What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-03 compared with 2024-02-29 · 332 added, 394 removed, 959 unchanged (43% of the section changed)

16 unchanged sentences

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, 2023, 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 February 29, 2024 expressed an unqualified opinion thereon.

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, 2024, 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 3, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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The Company’s provision for chargebacks estimate totaled $26.3 million at December 31, 2024.

As described in Note 5 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.

As described in Note 4 to the consolidated financial statements, the Company estimates the provision for chargebacks using the expected value method at the time of sale to wholesalers.

Auditing the provision for chargebacks estimate was especially challenging because of the subjectivity of management assumptions about future wholesale customer mix and related contract pricing, which impact the rates at which future chargebacks on current sales will be paid.

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, wholesaler inventory levels, customer mix and contract pricing.

We tested the Company’s controls addressing the identified risks of material misstatement related to the valuation of the provision for chargebacks.

This included testing controls over management’s review of significant assumptions discussed above.

This testing also included management’s control to compare subsequent actual activity to estimated activity and controls to ensure the data used to evaluate the significant assumptions was complete and accurate.

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 evaluated the reasonableness of significant assumptions (e.g., estimated future 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 evaluated subsequent events to assess whether there was any new information that would require adjustment to the initial provision.

Enoxaparin inventory lower of cost or net realizable value estimate

Estimated selling price impacting the Enoxaparin inventory lower of cost or net realizable value

Description of the Matter

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Total charges of $7.4 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, 2024.

As explained in Note 2 to the consolidated financial statements, the Company states inventory at the lower of cost and net realizable value.

As explained in Note 2 to the consolidated financial statements, the Company states inventory at the lower of cost or net realizable value.

Net 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 changes in 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.

We also 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 by comparing 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 Company’s significant assumptions.

BAQSIMI ® Acquisition

Description of the Matter

On June 30, 2023, the Company completed its acquisition of BAQSIMI ® glucagon nasal powder, or BAQSIMI ® , pursuant to an asset purchase agreement, or the Purchase Agreement, dated April 21, 2023, and a manufacturing service agreement, or the MSA, and a transition services agreement, or the TSA, dated June 30, 2023, with Eli Lilly & Company, or Lilly, as disclosed in Note 4 to the consolidated financial statements.

The transaction was accounted for as an asset acquisition.

Auditing the Company's accounting for its acquisition of BAQSIMI ® was complex due to the judgement applied in identifying the elements of the transaction, including but not limited to the assets acquired, the MSA, and the TSA, and the effort in performing procedures and evaluating audit evidence related to the accounting for the transaction.

Auditing management's estimate in determining the net realizable value of Enoxaparin inventory involved subjective auditor judgment because the estimated 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 changes in significant assumptions, including demand for the Company’s products, customer mix, expected competition, and planned price changes.

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 accounting for the BAQSIMI ® acquisition.

This included testing the effectiveness of controls over management’s identification of the elements of the transaction.

To test the accounting for the BAQSIMI ® acquisition, we performed audit procedures that included, among others, reviewing the related Purchase Agreement, the MSA and the TSA, and evaluating management’s identification of the elements of the transaction.

We involved subject matter resources to assist in evaluating the identification of elements of the transaction and the related accounting.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's estimated selling price impacting the Enoxaparin inventory lower of cost or net realizable value.

This included controls over management's assessment of assumptions such as future demand, customer mix, expected competition, and planned price changes.

We evaluated adjustments to the estimated selling price for specific considerations, such as demand for the Company’s products, new significant customers, competitors, or planned price changes.

We evaluated the reasonableness of management’s estimated selling price and whether expected changes in demand, competition, customer mix, or planned price changes were appropriate by comparing with the Company’s historical data and market conditions.

We also performed sensitivity analyses over the estimated selling price assumptions and assessed the historical accuracy of management's estimates by performing retrospective reviews over prior periods' estimated selling prices.

/s/ Ernst & Young LLP

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Irvine, California

February 29, 2024

March 3, 2025

AMPHASTAR PHARMACEUTICALS, INC.

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Long-term operating lease liabilities, net of current portion

Deferred tax liabilities

Other long-term liabilities

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300,000,000 shares authorized;

59,390,194 and 48,068,881 shares issued and outstanding as of December 31, 2023 and 58,110,231 and 48,112,069 shares issued and outstanding as of December 31, 2022, respectively

60,847,124 and 47,617,691 shares issued and outstanding, respectively, as of December 31, 2024 and 59,390,194 and 48,068,881 shares issued and outstanding, respectively, as of December 31, 2023

Additional paid-in capital

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Equity in losses of unconsolidated affiliate

Net income attributable to non-controlling interests

Net income attributable to Amphastar Pharmaceuticals, Inc.

Net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders:

Weighted-average shares used to compute net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders:

Net income per share:

Weighted-average shares used to compute net income per share:

See accompanying notes to consolidated financial statements.

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Year Ended December 31,

Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc., net of income taxes

Reclassification of adjustment for amounts included in net income

Other comprehensive income (loss), net of income taxes

Foreign currency translation adjustment

Change in pension obligations

Total other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc.

Total comprehensive income attributable to Amphastar Pharmaceuticals, Inc.

Total other comprehensive income (loss)

Total comprehensive income

See accompanying notes to consolidated financial statements.

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Comprehensive

Stockholders'

Income (loss)

Balance as of December 31, 2021

( 8,725,290 )

Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc.

ANP restructuring (see Note 3)

Net income attributable to non-controlling interest

Other comprehensive loss

Purchase of treasury stock

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( 9,998,162 )

Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive income

Purchase of treasury stock

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( 11,321,313 )

Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive loss

Purchase of treasury stock

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Loss on disposal of assets

Gain on deconsolidation of subsidiary

Impairment of long-lived assets

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Depreciation of property, plant, and equipment

Amortization of product rights, trademarks, and patents

Amortization of intangible assets

Operating lease right-of-use asset amortization

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Cash Flows From Financing Activities:

ANP restructuring (see Note 3)

Proceeds from equity plans, net of withholding tax payments

Purchase of treasury stock

Settlement of ANP equity awards

Debt issuance costs

Repayments under lines of credit

Proceeds from borrowing under lines of credit

Proceeds from issuance of long-term debt

2 unchanged sentences

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

Cash, cash equivalents, and restricted cash at beginning of period

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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.

The Company’s over-the-counter inhalation product, Primatene MIST ® , is primarily distributed through drug retailers.

Summary of Significant Accounting Policies

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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.

Certain prior period amounts have been reclassified within the operating activities of the consolidated statements of cash flows to conform to the current period presentation.

All intercompany activity has been eliminated in the preparation of the consolidated financial statements.

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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 losses of unconsolidated affiliate” in the accompanying 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.

The carrying value of equity method investments is reported as “Investment in unconsolidated affiliate” in the accompanying consolidated balance sheets.

The Company’s equity method investments 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.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates

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The principal accounting estimates include:

fair value of acquired assets, 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 value, impairment of investments, long-lived and intangible assets and goodwill, accrual for workers’ compensation liabilities, litigation reserves, stock price volatility for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.

fair value of financial instruments, allowance for discounts, provision for chargebacks and rebates, provision for product returns, adjustment of inventory to its net realizable value, impairment of investments, long-lived and intangible assets and goodwill, litigation reserves, stock price volatility for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency

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The resulting currency remeasurement adjustments and other transactional foreign currency exchange gains and losses are reflected in the Company’s accompanying 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.

The Company’s French subsidiary, AFP, maintains its books of record in euros.

AUK’s subsidiary, IMS UK, maintains its books of record in British pounds.

These local currencies have been determined to be the subsidiaries’ respective functional currencies.

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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 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 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, 2023, 2022, and 2021 were a $ 1.1 million gain, a $ 1.8 million loss, and a $ 2.6 million loss, respectively.

Comprehensive Income (loss)

The Company’s comprehensive income (loss) includes its foreign currency translation gains and losses, changes in pension obligations as well as its share of other comprehensive income from its equity method investments.

Translation adjustments are reflected in stockholders’ equity and are included as a component of other comprehensive income.

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.

The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature for the years ended December 31, 2024, 2023, and 2022 were a $ 1.9 million loss, a $ 1.1 million gain, and a $ 1.8 million loss, respectively.

Comprehensive Income

The Company’s comprehensive income includes its foreign currency translation gains and losses, changes in pension obligations as well as its share of other comprehensive income from its equity method investments.

The Company evaluates acquisitions and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

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In a business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition.

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Asset acquisitions may include contingent consideration arrangements that encompass obligations to make future payments to sellers contingent upon the achievement of future financial targets.

Contingent consideration, including assumed contingent considerations, is not recognized until all contingencies are resolved and the consideration is paid or becomes payable (unless contingent considerations meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired), at which point the consideration is allocated to the assets acquired based on their relative fair values at the acquisition date, with the exception of non-qualifying assets.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

fair values at the acquisition date, with the exception of non-qualifying assets.

Judgments are used in determining estimates of useful lives of long-lived assets.

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For the years ended December 31, 2024, 2023, and 2022, the Company did not have material capitalized pre-launch inventory.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments

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The carrying value of the Company’s long-term obligations, with the exception of the convertible debt (See Note 14) approximates their fair value, as the stated borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities.

Investments and short-term investments are recorded at fair value based on quoted prices from recognized security exchanges and other methods (See Note 9).

The Company at times enters into interest rate swap contracts to manage its exposure to interest rate changes and its overall cost of long-term debt.

The Company’s interest rate swap contracts exchange the variable interest rates for fixed interest rates.

From time to time, the Company may enter into forward currency contracts to lock in currency exchange rates to manage its foreign currency exchange rate exposure.

The Company’s interest rate swaps and forward currency contracts have not been designated as hedging instruments and, therefore are recorded at their fair values at the end of each reporting period with changes in fair value recorded in other income (expenses) on the consolidated statements of operations.

As of December 31, 2023, the Company did not have any unsettled forward currency contracts to purchase foreign currency.

As of December 31, 2022, the Company had an unsettled forward currency contract to purchase foreign currency with a fair value of approximately $ 0.2 million based on Level 2 inputs, which was recorded as a liability in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and highly liquid investments with original maturities of three months or less.

Investments as of December 31, 2023 and 2022 consisted of certificates of deposit and investment grade corporate, agency, and municipal bonds with original maturity dates between three and fifteen months.

Investments as of December 31, 2024 and 2023 consisted of certificates of deposit and investment grade corporate, agency, and municipal bonds with original maturity dates between three and nineteen months.

Restricted Cash

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As of December 31, 2024 and 2023, the balance of restricted short-term investments was $ 2.2 million.

Allowance for Credit Losses

Accounts receivable and 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

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and historical collection experience.

As of December 31, 2024 and 2023, the Company's allowance for credit losses was $ 3.5 million and $ 2.8 million, respectively.

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Lesser of remaining lease term or useful life

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets

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10 - 24 years

10 - 20 years

Land-use rights

37 - 50 years

Other intangibles

Impairment of Long-Lived Assets, including Identifiable Definite-Lived Intangible Assets

The Company assesses 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.

If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset or 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).

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A valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt Issuance Costs

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Convertible Debt

The Company accounts for its convertible debt instruments as a single unit of accounting, a liability, because the Company concluded that the conversion features do not require bifurcation as a derivative under Accounting Standards Codification, or ASC, 815-15, Derivatives and Hedging and the Company did not issue its convertible debt instruments at a substantial premium.

The Company records debt issuance costs as contra-liabilities in our consolidated balance sheets at issuance and amortizes them over the contractual term of the convertible debt instrument using the effective interest rate.

In accordance with ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) :

The Company accounts for its convertible debt instruments as a single unit of account, a liability, because the Company concluded that the conversion features do not require bifurcation as a derivative under Accounting Standards Codification, or ASC, 815-15, Derivatives and Hedging and the Company did not issue its convertible debt instruments at a substantial premium.

In accordance with Accounting Standards Update, or ASU, 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) :

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , the Company evaluates convertible debt instruments to determine if the conversion feature is freestanding or embedded.

If the conversion feature is embedded, the conversion feature is not bifurcated from the host instrument.

If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20, “ Debt with Conversion and Other Options” for consideration of any beneficial conversion features.

If no beneficial conversion features exist that require separate recognition, convertible debt instruments are accounted for as a single liability measured at its amortized cost as long as no other features require separation and recognition as derivatives.

If no beneficial conversion features exist that require separate

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recognition, convertible debt instruments are accounted for as a single liability measured at its amortized cost as long as no other features require separation and recognition as derivatives.

Impairment of Indefinite-Lived Intangible Asset and Goodwill

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Changes in estimates are recorded in the period identified.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Litigation, Commitments and Contingencies

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Due to the inherent uncertainties surrounding gain contingencies, the Company generally does not recognize potential gains until they are realized.

In 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 other income (expense), net in the consolidated statements of operations for the year ended December 31, 2021.

Recent Accounting Pronouncements

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

The Company is currently evaluating the disclosure requirements related to the new standard.

The adoption of this guidance did not have a material impact on the Company’s 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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The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the disclosure requirements related to the new standard.

ANP Restructuring

As a result of the ANP restructuring that was completed during the third quarter of 2021, and subsequent investments by other equity holders of Hanxin Pharmaceutical Technology Co., Ltd, or Hanxin, the Company has a 11.5 % noncontrolling investment in Hanxin as of December 31, 2023.

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, the Company’s Chief Executive Officer and Dr.

Mary Luo, the Company’s Chief Operating Officer, 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.

Hanxin continues to be a related party after the deconsolidation.

The Company is currently evaluating the disclosure

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company is currently evaluating the impact of disclosure requirements related to the new standard on its financial statements.

BAQSIMI ® Acquisition

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

In addition, the Company is required to pay Lilly a $ 125.0 million guaranteed payment on the first anniversary of the

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is also required to pay Lilly $ 4.0 million upon the assignment of certain contracts to the Company after the first anniversary of the Closing, but no later than 18 months after the Closing.

In addition, the Company paid to Lilly a $ 125.0 million guaranteed payment on the first anniversary of the Closing.

The Company also paid Lilly $ 4.0 million upon the assignment of certain contracts to the Company.

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

The Purchase Agreement provides that the contingent consideration that may become payable to Lilly would be achieved as follows:

(i) a one-time payment of $ 100.0 million if the Company achieves annual net sales of $ 175.0 million or more of BAQSIMI ® and certain related products, or the Milestone Products, in any one year during the first five years after the Closing;

(ii) up to two payments of $ 100.0 million each if the Company achieves annual net sales of $ 200.0 million or more of Milestone Products in any one year during the first five years after the Closing;

(i) a one-time payment of $ 100.0 million if the Company achieves annual net sales of $ 175.0 million or more of BAQSIMI ® and certain related products, or the Milestone Products, in any one contract year during the first five years after the Closing;

(ii) up to two payments of $ 100.0 million each if the Company achieves annual net sales of $ 200.0 million or more of Milestone Products in any one contract year during the first five years after the Closing;

and (iii) a one-time payment of $ 150.0 million if the Company achieves total cumulative net sales of $ 950.0 million or more of the Milestone Products for the first five years after the Closing.

In addition, the Company assumed certain contingent consideration of Lilly, which would require the Company to pay up to an aggregate of $ 125.0 million based on the achievement of annual net sales milestones of $ 350.0 million, $ 400.0 million and $ 600.0 million.

Through December 31, 2024, the Company has not triggered any milestones and therefore no amounts have been recognized or paid.

The Company has accounted for the BAQSIMI ® acquisition as an asset acquisition in accordance with ASC 805, Business Combination s, as substantially all the fair value of the assets acquired is concentrated in a single identifiable asset, BAQSIMI ® product rights.

2 unchanged sentences

The relative fair values of identifiable assets from the acquisition of BAQSIMI ® are based on estimates of fair value using assumptions that the Company believes are reasonable.

Manufacturing Services Agreement

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

Upon termination of the MSA, the Company will be obligated to purchase all API, components, and finished goods on hand at prices agreed upon in the MSA.

Transition Services Agreement

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

The following table summarizes the aggregate amount paid for the assets acquired by the Company in connection with the acquisition of BAQSIMI ® :

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The total purchase price was allocated to the acquired assets based on their relative fair values, as follow:

The total purchase price was allocated to the acquired assets based on their relative fair values, as follows:

(in thousands)

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The Company is amortizing the acquired intangible asset on a straight-line basis over its estimated useful life of 24 years (See Note 10 for additional information).

The fair value of the deferred cash payment is being accreted to the full $ 129.0 million amount over a one-year period through interest expense.

During the year ended December 31, 2023 $ 3.7 million of interest expense was recognized related to accretion of the deferred cash payments.

The fair value of the deferred cash payment was accreted to the full $ 129.0 million amount over a one-year period through interest expense.

During the years ended December 31, 2024 and 2023, $ 3.6 million and $ 3.7 million of interest expense was recognized related to accretion of the deferred cash payments, respectively.

The Company made the $129.0 million deferred cash payment in June 2024.

Manufacturing Services Agreement

In connection with the Closing, the Company entered into a Manufacturing Services Agreement, or the 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 or through third-party contractors to the Company in connection with its operation of the development, manufacture, and commercialization of BAQSIMI ® .

Upon termination of the MSA, the Company was obligated to purchase all API, components, and finished goods on hand at prices agreed upon in the MSA.

In December 2024, as the MSA expired, the Company entered into a commercial supply agreement with a third party contract manufacturing organization, or CMO, pursuant to which the CMO will provide manufacturing services for BAQSIMI ® .

Transition Services Agreement

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

Throughout 2024, the Company assumed distribution responsibilities, from Lilly, to its customers in the United States, and certain other countries.

As a result, the Company has recorded the sales and related cost of BAQSIMI ® to its customers in these countries as product revenue, net and cost of revenues, respectively.

The assumption of distribution of BAQSIMI ® for the final two countries occurred on January 1, 2025.

Credit Agreement

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The Credit Agreement provides for a senior secured term loan, or the Wells Fargo Term Loan, in an aggregate principal amount of $ 500.0 million.

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

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

In 2023, the Company repaid $ 250.0 million of the Wells Fargo Term Loan.

Proceeds from the Term Loan were used to finance the acquisition of

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Credit Agreement also provides a senior secured revolving credit facility, or the Revolving Credit Facility, in an aggregate principal amount of $ 200.0 million.

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As of December 31, 2024, the Company had no borrowings outstanding under the Revolving Credit Facility.

Proceeds from the Term Loan were used to finance the acquisition of BAQSIMI ® .

Revenue Recognition

Product revenues, net

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, the Company may require payment before products are delivered or services are rendered to customers.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers.

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 are recognized over time based on progress toward 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 $ 4.5 million, $ 4.3 million and $ 5.1 million for the years ended December 31, 2023, 2022 and 2021, 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.

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 and we satisfy our performance obligations, which is generally at the time of product delivery to the Company’s customers.

In some cases, our performance obligation is satisfied, and revenue is recognized at the time of shipment when stipulated by the terms of the sale agreements.

The consideration to which the Company expects to be entitled includes a stated list price, less various forms of variable consideration including provision for chargebacks and rebates, accrual for product returns, prompt pay discounts, distributor fees, patient co-pay assistance, and other related deductions.

These deductions to product sales are referred to as gross-to-net deductions and are estimated and recorded in the period in which the related product sales occur.

Payment terms offered to customers generally range from 30 to 75 days ;

however, payment terms differ by jurisdiction, by customer and, in some instances, by type of product.

Revenues from product sales, net of gross-to-net deductions, are recorded only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable of occurring when the uncertainty associated with gross-to-net deductions is subsequently resolved.

Taxes assessed by governmental authorities and collected from customers are excluded from product sales.

If the Company expects, at contract inception, that the period between the transfer of control and corresponding payment from the customer will be one year or less, the amount of consideration is not adjusted for the effects of a financing component.

Shipping and handling activities are considered to be fulfillment activities rather than a separate performance obligation and are recorded within selling, distribution and marketing expenses in the accompanying consolidated statements of operations.

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.

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, group purchasing organizations and pharmacy benefit managers in the United States.

Rebates include primarily amounts paid to retailers, payers, and providers in the United States, including those paid to Medicare and 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 customers based on inventory stocking levels, historical chargeback and rebate rates, and current contract pricing.

The provision for chargebacks and rebates is reflected as a component of product revenues, net.

The following table is an analysis of the chargeback and rebate provision:

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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 retailers’ 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

Changes in the rebate

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 20 days to 60 days after the sale to wholesalers.

provision from period to period are primarily dependent on retailers’ and other indirect customers’ purchases.

The approach that the Company uses to estimate chargebacks and rebates 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.

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.

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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 offers certain customers the right to return qualified excess or expired inventory for full or partial credit.

The Company’s product returns primarily consist of the returns of expired products from sales made in prior periods.

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The Company also assesses other factors that could affect product returns including market conditions, product obsolescence, and 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.

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Other long-term liabilities

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

Prompt Pay Discounts:

The Company provides its customers with a percentage discount on their invoice if the customers pay within the agreed upon timeframe.

The Company generally expects that its customers will earn such prompt pay discounts.

The Company estimates the probability of customers paying promptly based on the percentage of discount outlined in the purchase agreement between the two parties, and deducts the full amount of these discounts from gross product sales and accounts receivable at the time revenue is recognized.

Distributor Fees:

The Company engages with wholesalers to distribute its products to end customers.

The Company pays the wholesalers a fee for services such as:

inventory management, chargeback administration, and service level commitments.

The Company estimates the amount of distribution services fees to be paid and adjusts the transaction

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income per Share Attributable to Amphastar Pharmaceuticals, Inc.

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 potentially 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, and potential common shares issued upon the conversion of Convertible Notes of the Company, due March 2029, or the 2029 Convertible Notes.

For the year ended December 31, 2023, the Company did not have any options that were excluded in the computation of diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders because the effect would be anti-dilutive.

The 2029 Convertible Notes had no impact on the computation of diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders, as the average stock price during the period was less than the conversion price.

price with the amount of such estimate at the time of sale to the customer.

An accrued liability is recorded for unpaid distribution service fees.

Patient Co-Pay Assistance:

Co-pay assistance represents financial assistance to qualified patients, assisting them with prescription drug co-payments required by insurance.

The accrual for co-pay is based on an estimate of claims and the cost per claim that the Company expects to receive associated with inventory that exists in the distribution channel at period end.

Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers.

Revenues are recognized for each unit of account based on revenue recognition criteria relevant to that unit.

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

Revenue from research and development services at ANP was $ 4.2 million, $ 4.5 million, and $ 4.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Other revenues

Revenues related to BAQSIMI ® sales made 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.

Income per Share

Basic net income per share is calculated based upon the weighted-average number of shares outstanding during the period.

Diluted net income per share gives effect to all potentially 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, and potential shares of common stock issuable upon conversion of Convertible Notes of the Company, due March 2029, or the 2029 Convertible Notes.

For the year ended December 31, 2024, options to purchase 618,973 shares of stock with a weighted-average exercise price of $ 46.63 per share were excluded in the computation of diluted net income per share because their effect would be anti-dilutive.

The 2029 Convertible Notes had no impact on the computation of diluted net income per share as the average stock price during the period was less than the conversion price.

For the year ended December 31, 2023, the Company did not have any options that were excluded in the computation of diluted net income per share because the effect would be anti-dilutive.

The 2029 Convertible Notes had no impact on the computation of diluted net income per share as the average stock price during the period was less than the conversion price.

For the year ended December 31, 2022, options to purchase 704,483 shares of stock with a weighted-average exercise price of $ 34.79 per share were excluded from the computation of diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders because their effect would be anti-dilutive.

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 their effect would be anti-dilutive.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the calculation of basic and diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

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Basic and dilutive numerator:

Net income attributable to Amphastar Pharmaceuticals, Inc.

Weighted-average shares outstanding — basic

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Weighted-average shares outstanding — diluted

Net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders — basic

Net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders — diluted

Net income per share — basic

Net income per share — diluted

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

The Company’s business is the development, manufacture, and marketing of pharmaceutical products (See note 1).

The Company’s Chief Executive Officer, is the Chief Operating Decision Maker, or CODM.

The Company has previously disclosed two reporting segments:

Finished pharmaceutical products and APIs.;

however, the BAQSIMI ® acquisition that was completed in 2023 as well as the decline in API revenues resulted in a change to information provided to and used regularly by the CODM to assess the Company’s performance.

The CODM currently uses consolidated information to assess the Company’s performance.

As a result, in the fourth quarter of 2024, the Company combined both of its reportable segments into one segment, pharmaceutical products.

The measure of segment assets is reported on the consolidated balance sheets as total assets.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Other revenues from the sale of BAQSIMI ® are accounted for as a component of the finished pharmaceutical products segment.

Selected financial information by reporting segment is presented below:

Selected segment financial information is presented below.

The Company has recast the corresponding items of segment information for the periods presented:

Year Ended December 31,

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Net revenues:

Finished pharmaceutical products

Total net revenues

Gross profit (loss):

Finished pharmaceutical products

Total gross profit

Operating expenses

Income from operations

Non-operating (expenses) income

Income before income taxes

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:

Payroll expense

Materials and supplies

Clinical trials expense

Depreciation and amortization expense

Stock-based compensation expense

Consulting and outside services expense

Advertising and promotional expense

Other segment items (1)

Interest income

Interest expense

Income tax provision

Equity in losses of unconsolidated affiliate

(1) Other segment items includes maintenance and repairs expense, travel expense, professional services expense, legal expense, rent expense, manufacturing amounts capitalized on the balance sheet, certain overhead expenses, miscellaneous expenses, and foreign currency exchange gains and losses .

Net revenues by product are presented below:

Year Ended December 31,

(in thousands)

Finished pharmaceutical products segment net revenues:

Product revenues, net:

Primatene MIST ®

Other finished pharmaceutical products

Total finished pharmaceutical products net revenues

Total finished pharmaceutical products segment net revenues

Other products

Total product revenues, net

Other revenues

Total net revenues

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amount of depreciation and amortization expense included in cost of revenues by reporting segment is presented below:

Year Ended December 31,

(in thousands)

Depreciation and amortization expense

Finished pharmaceutical products

Total depreciation and amortization expense

Net revenues and carrying values of long-lived assets by geographic regions are as follows:

Net revenues and carrying values of long-lived assets, which includes property, plant and equipment, as well as finance and operating lease right-of-use assets, by geographic regions, based on where the Company conducts its operations, are as follows:

Long-Lived Assets

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Customer Concentrations

Three large wholesale drug distributors, Cencora Inc., formally AmerisourceBergen, or Cencora, 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.

Lilly currently manufactures and sells BAQSIMI ® on the Company’s behalf pursuant to the terms of the TSA (See Note 4 for additional information).

The Company considers these four 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, 2023, 2022, and 2021, and accounts receivable as of December 31, 2023 and 2022, respectively.

The following table provides accounts receivable and net revenue information for these major customers:

The following table provides accounts receivable and net revenue information for the Company’s four major customers:

% of Total Accounts

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Cardinal Health

(1) Net revenues from BAQSIMI ® sales made under the TSA agreement.

Supplier Concentrations

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Furthermore, a significant portion of raw materials may only be available from foreign sources.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Fair Value Measurements

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● Level 1 – Inputs to measure fair value are based on quoted prices (unadjusted) in active markets on identical assets or liabilities;

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

● Level 2 – Inputs to measure fair value are based on the following:

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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, 2023, cash equivalents include money market accounts and corporate and municipal bonds with original maturities of less than three months.

Investments consist of certificates of deposit as well as investment-grade corporate, agency and municipal bonds with original maturity dates between three and fifteen months.

As of December 31, 2024 and 2023, cash equivalents include money market accounts and corporate and municipal bonds with original maturities of less than three months.

Investments consist of certificates of deposit as well as investment-grade corporate, agency and municipal bonds with original maturity dates between three and nineteen months.

The certificates of deposit are carried at amortized cost in the Company’s consolidated balance sheets, which approximates their fair value determined based on Level 2 inputs.

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Total assets and liabilities measured at fair value as of December 31, 2024

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

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Interest rate swaps related to variable rate loans

Total assets measured at fair value as of December 31, 2022

Total assets and liabilities measured at fair value as of December 31, 2023

The Company does not hold any Level 3 instruments that are measured at fair value on a recurring basis.

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The Company’s deferred compensation plan assets are valued using the cash surrender value of the life insurance policies and are not included in the table above.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of the Company’s investments that are classified as held-to-maturity:

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Corporate and agency bonds (due within 1 year)

Corporate bonds (due within 1 to 3 years)

Corporate and agency bonds (due within 1 to 3 years)

Municipal bonds (due within 1 year)

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Corporate and agency bonds (due within 1 year)

Corporate and agency bonds (due within 1 to 3 years)

Municipal bonds (due within 1 year)

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Expected credit losses on held-to-maturity investments were not material to the consolidated financial statements.

Investment in unconsolidated affiliate

The Company accounts for its share of the earnings or losses of its unconsolidated affiliate 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 years ended December 31, 2023, 2022 and 2021 was $ 2.0 million, $ 1.2 million and $ 0.2 million, respectively, which was recorded in “equity in

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

losses of unconsolidated affiliate” on the accompanying consolidated statement of operations.

Goodwill and Intangible Assets

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BAQSIMI ® product rights (1)

IMS (UK) international product rights (2)

Land-use rights

Other intangibles

Indefinite-lived intangible assets

Goodwill - Finished pharmaceutical products

As of December 31, 2024

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Weighted-Average

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Definite-lived intangible assets

IMS (UK) international product rights (2)

BAQSIMI ® product rights (1)

Land-use rights

Other intangibles

Indefinite-lived intangible assets

Goodwill - Finished pharmaceutical products

As of December 31, 2023

Intangible assets with indefinite lives have an indeterminable average life.

In June 2023, the Company recorded an impairment related to its IMS (UK) international product rights in the amount of $ 2.7 million.

The Company recorded the impairment in the cost of revenue in its consolidated statement of operations for the year ended December 31, 2023

In 2023, the Company recorded an impairment related to its IMS (UK) international product rights in the amount of $ 2.7 million.

The Company recorded the impairment in the cost of revenues in its consolidated statement of operations for the year ended December 31, 2023.

The changes in the carrying amounts of goodwill are as follows:

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Primatene ® Trademark

In January 2009, the Company acquired the exclusive rights to the trademark, domain name, website and domestic

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2023.

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, 2024.

The trademark was determined to have an indefinite life.

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As discussed in Note 3, in June 2023, the Company acquired the BAQSIMI ® product rights.

BAQSIMI ® is an emergency nasal spray used to treat severe hypoglycemia.

The BAQSIMI ® product rights intangible asset is amortized over its estimated useful life of 24 years .

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effects of the regulatory environment;

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expected changes in distribution channels;

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Included in cost of revenues for the years ended December 31, 2024, 2023 and 2022 is product rights amortization expense of $ 24.7 million, $ 15.5 million, and $ 0.9 million, respectively.

As of December 31, 2023, the expected amortization expense for all amortizable intangible assets during the next five fiscal years ended December 31 and thereafter is as follows:

As of December 31, 2024, the expected amortization expense for all amortizable intangible assets during the next five fiscal years ending December 31 and thereafter is as follows:

(in thousands)

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Total inventories

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Charges of $ 14.0 million, $ 18.8 million, and $ 17.2 million were included in the cost of revenues in the Company’s consolidated statements of operations for the years ended December 31, 2024, 2023, and 2022, respectively, to adjust the Company’s inventory and related firm purchase commitments to their net realizable value.

For the year ended December 31, 2024, these charges included $ 7.4 million in the cost of revenues to adjust the Company’s enoxaparin inventory and related firm purchase commitments to their net realizable value.

For the year ended December 31, 2023, these charges included $ 9.1 million in the cost of revenues to adjust the Company’s enoxaparin inventory and related firm purchase commitments to their net realizable value.

Additionally, as a result of amending the MannKind RHI Supply Agreement in December 2023, the Company booked a $ 3.6 million adjustment to reduce RHI inventory to its net realizable value.

For the year ended December 31, 2022, the charge included $ 14.9 million in the cost of revenues to adjust the Company’s enoxaparin inventory and related firm 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.

Losses on firm purchase commitments related to raw materials on order as of December 31, 2023 and 2022 were $ 1.0 million and $ 2.7 million, respectively, which are recorded in cost of revenues in the Company’s consolidated statement of operations.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant, and Equipment

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Interest expense capitalized was approximately $ 0.8 million, $ 2.0 million, and $ 1.4 million, for the years ended December 31, 2024, 2023, and 2022, respectively.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Payable and Accrued Liabilities

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Total accounts payable and accrued liabilities

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt consists of the following:

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Wells Fargo Term Loan due June 2028

Capital One N.A.

Term Loan paid off June 2023

Mortgage Loans

Mortgage payable with East West Bank due June 2027

Mortgage payable with East West Bank paid off June 2024

Other Loans and Payment Obligations

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Wells Fargo Revolving line of credit facility due June 2028

Capital One N.A.

Revolving line of credit facility closed in June 2023

Line of credit facility with ICBC Bank due November 2033

Equipment under Finance Leases

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Long-term debt, net of current portion and unamortized debt issuance costs

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Agreement

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In connection with the issuance of the 2029 Convertible Notes, the Company incurred approximately $ 10.8 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees.

Unamortized debt issuance costs related to the 2029 Convertible Notes were $ 10.3 million as of December 31, 2023.

Unamortized debt issuance costs related to the 2029 Convertible Notes were $ 8.3 million and $ 10.3 million as of December 31, 2024 and 2023, respectively.

The fair value of the 2029 convertible notes was approximately $ 320.9 million as of December 31, 2024 based on level 2 inputs.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2024 and 2023, the total interest expense related to the 2029 Convertible Notes was $ 8.9 million and $ 2.6 million, with coupon interest expense of $ 6.9 million and $ 2.0 million, and the amortization of debt issuance cost of $ 2.0 million and $ 0.6 million, respectively.

The 2029 Convertible Notes are general senior, unsecured obligations and bear an interest rate of 2.0 % per year.

5 unchanged sentences

and structurally junior to all indebtedness and other liabilities of the Company’s current or future subsidiaries, including trade payables.

Interest will be payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2024.

Interest is payable semi-annually in arrears on March 15 and September 15 of each year.

The 2029 Convertible Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the 2029 Convertible Notes are not freely tradeable as required by the Indenture.

3 unchanged sentences

(i) during any calendar quarter commencing after the calendar quarter ending on December 31, 2023 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2029 Convertible Notes on each applicable trading day, (ii) during the five business day period after any five consecutive trading day period in which the trading price, as defined in the Indenture, per $ 1,000 principal amount of the 2029 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day, (iii) if the Company calls the 2029 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, and (iv) upon the occurrence of specified corporate events defined in the Indenture.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On or after December 15, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2029 Convertible Notes, in multiples of $ 1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

The Company may redeem the 2029 Convertible Notes, at its option, in whole or in part (subject to certain limitations), on or after September 20, 2026 and prior to the 41 st scheduled trading day preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The initial conversion rate is 15.8821 shares of the Company’s common stock per $ 1,000 principal amount of the 2029 Convertible Notes, which represents an initial conversion price of approximately $ 62.96 per share of common stock.

14 unchanged sentences

In the fourth quarter of 2023, the Company made a principal payment of $ 50.0 million, reducing the balance to $ 250.0 million.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Credit Agreement also provides for a $ 200.0 million Revolving Credit Facility and bears the same interest rate as the Wells Fargo Term Loan.

3 unchanged sentences

as well as the new Credit Agreement, the transaction was accounted for as a modification under ASC 470-50, Debt Modifications and Extinguishments , based on a comparison of the present value of the cash flows for each lender under the terms of the debt immediately before and after the transaction, which resulted in a change of less than 10%.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company incurred approximately $ 14.3 million in issuance costs in connection with the Credit Agreement, of which $ 3.0 million represented debt modification costs and were charged to interest expense in the Company’s consolidated statement of operations for year ended December 31, 2023.

Debt issuance costs associated with the Credit Agreement (other than its Revolving Credit Facility component) are presented as a reduction to the carrying value of the related debt, while debt issuance costs associated with the Revolving Credit Facility are capitalized within other long-term assets on the consolidated balance sheets.

Unamortized debt issuance costs related to the Credit Agreement as of December 31, 2023 were $ 7.8 million which are being amortized over the term of the Credit Agreement using the effective interest rate method.

Unamortized debt issuance costs related to the Credit Agreement as of December 31, 2024 and 2023 were $ 6.0 million and $ 7.8 million, respectively, which are being amortized over the term of the Credit Agreement using the effective interest rate method.

As a result of the $ 250.0 million repayment of the principal balance of the Wells Fargo Term Loan, approximately $ 3.8 million of unamortized debt issuance costs were written off during the year ended December 31, 2023.

Syndicated Credit Agreement with Capital One N.A.

– Paid off June 2023

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, or the Capital One N.A.

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 Capital One N.A.

Term Loan was 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.

In June 2023, the Company repaid all amounts outstanding under the Capital One N.A.

Mortgage Loans

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 SOFR rate plus 2.6 %.

Mortgage Payable with East West Bank — Paid off June 2024

In May 2017, the Company entered into a mortgage term loan with East West Bank in the principal amount of $ 9.0 million, which would have matured in June 2027.

The loan was payable in monthly installments with a final balloon payment of $ 7.4 million plus interest.

The loan was 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 had a variable interest rate at the one-month SOFR rate plus 2.6 %.

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.

In June 2024, the Company repaid all outstanding amounts due under this loan.

Line of Credit Facilities

Line of Credit Facility with China Merchant Bank – Due October 2026

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2020, the Company entered into a credit agreement with China Merchant Bank.

1 unchanged sentence

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 expired in March 2023.

The credit period was for 36 months and expired in March 2023.

In October 2023, the Company renewed the credit agreement with China Merchant Bank, and allows the Company to borrow up to $ 4.1 million.

The credit period is for 36 months and expires in October 2026.

Interest Rate Swap Contracts

As of December 31, 2023, the fair value of the loans listed above approximated their carrying amount based on Level 2 inputs.

For the mortgage loan with East West Bank, as well as the Wells Fargo Term Loan, the Company has entered into fixed interest rate swap contracts to exchange the variable interest rates for fixed interest rates.

The interest rate swap contracts are recorded at fair value in the other assets line in the consolidated balance sheets.

Syndicated Line of Credit Facility with ICBC Bank – Due November 2033

In January 2024, the Company entered into a credit agreement with Industrial and Commercial Bank of China Limited, or ICBC Bank, acting as a lender and as agent for other lenders.

The credit agreement allows the Company to borrow up to $ 40.0 million secured by equipment and buildings at 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 agreement expires in November 2033.

As of December 31, 2024, the Company borrowed approximately $ 18.4 million under the credit agreement.

The loan bears interest at the prime rate as published by The People’s Bank of China minus 0.2 %.

Interest payments are due quarterly and repayment of the principal amount is biannual and begins in May 2026.

As of December 31, 2024, the Company had $ 18.4 million of principal outstanding under this loan, which is recorded net of loan issuance costs of $ 1.1 million.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest Rate Swap Contract

As of December 31, 2024, the fair value of the loans listed above approximated their carrying amount based on Level 2 inputs, with the exception of the 2029 Convertible Notes.

For the Wells Fargo Term Loan, the Company has entered into a fixed interest rate swap contract to exchange the variable interest rates for fixed interest rates.

The interest rate swap contract is recorded at fair value in the other assets line in the consolidated balance sheets.

Changes in the fair values of interest rate swaps were $ 5.0 million and $ 5.9 million for the years ended December 31, 2024 and 2023, respectively.

3 unchanged sentences

(in thousands)

The Company’s income before income taxes generated from its operations were:

The Company’s income (loss) before income taxes generated from its operations were:

Year Ended December 31,

(in thousands)

Income before income taxes:

Income (loss) before income taxes:

United States

25 unchanged sentences

Effective tax rate

The Company’s effective tax rate for 2023 decreased in comparison to 2022 primarily due to differences in pre-tax income positions, including jurisdictions where the Company maintains valuation allowance reserves against its deferred tax assets, and additional research and development credit benefit.

The Company’s effective tax rate for 2024 decreased in comparison to 2023 primarily due to excess tax benefit from share-based compensation and lower state income tax expense.

Deferred Tax Assets and Liabilities

11 unchanged sentences

Accrued expenses

Accrued chargebacks

Accrued chargebacks and rebates

Product return allowance

19 unchanged sentences

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.

During the year ended December 31, 2023, the Company determined its U.K.

subsidiaries, AUK and IMS UK, more likely than not would not realize the benefits of their deferred tax assets.

Therefore, the Company recorded a valuation allowance expense of an immaterial amount and will discontinue recognizing income tax benefits until sufficient taxable income is generated to realize their deferred tax assets.

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.

As of December 31, 2023

The Company continues to record a full valuation allowance on the net deferred income tax assets of its French subsidiary, AFP, and its U.K.

subsidiaries, AUK and IMS UK and will continue to do so until the subsidiaries generate sufficient taxable income to realize their respective deferred income tax assets.

As of December 31, 2024 and 2023, the Company had a full valuation allowance against the net deferred tax assets of AFP, which totaled $ 20.7 million and $ 19.0 million, respectively, and a full valuation allowance against the net deferred tax assets of its UK subsidiaries of immaterial amounts.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and 2022, the Company had a full valuation allowance against the net deferred tax assets of AFP, which totaled $ 19.0 million and $ 18.9 million, respectively.

The Company records a valuation allowance on net deferred income tax assets in states where it files separately and will continue to do so until sufficient taxable income is generated to realize these state deferred income tax assets.

The Company also records a valuation allowance on net deferred income tax assets in states where it files separately and will continue to do so until sufficient taxable income is generated to realize these state deferred income tax assets.

Undistributed Earnings from Foreign Operations

17 unchanged sentences

states and foreign jurisdictions.

As of December 31, 2023, the Company is under examination in California for the 2019 - 2021 tax years, but does not have a tax examination in progress for federal, Massachusetts, other states, or foreign jurisdictions.

As of December 31, 2024, the Company is under U.S.

federal examination for the 2022 tax year and in California for the 2019-2021 tax years.

The Company does not have a tax examination in progress for Massachusetts, other states, or foreign jurisdictions.

The Company is subject to income tax audit by tax authorities for tax years 2021 to 2023 for federal, 2019 to 2023 for states, and 2014 to 2023 for foreign.

1 unchanged sentence

As of December 31, 2024, 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.

the Amended and Restated 2015 Equity Incentive Plan, or the Amended 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.

4 unchanged sentences

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 March 2015, the Board of Directors adopted the Company’s 2015 Equity Incentive Plan, or the Original 2015 Plan, which was approved by the Company’s stockholders in May 2015 and was set to expire in March 2025.

The Original 2015 Plan was 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 Original 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 of the 2015 Plan, there were 5,300,296 shares available for grant under the 2015 Plan.

As of December 31, 2023, the Company reserved an aggregate of 6,777,943 shares of common stock for future issuance under the Amended and Restated 2015 Equity Incentive Plan, or the 2015 Plan, including 1,201,722 shares, which were reserved in January 2024 pursuant to the evergreen provision in the 2015 Plan.

The Company initially reserved 5,000,000 shares of common stock for issuance under the Original 2015 Plan and also contained an “evergreen provision” that allowed 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.

In February 2024, the Board of Directors approved the Company’s Amended 2015 Plan, which was subsequently approved by the Company’s stockholders, and accordingly, adopted by the Company in June 2024.

The Amended 2015 Plan, among other things, extended the term of the Original 2015 Plan, increased the number of shares available for issuance under the Original 2015 Plan, and removed the evergreen provision.

The term of the Amended 2015 Plan will be extended indefinitely, however, the Company’s ability to grant incentive stock options thereunder will continue through February 2034.

As of December 31, 2024, the Company reserved an aggregate of 7,818,314 shares of common stock for future issuance under the Amended 2015 Plan.

Amended and Restated 2005 Equity Incentive Award Plan

23 unchanged sentences

Pursuant to the Company’s existing share buyback program, the Company purchased 1,919,670 shares, 1,338,757 shares, and 1,335,528 shares of its common stock during the years ended December 31, 2024, 2023 and 2022, for total consideration of $ 85.5 million, $ 58.1 million, and $ 39.9 million, respectively.

Share-Based Award Activity and Balances (excluding the ANP Equity Plan)

Share-Based Award Activity and Balances

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.

2 unchanged sentences

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.

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.

Options issued under the Company’s Amended 2015 Plan, Original 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.

7 unchanged sentences

● Expected Volatility.

The Company estimates its volatility based on the historical volatility of its stock price since IPO.

The Company estimates its volatility based on the historical volatility of its stock price.

● Expected Term.

The expected term represents the period of time in which the options granted are

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

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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 (using the simplified method as outlined in SAB Topic 14 due to a lack of sufficient historical exercise data) 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.

5 unchanged sentences

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, 2023, 2022 and 2021, the Company estimated an average overall forfeiture rate of approximately 7 %, 7 %, and 6 %, respectively, based on historical experience.

For each of the years ended December 31, 2024, 2023 and 2022, the Company estimated an average overall forfeiture rate of approximately 7 % based on historical experience.

Forfeiture rates are separately estimated for its (1) directors and officers, (2) management personnel and (3) other employees.

17 unchanged sentences

Options exercised

( 1,728,293 )

Options forfeited

19 unchanged sentences

Options vested

( 1,056,606 )

Options forfeited

3 unchanged sentences

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 Company grants restricted stock units, or RSUs, to certain employees and members of the Board of Directors with a vesting period of up to four 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 vested.

The RSUs do not have any voting or dividend rights prior to the issuance of underlying common stock.

The RSUs do not have any voting or dividend rights prior to the issuance 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.

13 unchanged sentences

(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, 168,067 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 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 the 2018 Plan was terminated, the number of stock options outstanding under the 2018 Plan 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 at the time the 2018 Plan was terminated, 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 cost to the Company was $ 2.3 million, of which $ 1.8 million was recorded as share-based compensation 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 year ended December 31, 2021, the Company recorded expense of $ 0.5 million related to stock options issued by ANP under the 2018 Plan.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Of the vested RSUs, 148,020 shares of common stock were surrendered to fulfill tax withholding obligations.

Share-based Compensation Expense

19 unchanged sentences

The plan is currently unfunded, and the benefit obligation under the plan was $ 2.6 million and $ 2.6 million at December 31, 2024 and 2023, respectively.

The Company recorded an immaterial amount of expense under the plan for each of the years ended December 31, 2023, 2022 and 2021.

Gain or loss due to change in actuarial valuation of the Company’s defined benefit pension plan is recorded in other comprehensive income (loss).

The Company recorded an immaterial amount of expense under the plan for each of the

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

years ended December 31, 2024, 2023 and 2022.

Gain or loss due to change in actuarial valuation of the Company’s defined benefit pension plan is recorded in other comprehensive income.

Non-qualified Deferred Compensation Plan

8 unchanged sentences

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.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

8 unchanged sentences

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 .

In connection with entry into one of the agreements with our CMOs, the Company identified an embedded lease and as a result recorded a ROU asset and a related operating lease liability of approximately $ 16.4 million in December 2024.

The components of lease costs were as follows:

34 unchanged sentences

Related-Party Transactions

ANP Restructuring and Investment in Hanxin

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 11.5 % 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.

Hanxin Pharmaceutical Technology, Co., Ltd.

The Company has an 11.5 % ownership in Hanxin that is accounted for as an equity method investment.

The Company maintains a seat on Hanxin’s board of directors, and Henry Zhang, the son of Dr.

Jack Zhang, is an equity holder, the general manager, and the chairman of the board of directors of Hanxin.

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.

Contract manufacturing agreement with Hanxin

In April 2022, ANP, entered into a contract manufacturing agreement with Hanxin, whereby Hanxin will develop several active pharmaceutical ingredients and finished products for the Chinese market and will engage ANP to manufacture the products on a cost-plus basis.

Hanxin will commit to purchase certain quantities from ANP subject to the terms and conditions set forth in the agreement, including Hanxin filing for and obtaining any required marketing authorizations.

During the years ended December 31, 2023 and 2022, the Company recognized $ 0.1 million and $ 0.4 million of revenue from manufacturing services provided to Hanxin, respectively.

As of December 31, 2023, the Company did not have any receivables from Hanxin.

Jack Zhang, have an ownership interest in Hanxin through an affiliated entity.

As a result, Hanxin is a related party.

Contract Manufacturing Agreements with Hanxin

The Company has various contract manufacturing agreements with Hanxin and its subsidiaries, whereby Hanxin will develop several active pharmaceutical ingredients and finished products for the Chinese market and will engage the Company to manufacture the products on a cost-plus basis.

During the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 0.5 million, $ 0.1 million and $ 0.4 million of revenue from manufacturing services provided to Hanxin, respectively.

As of December 31, 2024, the Company had an immaterial amount of receivables from Hanxin under these agreements.

Contract Research Agreement with Hanxin

In July 2022, the Company entered into a three-year contract research agreement with Hanxin, a related party, whereby Hanxin will develop Recombinant Human Insulin Research Cell Banks, or RCBs, for the Company and license the RCBs to the Company subject to a fully paid, exclusive, perpetual, transferable, sub-licensable worldwide license.

The RCBs will be used by the Company to make Master Cell Banks for one of its product candidates.

Per the terms of the agreement with Hanxin, all title to the RCBs developed, prepared and produced by Hanxin in conducting research and development will belong to the Company.

The Company will also own any confidential and proprietary information, technology regarding development and manufacturing of the RCBs, which shall include engineering, scientific and practical information and formula, research data, design, and procedures and others to develop and manufacture the RCBs, in use or developed by Hanxin.

The total cost of the agreement to the Company shall not exceed approximately $ 2.2 million, with payments adjusted based on the then current exchange rates.

Any additional work or changes to the scope of work requested by the Company will be charged by Hanxin to the Company on a cost-plus basis, plus any applicable taxes.

In March 2023, the Company amended the agreement with Hanxin, whereby Hanxin will perform scale-up manufacturing process development using the RCBs for the Company.

Per the terms of the amended agreement the Company will own any confidential and proprietary information and technology produced during the scale-up manufacturing, which shall include engineering, scientific and practical information and formula, research data design and procedures and others to develop and manufacture the RCBs.

The amendment agreement will remain in full force and effect until July 5, 2025.

The total cost of the amended agreement to the Company shall not exceed approximately $ 0.5 million in additional payments beyond the $ 2.2 million in payments under the contract research agreement, with payments adjusted based on actual currency exchange rates.

Any additional work or changes to the scope of work requested by the Company will be charged by Hanxin to the Company on a cost-plus basis, plus any applicable taxes.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2023 and 2022, the Company paid $ 1.6 million and $ 0.6 million, respectively, under this agreement.

Hanxin will also perform scale-up manufacturing process development using the RCBs for the Company.

During the years ended December 31, 2024, 2023 and 2022, the Company paid $ 0.2 million, $ 1.6 million and $ 0.6 million, respectively, under this agreement.

As of December 31, 2024, the Company had an immaterial amount of payable to Hanxin under this agreement.

Supply Agreement with Letop

In November 2022, ANP entered in to a supply agreement with Nanjing Letop Biotechnology Co., Ltd., or Letop, which is considered a related-party due to an ownership stake by Henry Zhang.

Under the terms of the supply agreement Letop will manufacture and deliver chemical intermediates for ANP on a cost-plus basis.

The agreement is effective for three years and the total cost of the agreement shall not exceed approximately $ 1.5 million, with payments adjusted based on the then current exchange rates.

During the years ended December 31, 2023 and 2022, ANP paid $ 0.7 million and $ 0.2 million, respectively, under this agreement.

In November 2022, the Company entered into a supply agreement with Nanjing Letop Biotechnology Co., Ltd., or Letop, which is considered a related-party due to an ownership stake of Henry Zhang.

Under the terms of the supply agreement, Letop will manufacture and deliver chemical intermediates to the Company on a cost-plus basis.

The agreement is effective for three years and the total cost of the agreement shall not exceed $ 1.5 million, with payments adjusted based on the then current exchange rates.

During the year ended December 31, 2024, the Company paid an immaterial amount under this agreement.

During the years ended December 31, 2023 and 2022, the Company paid $ 0.7 million and $ 0.2 million, respectively, under this agreement.

As of December 31, 2024, the Company did not have any additional accruals payable to Letop.

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 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 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 Litigation

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.

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 January 26, 2022, the Company and Astellas-Gilead reached an agreement to resolve the lawsuit.

Under the terms of the agreement, the Company received $ 5.4 million from Astellas constituting saved litigation expenses.

The Company recorded the settlement amount in other income (expenses) in its consolidated statement of operations for the year ended December 31, 2022.

Employee Litigations

In 2021 the Company settled employee litigations relating to alleged violations of various California labor laws pertaining to wage and hour against the Company.

For the year ended December 31, 2021, the Company recorded $ 1.0

Primatene MIST ® Distribution Agreement with Hong Kong Genreach Limited

In August 2024, the Company entered into a distribution agreement with Hong Kong Genreach Limited, or Genreach, a wholly owned subsidiary of Hanxin, a related party.

Per the terms of the agreement, the Company has appointed Genrearch as the exclusive distributor to market and sell Primatene MIST ® in Mainland China, Taiwan, Hong Kong, and Macau in the Greater China region.

Genreach will be responsible for obtaining any and all regulatory approvals in the region for Primatene MIST ® .

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

million, related to the settlement of employment litigation, in general and administrative expense in the Company’s consolidated statements of operations.

The term of the agreement is ten years, with both parties having termination rights without cause after the completion of the second contract year.

During the year ended December 31, 2024, the Company recognized $ 1.1 million of revenue from the distribution agreement with Genreach.

As of December 31, 2024, the Company did not have any receivables from Genreach.

Albuterol sulfate Inhalation Aerosol Patent Litigation

On July 25, 2024, Teva Branded Pharmaceutical Products R&D, Inc.

(“Teva Branded”), Norton (Waterford) Ltd.

(“Norton”), and Teva Pharmaceuticals USA, Inc.

(“Teva USA”), collectively referred to as (“Plaintiff”) filed a Complaint in the United States District Court for the District of Delaware (“Delaware Court”) against the Company for infringement of U.S.

9,463,289, with regard to Amphastar’s ANDA No.

212447, for approval to manufacture and sell generic version of ProAir ® HFA (albuterol sulfate) Inhalation Aerosol.

On October 21, 2024, Plaintiff amended its complaint against the Company to include additional claims for infringement of U.S.

9,808,587 and 10,561,808, with regard to Amphastar’s ANDA No.

212447, for approval to manufacture and sell generic version of ProAir ® HFA (albuterol sulfate) Inhalation Aerosol.

This lawsuit was subsequently settled in January 2025.

As part of the settlement, the Company agreed to pay the Plaintiff $ 2.0 million in exchange for a license to use their Patent.

The settlement amount was recorded as an intangible asset and is being amortized over its useful life of six years .

Employee Litigations

On April 15, 2024, a former employee initiated an employment litigation against Amphastar and IMS by filing a complaint, as amended, having individual and class action claims for alleged violations of the California Labor Code pertaining to California’s Private Attorneys General Act, or PAGA, wage and hour, and other state laws.

This complaint was filed in the Superior Court of California for the County of Los Angeles.

In the complaint, the plaintiff is seeking damages and related remedies under California Law, as well as various penalty payments under the California Labor Code.

In November 2024, the court ordered the plaintiff to dismiss the individual and class claims, with only the PAGA claim remaining.

The Company intends to vigorously defend itself against the complaint.

On June 20, 2024, a former employee initiated an employment litigation against Amphastar, IMS and Roth Staffing Companies L.P.

by filing a complaint having individual and class action claims for alleged violations of the California Labor Code pertaining to wage and hour, and other state laws.

This complaint was filed in the Superior Court of California for the County of Los Angeles.

In the complaint, the plaintiff is seeking damages and related remedies under California Law, as well as various penalty payments under the California Labor Code.

The Company intends to vigorously defend itself against the complaint.

Other Litigation

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In addition, third parties may, from time to time, assert claims against the Company in the forms of letters and other communications.

Currently, the Company is subject to a lawsuit for a property and casualty claim, for which it has recorded an estimated liability of $ 6.0 million within accounts payable and other accrued liabilities on the balance sheet as of December 31, 2024.

This estimated liability is fully covered by the Company’s insurance policies.

The $ 6.0 million insurance recovery related to this claim is recorded within prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2024.

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.

however, the results of litigation and claims are inherently unpredictable and the Company’s view of these matters may

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Subsequent Events

Syndicated Line of Credit Facility with ICBC Bank – Due June 2033

In January 2024, the Company entered into a credit agreement with ICBC Bank acting as a lender and as agent for other lenders.

The credit agreement allows the Company to borrow up to $ 40.0 million secured by equipment and buildings at 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 agreement expires in November 2033.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data