ANI PHARMACEUTICALS INC [ANIP] Filings

10-Q 1 anip-20230630.htm 10-Q anip-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2023


o			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 x No o

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 x No o

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 o			Accelerated filer x

Non-accelerated filer o			Smaller reporting company o

			Emerging growth company o

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. o

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

As of August 2, 2023 there were 20,280,798 shares of common stock and 10,864 shares of class C special stock of the registrant outstanding.

Table of Contents

ANI PHARMACEUTICALS, INC.

FORM 10-Q — Quarterly Report

For the Quarterly Period Ended June 30, 2023

TABLE OF CONTENTS


		Page
PART I —FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets — As of June 30 , 2023 and December 31, 2022	6
	Condensed Consolidated Statements of Operations — For the Three and Six Months Ended June 30 , 2023 and 2022	7
	Condensed Consolidated Statements of Comprehensive Income (Loss) — For the Three and Six Months Ended June 30 , 2023 and 2022	8
	Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity — For the Three and Six Months Ended June 30 , 2023 and 2022	9
	Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30 , 2023 and 2022	11
	Notes to Condensed Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50
PART II —OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	52
Signatures		54

Table of Contents

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, abbreviated new drug applications, or supplemental new drug applications to the U.S. Food and Drug Administration (the “FDA”), pipeline or potential markets for our products, selling and marketing strategies and associated costs to support the sales of Purified Cortrophin® Gel (Repository Corticotropin Injection USP) (“Cortrophin Gel”), impact of accounting principles, litigation expenses, liquidity and capital resources, the impact of the novel coronavirus (“COVID-19”) global pandemic on our business, and other statements that are not historical in nature, particularly those that utilize terminology such as “anticipates,” “will,” “expects,” “plans,” “potential,” “future,” “believes,” “intends,” “continue,” other words of similar meaning, derivations of such words, and the use of future dates. Such forward-looking statements are based on the reasonable beliefs of our management as well as assumptions made by and information currently available to our management. Readers should not put undue reliance on these forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified; therefore, our actual results may differ materially from those described in any forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in our periodic reports filed with the U.S. Securities and Exchange Commission (the “SEC”), including those discussed in the “Risk Factors” section in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 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 closure of our Oakville, Ontario manufacturing plant, including the transition of certain products manufactured there to our other facilities which has been completed, or have difficulties finding a buyer for the plant and property; and

•general business and economic conditions, such as inflationary pressures, geopolitical conditions including, but not limited to, the conflict between Russia and the Ukraine, and the effects and duration of outbreaks of public health emergencies, such as COVID-19.

Table of Contents

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, 2022, 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.

Table of Contents

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)


	June 30, 2023		December 31, 2022
Assets

Current Assets
Cash and cash equivalents	$	161,707	$	48,228
Current restricted cash	—		5,006
Accounts receivable, net of $89,427 and $161,052 of adjustments for chargebacks and other allowances at June 30, 2023 and December 31, 2022, respectively	172,925		165,438
Inventories	104,323		105,355
Prepaid income taxes	4,088		3,827
Assets held for sale	8,020		8,020
Prepaid expenses and other current assets	8,248		8,387
Total Current Assets	459,311		344,261
Non-current Assets
Property and equipment, net	44,371		43,246
Deferred tax assets, net of deferred tax liabilities and valuation allowance	81,500		81,363
Intangible assets, net	230,299		251,635
Goodwill	28,221		28,221
Derivatives and other non-current assets	15,639		11,361
Total Assets	$	859,341	$	760,087

Liabilities, Mezzanine Equity, and Stockholders’ Equity
Current Liabilities
Current debt, net of deferred financing costs	$	850	$	850
Accounts payable	28,505		29,305
Accrued royalties	9,885		9,307
Accrued compensation and related expenses	11,493		10,312
Accrued government rebates	11,971		10,872
Returned goods reserve	29,798		33,399
Current contingent consideration	25,025		—
Accrued expenses and other	5,338		5,394
Total Current Liabilities	122,865		99,439

Non-current Liabilities
Non-current debt, net of deferred financing costs and current component	285,244		285,669
Non-current contingent consideration	12,029		35,058
Other non-current liabilities	4,731		1,381
Total Liabilities	$	424,869	$	421,547

Commitments and Contingencies (Note 12)

Mezzanine Equity
Convertible Preferred Stock, Series A, $0.0001 par value, 1,666,667 shares authorized; 25,000 shares issued and outstanding at June 30, 2023 and December 31, 2022	24,850		24,850

Stockholders’ Equity
Common Stock, $0.0001 par value, 33,333,334 shares authorized; 20,535,782 shares issued and 20,287,425 outstanding at June 30, 2023; 17,643,497 shares issued and 17,494,466 shares outstanding at December 31, 2022	2		1
Class C Special Stock, $0.0001 par value, 781,281 shares authorized; 10,864 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	—		—
Preferred Stock, $0.0001 par value, 1,666,667 shares authorized; 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	—		—
Treasury stock, 248,357 shares of common stock, at cost, at June 30, 2023 and 149,031 shares of common stock, at cost, at December 31, 2022	(9,180)		(5,094)
Additional paid-in capital	495,488		403,901
Accumulated deficit	(90,414)		(97,286)
Accumulated other comprehensive income, net of tax	13,726		12,168
Total Stockholders’ Equity	409,622		313,690

