What changed in this filing

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Item 1. Business

2023-03-09 compared with 2022-03-15 · 80 added, 53 removed, 275 unchanged (33% of the section changed)

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and its consolidated subsidiaries (together, “ANI,” the “Company,” “we,” “us,” or “our”) is a diversified bio-pharmaceutical company serving patients in need by developing, manufacturing, and marketing high quality branded and generic prescription pharmaceuticals, including for diseases with high unmet medical need.

Our team is focused on delivering sustainable growth by building a successful Purified Cortrophin Gel franchise, strengthening our generics business with enhanced development capability, innovation in established brands and leveraging our North American manufacturing capabilities.

Our four pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, one is located in East Windsor, New Jersey, 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.

Our team is focused on delivering growth by building a successful Purified Cortrophin Gel franchise, strengthening our generics business with enhanced development capability, innovation in established brands and leveraging our manufacturing capabilities.

Our four current pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, one is located in East Windsor, New Jersey, 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.

On June 2, 2022, we announced that we intend to cease operations at our Oakville, Ontario, Canada manufacturing plant by first quarter 2023.

This action is part of ongoing initiatives to capture operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021.

We have transitioned the majority of products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites and are on track to cease operations by the end of the first quarter 2023.

We are seeking to find potential buyers for the Oakville site.

Through research and development, acquisitions of businesses, 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 111 products with a wide variety of indications and a robust portfolio of pipeline products as of December 31, 2022.

Refer to our website at www.anipharmaceuticals.com for information on our products, including indications/treatments.

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.

On November 19, 2021, we completed the acquisition of Novitium Pharma LLC (“Novitium”).

On November 19, 2021, we completed the acquisition of Novitium.

With operations in East Windsor, New Jersey, and Chennai, India, Novitium is a pharmaceutical company that specializes in development, manufacturing, and distribution of niche generic products.

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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 growth oriented 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.

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 growth drivers:

Building a successful Rare Disease platform

We have spent significant time, effort and resources in establishing our Rare Disease platform.

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

During the second quarter of 2021, we submitted a Supplemental New Drug Application (“sNDA”) to the FDA.

On October 29, 2021, the FDA approved the Company’s sNDA for Purified Cortrophin™ Gel (Repository Corticotropin Injection USP) for the treatment of certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis (“MS”) and rheumatoid arthritis (“RA”), in addition to excess urinary protein due to nephrotic syndrome.

On October 29, 2021, the FDA approved the Company’s sNDA for Purified Cortrophin Gel (Repository Corticotropin Injection USP) for the treatment of certain chronic autoimmune disorders, including acute exacerbations of

multiple sclerosis (“MS”) and rheumatoid arthritis (“RA”), in addition to excess urinary protein due to nephrotic syndrome.

Cortrophin Gel is an adrenocorticotropic hormone (“ACTH”), also known as purified corticotropin.

During 2021, we invested in leadership, expertise and infrastructure in the areas of commercialization of rare disease therapies and developed a launch strategy and commercial plan for this product.

In the fourth quarter of 2021 and first quarter of 2022, we hired a significant number of new employees and assembled and trained our rare disease field force.

On January 24, 2022, we announced the commercial launch of Cortrophin Gel in the U.S.

As a result of the build out of our rare disease team, our expenditures in support of these efforts are expected to materially increase in 2022 as compared to 2021.

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

During 2021 and 2022, we invested in leadership, expertise and infrastructure in the areas of commercialization of rare disease therapies and developed a launch strategy and commercial plan for this product.

During 2021 and throughout 2022, we hired a significant number of new employees and assembled and trained our Rare Disease field force.

On January 24, 2022, we announced the commercial launch of Cortrophin Gel in the U.S as our foundational Rare Disease asset.

As a result of the build out of our Rare Disease team, our expenditures in support of these efforts were significantly higher in 2022 as compared to 2021.

We plan to continue to invest behind Cortrophin Gel and our Rare Disease platform in 2023 and beyond.

Strengthening our Generics, Established Brands, and Other segment through continued investment in our generic 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 business and asset acquisitions, including, most recently, our acquisition of Novitium, including their portfolio of commercial and pipeline generic products, manufacturing and development facilities and expert workforce.

We have also successfully acquired numerous ANDAs through business and asset acquisitions.

