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What changed in ANI PHARMACEUTICALS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ANI PHARMACEUTICALS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+481 added−479 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-09)

Top changes in ANI PHARMACEUTICALS INC's 2023 10-K

481 paragraphs added · 479 removed · 297 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

66 edited+45 added−43 removed52 unchanged
Biggest changeGenerally, 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.
Biggest changeSee “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. 10 Table of Contents Sales, Marketing, and Distribution We market, sell, and distribute our products in the United States. Our products are distributed through the following channels: • Wholesalers .
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.
Product Liability Product liability litigation represents an inherent risk to all firms in the pharmaceutical industry. We utilize traditional third-party insu rance 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.
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.
Sales of Medicaid-reimbursed products marketed under NDAs require manufacturers to rebate the greater of 23.1% of the average manu facturer price or the difference between the average manufacturer price and the “best price” (as defined in the Medicaid statute) during a specific period.
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.
In either case, our business, financial position, and operating results could be materially adversely affected.” 7 Table of Contents 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.
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.
Pharmaceutical manufacturers that want their drug products covered by state Medicaid programs must enter into a rebate agreement with CMS and pa y 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.
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 3 Table of Contents multiple sclerosis (“MS”) and rheumatoid arthritis (“RA”), in addition to excess urinary protein due to nephrotic syndrome.
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.
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.
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 custom ers. As a result of this trend toward consolidation, a smaller number of companies each control a larger share of pharmaceutical distribution channels.
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.
Manufacturing, Suppliers, and Raw Materials We require a supply of quality raw materials, including 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.
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.
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. is highly regulated by multiple U.S. government agencies, such as the FDA, the DEA, and the Centers for Medicare and Medicaid Services (“CMS”).
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 9 Table of Contents programs to individuals with incomes up to 138% of the federal poverty level.
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 programs to individuals with incomes up to 138% of the federal poverty level.
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.
See “Risk Factors – Three products, which together comprised less than 10% of our total revenue in 2023, 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 our Rare Disease segment we contract with specialty pharmacies. ​ ● Hospitals. In our Rare Disease segment we contract with certain hospital systems. ​ 12 Table of Contents Competition Certain of our products face limited competition due to complexities in formulation, active pharmaceutical ingredient sourcing, materials handling and manufacturing, and regulatory hurdles.
In our Rare Disease segment we contract with specialty pharmacies. • Hospitals . In our Rare Disease segment we contract with certain hospital systems. Competition Certain of our products face limited competition due to complexities in formulation, active pharmaceutical ingredient sourcing, materials handling and manufacturing, and regulatory hurdles.
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. ​ ​ 14 Table of Contents
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.
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.
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 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.
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.
Cortrophin Gel is an adrenocorticotropic hormone (“ACTH”), also known as purified corticotropin. 3 Table of Contents During 2021 and 2022, we invested significantly 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.
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.
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 Three of our products, EEMT, Opium Tincture, and Thyroid Tablets, are marketed without approved NDAs or ANDAs.
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.
During this timeframe, 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.
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.
As of January 2023, we had 600 employees, of which 496 are located in the United States, including Puerto Rico, 48 located in Canada, and 56 are located in India.
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.
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.
The ANDA process, however, 7 Table of Contents typically requires one or more bioequivalence studies to show that the ANDA drug is bioequivalent to the previously approved reference listed drug (“RLD”).
The ANDA process, however, 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 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.
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. ANI started manufacturing serialization-compliant products in November 2018.
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.
The Company's three pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, and one is located in East Windsor, New Jersey, 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.
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.
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. 5 Table of Contents 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.
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 generally seek to develop and manufacture products at our own manufacturing plants to ensure quality control of our products, supply chain reliability 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.
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.
A REMS may include, but is not limited to, 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.
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.
Any pharmaceutical product marketed under an NDA, regardless of whether the product is marketed as a “generic,” is subject to the manufacturer discount requirement.
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.
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.
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.
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.
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 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.
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 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.
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.
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.
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.
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.
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.
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 contract and engage with the largest health insurance payers across the appropriate channels and classes of trade.
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.
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. Products Products A complete list of our generic and branded pharmaceutical products and descriptions is posted on our website, www.anipharmaceuticals.com.
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.
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.
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.
The loss of any of these customers, including in their role as distributors, could have a material adverse effect on our business. 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.
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 support flexible and remote working arrangements throughout the business. 12 Table of Contents Health and Safety Management and Training We are committed to the safety and health of our employees, patient-customers, and the public. It is critical within our mission to ensure we keep our employees and customers safe while accomplishing our business goals.
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 several major distributors and mail order pharmacies in the United States, including Anda, Smith Drug Company, Morris Dickson, CVS Caremark, Centerwell, and ExpressScripts. • Group Purchasing Organizations .
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.
The team is focused on delivering growth by scaling up the Rare Disease business through the successful launch of its lead asset, Cortrophin Gel, strengthening our generics business with enhanced development capability, innovation in established brands and leveraging our North American manufacturing capabilities.
In determining the potential profit of a product, we forecast our 4 Table of Contents 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.
In determining the potential profit of a product, we forecast our anticipated market share, pricing, competitive environment and the estimated cost to manufacture the products. • Manufacturing.
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.
When determining whether to develop or acquire an individual product, we review the current and expected market size for that product. and competitive environment. We endeavor to pursue 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.
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.
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.
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”).
Our manufacturing facilities provide a means of entering niche markets, such as hormone therapies, in which fewer generic companies typically compete. 4 Table of Contents Competitive Generic Therapy The FDA Reauthorization Act of 2017 (“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”).
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.
Our sales can also be impacted by new studies that indicate that a competitor’s product has greater efficacy than one of our products.
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.
We also recently acquired certain patents and patent applications relating to baclofen and a patent was granted on our hydrochlorothiazide product. 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.
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.
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 and/or third party payors or purchasing customers in certain states pay for health care products and services, which could result in reduced demand for our product candidates or additional pricing pressures. 9 Table of Contents 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 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.
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. Generic Product Development Considerations We consider a variety of criteria in determining which products to develop. These criteria include: • Formulation Complexity.
