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Item 1. Business

2021-03-11 compared with 2020-02-27 · 278 added, 636 removed, 50 unchanged (95% of the section changed)

ANI Pharmaceuticals, Inc.

consolidated subsidiaries, ANIP Acquisition Company and ANI Pharmaceuticals Canada Inc.

(together, “ANI,”

the “Company,”

“we,”

“us,”

or “our”) is an integrated specialty pharmaceutical company focused on delivering

value to our customers by developing, manufacturing, and marketing high quality branded and generic prescription pharmaceuticals.

We focus on niche and high barrier to entry opportunities including controlled substances, anti-cancer (oncolytics), hormones and

steroids, and complex formulations.

Our three pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota

and one is located in Oakville, Ontario, are together capable of producing oral solid dose products, as well as semi-solids, liquids

and topicals, controlled substances, and potent products that must be manufactured in a fully-contained environment.

is to use our assets to develop, acquire, manufacture, and market branded and generic specialty prescription pharmaceuticals.

executing this strategy, we believe we will be able to continue to grow our business, expand and diversify our product portfolio,

and create long-term value for our investors.

On June 19, 2013, pursuant to a merger

agreement dated as of April 12, 2013, ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc.

("ANIP") became

a wholly-owned subsidiary of BioSante Pharmaceuticals, Inc.

(“BioSante”) in an all-stock, tax-free reorganization

(the "Merger").

The Merger was accounted for as a reverse acquisition, pursuant to which ANIP was considered the acquiring

entity for accounting purposes.

Since the Merger, we have been operating under the leadership of the ANIP management team and ANIP's

historical results of operations have replaced BioSante's historical results of operations for all periods prior to the Merger.

The results of operations of both companies are included in our consolidated financial statements for all periods after completion

of the Merger.

In July 2013, we changed our name from “BioSante Pharmaceuticals, Inc.”

to “ANI Pharmaceuticals, Inc.”

In March 2014, we completed a follow-on

public offering of common stock, yielding net proceeds of $46.7 million.

In December 2014, we issued $143.8 million of our

Convertible Senior Notes (the “Notes”) in a registered public offering, yielding net proceeds of $122.6 million.

December 2018, we repurchased $25.0 million of our outstanding Notes.

In December 2017, we entered into a five-year senior

secured $125.0 million credit facility (the “Credit Agreement”) with Citizens Bank N.A.

The Credit Agreement was comprised

of a $75.0 million five-year secured term loan (the “Term Loan”) and a $50.0 million senior secured revolving credit

facility (the “Revolving Credit Facility”).

In December 2018, we refinanced our $125.0 million Credit Agreement

by entering into an amended and restated Senior Secured Credit Facility (the “Credit Facility”) for up to $265.2 million.

The principal new feature of the Credit Facility was a $118.0 million Delayed Draw Term Loan (the “DDTL”), which could

only be drawn on in order to pay down the Company’s remaining 3.0% Notes, which matured in December 2019.

Facility also extended the maturity of the $72.2 million secured term loan to December 2023.

In addition, the Credit Facility

increased the previous $50.0 million line of credit (the “Revolver”) to $75.0 million.

On November 29, 2019, we

exercised our option to borrow $118.0 million pursuant to the DDTL feature under the existing Credit Facility and the proceeds

were used to repay the outstanding Notes, which matured on December 1, 2019.

As of December 31, 2019, we had not drawn

on the Revolver.

With the additional funds resulting from

borrowings and operating cash, we have acquired Abbreviated New Drug Applications (“ANDAs”), New Drug Applications (“NDAs”),

and product rights, and have also entered into agreements to obtain the distribution rights for various products.

As a result of

these acquisitions and distribution agreements, we launched three products in 2014, six products in 2015, 11 products in 2016,

six products in 2017, 11 products in 2018, and six products in 2019 bringing our portfolio of products to 46 as of December 31,

and its consolidated subsidiaries, ANIP Acquisition Company and ANI Pharmaceuticals Canada Inc.

(together, “ANI,” the “Company,” “we,” “us,” or “our”) is an integrated specialty pharmaceutical company focused on delivering value to our customers by developing, manufacturing, and marketing high quality branded and generic prescription pharmaceuticals.

We focus on niche and high barrier to entry opportunities including controlled substances, oncology products (anti-cancer), hormones and steroids, and complex formulations.

Our three pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota and one is located in Oakville, Ontario, are together capable of producing oral solid dose products, as well as semi-solids, liquids and topicals, controlled substances, and potent products that must be manufactured in a fully-contained environment.

Through product launches, acquisitions of Abbreviated New Drug Applications (“ANDAs”), New Drug Applications (“NDAs”), product rights, and entry into agreements to obtain the distribution rights for various products, we have a commercial portfolio of 65 products as of December 31, 2020.

In addition, in January 2016, we acquired the Cortrophin gel and Cortrophin-Zinc NDAs.

We have continued to focus on

the re-commercialization of these products while increasing our portfolio of generic and mature brand products.

On August 6, 2018, our subsidiary,

ANI Pharmaceuticals Canada Inc., acquired all the issued and outstanding equity interests of WellSpring Pharma Services Inc.

(“WellSpring”),

a Canadian company that performs contract development and manufacturing of pharmaceutical products, for a purchase price of $18.0

million, subject to certain customary adjustments.

Pursuant to these customary adjustments, the total purchase consideration was

$16.7 million.

The consideration was paid entirely from cash on hand.

In conjunction with the transaction, we acquired WellSpring’s

pharmaceutical manufacturing facility, laboratory, and offices, its current book of commercial business, as well as an organized

Following the consummation of the transaction, WellSpring was merged into ANI Pharmaceuticals Canada Inc.

Canada”).

otherwise required by the context, references in this Annual Report on Form 10-K to the "Company,"

We continue to focus on the re-commercialization of these products while increasing our portfolio of generic and mature brand products.

On August 6, 2018, our subsidiary, ANI Pharmaceuticals Canada Inc.

(“ANI Canada”), acquired all the issued and outstanding equity interests of WellSpring Pharma Services Inc.

(“WellSpring”), a Canadian company that performs contract development and manufacturing of pharmaceutical products.

In conjunction with the transaction, we acquired WellSpring’s pharmaceutical manufacturing facility, laboratory, and offices, its current book of commercial business, as well as an organized workforce.

Unless otherwise required by the context, references in this Annual Report on Form 10-K to the "Company,"

"we,"

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refer to ANI Pharmaceuticals, Inc., a Delaware corporation formed in April 2001.

Our principal

executive offices are located at 210 Main Street West, Baudette, Minnesota, 56623, our telephone number is (218) 634-3500,

and our website address is www.anipharmaceuticals.com .

Mission and Strategy

We are an integrated specialty pharmaceutical

company focused on delivering value to our customers by developing, manufacturing, and marketing high quality branded and generic

prescription pharmaceuticals.

We focus on niche and high barrier to entry opportunities including controlled substances, anti-cancer

(oncolytics), hormones and steroids, and complex formulations.

At our three facilities, of which two are located in Baudette, Minnesota

and one is located in Oakville, Ontario, we manufacture oral solid dose products, as well as semi-solids, liquids and topicals,

controlled substances, and potent products that must be manufactured in a fully-contained environment.

We also perform contract

manufacturing for other pharmaceutical companies.

In addition to laboratories that support

the requirements of raw material, finished product, and stability testing, we have a 1,000-square foot pilot laboratory offering

liquid, suspension and solid dose development capabilities.

This pilot laboratory offers a full range of analytical capabilities

including method development, validation and de-formulation, and is licensed by the Drug Enforcement Administration (“DEA”).

Finally, a separate development suite located within our high-potency manufacturing facility offers additional capabilities for

product development.

Our objective is to create long term shareholder

value by building a sustainable and growing base business in generic and mature brand pharmaceutical products while advancing an

opportunity to re-commercialize Cortrophin gel and Cortrophin-Zinc.

We believe our strategies effectively leverage

our human and capital assets and will result in measurable growth of our business.

Since 2015, we have successfully:

Increased prescription product sales through a combination of market share gains on existing products and new product launches.

Filed one ANDA.

Acquired the NDAs for and began marketing Atacand, Atacand HCT, Arimidex, Casodex, Lithobid, Vancocin, Inderal LA, Inderal XL, and InnoPran XL.

Increased our product pipeline, through development, partnership, and acquisition, to 109 total products.

Entered into a $265.2 million credit agreement with Citizens, Bank, N.A.

Acquired WellSpring Pharma Services Inc.

(“ANI Canada”)

Launched 40 products.