Our most recent business acquisition was Novitium, including its portfolio of commercial and pipeline generic products, manufacturing and development facilities and expert workforce.

The Novitium acquisition significantly increased our generic pharmaceutical research and development and manufacturing capabilities.

We have begun to increase our focus on niche lower competition opportunities such as injectables, Paragraph IV, and Competitive Generic Therapy designation filings.

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

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

We have acquired the New Drug Applications (“NDAs”) for and market Atacand, Atacand HCT, Arimidex, Casodex, Lithobid, Vancocin, Inderal LA, Inderal XL, InnoPran XL, Oxistat, Veregen, and Pandel.

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 Novitium and WellSpring.

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 are enabled by an empowered, collaborative, and purposeful team with a high performance-orientation.

Product Development Considerations

On July 21, 2022, we completed an asset acquisition of four ANDAs from Oakrum Pharma, including two that were commercial at the time of acquisition.

We have grown our established brand product offerings through acquisition.

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

We are innovating in our go-to-market strategy through creative partnerships.

Our overall strategy is enabled by an empowered, collaborative, and purposeful team with a high performance-orientation.

Generic Product Development Considerations

We consider a variety of criteria in determining which products to develop, all of which influence the level of competition upon product launch.

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We research the availability and cost of active pharmaceutical ingredients in determining which products to develop or acquire.

In determining the potential profit of a product, we forecast our anticipated market share, pricing, including the expected price erosion caused by competition from other generic manufacturers, and the estimated cost to manufacture the products.

In determining the potential profit of a product, we forecast our

anticipated market share, pricing, including the expected price erosion caused by competition from other generic manufacturers, and the estimated cost to manufacture the products.

● Manufacturing.

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

We also lease a 968-square foot industrial space in Chennai, India where we perform research and development activities.

Products and Markets

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

In November 2021, we acquired Novitium which specializes in development, manufacturing, and distribution of niche generic products.

At the time of the acquisition, Novitium’s commercial portfolio consisted of 24 generic products.

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

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One of our manufacturing facilities in Baudette, Minnesota and our manufacturing facility in East Windsor, New Jersey 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

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● Utilize our specialized equipment and expertise.

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

We currently anticipate that revenues from contract manufacturing arrangements will begin to decline as we focus our efforts on Rare Disease and leveraging our generic R&D and manufacturing platform for ANI labeled products.

In conjunction with our acquisitions of WellSpring and Novitium, we acquired WellSpring’s and Novitium’s pharmaceutical manufacturing facilities.

As a result of these transactions, we perform contract manufacturing in our Baudette, Minnesota, Oakville, Ontario, and East Windsor, New Jersey facilities.

As a result of these transactions, we perform contract manufacturing in our Baudette, Minnesota and East Windsor, New Jersey facilities.

On June 2, 2022, we announced that we intend to cease operations at our Oakville, Ontario, Canada manufacturing plant by first quarter 2023.

This action is part of ongoing initiatives to capture operational synergies following our acquisition of Novitium in November 2021.

transitioned the majority of products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites and are on track to cease operations by the end of the first quarter 2023.

Manufacturing, Suppliers, and Raw Materials

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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 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.

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

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

Our suppliers are subject to similar regulations and periodic inspections.

Post-approval Requirements

After FDA approval of an NDA or ANDA product is obtained, there are many post-approval requirements that must be met.

These include registering the manufacturing establishment and listing the product with the FDA, reporting and keeping records of any adverse reactions or production problems, providing updated safety and efficacy information to the agency, and complying with advertising and promotional labeling regulations.

Additionally, FDA may approve an NDA with post-marketing study requirements, meaning that additional clinical trials must be conducted after approval in order to further monitor the drug’s safety and efficacy.

The FDA has the authority to require a Risk Evaluation and Mitigation Strategy (“REMS”) for any product they approve.

A REMS is designed to ensure that a drug's benefits outweigh its risks, and may include elements such as medication guides, patient package inserts, communication plans to educate healthcare providers of the product's risks, patient registries, or limitations on who can prescribe or dispense it.

A REMS imposes numerous compliance obligations on the NDA and ANDA manufacturers.

The FDA regulates the marketing, labeling, advertising and promotion of products that are placed on the market.