In addition, our customers include national mail order houses, including CVS Caremark, Humana, and ExpressScripts, as well as group purchasing organizations. 11 Table of Contents 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 recent years, the wholesale distributor network for pharmaceutical products has been subject to increasing consolidation, which has increased the concentration of our wholesale customers.
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.
The Company has ceased operations at our subsidiary in Oakville, Ontario, Canada as of March 31, 2023. This action was part of ongoing initiatives to capture operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021.
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.
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 license any patents associated with these products.
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.
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. T herefore, we consider the trademark names to be of material value and we act to protect these rights from infringement.
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.
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.
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. 8 Table of Contents 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 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 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.
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 coverage of pharmaceuticals, which has benefited the pharmaceutical industry for both brands and generic drugs.
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.
This portfolio is the result of internal 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 occasionally use a small number of part-time and consultant 13 Table of Contents 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.
We occasionally use a small number of part-time and consultant resources to meet our operational needs a nd our turnover is in line with similar businesses in our industry and locations. Our Purpose and Core Values Our human capital management strategy is guided by our purpose and core values. Our purpose is Serving Patients, Improving Lives.
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.
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.
Physicians may prescribe drugs or biologics off-label but manufacturers cannot promote such uses unless they have been previously authorized 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.
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.
See "Risk Factors ― We are subject to federal, state, and local laws and regulations, and complying with these may cause us to incur significant additional costs." 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.
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.
For the year ended December 31, 2023, approximately 70% of our net revenues were attributable to four customers. For the years ended December 31, 2022 and 2021, three customers, togeth er accounted for approximately 59% and 68% of our ne t revenues, respectively. In addition, as noted below, our customers also distribute our products.
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.
The sale is expected to close in March 2024 ( see Note 19. Subsequent Events, in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Re port on Form 10-K).
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.
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. 11 Table of Contents Principal competitors for the pharmaceutical market in which we do business include, but are not limited to, Amneal Pharmaceuticals, Inc., Apotex Inc., Aurobindo Pharma, Camber Pharmaceuticals Inc., Hikma Pharmaceuticals plc, Lupin Pharmaceuticals, Inc., Mallinckrodt Pharmaceuticals, Rising Pharmaceuticals, Inc., Strides Pharma Inc., Sun Pharmaceutical Industries Ltd., Teva Pharmaceuticals USA, Inc., Viatris Inc., and Zydus Pharmaceuticals USA.
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.
Total Rewards ANI’s Total Rewards Philosophy is grounded in pay for performance and seeks to provide compensation and benefits that are competitive within the pharmaceuticals industry, as well as competitive with local employers for jobs of a cross-industry nature. We pay fair and competitive salaries, short-term incentives, and long-term incentives that are informed by external market rates and internal equity.
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.
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 overall strategy is enabled by an empowered, collaborative, and purposeful team with a high performance-orientation, Serving Patients, Improving Lives.
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.
Our development and manufacturing capabilities enable us to manufacture pharmaceuticals that are differentiated and include high potency, modified release, combination, and hormonal products. This ability to manufacture a variety of differentiated products is a competitive strength that we intend to leverage in selecting products to develop and commercialize. • Market Size.
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.
In addition, there is an additional rebate if the average manufacturer price of the drug is rising faster than inflation. Since passage of ACA in 2010, Medicaid rebates have been capped at average manufacturer price per unit.
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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.
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The Company has fully completed the transition of the products manufactured or packaged in Oakville to one of the three U.S.-based manufacturing sites. On November 6, 2023, ANI Pharmaceuticals Canada Inc., a wholly owned subsidiary of the Company, entered into an agreement for the purchase and sale of the Oakville, Ontario manufacturing facility.
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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.
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However, during December 3023, the agreement was mutually terminated. In February 2024, the Company entered into an agreement for the purchase and sale of the Oakville site, for a purchase price of 19.2 million Canadian Dollars, or approximately $14.2 million US Dollars, based on the current exchange rate.
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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.
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The Company's operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, dependence on significant customers, and possible fluctuations in financial results.
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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.
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In May 2023, through a public offering, the Company completed the issuance and sale of 2,183,545 shares of ANI common stock, resul ting in net proceeds after issuance costs of $80.6 million. We have a commercial portfo lio of 116 pro ducts with a wide variety of indications and a robust portfolio of pipeline products as of December 31, 2023.
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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.
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On October 2, 2023, we announced FDA approval and commercial availability of a 1-mLvial of Cortrophin Gel, appropriate for adjunctive treatment of certain patients with acute gouty arthritis flares. We continued to invest in our Rare Disease team and support investments in Cortrophin Gel during 2023.
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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.
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We plan to continue to expand our rare disease business through a combination of organic growth, as described above, and through acquisition.
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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.
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While we continue to execute against our strategic initiatives that we believe will result in long-term, sustainable growth and value to our stockholders, we continue to evaluate potential acquisitions and other strategic transactions of businesses that we believe complement our existing portfolio, infrastructure and capabilities or provide us with the opportunity to expand our existing capabilities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks are discussed more fully in the section titled “Risk Factors.” These risks and uncertainties include, but are not limited to, the following: ● 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.
Biggest changeNoncompliance 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; 13 Table of Contents • We are subject to United States federal and state laws related to healthcare fraud and abuse and health information privacy and security, and the failure to comply with such laws may adversely affect our business; • 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; • 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; • Public health outbreaks, epidemics, or pandemics (such as COVID-19) have adversely affected and may in the future adversely affect our business; • 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; • Four of our products 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.
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.
Like all pharmaceutical companies, we face 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.
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.
While we devote substantial resources to our 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.
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. 27 Table of Contents 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.
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. 28 Table of Contents 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 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.
We have transitioned the 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.
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.
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 internationally (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.
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.
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, 2023, no single vendor represented at least 10% of inventory purchases. During the year ended December 31, 2022, we purchased approximately 19% of our inventory from one supplier.
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.
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 2023 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.
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.
Virtually all our contracts for the supply o f 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.
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 36 Table of Contents respect or undertake various other corporate activities.
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 respect or undertake various other corporate activities.
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.
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 15.
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 26 Table of Contents from a competitor.
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 from a competitor.
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.
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 mark ets.
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.
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. 20 Table of Contents The FDA regulates and monitors all promotion and advertising of prescription drugs after approval.