Acquired the NDAs for Cortrophin gel and Cortrophin-Zinc in January 2016;

assembled a Cortrophin re-commercialization team

of dedicated scientists;

executed a long-term supply agreement with a supplier of pig pituitary glands, our primary raw material

for corticotrophin active pharmaceutical ingredient (“API”);

executed a long-term supply agreement with a corticotrophin

API manufacturer with whom we have advanced the manufacture of corticotropin API via manufacture of both intermediate and commercial-scale

executed a long-term commercial agreement with a Cortrophin gel fill/finish contract manufacturer;

have validated

all analytical methods used to release batches of corticotropin API and Cortrophin gel finished drug product;

have manufactured a number of commercial scale batches of API including three registration batches and have completed process

have manufactured a number of commercial scale batches of Cortrophin gel finished drug product including

three registration batches and have completed process validation;

have completed viral clearance validation;

have completed a 20-person human clinical study that demonstrated that our Cortrophin gel is effective for its intended

use by demonstrating a blood level cortisol response that was consistent with cortisol levels produced by our drug product in the

remain on track to file our supplemental NDA in the first quarter 2020.

We believe that our cash resources and

forecasted cash flows from operations will be sufficient to enable us to meet our operational needs for the foreseeable future.

Our principal executive offices are located at 210 Main Street West, Baudette, Minnesota, 56623, our telephone number is (218) 634-3500, and our website address is www.anipharmaceuticals.com.

Our objective is to build a sustainable and growing biopharmaceutical company serving patients in need and creating long-term value for our investors.

Our growth strategy is driven by the following key pillars:

Building a successful Cortrophin Gel franchise.

We acquired the NDAs for Cortrophin gel and Cortrophin-Zinc in January 2016;

executed long-term supply agreements with a supplier of our primary raw material for corticotrophin active pharmaceutical ingredient (“API”), a supplier of corticotrophin API with whom we have advanced the manufacture of commercial scale batches of API, and a Cortrophin gel fill/finish contract manufacturer.

In April 2020, the FDA issued a Refusal to File (“RTF”) letter for our Supplemental New Drug Application (“sNDA”) for Cortrophin Gel.

Currently, our efforts are focused on the preparation of a complete resubmission of sNDA.

We have retained a prominent regulatory consulting firm to support our efforts and augment the capabilities of our restructured internal Cortrophin development team.

Together, we have performed a comprehensive review of the original sNDA filing and prepared an internal gap assessment and execution plan to address these gaps.

Throughout, we have remained engaged with the FDA and plan to re-submit our supplemental NDA in the second quarter of 2021.

We have invested in leadership and expertise in the areas of commercialization of rare disease therapies to develop a launch strategy and commercial plan for this product.

Strengthening our generics business with enhanced research and development capability and increased focus on niche opportunities

We have grown our generics business through a combination of market share gains on existing products and new product launches.

We have also successfully acquired numerous ANDAs through asset acquisitions, including, most recently, the U.S.

portfolio of 23 generic products, including 10 commercial products at the time of the acquisition, from Amerigen Pharmaceuticals, Ltd.

We also focus on niche lower competition opportunities such as injectables and Paragraph IV filings.

Additionally, we will seek opportunities to enhance our research and development capabilities through strategic partnerships and acquisitions of businesses.

Maximizing the value from our established brands through innovative “go-to-market” (“GTM”) strategies and continued programmatic acquisitions

We have acquired the NDAs for and market Atacand, Atacand HCT, Arimidex, Casodex, Lithobid, Vancocin, Inderal LA, Inderal XL, and InnoPran XL.

We are innovating in our GTM strategy through creative partnerships.

In addition, we will continue to explore opportunities in acquiring new brands to grow our established brands portfolio.

Expansion of contract development and manufacturing organization (“CDMO”) business by leveraging our unique manufacturing capabilities

We built a CDMO business through our sites in Baudette and grew it through the acquisition of WellSpring Pharma Services Inc.

(“ANI Canada”).

Our North America based manufacturing and unique capabilities in high-potency, hormonal, steroid, and oncolytic products can be leveraged to expand our CDMO business.

The pillars of our strategy will be enabled by an empowered, collaborative, and purposeful team with high performance-orientation.

We will also retain our continued programmatic approach to inorganic growth initiatives.

Product Development Considerations

We consider a variety of criteria in determining

which products to develop or acquire, all of which relate to the level of potential competition and expected profitability upon

product launch.

These criteria include:

We consider a variety of criteria in determining which products to develop or acquire, all of which relate to the level of potential competition and expected profitability upon product launch.

Below are the principal criteria we consider.

● Formulation Complexity.

Our development and manufacturing capabilities enable us to manufacture pharmaceuticals that are difficult to produce, including highly potent, extended release, combination, and low dosage products.

This ability to manufacture a variety of complex products is a competitive strength that we intend to leverage in selecting products to develop or manufacture.

This ability to manufacture a variety of complex products is a competitive strength that we intend to continue to leverage in selecting products to develop or manufacture.

● Patent Status.

We seek to develop products whose branded bioequivalents do not have long-term patent protection or existing patent challenges.

● Market Size.

When determining whether to develop or acquire an individual product, we review the current and expected market size for that product at launch, as well as forecasted price erosion upon conversion from branded to generic pricing.

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We generally seek to develop and manufacture products at our own manufacturing plants in order to optimize the utilization of our facilities, ensure quality control in our products, and maximize profit potential.

● Competition.

When determining whether to develop or acquire a product, we research existing and expected competition.

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Our specialized manufacturing facilities provide a means of entering niche markets, such as hormone therapies, in which fewer generic companies are able to compete.

In addition to laboratories that support the requirements of raw material, finished product, and stability testing, we have a 1,000-square foot pilot laboratory offering liquid, suspension and solid dose development capabilities.

This pilot laboratory offers a full range of analytical capabilities, including method development, validation and de-formulation, and is licensed by the Drug Enforcement Administration (“DEA”).

Finally, a separate development suite located within our high-potency manufacturing facility offers additional capabilities for product development.

Products and Markets

As of December 31, 2019, our products

include both branded and generic pharmaceuticals, specifically:

Generic Products

Branded Products

Aspirin and Extended Release Dipyridamole

Bretylium Tosylate Injection, USP

Candesartan Hydrochlorothiazide

Cholestyramine

Desipramine Hydrochloride

Diphenoxylate Hydrochloride and Atropine Sulfate

Erythromycin Ethylsuccinate

Erythromycin Ethylsuccinate for Oral Suspension

Esterified Estrogen with Methyltestosterone

Ezetimibe-Simvastatin

Hydrocortisone Enema

Hydrocortisone Rectal Cream (1% and 2.5%)

Lithium Carbonate ER

Mesalamine Enema

Methazolamide

Metoclopramide Syrup

Morphine Sulfate Oral Solution

Opium Tincture

Oxycodone Hydrochloride Capsules

Oxycodone Hydrochloride Oral Solution (5 mg/5 mL)

Oxycodone Hydrochloride Oral Solution (100 mg/5 mL)

Propranolol ER

Terbutaline Sulfate

Vancomycin Hydrochloride for Oral Solution

Arimidex is an aromatase inhibitor indicated

for adjuvant treatment of postmenopausal women with hormone receptor-positive early breast cancer.

and extended-release dipyridamole is indicated to reduce the risk of stroke in patients who have had transient ischemia of the

brain or completed ischemic stroke due to thrombosis.

Atacand is an angiotensin II receptor blocker

indicated for treatment of hypertension to lower blood pressure and the treatment of heart failure.

Tosylate Injection, USP is indicated in the prophylaxis and therapy of ventricular fibrillation.

also indicated in the treatment of life-threatening ventricular arrhythmias, such as ventricular tachycardia that have failed to

respond to adequate doses of a first-line antiarrhythmic agent, such as lidocaine.

Candesartan hydrochlorothiazide and its

branded equivalent, Atacand HCT, combine an angiotensin II receptor antagonist and a diuretic, hydrochlorothiazide, and is used

for the treatment of hypertension to lower blood pressure.

Casodex is an androgen receptor inhibitor

indicated for use in combination therapy with a luteinizing hormone-releasing hormone analog for the treatment of Stage D2 metastatic

carcinoma of the prostate.

Cholestyramine for Oral Suspension USP

is indicated as adjunctive therapy to diet for the reduction of elevated serum cholesterol in patients with primary hypercholesterolemia

(elevated low-density lipoprotein “LDL”

cholesterol) who do not respond adequately to diet.

It is also indicated for

the relief of pruritus associated with partial biliary obstruction.

Desipramine Hydrochloride is used to treat

Diphenoxylate Hydrochloride and Atropine

Sulfate is used as an adjunctive therapy in the management of diarrhea.

Erythromycin Ethylsuccinate is used to

treat infections caused by susceptible strains of designated organisms for selected diseases.

Erythromycin Ethylsuccinate for Oral Solution

is indicated in the treatment of infections caused by susceptible strains of selected diseases.

