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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to                       .

Commission File Number 001-31812

ANI PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware

58-2301143

(State or other jurisdiction of
incorporation or organization)  

(IRS Employer
Identification Number)

210 Main Street West

Baudette, Minnesota 56623

(Address of principal executive offices)

(218) 634-3500

(Registrant’s telephone number including area code)

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

Title of each class:

 

Trading Symbol(s)

 

Name of each exchange on which registered:

Common Stock

 

ANIP

 

Nasdaq Global Market

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

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

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

Large accelerated filer

Accelerated filer

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

Emerging growth company

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

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

As of November 2, 2022 there were 17,453,805 shares of common stock and 10,864 shares of class C special stock of the registrant outstanding.

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ANI PHARMACEUTICALS, INC.

FORM 10-Q — Quarterly Report

For the Quarterly Period Ended September 30, 2022

TABLE OF CONTENTS

 

 

Page

PART I —FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (unaudited)

5

Condensed Consolidated Balance Sheets — As of September 30, 2022 and December 31, 2021

5

Condensed Consolidated Statements of Operations — For the Three and Nine Months Ended September 30, 2022 and 2021

6

Condensed Consolidated Statements of Comprehensive Income/(Loss) — For the Three and Nine Months Ended September 30, 2022 and 2021

7

Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity — For the Three and Nine Months Ended September 30, 2022 and 2021

8

Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2022 and 2021

10

Notes to Condensed Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

52

Item 4.

Controls and Procedures

53

PART II —OTHER INFORMATION

Item 1.

Legal Proceedings

54

Item 1A.

Risk Factors

54

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

55

Item 3.

Defaults upon Senior Securities

55

Item 4.

Mine Safety Disclosures

55

Item 5.

Other Information

55

Item 6.

Exhibits

56

Signatures

57

2

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements include, but are not limited to, statements about future operations, strategies and growth potential, the revenue potential (licensing, royalty and sales) of products we sell, development timelines, expected timeframe for submission of new drug applications or supplemental new drug applications to the U.S. Food and Drug Administration (the “FDA”), pipeline or potential markets for our products, selling and marketing strategies and associated costs to support the sales of Purified Cortrophin® Gel (Repository Corticotropin Injection USP) (“Cortrophin Gel”), impact of accounting principles, litigation expenses, liquidity and capital resources, the impact of the novel coronavirus (“COVID-19”) global pandemic on our business, and other statements that are not historical in nature, particularly those that utilize terminology such as “anticipates,” “will,” “expects,” “plans,” “potential,” “future,” “believes,” “intends,” “continue,” other words of similar meaning, derivations of such words, and the use of future dates. Such forward-looking statements are based on the reasonable beliefs of our management as well as assumptions made by and information currently available to our management. Readers should not put undue reliance on these forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified; therefore, our actual results may differ materially from those described in any forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in our periodic reports filed with the U.S. Securities and Exchange Commission (the “SEC”), including those discussed in the “Risk Factors” section in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and the following factors: 

risks that we may face with respect to importing raw materials and delays in delivery of raw materials and other ingredients and supplies necessary for the manufacture of our products from both domestic and overseas sources due to supply chain disruptions or for any other reason;
delays or failure in obtaining and maintaining approvals by the FDA of the products we sell;
changes in policy or actions that may be taken by the FDA and other regulatory agencies, including drug recalls;
the ability of our manufacturing partners to meet our product demands and timelines;
our dependence on single source suppliers of ingredients due to the time and cost to validate a second source of supply;
acceptance of our products at levels that will allow us to achieve profitability;
our ability to develop, license or acquire, and commercialize new products;
the level of competition we face and the legal, regulatory and/or legislative strategies employed by our competitors to prevent or delay competition from generic alternatives to branded products;
our ability to protect our intellectual property rights;
the impact of legislative or regulatory reform on the pricing for pharmaceutical products;
the impact of any litigation to which we are, or may become, a party;
our ability, and that of our suppliers, development partners, and manufacturing partners, to comply with laws, regulations and standards that govern or affect the pharmaceutical and biotechnology industries;
our ability to maintain the services of our key executives and other personnel;
whether we experience disruptions to our operations resulting from the anticipated closure of our Oakville, Ontario manufacturing plant, including the transition of certain products manufactured there to our other facilities which remains ongoing, or have difficulties finding a buyer for the plant and property; and
general business and economic conditions, such as inflationary pressures, and the effects and duration of outbreaks of public health emergencies, such as COVID-19.