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 28 Table of Contents adjustment at any time during the calendar year.
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 adjustment at any time during the calendar year.
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.
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 Indian subsidiary in relation to various aspects of our business, including research and development services, tech transfers, and contract manufacturing.
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. 34 Table of Contents 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.
In the event that such 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. 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.
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 25 Table of Contents 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.
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 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.
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.
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. 27 Table of Contents Our reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate programs are complex and may involve subjective decisions.
In addition, the issuance of any equity securities could be at a discount to the then-prevailing market price of our common stock. 37 Table of Contents 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, the issuance of any equity securities could be at a discount to the then-prevailing market price of our common stock. 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.
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, 35 Table of Contents could increase our operating costs and could materially impair our ability to operate our business.
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, could increase our operating costs and could materially impair our ability to operate our business.
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 30 Table of Contents 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.
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 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.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, 16 Table of Contents 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.
Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, 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.
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 19 Table of Contents PAS can require between four and 18 months.
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.
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. 21 Table of Contents We have entered into distribution agreements under which we market products under ANDAs and NDAs owned by third parties.
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. We have entered into distribution agreements under which we market products under ANDAs and NDAs owned by third parties.
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.
We own the trademark names for most of our branded pro ducts, 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.
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.
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 could potentially require a recall of the product.
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 devoted significant time and money over the past eight years to the development of this product since we acquired the rights to the product in 2016.
Item 1A. Risk Factors Risk Factor Summary 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.
Item 1A. Risk Factors Risk Factor Summary Investing in our common stock involves a high degree of risk. You should carefully consider all information in this Annual Rep ort on Form 10-K prior to investing in our common stock.
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.
For example, in response to the continued 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.
The identification of suitable acquisition candidates or products can be difficult, time-consuming, 20 Table of Contents and costly, and we may not be able to successfully complete or successfully execute strategies for identified acquisitions.
The identification of suitable acquisition candidates or products can be difficult, time-consuming, and costly, and we may not be able to successfully complete or successfully execute strategies for identified acquisitions.
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.
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, Opium Tincture, and Thyroid Tablets, and Hyoscyamine.
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.
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, Opium Tincture, Thyroid Tablets, and Hyoscyamine.
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. ​ 33 Table of Contents The Foreign Corrupt Practices Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents.
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. The Foreign Corrupt Practices Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents.
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.
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.
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.
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 internal manufacturing operations are currently based in three fa cilities.
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.
If the U.S. dollar depreciates against the Indian rupee, the expenses we recognize from Indian-denominated transactions made by our Indian subsidiary could be translated at an unfavorable rate, leading to foreign exchange losses.
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.
Currency fluctuations and changes in exchange rates could have a material adverse effect on our business, fina ncial position, and operating results. A portion of our transactions are denominated in a foreign currency, the Indian rupee. Because we engage in certain transactions in a foreign currency, we are subject to the effects of exchange rate fluctuations.
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.
Except for licenses for patent technology for Veregen, and ownership of patents and patent applications relating to our baclofen and hydrochlorothiazide products, 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.
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.
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.
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.
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 annual assessment of goodwill based on our two reporting units.
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.
Our current principal stockholders, directors, and executive officers beneficially own approximately 13% of our outstanding capital stock entitled to vote as of December 31, 2023.
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; 18 Table of Contents ● 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 .
The ability for us to generate significant net product revenues from our Cortrophin Gel products 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; • successfully establishing and maintaining manufacturing capabilities with our third-party suppliers and CMOs 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.
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.
Three products, which tog ether comprised less than 10% of ou r total revenue in 2023, 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.
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.
In December of 2021, the FDA issued an information request to all manufacturers of propranolol products, including Inderal LA (Propranolol ER) currently being marketed by ANI 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.
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.
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.
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.
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 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.
Competition for personnel is intense in certain localities in which we operate, specifically northern Minnesota, where two of our three 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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. Item 1B. Unresolved Staff Comments None.
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.
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.
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.
Commitments and Contingencies, in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Re port on Form 10-K. 25 Table of Contents We are susceptible to product liability claims that may not be covered by insurance, which, if successful, could require us to pay substantial sums.
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 29 Table of Contents knowingly submit, or cause to be submitted, false or fraudulent claims for payment to the government.
The Federal False Claims Act (“FFCA”), also known as Qui Tam, imposes civil liability and criminal fines on individuals or entities that knowingly submit, or cause to be submitted, false or fraudulent claims for payment to the government.
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.
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 and information submission requirements 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.
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 17 Table of Contents product meeting specifications and terms such as license scope or termination rights.
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 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.
To the extent our efforts to commercialize this product are un successful, 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.
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.
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.
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. 29 Table of Contents Our products are subject to regulatory and quality standards and guidelines set forth by FDA and other governmental agencies.
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.
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. 31 Table of Contents All U.S. facilities where prescription drugs are manufactured, tested, packaged, stored, or distributed must comply with FDA current good manufacturing practices (“cGMPs”).
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.
For example, our net revenues are concentrated among four customers representing 31%, 13%, 13%, and 12% of net revenues, respectively, during the year ended December 31, 2023. As of December 31, 2023, accounts receivable from these four customers was approximately 81% of our accounts receivable, net.
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 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; • With the exception of patents on a limited number of products we do not own or license any material patents associated with the majority of our products, and our ability to protect and control unpatented trade secrets, know-how, and other technological innovation is limited; 14 Table of Contents • Our success is largely dependent upon certain key employees, including members of our senior management, 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 previously identified material weaknesses in our internal control over financial reporting, and the failure to maintain an effective system of internal controls and procedures may cause investors to lose confidence in our financial reporting; • 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.
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.
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.
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.
Any of these events could have a material adverse effect on our business, financial position, and operating results.
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.
To the extent we are not able to continue to achieve commercial success with this product, including expanding the market and gaining market share, our business, financial condition, and results of operations will be negatively impacted; • Our approved products, including Cortrophin Gel, may not achieve commercialization at levels of market acceptance that will continue to allow us to achieve profitability; • Acquisitions and investments could disrupt our business and harm our financial position and operating results; • The limited number of suppliers for our 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.
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.
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.
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.
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 certain key employees, including members of our senior management team.
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.