Esterified Estrogen with Methyltestosterone

(“EEMT”) is used to treat moderate to severe vasomotor symptoms of menopause that are not improved by estrogen alone.

Etodolac is used to treat mild to moderate

pain caused by osteoarthritis and rheumatoid arthritis, as well as other conditions.

Ezetimibe-Simvastatin is used to lower

high cholesterol and triglyceride levels to reduce the risk of heart attack, stroke, and blood vessel problems.

Felbamate is an anticonvulsant used in

the treatment of epilepsy.

It is used to treat partial seizures (with and without generalization) in adults and partial

and generalized seizures associated with Lennox–Gastaut syndrome in children.

Fenofibrate is a peroxisome proliferator

receptor alpha activator indicated as an adjunct with diet to reduce elevated LDL-C, Total-C, TG and Apo B, and to increase HDL-C

in adult patients with primary hypercholesterolemia or mixed dyslipidemia.

Fenofibrate is also indicated as an adjunct with diet

for adult patients with severe hypertriglyceridemia.

Flecainide is used to treat arrhythmia

(irregular heartbeat) in patients and to help patients maintain a normal heart rate.

Fluvoxamine is used to treat patients with

obsessive-compulsive disorder and social anxiety disorder.

It is generally used when the patient’s symptoms interfere with

the patient’s ability to function socially and occupationally.

Hydrocortisone Enema and its branded equivalent,

Cortenema, are used for the treatment of ulcerative colitis, especially distal forms, including ulcerative proctitis, ulcerative

proctosigmoiditis, and left-sided ulcerative colitis.

The products have also proved useful in some cases involving the transverse

and ascending colons.

Hydrocortisone Rectal Cream is used for

the relief of inflammatory and pruritic manifestations of corticosteroid-responsive dermatoses.

Indapamide tablets are indicated for the

treatment of hypertension, alone or in combination with other antihypertensive drugs.

Indapamide is also indicated for the treatment

of salt and fluid retention (swelling) associated with congestive heart failure.

Inderal XL is a beta-adrenergic blocker

indicated for the treatment of hypertension, to lower blood pressure.

Lowering blood pressure reduces the risk of fatal and nonfatal

cardiovascular events, primarily strokes and myocardial infarctions.

InnoPran XL is a beta-adrenergic blocker

indicated for the treatment of hypertension, to lower blood pressure.

Lowering blood pressure reduces the risk of fatal and nonfatal

cardiovascular events, primarily strokes and myocardial infarctions.

Lithium Carbonate ER and its branded equivalent,

Lithobid, are indicated in the treatment of manic episodes of bipolar disorder.

Lithium Carbonate ER and Lithobid are also indicated

as a maintenance treatment for individuals with a diagnosis of bipolar disorder.

Maintenance therapy reduces the frequency and

intensity of manic episodes.

Mesalamine Enema is used to treat active

to moderate distal ulcerative colitis, proctosigmoiditis, or proctitis.

Methazolamide is indicated in the treatment

of ocular conditions where lowering intraocular pressure is likely to be of therapeutic benefit, such as chronic open-angle glaucoma,

secondary glaucoma, and preoperatively in acute angle-closure glaucoma where lowering the intraocular pressure is desired before

Metoclopramide and its branded equivalent,

Reglan, are prescribed for periods of four to twelve weeks in adults with symptomatic, documented gastroesophageal reflux who fail

to respond to conventional therapy.

The products relieve daytime heartburn and heartburn after meals and also help ulcers in the

esophagus to heal.

The products also relieve symptoms associated with acute and recurrent diabetic gastric stasis and help treat

symptoms such as nausea, vomiting, heartburn, feeling full long after a meal, and loss of appetite.

Morphine Sulfate oral solution is indicated

for the management of acute and chronic pain severe enough to require an opioid analgesic and for which alternative treatments

are inadequate.

Nilutamide is indicated for use in combination

with surgical castration for the treatment of metastatic prostate cancer.

Nimodipine is used to improve neurological

outcomes by reducing the incidence and severity of ischemic deficits in patients with subarachnoid hemorrhage from ruptured brain

Opium Tincture is used is to treat diarrhea

in adults by slowing the movement of the intestines and decreasing the number and frequency of bowel movements.

Oxycodone Hydrochloride capsules are indicated

for the management of acute moderate to severe pain and chronic pain.

Oxycodone Hydrochloride oral solution (both

5 mg/5 mL and 100 mg/5 mL) is used to relieve acute moderate to severe pain and chronic pain.

Pindolol is indicated in the management

of hypertension.

It may be used alone or concomitantly with other antihypertensive agents, particularly with a thiazide-type diuretic.

Propafenone is used to treat arrhythmia

(irregular heartbeat) in patients and to help patients maintain a normal heart rate.

Propranolol ER and its branded equivalent, Inderal

LA, are indicated in the management of hypertension, to decrease angina frequency and increase exercise tolerance in patients with

angina pectoris, for the prophylaxis of common migraine headache, and to improve New York Heart Association (“NYHA”)

functional class in symptomatic patients with hypertrophic subaortic stenosis.

Terbutaline Sulfate is indicated for the

prevention and reversal of bronchospasm in patients 12 years of age or older with asthma and reversible bronchospasm associated

with bronchitis and emphysema.

Vancomycin and its branded equivalent,

Vancocin, are indicated for the treatment of C.

difficile-associated diarrhea, as well as enterocolitis caused by staphylococcus

aureus (including methicillin-resistant strains).

The capsules are not effective for other types of infections, as the drugs are

not systematically absorbed.

Vancomycin Hydrochloride for Oral Solution

is used for the treatment of enterocolitis caused by staphylococcus aureus, including

methicillin-resistant strains, and antibiotic-associated pseudomembranous colitis caused by clostridium difficile.

In determining which products to pursue

for development, we target products that are complex to manufacture and therefore have higher barriers to entry.

These factors

provide opportunities for growth, utilizing our competitive strengths at the same time that they decrease the number of potential

competitors in the markets for these products.

These markets currently include controlled substances, oncolytics, hormones and

steroids, and complex formulations, including extended release and combination products.

Controlled Substances

One of our manufacturing facilities in

Baudette, Minnesota is licensed by the DEA for the manufacture of Schedule II controlled substances.

Our manufacturing facility

in Oakville, Ontario is licensed by Health Canada for the manufacture of Schedule II controlled substances.

A complete list of our generic and branded pharmaceutical products and descriptions is posted on our website, www.anipharmaceuticals.com .

In determining which products to pursue for development, we target products that are complex to manufacture and therefore have higher barriers to entry.

These factors provide opportunities for growth, utilizing our competitive strengths at the same time that they decrease the number of potential competitors in the markets for these products.

These markets currently include controlled substances, oncology products, hormones and steroids, injectables, and complex formulations, including extended release and combination products.

Controlled Substances

are drugs considered to have a high abuse risk but that also have safe and accepted medical uses.

In addition to our six Schedule

II products currently on the market, our pipeline includes two ANDA’s in this market.

Due to the capabilities of our containment

facility and our expertise in manufacturing segregation, we are focused on developing and manufacturing niche oncolytic (anti-cancer)

In particular, we are targeting products subject to priority review by the FDA, more specifically those with no blocking

patents and no generic competition.

We currently have three oncolytic products on the market.

Schedule II controlled substances are drugs considered to have a high abuse risk but that also have safe and accepted medical uses.

In addition to our four Schedule II products currently on the market, our pipeline includes two ANDAs in this market.

One of our manufacturing facilities in Baudette, Minnesota is licensed by the DEA for the manufacture of Schedule II controlled substances.

Our manufacturing facility in Oakville, Ontario is licensed by Health Canada for the manufacture of Schedule II controlled substances.

Oncology Products

Due to the capabilities of our containment facility and our expertise in manufacturing segregation, we are focused on developing and manufacturing niche oncology products (anti-cancer).

In particular, we are targeting products subject to priority review by the FDA, more specifically those with no blocking patents and no generic competition.

We currently have five oncology products on the market.

Hormone and Steroid Drugs

The market for hormone and steroid drugs

includes hormone therapy to alleviate menopausal symptoms in women, contraceptives, testosterone replacement therapies for men,

and therapies for treating hormone-sensitive cancers.

Hormone Therapy (“HT”) has

been an accepted medical treatment for alleviating the symptoms of menopause since the 1930s, with formal FDA approval for that

use granted in 1942.

Initially, HT consisted of estrogen only, but has evolved to include combination therapies of estrogen, progesterone,

and androgens.

The market for hormone and steroid drugs includes hormone therapy to alleviate menopausal symptoms in women, contraceptives, testosterone replacement therapies for men, and therapies for treating hormone-sensitive cancers.