3

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These factors should not be construed as exhaustive and should be read in conjunction with our other disclosures, including but not limited to our Annual Report on Form 10-K for the year ended December 31, 2021, including the factors described in “Item 1A. Risk Factors.” Other risks may be described from time to time in our filings made under the securities laws, including our quarterly reports on Form 10-Q and our current reports on Form 8-K. New risks emerge from time to time. It is not possible for our management to predict all risks. The forward-looking statements contained in this document are made only as of the date of this document. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

The Company may use its investor relations website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s investor relations website. We encourage investors and others interested in our Company to review the information we post on our investor relations website in addition to filings with the SEC, press releases, public conference calls and webcasts. Information contained on the Company’s website is not included as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

NOTE REGARDING TRADEMARKS

Apexicon®, Cortenema®, Purified Cortrophin® Gel, Inderal® LA, Inderal® XL, InnoPran XL®, Lithobid®, Reglan®, Vancocin®, and Veregen® are registered trademarks subject to trademark protection and are owned by ANI Pharmaceuticals, Inc. and its consolidated subsidiaries. Cortrophin-ZincTM is a trademark owned by ANI Pharmaceuticals, Inc. and its consolidated subsidiaries pending registration. Atacand® and Atacand HCT® are the property of AstraZeneca AB and are licensed to ANI Pharmaceuticals, Inc. for U.S. sales of those products. Arimidex® and Casodex® are the property of AstraZeneca UK Limited and are licensed to ANI Pharmaceuticals, Inc. for U.S. sales of those products. Oxistat® is the property of Fougera Pharmaceuticals Inc. and licensed to ANI Pharmaceuticals, Inc. for U.S. sales of Oxistat® Lotion. Pandel® is property of Taisho Pharmaceutical Co, Ltd. and licensed to ANI Pharmaceuticals for U.S. sales of Pandel® creme.

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Part I — FINANCIAL INFORMATION

Item 1.   Condensed Consolidated Financial Statements (unaudited)

ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

    

September 30, 

    

December 31, 

2022

2021

Assets

Current Assets

 

  

 

  

Cash and cash equivalents

$

56,281

$

100,300

Accounts receivable, net of $111,000 and $105,260 of adjustments for chargebacks and other allowances at September 30, 2022 and December 31, 2021, respectively

 

140,433

 

128,526

Inventories, net

 

95,893

 

81,693

Prepaid income taxes

 

3,778

 

3,667

Assets held for sale

8,020

Prepaid expenses and other current assets

 

4,972

 

7,589

Total Current Assets

 

309,377

 

321,775

Non-current Assets

Property and equipment

 

72,935

 

75,627

Accumulated depreciation

(30,105)

(22,956)

Property and equipment, net

42,830

52,671

Restricted cash

 

5,003

 

5,001

Deferred tax assets, net of deferred tax liabilities and valuation allowance

 

77,340

 

67,936

Intangible assets, net

 

264,237

 

294,122

Goodwill

 

28,221

 

27,888

Derivatives and other non-current assets

 

12,102

 

2,205

Total Assets

$

739,110

$

771,598

Liabilities, Mezzanine Equity, and Stockholders’ Equity

 

  

 

  

Current Liabilities

 

  

 

  

Current debt, net of deferred financing costs

$

850

$

850

Accounts payable

 

18,992

 

22,967

Accrued royalties

 

6,585

 

6,225

Accrued compensation and related expenses

 

7,745

 

8,522

Accrued government rebates

 

8,745

 

5,492

Returned goods reserve

 

33,984

 

35,831

Accrued expenses and other

 

4,726

 

7,650

Total Current Liabilities

 

81,627

 

87,537

Non-current Liabilities

 

  

 

  

Non-current debt, net of deferred financing costs and current component

 

285,882

 

286,520

Non-current contingent consideration

 

33,434

 

31,000

Derivatives and other non-current liabilities

 

1,492

 

7,801

Total Liabilities

$

402,435

$

412,858

Commitments and Contingencies (Note 13)

 

  

 

  

Mezzanine Equity

 

  

 

  

Convertible Preferred Stock, Series A, $0.0001 par value, 1,666,667 shares authorized; 25,000 shares issued and outstanding at September 30, 2022 and December 31, 2021

 