We are continuing to develop our marketing and sales organization to support Cortrophin Gel and have limited experience in marketing prescription rare disease drug products. If we are unable to continue to develop marketing and sales capabilities for Cortrophin Gel, our business will suffer.
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.
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.
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: ​ • 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.
The risks presented by international operations include: • 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 conflict between Russia and the Ukraine, the conflict between Israel and Gaza, and conflicts related to the attacks on cargo ships in the Red Sea; • 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. 35 Table of Contents 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.
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.
The rate of inflation may significantly increase input costs for our products and, given the competitive nature of the generic and rare disease markets in which we compete, we may not be able to pass those costs on to our customers.
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.
In either case, our business, financial position, and operating results could be materially adversely affected. Three products, Esterified Estrogen with Methyltestosterone (“EEMT”), Opium Tincture, and Thyroid Tablets are marketed without approved NDAs or ANDAs. The Company obtained the rights to Hyoscyamine, a product without approved NDAs or ANDAs, on of December 27, 2023.
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.
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; • 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; and • Our operations, including those resulting from our acquisition of Novitium and its international 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.
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; 15 Table of Contents ● 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.
In either case, our business, financial position, and operating results could be materially adversely affected; • 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; • 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; • 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 three 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.
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.
With the exception of patents or patent applications related to Veregen, baclofen, and hydrochlorothiazide products, 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.
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.
Risks Related to Accounting, Tax, and SEC Rules and Regulations We have increased exposure to tax liabilities, including foreign tax liabilities. We are subject to, or potentially subject to, income taxes as well as non-income based taxes in various U.S. jurisdictions, Canada, and India. Significant judgment is required in determining our international provision for income taxes and other tax liabilities.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn 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.
Biggest changeIn addition, we own a facility in East Windsor, New Jersey, which includes manufacturing, warehousing, laboratory, product development, and employee office space, which was acquired as part of the acquisition of Novitium in November 2021.
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.
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, powder 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.
We 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, also located in Baudette, Minnesota. We own a cold storage facility located in Baudette, Minnesota.
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 ceased operations at our subsidiary, ANI Pharmaceuticals Canada, Inc., a wholly owned subsidiary of the Company located in Oakville, Ontario, Canada as of March 31, 2023. This action is part of ongoing initiatives to capture operational synergies following our acquisition of Novitium.
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 have fully completed the transition of the products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites. On November 6, 2023, ANI Pharmaceuticals Canada Inc., entered into an agreement for the sale of the Oakville, Ontario manufacturing facility. On December 22, 2023, the agreement was terminated by mutual agreement.
Removed
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.
Added
In February 2024, the Company entered into an agreement for the purchase and sale of the Oakville site, for a purchase price of 19.2 million Canadian Dollars, or approximately $14.2 million US Dollars, based on the current exchange rate. The sale is expected to close in March 2024 ( see Note 19.
Removed
The leases will 39 Table of Contents 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. ​
Added
Subsequent Events, in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Re port on Form 10-K). We lease spaces for warehouse and packaging activities in East Windsor, New Jersey, and for research and development activities in Chennai, India.
Added
In September 2022, we entered into a lease for office space in Princeton, New Jersey, which includes certain employees in our corporate, legal, human resources, business functions, and rare disease operations. The leases will expire between 2025 and 2028. During 2023, we have expanded our East Windsor, New Jersey facility to accommodate additional laboratory, product development, and employee office space.
Added
We consider our leased and owned properties suitable and adequate for our current and foreseeable needs. Item 3. Legal Proceedings Our legal proceedings are dis cussed in Note 15. Com mitments 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.
Added
Mine Safety Disclosures Not applicable. 41 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum Number (or ​ ​ ​ ​ ​ ​ ​ Total Number of ​ approximate dollar ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ value) of Shares ​ ​ Total Number ​ ​ ​ ​ Part of Publicly ​ that may yet be ​ ​ of Shares ​ Average Price ​ Announced Plans or ​ Purchased Under the Period Purchased (1) Paid per Share Programs Plans or Programs October 1 - October 31, 2022 ​ — ​ $ — ​ — ​ $ — November 1 - November 30, 2022 ​ 2,024 ​ $ 36.60 ​ — ​ $ — December 1 - December 31, 2022 ​ 1,156 ​ $ 39.24 ​ — ​ $ — Total ​ 3,180 ​ $ 37.56 ​ — ​ ​ 40 Table of Contents (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.
Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or approximate dollar value) of Shares that may yet be Purchased Under the Plans or Programs October 1 - October 31, 2023 — $ — — $ — November 1 - November 30, 2023 2,528 $ 52.30 — $ — December 1 - December 31, 2023 1,865 $ 52.91 — $ — Total 4,393 $ 52.56 — (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. 42 Table of Contents Performance Graph The graph below compares the five-year cumulative total stockholder return on our common stock, the Nasdaq Stock Market (US) Index, and the S&P 600 Pharmaceuticals, Biotechnology & Life Sciences Index, assuming the investment of $100.00 on December 31, 2018, with dividends being reinvested.
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.
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. To date, we have paid all preferred stock dividends in cash.
The stock price performance in the graph below is not necessarily indicative of future price performance. ​ ​ ​ 41 Table of Contents Item 6. Reserved ​ ​ 42 Table of Contents
The stock price performance in the graph below is not necessarily indicative of future price performance. 43 Table of Contents Item 6. Reserved 44 Table of Contents
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.
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 February 22, 2024, there were approximatel y 264 shar eholders 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table summarizes our results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (in thousands) 2022 2021 Net revenues ​ $ 316,385 ​ $ 216,136 Operating expenses ​ ​ ​ ​ Cost of sales (exclusive of depreciation and amortization) ​ 138,785 ​ 100,610 Research and development ​ 22,318 ​ 11,369 Selling, general, and administrative ​ 124,044 ​ 84,294 Depreciation and amortization ​ 56,972 ​ 47,252 Contingent consideration fair value adjustment ​ ​ 3,758 ​ ​ 500 Legal settlement expense ​ ​ — ​ ​ 8,750 Purified Cortrophin Gel pre-launch charges ​ — ​ 780 Restructuring activities ​ ​ 5,679 ​ ​ — Intangible asset impairment charge ​ ​ 112 ​ ​ 2,374 Operating loss ​ (35,283) ​ (39,793) Interest expense, net ​ (28,052) ​ (11,922) Other income/(expense), net ​ 670 ​ (4,343) Loss before benefit for income taxes ​ (62,665) ​ (56,058) Benefit for income taxes ​ 14,769 ​ 13,455 Net loss ​ $ (47,896) ​ $ (42,603) ​ 46 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. ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2022 2021 Net revenues 100.0 % 100.0 % Operating expenses ​ Cost of sales (exclusive of depreciation and amortization) 43.9 % 46.5 % Research and development 7.1 % 5.3 % Selling, general, and administrative 39.2 % 39.0 % Depreciation and amortization 18.0 % 21.9 % Contingent consideration fair value adjustment ​ 1.2 % 0.2 % Legal settlement expense ​ — % 4.0 % Purified Cortrophin Gel pre-launch charges — % 0.4 % Restructuring activities ​ 1.8 % — % Intangible asset impairment charge — % 1.1 % Operating loss (11.2) % (18.4) % Interest expense, net (8.9) % (5.5) % Other income/(expense), net 0.2 % (2.0) % Loss before benefit for income taxes (19.9) % (25.9) % Benefit for income taxes 4.7 % 6.2 % Net loss (15.2) % (19.7) % ​ Results of Operations for the Years Ended December 31, 2022 and 2021 Net Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ (in thousands) 2022 2021 Change % Change Generics, Established Brands, and Other Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Generic pharmaceutical products ​ $ 210,121 ​ $ 143,571 ​ $ 66,550 46.4 % Established brand pharmaceutical products ​ 39,463 ​ 47,561 ​ (8,098) (17.0) % Contract manufacturing ​ 16,106 ​ 10,042 ​ 6,064 60.4 % Royalty and other ​ 9,009 ​ 14,962 ​ (5,953) (39.8) % Generics, established brands, and other segment total net revenues ​ $ 274,699 ​ $ 216,136 ​ $ 58,563 ​ 27.1 % Rare Disease Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rare disease pharmaceutical products ​ $ 41,686 ​ $ — ​ $ 41,686 ​ NM (1) ​ Total net revenues ​ $ 316,385 ​ $ 216,136 ​ $ 100,249 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.
Biggest changeYear Ended December 31, 2023 2022 Net Revenues 100.0 % 100.0 % Operating Expenses Cost of sales (excluding depreciation and amortization) 37.3 % 43.9 % Research and development 7.0 % 7.1 % Selling, general, and administrative 33.2 % 39.2 % Depreciation and amortization 12.3 % 18.0 % Contingent consideration fair value adjustment 0.3 % 1.2 % Restructuring activities 0.2 % 1.8 % Intangible asset impairment charge — % 0.0% Operating Income (Loss) 9.6 % (11.2) % Interest expense, net (5.5) % (8.9) % Other (expense) income, net 0.0% 0.2 % Income (Loss) Before Expense (Benefit) for Income Taxes 4.1 % (19.9) % Income tax expense (benefit) 0.2 % (4.7) % Net Income (Loss) 3.9 % (15.2) % Results of Operations for the Years Ended December 31, 2023 and 2022 Net Revenues Year Ended December 31, (in thousands) 2023 2022 Change % Change Generics, Established Brands, and Other Segment Generic pharmaceutical products $ 269,449 $ 210,121 $ 59,328 28.2 % Established brand pharmaceutical products, royalties, and other pharmaceutical services 105,250 64,578 40,672 63.0 % Generics, established brands, and other segment total net revenues $ 374,699 $ 274,699 $ 100,000 36.4 % Rare Disease Segment Rare disease pharmaceutical products 112,117 41,686 $ 70,431 169.0 % Total net revenues $ 486,816 $ 316,385 $ 170,431 53.9 % We derive substantially all of our revenues from sales of generic, rare disease, and established brand pharmaceutical products, royalties on net sales of certain products, and other pharmaceutical services.
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.
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.
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.
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.
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.
We consider potential tax effects resulting from discontinued operations and gains and losses included in other comprehensive income (loss) 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.
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.
Chargebacks 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.
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.
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, 2024.
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.
Government Rebates If actual results were not consistent with our estimates as related to government rebates, 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.
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.
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 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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.
Our contractual obligations and commitments as of December 31, 2023 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.
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.
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; 54 Table of Contents • capital expenditures and equipment purchases to support product launches; and • business and product acquisitions.
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.
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. 59 Table of Contents 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.
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.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 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 , 2022 , filed with the SEC on March 9 , 2023 .
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.
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 lev el.
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.
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 Income (Loss) Before Expense (Benefit) for Income Taxes would be affected by $2.1 million for the year ended December 31, 2023.
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 53 Table of Contents Prior Credit Agreement, and to pay related accrued and unpaid interest, legal fees, and expenses.
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 Prior Credit Agreement, and to pay related accrued and unpaid interest, legal fees, and expenses.
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.
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 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.
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.
Cortrophin Gel is an adrenocorticotropic hormone (“ACTH”), also known as purified corticotropin. 45 Table of Contents During 2021 and 2022, we invested significantly 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.
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.
If we are not able to continue to be profitable in future years or are not able to continue to 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.
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.
Administrative Fees and Other Rebates 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.
We also have an interest rate swap used to manage changes in LIBOR-based interest rates underlying a portion of the 54 Table of Contents 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.
We also have an interest rate swap used to manage changes in SOFR-based interest rates underlying a portion of the borrowing under the Term Facility. Under the swap agreement, ANI pays the counterparty a fixed rate of 2.26% and receives variable 1-month SOFR, subject to a 0.75% floor, on the outstanding notional value.
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.
During this timeframe, 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.
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.
Net cash used in financing activities for the year ended December 31, 2022 was $5.1 million, 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 preferred stock dividends paid.
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.
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 $1.4 million and $3.8 million during the years ended December 31, 2023 and 2022, respectively.
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 of December 31, 2023 , the notional value of the interest rate swap was $139.4 million . See Note 6, 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.
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.
See Note 11, Mezz anine 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 included $46.5 million in contingent future earn-out payments.
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 44 Table of Contents means of entering niche markets, such as hormone therapies, in which fewer generic companies are able to compete.
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 manufacturing facilities provide a means of entering niche markets, such as hormone therapies, in which fewer generic companies typically compete.
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 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 SOFR Rate (or alternate benchmark rate as defined in the Credit Agreement) in the case of SOFR 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 SOFR Rate (as defined in the Credit Facility) in the case of loans under the Revolving Facility.
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.
We own and operate three pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, and one is located in East Windsor, New Jersey, 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.
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.
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 four customers representing 31%, 13%, 13%, and 12% of net revenues during the year ended December 31, 2023.
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 generally seek to develop and manufacture products at our own manufacturing plants to ensure quality control of our products, supply chain reliability 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.
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.
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. • We recognized an impairment charge of $0.1 million in the year ended December 31, 2022, in relation to an ANDA asset. No impairm ent charges were recognized in the year ended December 31, 2023.
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.
We believe that our financial resources, consisting of net current working capital of approximately $374.3 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, 2023, will be sufficient to enable us to meet our working capital requirements and debt obligations for at least the next 12 months.
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.
If there were a 10% change in the government rebate estimates throughout the year, our net revenues would be affected by $2.4 million for the year ended December 31, 2023.
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. 43 Table of Contents We plan to continue to invest behind Cortrophin Gel and our Rare Disease platform in 2023 and beyond.
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 the prior year, and we continued to invest behind Cortrophin Gel and our Rare Disease platform in 2023.
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.
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. Variable consideration is estimated after the consideration of applicable information that is reasonably available.
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.
On December 31, 2022, we had $48.2 million in unrestricted cash and cash equivalents. In 2023 and 2022, we invested in leadership, expertise, and infrastructure in the areas of commercialization of rare disease therapies, and in 2022 began to commercialize our Cortrophin Gel product.
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 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.
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. 48 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%.
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. For the year ended December 31, 2023, cost of sales increased to $181.5 million from $138.8 million for the same period in 2022, an increase of $42.7 million or 30.8%.
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.
If there were a 10% change in the administrative fees estimates throughout the year, our net revenues would be affected by $5.6 million for the year ended December 31, 2023. 57 Table of Contents Prompt Payment Discounts 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.
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 investing activities for the year ended December 31, 2022 was $15.7 million, principally due to $8.9 million of capital expenditures and the consideration paid for asset acquisitions of intangible assets totaling $7.6 million, partially offset by $0.8 million of proceeds from the sale of long-lived assets during the period.
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 team is focused on delivering sustainable growth by scaling up our Rare Disease business through the successful launch of our lead asset, Cortrophin Gel, strengthening our generics business with enhanced development capability, innovation in established brands and leveraging our North American manufacturing capabilities.
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.
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.
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.
The interest rate under the Term Facility as of December 31, 2023 is 11.46% . See Note 5, 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.
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.
See Note 15, Co mmitments 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.
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 55 Table of Contents and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily 56 Table of Contents apparent from other sources. Actual results could differ from those estimates.
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.
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. 49 Table of Contents Net revenues for the year ended December 31, 2023 were $486.8 million compared to $316.4 million for the same period in 2022, an increase of $170.4 million, or 53.9%, primarily as a result of the following factors: • Net revenues for generic pharmaceutical products were $269.4 million during the year ended December 31, 2023, an increase of 28.2% compared to $210.1 million for the same period in 2022, driven by increased volumes on the base business, increased volumes from the inclusion of 2022 launches in 2023 and 2023 new product launches.
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.
If there were a 1% change in the chargeback estimates throughout the year, our net revenues would be affected by $5.9 million for the year ended December 31, 2023.
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.
If there were a 10% change in the returns estimates throughout the year, our net revenues would be affected by $1.8 million for the year ended December 31, 2023.
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.
As of the closing of the acquisition, the contingent consideration had a fair value of $30.8 million. Refer to Note 10 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 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.
In determining the potential profit of a product, we forecast our anticipated market share, pricing, competitive environment and the estimated cost to manufacture the products. • Manufacturing.
The grants are made pursuant to inducement grants outside of our stockholder approved equity plan as permitted under the Nasdaq Stock Market listing rules. 60 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (in thousands) 2022 2021 2020 Cost of sales ​ $ 532 ​ $ 20 ​ $ 137 Research and development ​ 751 ​ 564 ​ 597 Selling, general, and administrative ​ 13,316 ​ 9,905 ​ 12,202 ​ ​ $ 14,599 ​ $ 10,489 ​ $ 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 following table summarizes stock-based compensation and ESPP expense included in our consolidated statements of operations: Years Ended December 31, (in thousands) 2023 2022 2021 Selling, general, and administrative $ 19,036 $ 13,316 $ 9,905 Research and development 910 751 564 Cost of sales 706 532 20 $ 20,652 $ 14,599 $ 10,489 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.
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.
We endeavor to pursue products with sufficient market size to enable us to enter the market with a strong likelihood of serving patients in need and thus being able to price our products both competitively and at a profit. • Profit Potential.
For the year ended December 31, 2022 and 2021, there was $0.1 million of interest capitalized into construction in progress.
For the year ended December 31, 2023, there was $0.6 million of interest capitalized into construction in progress, compared to less than $0.1 million of interest capitalized for the year ended December 31, 2022, representing an offset to interest expense.
There were no sales of rare disease pharmaceutical products during 2021. ​ Cost of Sales (Excluding Depreciation and Amortization) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ (in thousands) 2022 2021 Change % Change Cost of sales (excl. depreciation and amortization) ​ $ 138,785 ​ $ 100,610 ​ $ 38,175 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 (Excluding Depreciation and Amortization) Year Ended December 31, (in thousands) 2023 2022 Change % Change Cost of sales (excluding depreciation and amortization) 181,513 138,785 $ 42,728 30.8 % Cost of sales consists of direct labor, including manufacturing and packaging, active and inactive pharmaceutical ingredients, freight costs, packaging components, and royalties payable related to profit-sharing arrangements.
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%.
As of December 31, 2023 , the principal amount of our Term Facility was $294.0 million. The interest rate on our Term Facility is currently 1-month SOFR plus 6.00% per annum, plus a credit spread adjustment of 0.11448% for an interest period of one-month duration, subject to a 0.75% floor.
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.
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 Revenues are primarily derived from sales of generic, rare disease, and established brand pharmaceutical products, royalties, and other pharmaceutical services.
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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2022 2021 Operating Activities ​ $ (31,203) ​ $ 3,322 Investing Activities ​ $ (15,738) ​ $ (105,483) Financing Activities ​ $ (5,126) ​ $ 194,595 ​ Net Cash (Used in) / Provided by Operating Activities 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.
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: Year Ended December 31, (in thousands) 2023 2022 Operating Activities $ 118,959 $ (31,203) Investing Activities $ (18,511) $ (15,738) Financing Activities $ 67,439 $ (5,126) Net Cash Provided by (Used in) Operations Net cash provided by operating activities was $119.0 million for the year ended December 31, 2023, compared to $31.2 million used in operating activities during the same period in 2022, a change of $150.2 million.
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.
To the extent we 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.
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.
When determining whether to develop or acquire an individual product, we review the current and expected market size for that product. and competitive environment.
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.
During the year ended December 31, 2023, no single vendor represented at least 10% of inventory purchases.
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 significant accounting policies are discussed in Note 1, "Description of Business and Summary of Significant Accounting Policies" of the Notes to the consolidated financial statements in Part II, Item 8. of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company's consolidated financial statements.
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.
Our convertible preferred stock (“PIPE Shares”) accrue dividends at 6.50% per year on a cumulative basis, payable in cash or in-kind.
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.
Recent Accounting Standards For information on recent accounti ng standards, see Note 1, "Description of Business and Summary of Significant Accounting Policies" of the Notes to the consolidated financial statements in Part II, Item 8. of this Form 10-K.
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.
The Term Facility proceeds were used to finance the cash portion of the consideration under the Merger Agreement, repay the existing credit facility, and pay fees, costs and expenses incurred in connection with the merger. The Term Facility matures in November 2027 and the Revolving Facility in November 2026.
Benefit for Income Taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 Change % Change Benefit for income taxes ​ $ 14,769 ​ $ 13,455 ​ $ 1,314 9.8 % ​ 50 Table of Contents 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.
Income Tax Expense (Benefit) Year Ended December 31, (in thousands) 2023 2022 Change % Change Income tax expense (benefit) $ 1,093 $ (14,769) $ 15,862 (107.4) % Incom e tax expense (benef it) consists of current and deferred components, which include changes in our deferred tax assets, our deferred tax liabilities, and our valuation allowance. See Note 14.
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, 2023 , $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, 2023 , we had not drawn on the Revolving Facility and $40.0 million remained available for borrowing subject to certain conditions.
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 severance and other employee benefits costs of $0.2 million, and $0.7 million of accelerated depreciation costs. We recognized restructuring activities of $5.7 million of expense in the year ended December 31, 2022, in relation to the closure of our Oakville, Ontario, Canada facility.
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.
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 capabiliti es.
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.
General Impacts to our 2023 and 2022 results of operations, including to net revenues, operating expenses, interest and other expense, net, and income taxes are described below.
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.
As of December 31, 2023 accounts receivable from these four customers totaled approximately 81% of accounts receivable, net. Our net revenues were concentrated among three customers representing 26%, 18%, and 15% of net revenues during the year ended December 31, 2022.
Liquidity and Capital Resources The following table highlights selected liquidity and working capital information from our consolidated balance sheets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (in thousands) 2022 2021 Cash and cash equivalents ​ $ 48,228 ​ $ 100,300 Current restricted cash ​ ​ 5,006 ​ ​ — Accounts receivable, net ​ 165,438 ​ 128,526 Inventories, net ​ 105,355 ​ 81,693 Prepaid income taxes ​ 3,827 ​ 3,667 Assets held for sale ​ ​ 8,020 ​ ​ — Prepaid expenses and other current assets ​ 8,387 ​ 7,589 Total current assets ​ $ 344,261 ​ $ 321,775 ​ ​ ​ ​ ​ ​ ​ Current debt, net of deferred financing costs ​ $ 850 ​ $ 850 Accounts payable ​ 29,305 ​ 22,967 Accrued expenses and other ​ 5,394 ​ 7,563 Accrued royalties ​ 9,307 ​ 6,225 Accrued compensation and related expenses ​ 10,312 ​ 8,522 Accrued government rebates ​ 10,872 ​ 5,492 Returned goods reserve ​ 33,399 ​ 35,831 Deferred revenue ​ — ​ 87 Total current liabilities ​ $ 99,439 ​ $ 87,537 ​ On December 31, 2022, we had $48.2 million in unrestricted cash and cash equivalents.
(in thousands) December 31, 2023 December 31, 2022 Cash and cash equivalents $ 221,121 $ 48,228 Current restricted cash — 5,006 Accounts receivable, net 162,079 165,438 Inventories 111,196 105,355 Prepaid income taxes — 3,827 Assets held for sale 8,020 8,020 Prepaid expenses and other current assets 17,400 8,387 Total current assets $ 519,816 $ 344,261 Current debt, net of deferred financing costs $ 850 $ 850 Accounts payable 36,683 29,305 Accrued royalties 16,276 9,307 Accrued compensation and related expenses 23,786 10,312 Accrued government rebates 12,168 10,872 Income taxes payable 8,164 — Returned goods reserve 29,678 33,399 Current contingent consideration 12,266 — Accrued expenses and other 5,606 5,394 Total current liabilities $ 145,477 $ 99,439 As of December 31, 2023, we had $221.1 million in unrestricted cash and cash equivalents.
Other Expense, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 Change % Change Interest expense, net ​ $ (28,052) ​ $ (11,922) ​ $ (16,130) 135.3 % Other income/(expense), net ​ 670 ​ (4,343) ​ 5,013 (115.4) % Total other expense, net ​ $ (27,382) ​ $ (16,265) ​ $ (11,117) 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.
Other Expense, net Year Ended December 31, (in thousands) 2023 2022 Change % Change Interest expense, net (26,940) (28,052) $ 1,112 (4.0) % Other (expense) income, net (159) 670 (829) (123.7) % Total other expense, net $ (27,099) $ (27,382) $ 283 (1.0) % 51 Table of Contents For the year ended December 31, 2023, we recognized total other expense, net of $27.1 million versus total other expense of $27.4 million for the same period in 2022, a decrease of $0.3 million.
Other Operating Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 Change % Change Research and development ​ $ 22,318 ​ $ 11,369 ​ $ 10,949 96.3 % Selling, general, and administrative ​ 124,044 ​ 84,294 ​ 39,750 47.2 % Depreciation and amortization ​ 56,972 ​ 47,252 ​ 9,720 20.6 % Contingent consideration fair value adjustment ​ ​ 3,758 ​ ​ 500 ​ ​ 3,258 ​ NM (1) ​ Legal settlement expense ​ ​ — ​ ​ 8,750 ​ ​ (8,750) ​ (100.0) % Purified Cortrophin Gel pre-launch charges ​ — ​ 780 ​ (780) (100.0) % Restructuring activities ​ ​ 5,679 ​ ​ — ​ ​ 5,679 ​ NM (1) ​ Intangible asset impairment charge ​ ​ 112 ​ ​ 2,374 ​ ​ (2,262) ​ NM (1) ​ Total other operating expenses ​ $ 212,883 ​ $ 155,319 ​ $ 57,564 37.1 % (1) Not meaningful ​ ​ 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.
During the year ended December 31, 2022, we purc hased 19% of our inventory from one supplier. 50 Table of Contents Other Operating Expenses Year Ended December 31, (in thousands) 2023 2022 Change % Change Research and development $ 34,286 $ 22,318 $ 11,968 53.6 % Selling, general, and administrative 161,697 124,044 37,653 30.4 % Depreciation and amortization 59,791 56,972 2,819 4.9 % Contingent consideration fair value adjustment 1,426 3,758 (2,332) (62.1) % Restructuring activities 1,132 5,679 (4,547) (80.1) % Intangible asset impairment charge — 112 (112) (100.0) % Total other operating expenses $ 258,332 $ 212,883 $ 45,449 21.3 % For the year ended December 31, 2023, other operating expenses increased to $258.3 million from $212.9 million for the same period in 2022, an increase of $45.4 million, or 21.3%, primarily as a result of the following factors: • Research and development expenses increased from $22.3 million to $34.3 million, an increase of 53.6%, primarily due to expenses related to a 505(b)(2) filing for one product of approximately $1.6 million, expenses related to ANDA filings, and a higher level of activity associated with ongoing and new projects in the year ended December 31, 2023. • Selling, general, and administrative expenses increased from $124.0 million to $161.7 million, an increase of 30.4%, due to increased employment related costs, Rare Disease sales and marketing costs, legal expenses, as well as an overall increase in activities required to support the growth of our business. • Depreciation and amortization expense was $59.8 million for the year ended December 31, 2023, compared to $57.0 million for the same period in 2022, an increase of $2.8 million.
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. 51 Table of Contents Our working capital ratio, defined as total current assets divided by total current liabilities, is 3.5 as of December 31, 2022.
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.
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 ceased operations at our subsidiary in Oakville, Ontario, Canada as of March 31, 2023. This action was part of ongoing initiatives to capture operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021. We have fully completed the transition of the products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites.
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 increase is primarily due to an increase in amortization expense related to intangible assets acquired during 2023, and amortization of IPR&D which commenced during the year ended December 31, 2023. • We recognized a loss of $1.4 million and loss of $3.8 million in the year ended December 31, 2023 and 2022, respectively, for the contingent consideration fair value adjustment.
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.
Subsequent Events, in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Re port on Form 10-K). Strategy Our objective is to build a sustainable and growing biopharmaceutical company serving patients in need and creating long-term value for our investors.
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. 57 Table of Contents Prompt Payment Discounts As discussed in Note 1.
If there were a 10% decrease in the prompt payment discounts estimates throughout the year, our net revenues would increase by $2.3 million for the year ended December 31, 2023. Impairment of Goodwill and Intangible Assets Goodwill We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination.
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.
The decrease was primarily due to the non-recurrence of $5.3 million expense recognized in the year ended December 31, 2022 , related to the excess of fair value over cost for inventory acquired in a business combination, as well as the increased sales of Established brand pharmaceutical products, royalties, and other pharmaceutical services products and Cortrophin Gel coupled with increased generic volumes with a mix shift in higher margin products.
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.
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, 2023, we recognized an income tax expense of approximately $1.1 million. The Company's effective tax rate was 5.5% after discrete items for the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+3 added−4 removed7 unchanged
Biggest changeThe 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.
Biggest changeThe 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. 60 Table of Contents Amendment No. 1 In July 2023, the Company amended its Credit Agreement to transition from LIBOR to SOFR due to the cessation of LIBOR pursuant to the terms of Amendment No.1 to the Credit Agreement (“Amendment No. 1”).
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.
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 ended 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 notional value of the swap was $151.5 million 62 Table of Contents 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.
The notional value of the swap was $139.4 million and $151.5 million at December 31, 2023 and 2022, 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 $1.6 million.
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.
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, 2023 by approximately $2.2 million.
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. ​ 63 Table of Contents
Currency exchange rates did not have a material impact on our revenue, income, assets, liabilities, or equity during the year ended December 31, 2023 . 61 Table of Contents
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.
We are exposed to risks associated with foreign currency exchange rate risks as we remeasure certain Indian rupee-denominated transactions from our Indian subsidiary from the Indian-rupee to the U.S. dollar. Changes in exchange rates can positively or negatively impact our revenue, income, assets, liabilities, and equity.
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.
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 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.
Removed
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.
Added
SOFR will be applied to the Credit Facility for the interest period (as defined in the Credit Agreement) beginning on August 1, 2023 and will replace all LIBOR terms.
Removed
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.
Added
Amendment No. 1 also includes the addition of a credit spread adjustment of 0.11448% for an interest period of one-month duration, 0.26161% for a three-month duration, and 0.42826% for a six-month duration, in addition to SOFR and the applicable margin, as noted above. There were no other changes or modifications to the Credit Agreement.
Removed
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.
Added
The Company has applied the optional expedients in ASC 848, Reference Rate Reform, and elected to treat the change in the benchmark interest rate to SOFR as a continuation of the existing Credit Agreement and account for the change prospectively.
Removed
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.

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