Hormone Therapy (“HT”) has been a long-accepted medical treatment for alleviating the symptoms of menopause.

Initially, HT consisted of estrogen only but has evolved to include combination therapies of estrogen, progesterone, and androgens.

We target niche products in the HT and steroid product market for several reasons, including:

and steroid products are a core competency based on our manufacturing and product development teams' long history of manufacturing

these types of products;

aging baby boom population, of which women represent a majority, is expected to support continued growth in the HT market.

● Hormone and steroid products are a core competency based on our manufacturing and product development teams’ long history of manufacturing these types of products;

● The aging “baby boomer” population, of which women represent a majority, is expected to support continued growth in the HT market.

Our burgeoning injectable portfolio contains five injectable ANDA products encompassing several key therapeutic areas.

Additionally, Cortrophin Gel would be our first branded injectable product if we obtained approval for this product.

We work with world-class manufacturing partners to support these efforts.

Complex Formulations

Our manufacturing facilities can be used

to manufacture complex formulations, including, but not limited to, extended release and combination products, which have higher

barriers to entry and, therefore, fewer competitors.

In addition to our 13 complex formulation products currently on the market,

our pipeline includes 13 extended-release products and eight combination products.

In addition to our 18 complex formulation products currently on the market, our pipeline includes 10 extended-release products and seven combination products.

Contract Manufacturing

We manufacture pharmaceutical products

for several branded and generic companies, who outsource production in order to:

internal resources to focus on sales and marketing as well as research and development;

internal capacity to manufacture higher volume or more critical products;

our specialized equipment and expertise.

Given our specialized manufacturing capabilities,

we are focused on attracting niche contract manufacturing opportunities that offer high margins.

On August 6, 2018, we acquired all

the issued and outstanding equity interests of WellSpring Pharma Services Inc., a Canadian company that performs contract development

and manufacturing of pharmaceutical products.

In conjunction with the transaction, we acquired WellSpring’s pharmaceutical

manufacturing facility, laboratory, and offices, its current book of contract manufacturing business, as well as an organized workforce.

We manufacture pharmaceutical products for several branded and generic companies, who outsource production in order to:

● Free-up internal resources to focus on sales and marketing as well as research and development;

● Employ internal capacity to manufacture higher volume or more critical products;

● Utilize our specialized equipment and expertise.

Given our specialized manufacturing capabilities, we are focused on attracting niche contract manufacturing opportunities that offer high margins.

In conjunction with our acquisition of WellSpring Pharma Services Inc., we acquired WellSpring’s pharmaceutical manufacturing facility.

As a result of this transaction, we perform contract manufacturing in both our Baudette, Minnesota and Oakville, Ontario facilities.

Manufacturing,

Suppliers , and Raw Materials

require a supply of quality raw materials, including active pharmaceutical ingredients (“API”), and components to manufacture

and package our pharmaceutical products.

In order to manufacture certain of our products deemed controlled substances, we

must submit a request to the DEA for a quota to purchase the amount of API needed for manufacture.

Without approved quotas from

the DEA, we would not be able to purchase these ingredients from our suppliers.

We source the raw materials for our products

from both domestic and international suppliers, which we carefully select.

Generally, we qualify only a single source of API for

use in each product due to the cost and time required to validate and qualify a second source of supply.

Any change in one of our

API suppliers must usually be approved through a Prior Approval Supplement (“PAS”) by the FDA.

The process of obtaining

an approval of such a PAS can require between four and 18 months.

While we also generally qualify a single source for non-API raw

materials, the process required to qualify an alternative source of a non-API raw material is typically much less rigorous.

we were to change the supplier of a raw material for a product, the cost for the material could be greater than the amount we paid

Manufacturing, Suppliers, and Raw Materials

We require a supply of quality raw materials, including active pharmaceutical ingredients (“API”), and components to manufacture and package our pharmaceutical products.

In order to manufacture certain of our products deemed controlled substances, we must submit a request to the DEA for a quota to purchase the amount of API needed for manufacture.

Without approved quotas from the DEA, we would not be able to purchase these ingredients from our suppliers.

We source the raw materials for our products from both domestic and international suppliers, which we carefully select.

Generally, we qualify only a single source of API for use in each product due to the cost and time required to validate and qualify a second source of supply.

Any change in one of our API suppliers must usually be approved through a Prior Approval Supplement (“PAS”) by the FDA.

The process of obtaining an approval of such a PAS can require between four and 18 months.

While we also generally qualify a single source for non-API raw materials, the process required to qualify an alternative source of a non-API raw material is typically much less rigorous.

If we were to change the supplier of a raw material for a product, the cost for the material could be greater than the amount we paid

with the previous supplier.

Changes in suppliers are rare, but could occur as a result of a supplier’s business failing,

an issue arising from an FDA inspection, or failure to maintain our required standards of quality.

As a result, we select suppliers

with great care, based on various factors including quality, reliability of supply, and long-term financial stability.

of the APIs for our drug products, including those that are marketed without approved NDAs or ANDAs, are sourced from international

From time to time, we have experienced temporary disruptions in the supply of certain of such imported API due to FDA

Changes in suppliers are rare but could occur as a result of a supplier’s business failing, an issue arising from an FDA inspection, or failure to maintain our required standards of quality.

As a result, we selectively choose suppliers based on various factors including quality, reliability of supply, and long-term financial stability.

Certain of the APIs for our drug products, including those that are marketed without approved NDAs or ANDAs, are sourced from international suppliers.

From time to time, we have experienced temporary disruptions in the supply of certain of such imported API due to FDA inspections.

In addition, certain of our products are manufactured, packaged, or manufactured and packaged by third parties.

Government Regulation

pharmaceutical industry in the U.S.

The pharmaceutical industry in the U.S.

and Canada is highly regulated by multiple U.S.

and Canadian government agencies, such

as the FDA, the DEA, the Centers for Medicare and Medicaid Services (“CMS”), and Health Canada.

As a result, we are

subject to extensive and complex rules and regulations, which are subject to revision from time to time.

While we have experience

with these regulations, there can be no assurance that we will be able to fully comply with all applicable regulations.

and Canadian government agencies, such as the FDA, the DEA, the Centers for Medicare and Medicaid Services (“CMS”), and Health Canada.

As a result, we are subject to extensive and complex rules and regulations, which are subject to revision from time to time.

While we have experience with these regulations, there can be no assurance that we will be able to fully comply with all applicable regulations.

In April 2020, the FDA issued an RTF letter for our sNDA for Cortrophin Gel.

Since this time, our efforts have been focused on the preparation of a complete resubmission of the sNDA.

We immediately retained a prominent regulatory consulting firm to support our efforts and augment the capabilities of our internal Cortrophin development team.

In addition, we restructured the composition of the internal team.

We have performed a comprehensive review of the original sNDA filing and prepared an internal gap assessment and execution plan to address these gaps.

The resultant remediation activities are currently in-progress.

Branded and Generic Pharmaceutical Products

All prescription pharmaceutical products

distributed in the U.S., whether branded or generic, must be approved by the FDA.

All applications for FDA approval must contain

information relating to product formulation, raw material suppliers, stability, manufacturing processes, packaging, labeling, and

quality control.

Information to support the bioequivalence of generic drug products or the safety and effectiveness of new drug

products for their intended use is also required to be submitted.

There are generally two types of applications used for obtaining

FDA approval of new products:

Drug Application (“NDA”) —An NDA is filed when approval is sought to market a newly developed branded

product and, in certain instances, for a new dosage form, a new delivery system, or a new indication for an approved drug.

Arimidex, Atacand, Atacand HCT, Casodex, Cortenema, generic Candesartan Hydrochlorothiazide, generic Fenofibrate, generic Fluvoxamine

Maleate, generic Hydrocortisone Enema, generic Terbutaline Sulfate, Inderal LA, Inderal XL, InnoPran XL, generic

Lithium Carbonate ER, Lithobid, generic Mesalamine, generic Propranolol ER, Reglan, Vancocin, generic Vancomycin, and generic Vancomycin

for Oral Solution under approved NDAs.

New Drug Application (“ANDA ”) —An ANDA is filed when approval is sought to market a generic

equivalent of a drug approved under an NDA.

We market Aspirin and Extended Release Dipyridamole, Bretylium Tosylate Injection,

USP, Cholestyramine, Desipramine Hydrochloride, Diphenoxylate Hydrochloride and Atropine Sulfate, Erythromycin Ethylsuccinate,

Erythromycin Ethylsuccinate for Oral Suspension, Etodolac, Ezetimibe-Simvastatin, Felbamate, Flecainide, Hydrocortisone rectal

cream (1% and 2.5%), Indapamide, Methazolamide, Metoclopramide oral solution, Morphine Sulfate oral solution, Nilutamide,

Nimodipine, Oxycodone Hydrochloride capsules, Oxycodone Hydrochloride oral solution (5 mg/5 mL), Oxycodone Hydrochloride oral solution

(100 mg/5 mL), Pindolol, and Propafenone under approved ANDAs.

