Amphastar Pharmaceuticals, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Index to Amphastar Pharmaceuticals, Inc. Consolidated Financial Statements ​ ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 99 Consolidated Balance Sheets ​ 103 ​ Consolidated Statements of Operations ​ 104 ​ Consolidated Statements of Comprehensive Income ​ 105 ​ Consolidated Statements of Stockholders’ Equity ​ 106 ​ Consolidated Statements of Cash Flows ​ 107 ​ Notes to Consolidated Financial Statements ​ 108 ​ ​ ​ ​ 98 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Stockholders and the Board of Directors of Amphastar Pharmaceuticals, Inc. ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of Amphastar Pharmaceuticals, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 11, 2022 expressed an unqualified opinion thereon. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matters ​ The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. ​ 99 Table of Contents ​ Provision for chargebacks estimate Description of the Matter The Company’s provision for chargebacks estimate totaled $15.6 million at December 31, 2021. As described in Note 4 to the consolidated financial statements, a provision for chargebacks is made at the time of sale and is analyzed and adjusted, if necessary, at each balance sheet date. Auditing the provision for chargebacks estimate, the resulting impact of which is netted on the statement of operations against product sales, was complex, requires significant judgment, and the amounts involved are material to the financial statements taken as a whole. The significant judgment primarily relates to the estimation of the future wholesale customer mix and related contract pricing, which determine the rates at which future chargebacks on current sales will be paid. Revenue from product sales is recognized upon transfer of control of a product to a customer, generally upon delivery, and is based on an amount that reflects the consideration to which the Company expects to be entitled, which represents an amount that is net of the estimated provision for chargebacks, among other deductions. The estimated provision for chargebacks is based on wholesaler inventory levels, historic chargeback rates, and current contract pricing and wholesaler customer mix. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the provision for chargebacks estimation process. This included testing controls over management’s review of significant assumptions and inputs used in the provision for chargebacks estimate, including actual sales, historical experience and wholesaler inventory levels, customer mix and contract pricing. To test the provision for chargebacks estimate, we obtained management’s calculations and performed the following procedures, among others. We evaluated the appropriateness of the Company’s models and methodology, including recalculating the estimate using those models and testing the completeness and accuracy of the inputs by comparing to internal and external data. We evaluated the reasonableness of significant assumptions (e.g., estimated wholesale customer mix and related contract pricing) by comparing rates at different time periods, including historical and subsequent periods, obtaining an understanding of the facts supporting the selected rates, and performing sensitivity analyses over those rates. We assessed subsequent events to determine whether there was any new information that would require adjustment to the initial provision. Inventory lower of cost or net realizable value estimate Description of the Matter The Company's inventories totaled $92.8 million as of December 31, 2021 which is net of, amongst other things, provisions to reduce the value of enoxaparin inventory to the lower of its cost and net realizable value. Total charges of $20.7 million related to enoxaparin inventory and related purchase commitments were included in cost of revenues in the Company’s consolidated statement of operations for the year ended December 31, 2021. As explained in Note 2 to the consolidated financial statements, the Company states inventory at the lower of cost and net realizable value. Net 100 Table of Contents realizable value is determined using the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the inventory. Auditing management's estimate in determining the net realizable value of enoxaparin inventory involved subjective auditor judgment because the estimation of the average selling price relies on a number of factors that are affected by market conditions outside the Company's control. In particular, the estimated selling price forecast is sensitive to significant assumptions, including demand for the Company’s products, customer mix, and expected competition. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's lower of cost or net realizable value estimate process. This included controls over management's assessment of assumptions such as future demand, customer mix and expected competition and data underlying the estimate, including but not limited to the completeness of the underlying inventory. Our substantive audit procedures included, among others, evaluating the significant assumptions stated above and the accuracy and completeness of the underlying data management used to value enoxaparin inventory. We compared the cost of on-hand enoxaparin inventory and related purchase commitments to the estimated net realizable value estimated based on selling price forecasts and evaluated adjustments to the estimated selling price for specific considerations, such as new significant customers, competitors, or planned price changes. We evaluated the reasonableness of management’s forecasted selling price and whether expected changes in demand, competition, or customer mix were appropriate in comparison with the Company’s experience. We also assessed the historical accuracy of management's estimates by performing retrospective reviews over prior periods' forecasted average selling prices and performed sensitivity analyses over the significant assumptions to evaluate the changes in the selling price forecast that would result from changes in the underlying assumptions. ​ Accounting for Amphastar Nanjing Pharmaceuticals, Inc. restructuring transaction Description of the Matter In the third quarter of 2021, Amphastar Pharmaceuticals, Inc. executed a Share Purchase Agreement (SPA) to acquire approximately 18% additional ownership interest in Amphastar Nanjing Pharmaceuticals, Inc. (“ANP”) for approximately $29.4 million in cash and a Share Repurchase Agreement (SRA) to contribute 80% ownership interest in one of ANP’s wholly owned subsidiaries, Nanjing Hanxin Pharmaceutical Technology Co., Ltd. ("HX") (together with HX’s wholly owned subsidiaries), in exchange for approximately 10% additional ownership interest in ANP. Upon completion of the restructuring, the Company owned approximately 85% of ANP and ANP owned approximately 20% of HX. As described in Note 3 to the consolidated financial statements, the disposition of HX is accounted for under Accounting Standards Codification (ASC) 810 and the remaining interest in HX is recognized as an equity method investment. The Company recorded a gain of $13.6 million for the year ended December 31, 2021 related to the ANP restructuring transaction. In order to calculate the gain and equity method investment, management was required to estimate the fair value of both the shares received and equity method investment retained. Auditing the restructuring transaction was complex due to the nature of it being a significant unusual transaction, the involvement of related parties, and significant estimation uncertainty in 101 Table of Contents assumptions used in the valuations of the shares received and equity method investment retained including the discount rate, revenue base and growth rate, gross margin, and earnings before interest and taxes (EBIT). These significant assumptions are forward-looking and could be affected by future economic and market conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its accounting for the ANP restructuring transaction. This included testing controls over management’s judgment and evaluation of underlying assumptions and estimates with regards to the fair values of the shares received and equity method investment retained. Our substantive audit procedures included, among others, evaluating management’s conclusion that the SPA and SRA should be considered one transaction, and the appropriate accounting for the disposition of HX. We also involved our valuation specialists to assist in testing the significant assumptions used. For example, we compared the significant assumptions to current industry, market and economic trends, to the historical results of the entities and to other guidelines used by companies within the same industry. Further, we assessed the Company’s disclosures related to the transaction pertaining to the related party transaction. ​ ​ /s/ Ernst & Young LLP We have served as the Company’s auditor since 1998. Irvine, California March 11, 2022 ​ ​ ​ 102 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2021 ​ 2020 ASSETS ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 126,353 ​ $ 92,642 ​ Restricted cash ​ ​ 235 ​ ​ 1,865 ​ Short-term investments ​ ​ 10,320 ​ ​ 12,977 ​ Restricted short-term investments ​ 2,200 ​ 2,200 ​ Accounts receivable, net ​ 78,804 ​ 66,005 ​ Inventories ​ 92,807 ​ 96,831 ​ Income tax refunds and deposits ​ 126 ​ 385 ​ Prepaid expenses and other assets ​ 7,274 ​ 6,777 ​ Total current assets ​ 318,119 ​ 279,682 ​ ​ ​ ​ ​ ​ ​ ​ ​ Property, plant, and equipment, net ​ 244,244 ​ 260,055 ​ Finance lease right-of-use assets ​ ​ 353 ​ ​ 612 ​ Operating lease right-of-use assets ​ ​ 26,894 ​ ​ 20,042 ​ Investment in unconsolidated affiliate ​ ​ 3,985 ​ ​ — ​ Goodwill and intangible assets, net ​ 38,870 ​ 40,615 ​ Other assets ​ 16,665 ​ 5,250 ​ Deferred tax assets ​ 22,399 ​ 24,980 ​ Total assets ​ $ 671,529 ​ $ 631,236 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ Accounts payable and accrued liabilities ​ $ 89,545 ​ $ 95,504 ​ Income taxes payable ​ 9,081 ​ 1,077 ​ Current portion of long-term debt ​ 2,202 ​ 12,263 ​ Current portion of operating lease liabilities ​ ​ 2,982 ​ ​ 3,357 ​ Total current liabilities ​ 103,810 ​ 112,201 ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term reserve for income tax liabilities ​ 6,531 ​ 4,709 ​ Long-term debt, net of current portion and unamortized debt issuance costs ​ 74,776 ​ 34,186 ​ Long-term operating lease liabilities, net of current portion ​ ​ 24,703 ​ ​ 17,464 ​ Deferred tax liabilities ​ 534 ​ 741 ​ Other long-term liabilities ​ 15,653 ​ 13,212 ​ Total liabilities ​ 226,007 ​ 182,513 ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ Preferred stock: par value $ 0.0001 ; 20,000,000 shares authorized; no shares issued and outstanding ​ — ​ — ​ Common stock: par value $ 0.0001 ; 300,000,000 shares authorized; 56,440,202 and 47,714,912 shares issued and outstanding as of December 31, 2021 and 54,760,922 and 47,495,439 shares issued and outstanding as of December 31, 2020, respectively ​ 6 ​ 5 ​ Additional paid-in capital ​ 422,423 ​ 410,061 ​ Retained earnings ​ 180,337 ​ 117,773 ​ Accumulated other comprehensive loss ​ ( 6,765 ) ​ ( 3,721 ) ​ Treasury stock ​ ( 150,479 ) ​ ( 121,812 ) ​ Total Amphastar Pharmaceuticals, Inc. stockholders’ equity ​ 445,522 ​ 402,306 ​ Non-controlling interests ​ ​ — ​ ​ 46,417 ​ Total equity ​ ​ 445,522 ​ ​ 448,723 ​ Total liabilities and stockholders’ equity ​ $ 671,529 ​ $ 631,236 ​ See accompanying notes to consolidated financial statements. ​ 103 Table of Contents ​ AMPHASTAR PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Net revenues ​ $ 437,768 ​ $ 349,846 ​ $ 322,357 ​ Cost of revenues ​ 238,029 ​ 206,506 ​ 190,434 ​ Gross profit ​ 199,739 ​ 143,340 ​ 131,923 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, distribution, and marketing ​ 17,486 ​ 14,780 ​ 12,830 ​ General and administrative ​ 51,434 ​ 50,377 ​ 50,279 ​ Research and development ​ 60,932 ​ 67,229 ​ 68,853 ​ Total operating expenses ​ 129,852 ​ 132,386 ​ 131,962 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ 69,887 ​ 10,954 ​ ( 39 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-operating income (expenses): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 601 ​ 642 ​ 997 ​ Interest expense ​ ( 885 ) ​ ( 374 ) ​ ( 119 ) ​ Other income (expenses), net ​ 14,536 ​ ( 6,585 ) ​ 59,389 ​ Total non-operating income (expenses), net ​ 14,252 ​ ( 6,317 ) ​ 60,267 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 84,139 ​ 4,637 ​ 60,228 ​ Income tax provision ​ 20,630 ​ 3,540 ​ 13,723 ​ Income before equity in losses of unconsolidated affiliate ​ ​ 63,509 ​ ​ 1,097 ​ ​ 46,505 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity in losses of unconsolidated affiliate ​ ​ ( 208 ) ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 63,301 ​ $ 1,097 ​ $ 46,505 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to non-controlling interests ​ $ 1,185 ​ $ ( 306 ) ​ $ ( 2,434 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to Amphastar Pharmaceuticals, Inc. ​ $ 62,116 ​ $ 1,403 ​ $ 48,939 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per share attributable to Amphastar Pharmaceuticals, Inc. stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 1.30 ​ $ 0.03 ​ $ 1.04 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted ​ $ 1.25 ​ $ 0.03 ​ $ 0.98 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average shares used to compute net income per share attributable to Amphastar Pharmaceuticals, Inc. stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 47,777 ​ 47,038 ​ 46,982 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted ​ 49,784 ​ 49,124 ​ 49,907 ​ ​ See accompanying notes to consolidated financial statements. ​ 104 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Net income attributable to Amphastar Pharmaceuticals, Inc. ​ $ 62,116 ​ $ 1,403 ​ $ 48,939 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc., net of income taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reclassification of adjustment for amounts included in net income ​ ​ ( 362 ) ​ ​ — ​ ​ — ​ Foreign currency translation adjustment ​ ( 2,943 ) ​ 1,121 ​ ( 576 ) ​ Change in pension obligations ​ 261 ​ ​ ( 155 ) ​ ​ ( 98 ) ​ Total other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc. ​ ( 3,044 ) ​ 966 ​ ( 674 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total comprehensive income attributable to Amphastar Pharmaceuticals, Inc. ​ $ 59,072 ​ $ 2,369 ​ $ 48,265 ​ ​ See accompanying notes to consolidated financial statements. ​ ​ 105 Table of Contents Amphastar Pharmaceuticals, Inc. Consolidated Statements of Stockholders’ Equity (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ ​ ​ ​ Accumulated ​ Treasury Stock ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Amphastar ​ Non- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Retained ​ Comprehensive ​ ​ ​ ​ ​ ​ Stockholders' ​ controlling ​ ​ ​ ​ ​ Shares ​ Amount ​ Capital ​ Earnings ​ Income (loss) ​ Shares ​ Amount ​ Equity ​ Interest ​ Total Balance as of December 31, 2018 51,438,675 ​ ​ 5 ​ ​ 344,434 ​ ​ 67,485 ​ ​ ( 4,013 ) ( 4,807,557 ) ​ ​ ( 75,476 ) ​ ​ 332,435 ​ ​ 31,924 ​ ​ 364,359 ​ Beginning balance adjustment as a result of the adoption of new accounting standards ​ — ​ ​ — ​ ​ — ​ ​ ( 54 ) ​ ​ — ​ — ​ ​ — ​ ​ ( 54 ) ​ ​ — ​ ​ ( 54 ) ​ Net income attributable to Amphastar Pharmaceuticals, Inc. — ​ — ​ — ​ 48,939 ​ — — ​ — ​ 48,939 ​ — ​ 48,939 ​ Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc. — ​ — ​ — ​ — ​ ( 674 ) — ​ — ​ ( 674 ) ​ — ​ ( 674 ) ​ Proceeds from the private placement of ANP ​ — ​ ​ — ​ ​ 2,588 ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ 2,588 ​ ​ 16,378 ​ ​ 18,966 ​ Net loss attributable to non-controlling interest ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 2,434 ) ​ ​ ( 2,434 ) ​ Purchase of treasury stock — ​ — ​ — ​ — ​ — ( 1,122,781 ) ​ ​ ( 22,291 ) ​ ​ ( 22,291 ) ​ ​ — ​ ( 22,291 ) ​ Issuance of treasury stock in connection with the Company's equity plans ​ — ​ ​ — ​ ​ ( 140 ) ​ ​ — ​ ​ — ​ 11,823 ​ ​ 140 ​ ​ — ​ ​ — ​ ​ — ​ Issuance of common stock in connection with the Company's equity plans 1,056,808 ​ — ​ 3,421 ​ — ​ — — ​ — ​ 3,421 ​ — ​ 3,421 ​ Share-based compensation expense — ​ — ​ 17,001 ​ — ​ — — ​ — ​ 17,001 ​ 294 ​ 17,295 ​ Balance as of December 31, 2019 52,495,483 ​ ​ 5 ​ ​ 367,305 ​ ​ 116,370 ​ ​ ( 4,687 ) ( 5,918,515 ) ​ ​ ( 97,627 ) ​ ​ 381,366 ​ ​ 46,162 ​ ​ 427,528 ​ Net income attributable to Amphastar Pharmaceuticals, Inc. — ​ — ​ — ​ 1,403 ​ — — ​ — ​ 1,403 ​ — ​ 1,403 ​ Other comprehensive income attributable to