can affect the fair value estimate.
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Income Taxes
ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
We use the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes
are enacted.
The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not
that some portion or all of the deferred tax asset will not be realized. We have provided a valuation allowance against
certain of our state net operating loss (“NOL”) carryforwards that are not expected to be used during the carryforward
periods. As of December 31, 2022, our valuation allowance is $0.4 million and relates to state NOL carryforwards.
We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. We have not identified any uncertain income
tax positions that could have a material impact on the consolidated financial statements.
We recognize interest and penalties accrued on any unrecognized tax exposures as a component of income tax
expense; we did not have any material amounts accrued as of December 31, 2022, 2021, and 2020. We are subject to
taxation in various U.S. jurisdictions, Canada, and India, and all of our income tax returns remain subject to examination
by tax authorities due to the availability of NOL carryforwards.
We consider potential tax effects resulting from discontinued operations and for gains and losses in other
comprehensive income and record intra-period tax allocations, when those effects are deemed material. We previously
entered into an interest rate swap agreement (Note 5) that we have designated as a cash flow hedge designed to manage
exposure to changes in LIBOR-based interest rate underlying our variable rate debt. Due to the effective nature of the
hedge, the initial fair value of the hedge and subsequent changes in the fair value of the hedge are recognized in
accumulated other comprehensive loss, net of tax in the consolidated balance sheets. Income taxes are allocated to the
hedge component of accumulated other comprehensive income based on appropriate intra-period tax allocations when
those effects are deemed material.
Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the
weighted-average number of shares of common stock outstanding during the period.
For periods of net income, and when the effects are not anti-dilutive, we calculate diluted earnings (loss) per share by
dividing net income available to common shareholders by the weighted-average number of shares outstanding plus the
impact of all potential dilutive common shares, consisting primarily of common stock options, shares to be purchased
under our ESPP, unvested restricted stock awards under the treasury stock method, and convertible preferred stock using
the if-converted method. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share.
Our unvested restricted shares and convertible preferred stock shares contain non-forfeitable rights to dividends, and
therefore are considered to be participating securities; in periods of net income, the calculation of basic and diluted
earnings (loss) per share excludes from the numerator net income (but not net loss) attributable to the unvested restricted
shares and the common shares assumed converted from the preferred shares and excludes the impact of those shares from
the denominator.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Earnings per share for the years ended December 31, 2022, 2021, and 2020 are calculated for basic and diluted
earnings (loss) per share as follows:
(in thousands, except per share amounts)
Net loss
Net income allocated to participating
securities
Dividends on Series A convertible
preferred stock
Net loss available to common
shareholders
Basic Weighted-Average Shares
Outstanding
Dilutive effect of stock options and
ESPP
Diluted Weighted-Average Shares
Outstanding
Basic
Years Ended December 31,
2021
$ (42,603)
2022
$ (47,896)
2020
$ (22,548)
2022
$ (47,896)
Diluted
Years Ended December 31,
2021
$ (42,603)
2020
$ (22,548)
—
—
—
—
—
(1,625)
(190)
—
(1,625)
(190)
—
—
$ (49,521)
$ (42,793)
$ (22,548)
$ (49,521)
$ (42,793)
$ (22,548)
16,260
12,596
11,964
16,260
12,596
11,964
—
—
—
16,260
12,596
11,964
Loss per share
$
(3.05)
$
(3.40)
$
(1.88)
$
(3.05)
$
(3.40)
$
(1.88)
The number of anti-dilutive shares, which have been excluded from the computation of diluted earnings (loss) per
share, were 2.6 million, 1.7 million, and 1.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.
For the years ended December 31, 2022, 2021 and 2020, all potentially dilutive shares were anti-dilutive and excluded
from the calculation of diluted loss per share because we recognized a net loss.
Hedge Accounting
At times we use derivative financial instruments to hedge our exposure to interest rate risks. All derivative financial
instruments are recognized as either assets or liabilities at fair value on the consolidated balance sheet and are classified as
current or non-current based on the scheduled maturity of the instrument.
When we enter into a hedge arrangement and intend to apply hedge accounting, we formally document the hedge
relationship and designate the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net
investment hedge. When we determine that a derivative financial instrument qualifies as a cash flow hedge and is
effective, the changes in fair value of the instrument are recorded in accumulated other comprehensive (loss)/income, net
of tax in our consolidated balance sheets and will be reclassified to earnings when the hedged item affects earnings.
Contingent Consideration
The terms of the acquisition agreement between ANI and Novitium Pharma LLC include the potential payment of
future consideration that is contingent upon the achievement of certain regulatory and financial performance milestones.
At acquisition date, we recorded this contingent consideration at fair value based on the additional consideration expected
to be transferred, which is based on the estimate of probability-weighted future cash flows as discounted to present value.
Significant inputs used in the measurement of the fair value include discount rates, probabilities of achievement of
regulatory-based milestones and payments, and projected revenues and gross profits. The discount rates are derived using
accepted valuation methodologies. The probability of achievement of regulatory milestones is based on historical and
projected success rates. The projected revenues and gross profits are based on our internal forecasts and long-term plans.
We remeasure the fair value of the contingent consideration each reporting period using Level 3 inputs, as discussed
further below. Changes in fair value, which incorporate changes in assumptions and the passage of time, are recognized as
an operating expense in our consolidated statement of operations. As payments are not expected to be made shortly after
the acquisition, any future payment of contingent consideration will be reported as a financing cash flow for amounts paid
up to the acquisition-date fair value of the consideration, and as an operating cash outflow for any amounts in excess of
the acquisition-date fair value in our consolidated statement of cash flows.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Fair Value of Financial Instruments
Our consolidated balance sheets include various financial instruments (primarily cash and cash equivalents, prepaid
expenses, accounts receivable, accounts payable, accrued expenses, and other current liabilities) that are carried at cost
and that approximate fair value. Fair value is the price that would be received from the sale of an asset or paid to transfer a
liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP
establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in
measuring fair value. These tiers include:
● Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical
assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
● Level 2—Observable market-based inputs other than quoted prices in active markets for identical assets or
liabilities.
● Level 3—Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives
the lowest priority to Level 3 inputs.
See Note 9 for additional information regarding fair value.
Restructuring Activities
We define restructuring activities to include costs directly associated with exit or disposal activities. Such costs
include cash employee contractual severance and other termination benefits, one-time employee termination severance
and benefits, contract termination charges, impairment and acceleration of depreciation associated with long-lived assets,
and other exit or disposal costs. In general, we record involuntary employee- related exit and disposal costs when there is
a substantive plan for employee severance and related payments are probable and estimable. For one-time termination
benefits, including those with a service requirement, expense is recorded when the employees are entitled to receive such
benefits and the amount can be reasonably estimated. Expense related to one-time termination benefits with a service
requirement is recorded over time, as the service is completed. Contract termination fees and penalties, and
other exit and disposal costs are generally recorded as incurred. Restructuring activities are recognized as an operating
expense in our consolidated statement of operations.
Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
In December 2022, the Financial Accounting Standards Board issued ASU 2022-06, which extended the sunset date
of the reference rate reform in ASU 848 from December 31, 2022, to December 31, 2024. We have not adopted the
guidance and are currently evaluating the impact, if any, that the adoption of this guidance will have on our consolidated
financial statements.
We have evaluated all other issued and unadopted Accounting Standards Updates and believe the adoption of these
standards will not have a material impact on our consolidated statements of operations, comprehensive income, balance
sheets, or cash flows.
2. BUSINESS COMBINATION
Summary
On November 19, 2021, we completed our previously announced acquisition of all of the interests of Novitium
pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 2021, for cash consideration, 2,466,654
restricted shares of our common stock valued at $91.2 million based on our closing stock price of $43.54 on the date of
closing and discounted for lack of marketability due to restrictions on shares, and up to $46.5 million in additional
contingent consideration. Additionally, we agreed to pay certain debts of Novitium in the amount of
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
$8.5 million, which we deemed to be paid in consummation of the transaction closing, and not assumed liabilities, and
thus were included as additional cash consideration. This acquisition was accounted for as a business combination. The
contingent consideration is based on the achievement of certain milestones, including milestones on gross profit of
Novitium portfolio products over a 24-month period, regulatory filings completed during this 24-month period, and a
percentage of net profits on certain products that are launched in the future. As of the acquisition date, the contingent
consideration had a fair value of $30.8 million. The fair value of the contingent consideration was $35.1 million and $31.0
million as of December 31, 2022 and 2021, respectively. Refer to Note 9 for changes in contingent consideration and
changes in fair value. Total consideration including cash, restricted shares and contingent consideration was valued at
$206.5 million.
Purchase consideration consisted of the following:
Cash consideration
Repayment of Novitium debts
Fair value of restricted shares
Fair value of contingent consideration
Gross consideration
Cash acquired
Net consideration
$
(in thousands)
88,109
8,493
91,199
30,800
218,601
12,076
206,525
$
$
The cash consideration was funded in part by borrowings under our new credit facility (Note 4) and through issuance
of PIPE convertible preferred stock shares (Note 10). We acquired Novitium due to its proven track record of being a
research and development growth engine capable of fueling sustainable growth, to expand our research and development
pipeline via niche opportunities, to enhance our contract development and manufacturing organization (“CDMO”)
business and U.S. based manufacturing capacity, and to diversify our revenue base.
The following presents the final allocation of the purchase price to the assets acquired and liabilities assumed on
November 19, 2021:
Total Purchase Consideration
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses and other current assets
Property and equipment
Intangible assets
Goodwill
Other non-current assets
Total assets acquired
Accounts payable
Accrued expense and other current liabilities
Accrued compensation and other related expenses
Accrued government rebates
Returned goods reserve
Other non-current liabilities
Total liabilities assumed
Net assets acquired
$
(in thousands)
218,601
12,076
27,185
14,460
1,891
14,331
139,200
24,641
1,413
235,197
1,560
6,035
4,909
744
2,202
1,146
16,596
218,601
$
The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value
estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and
appropriate discount rates. In connection with the acquisition, we recognized $46.9 million of indefinite-lived
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
in-process research and development intangible assets, $67.4 million of acquired ANDA intangible assets, and $24.9
million of customer relationship intangible assets.
Goodwill is considered an indefinite-lived asset and relates primarily to intangible assets that do not qualify for
separate recognition, such as the assembled workforce and synergies between the entities. Goodwill established as a result
of the acquisition is tax deductible in the U.S.
Novitium operations generated $90.3 million and $7.7 million of revenue during the years ended December 31, 2022
and 2021, respectively.
Pro Forma Consolidated Financial Information (unaudited)
The following unaudited pro forma consolidated financial information summarizes the results of operations for the
periods indicated as if the Novitium acquisition had been completed as of January 1, 2020.
(in thousands)
Net revenues
Net loss
Transaction Costs
Years Ended December 31,
2021
2020
$
$
272,888
(31,740)
$
$
260,951
(48,814)
In conjunction with the acquisition, we incurred approximately $9.4 million in transaction costs, all of which were
expensed in 2021 as selling, general, and administrative expense in the consolidated statement of operations.
Restricted Shares
The Novitium acquisition consideration included 2,466,654 restricted shares, which were valued at $91.2 million.
These shares contain restrictions on their transfer for periods from three to 24 months following the completion of the
acquisition. A Finnerty model was used to value the restricted shares. It includes inputs of not readily observable market
data, which are Level 3 inputs. These unobservable inputs include ANI stock volatility with a range of 65% to 71%, and
the discounted lack of marketability with a range of 7.5% to 21.5% depending on the length of restriction.
3. RESTRUCTURING
On June 2, 2022, we announced that we intend to cease operations at our Oakville, Ontario, Canada manufacturing
plant by the first quarter of 2023. This action is part of ongoing initiatives to capture operational synergies following our
acquisition of Novitium in November 2021. We have transitioned the majority of products manufactured or packaged in
Oakville to one of our three U.S.-based manufacturing sites and are on track to cease operations by the end of the first
quarter 2023. We are seeking to find potential buyers for the Oakville site, though there can be no assurance as to when or
if that will occur or the amount of any net proceeds that may be received.
For the year ended December 31, 2022, restructuring activities resulted in expenses of $5.7 million. This included
$2.1 million of severance and other employee benefit costs and $3.1 million of asset-related impairment and accelerated
depreciation costs, for the year ended December 31, 2022, respectively. There were also $0.4 million of other costs year to
date. As of December 31, 2022, $1.4 million of the severance and other employee benefits are unpaid and accrued. These
costs are recorded as restructuring activities, an operating item, in the accompanying consolidated statements of
operations. Certain of the severance and other employee benefit costs contain a service requirement, and as such, are being
accrued over time as they are earned. We expect to incur additional charges of approximately $0.3 million in severance
costs, $1.2 million in asset-related accelerated depreciation and $0.2 million to $0.4 million in other charges over the next
three months. These costs are part of the Generics, Established Brands, and Other segment.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
In conjunction with the planned exit of our Canadian facility, we have determined that the land and building at our
Oakville, Ontario, Canada plant will be sold together over the transition period and meet the criteria to be classified as
held for sale as of December 31, 2022. The land and building have a net carrying value of $8.0 million, which is presented
as assets held for sale on the accompanying consolidated balance sheets. These assets are part of the Generics, Established
Brands, and Other segment.
4. INDEBTEDNESS
Credit Facility
On November 19, 2021, the Company, as borrower, entered into a credit agreement (the “Credit Agreement”) with
Truist Bank and other lenders, which provides for credit facilities consisting of (i) a senior secured term loan facility in an
aggregate principal amount of $300.0 million (the “Term Facility”) and (ii) a senior secured revolving credit facility in an
aggregate commitment amount of $40.0 million, which may be used for revolving credit loans, swingline loans and letters
of credit (the “Revolving Facility,” and together with the Term Facility, the “Credit Facility”).