The ANDA development process is generally

less time-consuming and less complex than the NDA development process.

It typically does not require new preclinical and clinical

studies, because it relies on the studies establishing safety and efficacy conducted for the branded drug approved through the

The ANDA process, however, typically requires one or more bioequivalence studies to show that the ANDA drug is bioequivalent

to the previously approved reference listed drug (“RLD”).

The Drug Price Competition and Patent Term

Restoration Act of 1984 (the “Hatch-Waxman Act”) provides that generic drugs may enter the market after the approval

of an ANDA, which requires (1) that bioequivalence to the branded product be demonstrated through clinical studies, and (2) either

the expiration, invalidation or circumvention of any patents or the end of any other relevant market exclusivity periods related

to the branded drug.

Accordingly, generic products generally

provide a safe, effective, and cost-efficient alternative to users of branded products.

Growth in the generic pharmaceutical industry

has been driven by the increased market acceptance of generic drugs, as well as the number of branded drugs for which patent terms

and/or other market exclusivities have expired.

Generic products are generally commercialized

after the expiration of patent protection for the branded product and after the end of a period of non-patent market exclusivity.

In addition to patent exclusivity, the holder of the NDA may be entitled to a period of non-patent market exclusivity, during which

the FDA cannot approve an application for a generic product.

Also, if the NDA is a new chemical entity (“NCE”), the

FDA may not approve an ANDA for a generic product for up to five years following approval of the NDA for the NCE.

not an NCE, but the holder of the NDA conducted clinical trials essential to approval of the NDA or a supplement thereto, the FDA

may not approve a generic equivalent to the NDA for three years.

Certain other periods of exclusivity may be available if the branded

drug is indicated for treatment of a rare disease or is studied for pediatric indications.

In order to obtain FDA approval of NDAs

and ANDAs, our manufacturing procedures and operations must conform to FDA requirements and guidelines, generally referred to as

“cGMP.”

The requirements for FDA approval encompass all aspects of the production process, including validation and

recordkeeping, the standards around which are continuously changing and evolving.

As a result, we must consistently monitor and

comply with these changes.

Our facilities, procedures, operations,

and testing of products are subject to periodic inspection by the FDA, the DEA, Health Canada, and other authorities.

the FDA and Health Canada conduct pre-approval and post-approval reviews and plant inspections to determine whether our systems

and processes are in compliance with cGMP and other FDA and Health Canada regulations.

Our suppliers are subject to similar regulations

and periodic inspections.

All prescription pharmaceutical products distributed in the U.S., whether branded or generic, must be approved by the FDA.

All applications for FDA approval must contain information relating to product formulation, raw material suppliers, stability, manufacturing processes, packaging, labeling, and quality control.

Information to support the bioequivalence of generic drug products or the safety and effectiveness of new drug products for their intended use is also required to be submitted.

There are generally two types of applications used for obtaining FDA approval of new products:

New Drug Application (“NDA”) —An NDA is filed when approval is sought to market a newly developed branded product and, in certain instances, for a new dosage form, a new delivery system, or a new indication for an approved drug.

Abbreviated New Drug Application (“ANDA”) —An ANDA is filed when approval is sought to market a generic equivalent of a drug approved under an NDA.

The ANDA development process is generally less time-consuming and less complex than the NDA development process.

It typically does not require new preclinical and clinical studies, because it relies on the studies establishing safety and efficacy conducted for the branded drug approved through the NDA process.

The ANDA process, however, typically requires one or more bioequivalence studies to show that the ANDA drug is bioequivalent to the previously approved reference listed drug (“RLD”).

The Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”) provides that generic drugs may enter the market after the approval of an ANDA, which requires (1) that bioequivalence to the branded product be demonstrated through clinical studies, and (2) either the expiration, invalidation or circumvention of any patents or the end of any other relevant market exclusivity periods related to the branded drug.

Accordingly, generic products generally provide a safe, effective, and cost-efficient alternative to users of branded products.

Growth in the generic pharmaceutical industry has been driven by the increased market acceptance of generic drugs, as well as the number of branded drugs for which patent terms and/or other market exclusivities have expired.

Generic products are generally commercialized after the expiration of patent protection for the branded product and after the end of a period of non-patent market exclusivity.

In addition to patent exclusivity, the holder of the NDA may be entitled to a period of non-patent market exclusivity, during which the FDA cannot approve an application for a generic product.

Also, if the NDA is a new chemical entity (“NCE”), the FDA may not approve an ANDA for a generic product for up to five years following approval of the NDA for the NCE.

If an NDA is not an NCE, but the holder of the NDA conducted clinical trials essential to approval of the NDA or a supplement thereto, the FDA may not approve a generic equivalent to the NDA for three years.

Certain other periods of exclusivity may be available if the branded drug is indicated for treatment of a rare disease or is studied for pediatric indications.

In order to obtain FDA approval of NDAs and ANDAs, our manufacturing procedures and operations must conform to FDA requirements and guidelines, generally referred to as “cGMP.” The requirements for FDA approval encompass all aspects of the production process, including validation and recordkeeping, the standards around which are continuously changing and evolving.

As a result, we must consistently monitor and comply with these changes.

Our facilities, procedures, operations, and testing of products are subject to periodic inspection by the FDA, the DEA, Health Canada, and other authorities.

In addition, the FDA and Health Canada conduct pre-approval and post-approval reviews and plant inspections to determine whether our systems and processes are in compliance with cGMP and other FDA and Health Canada regulations.

Our suppliers are subject to similar regulations and periodic inspections.

Controlled Substances

DEA regulates certain drug products containing controlled substances, pursuant to the U.S.

Controlled Substances Act (“CSA”).

Morphine Sulfate, which is a significant component of our Morphine Sulfate oral solution product, is classified as a controlled

Opium, which is a significant component of our Opium Tincture product, is also classified as a controlled substance.

Oxycodone Hydrochloride, a significant component of our Oxycodone Hydrochloride oral solution (5 mg/5 mL) , Oxycodone Hydrochloride

oral solution (100 mg/5 mL), and Oxycodone Hydrochloride capsule products, is also classified as a controlled substance.

DEA regulations impose specific requirements on manufacturers and other entities that handle these substances including registration,

recordkeeping, reporting, storage, security, and distribution.

Recordkeeping requirements include accounting for the amount of

product received, manufactured, stored, and distributed.

Companies handling controlled substances also are required to maintain

adequate security and to report suspicious orders, thefts, and significant losses.

The DEA periodically inspects facilities for

compliance with the CSA and its regulations.

Failure to comply with current and future regulations of the DEA could lead to a variety

of sanctions, including revocation or denial of renewal of DEA registrations, injunctions, or civil or criminal penalties.

In addition, we must submit a request to

the DEA for a quota to purchase the amount of API needed to manufacture certain of our products deemed controlled substances.

approved quotas from the DEA, we would not be able to purchase these ingredients from our suppliers.

As a result, we are dependent

upon the DEA to approve quotas large enough to support our continued manufacture of our controlled substances at commercial level.

The DEA regulates certain drug products containing controlled substances, pursuant to the U.S.

Controlled Substances Act (“CSA”).

Certain of our products contain significant components that are classified as controlled substances.

CSA and DEA regulations impose specific requirements on manufacturers and other entities that handle these substances including registration, recordkeeping, reporting, storage, security, and distribution.

Recordkeeping requirements include accounting for the amount of product received, manufactured, stored, and distributed.

Companies handling controlled substances also are required to maintain adequate security and to report suspicious orders, thefts, and significant losses.

The DEA periodically inspects facilities for compliance with the CSA and its regulations.

Failure to comply with current and future regulations of the DEA could lead to a variety of sanctions, including revocation or denial of renewal of DEA registrations, injunctions, or civil or criminal penalties.

In addition, we must submit a request to the DEA for a quota to purchase the amount of API needed to manufacture certain of our products deemed controlled substances.

Without approved quotas from the DEA, we would not be able to purchase these ingredients from our suppliers.

As a result, we are dependent upon the DEA to approve quotas large enough to support our continued manufacture of our controlled substances at commercial level.

See “Risk Factors ― We are entirely dependent on periodic approval by the DEA for the supply of the API needed to manufacture our controlled substances.

An inability to obtain such approvals would reduce or eliminate our revenues for our controlled substances, and could have a material adverse effect on our business, financial position, and operating results.

In addition, we are subject to strict regulation by the DEA and are subject to sanctions if we are unable to comply with related regulatory requirements.”

Unapproved Products

Two of our products, EEMT and Opium Tincture,

are marketed without approved NDAs or ANDAs.