Amphastar Pharmaceuticals, Inc. — ​ — ​ — ​ — ​ 966 — ​ — ​ 966 ​ — ​ 966 ​ Acquisition of additional ownership interest in ANP ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 106 ) ​ ​ ( 106 ) ​ Net loss attributable to non-controlling interest ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 306 ) ​ ​ ( 306 ) ​ Purchase of treasury stock — ​ — ​ — ​ — ​ — ( 1,366,915 ) ​ ​ ( 24,425 ) ​ ​ ( 24,425 ) ​ ​ — ​ ( 24,425 ) ​ Issuance of treasury stock in connection with the Company's equity plans ​ — ​ — ​ ( 240 ) ​ — ​ — 19,947 ​ ​ 240 ​ ​ — ​ ​ — ​ — ​ Issuance of common stock in connection with the Company's equity plans 2,265,439 ​ — ​ 23,165 ​ — ​ — — ​ — ​ 23,165 ​ — ​ 23,165 ​ Share-based compensation expense — ​ — ​ 19,831 ​ — ​ — — ​ — ​ 19,831 ​ 667 ​ 20,498 ​ Balance as of December 31, 2020 54,760,922 ​ ​ 5 ​ ​ 410,061 ​ ​ 117,773 ​ ​ ( 3,721 ) ( 7,265,483 ) ​ ​ ( 121,812 ) ​ ​ 402,306 ​ ​ 46,417 ​ ​ 448,723 ​ Net income attributable to Amphastar Pharmaceuticals, Inc. — ​ — ​ — ​ 62,116 ​ — — ​ — ​ 62,116 ​ — ​ 62,116 ​ Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc. — ​ — ​ — ​ — ​ ( 2,682 ) — ​ — ​ ( 2,682 ) ​ — ​ ( 2,682 ) ​ ANP restructuring (see Note 3) ​ — ​ ​ — ​ ​ ( 22,162 ) ​ ​ 448 ​ ​ ( 362 ) ​ — ​ ​ — ​ ​ ( 22,076 ) ​ ​ ( 46,641 ) ​ ​ ( 68,717 ) ​ Net income attributable to non-controlling interest ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 1,185 ​ ​ 1,185 ​ Purchase of treasury stock — ​ — ​ — ​ — ​ — ( 1,477,305 ) ​ ​ ( 28,873 ) ​ ​ ( 28,873 ) ​ ​ — ​ ( 28,873 ) ​ Issuance of treasury stock in connection with the Company's equity plans ​ — ​ — ​ ( 206 ) ​ — ​ — 17,498 ​ ​ 206 ​ ​ — ​ ​ — ​ — ​ Issuance of common stock in connection with the Company's equity plans 1,679,280 ​ 1 ​ 15,924 ​ — ​ — — ​ — ​ 15,925 ​ — ​ 15,925 ​ Share-based compensation expense — ​ — ​ 18,806 ​ — ​ — — ​ — ​ 18,806 ​ ( 961 ) ​ 17,845 ​ Balance as of December 31, 2021 56,440,202 ​ $ 6 ​ $ 422,423 ​ $ 180,337 ​ $ ( 6,765 ) ( 8,725,290 ) ​ $ ( 150,479 ) ​ $ 445,522 ​ $ — ​ $ 445,522 ​ See accompanying notes to consolidated financial statements. ​ ​ 106 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Cash Flows From Operating Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ $ 63,301 ​ $ 1,097 ​ $ 46,505 ​ Reconciliation to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss on disposal of assets ​ ​ 348 ​ ​ 240 ​ ​ 1,036 ​ Gain on deconsolidation of subsidiary ​ ​ ​ ( 13,587 ) ​ ​ — ​ ​ — ​ Depreciation of property, plant, and equipment ​ ​ 22,196 ​ ​ 20,491 ​ ​ 17,073 ​ Amortization of product rights, trademarks, and patents ​ ​ 1,290 ​ ​ 1,036 ​ ​ 1,037 ​ Operating lease right-of-use asset amortization ​ ​ ​ 3,266 ​ ​ 3,653 ​ ​ 3,011 ​ (Income) loss on equity method investment ​ ​ ​ 208 ​ ​ — ​ ​ — ​ Share-based compensation expense ​ ​ 18,687 ​ ​ 20,498 ​ ​ 17,295 ​ Changes in reserve for uncertain tax positions ​ ​ 1,821 ​ ​ 1,285 ​ ​ 3,010 ​ Changes in deferred taxes, net ​ ​ 2,388 ​ ​ ( 162 ) ​ ​ 4,542 ​ Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ ​ ( 14,921 ) ​ ​ ( 20,160 ) ​ ​ 6,702 ​ Inventories ​ ​ 1,258 ​ ​ 15,297 ​ ​ ( 41,103 ) ​ Prepaid expenses and other assets ​ ​ 3,572 ​ ​ ( 2,049 ) ​ ​ ( 3,604 ) ​ Income tax refunds, deposits, and payable, net ​ ​ 8,349 ​ ​ ( 972 ) ​ ​ 591 ​ Operating lease liabilities ​ ​ ​ ( 3,198 ) ​ ​ ( 3,597 ) ​ ​ ( 2,613 ) ​ Accounts payable and accrued liabilities ​ ​ 3,016 ​ ​ 20,609 ​ ​ ( 11,720 ) ​ Net cash provided by operating activities ​ ​ 97,994 ​ 57,266 ​ 41,762 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flows From Investing Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchases and construction of property, plant, and equipment ​ ​ ( 27,456 ) ​ ( 33,855 ) ​ ( 41,555 ) ​ Purchase of investments ​ ​ ​ ( 17,375 ) ​ ​ ( 13,557 ) ​ ​ ( 8,815 ) ​ Maturity of investments ​ ​ ​ 18,771 ​ ​ 12,411 ​ ​ — ​ Payment of deposits and other assets ​ ​ ( 2,612 ) ​ ( 1,414 ) ​ ( 157 ) ​ Net cash used in investing activities ​ ​ ( 28,672 ) ​ ( 36,415 ) ​ ( 50,527 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flows From Financing Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from the private placement of ANP ​ ​ ​ ​ ​ ​ — ​ ​ 18,298 ​ Acquisition of additional ownership interest in ANP ​ ​ ​ — ​ ​ ( 106 ) ​ ​ — ​ ANP restructuring (see Note 3) ​ ​ ​ ( 53,592 ) ​ ​ — ​ ​ — ​ Proceeds from equity plans, net of withholding tax payments ​ ​ 15,925 ​ 23,165 ​ 3,421 ​ Purchase of treasury stock ​ ​ ( 28,873 ) ​ ( 24,425 ) ​ ( 22,291 ) ​ Settlement of ANP equity awards ​ ​ ​ ( 839 ) ​ ​ — ​ ​ — ​ Debt issuance costs ​ ​ ​ ( 1,738 ) ​ ​ — ​ ​ — ​ Proceeds from borrowing under lines of credit ​ ​ — ​ 1,238 ​ — ​ Repayments under lines of credit ​ ​ ( 1,161 ) ​ — ​ ( 347 ) ​ Proceeds from issuance of long-term debt ​ ​ 70,000 ​ 6,283 ​ 3,570 ​ Principal payments on long-term debt ​ ​ ( 36,740 ) ​ ( 8,401 ) ​ ( 6,434 ) ​ Net cash used in financing activities ​ ​ ( 37,018 ) ​ ( 2,246 ) ​ ( 3,783 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash ​ ​ ( 223 ) ​ 352 ​ ( 104 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash, cash equivalents, and restricted cash ​ ​ 32,081 ​ 18,957 ​ ( 12,652 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash at beginning of period ​ ​ 94,507 ​ 75,550 ​ 88,202 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, and restricted cash at end of period ​ ​ $ 126,588 ​ $ 94,507 ​ $ 75,550 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noncash Investing and Financing Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital expenditure included in accounts payable ​ ​ $ 9,488 ​ $ 11,136 ​ $ 10,622 ​ Operating lease right-of-use assets ​ ​ $ 11,041 ​ $ 4,819 ​ $ 7,978 ​ Equipment acquired under finance leases ​ ​ $ 107 ​ $ 61 ​ $ 143 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental Disclosures of Cash Flow Information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest paid, net of capitalized interest ​ ​ $ 2,109 ​ $ 2,199 ​ $ 2,435 ​ Income taxes paid ​ ​ $ 8,096 ​ $ 3,411 ​ $ 5,717 ​ See accompanying notes to consolidated financial statements ​ 107 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Note 1. Business ​ Amphastar Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, hereinafter referred to as the “Company”) is a bio-pharmaceutical company that develops, manufactures, markets, and sells generic and proprietary injectable, inhalation, and intranasal products, including products with high technical barriers to market entry. Additionally, the Company sells insulin active pharmaceutical ingredient, or API, products. Most of the Company’s products are used in hospital or urgent care clinical settings and are primarily contracted and distributed through group purchasing organizations and drug wholesalers. The Company’s insulin API products are sold to other pharmaceutical companies for use in their own products and are being used by the Company in the development of injectable finished pharmaceutical products. The Company’s inhalation product, Primatene Mist ® is primarily distributed through drug retailers. ​ Note 2. Summary of Significant Accounting Policies ​ Basis of Presentation ​ The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, and are prepared in accordance with United States generally accepted accounting principles, or GAAP. All intercompany activity has been eliminated in the preparation of the consolidated financial statements. In the opinion of management, the accompanying consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the consolidated financial position, results of operations, and cash flows of the Company. ​ The Company’s subsidiaries include: (1) International Medication Systems, Limited, or IMS, (2) Armstrong Pharmaceuticals, Inc., or Armstrong, (3) Amphastar Nanjing Pharmaceuticals Inc., or ANP, (4) Amphastar France Pharmaceuticals, S.A.S., or AFP, (5) Amphastar UK Ltd., or AUK, and (6) International Medication Systems (UK) Limited, or IMS UK. ​ COVID-19 Pandemic ​ The Company is subject to risks and uncertainties as a result of the ongoing novel coronavirus pandemic, or COVID-19. The complete extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the information is constantly evolving. The Company considered the impact of COVID-19 on the assumptions and estimates used to determine the results reported and asset valuations as of December 31, 2021. ​ All of the Company’s production facilities continued to operate during the year as they had prior to the COVID-19 pandemic with very little change, other than for enhanced safety measures intended to prevent the spread of the virus. ​ It is not possible at this time to estimate the complete impact that COVID-19 could have on the Company’s business, including its customers and suppliers, as the impact will depend on future developments, which are highly uncertain and cannot be predicted. The Company will continue to monitor the impact of COVID-19 on all aspects of its business. ​ Investments in Unconsolidated Affiliate ​ The Company applies the equity method of accounting for investments when it has significant influence, but not controlling interest in the investee. Judgment regarding the level of influence over each equity method investment includes key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the earnings or losses resulting from these investments is reported as “Equity in earnings (losses) of unconsolidated affiliate” in the consolidated statements of operations. Investments accounted for using the equity method may be reported on a lag of up to three months if financial statements of the investee are not available in sufficient time for the investor to apply the equity method as of the current reporting date. The determination of whether an investee’s results are recorded on a lag is made on an investment-by-investment basis. 108 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ The carrying value of equity method investments is reported as “Equity method investment” in the consolidated balance sheets. The Company’s equity method investment are reported at cost and adjusted each period for the Company’s share of the investee’s earnings or losses and dividends paid, if any. ​ The Company assesses equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment. No such impairment was identified for any of the periods presented. ​ Use of Estimates ​ The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The principal accounting estimates include: determination of allowances for credit losses, fair value of financial instruments, allowance for discounts, provision for chargebacks and rebates, provision for product returns, adjustment of inventory to its net realizable values, impairment of investment, long-lived and intangible assets and goodwill, accruals for workers’ compensation liabilities, litigation reserves, stock price volatilities for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions. ​ Foreign Currency ​ The functional currency of the Company, its domestic subsidiaries, its Chinese subsidiary ANP, and its U.K. subsidiary, AUK, is the U.S. Dollar, or USD. ANP maintains its books of record in Chinese yuan. These books are remeasured into the functional currency of USD using the current or historical exchange rates. The resulting currency remeasurement adjustments and other transactional foreign currency exchange gains and losses are reflected in the Company’s consolidated statements of operations. ​ The Company’s French subsidiary, AFP, maintains its book of record in euros. AUK’s subsidiary, IMS UK, maintains its book of record in British pounds. These local currencies have been determined to be the subsidiaries’ respective functional currencies. These books of record are translated into USD using average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transactions. Translation adjustments are reflected in stockholders’ equity and are included as a component of other accumulated comprehensive income (loss). The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other accumulated comprehensive income (loss). The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature for the years ended December 31, 2021, 2020, and 2019 were a $ 2.6 million loss, a $ 3.0 million gain, and a $ 0.7 million loss, respectively. ​ Comprehensive Income (Loss) ​ For the years ended December 31, 2021, 2020 and 2019, the Company included its foreign currency translation gain (loss) and change in pension obligation of its defined benefit pension plan as part of its comprehensive income (loss) . There was no material income tax provision (benefit) allocated to other comprehensive loss for the years ended December 31, 2021 and 2019. Income tax expense of $ 0.9 million was allocated to other comprehensive income for the year ended December 31, 2020. ​ 109 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Shipping and Handling Costs ​ For each of the years ended December 31, 2021, 2020, and 2019, the Company included shipping and handling costs of approximately $ 4.3 million in selling, distribution and marketing expenses in the accompanying consolidated statements of operations. ​ Advertising Expense ​ Advertising expenses, primarily associated with Primatene Mist ® are recorded as they are incurred, except for expenses related to the development of a major commercial or media campaign, which are expensed in the period in which the commercial or campaign is first presented, and are reflected as a component of selling, distribution and marketing in the Company’s consolidated statement of operations. For the years ended December 31, 2021, 2020, and 2019, advertising expenses were $ 8.1 million, $ 5.8 million, and $ 4.3 million, respectively. ​ Research and Development Costs ​ Research and development costs are charged to expense as incurred and consist of costs incurred to further the Company’s research and development activities. These include salaries and related employee benefits, costs associated with clinical trials, nonclinical research and development activities, regulatory activities, research-related overhead expenses and fees paid to external service providers. ​ The Company may produce or purchase inventories prior to or with the expectation of receiving regulatory approval in the near term, based on operational decisions about the most effective use of existing resources. This inventory is referred to as pre-launch inventory. It is the Company’s accounting policy that the pre-launch inventory is capitalized if it has a probable future economic benefit at the time it is purchased or manufactured. If regulatory approval is received and previously expensed pre-launch inventory is sold, such sales may contribute up to a 100% margin to the Company’s operating results. Pre-launch inventory costs include cost of work in process, materials, and finished drug products. As of December 31, 2021, 2020, and 2019, the Company did not have material capitalized pre-launch inventory. ​ Financial Instruments ​ The carrying amounts of cash and cash equivalents, short-term investments, restricted cash and short-term investments, accounts receivable, accounts payable, accrued expenses, and short-term borrowings approximate fair value due to the short maturity of these items. The majority of the Company’s long-term obligations consist of variable rate debt, and their carrying value approximates fair value as the stated borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities. The Company at times enters into fixed interest rate swap contracts to exchange the variable interest rates for fixed interest rates without the exchange of the underlying notional debt amounts. Such interest rate swap contracts are recorded at their fair values. ​ Cash and Cash Equivalents ​ Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and highly liquid investments purchased with original maturities of three months or less. ​ Investments ​ Investments as of December 31, 2021 and 2020 consisted of certificates of deposit and investment grade corporate bonds with original maturity dates between 3 and 15 months. ​ 110 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Restricted Cash ​ Restricted cash is collateral required for the Company to guarantee certain vendor payments in France. As of December 31, 2021 and 2020, the restricted cash balance was $ 0.2 million and $ 1.9 million, respectively. ​ Restricted Short-Term Investments ​ Restricted short-term investments consist of certificates of deposit that are collateral for standby letters of credit to qualify for workers’ compensation self-insurance. The certificates of deposit have original maturities greater than three months, but less than one year. As of December 31, 2021 and 2020, the balance of restricted short-term investments was $ 2.2 million. ​ Allowance for Credit Losses ​ The Company evaluates the collectability of accounts receivable based on a combination of factors. When the Company is aware of circumstances that may impair a customer’s ability to pay subsequent to the original sale, the Company records a specific allowance to reduce the amounts receivable to the amount that the Company reasonably believes to be collectable. For all other customers, the Company recognizes an allowance for credit losses based on factors that include the length of time the receivables are past due, industry and geographic concentrations, the current economic conditions and historical collection experience. As of December 31, 2021 and 2020, the Company's allowance for credit losses was $ 2.3 million and $ 1.3 million, respectively. ​ Inventories ​ Inventories consist of currently marketed products and products manufactured under contract. Inventories are stated using the first-in, first-out method, on a consistent basis. The Company states inventory at the lower of cost or net realizable value. Provisions are made for slow-moving, unsellable, or obsolete items. Net realizable value is determined using the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose. ​ Property, Plant and Equipment Property, plant and equipment are stated at cost or, in the case of assets acquired in a business combination, at fair value on the purchase date. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives of the related assets as follows: ​ ​ ​ ​ Buildings 20 - 31 years Machinery and equipment 3 - 12 years Furniture and fixtures 3 - 7 years Automobiles 4 - 5 years Leasehold improvements Lesser of remaining lease term or useful life ​ Intangible Assets ​ Intangible assets with finite lives are amortized using the straight-line method over the period the asset is expected to contribute directly or indirectly to the future cash flows of the Company as follows: ​ ​ ​ ​ Product rights 10 - 15 years Patents 10 - 20 years Land-use rights 37 - 50 years ​ 111 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Impairment of Long-Lived Assets, including Identifiable Definite-Lived Intangible Assets ​ The Company reviews long-term and identifiable definite-lived intangible assets or asset groups for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset or an asset group, further impairment analysis is performed. An impairment loss is measured as the amount by which the carrying amount of the asset or asset groups exceeds the fair value (assets to be held and used) or fair value less cost to sell (assets to be disposed of). The Company also reviews the useful lives of its assets periodically to determine whether events and circumstances warrant a revision to the remaining useful life. Changes in the useful life are adjusted prospectively by revising the remaining period over which the asset is amortized. ​ Deferred Income Taxes ​ The Company utilizes the liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statements and the tax basis of assets and liabilities using enacted tax rates. A valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized. ​ Impairment of Indefinite-Lived Intangible Asset and Goodwill ​ The Company reviews indefinite-lived intangible asset and goodwill for impairment in the fourth quarter of each year or more frequently if indicators of impairment are present. When the Company chooses to perform a qualitative assessment, it evaluates economic, industry and company-specific factors as an initial step. If the Company determines it is more likely than not that the indefinite-lived intangible asset is impaired or the fair value of a reporting unit is less than its carrying amount, further quantitative impairment testing is then performed; otherwise, no further testing is required. An impairment loss is recorded if the asset’s fair value is less than its carrying value. The Company also periodically reviews the indefinite-lived intangible asset to determine if events and circumstances continue to support an indefinite useful life. If the life is no longer indefinite, the asset is tested for impairment. The carrying value, after recognition of any impairment loss, is amortized over its remaining useful life. ​ Self-Insured Claims ​ The Company is primarily self-insured, up to certain limits, for workers’ compensation claims. The Company has purchased stop-loss insurance, which will reimburse the Company for individual claims in excess of $ 350,000 annually or aggregate claims exceeding $ 3.5 million annually. The cost of claims reported and an estimate of claims incurred but not reported are charged to operating expenses. A liability for unpaid claims and the associated claim expenses, including incurred but not reported losses, is actuarially determined and reflected in accrued liabilities in the accompanying consolidated balance sheets. Total expense under the program was approximately $ 0.5 million, $ 0.5 million, and $ 0.4 million, for the years ended December 31, 2021, 2020 and 2019, respectively. The self-insured claims liability was $ 4.1 million and $ 4.5 million at December 31, 2021 and 2020, respectively. The determination of such claims and expenses and the appropriateness of the related liability is reviewed periodically and updated, as necessary. Changes in estimates are recorded in the period identified. ​ Litigation, Commitments and Contingencies ​ Litigation, commitments and contingencies are accrued when management, after considering the facts and circumstances of each matter as then known to management, has determined it is probable a liability will be found to have been incurred and the amount of the loss can be reasonably estimated. When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is recorded. Legal fees are expensed as incurred. Due to the inherent uncertainties surrounding gain contingencies, the Company generally does not recognize potential gains until realized. 112 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ In the fourth quarter of 2021, the Company settled a legal dispute with an unaffiliated third party and subsequently received a settlement payment, net of contingent legal fees, in the amount of $ 2.7 million. The net amount of $ 2.7 million was recorded as other income in the other income (expense), net line in the consolidated statements of operations. ​ Recent Accounting Pronouncements ​ The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements. ​ Note 3. ANP Restructuring ​ In July 2018, the Company’s Chinese subsidiary, ANP, completed a private placement of its common equity interest to accredited investors and received approximately $ 56.3 million of cash proceeds. The Company retained approximately 58 % of the equity interest in ANP following the private placement and continues to consolidate the financial results of ANP with the Company’s results of operations. ​ In May 2021, the Company’s Board of Directors approved a plan for the restructuring of the equity ownership of ANP, whereby the Company purchased an additional ownership interest in ANP from certain equity holders of ANP, or the Sellers, and split-off certain subsidiaries of ANP. Under the terms of the restructuring plan, the Company entered into a Share Purchase Agreement, or SPA, with certain of the Sellers to acquire an approximately 18 % additional ownership interest in ANP for approximately $ 29.4 million in cash. The Company also entered into a Share Repurchase Agreement, or SRA, with certain of the Sellers, whereby the Company contributed 80 % of its ownership interest in Hanxin and Hanxin’s existing subsidiaries, Baixin and Letop, to the Sellers in exchange for an approximately 10 % additional ownership interest in ANP. In July 2021, after receiving regulatory approval, the Company completed these transactions, and the Company’s ownership in ANP increased to approximately 85 %. ​ In August 2021, the Company entered into a second Share Purchase Agreement, or Second SPA, with the other sole remaining equity holder of ANP to acquire the remaining approximately 15 % of ownership interest in ANP. The total cash payment by the Company for this transaction was approximately $ 22.5 million. Following completion of the transaction, the Company’s ownership of ANP increased to 100 %. ​ Certain of the Sellers were the Company’s executive officers, directors and other related parties. The Sellers who participated in the SPA included executives of the Company William J. Peters, Rong Zhou, and Jacob Liawatidewi; directors of the Company Howard Lee and Richard Koo; relatives of Dr. Jack Zhang and Dr. Mary Luo, Henry Zhang, Qingqing Chen, Chongqing Zhang, Lu Zhang, and James Luo, or entities related to such persons. ​ The Sellers who participated in the SRA included Dr. Mary Luo and Dr. Jack Zhang through an affiliated party, and their family members Henry Zhang, Qingqing Chen, Chongqing Zhang, Bill Zhang, and Lu Zhang. Sellers who participated in the Second SPA include Dr. Mary Luo, Dr. Jack Zhang, through an affiliated party, and their family members Chongqing Zhang and Bill Zhang. ​ The restructuring of ANP was completed in the third quarter of 2021. As a result of the restructuring activities, the Company’s ownership interest in ANP was increased to 100 %, and ANP’s ownership interest in Hanxin and its subsidiaries was reduced to approximately 20 %. ​ The reduction of the Company’s ownership in Hanxin to 20 %, resulted in ANP experiencing a “loss of control” of a subsidiary as defined by GAAP. Loss of control is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock in the subsidiary, lacks a controlling financial interest in the subsidiary and, is unable to unilaterally control the subsidiary through other means such as having, or 113 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ being able to obtain, the power to elect a majority of the subsidiary's board of directors based solely on contractual rights or ownership of shares holding a majority of the voting power of the subsidiary's voting securities. These loss-of-control factors were met with respect to ANP’s ownership interest in Hanxin after the restructuring. ​ Accordingly, upon completion of the SRA in the third quarter, the Company deconsolidated Hanxin and recorded a $ 13.6 million gain on deconsolidation, which is recognized in other income (expenses), net, in the consolidated statement of operations for the year ended December 31, 2021. Of the $ 13.6 million gain recorded, approximately $ 2.7 million related to the remeasurement to fair value of the retained noncontrolling investment in Hanxin. The remainder of the gain relates to the excess of the fair value the consideration received, over the book value of Hanxin’s net assets. ​ Hanxin continues to be a related party after the deconsolidation. ​ In addition to the retained noncontrolling investment in Hanxin, the Company maintains a seat on Hanxin’s board of directors, and Henry Zhang, a relative of Dr. Jack Zhang and Dr. Mary Luo, is an equity holder, general manager, and chairman of the board of directors of Hanxin. As a result, it was determined that the Company has significant influence over Hanxin and as such the retained noncontrolling investment in Hanxin is accounted for as an equity method investment. ​ As an equity method investment, the retained noncontrolling 20 % investment in Hanxin was recorded at fair value in the amount of $ 4.2 million at the date of the transaction, which exceeds the amount of underlying equity in Hanxin’s net assets by $ 2.7 million. This basis difference was deemed to be a premium in excess of fair value, which is referred to as equity method goodwill, and is recorded within the “Investment in unconsolidated affiliate” line on the Company’s consolidated balance sheets. The fair value of the noncontrolling investment in Hanxin was determined using a discounted cash flow model using Level 3 inputs, including discount rates between 25 % and 27 %, revenue base and growth rate, gross margins, and earnings before interest and taxes (EBIT). ​ Subsequent to the restructuring, during the third quarter of 2021, Hanxin received additional capital contributions resulting in further reduction of ANP’s ownership to approximately 14 %. ​ ​ Note 4. Revenue Recognition ​ In accordance with ASC 606 Revenue from Contracts with Customers , revenue is recognized at the time that the Company’s customers obtain control of the promised goods. ​ Generally, revenue is recognized at the time of product delivery to the Company’s customers. In some cases, revenue is recognized at the time of shipment when stipulated by the terms of the sale agreements. ​ The consideration the Company receives in exchange for its goods or services is only recognized when it is probable that a significant reversal will not occur. The consideration to which the Company expects to be entitled includes a stated list price, less various forms of variable consideration. The Company makes significant estimates for related variable consideration at the point of sale, including chargebacks, rebates, product returns, other discounts and allowances. ​ The Company’s payment terms vary by types and locations of customers and the products or services offered. Payment terms differ by jurisdiction and customers, but payment is generally required in a term ranging from 30 to 75 days from date of shipment or satisfaction of the performance obligation. For certain products or services and certain customer types, we may require payment before products are delivered or services are rendered to customers. ​ Provisions for estimated chargebacks, rebates, discounts, product returns and credit losses are made at the time of sale and are analyzed and adjusted, if necessary, at each balance sheet date. ​ 114 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers, and after the customer has accepted test samples of the products to be shipped. ​ The Company’s accounting policy is to review each agreement involving contract development and manufacturing services to determine if there are multiple revenue-generating activities that constitute more than one unit of accounting. Revenues are recognized for each unit of accounting based on revenue recognition criteria relevant to that unit. The Company does not have any revenue arrangements with multiple performance obligations. ​ Service revenues derived from research and development contracts is recognized over time based on progress toward complete satisfaction of the performance obligation. For each performance obligation satisfied over time, the Company assesses the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation. Revenue from research and development services at ANP was $ 5.1 million. ​ Provision for Chargebacks and Rebates ​ The provision for chargebacks and rebates is a significant estimate used in the recognition of revenue. Wholesaler chargebacks relate to sales terms under which the Company agrees to reimburse wholesalers for differences between the gross sales prices at which the Company sells its products to wholesalers and the actual prices of such products that wholesalers resell under the Company’s various contractual arrangements with third parties such as hospitals and group purchasing organizations in the United States. Rebates include primarily amounts paid to retailers, payers, and providers in the United States, including those paid to state Medicaid programs, and are based on contractual arrangements or statutory requirements. The Company estimates chargebacks and rebates using the expected value method at the time of sale to wholesalers based on wholesaler inventory stocking levels, historic chargeback and rebate rates, and current contract pricing. ​ The provision for chargebacks and rebates is reflected as a component of net revenues. The following table is an analysis of the chargeback and rebate provision: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Beginning balance ​ $ 20,380 $ 21,644 ​ Provision for chargebacks and rebates ​ ​ 201,133 ​ 158,152 ​ Credits and payments issued to third parties ​ ​ ( 201,346 ) ​ ( 159,416 ) ​ Ending balance ​ ​ $ 20,167 ​ $ 20,380 ​ ​ Changes in the chargeback provision from period to period are primarily dependent on the Company’s sales to its wholesalers, the level of inventory held by wholesalers, and the wholesalers’ customer mix. Changes in the rebate provision from period to period are primarily dependent on retailer’s and other indirect customers’ purchases. The approach that the Company uses to estimate chargebacks has been consistently applied for all periods presented. Variations in estimates have been historically small. The Company continually monitors the provision for chargebacks and