What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-29 · 134 added, 192 removed, 222 unchanged (59% of the section changed)

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In this section, we generally discuss the results of our operations for the year ended December 31, 2024, compared to the year ended December 31, 2023.

For a discussion of the year ended December 31, 2022, to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023, which discussion is hereby incorporated herein by reference.

For a discussion of the year ended December 31, 2023, to the year ended December 31, 2022, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024, which discussion is hereby incorporated herein by reference.

We are a bio-pharmaceutical company focusing primarily on developing, manufacturing, marketing, and selling technically challenging generic and proprietary injectable, inhalation, and intranasal products, as well as insulin API products.

We currently manufacture and sell over 25 products.

Our largest products by net revenues currently include glucagon, Primatene MIST ® , epinephrine, lidocaine, BAQSIMI ® , and phytonadione.

In April 2022, the FDA approved our ganirelix acetate injection 250mg/0.5mL prefilled syringe, which we launched in June 2022.

In July 2022, the FDA approved our vasopressin injection, USP 20 Units/mL, 1 mL single-dose vial, which we launched in August 2022.

In May 2022, the FDA approved our regadenoson injection, 0.08mg/mL, 5mL, single-dose prefilled syringe, which we launched in April 2023.

On June 30, 2023, we completed our acquisition of BAQSIMI ® .

BAQSIMI ® is the first and only nasally administered glucagon for the treatment of severe hypoglycemia in people with diabetes and is currently available in 27 international markets.

In March 2023, the FDA approved our naloxone hydrochloride nasal spray 4mg, REXTOVY TM , which we plan to launch in the first quarter of 2024.

We are currently developing a portfolio of generic abbreviated new drug applications, or ANDAs, biosimilar insulin product candidates, and proprietary product candidates, which are in various stages of development and target a variety of indications.

Four of the ANDAs and one of the biosimilar insulin candidates are currently on file with the FDA.

Our largest products by net revenues currently include BAQSIMI ® , glucagon, Primatene MIST ® , epinephrine, lidocaine, and phytonadione.

In May 2024, the FDA approved our Albuterol Sulfate Inhalation Aerosol, which we launched in August 2024.

We are currently developing a portfolio of generic abbreviated new drug applications, or ANDAs, biologics license applications, or BLAs, including biosimilar insulin product candidates, and proprietary product candidates, which are in various stages of development and target a variety of indications.

Four of the ANDAs are currently on file with the FDA.

To complement our internal growth and expertise, we have made several strategic acquisitions of companies, products and technologies.

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Macroeconomic Trends and Uncertainties

The Russia-Ukraine conflict and resulting sanctions and other actions against Russia have led to uncertainty and disruption in the global economy.

Although the conflict has not had a direct material adverse impact on our revenues or other financial results, one of our insulin API customers in Western Europe, that previously bought our product and resold it into Russia, did not purchase API from us in 2022 and has not purchased from us in 2023.

We are closely monitoring the events of the Russia-Ukraine conflict and its impact on Europe and throughout the rest of the world.

It is not clear at this time how long the conflict will endure, or if it will escalate further, which could further compound the adverse impact to the global economy and consequently affect our results of operations.

Certain other worldwide events and macroeconomic factors, such as international trade relations, new legislation and regulations, taxation or monetary policy changes, public sector budgetary cycles and funding authorization in the United

States, political and civil unrest, global conflicts such as the Middle East conflict, supply chain disruptions, inflationary pressures, and rising interest rates, among other factors, also increase volatility in the global economy.

Recent worldwide events and macroeconomic factors, such as international trade relations, new legislation and regulations, changes in administration, taxation or monetary policy changes, public sector budgetary cycles and funding authorization in the United States, political and civil unrest, global conflicts such as the Russia-Ukraine and Middle East conflicts, supply chain disruptions, heightened inflationary pressures, tariffs and fluctuating interest rates, as well as rising healthcare costs among other factors, also increase volatility in the global economy and continue to pose challenges to our business.

For example, the United States has recently experienced historically high levels of inflation.

The existence of inflation in the United States, and global economy has and may continue to result in higher interest rates and capital costs, increased costs of labor, weakening exchange rates and other similar effects.

See Item 1A, “Risk Factors” for further discussion of the possible impact of the Russia-Ukraine conflict and other macroeconomic factors on our business.

See “Part I – Item 1A, Risk Factors” for further discussion of the potential adverse impacts of unfavorable global and geopolitical economic conditions on our business, results of operations and financial conditions.

Recent Developments

BAQSIMI ® Acquisition

On June 30, 2023, we completed our acquisition of BAQSIMI ® pursuant to an Asset Purchase Agreement, or the Purchase Agreement, with Lilly and Amphastar Medication Co., LLC, a wholly owned subsidiary of Amphastar, dated April 21, 2023.

In connection with the closing of the transaction, or the Closing, we paid Lilly $500.0 million in cash.

In addition, we are required to pay Lilly a $125.0 million guaranteed payment on the first anniversary of the closing.

We may also be required to pay additional contingent consideration of up to $450.0 million to Lilly based on the achievement of certain milestones.