Total Liabilities, Mezzanine Equity, and Stockholders’ Equity	$	859,341	$	760,087

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

ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net Revenues	$	116,547	$	73,855	$	223,333	$	138,332

Operating Expenses
Cost of sales (excluding depreciation and amortization)	42,284		35,294		79,992		69,565
Research and development	7,374		4,165		13,298		9,439
Selling, general, and administrative	38,760		31,958		75,228		60,775
Depreciation and amortization	14,690		13,764		29,390		28,321
Contingent consideration fair value adjustment	1,035		(1,095)		1,996		(342)
Restructuring activities	2		2,570		1,132		2,570
Intangible asset impairment charge	—		112		—		112

Total Operating Expenses	104,145		86,768		201,036		170,440

Operating Income (Loss)	12,402		(12,913)		22,297		(32,108)

Other Expense, net
Interest expense, net	(7,100)		(6,669)		(14,796)		(13,282)
Other (expense) income, net	(53)		764		(87)		675

Income (Loss) Before Income Tax Benefit	5,249		(18,818)		7,414		(44,715)

Income tax benefit	996		3,895		270		9,662

Net Income (Loss)	$	6,245	$	(14,923)	$	7,684	$	(35,053)

Dividends on Series A Convertible Preferred Stock	(407)		(407)		(813)		(812)

Net Income (Loss) Available to Common Shareholders	$	5,838	$	(15,330)	$	6,871	$	(35,865)

Basic and Diluted Income (Loss) Per Share:
Basic Income (Loss) Per Share	$	0.30	$	(0.94)	$	0.36	$	(2.21)
Diluted Income (Loss) Per Share	$	0.29	$	(0.94)	$	0.36	$	(2.21)

Basic Weighted-Average Shares Outstanding	17,688		16,272		17,044		16,205
Diluted Weighted-Average Shares Outstanding	17,855		16,272		17,177		16,205

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

ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net Income (Loss)	$	6,245	$	(14,923)	$	7,684	$	(35,053)

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(17)		—		90		—
Gain on interest rate swap	2,612		2,718		1,469		8,485
Total other comprehensive income, net of tax	2,595		2,718		1,559		8,485
Total comprehensive income (loss), net of tax	$	8,840	$	(12,205)	$	9,243	$	(26,568)

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

ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

(in thousands)

(unaudited)


	Mezzanine Equity Series A Convertible Preferred Stock		Mezzanine Equity Series A Convertible Preferred Stock Shares	Common Stock Par Value		Common Stock Shares	Class C Special Stock		Additional Paid-in Capital		Treasury Stock Shares	Treasury Stock		Accumulated Other Comprehensive Gain, Net of Tax		Accumulated Deficit		Total Mezzanine Equity and Stockholders' Equity
Balance, March 31, 2022	$	24,850	25	$	1	17,374	$	—	$	391,084	123	$	(4,253)	$	2,712	$	(68,300)	$	346,094
Stock-based Compensation Expense	—		—	—		—	—		3,756		—	—		—		—		3,756
Treasury Stock Purchases for Restricted Stock Vests	—		—	—		—	—		—		16	(483)		—		—		(483)
Issuance of Common Shares upon Stock Option and ESPP Exercise	—		—	—		8	—		203		—	—		—		—		203

Issuance of Restricted Stock Awards	—		—	—		208	—		—		—	—		—		—		—
Restricted Stock Awards Forfeitures	—		—	—		(24)	—		—		—	—		—		—		—
Dividends on Series A Convertible Preferred Stock	—		—	—		—	—		—		—	—		—		(407)		(407)
Other Comprehensive Income	—		—	—		—	—		—		—	—		2,718		—		2,718
Net Loss	—		—	—		—	—		—		—	—		—		(14,923)		(14,923)
Balance, June 30, 2022	$	24,850	25	$	1	17,566	$	—	$	395,043	139	$	(4,736)	$	5,430	$	(83,630)	$	336,958

Balance, March 31, 2023	$	24,850	25	$	1	18,226	$	—	$	408,395	234	$	(8,643)	$	11,131	$	(96,252)	$	339,482
Stock-based Compensation Expense	—		—	—		—	—		5,249		—	—		—		—		5,249
Treasury Stock Purchases for Restricted Stock Vests	—		—	—		—	—		—		14	(537)		—		—		(537)
Issuance of Common Shares upon Stock Option and ESPP Exercise	—		—	—		40	—		1,289		—	—		—		—		1,289
Issuance of Restricted Stock Awards	—		—	—		104	—		—		—	—		—		—		—
Restricted Stock Awards Forfeitures	—		—	—		(18)	—		—		—	—		—		—		—
Issuance of Common Stock in Public Offering	—		—	1		2,184	—		80,555		—	—		—		—		80,556
Dividends on Series A Convertible Preferred Stock	—		—	—		—	—		—		—	—		—		(407)		(407)
Other Comprehensive Income	—		—	—		—	—		—		—	—		2,595		—		2,595
Net Income	—		—	—		—	—		—		—	—		—		6,245		6,245
Balance, June 30, 2023	$	24,850	25	$	2	20,536	$	—	$	495,488	248	$	(9,180)	$	13,726	$	(90,414)	$	434,472