The FDA's policy with respect to the continued marketing of unapproved products appears

in the FDA's September 2011 Compliance Policy Guide Sec.

440.100 titled "Marketed New Drugs without Approved NDAs or

Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against

Two of our products, EEMT and Opium Tincture, are marketed without approved NDAs or ANDAs.

Previously, the U.S.

Food and Drug Administrations (“FDA’s”) Unapproved Drug Initiative included publication of their policy with respect to the continued marketing of unapproved products in the September 2011 Compliance Policy Guide Sec.

440.100 titled “Marketed New Drugs without Approved NDAs or ANDAs.” Under this policy, the FDA had stated that it would follow a risk-based approach with regard to enforcement against marketing of unapproved products.

The guideline allowed the FDA to evaluate whether to initiate enforcement action on a case-by-case basis, while giving higher priority to enforcement action against products in certain categories, such as those with potential safety risks or that lack evidence of effectiveness.

In November 2020 (effective December 2020), the Department of Health and Human Services (“HHS”) published a notice in the Federal Register to terminate the FDA’s Unapproved Drug Initiative, which would include the withdrawal of this September 2011 Compliance Policy Guide.

Neither the HHS nor the FDA has provided any additional guidance, notice or statement regarding how they intend to approach enforcement against

marketing of unapproved products.

The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher

priority to enforcement action against products in certain categories, such as those with potential safety risks or that lack evidence

of effectiveness.

While we believe that, so long as we comply with applicable manufacturing standards, the FDA will not take action

against us under the current enforcement policy, we can offer no assurances that the FDA will continue this policy or not take

a contrary position with any individual product or group of products.

We continue to believe that, so long as we comply with applicable manufacturing standards, the FDA will continue to operate on a risk-based approach and will not take action against us.

However, we can offer no assurance that the FDA will continue to follow this approach or that it will not take a contrary position with any individual product or group of products.

During the years ended December 31, 2020, 2019, and 2018, revenues for EEMT were 7%, 9%, and 11% of total revenue, respectively, and revenues from Opium Tincture were 1% of total revenue.

See “Risk Factors – Two of our products, which together comprised 8% of our total revenue in 2020, are marketed without approved NDAs or ANDAs and we can offer no assurances that the FDA will not require us to either seek approval for these products or withdraw them from the market.

In either case, our business, financial position, and operating results could be materially adversely affected.”

Medicaid/Medicare

Medicaid and Medicare, both of which are

Medicaid and Medicare, both of which are U.S.

federal health care programs administered by CMS, are major purchasers of pharmaceutical products, including those we produce.

Medicaid is administered by the states

and jointly funded by the federal and state governments.

Medicaid is administered by the states and jointly funded by the federal and state governments.

Its focus is on low income populations.

State drug coverage policies under

Medicaid may vary significantly state by state.

The Patient Protection and Affordable Care Act (“PPACA”), as amended

by the Health Care and Education and Reconciliation Act of 2010, together known as the Affordable Care Act ("ACA"), required

states to expand their Medicaid programs to individuals with incomes up to 138% of the federal poverty level.

Although the United

States Supreme Court in 2011 made the Medicaid expansion optional, many states are expanding their Medicaid programs.

The ACA also made changes to Medicaid law

that could negatively impact us.

In particular, pharmaceutical manufacturers must enter into rebate agreements with state Medicaid

agencies, which require manufacturers to pay rebates based on their drugs dispensed to Medicaid beneficiaries.

The ACA raised the

rebate percentages for both generic and branded pharmaceuticals effective January 1, 2010.

The required rebate is currently

13% of the average manufacturer price for sales of Medicaid-reimbursed products marketed under ANDAs.

Sales of Medicaid-reimbursed

products marketed under NDAs require manufacturers to rebate the greater of 23.1% of the average manufacturer price or the difference

between the average manufacturer price and the "best price"

(as defined in the Medicaid statute) during a specific period.

State drug coverage policies under Medicaid may vary significantly state by state.

The Patient Protection and Affordable Care Act (“PPACA”), as amended by the Health Care and Education and Reconciliation Act of 2010, together known as the Affordable Care Act ("ACA"), required states to expand their Medicaid programs to individuals with incomes up to 138% of the federal poverty level.

Although the United States Supreme Court in 2011 made the Medicaid expansion optional, many states are expanding their Medicaid programs.

The ACA also made changes to Medicaid law that has negatively impacted our business.

In particular, pharmaceutical manufacturers must enter into rebate agreements with state Medicaid agencies, which require manufacturers to pay rebates based on their drugs dispensed to Medicaid beneficiaries.

The ACA raised the rebate percentages for both generic and branded pharmaceuticals effective January 1, 2010.

The required rebate is currently 13% of the average manufacturer price for sales of Medicaid-reimbursed products marketed under ANDAs.

Sales of Medicaid-reimbursed products marketed under NDAs require manufacturers to rebate the greater of 23.1% of the average manufacturer price or the difference between the average manufacturer price and the “best price” (as defined in the Medicaid statute) during a specific period.

Federal and/or state governments may continue to enact measures aimed at reducing the cost of drugs to the Medicaid program.

Medicare is run by the federal government

and is largely focused on the elderly and disabled.

The Medicare Modernization Act of 2003 (“MMA”) created Medicare

Part D to provide prescription drug coverage for Medicare beneficiaries.

The MMA has increased usage of pharmaceuticals, a

trend that we believe will continue to benefit the generic pharmaceutical industry.

The ACA made some changes to Part D to

make it easier for Medicare beneficiaries to obtain drugs, such as reducing coinsurance amounts.

The ACA also required pharmaceutical

companies to provide discounts to Medicare Part D beneficiaries for the cost of branded prescription drugs.

Under the Medicare

Coverage Gap Discount Program authorized by the ACA, any pharmaceutical product marketed under an NDA, regardless of whether the

product is marketed as a "generic,"

is subject to the discount requirement.

Our Candesartan Hydrochlorothiazide, Fenofibrate,

Fluvoxamine, Hydrocortisone Enema, Lithium Carbonate ER, Mesalamine, Propranolol ER, and Vancomycin products, while marketed as

"generics,"

are marketed under approved NDAs and, therefore, are subject to the discount requirement.

While we may benefit

from Medicare changes that have reduced obstacles to drug usage, resulting sales increases, if any, may be offset by existing and

future legislative efforts to curb the cost of drugs to the Medicare program.

Most of our products are covered by Medicaid

and Medicare.

Our reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate

programs are complex and may involve subjective decisions.

Any determination that we have failed to comply with those obligations

could subject us to penalties and sanctions, and we could be subject to federal or state false claims litigation.

Trademarks , and Licenses

own the trademark names for most of our branded products, including Cortenema, Cortrophin gel, Cortrophin-Zinc, Inderal LA, Inderal

XL, InnoPran XL, Lithobid, Reglan, and Vancocin.

We license the trademark names for Atacand, Atacand HCT, Arimidex,

With the exception of a license for patent technology for InnoPran XL and Inderal XL, we do not own or license any

patents associated with these products.

Further, patent protection and market exclusivity for these branded products have expired,

with the exception of the InnoPran XL and Inderal XL products, who have market exclusivity until 2022.

Therefore, we consider the

trademark names to be of material value and we act to protect these rights from infringement.

However, our business is not dependent

upon any single trademark.

Trademark protection continues in some countries as long as used;

in other countries, as long as registered.

Medicare is run by the federal government and is largely focused on the elderly and disabled.

The Medicare Modernization Act of 2003 (“MMA”) created Medicare Part D to provide prescription drug coverage for Medicare beneficiaries.

The MMA has increased usage of pharmaceuticals, a trend that we believe will continue to benefit the generic pharmaceutical industry.

The ACA made some changes to Part D to make it easier for Medicare beneficiaries to obtain drugs, such as reducing coinsurance amounts.

The ACA also required pharmaceutical companies to provide discounts to Medicare Part D beneficiaries for the cost of branded prescription drugs.

The ACA created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, or BBA, effective as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Under the Medicare Coverage Gap Discount Program, any pharmaceutical product marketed under an NDA, regardless of whether the product is marketed as a “generic,” is subject to the discount requirement.

Our Candesartan Hydrochlorothiazide, Fenofibrate, Fluvoxamine, Hydrocortisone Enema, Lithium Carbonate ER, Mesalamine, Propranolol ER, Terbutaline, and Vancomycin products, while marketed as “generics,” are marketed under approved NDAs and, therefore, are subject to the discount requirement.

Since its enactment, there have been judicial, administrative, executive and Congressional legislative challenges to certain aspects of the ACA.

For example, the ACA is currently subject to a broad legal challenge in California vs.

Azar before the U.S.

Supreme Court.

Additionally, in November 2020, the U.S.

Supreme Court heard argument in Texas v.

Azar, which challenges the constitutionality of the ACA.

Were the Supreme Court to invalidate the ACA, that could have far-reaching consequences of an uncertain nature for our industry.

However, the Biden administration and Democratically-controlled Congress are expected to take significant action to mitigate any ruling against the Affordable

Further, the administration and Congress are expected to take steps towards expanding health care coverage beyond the ACA, which could have ramifications for the pharmaceutical industry.

Most of our products are covered by Medicaid and Medicare.

Our reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate programs are complex and may involve subjective decisions.

Any determination that we have failed to comply with those obligations could subject us to penalties and sanctions, and we could be subject to federal or state false claims litigation.

There has also been recent heightened federal governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

For example, there have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

For example, the last Presidential administration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

We expect that additional state and federal health care reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for health care products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Patents, Trademarks, and Licenses

We own the trademark names for most of our branded products, including Cortenema, Cortrophin gel, Cortrophin-Zinc, Inderal LA, Inderal XL, InnoPran XL, Lithobid, Reglan, and Vancocin.

We license the trademark names for Atacand, Atacand HCT, Arimidex, and Casodex.

With the exception of a license for patent technology for InnoPran XL and Inderal XL, we do not own or license any patents associated with these products.

Further, patent protection and market exclusivity for these branded products have expired, with the exception of the InnoPran XL and Inderal XL products, which have market exclusivity until 2022.

Therefore, we consider the trademark names to be of material value and we act to protect these rights from infringement.

However, our business is not dependent upon any single trademark.

Trademark protection continues in some countries as long as used, and in other countries, as long as registered.

Registration is for fixed terms and may be renewed indefinitely.

We believe that sales of our branded products have benefited and

will continue to benefit from the value of the product name.

In addition, we receive royalties from a license for patent rights

initially owned by Cell Genesys, Inc., which merged with BioSante in 2009.

The royalties are received as a result of sales

and milestones related to the Yescarta®

In 2019, we recorded $0.5 million of royalties related to the license of these

patent rights.

We believe that sales of our branded products have benefited and will continue to benefit from the value of the product name.

In addition, we receive royalties from a license for patent rights initially owned by Cell Genesys, Inc., which merged with BioSante in 2009.

The royalties are received as a result of sales and milestones related to the Yescarta® product.

In 2020, we recorded $1.4 million of royalties related to the license of these patent rights.

Description of Business and Summary of Significant Accounting Policies, in the notes to the consolidated financial statements in Part II, Item 8.

of this Annual Report on Form 10-K for further information.

Distribution Agreements

In addition to selling products under our

own NDAs and ANDAs, we enter into marketing and distribution agreements with third parties in which we sell products under ANDAs

or NDAs owned or licensed by these third parties.

In addition to selling products under our own NDAs and ANDAs, we enter into marketing and distribution agreements with third parties in which we sell products under ANDAs or NDAs owned or licensed by these third parties.

These products are sold under our own label.

Our customers purchase and distribute our

Our customers purchase and distribute our products.

Our products are sold by three major retail pharmacy chains:

CVS, Rite Aid, and Walgreens.

Our customers include five

major national wholesalers:

Our customers include five major national wholesalers:

AmerisourceBergen, Cardinal Health, McKesson, Smith Drug Company, and Morris Dickson.

our customers include national mail order houses, including CVS Caremark, Humana, and ExpressScripts, as well as group purchasing

organizations.

In recent years, the wholesale distributor

network for pharmaceutical products has been subject to increasing consolidation, which has increased the concentration of our

wholesale customers.

In addition, the number of retail market chains and, in particular, the number of independent drug stores

and small chains, has decreased as retail consolidation has occurred, also increasing the concentration of our retail customers.

As a result of this trend toward consolidation, a smaller number of companies each control a larger share of pharmaceutical distribution

In addition, our customers include national mail order houses, including CVS Caremark, Humana, and ExpressScripts, as well as group purchasing organizations.

In recent years, the wholesale distributor network for pharmaceutical products has been subject to increasing consolidation, which has increased the concentration of our wholesale customers.

In addition, the number of retail market chains and, in particular, the number of independent drug stores and small chains, has decreased as retail consolidation has occurred, also increasing the concentration of our retail customers.

As a result of this trend toward consolidation, a smaller number of companies each control a larger share of pharmaceutical distribution channels.

For the year ended December 31, 2020, approximately 74% of our net revenues were attributable to three wholesalers:

McKesson Corporation 25%, AmerisourceBergen Corporation 32%, and Cardinal Health, Inc.

For the years ended December 31,

2018 and 2017, McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation, together accounted for approximately

81% and 78% of our net revenues, respectively.

AmerisourceBergen Corporation 31%, McKesson Corporation 24%, and Cardinal Health, Inc.

For the years ended December 31, 2019 and 2018, McKesson Corporation, Cardinal Health, Inc., and AmerisourceBergen Corporation, together accounted for approximately 80% and 81% of our net revenues, respectively.

In addition, as noted below, our customers also distribute our products.

of any of these customers, including in their role as distributors, could have a material adverse effect on our business.

Due to a strategic partnership between

Amerisource Bergen and Walgreens, Amerisource Bergen handles product distribution for Walgreens.

Similarly, Cardinal Health and

CVS established a partnership in which Cardinal performs some product distribution for CVS.

McKesson also entered into a strategic

alliance with both Wal-Mart and Rite Aid.

As a result of these strategic partnerships between wholesalers and pharmacy chains,

we have experienced, and expect to continue to experience, increases in net sales to the wholesalers, with corresponding decreases

in net sales to the pharmacy chains.

Consistent with industry practice, we maintain

a return policy that allows customers to return product within a specified period prior to and subsequent to the expiration date.

Generally, product may be returned for a period beginning six months prior to its expiration date to up to one year after its expiration

See "Management's Discussion and Analysis of Results of Operations and Financial Condition—Critical Accounting

Estimates"

The loss of any of these customers, including in their role as distributors, could have a material adverse effect on our business.

Due to a strategic partnership between Amerisource Bergen and Walgreens, Amerisource Bergen handles product distribution for Walgreens.

Similarly, Cardinal Health and CVS established a partnership in which Cardinal performs some product distribution for CVS.

McKesson also entered into a strategic alliance with both Wal-Mart and Rite Aid.

As a result of these strategic partnerships between wholesalers and pharmacy chains, we have experienced, and expect to continue to experience, increases in net sales to the wholesalers, with corresponding decreases in net sales to the pharmacy chains.

Consistent with industry practice, we maintain a return policy that allows customers to return product within a specified period prior to and subsequent to the expiration date.

Generally, product may be returned for a period beginning six months prior to its expiration date to up to one year after its expiration date.

See "Management’s Discussion and Analysis of Results of Operations and Financial Condition—Critical Accounting Estimates"

for a discussion of our accruals for chargebacks, rebates, returns, and other allowances.

Marketing , and Distribution

We market, sell, and distribute our products

in the United States.

Sales, Marketing, and Distribution

We market, sell, and distribute our products in the United States.

Our products are distributed through the following channels:

conduct business with five major wholesalers in the United States:

AmerisourceBergen, Cardinal, McKesson, Smith Drug Company,

and Morris Dickson.

Market Chains.

We conduct business with three major retail chains in the

United States:

● Wholesalers.

We conduct business with five major wholesalers in the United States:

AmerisourceBergen, Cardinal, McKesson, Smith Drug Company, and Morris Dickson.

● Retail Market Chains.

We conduct business with three major retail chains in the United States:

CVS, Rite Aid, and Walgreens.

and Mail Order Pharmacies.

We have contracts with several major distributors

and mail order pharmacies in the United States, including Anda, CVS Caremark, Humana, and ExpressScripts.

Purchasing Organizations.

We have contracts with group purchasing organizations

in the United States, such as ClarusONE, Rx Sourcing Strategies, Walgreens Boots Alliance Development Group, Red Oak Sourcing,

Premier Inc., Managed Health Care Associates Inc., Innovatix, MedAssets, Minnesota Multi-State, Optisource, The Premier Group,

and Kaiser Permanente Purchasing Organization.

Certain of our products face limited competition

due to complexities in formulation, active pharmaceutical ingredient sourcing, materials handling and manufacturing, and regulatory

Nevertheless, we compete with numerous other pharmaceutical companies, including large, global pharmaceutical manufacturers

capable of addressing these complexities and hurdles with respect to products that we currently produce and products that are in

our pipeline.

In addition, our products are subject to competition from other generic products and non-prescription alternative

Our branded pharmaceutical products currently

face competition from generic products and we expect them to continue to face competition from generic products in the future.

In order to launch a generic product, a manufacturer must apply to the FDA for an ANDA showing that the generic product is therapeutically

equivalent to the RLD.