The Term Facility proceeds were used to finance the cash portion of the consideration under the merger agreement
between ANI and Novitium, repay our existing credit facility, and pay fees, costs and expenses incurred in connection
with the merger. Proceeds of the Revolving Facility are expected to be used, subject to certain limitations, for working
capital and other general corporate purposes.
The Term Facility matures in November 2027 and the Revolving Facility in November 2026. Each permits both base
rate borrowings (“ABR Loans”) and Eurodollar rate borrowings (“Eurodollar Loans”), plus a spread of (a) 5.00% above
the base rate in the case of ABR Loans under the Term Facility and 6.00% above the LIBOR Rate (or alternate benchmark
rate as defined in the Credit Agreement) in the case of LIBOR loans under the Term Facility and (b) 3.75% above the base
rate in the case of ABR Loans under the Revolving Facility and 4.75% above the LIBOR Rate (as defined in the Credit
Facility) in the case of loans under the Revolving Facility. The interest rate under the Term Facility was 10.39% at
December 31, 2022. The Credit Facility has a subjective acceleration clause in case of a material adverse effect. The Term
Facility includes a repayment schedule, pursuant to which $750 thousand of the loan will be paid in quarterly installments
during the twelve months ended December 31, 2023. As of December 31, 2022, $3.0 million of the loan is recorded as
current borrowings in the consolidated balance sheets. As of December 31, 2022, we have not drawn on the Revolving
Facility and $40.0 million remained available for borrowing.
We incurred $14.0 million in deferred debt issuance costs associated with the Credit Facility. Costs allocated to the
Term Facility are classified as a direct reduction to the current and non-current portion of the borrowings, depending on
their nature. Costs allocated to the Revolving Facility are classified as other current and other non-current assets,
depending on their nature. We incur a commitment fee of 0.5% per annum on any unused portion of the Revolving
Facility.
In connection with entry into the Credit Facility, on November 19, 2021, we terminated our existing Amended and
Restated Credit Agreement, dated as of December 27, 2018 (the “Prior Credit Agreement”), among the Company, as
borrower, and Citizens Bank with other lenders.
The Credit Facility is secured by a lien on substantially all of ANI Pharmaceuticals, Inc.’s and its principal domestic
subsidiary’s assets and any future domestic subsidiary guarantors’ assets. The Credit Facility is subject to customary
financial and nonfinancial covenants.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
The carrying value of the current and non-current components of the Term Facility as of December 31, 2022 and 2021
are:
(in thousands)
Current borrowing on debt
Deferred financing costs
Current debt, net of deferred financing costs
(in thousands)
Non-current borrowing on debt
Deferred financing costs
Non-current debt, net of deferred financing costs and current
component
Current
December 31,
2022
December 31,
2021
$
$
3,000 $
(2,150)
850
$
3,000
(2,150)
850
Non-Current
December 31, December 31,
2022
$ 294,000
(8,331)
$
2021
297,000
(10,480)
$ 285,669
$
286,520
As of December 31, 2022, we had a $297.0 million balance on the Term Facility. Of the $0.9 million of unamortized
deferred debt issuance costs allocated to the Revolving Facility, $0.6 million is included in other non-current assets in the
consolidated balance sheets, and $0.3 million is included in prepaid expenses and other current assets in the consolidated
balance sheets.
The contractual maturity of our Term Facility is as follows for the years ending December 31:
(in thousands)
2023
2024
2025
2026
2027
2028 and thereafter
Total
Term Facility
3,000
3,000
3,000
3,000
3,000
282,000
297,000
$
$
The following table sets forth the components of total interest expense related to the Term Facility and the Term
Loan, DDTL, and Revolver under our Prior Credit Agreement recognized in our consolidated statements of operations for
the year ended December 31:
(in thousands)
Contractual coupon
Amortization of finance fees
Capitalized interest
2022
2021
2020
Years Ended December 31,
$
$
26,150
2,363
(95)
28,418
$
$
11,129
914
(98)
11,945
$
$
8,847
720
(88)
9,479
5. DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY
In April 2020, we entered into an interest rate swap with Citizens Bank, N.A. to manage our exposure to changes in
LIBOR-based interest rates (or alternate benchmark rate as defined in the Credit Agreement) underlying total borrowings
under term facilities related to our Prior Credit Agreement. The interest rate swap matures in December 2026. Concurrent
with the termination of the Prior Credit Agreement and entry into the Credit Agreement with Truist Bank, the interest rate
swap with a notional value of $168.6 million at origin on November 19, 2021 was novated and Truist Bank is the new
counterparty. The swap is used to manage changes in LIBOR-based interest rates underlying a portion of the borrowing
under the Term Facility. The interest rate swap provides an effective
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
fixed interest rate of 2.26% and has been designated as an effective cash flow hedge and therefore qualifies for hedge
accounting. The notional amount of the interest rate swap was $151.5 million and $165.8 million as of December 31, 2022
and 2021, respectively, and decreases quarterly by approximately $4.0 million until December 2023, after which it
remains static until maturity in December 2026. As of December 31, 2022, the fair value of the interest rate swap asset
was recorded in other non-current assets in the consolidated balance sheets was $8.8 million. As of December 31, 2022,
$12.2 million was recorded in accumulated other comprehensive loss, net of tax in the consolidated balance sheets.
During the year ended December 31, 2022, the change in fair value of the interest rate swaps was a gain of $14.3
million. During the year ended December 31, 2022, gains on the interest rate swap of $15.2 million were recorded in
accumulated other comprehensive loss, net of tax in our consolidated statements of comprehensive (loss)/income.
Differences between the hedged LIBOR rate and the fixed rate are recorded as interest expense in the same period that the
related interest is recorded for the Term Facility based on the LIBOR rate. In the year ended December 31, 2022 and 2021,
$2.3 million and $4.8 million, respectively, of interest expense was recognized in relation to the interest rate swaps.
Included in these amounts for the years ended December 31, 2022 and 2021 are reclassifications out of accumulated other
comprehensive income/loss of $2.8 million and $3.5 million in expense, respectively, related to terminated and de-
designated cash flow hedges.
6. INVENTORIES
Inventories consist of the following as of December 31:
(in thousands)
Raw materials
Packaging materials
Work-in-progress
Finished goods
Reserve for excess/obsolete inventories
Inventories, net
7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31:
(in thousands)
Land
Buildings
Machinery, furniture, and equipment
Construction in progress
Less: accumulated depreciation
Property and equipment, net
December 31, December 31,
$
2022
70,497
7,760
1,889
35,487
115,633
(10,278)
$ 105,355
$
$
2021
51,350
5,475
652
31,969
89,446
(7,753)
81,693
December 31, December 31,
2022(1)
2021(1)
$
$
1,549
16,659
53,146
4,604
75,958
(32,712)
43,246
$
$
5,947
19,970
46,769
2,941
75,627
(22,956)
52,671
(1)Amounts as of December 31, 2022 exclude the land and building at our Canada facility, which are classified as held
for sale as of December 31, 2022. These assets have a carrying value of $8.0 million.
Depreciation expense for the years ended December 31, 2022, 2021, and 2020 totaled $7.4 million, $5.5 million, and
$4.8 million, respectively. During the years ended December 31, 2022, 2021, and 2020 there was $0.1 million of interest
capitalized into construction in progress.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
8. GOODWILL AND INTANGIBLE ASSETS
Goodwill
As a result of our 2013 merger with BioSante Pharmaceuticals, Inc. (“BioSante”), we recorded goodwill of $1.8
million. As a result of our acquisition of WellSpring Pharma Services Inc., we recorded additional goodwill of $1.7
million in 2018. From our acquisition of Novitium in 2021, we recorded goodwill of $24.6 million. We have two
operating segments, which are the same as our two reporting units, Generics, Established Brands, and Other reporting unit
and the Rare Disease reporting unit. All of the goodwill is recorded in our Generics, Established Brands, and Other
reporting unit.
For the goodwill impairment analyses performed at October 31, 2022 and 2021, we performed qualitative
assessments to determine whether it was more likely than not that our goodwill asset was impaired in order to determine
the necessity of performing a quantitative impairment test, under which management would calculate the asset’s fair
value. When performing the qualitative assessments, we evaluated events and circumstances that would affect the
significant inputs used to determine the fair value of the goodwill. Based on our assessments of the aforementioned
factors, it was determined that it was more likely than not that the fair value of our one reporting unit is greater than its
carrying amount as of October 31, 2022 and 2021, and therefore no quantitative testing for impairment was required.
In addition to the qualitative impairment analysis performed at October 31, 2022, there were no events or changes in
circumstances that would have reduced the fair value of our reporting unit below its carrying value from October 31, 2022
to December 31, 2022. No impairment loss was recognized during the years ended December 31, 2022, 2021, and 2020,
and the balance of goodwill was $28.2 million and $27.9 million as of December 31, 2022 and 2021, respectively.
Intangible Assets
The components of net definite-lived intangible assets and net indefinite-lived intangible assets other than goodwill
are as follows:
(in thousands)
Definite-Lived Intangible Assets:
Acquired ANDA intangible assets
NDAs and product rights
Marketing and distribution rights
Non-compete agreement
Customer relationships
Indefinite-Lived Intangible Assets:
In process research and development
Total Intangible Assets, net
December 31, 2022
December 31, 2021
Gross Carrying Accumulated Gross Carrying Accumulated
Amount
Amortization
Amount
Amortization
Weighted Average
Amortization
Period
$
195,862 $ (75,606) $
(162,188)
242,372
(13,309)
17,157
(602)
624
24,900
(4,150)
168,536 $
242,372
17,157
624
24,900
(54,079)
(138,835)
(12,347)
(513)
(593)
8.3 years
9.9 years
5.5 years
7.0 years
7.0 years
26,575
—
$
507,490 $ (255,855) $
46,900
—
500,489 $ (206,367)
Indefinite
8.9 years
During 2022, $20.3 million was reclassified from IPR&D to ANDA intangible assets upon completion of projects and
launch of related products. We also added $7.2 million in ANDA intangible assets related to the July 21, 2022 transaction
with Oakrum Pharma, LLC (Note 9). These assets will be amortized over a seven-year useful life.
Indefinite-Lived Intangible Assets impairment analysis was performed as of October 31, 2022. We performed
qualitative assessments to determine whether it was more likely than not that the assets were impaired in order to
determine the necessity of performing a quantitative impairment test, under which management would calculate the asset’s
fair value. When performing the qualitative assessments, we evaluated events and circumstances that would affect the
significant inputs used to determine the fair value of the assets. Based on our assessments of the aforementioned factors, it
was determined that it was more likely than not that the fair value of assets are greater than their carrying amount as of
October 31, 2022, and therefore no quantitative testing for impairment was
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
required. In addition to the qualitative impairment analysis performed, there were no events or changes in circumstances
that would have reduced the fair value of assets below their carrying value from October 31, 2022 to December 31, 2022.
During the year ended December 31, 2022, we recognized a full impairment of a definite-lived ANDA asset with a
remaining carrying value of $0.1 million.
Amortization expense was $49.5 million, $41.8 million, and $39.9 million for the years ended December 31, 2022,
2021, and 2020, respectively. Refer to Note 9 for more details on acquired definite-lived and indefinite-lived intangible
assets.
Expected future amortization expense is as follows for the years ending December 31:
(in thousands)
2023
2024
2025
2026
2027
2028 and thereafter
Total
$
51,792
50,996
48,893
35,574
26,663
37,717
$ 251,635
Expected amortization expense is an estimate. Actual amounts of amortization expense may differ due to timing of
regulatory approvals related to IPR&D assets, additional intangible assets acquired, impairment of intangible assets, and
other events.
9. FAIR VALUE DISCLOSURES
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an
orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical
disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value.
The inputs used in measuring the fair value of cash and cash equivalents are considered to be Level 1 in accordance
with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various
banks and brokers that held the majority of our funds. The fair value of short-term financial instruments (primarily
accounts receivable, prepaid expenses, accounts payable, accrued expenses, and other current liabilities) approximate their
carrying values because of their short-term nature. The Term Facility bears an interest rate that fluctuates with the changes
in LIBOR and, because the variable interest rates approximate market borrowing rates available to us, we believe the
carrying values of these borrowings approximated their fair values at December 31, 2022 and 2021.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Contingent Value Rights
Our contingent value rights (“CVRs”), which were granted coincident with our merger with BioSante
Pharmaceuticals, Inc. and expire in June 2023, are considered to be contingent consideration and are classified as
liabilities. As such, the CVRs were recorded as purchase consideration at their estimated fair value, using Level 3 inputs,
and are marked to market each reporting period until settlement. The fair value of CVRs is estimated using the present
value of management’s projection of the expected payments pursuant to the terms of the CVR agreement, which is the
primary unobservable input. If our projection or expected payments were to increase substantially, the value of the CVRs
could increase as a result. The present value of the liability was calculated using a discount rate of 15%. We determined
that the fair value of the CVRs was immaterial as of December 31, 2022 and 2021. We also determined that the changes in
such fair value were immaterial for the years ended December 31, 2022, 2021, and 2020.
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Interest Rate Swap
ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
The fair value of our interest rate swap is estimated based on the present value of projected future cash flows using
the LIBOR forward rate curve. In 2023, we expect that this will be replaced by a forward rate curve for an alternate
benchmark rate as defined in the Credit Agreement. The model used to value the interest rate swap includes inputs of
readily observable market data, a Level 2 input. As described in detail in Note 5, the fair value of the interest rate swap
was a $8.8 million asset at December 31, 2022.
Contingent Consideration
In connection with the acquisition of Novitium, we may pay up to $46.5 million in additional consideration related to
the achievement of certain milestones, including milestones on gross profit of Novitium portfolio products over a 24-
month period, regulatory filings completed during this 24-month period, and a percentage of net profits on certain
products that are launched in the future.