On June 30, 2023, in conjunction with our acquisition of BAQSIMI ® , we entered into a $700.0 million syndicated credit agreement, or the Credit Agreement by and among the Company, certain subsidiaries of the Company, as guarantors, certain lenders, and Wells Fargo, as Administrative Agent, (in such capacity, Agent), Swing Line Lender and L/C Issuer.

The Wells Fargo Term Loan matures on June 30, 2028.

The Wells Fargo Term Loan was fully funded on June 30, 2023.

The Credit Agreement provides for a senior secured revolving credit facility, or the Revolving Credit Facility, in an aggregate principal amount of $200.0 million, with a $15.0 million letter of credit sublimit and a $15.0 million swingline loan sublimit.

The Revolving Credit Facility matures on June 30, 2028.

In September 2023, we repaid $200.0 million of the Wells Fargo Term Loan with the proceeds from the issuance of the 2029 Convertible Notes.

In October 2023, we repaid an additional $50.0 million of the Wells Fargo Term Loan.

As of December 31, 2023, we had no borrowings outstanding under the Revolving Credit Facility.

Revenues from the sales of BAQSIMI ® under the TSA with Lilly during the year ended December 31, 2023, were recognized on a net basis similar to a royalty arrangement.

In connection with the acquisition of BAQSIMI ® in June 2023, we entered into a Transition Service Agreement, or TSA, with Lilly pursuant to which Lilly agreed, for a period of time not to exceed 18 months to provide certain services to us to support the transition of the BAQSIMI ® operations, including with respect to the conduct of certain clinical, regulatory, medical affairs, and commercial sales channel activities.

Revenues from the sales of BAQSIMI ® under the TSA with Lilly during the transition period were recognized on a net basis, similar to a royalty arrangement.

The impact of this revenue recognition method resulted in lower reported revenues relative to the revenue that would have been reported had we recognized gross revenues from sales of BAQSIMI ® .

Once we assume distribution responsibilities to our customers, we will begin recognizing gross revenues and cost of revenues from sales of BAQSIMI ® , which will be classified as product revenues, net and cost of revenues, respectively.

The assumption of distribution activities will occur on a country by country basis throughout 2024, once the marketing authorizations for each territory have been transferred to us, we have setup distribution agreements, and we have obtained sufficient inventory.

Throughout 2024, we assumed distribution responsibilities from Lilly on a country-by-country basis and once the marketing authorizations for each territory were transferred to us, we entered into distribution agreements, and obtained sufficient quantities of Amphastar labeled inventory.

As we assumed distribution responsibilities in each country, we started recognizing gross revenues and cost of revenues from the sales of BAQSIMI ® , which is classified as product revenue, net and cost of revenue, respectively on the consolidated statement of operations.

As of January 1, 2025, the TSA has been completed and we distribute and manage the BAQSIMI ® supply chain in all countries where it is available.

In connection with the acquisition, we also entered into a Manufacturing Service Agreement, or MSA, with Lilly, pursuant to which Lilly agreed, for a period of time not to exceed 18 months, to provide certain manufacturing, packaging, labeling, and supply services for BAQSIMI ® directly through third-party contractors to us in connection with our operation of the development, manufacture, and commercialization of BAQSIMI ® .

The MSA expired in December 2024 and as part of the agreement, we were obligated to purchase all API, components, and finished goods from Lilly at prices agreed upon in the MSA.

During the fourth quarter of 2024, we executed new agreements with CMOs, for the supply and packaging of BAQSIMI ® , and entered into an agreement to purchase approximately $34.0 million of API, components and finished goods inventories on hand from Lilly.

For more information regarding our acquisition of BAQSIMI ® , see “Part II – Item 8.

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Business Segments

As of December 31, 2023, our performance is assessed and resources are allocated based on the following two reportable segments:

(1) finished pharmaceutical products and (2) API products.

The finished pharmaceutical products segment manufactures, markets and distributes Primatene MIST ® , epinephrine, glucagon, phytonadione, lidocaine, enoxaparin, naloxone, as well as various other critical and non-critical care drugs.

Revenues from the sale of BAQSIMI ® are also accounted for as a component of the finished pharmaceutical product segment.

The API segment manufactures and distributes RHI API and porcine insulin API for external customers and internal product development.

Information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker.

Factors used to identify our segments include markets, customers and products.

As of December 31, 2024, our performance is assessed and resources are allocated based on one reportable segment, pharmaceutical products.

We previously operated as two reportable segments, Finished pharmaceutical products and APIs.

However, as a result of the BAQSIMI ® acquisition, including the expiration of the MSA, and TSA in the fourth quarter of 2024, the level of detail at which our chief operating decision maker, or CODM, regularly reviews and manages the business has changed, resulting in a change from two reportable segments to one segment, pharmaceutical products.

Information reported herein is consistent with how it is reviewed and evaluated by our CODM.

For more information regarding our segments, see “Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 6.

– Segment Reporting Information.”

– Segment Reporting.”