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

ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

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

For the Six Months Ended June 30, 2023 and 2022

(in thousands)

(unaudited)


	Mezzanine Equity Series A Convertible Preferred Stock		Mezzanine Equity Series A Convertible Preferred Stock Shares	Common Stock Par Value		Common Stock Shares	Class C Special Stock		Additional Paid-in Capital		Treasury Stock Shares	Treasury Stock		Accumulated Other Comprehensive (Loss) Gain, Net of Tax		Accumulated Deficit		Total Mezzanine Equity and Stockholders' Equity
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	—		—	—		—	—		6,993		—	—		—		—		6,993
Treasury Stock Purchases for Restricted Stock Vests	—		—	—		—	—		—		56	(1,601)		—		—		(1,601)
Issuance of Common Shares upon Stock Option and ESPP Exercise	—		—	—		8	—		206		—	—		—		—		206
Issuance of Restricted Stock Awards	—		—	—		669	—		—		—	—		—		—		—
Restricted Stock Awards Forfeitures	—		—	—		(24)	—		—		—	—		—		—		—
Dividends on Series A Convertible Preferred Stock	—		—	—		—	—		—		—	—		—		(812)		(812)
Other Comprehensive Income	—		—	—		—	—		—		—	—		8,485		—		8,485
Net Loss	—		—	—		—	—		—		—	—		—		(35,053)		(35,053)
Balance, June 30, 2022	$	24,850	25	$	1	17,566	$	—	$	395,043	139	$	(4,736)	$	5,430	$	(83,630)	$	336,958

Balance, December 31, 2022	$	24,850	25	$	1	17,644	$	—	$	403,900	149	$	(5,094)	$	12,167	$	(97,285)	$	338,539
Stock-based Compensation Expense	—		—	—		—	—		9,587		—	—		—		—		9,587
Treasury Stock Purchases for Restricted Stock Vests	—		—	—		—	—		—		99	(4,086)		—		—		(4,086)
Issuance of Common Shares upon Stock Option and ESPP Exercise	—		—	—		45	—		1,446		—	—		—		—		1,446
Issuance of Restricted Stock Awards	—		—	—		624	—		—		—	—		—		—		—
Issuance of Performance Stock Units	—		—	—		67	—		—		—	—		—		—		—
Restricted Stock Awards Forfeitures	—		—	—		(28)	—		—		—	—		—		—		—
Issuance of Common Stock in Public Offering	—		—	1		2,184	—		80,555		—	—		—		—		80,556
Dividends on Series A Convertible Preferred Stock	—		—	—		—	—		—		—	—		—		(813)		(813)
Other Comprehensive Income	—		—	—		—	—		—		—	—		1,559		—		1,559
Net Income	—		—	—		—	—		—		—	—		—		7,684		7,684
Balance, June 30, 2023	$	24,850	25	$	2	20,536	$	—	$	495,488	248	$	(9,180)	$	13,726	$	(90,414)	$	434,472

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

ANI PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited


	Six Months Ended June 30,
	2023		2022
Cash Flows From Operating Activities
Net income (loss)	$	7,684	$	(35,053)
Adjustments to reconcile net income (loss) to net cash and cash equivalents (used in) provided by operating activities:
Stock-based compensation	9,587		6,993
Deferred taxes	(137)		(11,378)
Depreciation and amortization	29,390		28,731
Non-cash operating lease expense	61		—
Non-cash interest	1,973		1,969
Contingent consideration fair value adjustment	1,996		(342)
Asset impairment charges	—		575
Gain on sale of ANDAs	—		(750)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net	(7,486)		(21,884)
Inventories	1,032		(10,852)
Prepaid expenses and other current assets	1,449		1,563
Accounts payable	(800)		4,047
Accrued royalties	(577)		70
Current income taxes payable, net	(261)		1,654
Accrued government rebates	(1,099)		3,948
Returned goods reserve	(3,601)		(903)
Accrued expenses, accrued compensation, and other	2,839		1,186
Net Cash and Cash Equivalents Provided by (Used in) Operating Activities	42,050		(30,426)

Cash Flows From Investing Activities
Acquisition of Novitium Pharma LLC, net of cash acquired	—		(33)
Acquisition of product rights, IPR&D, and other related assets	(4,329)		(229)
Acquisition of property and equipment, net	(4,850)		(3,270)
Proceeds from the sale of long-lived assets	—		750
Net Cash and Cash Equivalents Used in Investing Activities	(9,179)		(2,782)

Cash Flows From Financing Activities
Payments on borrowings under credit agreements	(1,500)		(1,500)
Series A convertible preferred stock dividends paid	(813)		(812)
Proceeds from stock option exercises and ESPP purchases	1,446		206
Proceeds from public offering	80,555		—
Treasury stock purchases for restricted stock vests	(4,086)		(1,601)
Net Cash and Cash Equivalents Provided by (Used in) Financing Activities	75,602		(3,707)

Net Change in Cash, Cash Equivalents, and Restricted Cash	108,473		(36,915)

Cash, cash equivalents, and restricted cash, beginning of period	53,234		105,301
Cash, cash equivalents, and restricted cash, end of period	$	161,707	$	68,386
Reconciliation of cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents	$	48,228	$	100,300
Restricted cash	5,006		5,001
Cash, cash equivalents, and restricted cash, beginning of period	$	53,234	$	105,301

Reconciliation of cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents	$	161,707	$	63,385
Restricted cash	—		5,001
Cash, cash equivalents, and restricted cash, end of period	$	161,707	$	68,386


Supplemental disclosure for cash flow information:
Cash paid for interest, net of amounts capitalized	$	15,456	$	11,400
Cash paid for income taxes	$	141	$	124
Right-of-use assets obtained in exchange for lease obligations	$	4,499	$	—
Supplemental non-cash investing and financing activities:
Property and equipment purchased and included in accounts payable	$	539	$	779

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

1. BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

Overview

ANI Pharmaceuticals, Inc. and its consolidated subsidiaries (together, “ANI,” the “Company,” “we,” “us,” or “our”) is a diversified bio-pharmaceutical company serving patients in need by developing, manufacturing, and marketing high quality branded and generic prescription pharmaceuticals, including for diseases with high unmet medical need. Our team is focused on delivering 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 manufacturing capabilities. Our 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. On June 2, 2022, we announced that we intended to cease operations at our Oakville, Ontario, Canada manufacturing plant by the end of the first quarter 2023. This action was part of ongoing initiatives to capture operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021. We previously completed the transition of the products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites. We are seeking to find potential buyers for the Oakville site.

Our 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. The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations, and potential other funding sources, including cash on hand, to meet our obligations as they become due. We believe the going-concern basis is appropriate for the accompanying unaudited interim condensed consolidated financial statements based on our current operating plan and business strategy for the 12 months following the issuance of this report.

In May 2023, through a public offering, we completed the issuance and sale of 2,183,545 shares of ANI common stock, resulting in net proceeds after issuance costs of $80.6 million.

On November 19, 2021, the Company, as borrower, entered into a credit agreement (the “Credit Agreement”) with Truist Bank and other lenders, which provides for credit facilities consisting of (i) a senior secured term loan facility in an aggregate principal amount of $300.0 million (the “Term Facility”) and (ii) a senior secured revolving credit facility in an aggregate commitment amount of $40.0 million, which may be used for revolving credit loans, swingline loans and letters of credit (the “Revolving Facility,” and together with the Term Facility, the “Credit Facility”).

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations, comprehensive income (loss), and cash flows. The consolidated balance sheet at December 31, 2022 has been derived from audited financial statements as of that date. The unaudited interim condensed consolidated statements of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the U.S. Securities and Exchange Commission (the “SEC”). We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of ANI Pharmaceuticals, Inc. and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Foreign Currency

We have ceased operations at our subsidiary in Oakville, Ontario, Canada as of March 31, 2023. We currently have a subsidiary located in India. The Canada-based subsidiary conducted its transactions in U.S. dollars and Canadian dollars, but its functional currency was the U.S. dollar. The Indian-based subsidiary generally conducts its transactions in Indian rupees, which is also its functional currency. The results of any non-U.S. dollar transactions and balances are remeasured in U.S. dollars at the applicable exchange rates during the period and resulting foreign currency transaction gains and losses are included in the determination of net income. Our gain or loss on transactions denominated in foreign currencies and the translation impact of local currencies to U.S. dollars was immaterial for the three and six months ended June 30, 2023 and 2022. Unless otherwise noted, all references to “$” or “dollar” refer to the U.S. dollar. The Company’s asset and liability accounts are translated using the current exchange rate as of the balance sheet date. Shareholders’ equity accounts are translated using historical rates at the balance sheet date. Net revenues and expense accounts are translated using a weighted average exchange rate over the period ended on the balance sheet date. Adjustments resulting from the translation of the financial statements of the Company’s foreign subsidiaries into U.S. dollars are accumulated as a separate component of shareholders’ equity within accumulated other comprehensive income, net of tax.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the condensed consolidated financial statements, estimates are used for, but not limited to, variable consideration determined based on accruals for chargebacks, administrative fees and rebates, government rebates, returns and other allowances, income tax provision or benefit, deferred taxes and valuation allowance, stock-based compensation, revenue recognition, allowance for inventory obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, including contingent consideration in acquisitions, fair value of long-lived assets, determination of right-of-use assets and lease liabilities, allowance for credit losses, and the depreciable lives of long-lived assets. Because of the uncertainties inherent in such estimates, actual results may differ from those estimates. Management periodically evaluates estimates used in the preparation of the financial statements for reasonableness.

Restructuring Activities

We define restructuring activities to include costs directly associated with exit or disposal activities. Such costs include cash employee contractual severance and other termination benefits, one-time employee termination severance and benefits, contract termination charges, impairment and acceleration of depreciation associated with long-lived assets, and other exit or disposal costs. In general, we record involuntary employee- related exit and disposal costs when there is a substantive plan for employee severance and related payments are probable and estimable. For one-time termination benefits, including those with a service requirement, expense is recorded when the employees are entitled to receive such benefits and the amount can be reasonably estimated. Expense related to one-time termination benefits with a service requirement is recorded over time, as the service is completed. Contract termination fees and penalties, and other exit and disposal costs are generally recorded as incurred. Restructuring activities are recognized as an operating expense in our consolidated statements of operations.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In December 2022, the Financial Accounting Standards Board issued ASU 2022-06, which extended the sunset date of the reference rate reform in ASU 848 from December 31, 2022 to December 31, 2024. We have not adopted the guidance and are currently evaluating the impact, if any, that the adoption of this guidance will have on our consolidated financial statements.

We have evaluated all other issued and unadopted Accounting Standards Updates and believe the adoption of these standards will not have a material impact on our condensed consolidated statements of operations, comprehensive income, balance sheets, or cash flows.

2. REVENUE RECOGNITION AND RELATED ALLOWANCES

Revenue Recognition

We recognize revenue using the following steps:

•Identification of the contract, or contracts, with a customer;

•Identification of the performance obligations in the contract;

•Determination of the transaction price, including the identification and estimation of variable consideration;

•Allocation of the transaction price to the performance obligations in the contract; and

•Recognition of revenue when we satisfy a performance obligation.

We derive our revenues primarily from sales of generic, rare disease, and established brand pharmaceutical products, royalties, and other pharmaceutical services. Revenue is recognized when our obligations under the terms of our contracts with customers are satisfied, which generally occurs when control of the products we sell is transferred to the customer. We estimate variable consideration after considering applicable information that is reasonably available. We generally do not have incremental costs to obtain contracts that would otherwise not have been incurred. We do not adjust revenue for the promised amount of consideration for the effects of a significant financing component because our customers generally pay us within 100 days.

All revenue recognized in the accompanying unaudited interim condensed consolidated statements of operations is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue:


	Three Months Ended				Six Months Ended
Products and Services	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
(in thousands)
Sales of generic pharmaceutical products	$	63,317	$	49,863	$	127,030	$	98,970
Sales of established brand pharmaceutical products, royalties, and other pharmaceutical services	28,926		13,790		55,669		27,868
Sales of rare disease pharmaceutical products	24,304		10,202		40,634		11,494
Total net revenues	$	116,547	$	73,855	$	223,333	$	138,332


	Three Months Ended				Six Months Ended
Timing of Revenue Recognition	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
(in thousands)
Performance obligations transferred at a point in time	$	116,547	$	73,324	$	222,958	$	137,235
Performance obligations transferred over time	—		531		375		1,097
Total	$	116,547	$	73,855	$	223,333	$	138,332

In the three and six months ended June 30, 2023 and 2022, we did not incur, and therefore did not defer, any material incremental costs to obtain or fulfill contracts. We recognized an increase of $5.0 million to net revenue from performance obligations satisfied in prior periods during the six months ended June 30, 2023, consisting primarily of revised estimates for variable consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales. We recognized a decrease of $3.7 million to net revenue from performance obligations satisfied in prior periods during the six months ended June 30, 2022, consisting primarily of revised estimates for variable consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales. As of June 30, 2023 and December 31, 2022, we did not have any contract assets related to revenue recognized based on percentage of completion but not yet billed. Our deferred revenue balance as of June 30, 2023, December 31, 2022, and December 31, 2021 was immaterial. For the three and six months ended June 30, 2023, we did not recognize deferred revenue. For the three and six months ended June 30, 2022, we recognized less than $0.1 million of revenue that was included in deferred revenue as of December 31, 2021. Deferred revenue is included in accrued expenses and other in the unaudited interim condensed consolidated balance sheets.

As of June 30, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations for all open contract manufacturing customer contracts was $4.1 million, which consists of firm orders for contract manufactured products. We will recognize revenue for these performance obligations as they are satisfied, which is anticipated within six months.

Variable consideration

Sales of our pharmaceutical products are subject to variable consideration due to chargebacks, government rebates, returns, administrative and other rebates, and cash discounts. Estimates for these elements of variable consideration require significant judgment.

The following table summarizes activity in the condensed consolidated balance sheets for accruals and allowances for the six months ended June 30, 2023 and 2022, respectively:


	Accruals for Chargebacks, Returns, and Other Allowances
(in thousands)	Chargebacks		Government Rebates		Returns		Administrative Fees and Other Rebates		Prompt Payment Discounts
Balance at December 31, 2021	$	94,066	$	5,492	$	35,831	$	13,100	$	4,642
Accruals/Adjustments	320,191		9,356		15,057		20,701		10,494
Credits Taken Against Reserve	(274,714)		(5,408)		(15,989)		(19,283)		(8,938)
Balance at June 30, 2022 (1)	$	139,543	$	9,440	$	34,899	$	14,518	$	6,198

Balance at December 31, 2022	$	148,562	$	10,872	$	33,399	$	9,442	$	6,488
Accruals/Adjustments	290,826		11,100		5,995		25,606		11,028
Credits Taken Against Reserve	(362,253)		(10,001)		(9,596)		(25,177)		(12,653)
Balance at June 30, 2023 (1)	$	77,135	$	11,971	$	29,798	$	9,871	$	4,863

______________________________________________

(1)Chargebacks and Prompt Payment Discounts are included as an offset to accounts receivable in the unaudited interim condensed consolidated balance sheets. Administrative Fees and Other Rebates are included as an offset to accounts receivable or as accrued expenses and other in the unaudited interim condensed consolidated balance sheets. Returns are included in returned goods reserve in the unaudited interim condensed consolidated balance sheets. Government Rebates are included in accrued government rebates in the unaudited interim condensed consolidated balance sheets.

Credit Concentration

Our customers are primarily wholesale distributors, chain drug stores, group purchasing organizations, and pharmaceutical companies.

During the three months ended June 30, 2023, we had four customers that accounted for 10% or more of net revenues. During the six months ended June 30, 2023 and the three and six months ended June 30, 2022, we had three customers that accounted for 10% or more of net revenues. As of June 30, 2023, accounts receivable from these customers totaled 84% of accounts receivable, net.

The three customers represent the total percentage of net revenues as follows:


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Customer 1	32	%	23	%	32	%	27	%
Customer 2	14	%	19	%	14	%	19	%
Customer 3	13	%	15	%	13	%	14	%
Customer 4	10	%	6	%	9	%	4	%

3. RESTRUCTURING

On June 2, 2022, we announced that we intended to cease operations at our Oakville, Ontario, Canada manufacturing plant by the first quarter of 2023. This action was part of ongoing initiatives to capture operational synergies following our acquisition of Novitium in November 2021. We have completed the transition of the products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites. We are seeking to find potential buyers for the Oakville site, though there can be no assurance as to when or if that will occur or the amount of any net proceeds that may be received.

For the six months ended June 30, 2023, restructuring activities resulted in expenses of $1.1 million. This included $0.2 million of severance and other employee benefit costs and $0.7 million of accelerated depreciation costs and $0.2 million for other miscellaneous costs, respectively. The restructuring activities recognized in the three months ended June 30, 2023 was immaterial. As of June 30, 2023, $0.1 million of the severance and other employee benefits are unpaid and accrued. These costs are recorded as restructuring activities, an operating item, in the accompanying unaudited interim condensed consolidated statements of operations and are part of the Generics, Established Brands, and Other segment. Certain of the severance and other employee benefit costs contain a service requirement, and as such, were accrued over time as they were earned.

In conjunction with the exit of our Canadian facility, we have determined that the land and building at our Oakville, Ontario, Canada plant will be sold together and meet the criteria to be classified as held for sale as of June 30, 2023. The land and building have a net carrying value of $8.0 million, which is presented as assets held for sale on the accompanying unaudited interim condensed consolidated balance sheets. These assets are part of the Generics, Established Brands, and Other segment.

4. INDEBTEDNESS

Credit Facility

On November 19, 2021, the Company completed its acquisition (the “Acquisition”) of Novitium pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 2021 (the “Merger Agreement”), by and among the Company, Novitium, Nile Merger Sub LLC, a Delaware limited liability company, and certain other parties, with Novitium becoming a wholly owned subsidiary of ANI.

The Term Facility proceeds were used to finance the cash portion of the consideration under the Merger Agreement, repay our 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. 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 (as defined in the Credit Agreement) in the case of LIBOR loans under the Term Facility and (b) 3.75% above the base rate in the case of ABR Loans under the Revolving Facility and 4.75% above the LIBOR Rate (as defined in the Credit Agreement) in the case of loans under the Revolving Facility. The interest rate under the Term Facility was 11.15% at June 30, 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 twelve months ended June 30, 2024. As of June 30, 2023, $3.0 million of the loan is recorded as current borrowings in the unaudited interim condensed consolidated balance sheets. As of June 30, 2023, we had not drawn on the Revolving Facility and $40.0 million remained available for borrowing subject to certain conditions.

In July 2023, the Company’s debt instruments that referenced LIBOR were amended to replace the benchmark rate with the Secured Overnight Financing Rate (“SOFR”) in anticipation of the termination of published LIBOR rates.

We incurred $14.0 million in deferred debt issuance costs associated with the Credit Facility. Costs allocated to the Term Facility are classified as a direct reduction to the current and non-current portion of the borrowings, depending on their nature. Costs allocated to the Revolving Facility are classified as other current and other non-current assets, depending on their nature. We incur a commitment fee of 0.5% per annum on any unused portion of the Revolving Facility.

The Credit Facility is secured by a lien on substantially all of ANI Pharmaceuticals, Inc.’s and its principal domestic subsidiary’s assets and any future domestic subsidiary guarantors’ assets. The Credit Facility is subject to customary financial and nonfinancial covenants.

The carrying value of the current and non-current components of the Term Facility as of June 30, 2023 and December 31, 2022 are:


	Current
(in thousands)	June 30, 2023		December 31, 2022
Current borrowing on debt	$	3,000	$	3,000
Deferred financing costs	(2,150)		(2,150)
Current debt, net of deferred financing costs	$	850	$	850


	Non-Current
(in thousands)	June 30, 2023		December 31, 2022
Non-current borrowing on debt	$	292,500	$	294,000
Deferred financing costs	(7,256)		(8,331)
Non-current debt, net of deferred financing costs and current component	$	285,244	$	285,669

As of June 30, 2023, we had a $295.5 million balance on the Term Facility. Of the $0.7 million of unamortized deferred debt issuance costs allocated to the Revolving Facility, $0.5 million is included in other non-current assets in the unaudited interim condensed consolidated balance sheets, and $0.2 million is included in prepaid expenses and other current assets in the unaudited interim condensed consolidated balance sheets.

The contractual maturity of our Term Facility is as follows for the period ending:


(in thousands)	Term Facility
2023 (remainder of the year)	$	1,500
2024	3,000
2025	3,000
2026	3,000
2027	285,000
Total	$	295,500

The following table sets forth the components of total interest expense related to the Term Facility during the three and six months ended June 30, 2023 and 2022, as recognized in the accompanying unaudited interim condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Contractual coupon	$	7,620	$	6,122	$	14,970	$	12,180
Amortization of finance fees	591		590		1,182		1,181
Capitalized interest	(277)		(19)		(298)		(49)
	$	7,934	$	6,693	$	15,854	$	13,312

5. DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

At times we use derivative financial instruments to hedge our exposure to interest rate risks. All derivative financial instruments are recognized as either assets or liabilities at fair value on the consolidated balance sheet and are classified as current or non-current based on the scheduled maturity of the instrument.

When we enter into a hedge arrangement and intend to apply hedge accounting, we formally document the hedge relationship and designate the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge. When we determine that a derivative financial instrument qualifies as a cash flow hedge and is effective, the changes in fair value of the instrument are recorded in accumulated other comprehensive loss, net of tax in our consolidated balance sheets and will be reclassified to earnings when the hedged item affects earnings.

In April 2020, we entered into an interest rate swap with Citizens Bank, N.A. to manage our exposure to changes in LIBOR-based interest rates underlying total borrowings under term facilities related to our Prior Credit Agreement. The interest rate swap matures in December 2026. Concurrent with the termination of the Prior Credit Agreement and entry into the Credit Agreement with Truist Bank, the interest rate swap with a notional value of $168.6 million at origin on November 21, 2021 was novated and Truist Bank is the new counterparty. The swap is used to manage changes in LIBOR-based interest rates underlying a portion of the borrowing under the Term Facility. The interest rate swap provides an effective fixed interest rate of 2.26% and has been designated as an effective cash flow hedge and therefore qualifies for hedge accounting. As of June 30, 2023, the notional amount of the interest rate swap was $143.5 million and decreases quarterly by approximately $4.0 million until December 2023, after which it remains static until maturity in December 2026. As of June 30, 2023, the fair value of the interest rate swap asset recorded in other non-current assets in the unaudited interim condensed consolidated balance sheets was $9.2 million. As of June 30, 2023, $13.8 million was recorded in accumulated other comprehensive income, net of tax in the unaudited interim condensed consolidated balance sheets.

During the three months ended June 30, 2023 , the change in fair value of the interest rate swaps was a gain of $2.0 million. During the six months ended June 30, 2023, the change in fair value of the interest rate swaps was a loss of $0.2 million. During the three and six months ended June 30, 2023, gains on the interest rate swap of $2.6 million and $1.5 million were recorded in accumulated other comprehensive (loss) income, net of tax in our unaudited interim condensed consolidated statements of comprehensive (loss) income, respectively. Differences between the hedged LIBOR rate and the fixed rate are recorded as interest expense in the same period that the related interest is recorded for the Term Facility based on the LIBOR rate. In the three and six months ended June 30, 2023, $0.6 million and $1.1 million of interest expense was recognized in relation to the interest rate swaps, respectively. Included in this amount for the three months ended June 30, 2023 and 2022 are reclassifications out of accumulated other comprehensive income (loss) of $0.7 million and $0.7 million and during the six months ended June 30, 2023 and 2022 are $0.7 million and $1.4 million in expense, respectively, related to terminated and de-designated cash flow hedges.

6. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

For periods of net income, and when the effects are not anti-dilutive, we calculate diluted earnings (loss) per share by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options, shares to be purchased under our Employee Stock Purchase Plan (“ESPP”), and performance stock units, using the more dilutive of the treasury stock or the two-class method. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share.

Our unvested restricted shares and Series A convertible preferred stock shares contain non-forfeitable rights to dividends, and therefore are considered to be participating securities; in periods of net income, the calculation of basic and diluted earnings (loss) per share excludes from the numerator net income (but not net loss) attributable to the unvested restricted shares and the common shares assumed converted from the preferred shares and excludes the impact of those shares from the denominator.