rebates and makes adjustments when it believes that the actual chargebacks and rebates may differ from the estimates. The settlement of chargebacks and rebates generally occurs within 30 days to 60 days after the sale to wholesalers. Accounts receivable and/or accounts payable and accrued liabilities are reduced and/or increased by the chargebacks and rebate amounts depending on whether the Company has the right to offset with the customer. Of the provision for chargebacks and rebates as of December 31, 2021 and 2020, $ 15.6 million and $ 16.4 million were included as a reduction to accounts receivable, net, on the consolidated balance sheets, respectively. The remaining provision as of December 31, 2021 and 2020 was $ 4.6 million and $ 4.0 million, respectively, which were included in accounts payable and accrued liabilities, respectively. ​ 115 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Accrual for Product Returns ​ The Company offers most customers the right to return qualified excess or expired inventory for partial credit; however, API product sales are generally non-returnable. The Company’s product returns primarily consist of the returns of expired products from sales made in prior periods. Returned products cannot be resold. At the time product revenue is recognized, the Company records an accrual for product returns estimated using the expected value method. The accrual is based, in part, upon the historical relationship of product returns to sales and customer contract terms. The Company also assesses other factors that could affect product returns including market conditions, product obsolescence, and the introduction of new competition. Although these factors do not normally give the Company’s customers the right to return products outside of the regular return policy, the Company realizes that such factors could ultimately lead to increased returns. The Company analyzes these situations on a case-by-case basis and makes adjustments to the product return reserve as appropriate. ​ The provision for product returns is reflected as a component of net revenues. The following table is an analysis of the product return liability: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Beginning balance ​ $ 14,204 $ 10,339 ​ Provision for product returns ​ ​ 15,005 ​ 11,810 ​ Credits issued to third parties ​ ​ ( 7,532 ) ​ ( 7,945 ) ​ Ending balance ​ ​ $ 21,677 ​ $ 14,204 ​ ​ Of the provision of product returns as of December 31, 2021 and 2020, $ 16.0 million and $ 10.2 million were included in accounts payable and accrued liabilities on the consolidated balance sheets, respectively. The remaining provision as of December 31, 2021 and 2020, of $ 5.7 million and $ 4.0 million were included in other long-term liabilities, respectively. For the years ended December 31, 2021 and 2020, the Company’s aggregate product return rate was 1.7 % and 1.4 % of qualified sales, respectively. ​ Note 5. Income per Share Attributable to Amphastar Pharmaceuticals, Inc. Stockholders ​ Basic net income per share attributable to Amphastar Pharmaceuticals Inc. stockholders is calculated based upon the weighted-average number of shares outstanding during the period. Diluted net income per share attributable to Amphastar Pharmaceuticals, Inc. stockholders gives effect to all potential dilutive shares outstanding during the period, such as stock options, non-vested restricted stock units, and shares issuable under the Company’s Employee Stock Purchase Plan, or ESPP. ​ For the year ended December 31, 2021, options to purchase 1,906,029 shares of stock with a weighted-average exercise price of $ 20.82 per share, and the reallocation of net income attributable to non-controlling interest were excluded from the computation of diluted net income per common share attributable to Amphastar Pharmaceuticals, Inc. stockholders because the effect would be anti-dilutive. ​ For the year ended December 31, 2020, options to purchase 1,917,437 shares of stock with a weighted-average exercise price of $ 20.85 per share, and the reallocation of net income attributable to non-controlling interest were excluded from the computation of diluted net income per common share attributable to Amphastar Pharmaceuticals, Inc. stockholders because the effect would be anti-dilutive. ​ For the year ended December 31, 2019, options to purchase 803,257 shares of stock with a weighted-average exercise price of $ 21.99 per share, and the reallocation of net income attributable to non-controlling interest were excluded from 116 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ the computation of diluted net income per common share attributable to Amphastar Pharmaceuticals, Inc. stockholders because the effect would be anti-dilutive. ​ The following table provides the calculation of basic and diluted net income per share attributable to Amphastar Pharmaceuticals, Inc. shareholders for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands, except per share data) Basic and dilutive numerator: ​ ​ ​ ​ Net income attributable to Amphastar Pharmaceuticals, Inc. ​ $ 62,116 ​ $ 1,403 ​ $ 48,939 ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average shares outstanding — basic ​ 47,777 ​ 47,038 ​ 46,982 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net effect of dilutive securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incremental shares from equity awards ​ 2,007 ​ 2,086 ​ 2,925 ​ Weighted-average shares outstanding — diluted ​ 49,784 ​ 49,124 ​ 49,907 ​ Net income per share attributable to Amphastar Pharmaceuticals, Inc. stockholders — basic ​ $ 1.30 ​ $ 0.03 ​ $ 1.04 ​ Net income per share attributable to Amphastar Pharmaceuticals, Inc. stockholders — diluted ​ $ 1.25 ​ $ 0.03 ​ $ 0.98 ​ ​ ​ Note 6. Segment Reporting ​ The Company’s business is the development, manufacture, and marketing of pharmaceutical products. The Company has identified two reporting segments that each report to the Chief Operating Decision Maker, or CODM, as defined in ASC 280, Segment Reporting. The Company’s performance is assessed and resources are allocated by the CODM based on the following two reportable segments: ​ ● Finished pharmaceutical products ● API ​ The finished pharmaceutical products segment manufactures, markets and distributes Primatene Mist ® , glucagon, enoxaparin, naloxone, phytonadione, lidocaine, epinephrine, various critical and non-critical care drugs, as well as certain contract manufacturing and contract research revenues. The API segment manufactures and distributes recombinant human insulin API and porcine insulin API for external customers and internal product development. ​ 117 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Selected financial information by reporting segment is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands) Net revenues: ​ ​ ​ ​ Finished pharmaceutical products ​ $ 419,570 ​ $ 331,368 ​ $ 302,000 ​ API ​ 18,198 ​ 18,478 ​ 20,357 ​ Total net revenues ​ 437,768 ​ 349,846 ​ 322,357 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Finished pharmaceutical products ​ 209,715 ​ 151,645 ​ 136,576 ​ API ​ ( 9,976 ) ​ ( 8,305 ) ​ ( 4,653 ) ​ Total gross profit ​ 199,739 ​ 143,340 ​ 131,923 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ 129,852 ​ 132,386 ​ 131,962 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ 69,887 ​ 10,954 ​ ( 39 ) ​ Non-operating income (expenses) ​ 14,252 ​ ( 6,317 ) ​ 60,267 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ $ 84,139 ​ $ 4,637 ​ $ 60,228 ​ ​ The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis. The Company does not identify total assets by segment for internal purposes, as the Company’s CODM does not assess performance, make strategic decisions, or allocate resources based on assets. ​ The amount of net revenues in the finished pharmaceutical product segment is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ (in thousands) Finished pharmaceutical products net revenues: ​ ​ ​ ​ Primatene Mist ® ​ ​ $ 73,113 ​ $ 51,725 ​ $ 18,065 ​ Epinephrine ​ ​ ​ 57,530 ​ ​ 23,799 ​ ​ 13,885 ​ Glucagon ​ ​ ​ 47,639 ​ ​ — ​ ​ — ​ Phytonadione ​ ​ 45,498 ​ 42,646 ​ 45,786 ​ Lidocaine ​ ​ ​ 44,413 ​ ​ 41,113 ​ ​ 46,013 ​ Enoxaparin ​ ​ ​ 35,962 ​ ​ 48,681 ​ ​ 42,695 ​ Naloxone ​ ​ ​ 27,540 ​ ​ 33,416 ​ ​ 34,761 ​ Other finished pharmaceutical products ​ ​ 87,875 ​ 89,988 ​ 100,795 ​ Total finished pharmaceutical products net revenues ​ ​ $ 419,570 ​ $ 331,368 ​ $ 302,000 ​ ​ The amount of depreciation and amortization expense included in cost of revenues, by reporting segments is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands) Depreciation and amortization expense ​ ​ ​ Finished pharmaceutical products ​ $ 6,003 ​ $ 5,766 ​ $ 5,581 API ​ 4,222 ​ 3,264 ​ 1,477 Total depreciation and amortization expense ​ $ 10,225 ​ $ 9,030 ​ $ 7,058 118 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Net revenues and carrying values of long-lived assets by geographic regions are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Revenue ​ Long-Lived Assets ​ Year Ended December 31, ​ December 31, ​ 2021 ​ 2020 ​ 2019 ​ 2021 ​ 2020 ​ (in thousands) United States ​ $ 419,869 $ 333,093 $ 304,896 $ 134,731 $ 129,401 ​ China ​ 6,020 ​ 3,161 ​ 1,481 ​ 91,876 ​ 98,538 ​ France ​ 11,879 ​ 13,592 ​ 15,980 ​ 44,884 ​ 52,770 ​ Total ​ $ 437,768 ​ $ 349,846 ​ $ 322,357 ​ $ 271,491 ​ $ 280,709 ​ ​ ​ ​ Note 7. Customer and Supplier Concentration ​ Customer Concentrations ​ Three large wholesale drug distributors, AmerisourceBergen Corporation, or AmerisourceBergen, Cardinal Health, Inc., or Cardinal, and McKesson Corporation, or McKesson, are all distributors of the Company’s products, as well as suppliers of a broad range of health care products. The Company considers these three customers to be its major customers, as each individually and these customers collectively, represented a significant percentage of the Company’s net revenue for the years ended December 31, 2021, 2020, and 2019, and accounts receivable as of December 31, 2021 and 2020, respectively. The following table provides accounts receivable and net revenue information for these major customers: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of Total Accounts ​ % of Net ​ ​ Receivable ​ Revenue ​ ​ December 31, ​ December 31, ​ Year Ended December 31, ​ 2021 2020 2021 2020 2019 AmerisourceBergen 13 % 9 % 24 % 23 % 24 % McKesson 30 % 24 % 21 % 22 % 25 % Cardinal Health 20 % 17 % 16 % 17 % 22 % ​ Supplier Concentrations ​ The Company depends on suppliers for raw materials, APIs, and other components that are subject to stringent FDA requirements. Some of these materials may only be available from one or a limited number of sources. Establishing additional or replacement suppliers for these materials may take a substantial period of time, as suppliers must be approved by the FDA. Furthermore, a significant portion of raw materials may only be available from foreign sources. If the Company is unable to secure, on a timely basis, sufficient quantities of the materials it depends on to manufacture and market its products, it could have a materially adverse effect on the Company’s business, financial condition, and results of operations. ​ Note 8. Fair Value Measurements ​ GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the measurement date (an exit price). These standards also establish a hierarchy that prioritizes observable and unobservable inputs used in measuring fair value of an asset or liability, as described below: ​ ● Level 1 – Inputs to measure fair value are based on quoted prices (unadjusted) in active markets on identical assets or liabilities; ​ 119 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ● Level 2 – Inputs to measure fair value are based on the following: a) quoted prices in active markets on similar assets or liabilities, b) quoted prices for identical or similar instruments in inactive markets, or c) observable (other than quoted prices) or collaborated observable market data used in a pricing model from which the fair value is derived; and ​ ● Level 3 – Inputs to measure fair value are unobservable and the assets or liabilities have little, if any, market activity; these inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities based on best information available in the circumstances. ​ As of December 31, 2021, cash equivalents include money market accounts. Investments consist of certificates of deposit as well as investment-grade municipal bonds with original maturity dates between 3 and 15 months. The certificates of deposit are carried at amortized cost in the Company’s consolidated balance sheet, which approximates their fair value determined based on Level 2 inputs. The corporate and municipal bonds are classified as held-to-maturity and are carried at amortized cost net of allowance for credit losses, which approximates their fair value determined based on Level 2 inputs. The restrictions on restricted cash and investments have a negligible effect on the fair value of these financial assets. ​ The fair value of the Company’s financial assets and liabilities measured on a recurring basis as of December 31, 2021 and 2020, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total (Level 1) (Level 2) (Level 3) ​ ​ (in thousands) Cash equivalents - money market ​ $ 102,863 ​ $ 102,863 ​ $ — ​ $ — ​ Restricted cash - money market ​ ​ 235 ​ ​ 235 ​ ​ — ​ ​ — ​ Short-term investments - certificates of deposit ​ ​ 5,103 ​ ​ — ​ ​ 5,103 ​ ​ — ​ Restricted short-term investments - certificates of deposit ​ 2,200 ​ — ​ 2,200 ​ — ​ Corporate and municipal bonds ​ ​ 6,984 ​ ​ — ​ ​ 6,984 ​ ​ — ​ Interest rate swap related to variable rate loans ​ ​ 596 ​ ​ — ​ ​ 596 ​ ​ — ​ Fair value measurement as of December 31, 2021 ​ $ 117,981 ​ $ 103,098 ​ $ 14,883 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents - money market ​ $ 58,710 ​ $ 58,710 ​ $ — ​ $ — ​ Restricted cash - money market ​ ​ 1,865 ​ ​ 1,865 ​ ​ — ​ ​ — ​ Short-term investments - certificates of deposit ​ ​ 9,089 ​ ​ — ​ ​ 9,089 ​ ​ — ​ Restricted short-term investments - certificates of deposit ​ 2,200 ​ — ​ 2,200 ​ — ​ Corporate and municipal bonds ​ ​ 3,855 ​ ​ — ​ ​ 3,855 ​ ​ — ​ Interest rate swap related to variable rate loans ​ ​ ( 902 ) ​ ​ — ​ ​ ( 902 ) ​ ​ — ​ Fair value measurement as of December 31, 2020 ​ $ 74,817 ​ $ 60,575 ​ $ 14,242 ​ $ — ​ ​ The Company does not hold any Level 3 instruments that are measured at fair value on a recurring basis. ​ Nonfinancial assets and liabilities are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances. These items primarily include investments in unconsolidated affiliates, long-lived assets, goodwill, and intangible assets for which the fair value is determined as part of the related impairment test. As of December 31, 2021 and 2020, there were no significant adjustments to fair value for nonfinancial assets or liabilities. ​ The deferred compensation plan assets are valued using the cash surrender value of the life insurance policies and are not included in the table above. ​ 120 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Note 9. Investments ​ A summary of the Company’s investments that are classified as held-to-maturity are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair ​ Cost Gains Losses Value ​ ​ (in thousands) Corporate bonds (due within 1 year) ​ $ 2,481 ​ $ — ​ $ ( 3 ) ​ $ 2,478 Corporate bonds (due within 1 to 3 years) ​ ​ 1,248 ​ ​ — ​ ​ ( 3 ) ​ ​ 1,245 Municipal bonds (due within 1 year) ​ ​ 3,263 ​ ​ — ​ ​ ( 2 ) ​ ​ 3,261 Total investments as of December 31, 2021 ​ $ 6,992 ​ $ — ​ $ ( 8 ) ​ $ 6,984 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate bonds (due within 1 year) ​ $ 1,560 ​ $ — ​ $ ( 1 ) ​ $ 1,559 Municipal bonds (due within 1 year) ​ ​ 2,297 ​ ​ — ​ ​ ( 1 ) ​ ​ 2,296 Total investments as of December 31, 2020 ​ $ 3,857 ​ $ — ​ $ ( 2 ) ​ $ 3,855 ​ At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, noting neither a significant deterioration since purchase nor any other factors that would indicate a material credit loss. ​ The Company measures expected credit losses on held-to-maturity investments on a collective basis. All the Company’s held-to-maturity investments were considered to be one pool. The estimate for credit losses considers historical loss information that is adjusted for current conditions and reasonable and supportable forecasts. Expected credit losses on held-to-maturity investments were not material to the consolidated financial statements. ​ Investment in Hanxin ​ As a result of the ANP restructuring that was completed during the third quarter of 2021 (see Note 3), and subsequent investments by other equity holders of Hanxin, the Company has a 14 % noncontrolling investment in Hanxin that is accounted for as an equity method investment. ​ The Company accounts for its share of the earnings or losses of Hanxin with a reporting lag of three months, as the financial statements of Hanxin are not completed on a basis that is sufficient for the Company to apply the equity method on a current basis. The Company’s share of Hanxin’s losses for the year ended December 31, 2021 was $ 0.2 million, which was recorded in the “Equity in losses of unconsolidated affiliate” line on the consolidated statement of operations. 