Results of Operations

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(in thousands)

Finished pharmaceutical products

Total product revenues, net

Product revenues, net

Other revenues

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Cost of revenues

Finished pharmaceutical products

Total cost of revenues

as % of net revenues

The increase in net revenues of finished pharmaceutical products for 2023 was primarily due to the following changes:

The increase in net revenues for 2024 was primarily due to the following changes:

Year Ended December 31,

(in thousands)

Finished pharmaceutical products net revenues

Product revenues, net:

Primatene MIST ®

Other finished pharmaceutical products

Total finished pharmaceutical products net revenues

Other products

Total product revenues, net

Product Revenues, net

The increase in sales of glucagon was primarily due to an increase in unit volumes, as a result of two competitors discontinuing their glucagon injection products at the end of 2022.

Primatene MIST ® sales increased primarily due to an increase in average selling price.

The increase in sales of epinephrine and lidocaine was primarily due to an increase in unit volumes, as a result of an increase in demand caused by supplier shortages.

The decrease in sales of phytonadione was due to a decrease in unit volumes, as a result of increased competition.

The decrease in sales of enoxaparin was primarily due to a decrease in unit volumes.

The decrease in sales of naloxone was due to a decrease in unit volumes reducing sales by $4.6 million, as well as a lower average selling price reducing sales by $2.7 million as a result of increased competition.

The increase in other finished pharmaceutical products was primarily due to higher unit volumes of dextrose, atropine, calcium chloride, and sodium bicarbonate, due to increased demand caused by supplier shortages, as well as a full period of sales for ganirelix and vasopressin, which were launched in June 2022 and August 2022, respectively, and the launch of regadenoson in April 2023.

Throughout 2024, we assumed distribution responsibilities for BAQSIMI ® from Lilly to our customers in the United States, and certain other countries.

As a result, $126.9 million of our BAQSIMI ® sales for the year ended December 31, 2024, were recognized as product revenues, net, similar to our other products.

For more information, see “Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 4.

Revenue Recognition.”

Primatene MIST ® sales increased primarily due to an increase in unit volumes.

The increase in sales of epinephrine was primarily due to an increase in unit volumes as we began selling our epinephrine pre-filled syringes in Canada starting in the third quarter of 2024.

The decrease in sales of glucagon was primarily due to a decrease in unit volumes, as a result of competition and a move to ready to use glucagon products such as BAQSIMI ® .

The decrease in sales of enoxaparin and naloxone was primarily due to a decrease in unit volumes.

The decrease in other products was primarily due to lower unit sales of atropine and calcium chloride, as a result of other suppliers returning to their historical distribution levels, as well as lower unit sales of medroxyprogesterone, as our API supplier discontinued making the active ingredient, which resulted in a halt of sales of medroxyprogesterone after the third quarter of 2023.

Subsequently, we qualified our subsidiary, ANP, to manufacture this API, and in September 2024, we re-launched the product.

This decrease was partially offset by higher unit volumes of dextrose and sodium bicarbonate due to an increase in demand caused by other supplier shortages, as well as the launch of albuterol in August 2024.

We anticipate that sales of naloxone and enoxaparin will continue to fluctuate in the future due to competitive dynamics.

We also anticipate that sales of epinephrine and other finished pharmaceutical products will continue to fluctuate depending on the ability of our competitors to supply market demands.

Sales of medroxyprogesterone had essentially halted as of August 2023 as our API supplier discontinued manufacturing this product.

During the fourth quarter of 2023, we qualified our subsidiary ANP to manufacture this API.

Sales of medroxyprogesterone totaled $12.8 million in the year ended December 31, 2023, compared to $26.6 million in the year ended December 31, 2022.

We plan to relaunch the product during the first quarter of 2024.

Sales of API primarily depend on the timing of customer purchases.

In December 2023, we amended the Supply Agreement with MannKind Corporation, whereby MannKind’s aggregate total commitment of RHI API under the Supply Agreement was modified and extended for an additional period of time upon receipt of FDA approval of RHI produced from inclusion bodies made at AFP, which timeframe would have previously lapsed after calendar year 2027.

MannKind agreed to pay us a capacity fee quarterly beginning in 2025, until it resumes purchases.

We anticipate that sales of API will continue to fluctuate and may decrease due to the inherent uncertainties related to sales to MannKind pursuant to the Supply Agreement.

In addition, most of our API sales are denominated in euros, and the fluctuation in the value of euros versus the U.S.

dollar has had, and may continue to have, an impact on API sales revenues in the near term.

We also anticipate that sales of epinephrine and other products will continue to fluctuate depending on the ability of our competitors to supply market demands.

Other Revenues

Other revenues includes revenues from the sales of BAQSIMI ® of $51.2 million during the year ended December 31, 2023, based on total BAQSIMI ® sales of $86.3 million as reported to us by Lilly, which was recognized on a net basis similar to a royalty arrangement.

Currently, BAQSIMI ® is being sold by Lilly on our behalf under the TSA, whereby Lilly would provide certain services to support the transition of the BAQSIMI ® operations to us.