(See “Government Regulation.”)

The primary means of competition among

generic drug manufacturers are pricing, contract terms, service levels, and reliability.

To compete effectively, we seek to consistently

produce high-quality, reliable, and effective products.

We also establish active working relationships with each of our customers,

continually gather important market information in order to respond successfully to requests for proposals, maintain sufficient

inventories to assure high service levels, and work to reduce product costs by sourcing and qualifying alternative suppliers whenever

Our sales can be impacted by new studies

that indicate that a competitor's product has greater efficacy than one of our products.

If competitors introduce new products

with therapeutic or cost advantages, our products can be subject to progressive price reductions and/or decreased volume of sales.

Principal competitors for the pharmaceutical

market in which we do business include Amneal Pharmaceuticals, Inc., Alvogen, Inc., Apotex Inc., Glenmark Pharmaceuticals

Ltd, Hikma Pharmaceuticals plc, Method Pharmaceuticals, LLC, Mylan N.V., Par Pharmaceutical, Inc., Perrigo Company plc, Rising

Pharmaceuticals, Inc., Sun Pharmaceutical Industries Ltd., and Teva Pharmaceuticals USA, Inc.

Pharmaceutical Industry Trends

In recent years, the pharmaceutical industry

has experienced significant consolidation, particularly in distribution channels and amongst generic and brand drug companies.

The wholesale distributor network for pharmaceutical

products has been subject to increasing consolidation, which has increased the concentration of our wholesale customers.

the number of retail market chains and, in particular, the number of independent drug stores and small chains, has decreased as

retail consolidation has occurred, also increasing the concentration of our retail customers.

As a result of this trend toward

consolidation, a smaller number of companies each control a larger share of pharmaceutical distribution channels.

In addition, consolidation amongst pharmaceutical

companies has created opportunities by reducing the number of competitors.

However, as competitors grow larger through consolidation,

so do their resources.

Larger competitors may be able to aggressively decrease prices in order to gain market share on certain

products and may have resources that would allow them to more effectively market their products to potential customers.

● Distributors and Mail Order Pharmacies.

We have contracts with several major distributors and mail order pharmacies in the United States, including Anda, CVS Caremark, Humana, and ExpressScripts.

● Group Purchasing Organizations.

We have contracts with group purchasing organizations in the United States, such as ClarusONE, Rx Sourcing Strategies, Walgreens Boots Alliance Development Group, Red Oak Sourcing, Premier Inc., Managed Health Care Associates Inc., Innovatix, MedAssets, Minnesota Multi-State, Optisource, The Premier Group, and Kaiser Permanente Purchasing Organization.

Certain of our products face limited competition due to complexities in formulation, active pharmaceutical ingredient sourcing, materials handling and manufacturing, and regulatory hurdles.

Nevertheless, we compete with numerous other pharmaceutical companies, including large, global pharmaceutical manufacturers capable of addressing these complexities and hurdles with respect to products that we currently produce and products that are in our pipeline.

In addition, our products are subject to competition from other generic products and non-prescription alternative therapies.

Our branded pharmaceutical products currently face competition from generic products and we expect them to continue to face competition from generic products in the future.

In order to launch a generic product, a manufacturer must apply to the FDA for an ANDA showing that the generic product is therapeutically equivalent to the RLD.

(See “Government Regulation.”)

The primary means of competition among generic drug manufacturers are pricing, contract terms, service levels, and reliability.

To compete effectively, we seek to consistently produce high-quality, reliable, and effective products.

We also establish active working relationships with each of our customers, continually gather important market information in order to respond successfully to requests for proposals, maintain sufficient inventories to assure high service levels, and work to reduce product costs by sourcing and qualifying alternative suppliers whenever possible.

Over the past several years, the pharmaceutical industry has experienced significant consolidation, particularly in distribution channels and among generic and brand drug companies.

The wholesale distributor network for pharmaceutical products has been subject to increasing consolidation, which has increased the concentration of our wholesale customers.

As a result of this trend toward consolidation, a smaller number of companies each control a larger share of pharmaceutical distribution channels, which results in pricing pressure on our business and can result in a shift in sales to our competitors.

In addition, consolidation among pharmaceutical companies has created opportunities by reducing the number of competitors.

However, as competitors grow larger through consolidation, so do their resources.

Larger competitors may be able to aggressively decrease prices in order to gain market share on certain products and may have resources that would allow them to market their products more effectively to potential customers.

Our sales can also be impacted by new studies that indicate that a competitor’s product has greater efficacy than one of our products.

If competitors introduce new products with therapeutic or cost advantages, our products can be subject to progressive price reductions and/or decreased volume of sales.

Principal competitors for the pharmaceutical market in which we do business include Amneal Pharmaceuticals, Inc., Alvogen, Inc., Apotex Inc., Glenmark Pharmaceuticals Ltd, Hikma Pharmaceuticals plc, Method Pharmaceuticals, LLC, Mylan N.V., Par Pharmaceutical, Inc., Perrigo Company plc, Rising Pharmaceuticals, Inc., Sun Pharmaceutical Industries Ltd., and Teva Pharmaceuticals USA, Inc.

Product Liability

Product liability litigation represents an inherent risk

to all firms in the pharmaceutical industry.

We utilize traditional third-party insurance policies with regard to our product

liability claims.

Such insurance coverage at any given time reflects current market conditions, including cost and availability,

when the policy is written.

We define backlog as firm orders received

prior to December 31, 2019 that have not been shipped as of December 31, 2019.

We had a backlog of $8.1 million,

$6.3 million, and $0.5 million at December 31, 2019, 2018, and 2017, respectively, relating to contract manufacturing purchase

orders from customers.

As of December 31, 2019, we had 338

full-time employees.

Seasonality of Business

We do not believe our business is subject

to seasonality.

However, our business can be affected by the business practices of our business partners.

To the extent that the

availability of inventory or materials from or development practices of our partners is seasonal, our sales may be subject to fluctuations

quarter to quarter or year to year.

Product liability litigation represents an inherent risk to all firms in the pharmaceutical industry.

We utilize traditional third-party insurance policies with regard to our product liability claims.

Such insurance coverage at any given time reflects current market conditions, including cost and availability, when the policy is written.

Human Capital

As of January 2021, we have 369 employees, of which 250 are located in the United States and another 119 are located in Canada.

We occasionally use a small number of part-time and consultant resources to meet our operational

needs and are generally not impacted by significant turnover year-to-year.

We are committed to creating a diverse and inclusive work environment within all levels of the business.

Attracting and retaining talented employees is critical to the success of our business, especially at our manufacturing operations in Baudette, Minnesota, which is located in a sparsely populated area of Northern Minnesota, with a population of less than 5,000.

As a result, it can be challenging to find sufficiently qualified personnel in all functional areas.

To address this, we support remote working arrangements for a number of employees in several functions throughout the business, including at the executive level.

Additionally, our compensation plans are designed to be competitive within the pharmaceuticals industry as well as competitive with local employers for jobs of a cross-industry nature.

Our approach provides ANI with the resources to recognize and reward employee performance, productivity, and quality commitment.

Our total compensation program includes competitive base salaries, comprehensive benefits, and employee equity programs.

and Canada facilities are committed to the safety and health of our employees, patient-customers and the general public.

It is critical within our mission to ensure we keep our employees and customers safe while accomplishing our business goals.

We accomplish these initiatives through the following:

Health and Safety Management and Training

ANI has established a health and safety program with a focus on continuous improvement and employee engagement.

ANI personnel are encouraged to take corrective actions where appropriate and to communicate concerns to management with a “see something, say something” approach.

We recognize and reward personnel for contributing to the safety system within our working environment.

The overall program continually evolves to reflect regulatory changes and compliance standard industry best practices.

As part of onboarding new employees, we provide health and safety training and periodic training programs to maintain and improve employee awareness of safety issues.

The goal of the safety training programs is to ensure that our staff are well informed on the subject matters and have the appropriate tools to make sound health and safety decisions in our day-to-day operations.

Environmental Stewardship

ANI is committed to minimizing waste and emissions, promoting reuse and recycling and conserving resources, where feasible, to reduce our environmental footprint on our environment.

COVID-19 Actions

and Canada facilities quickly responded to the COVID-19 pandemic by establishing a COVID-19 action plan to protect the health and safety of our employees as they performed their duties, as all of our facilities have remained open during the pandemic.

Measures include social distancing requirements, increased and expanded sanitation for both employees and our property, face covering requirements for employees and visitors, staggered work schedules to minimize contact, flexible and work-from-home schedules, and employee illness and exposure protocols.

These measures also seek to comply with all county, state, province, and/or city mandates as they relate to COVID-19.

Please refer to Part I, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for further discussion.

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 1. Business