Manufacturers must adhere to strict guidelines when promoting their products;

all statements regarding a product must be consistent with its approved labeling and truthful in nature.

Additionally, manufacturers may only promote their product for approved indications outlined by the FDA.

Physicians may prescribe drugs or biologics off-label but manufacturers cannot promote such uses unless they have been previously authorized by the FDA.

All claims made about a product should also be adequately substantiated with evidence of both benefits and risks associated with use in order to ensure fair balance between them.

The Prescription Drug Marketing Act (“PDMA”) regulates the distribution of a manufacturer’s prescription drug samples and requires a compliance program governing the storage, security, distribution and recordkeeping of samples, as well as monitoring for loss or theft.

The Drug Supply Chain Security Act (“DSCSA”) requires manufacturers and their trading partners, such as repackagers, wholesale distributors, dispensers, and third-party logistics providers, to implement product tracking and tracing technology at the package level to identify and trace certain prescription drugs as they are distributed in the United States.

Controlled Substances

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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.

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 ANDAs.” Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against marketing of unapproved products.

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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.

See “Risk Factors – Two of our products, which together comprised 7% of our total revenue in 2021, 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.

See “Risk Factors – Two of our products, which together comprised less than 10% of our total revenue in 2022, 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.”

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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”), originally required states to expand their Medicaid programs to individuals with incomes up to 138% of the federal poverty level.

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 have expanded their Medicaid programs.

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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, a recent 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.

paid by consumers.

For example, the Inflation Reduction Act of 2022 imposes a requirement on manufacturers to negotiate drug prices with Medicare, beginning in 2026, with negotiated prices subject to a cap.

The negotiation provision focuses on single-source drugs and biologics that represent the highest Medicare expenditure, while orphan drugs and certain other drugs are exempt.

Also, certain drugs with price increases that outpace inflation will become subject to additional rebates.

Under Medicare Part B, the rebate will first be due with respect to Q1 2023, and applies to single-source drugs and biologicals, including biosimilars.

Under Medicare Part D, the rebate will first be due with respect to the period from October 1, 2022, to September 30, 2023, and applies to brand drugs and generics that are the sole drug on the market.

The law’s expansion of inflation-based rebates in the Medicare Part B and D space, and changes to the coverage gap discount program, will further complicate pricing strategies, particularly as to the launch of new products.

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.

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With the exception of a license for patent technology for Inderal XL, InnoPran XL, and Veregen, 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 Veregen product, which has three patents that expire in 2022, 2025, and 2026.

Further, patent protection and market exclusivity for these branded products have expired, with the exception of the Veregen product, which has three patents.

One patent expired in 2022 and the remaining two patents expire in 2025 and 2026.

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

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We have contracts with group purchasing organizations in the United States, such as ClarusONE, Walgreens Boots Alliance Development Group, Red Oak Sourcing, Econdisc, Optisource, Rx Sourcing Strategies, The Premier Group, Topco, The Buyer’s Consortium, Managed Health Care Associates Inc., Asembia, Premier Inc, and Kaiser Permanente.

● Specialty Pharmacies.

In our Rare Disease segment we contract with specialty pharmacies.

In our Rare Disease segment we contract with certain hospital systems.

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

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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.

Our established brand 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.

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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, Viatris Inc., Par Pharmaceutical, Inc., Perrigo Company plc, Rising Pharmaceuticals, Inc., Sun Pharmaceutical Industries Ltd., and Teva Pharmaceuticals USA, Inc.

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, Mallinckrodt Pharmaceuticals, Par Pharmaceutical, Inc., Padagis LLC., Rising Pharmaceuticals, Inc., Sun Pharmaceutical Industries Ltd., and Teva Pharmaceuticals USA, Inc., and Viatris Inc.

Product Liability

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Human Capital

As of January 2022, we have 601 employees, of which 457 are located in the United States, 123 are located in Canada, and 21 are located in India.

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.

As of January 2023, we have 600 employees, of which 496 are located in the United States, including Puerto Rico, 48 are located in Canada, and 56 are located in India.

We occasionally use a small number of part-time and consultant

resources to meet our operational needs and our turnover is in line with similar businesses in our industry and locations.

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.

In September 2023, we opened a corporate office in Princeton, NJ which houses certain employees in our corporate, legal, and business functions.

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.

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

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

and India 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.

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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, 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.

Available Information

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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