The transfer of the BAQSIMI ® distribution to us is anticipated to occur at different points in time depending on the jurisdiction, with the United States occurring in the first quarter of 2024, which makes up approximately 80% of BAQSIMI ® worldwide revenues.

The assumption of distribution in countries outside the United States will occur on a country by country basis once the marketing authorizations for each territory have been transferred to us, we have set up distribution agreements, and we have obtained sufficient inventory.

Upon the assumption of distribution responsibilities, we will begin to recognize gross revenues and cost of revenues in their respective lines on the consolidated statements of operations.

Other revenues include the portion of BAQSIMI ® sales made by Lilly on our behalf under the TSA which amounted to $19.2 million and $51.2 million during the years ended December 31, 2024 and 2023, respectively, based on total BAQSIMI ® sales of $37.6 million and $86.3 million, respectively, as reported to us by Lilly, which was recognized on a net basis, similar to a royalty arrangement.

The BAQSIMI ® sales made by Lilly on our behalf under the TSA have decreased throughout 2024, due to our assumption of distribution responsibilities for BAQSIMI ® from Lilly to our customers in the United States, and certain other countries.

We recognized these sales within product net revenues.

A significant portion of our customer shipments in any period relate to orders received and shipped in the same period, generally resulting in low product backlog relative to total shipments at any time.

As of December 31, 2023, our backlog was minimal, primarily as a result of competitor shortages and supplier constraints.

We had no significant backlog as of December 31, 2024.

Historically, our backlog has not been a meaningful indicator in any given period of our ability to achieve any particular level of overall revenue or financial performance.

Gross Margins

The increase in sales of glucagon, Primatene MIST ® , and epinephrine, which are higher-margin products, the sales of ganirelix and vasopressin, both of which we launched last year, as well as the sales of regadenoson, which we launched in April 2023, contributed to the increase in our gross margins for the year ended December 31, 2023.

Additionally, as a result of the TSA with Lilly, revenues relating to BAQSIMI ® are reported on a net basis similar to a royalty arrangement with no amount reported as cost of revenues.

These increases in gross margins were partially offset by an impairment charge of $2.7 million in June 2023 relating to the impairment of the IMS (UK) international product rights, as well as charges included in cost of revenue to adjust our inventory and related purchase commitments to their net realizable value.

As a result of amending the Supply Agreement with MannKind in December 2023, we booked a $3.6 million inventory reserve.

We are experiencing increased costs for labor and certain purchased components.

Additionally, the cost of heparin may fluctuate, which could put downward pressure on our gross margins.

However, we believe that this trend will be offset by increased sales of our higher-margin products, including glucagon, vasopressin, ganirelix, regadenoson and new products we anticipate launching in 2024.

The decrease in gross margins during the year ended December 31, 2024, is primarily a result of the TSA with Lilly.

The portion of revenues relating to BAQSIMI ® sales made by Lilly on our behalf are reported on a net basis, similar to a royalty arrangement with no amount reported as cost of revenues.

Therefore, in the prior year, BAQSIMI ® sales did not have any associated cost of revenues, which increased the gross margins.

Additional factors contributing to the decrease in gross margins during the year include an increase in depreciation and amortization expenses related to the acquired BAQSIMI ® assets, as well as increases in labor costs and the cost for certain APIs and purchased components.

The decrease in gross margins was partially offset by the increase in sales of Primatene MIST ® and epinephrine, which are higher-margin products.

Selling, distribution, and marketing, and general and administrative

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General and administrative

The increase in selling, distribution and marketing expenses was primarily due to expenses related to the expansion of our sales and marketing efforts related to BAQSIMI ® , as well as an increase in advertising spending for Primatene MIST ® .

The increase in general and administrative expense was primarily due to an increase in salary and personnel-related expenses, as well as costs related to the acquisition of BAQSIMI ® , which was partially offset by a decrease in legal fees.

The increase in selling, distribution and marketing expenses was primarily due to expenses related to the expansion of our sales and marketing efforts related to BAQSIMI ® .

The increase in general and administrative expense was primarily due to an increase in salary and personnel-related expenses and expenses related to BAQSIMI ® .

We expect that selling, distribution and marketing expenses will continue to increase due to the increase in marketing expenditures for BAQSIMI ® and Primatene MIST ® .

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Total research and development expenses

The decrease in research and development expenses is primarily due to a decrease in materials and supply expense, as a result of a ramp-up of expenses in 2022 for AMP-018 and insulin pipeline products.

This was partially offset by an increase in salary and personnel-related expenses.

Research and development expenses consist primarily of costs associated with the research and development of our product candidates including the cost of developing APIs.

We expense research and development costs as incurred.

Research and development expenses remained flat during the year.

There was an increase in salary and personnel-related expenses, as well as an increase in FDA filing fees as we filed the ANDA for AMP-018 in 2024.

These increases were offset by a decrease in clinical trials expense, as well as a decrease in materials and supplies expense, as a result of a ramp-up of expenses in 2023 for our insulin and inhalation pipeline products.

We have made, and expect to continue to make, substantial investments in research and development to expand our product portfolio and grow our business.