121 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Note 10. Goodwill and Intangible Assets ​ The table below shows the weighted-average life, original cost, accumulated amortization, and net book value by major intangible asset classification: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ Accumulated ​ ​ ​ ​ Life (Years) Original Cost Amortization Net Book Value ​ ​ (in thousands) Definite-lived intangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ IMS (UK) international product rights ​ 10 ​ $ 9,445 ​ $ 5,116 ​ $ 4,329 ​ Patents 12 ​ 486 ​ ​ 340 ​ 146 ​ Land-use rights 39 ​ 2,540 ​ ​ 683 ​ 1,857 ​ Subtotal 12 ​ 12,471 ​ 6,139 ​ 6,332 ​ Indefinite-lived intangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Trademark * ​ 29,225 ​ — ​ 29,225 ​ Goodwill - Finished pharmaceutical products * ​ 3,313 ​ — ​ 3,313 ​ Subtotal * ​ 32,538 ​ — ​ 32,538 ​ As of December 31, 2021 * ​ $ 45,009 ​ $ 6,139 ​ $ 38,870 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ Accumulated ​ ​ ​ ​ Life (Years) Original Cost Amortization Net Book Value ​ ​ (in thousands) Definite-lived intangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ IMS (UK) international product rights ​ 10 ​ $ 9,561 ​ $ 4,223 ​ $ 5,338 ​ Patents 12 ​ 486 ​ ​ 297 ​ 189 ​ Land-use rights 39 ​ 2,540 ​ ​ 617 ​ 1,923 ​ Subtotal 12 ​ 12,587 ​ 5,137 ​ 7,450 ​ Indefinite-lived intangible assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Trademark * ​ 29,225 ​ — ​ 29,225 ​ Goodwill - Finished pharmaceutical products * ​ 3,940 ​ — ​ 3,940 ​ Subtotal * ​ 33,165 ​ — ​ 33,165 ​ As of December 31, 2020 * ​ $ 45,752 ​ $ 5,137 ​ $ 40,615 ​ * Intangible assets with indefinite lives have an indeterminable average life. ​ Goodwill ​ The changes in the carrying amounts of goodwill were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Beginning balance ​ $ 3,940 $ 3,634 ​ ANP restructuring ​ ​ ​ ( 374 ) ​ ​ — ​ Currency translation ​ ​ ( 253 ) ​ 306 ​ Ending balance ​ ​ $ 3,313 ​ $ 3,940 ​ ​ Primatene ® Trademark ​ In January 2009, the Company acquired the exclusive rights to the trademark, domain name, website and domestic marketing, distribution and selling rights related to Primatene Mist ® , an over-the-counter bronchodilator product, recorded at the allocated fair value of $ 29.2 million, which is its carrying value as of December 31, 2021. 122 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ The trademark was determined to have an indefinite life. In determining its indefinite life, the Company considered the following: the expected use of the intangible; the longevity of the brand; the legal, regulatory and contractual provisions that affect their maximum useful life; the Company’s ability to renew or extend the asset’s legal or contractual life without substantial costs; effects of the regulatory environment; expected changes in distribution channels; maintenance expenditures required to obtain the expected future cash flows from the asset; and considerations for obsolescence, demand, competition and other economic factors. ​ Amortization ​ Included in cost of revenues for the years ended December 31, 2021, 2020 and 2019 is product rights amortization expense of $ 1.0 million, $ 1.2 million, and $ 1.0 million, respectively. ​ As of December 31, 2021, the expected amortization expense for all amortizable intangible assets during the next five fiscal years ended December 31 and thereafter is as follows: ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 ​ $ 1,045 ​ 2023 ​ 1,035 ​ 2024 ​ 1,035 ​ 2025 ​ 1,035 ​ 2026 ​ 584 ​ Thereafter ​ 1,598 ​ Total amortizable intangible assets ​ 6,332 ​ Indefinite-lived intangibles ​ 32,538 ​ Total intangibles (net of accumulated amortization) ​ $ 38,870 ​ ​ ​ Note 11. Inventories ​ Inventories consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Raw materials and supplies ​ $ 41,853 $ 47,051 ​ Work in process ​ ​ 33,298 ​ 37,257 ​ Finished goods ​ ​ 17,656 ​ 12,523 ​ Total inventories ​ ​ $ 92,807 ​ $ 96,831 ​ ​ ​ ​ Charges of $ 24.6 million, $ 13.9 million, and $ 9.4 million were included in the cost of revenues in the Company’s consolidated statements of operations for the years ended December 31, 2021, 2020, and 2019, respectively, to adjust the Company’s inventory and related purchase commitments to their net realizable value. For the year ended December 31, 2021, the charge included $ 20.7 million as a result of an increase in the price of heparin as well as a decrease in the forecasted average selling price of enoxaparin. For the year ended December 31, 2020, the charge included $ 9.4 million as a result of an increase in the price of heparin as well as a decrease in the forecasted average selling price of enoxaparin. For the year ended December 31, 2019, the charge included $ 5.8 million as a result of an increase in purchases of higher price heparin. ​ Losses on firm purchase commitments related to raw materials on order were $ 7.1 million, $ 1.2 million and $ 1.3 million as of December 31, 2021, 2020 and 2019, respectively. ​ ​ ​ ​ 123 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Note 12. Property, Plant, and Equipment ​ Property, plant, and equipment consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Buildings ​ $ 130,582 $ 124,326 ​ Leasehold improvements ​ ​ 29,221 ​ 30,028 ​ Land ​ ​ 7,615 ​ 7,719 ​ Machinery and equipment ​ ​ 207,883 ​ 211,666 ​ Furniture, fixtures, and automobiles ​ ​ 27,376 ​ 26,482 ​ Construction in progress ​ ​ 41,186 ​ 43,981 ​ Total property, plant, and equipment ​ ​ 443,863 ​ 444,202 ​ Less accumulated depreciation ​ ​ ( 199,619 ) ​ ( 184,147 ) ​ Total property, plant, and equipment, net ​ ​ $ 244,244 ​ $ 260,055 ​ ​ The Company incurred depreciation expense of $ 22.2 million, $ 20.5 million, and $ 17.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. ​ Interest expense capitalized was approximately $ 1.4 million, $ 1.8 million, and $ 2.3 million, for the years ended December 31, 2021, 2020, and 2019, respectively. ​ Note 13. Accounts Payable and Accrued Liabilities ​ Accounts payable and accrued liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 ​ 2020 ​ (in thousands) Accrued customer fees and rebates $ 12,121 ​ $ 9,029 Accrued payroll and related benefits ​ 23,256 ​ ​ 24,597 Accrued product returns, current portion ​ 16,028 ​ ​ 10,190 Accrued loss on firm purchase commitments ​ 7,133 ​ ​ 1,223 Accrued litigation and settlements ​ — ​ ​ 13,780 Other accrued liabilities ​ 8,793 ​ ​ 12,328 Total accrued liabilities 67,331 ​ 71,147 Accounts payable 22,214 ​ 24,357 Total accounts payable and accrued liabilities $ 89,545 ​ $ 95,504 ​ 124 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Note 14. Debt ​ Debt consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Line of Credit Facilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Line of credit facility with China Everbright Bank - closed June 2021 ​ $ — ​ $ 764 ​ Line of credit facility with China Merchant Bank ​ ​ — ​ ​ 382 ​ Line of credit facility with Bank of Nanjing - deconsolidated (see Note 3) ​ ​ — ​ ​ 153 ​ Line of credit facility with Cathay Bank - closed in August 2021 ​ — ​ — ​ Line of credit facility with East West Bank - closed in August 2021 ​ ​ — ​ ​ — ​ Equipment line of credit facility with East West Bank - closed in August 2021 ​ ​ — ​ ​ 3,216 ​ Revolving line of credit facility with Capital One N.A. due August 2026 ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Term Loan ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Term loan with Capital One N.A. due August 2026 ​ ​ 69,563 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage payable with East West Bank paid off May 2021 ​ ​ — ​ ​ 3,306 ​ Mortgage payable with East West Bank paid off August 2021 ​ — ​ 3,334 ​ Mortgage payable with Cathay Bank paid off August 2021 ​ — ​ 7,268 ​ Mortgage payable with East West Bank due June 2027 ​ ​ 8,353 ​ ​ 8,510 ​ ​ ​ ​ ​ ​ ​ ​ ​ Equipment Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equipment loan with East West Bank paid off June 2021 ​ ​ — ​ ​ 612 ​ Equipment loan with East West Bank paid off August 2021 ​ ​ — ​ ​ 4,000 ​ Equipment loan with East West Bank paid off August 2021 ​ ​ — ​ ​ 5,254 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Loans and Payment Obligations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition loan with Cathay Bank paid off August 2021 ​ — ​ 8,710 ​ French government loan paid off July 2021 ​ ​ — ​ ​ 64 ​ French government loans due December 2026 ​ ​ 269 ​ ​ 350 ​ ​ ​ ​ ​ ​ ​ ​ ​ Equipment under Finance Leases ​ 398 ​ 610 ​ Total debt ​ 78,583 ​ 46,533 ​ Less current portion of long-term debt ​ 2,202 ​ 12,263 ​ Less: Loan issuance costs ​ ​ 1,605 ​ ​ 84 ​ Long-term debt, net of current portion and unamortized debt issuance costs ​ $ 74,776 ​ $ 34,186 ​ ​ ​ 125 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Credit Agreement ​ Credit Agreement with Capital One N.A. - Due August 2026 ​ In August 2021, the Company entered into a $ 140.0 million credit agreement with Capital One N.A. acting as a lender and as agent for other lenders. Under the terms of the credit agreement, the Company borrowed $ 70.0 million in the form of a term loan. Proceeds from the loan were used to pay down certain of the Company’s outstanding loans and revolving lines of credit with Cathay Bank and East West Bank. The interest rate on the term loan is based on a variable interest rate, plus an applicable margin rate ranging between 0.5 % and 2.5 %, determined based on the Company’s net leverage ratio as defined by the terms of the agreement. The loan matures in August 2026. ​ At December 31, 2021, the interest rate on this loan was 1.84 %. ​ The loan requires principal payments of $ 1.8 million per year for the first two years, which increases to $ 3.5 million during the third and fourth year and to $ 3.9 million in the fifth year, with the remaining balance due at maturity. The loan is secured by substantially all of the Company’s assets, excluding the assets of ANP. ​ The credit agreement provides for a $ 70.0 million revolving credit facility, which bears a variable interest rate, plus a fixed margin. ​ In conjunction with the new credit agreement, the Company entered into an interest rate swap agreement with Capital One N.A., with a notional amount of $ 55.0 million to exchange the variable interest rate on the new term loan for a fixed rate of 0.93 %. ​ The Company incurred approximately $ 1.7 million in issuance costs in connection with this credit agreement, which are being amortized over the term of the loan. ​ Line of Credit Facilities ​ Line of Credit Facility with China Everbright Bank – Closed June 2021 ​ In June 2020, the Company entered into a line of credit facility with China Everbright bank for $ 0.7 million. The loan bore interest at a fixed rate of 4.05 %. Interest payments were due quarterly and repayment of the principal amount was due in June 2021. In June 2021, the Company repaid all outstanding amounts due under this line of credit. ​ Line of Credit Facility with China Merchant Bank – Due March 2023 ​ In March 2020, the Company entered into a credit agreement with China Merchant Bank. The credit agreement allows the Company to borrow up to $ 14.6 million secured by buildings and land use rights held by ANP. The interest rate and other terms will be determined at the time of the borrowing, depending on the type of loan requested. The credit period is for 36 months and expires in March 2023. ​ In August 2020, the Company borrowed $ 0.4 million under the credit agreement. The loan bore interest at a fixed rate of 4.35 %. Interest payments were due quarterly and repayment of the principal amount was due in August 2021. In August 2021, the Company repaid all outstanding amounts due under this loan. As of December 31, 2021, the Company did not have any amounts outstanding under this line of credit. ​ Line of Credit Facility with Bank of Nanjing – Deconsolidated ​ In October 2020, Hanxin entered into a line of credit facility with Bank of Nanjing for $ 0.2 million. The loan bore interest at a fixed rate of 4.6 %. Interest payments were due monthly and repayment of the principal amount was due in 126 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ October 2021. As a result of the deconsolidation of Hanxin during the third quarter of 2021, the line of credit was no longer on the Company’s consolidated balance sheets. ​ Line of Credit Facility with Cathay Bank — Closed August 2021 ​ In April 2012, the Company entered into a $ 20.0 million revolving line of credit facility with Cathay Bank. Borrowings under the facility were secured by inventory, accounts receivable, and intangibles held by the Company. The facility had a variable interest rate at the prime rate as published by The Wall Street Journal with a minimum interest rate of 4.00 %. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company closed this line of credit. ​ Line of Credit Facility with East West Bank — Closed August 2021 ​ In March 2012, the Company entered into a $ 10.0 million line of credit facility with East West Bank, which had a variable interest rate at the prime rate as published by The Wall Street Journal . Borrowings under the facility were secured by inventory and accounts receivable. In March 2016, the facility was amended to increase the line of credit to $ 15.0 million. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company closed this line of credit. ​ Equipment Line of Credit with East West Bank — Closed August 2021 ​ In September 2020, the Company entered into a $ 10.0 million equipment credit line with a 12-month draw down period with East West Bank. Interest payments were due monthly through September 2021 at the prime rate as published by The Wall Street Journal minus 0.5 %. After the draw down period, the outstanding principal balance converted into a 48-month term loan that had a variable interest rate at the prime rate as published by The Wall Street Journal minus 0.5 %. The loan would have matured in September 2025, and the principal and interest payments were due monthly. Borrowings under the facility were secured by equipment. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company repaid all outstanding amounts and closed this line of credit. ​ Mortgage Loans ​ Mortgage Payable with East West Bank — Paid off May 2021 ​ The Company refinanced the mortgage term loan with East West Bank in January 2016, which had an outstanding principal balance of $ 3.7 million at December 31, 2015, and had a maturity date of May 2021. The refinanced loan was payable in monthly installments with a final balloon payment of $ 3.3 million. The refinanced loan was secured by one of the buildings at the Company’s Rancho Cucamonga, California, headquarters complex. The refinanced loan had a variable interest rate at the prime rate as published by The Wall Street Journal . In May 2021, the Company repaid all outstanding amounts due under this loan. ​ Mortgage Payable with East West Bank — Paid off August 2021 ​ In September 2006, the Company entered into a mortgage term loan with East West Bank in the principal amount of $ 2.8 million, which matured in September 2016. The Company refinanced the mortgage term loan in September 2016, which increased the principal amount to $ 3.6 million and extended the maturity date to October 2026. The refinanced loan was payable in monthly installments with a final balloon payment of $ 2.9 million. The refinanced loan was secured by one of the buildings at the Company’s Rancho Cucamonga, California, headquarters complex. The refinanced loan had a variable interest rate at the one-month LIBOR rate plus 2.75 %. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company repaid all outstanding amounts under this loan. ​ 127 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Mortgage Payable with Cathay Bank — Paid off August 2021 ​ In August 2017, the Company refinanced the mortgage term loan with Cathay Bank that had been entered into on April 2014, with a principal balance outstanding of $ 7.9 million. The loan was payable in monthly installments and was secured by the building at the Company’s Canton, Massachusetts location. The loan bore interest at a fixed rate of 4.70 % for the first five years of the loan; thereafter, the loan had a variable interest rate at the prime rate as published by The Wall Street Journal and would have matured in June 2027. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company repaid all outstanding amounts under this loan. ​ Mortgage Payable with East West Bank — Due June 2027 In May 2017, the Company entered into a mortgage term loan with East West Bank in the principal amount of $ 9.0 million, which matures in June 2027. The loan is payable in monthly installments with a final balloon payment of $ 7.4 million plus interest. The loan is secured by one of the buildings at the Company’s Rancho Cucamonga, California, headquarters complex and two buildings at the Company’s Chino, California, facility. The loan bears a variable interest rate at the one-month LIBOR rate plus 2.5 %. As of December 31, 2021, the fair value of the loan approximates its book value. The interest rate used in the fair value estimation was determined to be a Level 2 input. The Company entered into a fixed interest rate swap contract on this loan to exchange the variable interest rate for a fixed interest rate of 4.79 % until June 2024. ​ Equipment Loans ​ Equipment Loan with East West Bank – Paid off June 2021 ​ In March 2016, the Company entered into a $ 5.0 million equipment credit facility with East West Bank. In May 2017, the Company converted the outstanding balance of $ 5.0 million into a term equipment loan that matured in June 2021. Borrowings under the loan were secured by equipment. The loan had a variable interest rate at the prime rate as published by The Wall Street Journal . In June 2021, the Company repaid all outstanding amounts under this loan. ​ Equipment Loan with East West Bank — Paid off August 2021 ​ In June 2017, the Company entered into an $ 8.0 million equipment credit line with an 18 -month draw down period with East West Bank. Interest payments were due monthly through December 2018 at the prime rate as published by The Wall Street Journal . After the draw down period, the outstanding principal balance converted into a 48 -month term loan which had a variable interest rate at the prime rate as published by The Wall Street Journal . The loan would have matured in December 2022, and the principal and interest payments were due monthly. Borrowings under the facility were secured by equipment. In June 2018, the Company drew down $ 8.0 million on the equipment credit line and in December 2018, the credit line converted into an equipment loan. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company repaid all outstanding amounts under this loan. ​ Equipment loan with East West Bank — Paid off August 2021 ​ In January 2019, the Company entered into a $ 10.0 million equipment credit line with East West Bank which had a 12 -month draw down period. Interest payments were due monthly through February 2020 at the prime rate as published by The Wall Street Journal minus 1 % . After the draw down period, the outstanding principal balance converted into a 48 -month term loan which had a variable interest rate at the prime rate as published by The Wall Street Journal minus 1 % . The loan would have matured in February 2024, and the principal and interest payments were due monthly. Borrowings under the facility were secured by equipment. In January 2020, the Company drew an additional $ 3.0 million on the equipment credit line and in February 2020, the credit line converted into a $ 6.6 million equipment loan. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company repaid all outstanding amounts under this loan. 128 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Other Loans and Payment Obligations ​ Acquisition Loan with Cathay Bank — Paid off August 2021 ​ On April 22, 2014, in conjunction with the Merck API Transaction, the Company entered into a secured term loan with Cathay Bank as lender. The principal amount of the loan was $ 21.9 million and had a variable interest rate at the prime rate as published by The Wall Street Journal , with a minimum interest rate of 4.00 %. The loan was secured by 65 % of the issued and outstanding shares of stock in AFP and certain assets of the Company, including accounts receivable, inventory, certain investment property, goods, deposit accounts, and general intangibles but not including the Company’s equipment and real property. ​ In July 2019, the Company amended the acquisition loan relating to the AFP acquisition. The amendment was effective in June 2019. Under the amended loan agreement, the maturity date was extended to June 2024. The acquisition loan had a variable interest rate at the prime rate as published by The Wall Street Journal , with a minimum interest rate of 5.00 %. Beginning in August 2019, and through the maturity date, the Company made monthly payments of principal and interest based on the then outstanding amount of the loan amortized over a 60-month period. As a result of the credit agreement that the Company entered into with Capital One N.A. in August 2021, the Company repaid all outstanding amounts under this loan. ​ Loans with Seine-Normandie Water Agency ​ In December 2018, the Company entered into two additional French government loans with the Seine-Normandie water agency in the aggregate amount $ 0.5 million. The loans have 8 year maturities, and include annual equal payments and bear no interest. ​ As of December 31, 2021, the payment obligation had an aggregate book value of $ 0.3 million, which approximates fair value. ​ Covenants ​ At December 31, 2021 and 2020, the Company was in compliance with all of its debt covenants. ​ Long-Term Debt Maturities ​ As of December 31, 2021, the principal amounts of long-term debt maturities during each of the next five fiscal years ending December 31 are as follows: ​ ​ ​ ​ ​ ​ ​ Long-term ​ ​ Debt ​ ​ (in thousands) 2022 $ 1,969 2023 ​ 2,414 2024 ​ 3,736 2025 ​ 4,184 2026 ​ 58,443 Thereafter ​ 7,439 ​ ​ $ 78,185 ​ ​ ​ ​ 129 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Note 15. Income Taxes ​ The Company’s income (loss) before income taxes generated from its United States and foreign operations were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands) Income (loss) before income taxes: ​ ​ ​ ​ United States ​ $ 86,236 ​ $ 15,634 ​ $ 77,092 ​ Foreign ​ ( 2,097 ) ​ ( 10,997 ) ​ ( 16,864 ) ​ Total income (loss) before taxes ​ $ 84,139 ​ $ 4,637 ​ $ 60,228 ​ ​ The Company’s provision for income taxes consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands) Current provision: ​ ​ ​ ​ Federal ​ $ 14,088 ​ $ 1,803 ​ $ 4,283 ​ State ​ 1,182 ​ 541 ​ 430 ​ Foreign ​ 1,676 ​ 279 ​ 1,514 ​ Total current provision ​ 16,946 ​ 2,623 ​ 6,227 ​ Deferred provision (benefit): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ 2,657 ​ 1,770 ​ 9,825 ​ State ​ 110 ​ ( 1,489 ) ​ 499 ​ Foreign ​ 917 ​ 636 ​ ( 2,828 ) ​ Total deferred provision ​ 3,684 ​ 917 ​ 7,496 ​ Total provision for income taxes ​ $ 20,630 ​ $ 3,540 ​ $ 13,723 ​ ​ A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Statutory federal income tax ​ 21.0 % 21.0 % 21.0 % State tax expense, net of federal tax benefit 1.2 ( 16.2 ) 1.2 Foreign tax rate differences ( 2.0 ) ( 20.1 ) 1.2 Foreign valuation allowance ​ 5.5 ​ 89.5 ​ 2.5 ​ Research and development credits ( 3.2 ) ( 65.1 ) ( 4.8 ) Share-based compensation ( 0.2 ) 18.7 ( 1.5 ) Executive compensation ​ 2.3 ​ 48.1 ​ 2.9 ​ Employee-related expenses ​ 0.1 ​ 1.7 ​ 0.2 ​ Other ( 0.2 ) ( 1.3 ) 0.1 Effective tax rate ​ 24.5 % 76.3 % 22.8 % ​ The Company’s effective tax rate for 2021 decreased in comparison to 2020 primarily due to differences in pre-tax income positions. ​ Deferred Tax Assets and Liabilities ​ Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, tax credit carryforwards, and the tax effects of net operating loss carryforwards. 130 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ The significant components of the Company’s deferred tax assets and liabilities are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Deferred tax assets: ​ ​ ​ Research and development credits ​ $ 17,019 ​ $ 18,531 ​ Net operating loss carryforward ​ ​ 17,568 ​ ​ 16,187 ​ Inventory capitalization and reserve ​ 8,489 ​ 7,744 ​ Share-based compensation ​ 4,892 ​ 5,564 ​ Operating leases ​ ​ 6,555 ​ ​ 4,999 ​ Accrued expenses ​ 5,188 ​ 4,340 ​ Accrued chargebacks ​ 3,694 ​ 3,927 ​ Product return allowance ​ 5,611 ​ 3,798 ​ Intangibles ​ 2,124 ​ 2,124 ​ Other ​ ​ — ​ ​ 2,633 ​ Total deferred tax assets ​ 71,140 ​ 69,847 ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ ​ Depreciation/amortization ​ 13,525 ​ 13,735 ​ Intangibles ​ 7,893 ​ 7,298 ​ Operating leases ​ ​ 6,368 ​ ​ 4,808 ​ Federal impact of state deferred taxes ​ 3,966 ​ 3,987 ​ Other ​ ​ 642 ​ ​ — ​ Total deferred tax liabilities ​ 32,394 ​ 29,828 ​ Valuation allowance ​ ( 16,881 ) ​ ( 15,780 ) ​ Net deferred tax assets ​ $ 21,865 ​ $ 24,239 ​ ​ Net Operating Loss Carryforwards and Tax Credits ​ At December 31, 2021, the Company had approximately $ 0.8 million California net operating loss carryforwards, or NOL carryforwards, and no material U.S. federal or other state NOL carryforwards. The California NOL carryforwards begin to expire in 2032 . The Company had France and United Kingdom foreign NOL carryforwards of approximately $ 68.1 million and $ 2.0 million, respectively. The France and United Kingdom NOL carryforward can be used annually with certain limitations and have an indefinite carryforward. At December 31, 2021, the Company had California research and development tax credit carryforwards of approximately $ 22.8 million. The California research and development tax credit has an indefinite carryforward period. ​ The utilization of NOL and credit carryforwards and other tax attributes could be subject to an annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, or the Code, whereby they could be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period as defined in the Code. ​ Valuation Allowance ​ In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Ultimately, the realization of deferred tax assets depends on the existence of future taxable income. Management considers sources of taxable income such as income in prior carryback periods, future reversal of existing deferred taxable temporary differences, tax-planning strategies, and projected future taxable income. ​ 131 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ The Company continues to record a full valuation allowance on AFP’s net deferred income tax assets and will continue to do so until AFP generates sufficient taxable income to realize its deferred income tax assets. However, a tax benefit is included in the annual effective tax rate computation for 2020 due to AFP reporting a year-to-date foreign exchange gain in other comprehensive income. As of December 31, 2021 and 2020, the Company had a full valuation allowance against the net deferred tax assets of AFP, which totaled $ 16.9 million and $ 13.7 million, respectively. ​ The Company continued to record a full valuation allowance on Hanxin’s net deferred tax assets until the July 2021 Hanxin split-off transaction caused Hanxin to be deconsolidated. As such, the Company had no valuation allowance on Hanxin’s deferred tax assets as of December 31, 2021, and a valuation allowance of $ 2.1 million as of December 31, 2020. ​ Undistributed Earnings from Foreign Operations ​ As of December 31, 2021 and 2020, deferred income taxes have not been provided for any undistributed earnings from foreign operations. The foreign subsidiaries have accumulated losses of approximately $ 30.3 million and $ 51.6 million, respectively, and as such there are no earnings in which to provide taxes. It is the Company’s plan not to repatriate future foreign earnings to the U.S. and indefinitely reinvest such earnings in the foreign jurisdiction. ​ CARES Act ​ On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was signed into law in the U.S. to provide certain relief as a result of the COVID-19 pandemic. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. As of December 31, 2021, neither the CARES Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on the Company’s effective tax rate. ​ Uncertain Income Tax Positions ​ A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 2019 ​ ​ (in thousands) Balance at the beginning of the year $ 10,053 $ 8,331 $ 6,994 Additions based on tax positions related to the current year ​ 1,754 ​ 1,815 ​ 1,382 Deductions based on tax audit settlement ​ — ​ — ​ ( 45 ) Deductions based on statute of limitations ​ ( 11 ) ​ ( 93 ) ​ — Balance at the end of the year ​ $ 11,796 ​ $ 10,053 ​ $ 8,331 ​ Included in the balance of unrecognized tax benefits as of December 31, 2021 and 2020, was $ 11.4 million and $ 9.9 million, respectively that represents the portion that would impact the effective income tax rate if recognized. ​ The Company recognizes interest and penalties related to unrecognized tax benefits in its income tax provision. For the years ended December 31, 2021, 2020 and 2019, the Company accrued interest of approximately $ 0.5 million, $ 0.2 million and $ 0.3 million, respectively, related to its uncertain tax positions. ​ The Company and/or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various U.S. states and foreign jurisdictions. As of December 31, 2021, the Company does not have a tax examination in progress for federal, state, or foreign jurisdictions. The Company is subject to income tax audit by tax authorities for tax years 2018 to 2020 for federal, 2017 to 2020 for states and 2011 to 2020 for foreign. ​ 132 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Note 16. Stockholders' Equity ​ Common and Preferred Stock ​ The Company’s Certificate of Incorporation authorizes the Company to issue 300,000,000 shares of common stock, $ 0.0001 par value per share, and 20,000,000 shares of preferred stock, $ 0.0001 par value per share. As of December 31, 2021 and 2020, there were no shares of preferred stock issued or outstanding. ​ Equity Plans ​ As of December 31, 2021, the Company has two equity plans: the Amended and Restated 2015 Equity Incentive Plan, or 2015 Plan, and the 2014 Employee Stock Purchase Plan or ESPP. Prior to the adoption of these plans, the Company granted options pursuant to the Amended and Restated 2005 Equity Incentive Award Plan. Upon termination of the predecessor plans, the shares available for grant at the time of termination, and shares subsequently returned to the plans upon forfeiture or option termination, were transferred to the successor plan in effect at the time of share return. The Company issues new shares of common stock upon exercise of stock options, vesting of restricted stock units, or RSU, and settlement of ESPP, with the exception of the awards granted to employees at AFP, which are settled through re-issuance of the Company’s treasury shares. ​ Amended and Restated 2015 Equity Incentive Plan ​ In March 2015, the Board of Directors adopted the Company’s 2015 Equity Incentive Plan, or the 2015 Plan, which was approved by the Company’s stockholders in May 2015 and is set to expire in March 2025. The 2015 Plan is designed to meet the needs of a publicly traded company, including the requirements for granting “performance based compensation” under Section 162(m) of the Internal Revenue Code. The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, performance shares, and other stock or cash awards to employees of the Company and its subsidiaries, members of the Board of Directors and consultants. ​ In November 2020, the Board of Directors approved the Amendment and Restated 2015 Equity Incentive Plan to provide that at least 95 % of the shares awarded under the plan will be subject to a minimum vesting requirement of at least one year . ​ The Company initially reserved 5,000,000 shares of common stock for issuance under the 2015 Plan. This number will be increased by the number of shares available for issuance under the Company’s prior equity incentive plans or arrangements that are not subject to options or other awards, plus the number of shares of common stock related to options or other awards granted under the Company’s prior equity incentive plans or arrangements that are repurchased, forfeited, expired, or cancelled on or after the effective date of the 2015 Plan. The 2015 Plan also contains an “evergreen provision” that allows for an annual increase in the number of shares available for issuance on January 1 of each year during the 10 year term of the 2015 Plan, beginning January 1, 2016. The annual increase in the number of shares shall be the lesser of (i) 3,000,000 shares, (ii) two and one-half percent ( 2.5 % ) of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares as determined by the Board of Directors. As of the effective date, there were 5,300,296 shares available for grant under the 2015 Plan. ​ As of December 31, 2021, the Company reserved an aggregate of 6,059,138 shares of common stock for future issuance under the 2015 Plan. In January 2022, an additional 1,192,873 shares were reserved under the 2015 Plan pursuant to the evergreen provision. ​ Amended and Restated 2005 Equity Incentive Award Plan ​ The Amended and Restated 2005 Equity Incentive Award Plan, or 2005 Plan, provided for the grant of incentive stock options, or ISOs, nonqualified stock options, or NQSOs, restricted stock awards, restricted stock unit awards, stock 133 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ appreciation rights, or SARs, dividend equivalents and stock payments to the Company’s employees, members of the Board of Directors and consultants. Stock options under the 2005 Plan were granted with a term of up to ten years and at prices no less than the fair market value of the Company’s common stock on the date of grant. To date, stock options granted to existing employees generally vest over three to five years and stock options granted to new employees vest over four years . Stock options granted to Board of Directors and consultants generally vested over one year . ​ As of March 2015, consequent to the 2015 Plan becoming effective, awards were no longer granted under the 2005 Plan. ​ 2014 Employee Stock Purchase Plan ​ In June 2014, the Company adopted the ESPP in connection with its initial public offering. A total of 2,000,000 shares of common stock are reserved for issuance under this plan. The Company’s ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. Under the ESPP, the Company may specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of its common stock will be purchased for employees participating in the offering. An offering may be terminated under certain circumstances. The price at which the stock is purchased is equal to 85 % of the lower of the fair market value of the common stock at the beginning of an offering period or on the date of purchase. ​ As of December 31, 2021, the Company has issued 954,456 shares of common stock under the ESPP and 1,045,544 shares of its common stock remains available for issuance under the ESPP. ​ For the year ended December 31, 2021, 2020, and 2019, the Company recorded ESPP expense of $ 0.7 million, $ 0.8 million, and $ 0.7 million, respectively. ​ Share Buyback Program ​ As of December 31, 2021, the Company’s Board of Directors have authorized a total of $ 160.0 million in the share buyback program. The primary goal of the program is to offset dilution created by the Company’s equity compensation programs. The Company’s share buyback program is expected to continue for an indefinite period of time. ​ Purchases are made through open market and private block transactions pursuant to Rule 10b5-1 plans, privately negotiated transactions or other means as determined by the Company’s management and in accordance with the requirements of the SEC. The timing and actual number of treasury share purchases will depend on a variety of factors including price, corporate and regulatory requirements, and other conditions. These treasury share purchases are accounted for under the cost method and are included as a component of treasury stock in the Company’s consolidated balance sheets. ​ Pursuant to the Company’s share buyback program, the Company purchased 1,477,305 shares, 1,366,384 shares, and 1,122,781 , shares of its common stock during the years ended December 31, 2021, 2020 and 2019, totaling $ 28.9 million, $ 24.4 million, and $ 22.3 million, respectively. ​ Share-Based Award Activity and Balances (excluding the ANP Equity Plan) ​ The Company accounts for share-based compensation payments in accordance with ASC 718, which requires measurement and recognition of compensation expense at fair value for all share-based payment awards made to employees and directors. Under these standards, the fair value of option awards and the option components of the ESPP awards are estimated at the grant date using the Black-Scholes option-pricing model. The fair value of RSUs is estimated at the grant date using the Company’s common share price. Compensation cost for all share-based payments granted with service-based graded vesting schedules is recognized using the straight-line method over the requisite service period. 134 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Options issued under the Company’s 2015 Plan and 2005 Plan, are granted at exercise prices equal to or greater than the fair value of the underlying common shares on the date of grant and vest based on continuous service. There have been no awards with performance conditions and no awards with market conditions. The options have a contractual term of five to ten years and generally vest over a three - to five -year period. The Black-Scholes option pricing model has various inputs such as the common share price on the date of grant, exercise price, the risk-free interest rate, volatility, expected life and dividend yield, all of which are estimates. The Company records share-based compensation expense net of expected forfeitures. The change of any of these inputs could significantly impact the determination of the fair value of the Company’s options as well as significantly impact its results of operations. The significant assumptions used in the Black-Scholes option-pricing are as follows: ● Determination of Fair Value of the Underlying Common Stock. For options and ESPP awards granted, the fair value for its underlying common stock is determined using the closing price on the date of grant as reported on the Nasdaq Global Select Market, or Nasdaq. Following the listing of our common stock on Nasdaq, we use the closing stock price as reported on Nasdaq on the grant date for the fair value of its stock. ​ ● Expected Volatility. Starting in 2020, the Company estimates its volatility based on the historical volatility of its stock price since IPO. Prior to that, the Company had limited data regarding company-specific historical or implied volatility of its share price. Consequently, the Company estimated its volatility based on the weighted average historical volatility of its stock price since its IPO and the stock price volatility from a set of peer companies, since our shares did not have sufficient trading history. Management considered factors such as stage of life cycle, competitors, size, market capitalization and financial leverage in the selection of similar entities. ​ ● Expected Term. The expected term represents the period of time in which the options granted are expected to be outstanding. The Company estimates the expected term of options with consideration of vesting date, contractual term, and historical experience for exercise and post-vesting employment or contractual termination behavior after its common stock has been publicly traded. The expected term of “plain vanilla” options is estimated based on the midpoint between the vesting date and the end of the contractual term under the simplified method permitted by the SEC implementation guidance. ​ ● Risk- Free Rate. The risk-free interest rate is selected based upon the implied yields in effect at the time of the option grant on U.S. Treasury zero-coupon issues with a term approximately equal to the expected life of the option being valued. ​ ● Dividends. The Company does not anticipate paying cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield rate of zero. ​ The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual experience differs from those estimates. For the years ended December 31, 2021, 2020 and 2019, the Company estimated an average overall forfeiture rate of approximately 6 %, 5 %, and 5 %, respectively, based on historical experience. Forfeiture rates are separately estimated for its (1) directors and officers, (2) management personnel and (3) other employees. Share-based compensation is recorded net of expected forfeitures. The Company periodically assesses the forfeiture rate and the amount of expense recognized based on estimated historical forfeitures as compared to actual forfeitures. Changes in estimates are recorded in the period they are identified. ​ Tax benefits resulting from tax deductions in excess of the share-based compensation cost recognized (excess tax benefits) are recorded in the statements of cash flows as financing activities. ​ 135 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ The weighted-averages for key assumptions used in determining the fair value of options granted during the years ended December 31, 2021, 2020, and 2019 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 Average volatility ​ 42.1 % 43.1 % 42.5 % Average risk-free interest rate ​ 1.2 % 0.8 % 2.4 % Weighted-average expected life in years ​ 6.1 ​ 5.7 ​ 5.7 ​ Dividend yield rate ​ — % — % — % ​ Stock Options ​ A summary of option activity under all plans for the year ended December 31, 2021, is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ Remaining ​ Aggregate ​ ​ ​ ​ Exercise ​ Contractual ​ Intrinsic ​ ​ Options ​ Price ​ Term (Years) ​ Value (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Outstanding as of December 31, 2020 8,580,475 $ 15.00 ​ ​ Options granted 1,438,338 ​ ​ 18.26 ​ ​ ​ ​ ​ ​ Options exercised ( 1,302,350 ) ​ ​ 13.95 ​ ​ ​ ​ ​ ​ Options cancelled ( 190,291 ) ​ ​ 17.07 ​ ​ ​ ​ ​ ​ Options expired ( 70,451 ) ​ ​ 15.27 ​ ​ ​ ​ ​ ​ Outstanding as of December 31, 2021 8,455,721 ​ $ 15.67 ​ 5.22 ​ $ 64,431 ​ Exercisable as of December 31, 2021 5,606,787 ​ $ 15.11 ​ 3.76 ​ $ 45,848 ​ Vested and expected to vest as of December 31, 2021 ​ 8,265,759 ​ $ 15.64 ​ 5.14 ​ $ 63,213 ​ (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s common stock for those awards that have an exercise price below the estimated fair value at December 31, 2021. ​ During the years ended December 31, 2021, 2020, and 2019, the Company recorded expense of $ 8.0 million, $ 9.1 million, and $ 8.1 million, respectively, related to stock options granted under all plans. ​ Information relating to option grants and exercises is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 ​ (in thousands, except per share data) Weighted-average grant date fair value per option share ​ $ 7.62 ​ $ 5.51 ​ $ 8.48 ​ Intrinsic value of options exercised ​ 7,906 ​ 9,169 ​ 7,718 ​ Cash received from options exercised ​ 16,757 ​ 24,357 ​ 7,761 ​ Total fair value of the options vested during the period ​ 8,177 ​ 9,978 ​ 7,613 ​ ​ 136 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ A summary of the status of the Company’s non-vested options as of December 31, 2021, and changes during the year ended December 31, 2021, are presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ Grant Date ​ ​ Options ​ Fair Value Non-vested as of December 31, 2020 ​ 2,825,652 ​ $ 6.50 ​ Options granted 1,438,338 ​ ​ 7.62 ​ Options vested ( 1,224,765 ) ​ ​ 6.68 ​ Options forfeited ( 190,291 ) ​ ​ 7.05 ​ Non-vested as of December 31, 2021 2,848,934 ​ 6.95 ​ ​ As of December 31, 2021, there was $ 12.3 million of total unrecognized compensation cost, net of forfeitures, related to non-vested stock option based compensation arrangements granted under all plans. The cost is expected to be recognized over a weighted-average period of 2.5 years and will be adjusted for future changes in estimated forfeitures. ​ In April 2020, Jason Shandell resigned from his position as the Company’s President and General Counsel and as a member of the Company’s board of directors. In connection with his resignation, the Company and Mr. Shandell entered into a separation agreement. As part of the separation agreement, the Company agreed to accelerate 80 % of his unvested stock options and extended the expiration date of certain vested stock option awards. As a result of this modification, the Company incurred share-based compensation expense of $ 0.7 million, which is included within general and administration expenses in the consolidated statement of operations for the year ended December 31, 2020. ​ Restricted Stock Units ​ The Company grants restricted stock units, or RSUs, to certain employees and members of the Board of Directors with a vesting period of up to five years . The grantee receives one share of common stock at a specified future date for each RSU awarded. The RSUs may not be sold or otherwise transferred until certificates of common stock have been issued, recorded, and delivered to the participant. The RSUs do not have any voting or dividend rights prior to the issuance of certificates of the underlying common stock. The share-based expense associated with these grants was based on the Company’s common stock fair value at the time of grant and is amortized over the requisite service period, which generally is the vesting period, using the straight-line method. During the years ended December 31, 2021, 2020, and 2019, the Company recorded expenses of $ 8.1 million, $ 10.0 million, and $ 8.2 million, respectively, related to RSU awards granted under all plans. ​ As part of the separation agreement with Mr. Shandell, the Company agreed to accelerate the vesting of 80 % of his RSU awards. As a result of this modification, the Company incurred share-based compensation expense of $ 1.6 million, which is included within general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2020. ​ As of December 31, 2021, there was $ 13.1 million of total unrecognized compensation cost, net of forfeitures, related to non-vested RSU-based compensation arrangements granted under all plans. The cost is expected to be recognized over a weighted-average period of 2.5 years and will be adjusted for future changes in estimated forfeitures. ​ ​ 137 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Information relating to RSU grants and deliveries is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Fair Market ​ ​ Total RSUs ​ Value of RSUs ​ Issued Issued (1) ​ ​ ​ ​ (in thousands) RSUs outstanding at December 31, 2020 1,156,518 ​ ​ ​ ​ RSUs granted 600,797 ​ $ 10,954 ​ RSUs forfeited ( 78,755 ) ​ ​ ​ ​ RSUs vested (2) ( 493,718 ) ​ ​ ​ ​ RSUs outstanding at December 31, 2021 1,184,842 ​ ​ ​ ​ (1) The total FMV is derived from the number of RSUs granted times the current stock price on the date of grant. (2) Of the vested RSUs, 167,268 shares of common stock were surrendered to fulfil tax withholding obligations ​ The 2018 ANP Equity Incentive Plan ​ In December 2018, ANP’s board of directors approved the 2018 ANP Equity Incentive Plan, or the 2018 Plan, which was set to expire in December 2023. The 2018 Plan permitted the grant of stock options and other equity awards in ANP shares to ANP employees. ​ During the second quarter of 2021, in connection with the ANP restructuring, the 2018 Plan was terminated. ​ At the time of the 2018 Plan termination, the number of stock options outstanding was 5,018,880 . As part of the termination, ANP cash settled 4,091,080 stock options, of which 1,944,771 stock options were vested and 2,146,309 stock options were unvested, for $ 0.8 million which approximated the fair value of these awards at the time of the settlement. The cash settlement of these awards was recorded as a reduction in equity. ​ For the remaining 927,800 stock option awards that were outstanding under the 2018 Plan, of which 56,925 stock options were vested and 870,875 were unvested, the Company cancelled these awards and issued replacement awards under the 2015 Plan. The modified awards vest over periods ranging from 1 to 2 years and have a 10-year contractual term. The cancellation and replacement of the awards was accounted for as a modification in accordance with ASC 718. ​ As a result of the modification, the Company incurred $ 2.3 million of share-based compensation expense, of which $ 1.8 million was recorded within general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2021, and the remaining $ 0.5 million which will be recognized over the vesting period of the modified awards. ​ Prior to the termination of the 2018 Plan, for the years ended December 31, 2021, 2020 and 2019, the Company recorded expense of $ 0.5 million, $ 0.7 million and $ 0.3 million related to stock options issued by ANP under the 2018 Plan, respectively. ​ 138 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Share-based Compensation Expense ​ The Company recorded share-based compensation expense under all plans and is included in the Company’s consolidated statement of operations as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands) Cost of revenues ​ $ 3,778 $ 4,248 $ 3,819 ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, distribution, and marketing ​ ​ 596 ​ 456 ​ 387 ​ General and administrative ​ ​ 12,622 ​ 14,089 ​ 11,538 ​ Research and development ​ ​ 1,691 ​ 1,705 ​ 1,551 ​ Total share-based compensation ​ ​ $ 18,687 ​ $ 20,498 ​ $ 17,295 ​ ​ ​ ​ ​ ​ ​ Note 17. Employee Benefits ​ 401(k) Plan ​ The Company has a defined contribution 401(k) plan, or the Plan, whereby eligible employees voluntarily contribute up to a defined percentage of their annual compensation. The Company matches contributions at a rate of 50 % on the first 6 % of employee contributions, and pays the administrative costs of the Plan. Total employer contributions for the years ended December 31, 2021, 2020, and 2019 were approximately $ 2.0 million, $ 1.9 million, and $ 1.5 million, respectively. ​ Defined Benefit Pension Plan ​ The Company’s subsidiary, AFP, has an obligation associated with a defined-benefit plan for its eligible employees. This plan provides benefits to the employees from the date of retirement and is based on the employee’s length of time employed by the Company. The calculation is based on a statistical calculation combining a number of factors that include the employee’s age, length of service, and AFP employee turnover rate. ​ The liability under the plan is based on a discount rate of 1.00 % and 0.30 % as of December 31, 2021 and 2020, respectively. The liability is included in accrued liabilities in the accompanying consolidated balance sheets. The plan is currently unfunded, and the benefit obligation under the plan was $ 2.7 million and $ 3.0 million at December 31, 2021 and 2020, respectively. Expense under the plan was $ 0.2 million for each of the years ended December 31, 2021, 2020, and 2019. Gain or loss due to change in actuarial valuation of the Company’s defined benefit pension plan is recorded in other comprehensive income (loss). ​ Deferred Compensation Plan ​ In December 2019, the Company established a non-qualified deferred compensation plan. The deferred compensation plan allows certain eligible participants to defer a portion of their cash compensation and provides a matching contribution at the discretion of the Company. The plan obligations are payable upon retirement, termination of employment and/or certain other times in a lump-sum distribution or in installments, as elected by the participant in accordance with the plan. Participants can allocate their deferred compensation amongst various investment options with earnings accruing to the participant. The Company has established a Rabbi Trust to fund the plan obligations and to hold the plan assets. Eligible participants began contributing to the plan in January 2020. The plan assets were valued at approximately $ 3.4 million as of December 31, 2021. The plan liabilities were valued at approximately $ 3.5 million as of December 31, 2021. As of December 31, 2020, the plan assets and liabilities were valued at approximately $ 1.6 million 139 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ and $ 1.7 million, respectively. The plan assets and liabilities are included in other long-term assets and other long-term liabilities, respectively, on the Company’s consolidated balance sheets. ​ Note 18. Commitments and Contingencies ​ Lease Liabilities ​ Right-of-Use, or ROU assets, represent the Company’s right to control an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Lease terms are generally based on their initial non-cancelable terms, unless there is a renewal option that is reasonably certain to be exercised. Various factors, including economic incentives, intent, past history and business needs are considered to determine if a renewal option is reasonably certain to be exercised. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the discount rate used to present value the lease payments. The Company has lease agreements with both lease and non-lease components, which are accounted for as a single component for all asset classes. The Company leases real and personal property, in the normal course of business, under various non-cancelable operating leases. The Company, at its option, can renew a substantial portion of its leases, at the market rate, for various renewal periods ranging from one to six years . ​ The components of lease costs for the years ended December 31, 2021, 2020 and 2019 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands) Operating lease costs ​ $ 4,328 $ 4,462 $ 3,981 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term lease costs ​ ​ ​ 518 ​ ​ 649 ​ ​ 613 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance lease costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of right-of-use assets ​ ​ 384 ​ 351 ​ 351 Interest on lease liabilities ​ ​ 26 ​ 33 ​ 46 Total finance lease costs ​ ​ $ 410 ​ $ 384 ​ $ 397 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total lease costs ​ ​ $ 5,256 ​ $ 5,495 ​ $ 4,991 ​ ​ 140 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ Other information pertaining to leases is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2021 ​ ​ 2020 ​ ​ 2019 ​ ​ ​ ​ (in thousands, except lease term and discount rate) ​ Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating cash flows from operating leases ​ $ 4,446 ​ $ 4,491 ​ $ 3,531 ​ Operating cash flows from finance leases ​ ​ ​ 25 ​ ​ ​ 33 ​ ​ ​ 46 ​ Financing cash flows from finance leases ​ ​ ​ 310 ​ ​ ​ 369 ​ ​ ​ 354 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Right-of use assets obtained in exchange for lease liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating leases ​ ​ ​ 11,041 ​ ​ ​ 4,819 ​ ​ ​ 7,978 ​ Finance leases ​ ​ 110 ​ ​ 61 ​ ​ 143 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average remaining lease term (years) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating leases ​ ​ 10 ​ ​ 8.7 ​ ​ 8.1 ​ Finance leases ​ ​ 2 ​ ​ 2.3 ​ ​ 2.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average discount rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating leases ​ ​ 4.5 % ​ 5.2 % ​ 5.9 % Finance leases ​ ​ 5.2 % ​ 5.0 % ​ 4.6 % ​ Future minimum rental payments under leases that have initial or remaining non-cancelable lease terms in excess of 12 months as of December 31, 2021, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating ​ Finance ​ ​ ​ ​ Leases ​ Leases ​ Total ​ ​ (in thousands) 2022 $ 4,141 ​ $ 246 ​ $ 4,387 2023 ​ 3,723 ​ 71 ​ 3,794 2024 ​ 3,385 ​ 61 ​ 3,446 2025 ​ 3,245 ​ 37 ​ 3,282 2026 ​ 3,070 ​ 6 ​ 3,076 Thereafter ​ ​ 16,810 ​ ​ — ​ ​ 16,810 Total lease payments ​ $ 34,374 ​ $ 421 ​ $ 34,795 Less: interest ​ ​ 6,689 ​ ​ 23 ​ ​ 6,712 Total ​ $ 27,685 ​ $ 398 ​ $ 28,083 ​ Purchase Commitments ​ As of December 31, 2021, the Company has entered into commitments to purchase equipment and raw materials for an aggregate amount of approximately $ 60.0 million. The Company anticipates that most of these commitments with a remaining term in excess of one year will be fulfilled by 2023. ​ 141 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Note 19. Related-Party Transactions ​ ANP Restructuring ​ Subsequent to the ANP restructuring discussed in Note 3, which involved various related parties, Hanxin is no longer a wholly-owned subsidiary of the Company and was deconsolidated in the third quarter of 2021. ​ The Company determined that it has significant influence over Hanxin as a result of its 14 % ownership interest, its seat on Hanxin’s board of directors, and Henry Zhang’s position as an equity holder, general manager, and chairman of the board of directors of Hanxin, given he is the son of Dr. Jack Zhang. Additionally, Dr. Mary Luo and Dr. Jack Zhang, through an affiliated entity, have an ownership interest in Hanxin and as such Hanxin continues to be a related party after the restructuring. ​ Retirement of James Luo ​ In December 2020, James Luo retired from his position as the Company’s Senior Vice President of Engineering and President of AFP. Mr. Luo is a relative of the Company’s Chief Operating Officer, Dr. Mary Luo. In connection with his retirement, the Company and Mr. Luo entered into a retirement agreement where the Company agreed to pay Mr. Luo approximately $ 1.0 million in cash compensation over a period of three years as well as provide health insurance coverage for a six year period beginning in 2021. As a result, the Company recorded a total of $ 1.1 million in general and administrative expense in the fourth quarter of 2020 related to this agreement. ​ Note 20. Litigation ​ Momenta/Sandoz Enoxaparin Patent and Antitrust Litigation ​ In September 2011, Momenta Pharmaceuticals, Inc., or Momenta, a Boston based pharmaceutical company, and Sandoz Inc., or Sandoz, the generic division of Novartis, initiated litigation against the Company for alleged patent infringement of two patents related to testing methods for batch release of enoxaparin, which the Company refers to as the “’886 patent” and the “’466 patent.” ​ On September 17, 2015, the Company initiated an antitrust lawsuit by filing a complaint in the California District Court against Momenta and Sandoz. This lawsuit was subsequently transferred to the Massachusetts District Court. ​ On May 20, 2019, the Company and Momenta and Sandoz entered into a Settlement Agreement to settle the patent litigation and antitrust litigation. On June 27, 2019, Momenta and Sandoz paid the Company $ 59.9 million. The Company recorded the settlement amount as other income (expenses), in its consolidated statements of operations. ​ Amphastar Pharmaceuticals, Inc. v Aventis Pharma, SA ​ In January 2009, the Company filed a qui tam complaint in the U.S. District Court for the Central District of California, alleging that Aventis Pharma S.A., or Aventis, through its acquisition of a patent through false and misleading statements to the U.S. Patent and Trademark Office, as well as through false and misleading statements to the FDA, overcharged the federal and state governments for its Lovenox ® product (the “Aventis FCA Action”). ​ On May 11, 2017, the Company’s lawsuit against Aventis was dismissed for lack of jurisdiction. On July 14, 2017, Aventis filed an application with the District Court for entitlement to attorneys’ fees and expenses. On November 20, 2017, the District Court issued its order granting Aventis’ application for fees, and on November 13, 2020, the Court issued an Order (“November Order”) awarding Aventis $ 12.1 million in attorneys’ fees and $ 0.7 million in costs and 142 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ expenses. The Company recorded $ 12.8 million in other income (expenses) in the consolidated statement of operations for the year ended December 31, 2020. ​ On May 3, 2021, the Court issued a further Order based upon supplemental application to the Court seeking fees, expenses, and interest for the period after, and not covered by, the November Order. The Court awarded Aventis an additional $ 4.4 million bringing the total amount awarded to Aventis to $ 17.2 million. ​ On June 30, 2021, the Company and Aventis entered into a settlement agreement to settle the attorney fees’ and expenses claim for $ 14.5 million. The additional $ 1.7 million was recorded in other income (expenses), in the consolidated statement of operations. The settlement was paid in full in the third quarter of 2021. ​ Hatch-Waxman Litigations ​ Regadenoson (0.4 mg/5 mL, 0.08 mg/mL) Patent Litigation ​ On February 25, 2020, Astellas US LLC, Astellas Pharma US, Inc., and Gilead Sciences, Inc. (collectively, “Astellas-Gilead”) filed a Complaint in the United States District Court for the District of Delaware against IMS for infringement of U.S. Patent Nos. 8,106,183 (the “‘183 patent”), RE47,301 (the “‘301 patent”), and 8,524,883 (the “‘883 patent”) (collectively, “Astellas-Gilead Patents”) with regard to IMS’s ANDA No. 214,252 for approval to manufacture and sell 0.4 mg/5 mL (0.08 mg/mL) intravenous solution of Regadenoson. On March 4, 2020, IMS filed its Answer and Counterclaims. On March 30, 2020, the Court issued an Order allowing the Company to join pending consolidated litigation with five other generic Regadenoson ANDA filers involving similar claims. The Company’s 30-month FDA stay expires August 10, 2022. On January 26, 2022, the Company and Astellas-Gilead reached an agreement to resolve the lawsuit. The parties submitted, and the Court granted, a motion to dismiss without prejudice Astellas-Gilead’s complaint of infringement against IMS on January 27, 2022. ​ Teriparatide (0.25 mg/mL) Patent Litigation ​ On June 29, 2021, the Company filed a Complaint in the United States District Court for the Southern District of Indiana against Eli Lilly and Company (“Lilly”) seeking a declaratory judgment of non-infringement of U.S. Patent No. 7,517,334 with regard to Amphastar’s ANDA No. 213,641 for approval to manufacture and sell 0.25 mg/mL prefilled pens. On September 30, 2021, the Company and Lilly submitted a motion for entry of a consent judgment of non-infringement of Amphastar’s ANDA No. 213,641 in favor of Amphastar and against Lilly. The Court endorsed the consent judgment and issued a final determination in favor of Amphastar and against Lilly on October 1, 2021. ​ Employee Litigations ​ Brenes v. International Medication Systems, Limited ​ On September 11, 2019, a former employee, Raquel Brenes, (“Brenes”), initiated an employment litigation against IMS et al. by filing a Complaint in the Superior Court of California, Los Angeles County alleging individual and class action claims for alleged violations of various California labor laws pertaining to wage and hour, and other state laws. On September 18, 2019, Brenes filed a First Amended Complaint maintaining the individual and class action claims. On January 21, 2020, Brenes filed a Second Amended Complaint that alleges only Private Attorney General Act, or PAGA, claims and omitted the individual and class action claims. On February 9, 2021, the Company was able to successfully resolve these claims, as well as Brenes’ personal employment claims at mediation for $ 1.0 million. The settlement was approved by the Court on April 7, 2021. The Company accrued the amount of $ 1.0 million as of December 31, 2020. ​ Ramirez v. Amphastar Pharmaceuticals, Inc. ​ On May 29, 2020, Priscilla Ramirez, (“Ramirez”), a former employee filed a PAGA lawsuit for alleged violations of various California labor laws pertaining to wage and hour against the Company. The Company accrued the amount of 143 Table of Contents AMPHASTAR PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ $ 1.0 million for this litigation as of March 31, 2021. On April 5, 2021, the parties reached a settlement for $ 1.0 million. On June 9, 2021, Ramirez submitted a motion to the Court seeking approval of the settlement. On August 16, 2021, the Court approved the settlement. On September 13, 2021, consistent with the terms of the settlement agreement, the Company remitted payment for this case, thus resolving the matter. ​ Navarrette v. International Medication Systems, Limited ​ On January 30, 2020, a former employee, Robert Navarrette, (“Navarrette”), provided written notice, through his counsel to IMS that he intends to file a PAGA lawsuit for alleged violations of various California labor laws pertaining to wage and hour. On April 7, 2020, Navarrete filed his PAGA lawsuit against IMS and Amphastar Pharmaceuticals, Inc. in the Superior Court of California, Los Angeles County, Central District. As to IMS, the Brenes settlement subsumes the claims of Navarrette. As to the Company, the Ramirez settlement subsumes the claims of Navarette covering overlapping periods. ​ Other Litigation ​ The Company is also subject to various other claims, arbitrations, and lawsuits from time to time arising in the ordinary course of business. ​ The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the opinion of management, the ultimate resolution of any such matters is not expected to have a material adverse effect on its financial position, results of operations, or cash flows; however, the results of litigation and claims are inherently unpredictable and the Company’s view of these matters may change in the future. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. ​ Note 21. Subsequent Events ​ On January 26, 2022, the Company reached an agreement with Astellas US, LLC, Astellas Pharma US, Inc. (together with Astellas US, LLC, “Astellas”), and Gilead Sciences, Inc. to settle the Regadenoson patent litigation (See Note 20). Under the terms of the agreement, the Company received $ 5.4 million from Astellas constituting saved litigation expenses. ​ ​ ​ 144 Table of Contents ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.