Earnings (loss) per share for the three and six months ended June 30, 2023 and 2022 are calculated for basic and diluted earnings (loss) per share as follows:


	Basic				Diluted				Basic				Diluted
(in thousands, except per share amounts)	Three Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022		2023		2022		2023		2022
Net income (loss) available to common shareholders	$	5,838	$	(15,330)	$	5,838	$	(15,330)	$	6,871	$	(35,865)	$	6,871	$	(35,865)
Earnings allocated to participating securities	(589)		—		(589)		—		(716)		—		(716)		—
Net income (loss) available to common shareholders	$	5,249	$	(15,330)	$	5,249	$	(15,330)	$	6,155	$	(35,865)	$	6,155	$	(35,865)
Basic Weighted-Average Shares Outstanding	17,688		16,272		17,688		16,272		17,044		16,205		17,044		16,205
Dilutive effect of common stock options, ESPP, and performance stock units					167		—						133		—
Diluted Weighted-Average Shares Outstanding					17,855		16,272						17,177		16,205

Income (loss) per share	$	0.30	$	(0.94)	$	0.29	$	(0.94)	$	0.36	$	(2.21)	$	0.36	$	(2.21)

The number of anti-dilutive shares, which have been excluded from the computation of diluted earnings (loss) per share, was 2.5 million for the three and six months ended June 30, 2023. For the three and six months ended June 30, 2022, all potentially dilutive shares were anti-dilutive and excluded from the calculation of diluted loss per share because we recognized a net loss.

7. INVENTORIES

Inventories consist of the following as of:


(in thousands)	June 30, 2023		December 31, 2022
Raw materials	$	67,019	$	67,726
Packaging materials	8,079		7,720
Work-in-progress	3,258		1,889
Finished goods	25,967		28,020
Inventories	$	104,323	$	105,355

Vendor Concentration

We source the raw materials for our products, including active pharmaceutical ingredients (“API”), from both domestic and international suppliers. Generally, only a single source of API is qualified for use in each product due to the cost and time required to validate a second source of supply. As a result, we are dependent upon our current vendors to reliably supply the API required for on-going product manufacturing. During the three and six months ended June 30, 2023, no single vendor represented more than 10% of inventory purchases. During the three and six months ended June 30, 2022, one vendor represented 18% and 17% of inventory purchases, respectively.

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

As a result of our 2013 merger with BioSante Pharmaceuticals, Inc. (“BioSante”), we recorded goodwill of $1.8 million. As a result of our acquisition of WellSpring Pharma Services Inc., we recorded additional goodwill of $1.7 million in 2018. From our acquisition of Novitium in 2021, we recorded goodwill of $24.6 million. We have two operating segments, which are the same as our two reporting units, Generics, Established Brands, and Other reporting unit and the Rare Disease reporting unit. All of the goodwill is recorded in our Generics, Established Brands, and Other reporting unit.

We assess the recoverability of the carrying value of goodwill and other indefinite-lived intangible assets as of October 31st of each year, and whenever events occur or circumstances change that would, more likely than not, reduce the fair value of our reporting unit below its carrying value. There have been no events or changes in circumstances that would have reduced the fair value of our reporting unit below its carrying value during the three and six months ended June 30, 2023. No impairment losses were recognized during the three and six months ended June 30, 2023 and 2022.

Intangible Assets

The components of definite-lived intangible assets and indefinite-lived intangible assets other than goodwill are as follows:


	June 30, 2023				December 31, 2022				Remaining Weighted Average Amortization Period(1)
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Definite-Lived Intangible Assets:
Acquired ANDAs intangible assets	$	200,191	$	(87,653)	$	195,862	$	(75,606)	5.5 years
NDAs and product rights	242,372		(173,524)		242,372		(162,188)		3.4 years
Marketing and distribution rights	17,157		(13,790)		17,157		(13,309)		3.5 years
Non-compete agreement	624		(624)		624		(602)		— years
Customer relationships	24,900		(5,929)		24,900		(4,150)		5.3 years
Total Definite-Lived Intangible Assets	485,244		(281,520)		480,915		(255,855)		4.7 years
Indefinite-Lived Intangible Assets:
In process research and development	26,575		—		26,575		—		Indefinite
Total Intangible Assets, net	$	511,819	$	(281,520)	$	507,490	$	(255,855)

(1)Weighted average amortization period as of June 30, 2023.

The definite-lived Abbreviated New Drug Applications (“ANDAs”), New Drug Applications (“NDAs”) and product rights, marketing and distribution rights, customer relationships, and non-compete agreement are stated at cost, net of amortization, and generally amortized over their remaining estimated useful lives, ranging from seven to 10 years, based on the straight-line method. In the case of certain NDAs and product rights assets, we use an accelerated amortization method to better match the anticipated economic benefits expected to be provided. Our indefinite-lived intangible assets other than goodwill include in-process research and development (“IPR&D”) projects. IPR&D intangible assets represent the fair value of technology acquired in a business combination for which the technology projects are incomplete but have substance. When an IPR&D project is completed (generally upon receipt of regulatory approval), the asset is then accounted for as a definite-lived intangible asset.

Amortization expense was $12.8 million and $11.9 million for the three months ended June 30, 2023 and 2022, respectively. Amortization expense was $25.7 million and $24.4 million for the six months ended June 30, 2023 and 2022, respectively.

We test for impairment of definite-lived intangible assets when events or circumstances indicate that the carrying value of the assets may not be recoverable. No such triggering events were identified in the three and six months ended June 30, 2023. No such triggering events were identified during the three and six months ended June 30, 2023 therefore no impairment loss was recognized in the three and six months ended June 30, 2023. During three and six months ended June 30, 2022 we recognized an impairment of $0.1 million in relation to ANDA asset.

Expected future amortization expense for definite-lived intangible assets is as follows:


(in thousands)
2023 (remainder of the year)	$	25,952
2024	48,950