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The change in non-operating income (expenses), net is primarily a result of:

● Interest income increased as a result of an increase in cash and investments.

● Interest incurred in connection with the Wells Fargo Term Loan used to finance the acquisition of BAQSIMI ® , as well as the interest incurred in connection with the 2029 Convertible Notes.

● An increase in interest income resulting from an increase in cash and investments.

● An increase in interest expense resulting from the Term Loan used to finance the acquisition of BAQSIMI ® , as well as the 2029 Convertible Notes, which we entered into in the second half of 2023.

For more information regarding our debt, see “Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 14.

● Other income (expenses), net is primarily a result of foreign currency fluctuation, as well as the mark-to-market adjustments relating to our interest rate swap contracts during the year ended December 31, 2023.

For the year ended December 31, 2022, we received a settlement of $5.4 million in connection with the Regadenoson patent litigation.

For more information regarding our litigation matters, see “Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note.

21 – Litigation .”

● A change to other income (expenses), net primarily as a result of foreign currency fluctuation, as well as mark-to-market adjustments relating to our interest rate swap contracts during the year ended December 31, 2024.

Income tax provision

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Effective tax rate

Our effective tax rate for the year ended December 31, 2023 decreased in comparison to the year ended December 31, 2022, primarily due to differences in pre-tax income positions, including jurisdictions where we maintain valuation allowance reserves against our deferred tax assets, and additional research and development credit benefit.

Our effective tax rate for the year ended December 31, 2024 decreased in comparison to the year ended December 31, 2023, primarily due to excess tax benefit from share-based compensation and lower state income tax expense.

For more information regarding our income taxes, see “Part II – Item 8.

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We need capital resources to maintain and expand our business.

We expect our cash requirements to increase significantly in the foreseeable future as we sponsor clinical trials for, seek regulatory approvals of, and develop, manufacture and market our current development stage product candidates and pursue strategic acquisitions of businesses or assets.

We expect our cash requirements to increase significantly in the foreseeable future as we make milestone payments for our BAQSIMI ® acquisition of up to an aggregate of $575 million contingent upon certain net sales milestones related to the BAQSIMI ® acquisition, sponsor clinical trials for, seek regulatory approvals of, and develop, manufacture and market our current development stage product candidates and pursue strategic acquisitions of businesses or assets.

Our future capital expenditures include projects to upgrade, expand, and improve our manufacturing facilities in the United States and China, including a significant increase in capital expenditures over the next few years.

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Cash or cash equivalents held at foreign subsidiaries are not available to fund the parent company’s operations in the United States.

We believe that our cash reserves, operating cash flows, and borrowing availability under our credit facilities will be sufficient to fund our operations for at least the next 12 months.

We believe that our cash reserves, operating cash flows, and borrowing availability under our credit facilities will be sufficient to fund our operations for at least the next 12 months from the filing of this Annual Report on Form 10-K.

We expect additional cash flows to be generated in the longer term from future product introductions, although there can be no assurance as to the receipt of regulatory approval for any product candidates that we are developing or the timing of any product introductions, which could be lengthy or ultimately unsuccessful.

We maintain a shelf registration statement on Form S-3 pursuant to which we may, from time to time, sell up to an aggregate of $250 million of our common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts, or units.

If we require or elect to seek additional capital through debt or equity financing in the future, we may not be able to raise capital on terms acceptable to us or at all.

To the extent we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities will result in

dilution to our stockholders.

If we are required and unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.

Working capital decreased $19.3 million to $264.2 million at December 31, 2023, compared to $283.5 million at December 31, 2022.

Working capital increased $96.1 million to $360.3 million at December 31, 2024, compared to $264.2 million at December 31, 2023.

Cash Flows from Operations

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Effect of exchange rate changes on cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Sources and Use of Cash

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Net cash provided by operating activities was $213.4 million for the year ended December 31, 2024, which included net income of $159.5 million.

Non-cash items comprised primarily of $53.2 million of depreciation and amortization, which includes $25.2 million related to deprecation of property, plant and equipment, $12.8 million related to amortization of product rights, trademarks and patents, $11.4 million related to amortization of discounts, premiums, and debt issuance costs.

Non-cash items comprised primarily of $63.2 million of depreciation and amortization, which includes $28.2 million related to depreciation of property, plant and equipment;

$24.7 million related to amortization of intangible assets;

$4.2 million related to amortization of operating lease right-of-use assets;

$6.0 million related to amortization of discounts, premiums, and debt issuance costs;

and share-based compensation expense of $24.4 million.

Additionally, for the year ended December 31, 2024, there was a net cash outflow from changes in operating assets and liabilities of $14.5 million, which resulted primarily from an increase in accounts receivables, an increase in inventories, as well as an increase in prepaid expenses and other assets, which was partially offset by an increase in accounts payable and accrued liabilities.

The increase in accounts receivables was primarily due to the increase in sales.

The increase in inventories was primarily due to the increased purchases of finished product, raw materials and components for BAQSIMI ® .