The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable
market data, which are Level 3 inputs. As of the November 19, 2021 acquisition date, the contingent consideration had a
fair value of $30.8 million. The fair value of the contingent consideration was $35.1 million and $31.0 million as of
December 31, 2022 and 2021, respectively, and is reflected as a non-current accrued contingent consideration liability in
the consolidated balance sheet.
The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include
the following significant unobservable inputs:
Payment Type
Profit-based milestone payments
Valuation Technique
Probability-weighted
discounted cash flow
Unobservable Input
Assumptions
Discount rate
Projected fiscal year of payment
13.0%
2024-2029
Product development-based milestone
payments
Probability-weighted
discounted cash flow
Discount rate
Probability of payment
Projected fiscal year of payment
8.8%
95.0%
2024
The following table presents the changes in contingent consideration balances classified as Level 3 balances for the
year ended December 31, 2022 and 2021:
(in thousands)
Beginning balance
Initial valuation
Measurement period adjustment
Change in fair value
Ending balance
Years Ended December 31,
2022
2021
$
$
31,000
—
300
3,758
35,058
$
$
—
30,800
—
200
31,000
The following table presents our financial assets and liabilities accounted for at fair value on a recurring basis as of
December 31, 2022 and December 31, 2021, by level within the fair value hierarchy:
(in thousands)
Description
Assets
Interest rate swap
Liabilities
Contingent consideration
CVRs
Fair Value at
December 31, 2022
Level 1
Level 2
Level 3
8,759 $ — $ 8,759 $
—
35,058 $ — $
— $ — $
— $ 35,058
—
— $
$
$
$
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Description
Liabilities
Contingent consideration
Interest rate swaps
CVRs
Fair Value at
December 31, 2021
Level 1
Level 2
Level 3
$
$
$
31,000
6,790
$ — $ — $ 31,000
—
$
$ — $ 6,790
—
— $ — $ — $
Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
We have no financial assets and liabilities that are measured at fair value on a non-recurring basis.
Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
We have no non-financial assets and liabilities that are measured at fair value on a recurring basis.
Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
We measure our long-lived assets, including property and equipment, ROU assets, intangible assets, and goodwill, at
fair value on a non-recurring basis. These assets are recognized at fair value when they are deemed to be other-than-
temporarily impaired. During the year ended December 31, 2022, we recognized an impairment charge of $0.1 million
related to a definite-lived ANDA intangible asset. During the year ended December 31, 2021, we recognized an
impairment charge of $2.4 million related to a definite-lived ANDA intangible asset. There were no other fair value
impairments recognized in the years ended December 31, 2022 and 2021.
Acquired Non-Financial Assets Measured at Fair Value
On July 21, 2022, we acquired four ANDAs from Oakrum Pharma, LLC for total consideration of $8.0 million plus
an immaterial amount for the purchase of finished goods inventory. The transaction was funded from cash on hand. We
accounted for this transaction as an asset acquisition and capitalized the transaction costs directly related to the
acquisition. The product portfolio included one commercial product, one approved product with a launch completed in
September and two filed products, with approval pending. We recognized $7.2 million as acquired ANDA intangible
assets and $1.2 million as research and development expense because certain of the generic products have significant
remaining work required in order to be commercialized and the products do not have an alternative future use. The
payment was allocated to the acquired intangible assets and in-process research and development based on relative fair
value, which was determined using Level 3 unobservable inputs. We used the present value of the estimated cash flows
related to the products, using a discount rate of 13% to determine the fair value of the acquired intangible assets and in-
process research and development. The inventory acquired was immaterial. Contingent liabilities are accrued when they
are both estimable and probable. We accrued $0.2 million in contingent payments due to a third party upon the launch of a
product completed in September. This was accrued and recorded in the fair value of acquired intangible assets as it was
probable at the acquisition date and has been paid in December 2022. The ANDA’s will be amortized in full over its useful
life of seven years and will be tested for impairment when events or circumstances indicate that the carrying value of the
asset may not be recoverable. No such triggering events were identified during the period from the date of acquisition to
December 31, 2022, and therefore no impairment loss was recognized for the year ended December 31, 2022.
In April 2021, we acquired three NDAs and an ANDA and certain related inventories from Sandoz, Inc. for total
consideration of $20.7 million. We also incurred and paid $0.4 million in transaction costs directly related to the
acquisition. The acquisition was funded via borrowings under our Revolver. We accounted for this transaction as an asset
acquisition and capitalized the transaction costs directly related to the acquisition. We recognized $11.4 million as
acquired intangible assets and $9.7 million of inventory at fair value, including $0.6 million of API, $1.0 million of
sample inventory, and $8.1 million in finished goods inventory. In order to determine the fair value of the intangible
assets, we used the present value of the estimated cash flows related to the product rights using a discount rate of 10%,
which are level 3 unobservable inputs. The fair value of the inventory was determined based on the estimated selling price
to be generated from the finished goods, less costs to sell, including a reasonable margin, which are level 3 unobservable
inputs. The intangible assets are being amortized in full over a useful life of seven years and are tested for impairment
when events or circumstances indicate that the carrying value of the asset may
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
not be recoverable. No such triggering events were identified during the period from the date of acquisition to December
31, 2022 and therefore no impairment loss was recognized for the years ended December 31, 2021 and 2022.
In July 2020, we acquired an ANDA and certain related inventories from a private company for total consideration of
$4.3 million. We also incurred and paid $0.1 million in transaction costs directly related to the acquisition. We accounted
for this transaction as an asset acquisition and capitalized the transaction costs directly related to the acquisition. We
recognized $3.0 million as an acquired ANDA intangible asset and $1.4 million in inventory at fair value. The fair value
of the inventory was determined based on the estimated selling price to be generated from the finished goods, less costs to
sell, including a reasonable margin, which are level 3 unobservable inputs. The ANDA was being amortized in full over
its useful life of seven years. During the fourth quarter 2021, we recognized a full impairment of the remaining $2.4
million carrying value of the asset, as it was determined that the asset would not generate future cash flows.
In January 2020, we completed the acquisition of the U.S. portfolio of 23 generic products and API and finished
goods related to certain of those products from Amerigen Pharmaceuticals, Ltd. (“Amerigen”) for a purchase
consideration of $56.8 million and up to $25.0 million in contingent payments over the subsequent four years from the
acquisition. The product portfolio at the time of the acquisition included ten commercial products, three approved
products with launches pending, four filed products and four in-development products as well as a license to
commercialize two approved products. Payments were made using cash on hand and through borrowings of $15.0 million
under our Revolver. We also incurred and paid $0.7 million in transaction costs directly related to the acquisition. We
accounted for the transaction as an asset acquisition and capitalized the transaction costs directly related to the acquisition.
We recognized $38.5 million as acquired ANDA intangible assets and $6.7 million as acquired marketing and distribution
rights related to the licensed products, which are being amortized over their useful lives of seven years. We also
recognized $3.8 million of the purchase price as research and development expense because certain of the generic
products have significant remaining work required in order to be commercialized and the products do not have an
alternative future use. The payment was allocated to the two asset categories and in-process research and development
based on relative fair value, which was determined using Level 3 unobservable inputs. To determine the fair value of the
acquired intangible assets and in-process research and development, we used the present value of the estimated cash flows
related to the products, using a discount rate of 8%. We also recognized $8.4 million in inventory at fair value, including
$1.7 million of API and $6.7 million of finished goods. The fair value of the inventory was determined based on the
estimated selling price to be generated from the finished goods, less costs to sell, including a reasonable margin, which are
level 3 unobservable inputs. Contingent liabilities will be accrued when they are both estimable and probable. The
intangible assets will be tested for impairment when events or circumstances indicate that the carrying value of the asset
may not be recoverable. No such triggering events were identified during the period from the date of acquisition to
December 31, 2022 and therefore no impairment loss was recognized for the years ended December 31, 2020, 2021, and
2022.
10. MEZZANINE AND STOCKHOLDERS’ EQUITY
Stockholders’ Equity
Authorized shares
We are authorized to issue up to 33.3 million shares of common stock with a par value of $0.0001 per share, 0.8
million shares of class C special stock with a par value of $0.0001 per share, and 1.7 million shares of undesignated
preferred stock with a par value of $0.0001 per share at December 31, 2022 and 2021.
There were 17.6 million and 17.5 million shares of common stock issued and outstanding as of December 31, 2022,
respectively, and 16.9 million and 16.8 million shares of common stock issued and outstanding as of December 31, 2021,
respectively. During 2021, we issued 1.5 million shares related to a public offering of our common stock and 2.5 million
shares as consideration for our acquisition of Novitium.
There were 11 thousand shares of class C special stock issued and outstanding as of December 31, 2022 and 2021.
Each share of class C special stock entitles its holder to one vote per share. Each share of class C special stock
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
is exchangeable, at the option of the holder, for one share of our common stock, at an exchange price of $90.00 per share,
subject to adjustment upon certain capitalization events. Holders of class C special stock are not entitled to receive
dividends or to participate in the distribution of our assets if we were to liquidate, dissolve, or wind-up the company. The
holders of class C special stock have no cumulative voting, preemptive, subscription, redemption, or sinking fund rights.
Mezzanine Equity
PIPE Shares
Concurrently with the execution of the Merger Agreement, and as financing for a portion of the acquisition, on March
8, 2021, we entered into an Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership
(the “PIPE Investor”), pursuant to which we agreed to issue and sell to the PIPE Investor, and the PIPE Investor agreed to
purchase, 25,000 shares of our Series A Convertible Preferred Stock (the “PIPE Shares”), for a purchase price of
$1,000 per share and an aggregate purchase price of $25.0 million. This agreement closed and the 25,000 PIPE Shares
were sold and issued for $25.0 million on November 19, 2021. The PIPE Shares are classified as mezzanine equity
because the shares are mandatorily redeemable for cash upon a change in control, an event that is not solely in our control.
We incurred $0.2 million in issuance costs associated with the transaction.
The PIPE Shares accrue dividends at 6.50% per year on a cumulative basis, payable in cash or in-kind, and will also
participate, on a pro-rata basis, in any dividends that may be declared with respect to our common stock. The PIPE Shares
are convertible into our common shares at the conversion price of $41.47 (i) beginning two years after their issuance date,
at the election of ANI (in which case the PIPE Investor must convert all of the PIPE Shares), if the volume-weighted
average price of our common stock for any 20 trading days out of 30 consecutive trading days exceeds 170% of the
conversion price, and (ii) at any time after issuance, at the election of the PIPE Investor. As of December 31, 2022, the
PIPE shares are currently convertible into a maximum of 602,901 shares of our common stock.
In case of a liquidation event, the holder of the PIPE Shares will be entitled to receive, in preference to holders of our
common stock, the greater of (i) the PIPE Shares’ purchase price plus any accrued and unpaid dividends thereon and (ii)
the amount the holder of the PIPE Shares would have received in the liquidation event if it had converted its PIPE Shares
into our common stock. The PIPE Shares will have voting rights, voting as one series with our common stock, on as-
converted basis, and will have separate voting rights on any (i) amendment to the Certificate of Designation of
Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate”) that adversely amends and
relates solely to the terms of the PIPE Shares and (ii) issuance of additional Series A convertible preferred stock. In case
of a change of control of ANI, the PIPE Shares will be redeemed at the greater of (i) the PIPE Shares’ purchase price plus
any accrued and unpaid dividends thereon and (ii) the change of control transaction consideration that the holder of the
PIPE Shares would have received if it had converted into our common stock.
There were 25,000 shares of Series A convertible preferred stock outstanding as of December 31, 2022 and 2021.
11. STOCK-BASED COMPENSATION
Employee Stock Purchase Plan
In July 2016, we commenced administration of the ANI Pharmaceuticals, Inc. 2016 Employee Stock Purchase Plan.
The Board of Directors and shareholders approved a maximum of 0.2 million shares of common stock, which were
reserved and made available for issuance under the ESPP. Under the ESPP, participants can purchase shares of our stock at
a 15% discount. We issued 29 thousand, 14 thousand, and 13 thousand shares in the years ended December 31, 2022,
2021, and 2020, respectively.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
The following table summarizes ESPP expense incurred under the 2016 Employee Stock Purchase Plan and included
in our consolidated statements of operations:
(in thousands)
Cost of sales
Research and development
Selling, general, and administrative
Stock Incentive Plan
2022
Years Ended December 31,
2021
2020
50
41
222
313
$
$
15
21
87
123
$
$
21
36
123
180
$
$
Equity-based service awards are granted under the ANI Pharmaceuticals, Inc. Amended and Restated 2022 Stock
Incentive Plan (the “2022 Plan”), which was approved by our stockholders at the 2022 Annual Meeting of Stockholders
(the “Annual Meeting”) held on April 27, 2022. Prior to this approval, we had been granting equity-based incentive
awards under our Sixth Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”), which was renamed and was
amended and restated to become the 2022 Plan. This amendment and restatement, among other things, increased the
number of shares reserved for issuance thereunder by 1,150,000 shares. As of December 31, 2022, 1.1 million shares of
our common stock were available for issuance under the 2022 Plan.
From time to time, we may grant stock options to employees through an inducement grant outside of our 2022 Plan to
induce prospective employees to accept employment with us (the “Inducement Grants”). The options are granted at an
exercise price equal to the fair market value of a share of our common stock on the respective grant date and are generally
exercisable in four equal annual installments beginning on the first anniversary of the respective grant date. The grants are
made pursuant to inducement grants outside of our stockholder approved equity plan as permitted under the Nasdaq Stock
Market listing rules.
We measure the cost of equity-based service awards based on the grant-date fair value of the award. The cost is
recognized ratably over the period during which an employee is required to provide service in exchange for the award or
the requisite service period. We recognize stock-based compensation expense ratably over the vesting periods of the
awards.