24,850

 

24,850

Stockholders’ Equity

 

  

 

  

Common Stock, $0.0001 par value, 33,333,334 shares authorized; 17,613,771 shares issued and 17,467,920 outstanding at September 30, 2022; 16,912,401 shares issued and 16,829,739 shares outstanding at December 31, 2021

 

1

 

1

Class C Special Stock, $0.0001 par value, 781,281 shares authorized; 10,864 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

Preferred Stock, $0.0001 par value, 1,666,667 shares authorized; 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

Treasury stock, 145,851 shares of common stock, at cost, at September 30, 2022 and 82,662 shares of common stock, at cost, at December 31, 2021

 

(4,975)

 

(3,135)

Additional paid-in capital

 

399,396

 

387,844

Accumulated deficit

 

(92,636)

 

(47,765)

Accumulated other comprehensive income/(loss), net of tax

 

10,039

 

(3,055)

Total Stockholders’ Equity

 

311,825

 

333,890

Total Liabilities, Mezzanine Equity, and Stockholders’ Equity

$

739,110

$

771,598

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

    

Net Revenues

$

83,821

$

52,061

$

222,153

$

155,207

Operating Expenses

 

  

 

  

 

  

 

  

Cost of sales (excluding depreciation and amortization)

 

32,894

 

24,413

 

102,459

 

66,712

Research and development

 

7,657

 

2,456

 

17,096

 

8,229

Selling, general, and administrative

 

30,081

 

17,181

 

90,856

 

53,588

Depreciation and amortization

 

14,167

 

11,346

 

42,488

 

33,568

Contingent consideration fair value adjustment

2,476

2,134

Legal settlement expense

8,400

Purified Cortrophin Gel pre-launch charges

227

780

Restructuring activities

1,541

4,111

Intangible asset impairment charge

 

 

 

112

 

Total Operating Expenses

 

88,816

 

55,623

 

259,256

 

171,277

Operating Loss

 

(4,995)

 

(3,562)

 

(37,103)

 

(16,070)

Other Expense, net

 

  

 

  

 

  

 

  

Interest expense, net

 

(7,264)

 

(2,497)

 

(20,546)

 

(7,482)

Other income/(expense), net

 

37

 

(1,071)

 

712

 

(1,653)

Loss Before Benefit for Income Taxes

 

(12,222)

 

(7,130)

 

(56,937)

 

(25,205)

Benefit for income taxes

 

3,622

 

2,683

 

13,284

 

6,738

Net Loss

$

(8,600)

$

(4,447)

$

(43,653)

$

(18,467)

Dividends on Series A Convertible Preferred Stock

(406)

(1,218)

Net Loss Available to Common Shareholders

$

(9,006)

$

(4,447)

$

(44,871)

$

(18,467)

Basic and Diluted Loss Per Share:

 

  

 

  

 

  

 

  

Basic Loss Per Share

$

(0.55)

$

(0.37)

$

(2.76)

$

(1.53)

Diluted Loss Per Share

$

(0.55)

$

(0.37)

$

(2.76)

$

(1.53)

Basic Weighted-Average Shares Outstanding

 

16,303

 

12,107

 

16,238

 

12,066

Diluted Weighted-Average Shares Outstanding

 

16,303

 

12,107

 

16,238

 

12,066

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income/(Loss)

(in thousands)

(unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

    

2022

    

2021

    

Net loss

$

(8,600)

$

(4,447)

$

(43,653)

$

(18,467)

Other comprehensive income/(loss), net of tax:

 

  

 

  

 

  

 

  

Gains on interest rate swap, net of tax

 

4,609

 

1,198

 

13,094

 

7,202

Total other comprehensive income, net of tax

 

4,609

 

1,198

 

13,094

 

7,202

Total comprehensive loss, net of tax

$

(3,991)

$

(3,249)

$

(30,559)

$

(11,265)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity

For the Three Months Ended September 30, 2022 and 2021

(in thousands)

(unaudited)

Mezzanine Equity

    

Mezzanine Equity

Total Mezzanine

Series A Convertible

Series A Convertible

    

Common

    

Common

Class C

    

Additional

    

Treasury

    

    

Accumulated

    

    

Equity and

Preferred

Preferred Stock

Stock

Stock

Special

Paid-in

Stock

Treasury

Other Comprehensive

Stockholders'