Accounts payable and accrued liabilities increased primarily due to the increase in accrued customer fees and rebates associated with BAQSIMI ® sales, as we continued to assume distribution responsibilities for BAQSIMI ® from Lilly to our customers in the United States and certain other countries throughout 2024.

Net cash provided by operating activities was $183.5 million for the year ended December 31, 2023, which included net income of $137.5 million.

Non-cash items comprised primarily of $53.2 million of depreciation and amortization, which includes $25.2 million related to depreciation of property, plant and equipment, $12.8 million related to amortization of intangible assets, $11.4 million related to amortization of discounts, premiums, and debt issuance costs.

Additionally, non-cash items included share-based compensation expense of $20.2 million, and an impairment charge of $2.7 million relating to the impairment of the IMS (UK) international product rights.

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The increase in accounts receivables was primarily due to the timing of the payment from Lilly for BAQSIMI ® revenues during the fourth quarter, which was received subsequent to the year end.

Net cash provided by operating activities was $89.2 million for the year ended December 31, 2022, which included net income of $91.4 million.

Non-cash items comprised primarily of $28.7 million of depreciation and amortization and $17.9 million of share-based compensation expense.

Additionally, for the year ended December 31, 2022, there was a net cash outflow from changes in operating assets and liabilities of $32.2 million, which resulted from an increase in accounts receivables;

an increase in inventories, as we increased purchases of certain raw materials and components;

as well as a decrease in accounts payable and accrued liabilities.

Accounts payable and accrued liabilities decreased primarily due to the timing of payments.

The increase in accounts receivables was due to both increases in sales and timing of sales.

Investing Activities

Net cash used in investing activities was $124.9 million for the year ended December 31, 2024, primarily due to the payment of $129.0 million relating to the BAQSIMI ® acquisition, $41.0 million in purchases of property, plant, and equipment, which included $16.6 million incurred in the United States, $2.9 million in France, and $21.5 million in China.

This was partially offset by a net cash inflow of $49.2 million from sales and purchases of investments during the period.

Net cash used in investing activities was $649.1 million for the year ended December 31, 2023, primarily as a result of $506.4 million relating to the BAQSIMI ® acquisition, $38.2 million in purchases of property, plant, and equipment, which included $24.7 million incurred in the United States, $1.9 million in France, and $11.6 million in China.

Additionally, net cash outflows from purchases and sales of investments during the period was $105.9 million.

Net cash used in investing activities was $32.8 million for the year ended December 31, 2022, primarily as a result of

$24.0 million in purchases of property, plant, and equipment, which included $15.4 million incurred in the United States, $1.4 million in France, and $7.2 million in China.

Additionally, net cash outflows from purchases and sales of short-term investments during the period was $7.8 million.

Financing Activities

Net cash used in financing activities was $81.0 million for the year ended December 31, 2024, primarily as a result of $85.5 million used to purchase treasury stock and $4.9 million used to settle share-based compensation awards under our equity plan and for tax payments related to the net share settlement of options exercised.

Additionally, we made $8.3 million in principal payments on our long-term debt, primarily as a result of paying off the mortgage loan with East West Bank.

This was partially offset by $18.4 million of net proceeds from borrowings on our line of credit in China.

Net cash provided by financing activities was $454.1 million for the year ended December 31, 2023, primarily as a result of proceeds of $500.0 million from the Credit Agreement with Wells Fargo and $345.0 million from the 2029 Convertible Notes, which were partially offset by $318.7 million in principal payments of our long-term debt and $25.1 million in debt issuance cost.

Additionally, we received $11.0 million in net proceeds from the settlement of share-based compensation awards under our equity plan, which was offset by the $58.1 million used to purchase treasury stock.

Net cash used in financing activities was $26.4 million for the year ended December 31, 2022, primarily as a result of purchases of $39.9 million of treasury stock, which was partially offset by $15.7 million in net proceeds from the settlement of share-based compensation awards under our equity plan.

Additionally, we also made $1.8 million in principal payments on our long-term debt.

Additionally, we received $11.0 million in net proceeds from the settlement of share-based

compensation awards under our equity plan, which was offset by the $58.1 million used to purchase treasury stock.

Debt and Borrowing Capacity

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Long-term debt

As of December 31, 2023, we had $204.1 million in unused borrowing capacity under revolving lines of credit with Wells Fargo Bank and China Merchant Bank.

As of December 31, 2024, we had $224.5 million in unused borrowing capacity under revolving lines of credit with Wells Fargo Bank, China Merchant Bank, and Industrial and Commercial Bank of China Limited.

The weighted average interest rates on lines of credit as of December 31, 2024 and 2023 were 4.0% and 7.0%, respectively.

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Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 14.

Contractual Obligations and Commitments

Operating Lease Obligations

As of December 31, 2023 we had a total of $41.5 million of minimum rental payments under operating leases.

As of December 31, 2024 we had a total of $59.3 million of minimum rental payments due under operating leases.

Of that amount, $9.6 million is due within 12 months as of December 31, 2024.

For more information regarding our operating lease obligations see “Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – See Note.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements –Note.