The following table summarizes stock-based compensation expense incurred under the Stock Incentive Plans and
Inducement Grant and included in our consolidated statements of operations:
(in thousands)
Cost of sales
Research and development
Selling, general, and administrative
2022
Years Ended December 31,
2021
2020
$
$
482
710
13,094
14,286
$
$
5
543
9,818
10,366
$
$
115
561
12,080
12,756
We recognized income tax benefits of $1.7 million, $1.0 million, and $1.6 million for stock-based compensation-
related tax deductions in our 2022, 2021, and 2020 consolidated statements of operations,
Stock Options
Outstanding stock options granted to employees and consultants generally vest over a period of four years and have
10-year contractual terms. Outstanding stock options granted to non-employee directors generally vest over a period of
one to four years and have 10-year contractual terms. Upon exercise of an option, we issue new shares of our common
stock or issue shares from treasury stock.
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
For 2022, 2021, and 2020, the fair value of each option grant was estimated using the Black-Scholes option-pricing
model, using the following assumptions:
Expected option life (years)
Risk-free interest rate
Expected stock price volatility
Dividend yield
2022
5.50 - 6.25
Years Ended December 31,
2021
5.50 - 6.25
1.71% - 2.83% 0.68% - 1.39% 0.31% - 1.63%
48.4% - 50.0% 48.2% - 49.5% 49.2% - 51.2%
—
2020
5.50 - 6.25
—
—
We use the simplified method to estimate the expected option life of options. The risk-free interest rate used is the
yield on a U.S. Treasury note as of the grant date with a maturity equal to the estimated life of the option. We calculated
an estimated volatility rate based on our historical stock price. We have not issued a cash dividend on our common shares
in the past nor do we have any current plans to do so in the future; therefore, an expected dividend yield of zero was used.
A summary of stock option activity under the 2022 Plan and Inducement Grants during the years ended December 31,
2022, 2021, and 2020 is presented below:
(in thousands, except per share and
remaining term data)
Outstanding December 31, 2019
Granted
Exercised
Forfeited
Expired
Outstanding December 31, 2020
Granted
Exercised
Forfeited
Expired
Outstanding at
December 31, 2021
Granted
Exercised
Forfeited
Expired
Outstanding at
December 31, 2022
Exercisable at December 31, 2022
Weighted Weighted
Average
Grant-
date
Fair Value
$ 14.39
Average
Remaining
Term
(years)
7.2
Aggregate
Intrinsic Value
6,761
$
7.1
$
$ 15.71
216
372
552
Weighted
Average
$
Option
Shares Exercise Price
54.21
30.29
36.81
54.54
—
48.44
33.09
40.25
59.84
55.59
757
231
(8)
(44)
—
936
$
168
(42)
(19)
(55)
$
988
36
(23)
(47)
(47)
907
686
$
$
45.56
34.52
30.03
36.91
55.07
45.47
49.31
$ 16.82
6.6
$
6,786
153
5.6
4.9
$
$
3,868
2,003
As of December 31, 2022, there was $3.2 million of total unrecognized compensation cost related to non-vested stock
options granted under the 2022 Plan and Inducement Grant. The cost is expected to be recognized over a weighted-
average period of 2.0 years. During the year ended December 31, 2022, we received $0.7 million in cash from the exercise
of stock options and recorded less than $0.1 million tax provision related to these exercises. During the year ended
December 31, 2021, we received $1.7 million in cash from the exercise of stock options and recorded a $0.1 million tax
provision related to these exercises. During the year ended December 31, 2020, we received $0.3 million in cash from the
exercise of stock options and recorded a $43 thousand tax provision related to these exercises.
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Restricted Stock Awards
ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Restricted stock awards (“RSAs”) granted to employees generally vest over a period of four years. RSAs granted to
non-officer directors generally vest over a period of one year.
Shares of our common stock delivered to employees and directors will be unrestricted upon vesting. During the
vesting period, the recipient of the restricted stock has full voting rights as a stockholder and would receive dividends, if
declared, even though the restricted stock remains subject to transfer restrictions and will generally be forfeited upon
termination of the officer prior to vesting. The fair value of each RSA is based on the market value of our stock on the
date of grant.
A summary of RSA activity under the Plan during the years ended December 31, 2022, 2021, and 2020 is presented
below:
(in thousands, except per share and
remaining term data)
Unvested at December 31, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2020
Granted
Vested
Forfeited
Unvested at December 31, 2021
Granted
Vested
Forfeited
Unvested at December 31, 2022
Weighted
Average Grant Weighted Average
Remaining Term
(years)
Date Fair
Value
$
$
$
$
61.46
44.42
58.88
51.53
48.14
33.02
48.32
48.16
36.52
32.76
36.99
38.08
33.86
2.6
2.7
2.8
2.6
Shares
192
305
(127)
(18)
352
541
(125)
(61)
707
748
(245)
(69)
1,141
As of December 31, 2022, there was $31.2 million of total unrecognized compensation cost related to non-vested
RSAs granted under the Plan, which is expected to be recognized over a weighted-average period of 2.6 years.
12. INCOME TAXES
On August 6, 2018, ANI Pharmaceuticals Canada Inc. (“ANI Canada”) acquired all the issued and outstanding equity
interests of WellSpring in a non-taxable transaction. Following the consummation of the transaction, WellSpring was
merged into ANI Canada. For U.S. Federal and state income tax purposes, ANI Canada is not part of ANI’s consolidated
group; rather, ANI Canada is subject to income taxes only in Canada and solely based on its stand-alone operations. The
foreign current and foreign deferred provisions (benefits) below represent our tax provision (benefit) from the Canadian,
Indian, and Israeli taxing jurisdictions.
We are required to establish a valuation allowance for deferred tax assets if, based on the weight of available
evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which
those temporary differences become deductible. We consider the projected future taxable income and tax planning
strategies in making this assessment.
As of December 31, 2022 and 2021, our consolidated valuation allowance was $0.4 million, related solely to deferred
tax assets for net operating loss carryforwards in certain U.S. state jurisdictions.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Our total provision for income taxes consists of the following for the years ended December 31, 2022, 2021, and
2020:
(in thousands)
Current income tax provision:
Federal
State
Foreign
Total
Deferred income tax benefit
Federal
State
Foreign
Total
Change in valuation allowance
Total benefit for income taxes
2022
2021
2020
$
$
152
249
66
467
$
1,296
1,320
691
3,307
9,232
559
—
9,791
(13,382)
(1,722)
(128)
(15,232)
(4)
(12,163)
(5,122)
336
(16,949)
187
$ (14,769) $ (13,455) $
(14,125)
744
345
(13,036)
(169)
(3,414)
The difference between our expected income tax provision from applying U.S. Federal statutory tax rates to the pre-
tax income and actual income tax provision relates primarily to the effect of the following:
As of December 31,
US Federal statutory rate
State taxes, net of Federal benefit
Foreign taxes
Change in valuation allowance
Stock-based compensation
Non-deductible costs
Change in state apportionment factors, state and foreign rates
Research and experimentation and charitable credits
Transfer pricing and other
Effective income tax rate
100
2022
2020
2021
21.0 % 21.0 % 21.0 %
3.3 %
3.2 %
1.9 %
(0.1)%
(1.0)%
0.1 %
0.7 %
(0.3)%
— %
(2.5)%
(1.7)%
(1.4)%
(3.5)%
(0.8)%
(0.5)%
(7.3)%
5.5 %
(0.1)%
0.9 %
0.9 %
1.4 %
2.0 %
(2.9)%
(0.1)%
23.6 % 24.0 % 13.1 %
Table of Contents
ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Deferred income taxes reflect the net tax effects of differences between the bases of assets and liabilities for financial
reporting and income tax purposes. Our deferred income tax assets and liabilities consisted of the following:
(in thousands)
Deferred tax assets:
Accruals and advances
Stock-based compensation
Accruals for chargebacks and returns
Inventory
Intangible asset
Net operating loss carryforwards
Other
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Intangible assets
Other
Total deferred tax liabilities
Valuation allowance
Deferred tax assets, net of deferred tax liabilities and valuation
allowance
As of December 31,
2021
2022
$
9,233
6,041
15,344
5,292
33,431
5,994
16,548
$ 91,883
$ 10,149
5,108
18,371
5,983
23,470
6,038
8,758
$ 77,877
$ (5,776) $ (6,601)
(11)
—
(2,879)
$ (10,074) $ (9,491)
(450)
(4,298)
(446)
$ 81,363
$ 67,936
As of December 31, 2022, we had U.S. federal net operating loss carryforwards of approximately $22.6 million, all of
which arose as a result of the 2013 merger with BioSante Pharmaceuticals, Inc. and from our taxable loss in 2021 and
2022. Our net operating loss carryforwards related to our 2013 merger, if not used, expire in annual increments through
2033 and are limited on an annual basis as prescribed by Section 382 of the U.S. Internal Revenue Code; our current
annual limitation is approximately $0.8 million per year. Our net operating losses that arose in 2021 and 2022 do not
expire and are not limited by Section 382. Additionally, as of December 31, 2022, we have total net operating losses in
Canada of $1.7 million that expire through 2038.
We are subject to income taxes in numerous jurisdictions in the U.S., Canada, and India. Significant judgment is
required in evaluating our tax positions and determining our provision for income taxes. We establish liabilities for tax-
related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities
are established when we believe that certain positions might be challenged despite our belief that our tax return positions
are fully supportable. We adjust these liabilities in light of changing facts and circumstances, such as the outcome of a tax
audit. The provision for income taxes includes the impact of changes to the liability that is considered appropriate. We
identified no material uncertain income tax positions as of December 31, 2022 and 2021.
We are subject to income tax audits in all jurisdictions for which we file tax returns. Tax audits by their nature are
often complex and can require several years to complete. All of our income tax returns remain subject to examination by
tax authorities due to the availability of net operating loss carryforwards.
13. COMMITMENTS AND CONTINGENCIES
Operating Leases
All our existing leases as of December 31, 2022 are classified as operating leases. As of December 31, 2022, we have
13 material operating leases for facilities and office equipment with remaining terms expiring from 2025 through 2027
and a weighted average remaining lease term of 2.6 years. Many of our existing leases have fair value renewal options,
none of which are considered certain of being exercised or included in the minimum lease term. Discount rates used in the
calculation of our lease liability ranged between 3.99% and 8.95%.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Rent expense for the years ended December 31, 2022 and 2021 consisted of the following:
(in thousands)
Operating lease costs
Variable lease costs
Total lease costs
A maturity analysis of our operating leases follows:
Year Ended December 31,
2021
2022
$
$
701
236
937
$
$
240
48
288
(in thousands)
Future payments:
2023
2024
2025
2026
2027
Total
Discount
Lease liability
Current lease liability, included in accrued expenses and other in the consolidated balance sheets
Non-current lease liability, included in derivatives and other non-current liabilities in the consolidated
balance sheets
$
$
798
868
470
89
34
2,259
(194)
2,065
(684)
$
1,381
Vendor Purchase Minimums
We have a supply agreement with one vendor that includes purchase minimums. Pursuant to this agreement, we will
be required to purchase a total of $0.1 million of API from this vendor during the year ended December 31, 2023.
Government Regulation
Our products and facilities are subject to regulation by a number of federal and state governmental agencies, such as
the Drug Enforcement Administration (“DEA”), the Food and Drug Administration (“FDA”), the Centers for Medicare
and Medicaid Services (“CMS”), Health Canada, the Central Drugs Standard Control Organization (“CDSCO”), The
Narcotics Control Bureau (“NCB”), and India’s Ministry of Health and Family Welfare (“MoHFW”). The FDA, in
particular, maintains oversight of the formulation, manufacture, distribution, packaging, and labeling of all of our
products. The DEA, Health Canada, and NCB maintain oversight over our products that are considered controlled
substances.
Unapproved Products
Two of our products, Esterified Estrogen with Methyltestosterone (“EEMT”) and Opium Tincture, are marketed
without approved NDAs or ANDAs. During the years ended December 31, 2022, 2021, and 2020, net revenues for these
products totaled $14.2 million, $16.2 million, and $16.9 million, respectively.
The FDA's policy with respect to the continued marketing of unapproved products appears in the FDA's September
2011 Compliance Policy Guide Sec. 440.100 titled “Marketed New Drugs without Approved NDAs or ANDAs.” Under
this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against marketing of
unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher
priority to enforcement action against products in certain categories, such as those with potential safety risks or that lack
evidence of effectiveness.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
We continue to believe that, so long as we comply with applicable manufacturing standards, the FDA will continue to
operate on a risk-based approach and will not take action against us. However, we can offer no assurance that the FDA
will continue to follow this approach or that it will not take a contrary position with any individual product or group of
products. If the FDA were to move away from the risk-based approach to enforcement against marketing of unapproved
products, we may be required to seek FDA approval for these products or withdraw such products from the market. If we
decide to withdraw the products from the market, our net revenues for generic pharmaceutical products would decline
materially, and if we decide to seek FDA approval, we would face increased expenses and might need to suspend sales of
the products until such approval was obtained, and there are no assurances that we would receive such approval.
In addition, one group of products that we manufacture on behalf of a contract customer is marketed by that customer
without an approved NDA. If the FDA took enforcement action against such customer, the customer may be required to
seek FDA approval for the group of products or withdraw them from the market. Our contract manufacturing revenues for
the group of unapproved products for the years ended December 31, 2022, 2021, and 2020 were $2.6 million, $2.4
million, and $2.8 million, respectively.
Legal proceedings
We are involved, and from time to time may become involved, in various disputes, governmental and/or regulatory
inquiries, investigations, government reimbursement related actions and litigation. These matters are complex and subject
to significant uncertainties. Due to the inherent unpredictability of legal matters, including litigation, governmental and
regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings,
investigations or inquiries are in the early stages, we cannot accurately predict the outcome, or the effects of the legal
proceedings described below. While we believe that we have valid claims and/or defenses in the litigation and other
matters described below, litigation is inherently unpredictable, and the outcome of the proceedings could result in losses,
including substantial damages, fines, civil or criminal penalties and injunctive or administrative remedies. We intend to
vigorously prosecute and/or defend these matters, as appropriate; however, from time to time, we may settle or otherwise
resolve these matters on terms and conditions that we believe are in our best interests. Resolution of any or all claims,
investigations, and legal proceedings, individually or in the aggregate, could have a material adverse effect on our results
of operations and/or cash flows in any given accounting period or on our overall financial condition.
Some of these matters with which we are involved are described below and in our 2021 Form 10-K, and unless
otherwise disclosed, we are unable to predict the outcome of the matter or to provide an estimate of the range of
reasonably possible material losses. We record accruals for loss contingencies to the extent we conclude it is probable that
a liability has been incurred and the amount of the loss can be reasonably estimated.
From time to time, we are also involved in other pending proceedings for which, in our opinion based upon facts and
circumstances known at the time, either the likelihood of loss is remote or any reasonably possible loss associated with the
resolution of such proceedings is not expected to be material to our results, and therefore remain undisclosed. If and when
any reasonably possible losses associated with the resolution of such other pending proceedings, in our opinion, become
material, we will disclose such matters.
Furthermore, like many pharmaceutical manufacturers, we are periodically exposed to product liability claims. The
prevalence of these claims could limit our coverage under future insurance policies or cause those policies to become
more expensive, which could harm our business, financial condition, and operating results. Recent trends in the product
liability and director and officer insurance markets is to exclude matters related to certain classes of drugs. Our policies
have been subject to such exclusions which place further potential risk of financial loss on us.
Legal fees for litigation-related matters are expensed as incurred and included in the condensed consolidated
statements of operations under the selling, general, and administrative expense line item.
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Commercial Litigation
ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
In November of 2017, we were served with a complaint filed by Arbor Pharmaceuticals, LLC, in the United States
District Court for the District of Minnesota. The complaint alleged false advertising and unfair competition in violation of
Section 43(a) of the Lanham Act, Section 1125(a) of Title 15 of the United States Code, and Minnesota State law, under
the premise that we sold an unapproved Erythromycin Ethylsuccinate (“EES”) product during the period between
September 27, 2016 and November 2, 2018. The complaint sought a trial by jury and monetary damages (inclusive of
actual and consequential damages, treble damages, disgorgement of ANI profits, and legal fees) of an unspecified
amount. Discovery in this action closed on March 31, 2019 and trial was scheduled to commence on August 25, 2021. On
August 3, 2021, the Company entered into a Settlement Agreement with Arbor Pharmaceuticals, LLC to resolve all claims
related to Civil Action 17-4910, Arbor Pharmaceuticals, LLC (“Arbor”) v. ANI Pharmaceuticals, Inc., which was pending
trial in the United States District Court for the District of Minnesota. Under the terms of the agreement, ANI paid Arbor
$8.4 million and Arbor dismissed the action with prejudice. Neither party admitted wrongdoing in reaching this
settlement. The Company paid the settlement from cash on the balance sheet
On December 3, 2020, class action complaints were filed against the Company on behalf of putative classes of direct
and indirect purchasers of the drug Bystolic. On December 23, 2020, six individual purchasers of Bystolic, CVS, Rite Aid,
Walgreen, Kroger, Albertsons, and H-E-B, filed complaints against the Company. On March 15, 2021, the plaintiffs in
these actions filed amended complaints. All amended complaints are substantively identical. The plaintiffs in these
actions allege that, beginning in 2012, Forest Laboratories, the manufacturer of Bystolic, entered into anticompetitive
agreements when settling patent litigation related to Bystolic with seven potential manufacturers of a generic version of
Bystolic: Hetero, Torrent, Alkem/Indchemie, Glenmark, Amerigen, Watson, and various of their corporate parents,
successors, subsidiaries, and affiliates. ANI itself was not a party to patent litigation with Forest concerning Bystolic and
did not settle patent litigation with Forest. The plaintiffs named the Company as a defendant based on the Company’s
January 8, 2020 Asset Purchase Agreement with Amerigen. The complaints alleged that the 2013 patent litigation
settlement agreement between Forest and Amerigen violated federal and state antitrust laws and state consumer protection
laws by delaying the market entry of generic versions of Bystolic. Plaintiffs alleged they paid higher prices as a result of
delayed generic competition. Plaintiffs sought damages, trebled or otherwise multiplied under applicable law, injunctive
relief, litigation costs and attorneys’ fees. The complaints did not specify the amount of damages sought from the
Company or other defendants and the Company at this early stage of the litigation cannot reasonably estimate the potential
damages that the plaintiffs will seek. The cases have been consolidated in the United States District Court for the Southern
District of New York as In re Bystolic Antitrust Litigation, Case No. 20-cv-005735 (LJL). On April 23, 2021, the
Company and other defendants filed motions to dismiss the amended complaints. On January 24, 2022, the court
dismissed all claims brought by the plaintiffs without prejudice. The court granted the plaintiffs until February 22, 2022 to
file amended complaints, which were filed in federal court in the Southern District of New York, on that date. The newly
amended complaints contain substantially similar claims. On April 19, 2022, the Company and other defendants filed
motions to dismiss the newly amended complaints. On May 23, 2022, the plaintiffs filed oppositions to the motions to
dismiss and, on June 24, 2022, the Company and other defendants filed replies to those oppositions. On February 21,
2023, the Company and the defendants’ motions to dismiss all actions were granted with prejudice. Plaintiffs have thirty
days to file an appeal.
On March 24, 2021, Azurity Pharmaceuticals, Inc. (“Azurity”) filed a complaint in the United States District Court
for the District of Minnesota against ANI Pharmaceuticals, Inc., asserting that ANI’s vancomycin hydrochloride oral
solution drug product infringes U.S. Patent No. 10,688,046. The complaint sought injunctive relief, damages, including
lost profits and/or royalty, treble damages, and attorneys’ fee and costs. On February 15, 2022, the Company entered into a
settlement agreement with Azurity to resolve all claims related to this action. Under the terms of the agreement, Azurity
granted ANI a non-exclusive, non-transferable, non-sublicensable, royalty-bearing license under its Patents to sell ANI
product in the United States and dismissed the action with prejudice. In exchange, we paid Azurity $1.9 million of
royalties from past sales and we will pay Azurity a royalty equal to 20% of gross margin of sales of the ANI product for a
contractually defined term. We paid the settlement from cash on hand and the $1.9 million charge was recorded as cost of
sales (excluding depreciation and amortization) on the consolidated statement of operations for the year ended December
31, 2021.
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
On April 1, 2021, United Therapeutics Corp. and Supernus Pharmaceuticals, Inc. (“UTC/Supernus”) filed a complaint
in the United States District Court for the District of Delaware against ANI Pharmaceuticals, Inc., asserting that ANI’s
proposed Treprostinil extended release drug product, which is subject to ANI’s Abbreviated New Drug Application No.
215667, infringes U.S. Patent Nos. 7,417,070, 7,544,713, 8,252,839, 8,349,892, 8,410,169, 8,747,897, 9,050,311,
9,278,901, 9,393,203, 9,422,223, 9,593,066 and 9,604,901 (“the Asserted Patents”). The complaint seeks injunctive relief,
attorneys' fee and costs. ANI filed its answer and counterclaims on May 28, 2021, denying UTC/Supernus’ allegations and
seeking declaratory judgment that ANI has not infringed any valid and enforceable claim of the Asserted Patents, that the
Asserted Patents are invalid, and an award of attorneys’ fees and costs. On May 26, 2022, the parties’ respective claims
and counterclaims were dismissed pursuant to a confidential settlement agreement.
On October 3, 2022, Azurity Pharmaceuticals, Inc. filed a complaint in the United States District Court for the
District of New Jersey against ANI’s wholly owned subsidiary, Novitium Pharma, LLC, asserting that Novitium’s
manufacture, use, sale, importation and/or offer to sell Bionpharma Inc.’s (“Bionpharma”) enalapril maleate oral solution
drug product (the “Product”) infringes U.S. Patents No. 11,040,023 and 11,141,405. The complaint seeks injunctive relief,
and an award of Azurity’s costs and expenses. On October 12, 2022, Bionpharma filed a motion in United States District
Court for the District of New Jersey to intervene on Novitium’s behalf in the litigation and on October 14, 2022, Novitium
and Bionpharma filed a joint motion to transfer venue to the District of Delaware, which motion to transfer was granted on
January 23, 2023. Bionpharma has agreed to indemnify Novitium under the terms of its manufacturing and supply
agreement for any damages, costs and expenses relating to actual or alleged infringement of intellectual property rights or
sale of the Product by Bionpharma. ANI and Novitium dispute any liability in this matter.
Ranitidine Related Litigation
State of New Mexico Litigation. In July 2020, ANI and Novitium were served with a complaint brought in the First
Judicial Court, County of Santa Fe, State of New Mexico by the Office of the Attorney General of the State of New
Mexico against manufacturers and sellers of ranitidine products. The complaint asserts a public nuisance claim and a
negligence claim against the generic ranitidine manufacturer defendants, including ANI and Novitium. The public
nuisance claim asserts that the widespread sale of ranitidine products in the state created a public nuisance that requires a
state-wide medical monitoring program of New Mexico residents for the development of colorectal cancer, stomach
cancer, gastrointestinal disorders and liver disease. As damages, New Mexico asks that the defendants fund this medical
monitoring program. The negligence claims assert that the defendants were negligent in selling the product, essentially
alleging that it was unreasonable to have the product on the market. With respect to that claim, New Mexico asserts that it
paid for ranitidine products through state-funded insurance and health-care programs. On December 15, 2020, the case
was removed to federal court and transferred to the In re Zantac multidistrict litigation (“MDL”) pending in the United
States District Court for the Southern District of Florida. New Mexico moved for remand to state court. The MDL court
granted the remand motion on February 25, 2021. On April 16, 2021, New Mexico filed an amended complaint in the
New Mexico First Judicial District Court in Santa Fe County. It did not name ANI in the amended complaint, effectively
voluntarily dismissing ANI from the action. Novitium is named as a Defendant in the amended complaint. According to
Novitium’s records, Novitium did not ship any ranitidine product to New Mexico, and received no funds from any state
funded health care plan or Medicaid. The Defendants filed a motion to dismiss the claims asserted in the New Mexico
litigation based primarily on preemption. The motion was denied in August 2021. A motion for reconsideration was
denied on September 22, 2022. The case is currently in discovery.
Federal Court Personal Injury Litigation. In June 2020, ANI was served with a personal injury complaint in the case
of Koepsel v. Boehringer Ingelheim Pharmaceuticals, et al., MDL No. 20-MD-2924, Case No. 9:20-cv-80882-RLR, filed
in the United States District Court for Southern District of Florida, in which the plaintiff alleges that he developed kidney
cancer in 2018 as a result of taking over the counter medication containing ranitidine. The Koepsel action was filed within
the existing MDL concerning ranitidine-containing drugs pending in the Southern District of Florida before Judge Robin
L. Rosenberg, In re Zantac MDL, 20 MDL 2924. A Master Personal Injury Complaint (“MPIC”) in that MDL that was
filed on June 22, 2020 also named ANI and Novitium as defendants. ANI was dismissed from the Koepsel case on August
21, 2020 and was dismissed from the MPIC on September 8, 2020. On December 31, 2020, after ANI was dismissed, the
district court dismissed the MPIC claims against generic
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
manufacturer defendants partially with prejudice and partially with leave to replead. The failure to warn and design defect
claims were dismissed with prejudice on preemption grounds. An Amended Master Personal Injury Complaint was filed
on February 8, 2021, which did not name ANI but did name Novitium. By opinion dated July 8, 2021, the district court
dismissed all claims against the generic manufacturer defendants with prejudice on preemption grounds. That decision is
on appeal to the Eleventh Circuit Court of Appeals. In addition, by opinion and order dated December 6, 2022, the district
court granted the brand manufacturer defendants’ Daubert motion to exclude the plaintiffs’ expert testimony on general
causation for the “designated cancers” that the plaintiffs’ leadership team claimed to be caused by ranitidine. The district
court also granted the brand manufacturer defendants’ motion for summary judgment because the plaintiffs had failed to
produce admissible primary evidence of general causation.
ANI and Novitium were named in other individual personal injury complaints filed in MDL 20 MD 2924 in which
plaintiffs allege that they developed cancer after taking prescription and over the counter medication containing ranitidine.
ANI was served with complaints in five of those additional cases: Cooper v. Boehringer Ingelheim Pharmaceuticals, et
al., MDL No. 20-MD-2924, Case No. 9:20-cv-81130-RLR (served September 30, 2020), Lineberry v. Amneal
Pharmaceuticals, LLC, et al., MDL No. 20-MD-2924, Case No. 9:20-cv-81079-RLR (served August 20, 2020), Lovette v.
Amneal Pharmaceuticals, LLC, et al., MDL No. 20-MD-2924, Case No. 9:20-cv-81040-RLR (served August 26, 2020),
Hightower v. Pfizer, et al, MDL No. 20-MD-2924, Case No. 9-20-cv-82214-RLR (served December 16, 2020) and Bird v.
Boehringer Ingelheim Pharmaceuticals, et al., MDL No. 20-MD-2924, Case No. 9-20-cv-80837-RLR (served December
30, 2020). ANI informed counsel for the plaintiffs that ANI did not sell an over the counter ranitidine product and sold a
generic prescription ranitidine product for a limited two-month period of time, from July 2019 to September 2019. ANI’s
product was voluntarily recalled in January 2020. Each of the plaintiffs in the five pending cases alleges a cancer
diagnosis prior to the time that ANI sold ranitidine, and we have informally sought dismissal from these cases on that
basis. ANI was voluntarily dismissed from the Cooper, Lineberry and Lovette actions on November 20, 2020, from the
Bird action on March 15, 2021, and from the Hightower action on March 29, 2021.
Prior to the district court’s July 8, 2021 preemption decision, Novitium had been named in 158 short form complaints
filed by claimants in the MDL. Those complaints were effectively dismissed with prejudice with the MPIC on July 8,
2021. Counsel for the plaintiffs have been notified that Novitium did not sell an over the counter ranitidine product and
sold a generic prescription ranitidine product for a limited period of time, from December 2018 until September 2019.
Novitium’s product was voluntarily recalled in October 2019. Out of the 158 short form complaints, approximately 114
plaintiffs either were diagnosed with cancer before Novitium began manufacturing the product, only took over the counter
ranitidine, or took ranitidine before Novitium began manufacturing it. Two of those 114 plaintiffs dismissed Novitium
from their short form complaints. In light of the Court’s dismissal of all claims with prejudice, Novitium has not pursued
dismissal of the short form complaints against it at this time. Following the district court’s Daubert decision, plaintiffs
began filing additional short form complaints in the MDL. Novitium currently is named as a defendant in more than 200
short form complaints.
State Court Personal Injury Litigation
Illinois. On February 3, 2022, a complaint was filed in Cook County, Illinois, naming Novitium as a defendant. The
complaint incorrectly identifies Novitium as a “repackager.” The case is styled Ross v. Boehringer Ingelheim
Pharmaceuticals, Inc., et. al. The complaint asserts claims of strict liability/failure to warn, strict liability/design defect,
negligent failure to warn, negligent product design, general negligence, negligent misrepresentation, breach of express and
implied warranties, and unjust enrichment. The plaintiff alleges that he was diagnosed with prostate cancer in 2017, before
Novitium began selling generic ranitidine products, and that he took over the counter ranitidine that he purchased at
Walgreens from 2008 to 2019. At this point, the allegations show that the plaintiff’s alleged cancer injury could not have
come from a Novitium product. The generic manufacturer defendants filed a motion to dismiss on preemption grounds.
That motion is pending.
In August 2022, the Keller Postman law firm commenced six multi-plaintiff actions in Illinois state court naming
generic ranitidine manufacturers, including ANI and/or Novitium, as defendants. Those cases are: (1) Jodee Gillespie v.
Walgreen Co., et. al., Circuit Court of the Third Judicial Circuit, Madison County, Illinois, Case No. 2022LA001007
(naming both Novitium and ANI); (2) John Jackson v. Walgreen Co., et. al., Circuit Court of the
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Third Judicial Circuit, Madison County, Illinois, Case No. 2022LA001012 (naming Novitium); (3) Ayesha Salahuddin v.
Walgreen Co., et. al., Circuit Court of the Twentieth Judicial Circuit, St. Clair County, Illinois, Case No. 22LA0709
(naming Novitium); (4) Lashanda McGruder v. Walgreen Co., et. al., Circuit Court of the Third Judicial Circuit, Madison
County, Illinois, Case No. 22LA0710 (naming both Novitium and ANI); (5) Richard Devriendt v. Walgreen Co., et. al.,
Circuit Court of Cook County, Illinois, Case No. 2022L007429 (naming Novitium); (6) Anthony Stigger v. Walgreen Co.,
et. al., Circuit Court of Cook County, Illinois, Case No. 2022L007396 (naming both Novitium and ANI). The complaints
allege causes of action for failure to warn, design defect, general negligence, loss of consortium and wrongful death.
Pursuant to an Order of the Illinois Supreme Court dated October 25, 2022, the pending ranitidine personal injury actions
in Illinois have been consolidated in Cook County for coordinated pre-trial proceedings. Those pre-trial proceedings are
pending in the Circuit Court of Cook County before Judge Daniel A. Trevino. On January 12, 2023, Judge Trevino
directed the plaintiffs to dismiss the multi-plaintiff actions and refile each individual plaintiff action under a separate case
number. The Keller Postman firm has communicated that it is complying with that directive. At a status conference held
on February 16, 2023, the court required that the plaintiffs re-file within 60 days. The court also authorized use of a master
complaint, which is due within 21 days. The Keller Postman attorneys requested authority to bypass formal service of
process for the refiled single-plaintiff actions, and serve the new complaints by email on outside counsel. Judge Trevino
authorized email service. As of February 21, 2023, ANI and Novitium had not yet been served with any of the single-
plaintiff complaints.
California. In August and September 2022, the Keller Postman law firm commenced seven multi-plaintiff actions in
California state court, Alameda County, naming generic ranitidine manufacturers, including ANI and/or Novitium, as
defendants. Those cases are: (1) Carlos Ascencio v. ANI Pharmaceuticals, et. al., Superior Court of California, County of
Alameda, Case. No. 22CV016230 (naming both Novitium and ANI); (2) Andre Lebeau v. Actavis Mid Atlantic, LLC et.
al., Superior Court of California, County of Alameda, Case No. 22CV016448 (naming Novitium); (3) Roque Torres v. ANI
Pharmaceuticals, Inc., et. al., Superior Court of California, County of Alameda, Case No. 22CV016338 (naming both
Novitium and ANI); (4) Deborah Hinds v. ANI Pharmaceuticals, Inc., et. al., Superior Court of California, County of
Alameda, Case No. 22CV016123 (naming both Novitium and ANI); (5) Mark Cruz v. ANI Pharmaceuticals, Inc., et. al.,
Superior Court of California, County of Alameda, Case No. 22CV016338 (naming both Novitium and ANI); (6) Bent
Olsen v. ANI Pharmaceuticals, Inc., et. al., Superior Court of California, County of Alameda, Case No. 22CV016402
(naming both Novitium and ANI); (7) John Norman v. Actavis Mid Atlantic, LLC, et. al., Superior Court of California,
County of Alameda, Case No. 22CV018334 (naming Novitium). The complaints allege causes of action for failure to
warn, design defect, general negligence, loss of consortium and wrongful death. By stipulation and order dated December
28, 2022, the cases were transferred to an existing civil case coordination docket for pretrial proceedings (JCCP) pending
before Judge Evelio Grillo in Alameda County. By order dated January 19, 2023, Judge Grillo ordered that counsel for the
plaintiffs must dismiss the individual plaintiffs (other than the first-named plaintiff) from each of the multi-plaintiff
complaints and that each of the dismissed plaintiffs must re-file their claims in a single plaintiff complaint. As of
February 21, 2023, ANI and Novitium had not yet been served with any of these single-plaintiff complaints. As of
February 21, 2023, the Company is aware of three single-plaintiff cases in which Novitium is named as a
defendant: David Duncan v. GSK Holdings, No. T23-507; Charmaine Sili v. GSK Holdings, No. T23-355; and Charles
Crippen v. Boehringer, No. T23-349.
Pennsylvania. In September 2022, two single-plaintiff complaints were filed in Pennsylvania state court,
Philadelphia County, naming Novitium as a defendant: (1) William Titus v. Glaxo SmithKline LLC, et. al., Court of
Common Pleas, Philadelphia County, Pennsylvania, Case No. 220902548; and (2) Jodi Woodard v. Ajanta Pharma USA,
Inc., et. al., Court of Common Pleas, Philadelphia County, Pennsylvania, Case No. 220902329. These complaints allege
causes of action for negligence, failure to warn, negligent storage and transportation, breach of express and implied
warranties, negligent misrepresentation, and fraud. On February 16, 2023, the Pennsylvania plaintiffs filed a consolidated
long-form complaint against the generic defendants, Plaintiffs v. Actavis, et. al. Civil Action No. 1364. The long-form
complaint names Novitium as a defendant. The long form complaint asserts causes of action for negligence, failure to
warn, negligent storage and transportation, breach of express warranties, breach of implied warranties, negligent
misrepresentation, fraud, strict products liability, wrongful death and survivor
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
actions, and loss of consortium. The complaint includes a prayer for punitive damages. The court has not yet set a
deadline for responsive pleadings.
ANI and Novitium dispute any liability in these matters.
Other Industry Related Matters
On or about September 20, 2017, the Company and certain of its employees were served with search warrants and/or
grand jury subpoenas to produce documents and possibly testify relating to a federal investigation of the
generic pharmaceutical industry. We have been cooperating and intend to continue cooperating with the investigation.
However, no assurance can be given as to the timing or outcome of the investigation.
14. PURIFIED CORTROPHIN GEL PRE-LAUNCH CHARGES
In January 2016, we acquired the right, title and interest in the NDAs for Cortrophin Gel and Cortrophin-Zinc.
Subsequently, we assembled a Cortrophin Gel re-commercialization team of scientists, executed a long-term supply
agreement with a supplier of pig pituitary glands, our primary raw material for corticotrophin API, executed a long-term
supply agreement with an API manufacturer, with whom we have advanced the manufacture of corticotropin API via
manufacture of commercial-scale batches, and executed a long-term commercial supply agreement with a current good
manufacturing practice (“cGMP”) aseptic fill contract manufacturer.
Prior to the third quarter 2019, all purchases of material, including pig pituitary glands and API, related to the re-
commercialization efforts were consumed in research and development activities and recognized as research and
development expense in the period in which they were incurred. In the third quarter of 2019, we began purchasing
materials that are intended to be used commercially in anticipation of FDA approval of Cortrophin Gel and the resultant
product launch. The FDA granted approval of the sNDA of this product on October 29, 2021. Prior to FDA approval,
under U.S. GAAP, we were prohibited from capitalizing these pre-launch purchases of materials as inventory, and
accordingly, they were charged to expense in the period in which they were incurred. Subsequent to approval, these
purchases are recorded as inventory at net realizable value. During the years ended December 31, 2021 and 2020, we
recognized $0.8 million and $11.3, million, respectively, of charges for the purchase of materials. We also incurred other
charges directly related to the Cortrophin pre-launch commercialization efforts, including, but not limited to, sales and
marketing and consulting expenses. During the year ended December 31, 2021, we incurred $14.0 million of these
charges, which are included on the consolidated statements of operations as a selling, general, and administrative expense.
There were no comparable expenses in 2020.
15. RELATED PARTY TRANSACTIONS
On March 8, 2021, we entered into an Equity Commitment and Investment Agreement with the PIPE Investor,
pursuant to which we agreed to issue and sell 25,000 shares of our PIPE Shares for a purchase price of $1,000 per share
and an aggregate purchase price of $25.0 million. This agreement closed and the shares were sold and issued for $25.0
million on November 19, 2021. The Chairman of our board of directors is an operating partner of Ampersand Capital
Partners, an affiliate of the PIPE Investor.
In August 2020, we appointed Jeanne Thoma as a director of the Company. Ms. Thoma is the former Chief Executive
Officer of SPI Pharmaceuticals, Inc. (“SPI”), who retired in October 2020. SPI supplies ingredients to the Company. We
made payments totaling approximately $352,000 in the year ended 2020, to SPI, related to the purchase of ingredients.
In connection with our acquisition of Novitium, we entered into employment agreements with the two executives and
founders of Novitium, Muthusamy Shanmugam and Chad Gassert. Both serve as executive officers of the Company and
Mr. Shanmugam was also appointed to the board of directors. Mr. Shanmugam holds a minority interest in Scitus Pharma
Services (“Scitus”), which provides clinical research services to Novitium, majority
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ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
interest in SS Pharma LLC (“SS Pharma”), which acquires and supplies API to Novitium, a minority interest in Nuray
Chemical Private Limited (“Nuray”), which manufactures and supplies API to Novitium, and a majority interest in Esjay
Pharma LLC (“Esjay”), which provided research and development and facilities consulting services through September
30, 2022. Mr. Gassert holds a minority interest in Scitus.
A summary of our payments to related parties is presented below:
Scitus Pharma Services
SS Pharma LLC
Esjay Pharma LLC
Nuray Chemical Private Limited
Years Ended December 31,
2021(1)
2022
$ 2,074,773
3,668,542
101,468
1,110,158
$ 6,954,941
$
— $
—
24,989
364,620
$ 389,609
$
2020
—
—
—
—
—
(1)Includes payments during the period from November 19, 2021 to December 31, 2021, subsequent to our
acquisition of Novitium.
As of December 31, 2022, the outstanding balances due to Scitus and SS Pharma were $45 thousand and $170
thousand, respectively. There was no outstanding balance due to Nuray at December 31, 2022.
16. SEGMENT REPORTING
An operating segment is defined as a component of an entity that engages in business activities from which it may
recognize revenues and incur expense, its operating results are regularly reviewed by the entity’s chief operating decision
maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and its
discrete financial information is available. Prior to 2022, based on this definition, we had concluded that we had one
operating segment. Prior period segment disclosures have been recast for the new segment presentation. Effective in the
first quarter of 2022 and prospectively, in conjunction with the principal completion of our buildout of infrastructure in the
areas of commercialization of rare disease therapies and the launch of Cortrophin Gel, we determined that we have two
operating segments as follows:
● Generics, Established Brands, and Other – Consists of operations related to the development,
manufacturing, and marketing of generic and established brand pharmaceuticals, including those sold
through traditional channels, contract manufactured products, product development services, royalties, and
other.
● Rare Disease – Consists of operations related to the development, manufacturing and marketing of
pharmaceuticals used in the treatment of patients with rare conditions. The rare disease segment currently
consists of operations related to Cortrophin Gel.
Our CODM evaluates our two operating segments based on revenues and earnings before interest, income taxes,
depreciation, and amortization (“EBITDA”), exclusive of corporate expenses and other expenses not directly allocated or
attributable to an operating segment. These expenses include, but are not limited to, certain management, legal,
accounting, human resources, insurance, and information technology expenses.
We do not manage assets of the Company by operating segment and our CODM does not review asset information by
operating segment. Accordingly, we do not present total assets by operating segment.
Financial information by reportable segment, including historical information that has been retroactively re-cast to
reflect our two operating segments, is as follows:
(in thousands)
Net Revenues
2022
Year Ended December 31,
2021
2020
Generics, Established Brands, and Other
$
274,698
$
216,136
$
208,475
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Rare Disease
Total net revenues
ANI Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022, 2021, and 2020
Segment earnings/(loss) before interest, taxes, depreciation and
amortization (“EBITDA”) and reconciliation to (loss)/income before income
taxes
Generics, Established Brands, and Other
Rare Disease
Depreciation and amortization
Corporate and other unallocated expenses(1)
Total operating loss
Interest expense, net
Other income/(expense), net
Loss before benefit for income taxes
$
$
41,687
316,385
$
—
216,136
$
—
208,475
78,958
(18,348)
(56,973)
(38,920)
(35,283)
(28,052)
670
(62,665)
$
63,418
(18,571)
(47,252)
(37,388)
(39,793)
(11,922)
(4,343)
(56,058)
$
78,790
(15,620)
(44,638)
(34,548)
(16,016)
(9,452)
(494)
(25,962)
(1)
Includes expenses not directly allocated or attributable to a reporting segment, including certain management,
legal, accounting, human resources, insurance, and information technology expenses, and are included in selling,
general, and administrative expenses in our consolidated statement of operations.
Geographic Information
Our operations are located in the United States, Canada, and India. The majority of the assets of the Company are
located in the United States.
The following table depicts the Company’s revenue by geographic operations during the following periods:
(in thousands)
Location of Operations
United States
Canada
Total Revenue
2022
$ 312,427
3,958
$ 316,385
Years Ended December 31,
2021
$ 211,893
4,243
$ 216,136
2020
$ 202,881
5,594
$ 208,475
The following table depicts the Company’s property and equipment, net according to geographic location as of:
(in thousands)
United States
Canada(1)
India
Total property and equipment, net
December 31, 2022
December 31, 2021
$
$
40,343
1,856
1,047
43,246
$
$
38,564
13,831
276
52,671
(1)Amounts as of December 31, 2022 exclude the land and building at our Canada facility, which are classified as held
for sale as of December 31, 2022. These assets have a carrying value of $8.0 million.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure information required
to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated
and communicated to management, including our principal executive officer and principal financial officers, as
appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Our management has carried out an evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 154-15(e) under the Exchange Act), as of December 31, 2022. Due to
the material weaknesses in internal control over financial reporting as described below, our principal executive officer and
principal financial officers concluded that, as of the end of the period covered by this report, our disclosure controls and
procedures were not effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as
a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and
effected by a company’s board of directors, management, and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and
dispositions of our assets.
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance
with authorizations of management and directors.
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
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.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) in Internal Control — Integrated Framework (2013). This assessment resulted in
management identifying certain material weaknesses in internal control over financial reporting as described below. As a
result, management has concluded that, as of December 31, 2022, our internal control over financial reporting is not
effective.
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Notwithstanding the identified material weaknesses, management has concluded that the Consolidated Financial
Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial
position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.
The Company's independent registered public accounting firm, EisnerAmper LLP, who audited the consolidated
financial statements included in this Annual Report on Form 10-K issued an adverse opinion on the effectiveness of the
Company's internal control over reporting. EisnerAmper LLP's report is included herein.
Material Weaknesses in Internal Control over Financial Reporting
Upon evaluation of our internal control over financial reporting we identified certain material weaknesses in our
controls at our Novitium subsidiary. We completed the acquisition of Novitium in November of 2021 and shortly
thereafter, began the integration of Novitium’s policies, processes, people, technology, and operations into our system of
internal control over financial reporting. In 2022, we completed the integration of Novitium’s order to cash cycle into
ANI’s system of procedures and contracts, and the controls were successfully tested and found to be operating as
prescribed, however, we found material weaknesses in other key processes.
The Company did not maintain an effective control environment in the Novitium subsidiary as a result of the
following:
● Lack of adequate personnel resources in Novitium team to implement appropriate process controls addressing
Novitium activity.
● Turnover in key finance personnel at Corporate that were tasked with driving / managing implementation of
internal controls at Novitium, including the Corporate Controller. While we have seasoned temporary personnel
in these corporate positions, we did not have adequate bandwidth to maintain focus on compliance with internal
controls.
● Delays in execution of the extraction of the Procure to Pay cycle integration plan for the subsidiary, including
creation of the Accounts Payable centers of excellence whereby processes at Novitium would be combined with
legacy processes.
These factors contributed to the weaknesses in the following control activities, specifically, the following process
areas related to activity at Novitium did not have effective controls in place and were not operating effectively for a
sufficient amount of time:
● Purchase to Pay (Purchasing, Accounts Payable, and Cash Disbursements)
● Manufacturing and Inventory
● Human Resources/Payroll
● Financial Statement Close (limited to those pertaining to the Novitium subsidiary level that were not
incorporated into overall Company controls)
● Information technology general controls
The areas noted above had one or more of the following specific compliance exceptions:
● Certain controls were not implemented as designed.
● Documented controls not being performed consistently for all applicable transactions.
● Control performance not being adequately documented and evidenced.
● Materiality thresholds used in certain control performance were not consistent with documented control design.
● Controls not in place nor operating for a sufficient amount of time/number or instances.
● Changes to control performance upon employee turnover.
● Information technology general controls (“ITGC”) which could result in misstatements potentially impacting all
Novitium related financial statement accounts and disclosures. Specifically, Novitium user access controls were
not appropriately designed and maintained to adequately restrict user and privileged access to financial
applications and data to the appropriate personnel.
In addition to the above Material Weaknesses related to our Novitium subsidiary, we also identified a material
weakness in our ITGC. Specifically, our evaluation of our ITGC’s identified that user access controls were not
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operating effectively to adequately restrict user access to our network and financial applications and data. The Company
attributes the findings primarily due to significant turnover in its IT personnel during the year.
We determined that the designed internal controls were not operating effectively as detailed above, and therefore
did not reduce the risk of a material error occurring and going undetected in our financial statements to an acceptable level
giving rise to the material weaknesses in the four Novitium related process areas noted above as well as overall ITGC
related to user access.
Remediation of Material Weaknesses
The Company is committed to the planning and implementation of remediation efforts to address the material
weaknesses. The Company is in the process of establishing formal processes through which it intends to remediate the
identified material weaknesses and enhance the Company’s overall control environment, including the following:
Novitium Related:
● Refine and complete its plan to incorporate procure to pay cycle into the overall company controls.
● For those controls that remain at the Novitium subsidiary, review the existing control documentation and revise
and upgrade as appropriate to address all identified risks.
● Ensure Novitium processes and controls have adequate resources to properly perform identified controls
including hiring of additional resources with the requisite skills to consistently perform control procedures
without material exception.
● Implement its ERP and other systems as appropriate to support the internal control structure.
● Ensure all personnel are properly trained as to the importance of and specifics over the internal controls for
which they are responsible, including consistent, repeatable performance of such controls.
ITGC Related:
● Management will ensure proper staffing of IT personnel and ensure all personnel are properly trained as to the
importance of and specifics over the internal controls for which they are responsible, including consistent,
repeatable performance of such controls.
When fully implemented, the Company believes that the measures described above will appropriately remediate the
identified material weaknesses, although management may determine that taking additional measures to remediate the
material weaknesses may be necessary.
As part of its remediation efforts, the Company will continue to implement and document associated policies,
procedures and internal controls and will test the ongoing operating effectiveness of the new and existing policies,
procedures and internal controls in future periods.
Management intends to begin the above remediation efforts immediately and expects all remediation efforts to be
completed in 2023. While the material weaknesses cannot be considered completely remediated until the applicable
policies, procedures, and internal controls have operated for a sufficient period of time, management has determined that
our timetable for completing the remediation efforts in 2023 will provide sufficient time to provide its assessment over the
effectiveness of internal controls as of December 31, 2023.
Changes in Internal Control over Financial Reporting
Other than the material weaknesses and remediation efforts discussed above, there were no changes in our internal
control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 10. Directors, Executive Officers, and Corporate Governance
PART III
The text of our Code of Ethics, which applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, and persons performing similar functions, is posted on our website,
www.anipharmaceuticals.com, under the “Governance” subsection of the “Investors” section of the site. We will disclose
on our website amendments to, and, if any are granted, waivers of, our Code of Ethics for our principal executive officer,
principal financial officer, or principal accounting officer, controller, or persons performing similar functions.
Information required by this item with respect to our directors will be set forth under the caption “Election of
Directors” in our definitive proxy statement for our 2023 annual meeting, to be filed with the SEC pursuant to Regulation
14A no later than 120 days after the close of our fiscal year, and is incorporated herein by reference.
Information required by this item with respect to our executive officers will be set forth under the caption “Executive
Officers of the Company” in our definitive proxy statement for our 2023 annual meeting, to be filed with the SEC
pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by
reference.
To the extent required, information required by this item with respect to compliance with Section 16(a) of the
Exchange Act will be set forth under the caption “Delinquent Section 16(a) Reports” in our definitive proxy statement for
our 2023 annual meeting, to be filed with the SEC pursuant to Regulation 14A no later than 120 days after the close of our
fiscal year, and is incorporated herein by reference.
Information required by this item with respect to our audit committee, our audit committee financial expert, and any
material changes to the way in which our security holders may recommend nominees to our Board of Directors will be set
forth under the caption “Corporate Governance” in our definitive proxy statement for our 2023 annual meeting, to be filed
with the SEC pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated
herein by reference.
Item 11. Executive Compensation
Information required by this item with respect to executive compensation will be set forth under the caption
“Executive Compensation” in our definitive proxy statement for our 2023 annual meeting, to be filed with the SEC
pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item with respect to security ownership of certain beneficial owners and management
will be set forth under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of
Directors and Executive Officers” and information relating to our equity compensation plans will be set forth under
“Equity Compensation Plan Information” in our definitive proxy statement for our 2023 annual meeting, to be filed with
the SEC pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item with respect to certain relationships and related transactions and director
independence will be set forth under the captions “Certain Relationships and Related Transactions” and “Corporate
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Governance” in our definitive proxy statement for our 2023 annual meeting, to be filed with the SEC pursuant to
Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Our independent registered public accounting firm is EisnerAmper LLP, Philadelphia, Pennsylvania, Auditor Firm
ID: 274.
Information required by this item with respect to principal accounting fees and services will be set forth under the
caption “Ratification of Selection of Independent Registered Public Accountants” in our definitive proxy statement for our
2023 annual meeting, to be filed with the SEC pursuant to Regulation 14A no later than 120 days after the close of our
fiscal year, and is incorporated herein by reference.
PART IV.
Item 15. Exhibits and Financial Statement Schedules
Documents filed as part of this report on Form 10-K:
(a) Financial Statements:
The consolidated balance sheets of the Registrant as of December 31, 2022 and 2021, the related consolidated
statements of operations, statements of comprehensive income, changes in stockholders’ equity, and cash flows for
each of the years ended December 31, 2022, 2021, and 2020, the footnotes thereto, and the reports of EisnerAmper
LLP, independent registered public accounting firm, are filed herewith.
(b) Financial Statement Schedules:
All schedules have been omitted because they are not applicable or the required information is included in the
consolidated financial statements or notes thereto.
(c) Exhibits
Exhibits included or incorporated by reference herein: see Exhibit Index on page 116.
115
Table of Contents
Exhibit
No.
2.1
2.2
2.3
3.1
3.2
3.3
4.1
4.2
ANI PHARMACEUTICALS, INC.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2022
Exhibit
Amended and Restated Agreement and Plan
of Merger, dated as of April 12, 2013, by
and among BioSante Pharmaceuticals, Inc.,
ANI Merger Sub, Inc. and ANIP Acquisition
Company (1)
Asset Purchase Agreement, dated as of
December 26, 2013, by and between ANI
Pharmaceuticals, Inc. and Teva
Pharmaceuticals USA, Inc. (2)
Agreement and Plan of Merger dated March
8, 2021 by and among ANI Pharmaceuticals,
Inc., Nile Merger Sub LLC, Novitium
Pharma LLC, Esjay LLC, Chali Properties,
LLC, Chad Gassert, Muthusamy
Shanmugam and Thorappadi Vijayaraj and
Shareholder Representative Services LLC as
the representative of the Company Members
Certificate of Amendment of the Restated
Certificate of Incorporation of BioSante
Pharmaceuticals, Inc., dated as of July 17,
2013, Certificate of Amendment of the
Restated Certificate of Incorporation of
BioSante Pharmaceuticals, Inc., dated as of
June 1, 2012, and Restated Certificate of
Incorporation of BioSante
Pharmaceuticals, Inc.
Second Amended and Restated Bylaws of
ANI Pharmaceuticals, Inc.
Certificate of Designation of Preferences,
Rights and Limitations of Series A
Convertible Preferred Stock of the
Company, effective as of November 19,
2021.
Description of Securities
Method of Filing
Incorporated by reference to Exhibit 2.1 to ANI’s Current
Report on Form 8-K as filed with the Securities and
Exchange Commission on April 12, 2013 (File No. 001-
31812)
Incorporated by reference to Exhibit 2.2 to ANI’s Annual
Report on Form 10-K as filed for the fiscal year ended
December 31, 2013 (File No. 001-31812)
Incorporated by reference to Exhibit 2.1 to the
Company’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on March 9, 2021
(File No. 001-31812)
Incorporated by reference to Exhibit 3.1 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2013 (File No. 001-31812)
Incorporated by reference to Exhibit 3.1 to ANI’s Current
Report on Form 8-K as filed with the Securities and
Exchange Commission on March 6, 2022 (File No. 001-
31812)
Incorporated by reference to Exhibit 3.1 to ANI’s Current
Report on Form 8-K as filed with the Securities and
Exchange Commission on November 26, 2021 (File
No. 001-31812)
Incorporated by reference to Exhibit 4.1 to ANI’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2020 (File No. 001-31812)
Registration Rights Schedule to the Merger
Agreement, effective as of November 19,
2021
Incorporated by reference to Exhibit 4.1 to ANI’s Current
Report on Form 8-K as filed with the Securities and
Exchange Commission on November 26, 2021 (File
No. 001-31812)
116
Table of Contents
Exhibit
No.
10.1
10.2*
10.3
10.4
Exhibit
Method of Filing
Generic Wholesale Service Agreement,
dated as of May 1, 2006, between ANI
Pharmaceuticals, Inc. and Cardinal Health,
First Amendment to Generic Wholesale
Service Agreement, dated as of July 10,
2008, Letter Agreement, dated as of July 10,
2008, regarding assignment of the Generic
Wholesale Service Agreement to ANIP
Acquisition Company, d/b/a ANI
Pharmaceuticals, Inc., Letter from Cardinal
Health, dated December 22, 2008 Regarding
Increase in Base Service Fee, and Second
Amendment to Generic Wholesale Service
Agreement, dated May 7, 2012 (2)
Employment Agreement, entered into by the
Company and James G. Marken
Incorporated by reference to Exhibit 10.59 to ANI’s
Registration Statement on Form S-4 as filed with the
Securities and Exchange Commission on December 11,
2012 (File No. 333-185391)
Incorporated by reference to Exhibit 10.4 to ANI’s
Current Report on Form 8-K filed January 22, 2020 (File
No. 001-31812)
Amendment No. 2 to Asset Purchase
Agreement, dated as of July 10, 2015,
between Teva Pharmaceuticals, Inc. and ANI
Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.1 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2015 (File No. 001-31812)
Asset Purchase Agreement, dated as of
September 18, 2015, between Merck
Sharp & Dohme B.V. and ANI
Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.2 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2015 (File No. 001-31812)
10.5*
ANI Pharmaceuticals, Inc. 2016 Employee
Stock Purchase Plan
Incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement on Schedule 14A
filed with the Commission on April 14, 2016
10.6
10.7
10.8*
10.9
Asset Purchase Agreement between H2-
Pharma, LLC and ANI Pharmaceuticals, Inc.
(2)
Incorporated by reference to Exhibit 10.1 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2016 (File No. 001-31812)
Asset Purchase Agreement between
Cranford Pharmaceuticals, LLC and ANI
Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.2 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2016 (File No. 001-31812)
Employment Agreement, entered into by the
Company and Stephen P. Carey
Incorporated by reference to Exhibit 10.2 to ANI’s
Current Report on Form 8-K filed January 22, 2020 (File
No. 001-31812)
Asset Purchase Agreement between
Cranford Pharmaceuticals, LLC and ANI
Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.1 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2017 (File No. 001-31812)
117
Table of Contents
Exhibit
No.
10.10
10.11
10.12
10.13
10.14
10.15
10.16
Exhibit
Method of Filing
Asset Purchase Agreement between
Holmdel Pharmaceuticals, LP and ANI
Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.2 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2017 (File No. 001-31812)
Asset Purchase Agreement between
AstraZeneca AB, AstraZeneca UK Limited,
and ANI Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.25 to ANI’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2017 (File No. 001-31812)
Stock Purchase Agreement by and among
WellSpring Pharma Services Inc., WSP
Pharma Holdings, LLC, ANI
Pharmaceuticals Canada Inc., and ANI
Pharmaceuticals, Inc.
Incorporated by reference to Exhibit 10.1 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2018 (File No. 001-31812)
Amended and Restated Credit Agreement
between Citizens Bank, N.A. and ANI
Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.22 to ANI’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2018 (File No. 001-31812)
Amendment No. 4 to Asset Purchase
Agreement between ANI
Pharmaceuticals, Inc. and Teva
Pharmaceuticals USA, Inc.
Incorporated by reference to Exhibit 10.1 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2019 (File No. 001-31812)
Asset Purchase Agreement between
Amerigen Pharmaceuticals LTD. and ANI
Pharmaceuticals, Inc.
Incorporated by reference to Exhibit 10.24 to ANI’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2019 (File No. 001-31812)
ANI Pharmaceuticals, Inc. Amended and
Restated 2022 Stock Incentive Plan
10.17*
Form of Restricted Stock Grant Agreement
Incorporated by reference Appendix A to ANI
Pharmaceuticals, Inc.’s definitive proxy statement dated
March 25, 2022 filed with the Securities and Exchange
Commission on March 25, 2022 (File No. 001-31812).
Incorporated by reference to Appendix A to ANI’s
Definitive Proxy Statement for the 2022 Virtual Annual
Meeting filed on March 25, 2022 (File No. 001-31812)
10.18*
Form of Stock Option Agreement
Incorporated by reference to Appendix A to ANI’s
Definitive Proxy Statement for the 2022 Virtual Annual
Meeting filed on March 25, 2022 (File No. 001-31812)
10.19*
10.20*
10.21
Employment Agreement between Nikhil
Lalwani and ANI Pharmaceuticals, Inc.,
dated July 24, 2020
Incorporated by reference to Exhibit 10.1 to ANI’s
Current Report on Form 8-K filed August 3, 2020 (File
No. 001-31812)
Inducement Stock Option Award
Agreement, effective as of September 8,
2020, between ANI Pharmaceuticals, Inc.
and Nikhil Lalwani
Incorporated by reference to Exhibit 10.2 to ANI’s
Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2020 (File No. 001-31812)
Credit Agreement, dated as of November 19,
2021 by and among the Company, certain of
the Company’s subsidiaries, as
Incorporated by reference to Exhibit 10.1 to ANI’s
Current Report on Form 8-K as filed with the
118
Table of Contents
guarantors, Truist Bank, as Administrative
Agent and other parties party thereto.
Securities and Exchange Commission on November 26,
2021 (File No. 001-31812)
Exhibit
No.
10.22
Exhibit
Equity Commitment and Investment Agreement, dated as
of March 8, 2021, by and between the Company and
Ampersand 2020 Limited Partnership
10.23*
Employment Agreement between Muthusamy
Shanmugam and the Company, dated as of March 8, 2021
and effective as of November 19, 2021.
Sublicense Agreement, dated as of October 30, 2009, by
and between ANIP Acquisition Company, d/b/a ANI
Pharmaceuticals, Inc., and Jazz Pharmaceuticals, Inc. (2)
Method of Filing
Incorporated by reference to Exhibit 10.2 to
ANI’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
March 9, 2021 (File No. 001-31812)
Incorporated by reference to Exhibit 10.3 to
ANI’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on
November 26, 2021 (File No. 001-31812)
Incorporated by reference to Exhibit 10.24 to
ANI’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2022 (File
No. 001-31812)
Master Product Development and Collaboration
Agreement, dated as of July 11, 2011, by and among
ANIP Acquisition Company d/b/a ANI Pharmaceuticals,
Inc. and RiconPharma LLC (2)
Incorporated by reference to Exhibit 10.25 to
ANI’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2022 (File
No. 001-31812
10.24
10.25
10.26*
Employment Agreement between and Christopher Mutz
and the Company, dated February 10, 2021.
10.27*
Employment Agreement between Ori Gutwerg and the
Company, dated January 18, 2021.
10.28*
Employment Agreement between Chad Gassert and the
Company, dated March 8, 2021.
10.29*
Employment Agreement between Meredith Cook and the
Company, dated June 21, 2022.
10.30*
Employment Agreement between Krista Davis and ANI
Pharmaceuticals, Inc. dated July 14, 2022.
10.31
Asset Purchase Agreement between Cranford
Pharmaceuticals, LLC and ANI Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.26 to
ANI’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2022 (File
No. 001-31812Filed herewith
Incorporated by reference to Exhibit 10.27 to
ANI’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2022 (File
No. 001-31812
Incorporated by reference to Exhibit 10.28 to
ANI’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2022 (File
No. 001-31812
Incorporated by reference to Exhibit 10.1 to
ANI’s Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2022 (File No. 001-
31812)
Incorporated by reference to Exhibit 10.1 to
ANI’s Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2022 (File
No. 001-31812)
Incorporated by reference to Exhibit 10.1 to
ANI’s Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2022 (File
No. 001-31812)
10.32
Asset Purchase Agreement between Holmdel
Pharmaceuticals, LP and ANI Pharmaceuticals, Inc. (2)
Incorporated by reference to Exhibit 10.2 to
ANI’s Quarterly Report on Form 10-Q for the
119
Table of Contents
10.34*
ANI Pharmaceuticals, Inc. Executive Incentive Bonus
Plan
fiscal quarter ended March 31, 2022 (File
No. 001-31812)
Incorporated by reference to Exhibit 10.1 to
ANI’s Current Report on Form 8-K filed on
February 28, 2022 (File No. 001-31812)
21
23.1
31.1
31.2
32.1
101
List of subsidiaries
Consent of EisnerAmper LLP
Certification of Chief Executive Officer Pursuant to SEC
Rule 13a-14
Filed herewith
Filed herewith
Filed herewith
Certification of Chief Financial Officer Pursuant to SEC
Rule 13a-14
Filed herewith
Furnished herewith
Filed herewith
Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to Rule 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
The following financial information from this annual
report on Form 10-K for the fiscal year ended
December 31, 2022, formatted in Inline XBRL: (i) the
audited consolidated Balance Sheets, (ii) the audited
consolidated Statements of Operations, (iii) the audited
consolidated Statements of Comprehensive Income,
(iv) the audited consolidated Statements of Mezzanine
Equity and Stockholders’ Equity; (v) the audited
consolidated Statements of Cash Flows, and (vi) Notes to
consolidated Financial Statements.
Exhibit
No.
104
Exhibit
The cover page from the Company Annual Report on
Form 10-K for the year ended December 31, 2022
formatted in inline XBRL (included in Exhibit 101)
Method of Filing
Filed herewith
(1) All exhibits to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. ANI will furnish the
omitted exhibits to the SEC upon request by the SEC.
(2) Confidential treatment has been granted with respect to redacted portions of this document or certain information has
been omitted from this exhibit in accordance with Regulation S-K Item 601(b)(10)(iv). The Company agrees to furnish
supplementally a copy of any omitted information to the Securities and Exchange Commission upon its request.
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 15(a).
120
Table of Contents
Item 16. Form 10-K Summary
None.
121
Table of Contents
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.
SIGNATURES
ANI PHARMACEUTICALS, INC.
By:
/s/ Nikhil Lalwani
Nikhil Lalwani
President and Chief Executive Officer
(principal executive officer)
Date: March 9, 2023
By:
/s/ Stephen P. Carey
Stephen P. Carey
Senior Vice President, Finance and
Chief Financial Officer
(principal financial and accounting officer)
Date: March 9, 2023
Pursuant to the requirements 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.
Name
Capacity
/s/ Nikhil Lalwani
Nikhil Lalwani
/s/ Stephen P. Carey
Stephen P. Carey
/s/ Muthusamy Shanmugam
Muthusamy Shanmugam
/s/ Patrick D. Walsh
Patrick D. Walsh
/s/ Thomas J. Haughey
Thomas J. Haughey
/s/ David B. Nash, M.D., M.B.A.
David B. Nash, M.D., M.B.A.
/s/ Robert E. Brown, Jr.
Robert E. Brown, Jr.
/s/ Jeanne Thoma
Jeanne Thoma
/s/ Antonio Pera
Antonio Pera
/s/ Renee Tannenbaum
Renee Tannenbaum
Director, President, and
Chief Executive Officer
(principal executive officer)
Senior Vice President, Finance and
Chief Financial Officer
(principal financial and accounting officer)
Director, Head of Research and Development and
Chief Operating Officer of New Jersey Operations
Director and Chairman of the Board of
Directors
Director
Director
Director
Director
Director
Director
122
Date
March 9, 2023
March 9, 2023
March 9, 2023
March 9, 2023
March 9, 2023
March 9, 2023
March 9, 2023
March 9, 2023
March 9, 2023
March 9, 2023
Table of Contents
123
ANI PHARMACUTICALS, INC.
Exhibit 21
The following is a list of subsidiaries of ANI Pharmaceuticals, Inc., omitting subsidiaries which, considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary, as of December 31, 2022:
Name
ANIP Acquisition Company
ANI Pharmaceuticals Canada Inc.
Novitium Pharma, LLC
New Castle Pharma LLC
Novitium Labs Private Limited
New Castle Pharma Real Estate LLC
Jurisdiction of Incorporation or Organization
Delaware
Canada
Delaware
Delaware
Delaware
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements of ANI Pharmaceuticals, Inc. on Form S-3 (Nos. 333-239771
and 333-261731) and on Form S-8 (Nos. 333-196518, 333-214416, 333-218120, 333-250892, 333-260662, and 333-264511) of our
reports dated March 9, 2023, on our audits of the consolidated financial statements as of December 31, 2022 and 2021 and for each of the
years in the three-year period ended December 31, 2022, and the effectiveness of ANI Pharmaceuticals, Inc. and Subsidiaries’ internal
control over financial reporting as of December 31, 2022, which reports are included in this Annual Report on Form 10-K to be filed on
or about March 9, 2023. Our report on the effectiveness of the Company’s internal control over financial reporting as of December 31,
2022 expresses an adverse opinion because of material weaknesses.
Exhibit 23.1
/s/ EisnerAmper LLP
EISNERAMPER LLP
Philadelphia, Pennsylvania
March 9, 2023
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nikhil Lalwani, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of ANI Pharmaceuticals, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 9, 2023
/s/ Nikhil Lalwani
Nikhil Lalwani
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen P. Carey, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of ANI Pharmaceuticals, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 9, 2023
/s/ Stephen P. Carey
Stephen P. Carey
Senior Vice President, Finance and Chief Financial Officer
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of ANI Pharmaceuticals, Inc. (the “Company”) for the year ended December 31,
2022 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof, the undersigned Chief Executive Officer
and Chief Financial Officer of the Company hereby certify that, to such officer’s knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Dated: March 9, 2023
Dated: March 9, 2023
/s/ Nikhil Lalwani
Nikhil Lalwani
President and
Chief Executive Officer
(principal executive officer)
/s/ Stephen P. Carey
Stephen P. Carey
Senior Vice President, Finance and
Chief Financial Officer
(principal financial and accounting officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.