Stock

Shares

Par Value

Shares

Stock

Capital

Shares

Stock

(Loss)/Gain, Net of Tax

Accumulated Deficit

Equity

Balance, June 30, 2021

$

$

1

 

12,826

$

$

219,403

 

80

$

(3,062)

$

(5,433)

$

(18,992)

$

191,917

Stock-based Compensation Expense

 

 

 

 

2,808

 

 

 

 

 

2,808

Treasury Stock Purchases for Restricted Stock Vests

 

 

 

 

 

3

 

(73)

 

 

 

(73)

Issuance of Restricted Stock Awards

 

 

6

 

 

 

 

 

 

 

Restricted Stock Awards Forfeitures

(8)

Other Comprehensive Income

 

1,198

1,198

Net Loss

 

 

 

 

 

 

 

 

(4,447)

 

(4,447)

Balance, September 30, 2021

$

$

1

 

12,824

$

$

222,211

 

83

$

(3,135)

$

(4,235)

$

(23,439)

$

191,403

Balance, June 30, 2022

$

24,850

25

$

1

 

17,566

$

$

395,043

 

139

$

(4,736)

$

5,430

$

(83,630)

$

336,958

Stock-based Compensation Expense

 

3,870

 

3,870

Treasury Stock Purchases for Restricted Stock Vests

 

7

(239)

(239)

Issuance of Common Shares upon Stock Option and ESPP Exercise

 

16

483

483

Issuance of Restricted Stock Awards

 

54

Dividends on Series A Convertible Preferred Stock

(406)

(406)

Restricted Stock Awards Forfeitures

(22)

Other Comprehensive Income

 

4,609

4,609

Net Loss

 

 

 

 

 

 

(8,600)

 

(8,600)

Balance, September 30, 2022

$

24,850

25

$

1

17,614

$

$

399,396

146

$

(4,975)

$

10,039

$

(92,636)

$

336,675

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity

For the Nine Months Ended September 30, 2022 and 2021

(in thousands)

(unaudited)

Mezzanine Equity

    

Mezzanine Equity

    

    

Total

Series A Convertible

Series A Convertible

Common

    

Common

Class C

    

Additional

    

Treasury

    

    

Accumulated

Mezzanine Equity

Preferred

Preferred Stock

Stock

Stock

Special

Paid-in

Stock

Treasury

Other Comprehensive

and Stockholders'

Stock

Shares

Par Value

Shares

Stock

Capital

Shares

Stock

(Loss)/Gain, Net of Tax

Accumulated Deficit

Equity

Balance, December 31, 2020

$

 

$

1

 

12,430

$

$

214,354

 

76

$

(2,246)

$

(11,437)

$

(4,972)

$

195,700

Stock-based Compensation Expense

 

 

 

 

 

 

7,521

 

 

 

 

 

7,521

Treasury Stock Purchases for Restricted Stock Vests

 

 

 

 

 

 

 

28

 

(889)

 

 

 

(889)

Issuance of Common Shares upon Stock Option and ESPP Exercise

 

 

 

 

12

 

 

336

 

 

 

 

 

336

Issuance of Restricted Stock Awards

 

 

 

 

463

 

 

 

 

 

 

 

Restricted Stock Awards Forfeitures

(81)

(21)

Other comprehensive income

7,202

7,202

Net Loss

(18,467)

(18,467)

Balance, September 30, 2021

$

 

$

1

 

12,824

$

$

222,211

 

83

$

(3,135)

$

(4,235)

$

(23,439)

$

191,403

Balance, December 31, 2021

$

24,850

 

25

$

1

 

16,913

$

$

387,844

 

83

$

(3,135)

$

(3,055)

$

(47,765)

$

358,740

Stock-based Compensation Expense

 

 

 

 

 

 

10,862

 

 

 

 

 

10,862

Treasury Stock Purchases for Restricted Stock Vests

 

 

 

 

 

 

 

63

 

(1,840)

 

 

 

(1,840)

Issuance of Common Shares upon Stock Option and ESPP Exercise

 

 

 

 

24

 

 

690

 

 

 

 

 

690

Issuance of Restricted Stock Awards

 

 

723

 

 

 

 

 

 

 

Restricted Stock Awards Forfeitures

(46)

Dividends on Convertible Preferred Stock

(1,218)

(1,218)

Other comprehensive income

 

 

 

 

 

 

 

13,094

 

 

13,094

Net Loss