18 – Commitments and Contingencies.”

Milestone Obligations

The terms of our Purchase Agreement with Lilly require us to make future sales-based milestone payments aggregating up to $575.0 million based on achievement of specified net sales amounts.

As of December 31, 2024, we have not triggered any milestones and therefore no amounts have been recognized or paid.

The amount and timing of such future obligations are unknown and uncertain.

Purchase Obligations

We have certain purchase obligations under which we are required to make minimum payments for items including, but not limited to, inventory and pharmaceutical manufacturing and laboratory equipment.

As of December 31, 2023, we had an aggregate amount of approximately $93.3 million.

As of December 31, 2024, we had an aggregate amount of approximately $135.5 million of purchase obligations.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP.

The preparation of consolidated financial statements in conformity 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.

In some cases, changes in the accounting estimates are reasonably likely to occur from period to period.

Accordingly, actual results could differ materially from our estimates.

To the extent that there are material differences between these estimates and actual results, our financial condition and results of operations will be affected.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

We refer to accounting estimates of this type as critical accounting policies, which we discuss further below.

While our significant accounting policies are more fully described in Part II – Item 8.

Financial Statements and Supplementary Data – Notes to

Consolidated Financial Statements – Note 2.

– Summary of Significant Accounting Policies”, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our audited consolidated financial statements.

Revenue Recognition

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We also generate a small amount of revenues from contract manufacturing services.

Generally, we recognize revenues at the time

of product delivery to our customers in accordance with ASC, 606 Revenue from Contracts with Customers .

Generally, we recognize revenues at the time of product delivery to our customers in accordance with ASC, 606 Revenue from Contracts with Customers .

In some cases, revenues are recognized at the time of shipment when stipulated by the terms of the sale agreements.

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If actual future payments for the discounts, returns, fees, rebates and chargebacks exceed the estimates we made at the time of sale, our financial position, results of operations and cash flows would be negatively impacted.

As discussed under “Accrual for Product Returns” below, we are generally obligated to accept from our customers the return of pharmaceuticals that have reached or will soon reach their expiration dates.

We are generally obligated to accept from our customers the return of pharmaceuticals that have reached or will soon reach their expiration dates.

We establish reserves for such amounts based on historical experience and other information available at the time of sale, but the actual returns will not occur until several years after the sale.

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● anticipated pricing strategy changes by us and/or our competitors.

Service revenues derived from research and development contracts are recognized over time based on progress toward satisfaction of the performance obligation.

For each performance obligation satisfied over time, we assess 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.

For the years ended December 31, 2023, 2022 and 2021, revenue from research and development services at ANP were $4.5 million, $4.3 million and $5.1 million, respectively.

Other revenues

Revenues related to sales of BAQSIMI ® , which was acquired on June 30, 2023 and was manufactured and sold by Lilly under the TSA during the year ended December 31, 2023, were recorded on a net basis, similar to a royalty arrangement.

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 we agree to reimburse wholesalers for differences between the gross sales prices at which we sell our products to wholesalers and the actual prices of such products that wholesalers resell them

under our 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.

We estimate 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:

The following table summarizes activity in each of our product revenue provision and allowance categories for the years ended December 31, 2024 and 2023:

Chargebacks and

Management fees

Product Returns (2)

and Incentives (3)

(in thousands)

Beginning balance

Provision for chargebacks and rebates

Balance as of December 31, 2022

Credits and payments issued to third parties

Ending balance

Changes in the provision for chargebacks from period to period are primarily dependent on our sales to its wholesalers, the level of inventory held by wholesalers, and the wholesalers’ customer mix.

Changes in the provision for rebates from period to period are primarily dependent on retailer’s and other indirect customers’ purchases.

The approach that we use to estimate chargebacks and rebates has been consistently applied for all periods presented.

Variations in estimates have been historically small.

We continually monitor the provision for chargebacks and rebates and make adjustments when we believe that the actual chargebacks and rebates may differ from the estimates.

The settlement of chargebacks and rebates generally occurs within 20 days to 60 days after the sale to wholesalers.

The provision for chargebacks and rebates is included in the following balance sheet accounts:

(in thousands)

Reduction to accounts receivable, net

Accounts payable and accrued liabilities

Accrual for Product Returns

We offer most customers the right to return qualified excess or expired inventory for partial credit;

however, API product sales are generally non-returnable.

Our 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, we record 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.

We also assesses other factors that could affect product returns including market conditions, product obsolescence, and new competition.

Although these factors do not normally give our customers the right to return products outside of the regular return policy, we realize that such factors could ultimately lead to increased returns.

We analyze these situations on a case-by-case basis and make 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:

(in thousands)

Beginning balance

Provision for product returns

Credits issued to third parties

Ending balance

The provision for product returns is included in the following balance sheet accounts:

(in thousands)

Accounts payable and accrued liabilities

Other long-term liabilities

For the years ended December 31, 2023 and 2022, our aggregate product return rate was 1.1% and 1.4% of qualified sales, respectively.

Balance as of December 31, 2023

Credits and payments issued to third parties

Balance as of December 31, 2024

(1) Chargeback and Rebates include chargebacks, managed care rebates, GPO rebates, government rebates, and co-pay program incentives.

Chargeback and rebates were deducted from gross revenue at the time revenues were recognized and were recorded as a reduction to accounts receivables, net and accounts payable and accrued liabilities on our consolidated balance sheets.

(2) Estimated provisions for product returns were deducted from gross revenues at the time revenues were recognized and are included in accounts payable and accrued liabilities and other long-term liabilities on our consolidated balance sheets.

(3) Management fees and incentives include management and GPO fees and sales incentives and allowances, which were deducted from gross revenues at the time revenues were recognized and were recorded as accounts payable and accrued liabilities on our consolidated balance sheets.

Other revenues

Revenues related to sales of BAQSIMI ® , which was acquired on June 30, 2023 and was manufactured and sold by Lilly under the TSA during the years ended December 31, 2024 and 2023, were recorded on a net basis, similar to a royalty arrangement.

Inventories consist of currently marketed products and products manufactured under contract.

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Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset or asset groups and its eventual disposition.

If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset or asset groups, further impairment analysis is performed.

If the sum of the expected future undiscounted cash flows is less than

the carrying amount of the asset or asset groups, further impairment analysis is performed.

An impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the asset or asset groups (assets to be held and used) or fair value less cost to sell (assets to be disposed of).

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If we determine it is more likely than not that the Primatene ® trademark is impaired or the fair value of a reporting unit is less than its carrying amount, further quantitative impairment process is then performed;

otherwise, no further testing is

otherwise, no further testing is required.

If the life is no longer indefinite, the asset is tested for impairment, and the carrying value, after recognition of any impairment loss, is amortized over its remaining useful life.

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and considerations for obsolescence, demand, competition and other economic factors.

No impairment of indefinite-lived intangible asset and goodwill was recorded during the years ended December 31, 2024 and 2022.

For the year ended December 31, 2023, we recorded an impairment charge of $2.7 million related to our IMS (UK) international product rights, as we decided to delay the launch of the IMS UK products indefinitely.

We recorded the impairment in the cost of revenue line in our consolidated statement of operations.

No impairment of indefinite-lived intangible asset and goodwill was recorded during the years ended December 31, 2022 and 2021.

Deferred Income Taxes

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Share-Based Compensation

Options issued under our 2015 Equity Incentive Award Plan, or the 2015 Plan, and our Amended and Restated 2005 Equity Incentive Award Plan, or 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.

Options issued under our amended and restated 2015 Equity Incentive Award Plan, or the Amended 2015 Plan, 2015 Equity Incentive Award Plan, or the Original 2015 Plan, and our amended and restated 2005 Equity Incentive Award Plan, or 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.

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Our volatility estimate was based on the weighted average historical volatility of our stock price since IPO.

Our dividend yield was assumed to be 0%, because we have no plans to pay dividends.

dividend yield was assumed to be 0%, because we have no plans to pay dividends.

We estimate the expected term of options with consideration of vesting date, contractual term, and historical experience for employee exercise and post-vesting employment termination behavior after our common stock has been publicly traded.

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The change of any of these inputs could significantly impact the determination of the fair value of our options as well as significantly impact our results of operations.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP.

Actual results could differ from those estimates.

In some cases, changes in the accounting estimates are reasonably likely to occur from period to period.

Accordingly, actual results could differ materially from our estimates.

To the extent that there are material differences between these estimates and actual results, our financial condition and results of operations will be affected.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

We refer to accounting estimates of this type as critical accounting policies, which we discuss further below.

While our significant accounting policies are more fully described in Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2.

Recent Accounting Pronouncements

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The amendments should be applied retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the disclosure requirements related to the new standard.

The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued Accounting Standard Update 2023-09, Income taxes (Topic 740):

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We are currently evaluating the disclosure requirements related to the new standard.

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting-Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses.

The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions.

The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The standard updates are to be applied prospectively with the option for retrospective application.

We are currently evaluating the impact of disclosure requirements related to the new standard on our financial statements.

Government Regulation

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The Drug Enforcement Administration, or DEA, maintains oversight over our products that are considered controlled substances.

From February 6 through February 16, 2023, our IMS facility in South El Monte, California was subject to pre-approval inspection by the FDA.

The inspection included a review of compliance with FDA regulations to support one of our pending applications.

The inspection resulted in two observations on Form 483.

We responded to those observations.

We believe that our response to the observations will satisfy the requirements of the FDA and that no significant further actions will be necessary.

Our manufacturing facilities as well as our CMOs are subject to periodic inspection by the FDA to ensure that they are operating in compliance with cGMP requirements.

As of December 31, 2024, all of our manufacturing facilities and our CMOs are in compliance with all federal and state governmental agencies, including all FDA and DEA regulations.

In 2024, we have had inspections conducted by the FDA in our various manufacturing facilities, which resulted in several observations on Form 483.

We have responded to those observations and have satisfied the requirements of the FDA.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis