ANI PHARMACEUTICALS INC 10-K

Item 1. Business ANI Pharmaceuticals, Inc. and its consolidated subsidiaries (together, “ANI,” the “Company,” “we,” “us,” or “our”) is a diversified bio-pharmaceutical company committed to its mission of “Serving Patients, Improving Lives” by developing, manufacturing, and commercializing innovative and high-quality therapeutics. On September 16, 2024, the Company completed its previously announced acquisition of Alimera Sciences, Inc., a Delaware corporation pursuant to the terms of the Agreement and Plan of Merger (the "Merger Agreement"), dated as of June 21, 2024, by and among the Company, Alimera and ANIP Merger Sub INC., a Delaware corporation and wholly-owned subsidiary of the Company. Pursuant to the Merger Agreement, Merger Sub merged with and into Alimera, with Alimera surviving the merger as a wholly-owned subsidiary of the Company. In connection with the acquisition, the Company added two new products, ILUVIEN® and YUTIQ®, both of which are indicated for the treatment of certain chronic retinal diseases (see Note 3 "Business Combination" in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K). The Company's three pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, and one is located in East Windsor, New Jersey, 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. The Company has ceased operations at our subsidiary in Oakville, Ontario, Canada as of March 31, 2023, and the building was ultimately sold in March 2024. This action was part of ongoing initiatives to capture operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021. The Company has fully completed the transition of the products manufactured or packaged in Oakville to one of the three U.S.-based manufacturing sites (see Note 4 "Restructuring Canada Operations" in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K). The Company's operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, dependence on significant customers, and possible fluctuations in financial results. On August 13, 2024, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the financial institutions party thereto as lenders, (the "New Credit Agreement") which provides for aggregate principal commitments consisting of (i) a senior secured delayed-draw term loan facility in an aggregate principal amount of $325.0 million, and (ii) a senior secured revolving credit facility in an aggregate commitment amount of $75.0 million, which may be used for revolving credit loans, swingline loans and letters of credit. On September 16, 2024, ANI drew the full $325.0 million of New Credit Agreement principal, with proceeds used to finance the acquisition of Alimera, including fees, costs and expenses incurred in connection with the acquisition. As of December 31, 2024, the revolving credit facility remains undrawn, and $75.0 million is available for borrowing, subject to the satisfaction of certain conditions. The New Credit Agreement and the revolving credit facility mature on September 16, 2029. On August 13, 2024, the Company completed an offering of $316.25 million aggregate principal amount of the Company's Convertible Senior Notes due 2029 (the “Notes”). The Notes are due September 1, 2029, unless earlier repurchased, redeemed, or converted. After deducting the initial purchasers’ discounts and commissions of approximately $9.5 million, but before deducting the Company’s offering expenses, the net proceeds to the Company from the offering of the Notes was approximately $306.8 million. In connection with the offering of Notes, on August 7, 2024 and August 8, 2024, the Company entered into capped call transactions with certain financial institutions (“Capped Calls”). After payment of the cost of entering into the Capped Calls transactions, of approximately $40.6 million, the Company used the remainder of the net proceeds from the Notes offering, together with cash on hand, to repay the Company’s existing senior secured credit agreement with Truist Bank, dated as of November 19, 2021. In May 2023, through a public offering, the Company completed the issuance and sale of 2,183,545 shares of ANI common stock, resulting in net proceeds after issuance costs of $80.6 million. We have a commercial portfo lio of 125 pro ducts with a wide variety of indications and a robust portfolio of pipeline products as of December 31, 2024. This portfolio is the result of internal 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. 4 Ta b l e of Contents Strategy Our objective is to build a sustainable and growing biopharmaceutical company serving patients in need and creating long-term value for our investors. Our overall strategy is enabled by an empowered, collaborative, and purposeful team with high performance-orienta tion that seeks to deliver on our purpose of “Servin g Patients, Improving Lives.” Our strategy is driven by the following key growth drivers: Building a successful Rare Disease and Brands Segment We have spent significant time, effort and resources in establishing and expanding our Rare Disease and Brands segment which consists of Rare Disease and Brands portfolio of products. We plan to continue to expand our Rare Disease business, through a combination of organic growth and acquisition. While we execute against our strategic initiatives that we believe will result in the long-term, sustainable growth and value to our stockholders, we continue to evaluate potential acquisitions and other strategic transactions of businesses that we believe complement our existing portfolio, infrastructure and capabilities or provide us with the opportunity to expand our existing capabilities. The acquisition of Alimera is anticipated to strengthen our Rare Disease business and expand our footprint beyond the U.S. with the addition of Alimera’s direct marketing operations located in Germany, the United Kingdom, Portugal, and Ireland, as well as its partnerships in other countries in Europe, Asia, and the Middle East. ILUVIEN and YUTIQ are a durable franchise with high barriers to genericization which the Company believes have a clear role for patients in need of alternative therapeutic options. ANI sees the potential to unlock significant additional growth for the ILUVIEN and YUTIQ franchise through commercial synergies and execution. Purified Cortrophin ® Gel We acquired the NDAs for Purified Cortrophin® Gel (Repository Corticotropin Injection USP) (“Cortrophin Gel”) and Cortrophin-Zinc TM in January 2016 and executed long-term supply agreements with a supplier of our primary raw material for corticotrophin 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. On October 29, 2021, the FDA approved the Company’s Supplemental New Drug Application ("sNDA") for Cortrophin Gel 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. On January 24, 2022, we announced the commercial launch of Cortrophin Gel in the U.S. as our foundational Rare Disease asset. Throughout 2023 and 2024, we continued to build and invest in our Rare Disease infrastructure to support growth in new areas of opportunity, such as pulmonology, ophthalmology, and gout in the ACTH market. On October 2, 2023, we announced FDA approval and commercial availability of a 1-mLvial of Cortrophin Gel, appropriate for adjunctive treatment of certain patients with acute gouty arthritis flares. During the first quarter of 2024, ANI launched a targeted ophthalmology-focused sales force for Cortrophin Gel. The team has continued to gain momentum in ophthalmology, driving significant growth in the number of new patient starts during 2024. Importantly, the addition of Alimera expands the reach of the ophthalmology sales team and the Company believes there will be significant overlap between high potential prescribers of Cortrophin Gel, ILUVIEN, and YUTIQ. ILUVIEN and YUTIQ ILUVIEN (fluocinolone acetonide intravitreal implant) 0.19 mg, was developed in the U.S. and internationally for the treatment of diabetic macular edema (“DME”), a leading cause of severe vision loss and blindness, and certain international markets for chronic non-infectious uveitis affecting the posterior segment of the eye (“NIU-PS”). Alimera acquired exclusive commercialization rights to YUTIQ (fluocinolone acetonide intravitreal implant) 0.18 mg, in May 2023 from EyePoint Pharmaceuticals, Inc. (“EyePoint”) for the treatment and prevention of NIU-PS worldwide except for Europe, the Middle East, Africa, (known as ILUVIEN in Europe, the Middle East and Africa) and certain Asian countries including China. ILUVIEN and YUTIQ are state-of-the-art sustained release intravitreal implants that respectively help patients maintain vision longer and reduce disease recurrence. ILUVIEN is being evaluated as baseline therapy in naïve or near naïve patients with early DME in combination with the current standard of care, anti-vascular endothelial growth factor (“VEGF”) therapy in the NEW DAY clinical trial . YUTIQ is being further studied in the SYNCHRONICITY clinical trial , a prospective, open-label clinical trial evaluating the safety and efficacy of YUTIQ for the treatment and prevention of chronic NIU-PS and related intraocular inflammation. 5 Ta b l e of Contents Both ILUVIEN and YUTIQ treat patients by delivering a continuous microdose of the corticosteroid fluocinolone acetonide (“FAc”) in the eye, for up to 36 months. ILUVIEN was developed internally by Alimera and initially to treat DME, a disease of the retina that affects individuals with Type 1 or Type 2 diabetes and can lead to severe vision loss and blindness. ILUVIEN is sold to treat DME only in the U.S. YUTIQ is sold to treat NIU-PS only in the U.S. In certain European and Middle Eastern countries, ILUVIEN is approved and commercialized to treat DME and to prevent relapse in recurrent NIU-PS, an inflammatory disease of the uveal tract, which is comprised of the iris, ciliary body and choroid, that can lead to severe vision loss and blindness. We also have rights to commercialize ILUVIEN for NIU-PS in Africa. ILUVIEN and YUTIQ are both intravitreal implants that are inserted into the back of the patient’s eye in non-surgical procedures employing devices with 25-gauge needles, which allow for a self-sealing wounds. “Intravitreal” refers to the space inside the eye behind the lens that contains the jelly-like substance called vitreous. The implants, which are non-bioerodible, provide consistent delivery as a result of their constant surface area, permitting elution of FAc to the vitreous. We call this CONTINUOUS MICRODOSING™. This delivery mechanism provides lower daily and aggregate exposure to corticosteroids than any other intraocular dosage forms currently available, which we believe mitigates the typical risks associated with corticosteroid therapy. CONTINUOUS MICRODOSING delivery makes ILUVIEN and YUTIQ the only approved drug therapies for DME and NIU-PS that are designed to deliver consistent daily therapeutic levels of corticosteroid and reduce the recurrence of DME and uveitis for up to three years. Other therapies that physicians currently use to treat DME, such as anti-VEGF treatments and other corticosteroids, are acute (short-acting) therapies that provide a higher initial daily dose but then rapidly decline, requiring frequent reinjection by the physician to maintain an effective dose or reestablish the therapeutic effect after the disease has recurred. FAc is a non-proprietary corticosteroid and the active compound in ILUVIEN (0.19mg) and YUTIQ (0.18mg). We believe that corticosteroids provide the best option in the treatment of DME and NIU-PS because they reduce the inflammatory aspects of both diseases. ILUVIEN and YUTIQ deliver continuous daily sub-microgram levels of FAc in in vivo release kinetic studies for up to 36 months. ILUVIEN and YUTIQ are the only single injection therapies available to treat retinal diseases consistently every day for up to three years, which may allow patients to see better, longer, with fewer injections. NEW DAY Clinical Trial We believe that ILUVIEN continues to be underutilized in the treatment of DME and should be used much earlier in patients suffering from DME. With the NEW DAY clinical trial, we intend to demonstrate the efficacy of ILUVIEN as baseline therapy in patients with early DME by comparing ILUVIEN to the current standard of care, anti-VEGF therapy. In July 2020, Alimera announced the initiation of our NEW DAY clinical trial, a multicenter, single masked, randomized, controlled trial designed to generate prospective data evaluating ILUVIEN as a baseline therapy in the treatment of DME and demonstrate its advantages over using the current standard of care of repeat anti-VEGF injections. The NEW DAY clinical trial was fully enrolled with 300 treatment-naïve, or almost naïve, DME patients in approximately 42 sites around the U.S. We expect to share the clinical trial data in the second half of 2025. Patients who meet the entry criteria have been randomized to receive either an ILUVIEN intravitreal implant or five injections of intravitreal aflibercept 2 mg at four-week intervals for the first 16 weeks as a loading dose. After the initial 16-week period, both treatment arms will be evaluated every four weeks and receive supplemental intravitreal injections of aflibercept 2 mg only as needed. Criteria for supplemental treatment is set by protocol and will be identical in both treatment arms. The planned treatment period in the trial is 18 months. Once the treatment period is concluded, patients will be given the option to participate in an open label extension trial for up to 42 months. The primary outcome measure for the NEW DAY clinical trial is the mean number of supplemental aflibercept injections needed during the trial between treatment groups. Key secondary endpoints include mean best corrected visual acuity (“BCVA”) score over time up to 18 months, time to first supplemental treatment, retinal thickness amplitude on optical coherence tomography (“OCT”), and diabetic retinopathy scores. In addition, the trial will collect patient-reported outcome measures to evaluate the effect on patients’ quality of life and level of functioning. Exploratory endpoints will include neuronal functional measures and OCT imaging measures of retinal nerve layer thickness. SYNCHRONICITY Clinical Trial The SYNCHRONICITY clinical trial is a multicenter, open label trial evaluating YUTIQ in chronic inflammation. The SYNCHRONICITY clinical trial currently has enrolled 110 patient eyes in approximately 25 sites around the U.S. Patients who meet the entry criteria receive YUTIQ as an intravitreal injection in the designated study eye. The treatment period is 36 months, with data capture for this clinical trial being the first 24 months of YUTIQ drug treatment. 6 Ta b l e of Contents The primary outcome measure for the SYNCHRONICITY clinical trial is the mean change from baseline in BCVA letter score in the study eye measured by EDTRS at Month 6 and the mean change from baseline central subfield thickness at Month 6. Key secondary endpoints include time to recurrence of non-infectious inflammation in the study eye, presence of vascular leakage at Months 1, 3, 6, 12, 18, and 24, proportion of subjects with resolution of macular edema at Months 1, 3, 6, 12, 18, and 24, mean change from baseline in BCVA letter score at Day 14 and at Months 1, 3, 12, 18, and 24, and mean change from baseline in CST at Months 1, 3, 12, 18, and 24. We expect to share the preliminary topline results of the SYNCHRONICITY clinical trial data in the first half of 2025. Brands We have grown our brands portfolio of 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, and Veregen. We are innovating in our go-to-market strategy through creative partnerships and a sales force for these products. Strengthening our Generics 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. Our acquisition of Novitium in 2021 included 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 capabiliti es. We have begun to increase our focus on niche lower competition opportunities such as injectables, Paragraph IV, and competitive generic therapy (“CGT”) designation filings. Additionally, we will continue to seek opportunities to enhance our capab ilities through strategic partnerships and acquisitions of assets and businesses. D uring 2023, we acquired two ANDAs and one pipeline product from the Chapter 7 Trustee for the estates of Akorn Holding Company and certain of its affiliates, acquired an ANDA and registered patents and pending patent applications from Slayback Pharma Limited Liability Company, and acquired additional ANDAs and product rights for two products in the second half of 2023. During 2022, we completed an asset acquisition of four ANDAs from Oakrum Pharma, including two that were co mmercial at the time of acquisition. Generic Product Development Considerations We consider a variety of criteria in determining which products to develop. These criteria include: • Formulation Complexity . Our development and manufacturing capabilities enable us to manufacture pharmaceuticals that are differentiated and include high potency, modified release, combination, and hormonal products. This ability to manufacture a variety of differentiated products is a competitive strength that we intend to leverage in selecting products to develop and commercialize. • Market Size and Patient Need . When determining whether to develop or acquire an individual product, we review the current and expected market size for that product. and competitive environment. We endeavor to pursue products with sufficient market size to enable us to enter the market with a strong likelihood of serving patients in need and thus being able to price our products both competitively and at a profit. • Profit Potential. In determining the potential profit of a product, we forecast our anticipated market share, pricing, competitive environment and the estimated cost to manufacture the products. • Manufacturing. We generally seek to develop and manufacture products at our own manufacturing plants to ensure quality control of our products, supply chain reliability and to more closely control the economic inputs and outputs of our products. • Competition. When determining whether to develop or acquire a product, we research existing and expected competition. We seek to develop products for which we can obtain sufficient market share and may decline to develop a product if we anticipate significant competition. Our manufacturing facilities provide a means of entering niche markets, such as hormone therapies, in which fewer generic companies typically compete. 7 Ta b l e of Contents Competitive Generic Therapy The FDA Reauthorization Act of 2017 (“FDARA”) created a new pathway by which the FDA may, at the request of the applicant, designate a drug with “inadequate generic competition” as a competitive generic therapy (“CGT”). At the request of the applicant, the FDA may also expedite the review of an ANDA for a drug designated as a CGT. Under the CGT pathway, the FDA provides a statutory provision for a 180-day exclusivity period for certain first to market applicants whose ANDA received a CGT designation. Our Novitium subsidiary has developed a strong track record of obtaining CGT approvals and we expect to continue to develop generic drugs under the CGT pathway. Products A complete list of our generic and branded pharmaceutical products and descriptions is posted on our website, www.anipharmaceuticals.com. Manufacturing, Suppliers, and Raw Materials Several of our key products, including injectables, softgel capsules, and Cortrophin Gel, as well as ILUVIEN and YUTIQ, are products that are currently manufactured and supplied by third parties, in some cases as a single source. We expect our reliance on third party manufacturers to increase in the future as we receive approvals for new products to be manufactured through our collaboration arrangements, and as we seek additional growth opportunities outside of the capabilities of our current manufacturing facilities. For instance, our supply agreement for YUTIQ (the "YUTIQ Supply Agreement") with EyePoint has an initial term of two years through May 2025. On February 27, 2025, the Company received written notice of non-renewal from EyePoint of the YUTIQ Supply Agreement, effective May 31, 2025. The Company has submitted a Prior Approval Supplement ("PAS") to the FDA seeking to add YUTIQ’s indication of chronic NIU-PS to the ILUVIEN label. The Company expects FDA approval of the PAS in the second quarter of 2025 and plans to market ILUVIEN for chronic NIU-PS in addition to its current indication of DME in the U.S. For reference, ILUVIEN is already approved and marketed for DME and NIU-PS outside the U.S., including in 17 European countries and the Middle East. In order to support the transition to ILUVIEN, in July 2024, the Company extended its partnership with Alliance Medical Products, Inc., a subsidiary of Siegfried Holding AG ("Siegfried"), its long-term supplier for ILUVIEN, through 2029, and contracted with Siegfried to upgrade equipment on the existing manufacturing line and significantly expand capacity through the addition of a second manufacturing line. We require a supply of quality raw materials, including 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 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 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 and customs delays. In addition, certain of our products are manufactured, packaged, or manufactured and packaged by third parties. Alimera did not have, and we do not have in-house manufacturing capability for and depend, and expect to continue to depend, exclusively on third-party contract manufacturers to manufacture and package ILUVIEN and YUTIQ. 8 Ta b l e of Contents The pharmaceutical industry in the U.S. is highly regulated by multiple U.S. government agencies, such as the FDA, the DEA, and the Centers for Medicare and Medicaid Services (“CMS”), as well as state and local government entities. As a result, we are subject to extensive and complex rules and regulations, which are subject to revision from time to time, including changes in the priorities and focus of presidential administrations on our industry, as occurred in January 2025, or when a U.S. Supreme Court ruling changes the scope of judicial deference to federal agency interpretations of law as occurred in Loper Bright Enterprises v. Raimondo , 603 U.S. 369 (2024). While we have experience with these regulations and changes, there can be no assurance that we will be able to fully comply with all applicable regulations or that our past compliance activities will be upheld by government agencies or U.S. Courts in the future. Branded and Generic Pharmaceutical Products The Drug Approval Process Generally, 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, analytical testing, stability, manufacturing processes, packaging, labeling, and quality control. Information and data 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. An NDA is filed with the FDA 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. To market a new drug in the U.S., a sponsor must generally complete nonclinical laboratory tests, animal studies and formulation studies under the FDA’s Good Laboratory Practice (“GLP”) regulations and other applicable laws or regulations; conduct clinical testing in humans pursuant to an investigational new drug application (“IND”); develop manufacturing processes to ensure the product’s identity, strength, quality, purity, and potency; successfully undergo an FDA inspection or remote regulatory assessment of the manufacturing facility or facilities where the product is produced to assess compliance with current good manufacturing practices (“cGMP”); and receive FDA approval of the NDA. Clinical trials involve the administration of an investigational product to human subjects under the supervision of qualified investigators. The trials must be conducted in accordance with protocols detailing objectives, safety parameters, effectiveness criteria, human subject protections, and statistical analysis plans. To ensure that clinical trials are conducted ethically and safely, sponsors must file a protocol for each trial with the FDA as part of their IND along with diversity action plans when applicable. Additionally, all research participants or their legally authorized representatives must provide written informed consent prior to participating in a clinical trial, which is then reviewed and approved by an institutional review board (“IRB”). The FDA may order the temporary or permanent discontinuation of, or impose conditions on the conduct of, a clinical trial at any time or impose other sanctions if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to clinical trial patients. An IRB also may require the clinical trial to be halted for failure to comply with the IRB’s requirements or if the trial poses an unexpected serious harm to human subjects. The purpose of the clinical trials is to generate enough data to provide statistically significant evidence of clinical efficacy and safety of the product candidate for approval. These trials are well-controlled and are intended to establish the overall risk-benefit profile of the product candidate and provide an adequate basis for physician labeling. The FDA typically requires that an NDA include data from two adequate and well-controlled clinical trials, but sometimes approval may be based upon a single adequate and well-controlled clinical trial plus confirmatory evidence or a single large multicenter trial without confirmatory evidence. Clinical trials must be registered with and clinical trial data must be disclosed to a publicly-available government database, or be subject to potential FDA enforcement action. 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”). 9 Ta b l e of Contents 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 or in vitro studies, or be self-evident, 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 drug 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 drug is not an NCE, but the holder of the NDA conducted or sponsored clinical trials (that are not bioequivalence studies) essential to approval of the NDA or a supplement thereto, the FDA may not approve a generic equivalent to the NDA drug for three years. Certain other periods of exclusivity may be available if the branded drug is indicated for treatment of a rare disease, is an antibiotic, 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, and other authorities. In addition, the FDA conducts drug pre-approval and post-approval reviews and plant inspections to determine whether our systems and processes are in compliance with NDA and ANDA specifications, cGMP and other FDA regulations. Our suppliers are subject to similar regulations and periodic inspections. Hatch-Waxman Act for Drugs Section 505 of the Federal Food, Drug, and Cosmetic Act (“FDCA”) sets forth three types of drug applications that may be submitted to the FDA for marketing authorization for a new drug. Under section 505(b)(1), sponsors may file an NDA which must contain full reports of investigations of safety and efficacy. Under section 505(b)(2), sponsors may file an NDA with full reports of investigations of safety and efficacy but may include at least some of the information required for approval from investigations that were not conducted by or for the applicant and relying, in part, on the FDA’s prior findings of safety and efficacy for an existing product, or published literature. Under section 505(j), the ANDA approval pathway allows an abbreviated approval process for a generic version of an approved drug by which a manufacturer scientifically demonstrates that its duplicate product performed in the same manner as an existing approved drug (the “RLD”), by measuring the time it takes the duplicate (or “generic”) drug to reach the bloodstream in healthy volunteers and thereby demonstrating “bioequivalence” to the RLD. An approved ANDA provides marketing authority for a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use as a previously approved product. The ANDA or 505(b)(2) NDA approval generally cannot be made effective until all of the RLD’s FDA-listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through a paragraph IV certification. Upon submission of an ANDA or 505(b)(2) NDA that references an RLD with listed patents, an applicant must certify to the FDA that at least one of the following criteria are met – (1) no patent information has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. Alternatively, the applicant may elect to submit a “section viii” statement certifying that its proposed label does not contain any language regarding the RLD’s patented method-of-use. If the ANDA or 505(b)(2) NDA applicant has provided a paragraph IV certification to the FDA, the applicant must also notify NDA and patent holders of the certification, who may then initiate a patent infringement lawsuit. If the suit is filed within 45 days of receipt of the certification, the FDA is subject to a 30-month stay such that the ANDA or 505(b)(2) NDA approval does not become effective until the earlier of (i) 30 months from the patent or application owner’s receipt of the notice of the paragraph IV certification, (ii) the expiration of the patent, (iii) when the infringement case concerning each such patent is decided in the applicant’s favor or settled, or (iv) such shorter or longer period as may be ordered by a court. It is common for the NDA holder or patent owner(s) to sue for patent infringement, thereby initiating a 30 month stay and delaying approval of the ANDA or 505(b)(2) NDA for a significant period of time. 10 Ta b l e of Contents Orphan drug designation The FDA may grant orphan drug designation to drugs intended to treat a “rare disease or condition,” which is defined as a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making the drug available in the U.S. will be recovered from sales in the U.S. for that product. Orphan drug designation must be requested before submitting an application to FDA for marketing approval. When reviewing a request for orphan drug designation, FDA considers the mechanism of action of the drug to determine what distinct disease or condition the drug is intended to treat, diagnose or prevent. Whether a given medical condition constitutes a distinct disease or condition for the purpose of orphan-drug designation depends on a number of factors, assessed cumulatively, including, pathogenesis of the disease or condition; course of the disease or condition; prognosis of the disease or condition; and resistance to treatment. These factors are analyzed in the context of the specific drug for which designation is requested. While an orphan drug designation does not shorten the regulatory review and approval process or convey any other advantage in the review process, it does provide opportunities for grant funding towards clinical trial costs, tax advantages, and FDA user-fee exemptions. Additionally, if a product with orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances. 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, drug shortage and manufacturing volume reporting, 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 certain medications with serious safety concerns to help ensure the benefits of the medication outweigh its risks. A REMS may include, but is not limited to, 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. We currently participate in the Opioid Analgesic REMS for our Oxycodone Hydrochloride Oral Solution, Oxycodone Capsules and Levorphanol Tartrate Tablets commercial products, among others. 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 interoperable electronic product tracking and tracing technology at the package level to identify and trace certain prescription drugs as they are distributed in the United States. Products subject to the DSCSA must only be transferred to appropriately licensed purchasers. ANI started manufacturing serialization-compliant products in November 2018. The DSCSA also establishes product verification, investigation, quarantine, disposition and notification responsibilities related to counterfeit, diverted, stolen, fraudulent and intentionally adulterated products that would result in serious adverse health consequences or death to humans. See "Risk Factors ― We are subject to federal, state, and local laws and regulations, and complying with these may cause us to incur significant additional costs." Drug Advertising, Marketing and Promotion 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 and non-misleading in nature. Additionally, manufacturers may only promote their product for approved indications outlined 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. 11 Ta b l e of Contents Physicians may prescribe drugs off-label but manufacturers cannot promote such uses unless they have been previously authorized by the FDA. Interactions between manufacturers and health care providers (“HCPs”) are governed by fraud and abuse laws, including anti-kickback provisions and the submission of claims for reimbursement. The federal Anti-Kickback Statute (“AKS”) is a criminal statute that prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs, in whole or in part. The term “remuneration” has been interpreted broadly by the Office of Inspector General of the U.S. Department of Health and Human Services and the courts to include anything of value including arrangements between pharmaceutical industry members on the one hand and prescribers, purchasers and formulary managers on the other. The Beneficiary Inducement Civil Monetary Penalties Law imposes similar restrictions on interactions between the pharmaceutical industry and federal healthcare program beneficiaries. There are certain statutory exceptions and regulatory safe harbors to the AKS protecting some common activities from prosecution, but they are drawn narrowly, and practices that involve remuneration that may be alleged to be intended to induce or reward prescribing, purchases, or recommendations may be subject to scrutiny. The Patient Protection and Affordable Care Act, of 2010, as amended, (the “ACA”) modified the intent requirement under the AKS to a stricter standard, such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the ACA also provided that a violation of the AKS is grounds for the government or a whistleblower to assert that a claim for reimbursement submitted to a federal healthcare program for payment of items or services resulting from such violation constitutes a per se false or fraudulent claim for purposes of the federal civil False Claims Act (“FCA”). The FCA imposes civil liability on individuals or entities that knowingly submit, or cause to be submitted, false or fraudulent claims for payment to the government or avoid, decrease, or conceal an obligation to pay money to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. The civil FCA has been used to assert liability on the basis of kickbacks and other improper referrals, improperly reported government pricing metrics such as Best Price or Average Manufacturer Price, improper use of Medicare provider or supplier numbers when detailing a provider of services, improper promotion of off-label uses not expressly approved by the FDA in a product’s label, and allegations as to misrepresentations with respect to products, contract requirements, and services rendered. Intent to deceive is not required to establish liability under the civil FCA. Rather, a claim may be false for deliberate ignorance of the truth or falsity of the information provided or for acts in reckless disregard of the truth or falsity of that information. The FCA also allows private individuals to bring a suit on behalf of the government against an individual or entity for violations of the FCA. These suits, also known as qui tam actions, may be brought, with only a few exceptions, by any private citizen who has material information of a false claim that has not yet been previously disclosed. If the government decides to intervene in a qui tam action and prevails in the lawsuit, the individual will share in the proceeds from any damages, penalties or settlement funds. If the government declines to intervene, the individual may pursue the case alone. The civil FCA provides for treble damages and a civil penalty for each false claim, such as an invoice or pharmacy claim for reimbursement. FCA liability may further be imposed for known Medicare or Medicaid overpayments, for example, overpayments caused by understated rebate amounts, that are not refunded within 60 days of discovering the overpayment, even if the overpayment was not caused by a false or fraudulent act. In addition, a civil judgment for violating the FCA may result in exclusion from federal health care programs, suspension and debarment from government procurement programs, and refusal of orders under existing government contracts. The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) also created federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, in connection with the delivery or payment for healthcare benefits; knowingly and willfully embezzling or stealing from a healthcare benefit program; willfully obstructing a criminal investigation of a healthcare offense; and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact, or making any materially false statements, in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters. Additionally, the ACA amended the intent requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation. In addition, as part of the ACA, the federal government enacted the Physician Payment Sunshine Act. Manufacturers of drugs and biologics for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) are required to annually report to CMS certain payments and other transfers of value made to or at the request of HCPs that are covered recipients as well as principal investigators and research institutions at teaching hospitals for clinical trials. Failure to submit required information may result in civil monetary penalties. If not preempted by this federal law, several states currently also require reporting of marketing and promotion expenses, as well as gifts and payments to HCPs and organizations. 12 Ta b l e of Contents Most states have adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or services reimbursed by any third-party payor, including commercial insurers. Certain state laws regulate sponsors’ use of prescriber-identifiable data and require implementation of commercial compliance programs, compliance with the pharmaceutical industry’s voluntary compliance guidelines, and applicable compliance guidance promulgated by the federal government. State laws may also restrict payments or the provision of other items of value made to HCPs and other potential referral sources; impose restrictions on marketing practices; or require sponsors to track and report information related to payments, gifts, and other items of value to HCPs. Such laws typically impose significant civil monetary penalties for each instance of reporting noncompliance. See “Risk Factors ― We may become subject to federal and state false claims litigation brought by private individuals and the government.” Controlled Substances 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 levels. 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 Four of our products, EEMT, Opium Tincture, Thyroid Tablets, and Hyoscyamine, 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 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. 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. 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. See “Risk Factors – Four products, which together comprised less than 10% of our total revenue in 2024, 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. ” 13 Ta b l e of Contents Pharmaceutical Coverage, Pricing, and Reimbursement In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our products. Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Sales of our products will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such products. The process for determining whether a payor will provide coverage for a product is separate from the process for setting the price or reimbursement rate that the payor will pay for the product if coverage is approved. Decisions regarding whether to cover any of our products, the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. No uniform policy for coverage and reimbursement exists in the U.S., and coverage and reimbursement can differ significantly from payor to payor. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular condition. The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Under the United States federal Budget Control Act of 2011, the failure of the Joint Select Committee on Deficit Reduction to reach required deficit reduction goals triggers automatic reimbursement reduction under Medicare and other government programs. Currently, All fee-for-service Medicare items and services on claims, including drugs, are subject to the 2% sequestration cut through fiscal year 2032. The payment reduction is taken from the calculated payment amount after the approved amount is determined and the deductible and coinsurance are applied. The Inflation Reduction Act of 2022 ("IRA") became law on August 22, 2022. Among other things, it requires manufacturers of selected drugs to negotiate discounted prices with the Secretary of the Department of Health and Human Services to set the maximum reimbursement for such drugs under Medicare Part D. Failure to reach an agreement can subject manufacturers to an excise tax and lost of coverage for such drugs under Medicare. In addition, the IRA amended the Medicare Part D plan design to eliminate the coverage gap phase of the benefit beginning on January 1, 2025. Manufacturers desiring Medicare Part D coverage of their branded drugs and biologics must participate in the new Manufacturer Discount Program and pay a rebate of 10% of the reimbursement in the initial phase of the benefit and 20% in the catastrophic phase of the benefit. The company does participate in the Manufacturer Discount Program ensure Medicare Part D coverage of our products but results in lower profitability when such drugs are dispensed to Medicare Part D beneficiaries. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any approved product(s). Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products, less favorable coverage policies and reimbursement rates may be implemented for other company products and/or for the products in the future. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. Furthermore, restrictions or conditions on coverage imposed by Medicare, Medicaid or other government programs may result in similar restrictions or conductions being adopted or imposed by private payors. The implementation of cost containment measures or other healthcare reforms may prevent the generation of revenue, attainment of profitability, or commercialization of products. In addition, it is possible that there will be further legislation or regulation that could harm the business, financial condition and results of operations. 14 Ta b l e of Contents Medicaid/Medicare Medicaid and Medicare, both of which are U.S. federal health care programs administered by CMS, are major payors of pharmaceutical products, including those we produce. 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”), originally 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 have expanded their Medicaid programs. The ACA also made changes to Medicaid law that has negatively impacted our business. Pharmaceutical manufacturers that want their drug products covered by state Medicaid programs must enter into a rebate agreement with CMS and pa y rebates to state Medicaid agencies on utilization of their drugs dispensed to Medicaid beneficiaries. The ACA raised the rebate percentages for both generic and branded pharmaceuticals effective January 1, 2010. The basic 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 manu facturer price or the difference between the average manufacturer price and the “best price” (as defined in the Medicaid statute) during a specific period. In addition, there is an additional rebate if the average manufacturer price of the drug is rising faster than inflation. Since passage of ACA in 2010, Medicaid rebates have been capped at average manufacturer price per unit. However, beginning January 1, 2024 pursuant to the American Rescue Plan of 2021, Medicaid rebates will no longer be capped at average manufacturer price. As a result we could end up paying substantially higher Medicaid rebates on certain products. 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 voluntary prescription drug coverage for Medicare beneficiaries. The MMA has increased coverage of pharmaceuticals, which has benefited the pharmaceutical industry for both brands and generic drugs. 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. Certain of our products, while marketed as “generics,” are sold under approved NDAs and, therefore, are subject to the discount requirement. The IRA was signed into law on August 16, 2022. The IRA brings sweeping changes to Medicare coverage and reimbursement for prescription drugs that could negatively impact us and other pharmaceutical manufacturers. Of note, beginning January 1, 2025, the IRA alters the current structure of the Medicare Part D standard benefit by eliminating the coverage gap. The IRA reduces a beneficiary’s out-of-pocket maximum to $2,000 beginning in 2025. The existing coverage gap discount program for pharmaceutical manufacturers has been replaced by a new manufacturer discount program effective in January 2025. Under the new program, manufacturers will provide a 10% discount off the negotiated price for applicable drugs (branded drugs and biologics manufactured by companies that have Part D discount agreements) after the deductible is satisfied through the initial coverage phase of the benefit. In the catastrophic phase, manufacturers will provide a 20% discount off negotiated price. Any pharmaceutical product marketed under an NDA, regardless of whether the product is marketed as a “generic,” is subject to the manufacturer discount requirement. We currently expect that this will increase discounts due on Medicare Part D utilization of our drug products. ANI has qualified as a Specified Manufacturer, and is therefore eligible for the specified manufacturer discount phase in for patients covered under the Low Income Subsidy program for applicable drugs marketed as of August 16, 2022. 15 Ta b l e of Contents In addition to restructuring the Medicare Part D benefit, under the IRA, CMS will negotiate directly with manufacturers the price that Medicare will pay for certain high-cost drugs via establishment of the Drug Price Negotiation Program (or the “Program”). The Program will apply to drugs administered or dispensed under both Medicare Parts B and D, although for the first two years of the Program, only Medicare Part D qualifying drugs will be impacted. The Program officially began in 2023 with CMS selecting 10 drugs for direct price negotiation from a list of drugs representing the highest Medicare Part D spend. The newly negotiated prices for the first tranche of Part D drugs will not be applicable until 2026. CMS will select up to an additional 15 drugs for price negotiation for initial price applicability year 2027 by February 1, 2025. If a manufacturer of a selected drug does not negotiate a Maximum Fair Price (“MFP”) with the CMS, the manufacturer must pay an excise tax of 65 to 95% of Medicare utilization based on the prior year or withdraw all manufacturer drug products from coverage under Medicare and Medicaid. Manufacturers that agree on an MFP, but do not honor it, will be subject to civil monetary penalties equal to 10 times the amount of the product dispensed or administered that year, as well as the difference between the reimbursed price and the MFP. Even if a manufacturer’s drug is not selected for negotiation under the Program, its Medicare coverage could be impacted as a drug with a MFP automatically receives placement on Part D plan formularies and could usurp coverage of another therapeutic alternative in the same class of drugs as the general rule is that Medicare Part D plan formularies have at least 2 drugs per each therapeutic class outside of the 6 protected classes. While none of our drug products have currently been selected for negotiation, we continue to monitor the process for potential impact to our business. The Program and resulting excise tax have been challenged as unconstitutional in various lawsuits including cases brought by the National Infusion Center Association, Global Colon Cancer Association, and Pharmaceutical Research and Manufacturers of America. In the event that the Program and resulting excise tax are struck down as unconstitutional, the Medicare Part D marketplace could be disturbed by insurers exiting the Medicare Part D market and premiums increasing. If this occurs, it could negatively impact reimbursement and coverage for our self-administered drugs. Lastly, the IRA imposed additional rebates on manufacturers including ANI to the extent certain drug pricing metrics are rising faster than inflation. These new inflation rebates are similar to those imposed on manufacturers under Medicaid and could result in additional rebates due from us on Medicare utilization of our products. Inflation rebates are accruing on Medicare Part D utilization from October 1, 2022 and on Medicare Part B utilization of drugs from January 1, 2023 forward though the CMS has deferred collection of such rebates until 2025. Payment or reimbursement of prescription therapeutics by Medicaid or Medicare requires manufacturers to submit certified pricing information to CMS. The Medicaid Drug Rebate statute requires manufacturers to calculate and report price points, which are used to determine Medicaid manufacturer rebate payments shared between the states and the federal government and Medicaid payment rates for ANI products. For products paid under Medicare Part B, manufacturers must also calculate and report their Average Sales Price, which is used to determine the Medicare Part B payment rate. For certain products, the Veterans Health Care Act (the “VHCA”) requires manufacturers to calculate and report to the Department of Veterans Affairs (“VA”) a different price called the Non-Federal Average Manufacturer Price, which is used to determine the maximum price that can be charged to certain federal agencies, referred to as the Federal Ceiling Price (“FCP”). Like the Medicaid rebate amount, the FCP includes an inflation penalty. A Department of Defense regulation requires manufacturers to provide this discount on products dispensed by retail pharmacies when paid by the TRICARE Program. The VHCA also requires manufacturers participating in the Medicaid program to enter into Federal Supply Schedule contracts with the VA through which their products must be sold to certain federal agencies at FCP. This necessitates compliance with applicable federal procurement laws and regulations, including submission of commercial sales and pricing information, and subjects companies to contractual remedies as well as administrative, civil, and criminal sanctions. In addition, the VHCA requires sponsors participating in Medicaid to agree to provide different mandatory discounts to certain Public Health Service grantees and other safety net hospitals and clinics under the 340B program based on the sponsor’s reported Medicaid pricing information. The 340B program has its own regulatory authority to impose sanctions for non-compliance, adjudicate overcharge claims against sponsors by the purchasing entities, and impose civil monetary penalties for instances of overcharging. These price reporting requirements create risk of submitting false information to the government, potential FCA liability and exclusion from certain of these programs. 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. 16 Ta b l e of Contents 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. Certain states have formed Prescription Drug Affordability Boards that have the authority to set reimbursement and/or drug pricing in the state. 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 and/or third party payors or purchasing customers in certain states 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 Our success depends in part on our and our licensors’ ability to obtain and maintain proprietary protection for our key branded products or any future products or product candidates, technology and know-how, to operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. Because we license certain intellectual property relating to ILUVIEN from third parties, we depend on their ability to obtain and maintain such protection. Where we have conducted our own research, our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position. As of December 31, 2024, we owned two U.S. patents as well as pending patent applications relating to Cortrophin Gel. In addition, as a result of the Alimera acquisition, in September 2024, we acquired rights to two U.S. utility patents covering ILUVIEN and YUTIQ and foreign counterparts to an expired U.S. design patent covering the ILUVIEN injector. We license one utility patent right relating to the YUTIQ injector from EyePoint. Pursuant to an amended and restated license agreement (the "New Collaboration Agreement") with EyePoint, our ILUVIEN-related patent rights are only for diseases of the human eye in Europe, the Middle East and Africa, and for diseases of the human eye excluding uveitis in the rest of the world. Pursuant to a product rights agreement ("Product Rights Agreement") entered into with EyePoint in May 2023, these rights have been expanded to include uveitis worldwide except for China and certain other countries in Asia. U.S. utility patents generally have a term of 20 years from the date of filing. The utility patent rights relating to ILUVIEN that EyePoint licensed to us include one U.S. patent that will expire in August 2027. An additional licensed patent relating to the YUTIQ injector will expire in January 2028. In addition to Cortrophin Gel, ILUVIEN and YUTIQ, we own the trademark names for most of our branded products, including Cortenema, Cortrophin-Zinc, Inderal LA, Inderal XL, InnoPran XL, Kionex, Lithobid, SOVUNA, Reglan, Vancocin, and Veregen. We license the trademark names for Atacand, Atacand HCT, Arimidex, Casodex, Oxistat. With the exception of a license for patent technology for Inderal XL, InnoPran XL, and Veregen, we do not license any patents associated with these products. Further, patent protection and market exclusivity for some of 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. T herefore, 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. We also recently acquired certain patents and patent applications relating to baclofen and a patent was granted on our hydrochlorothiazide product. 17 Ta b l e of Contents The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our and our licensor’s success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent applications or those patent applications that we license will result in the issuance of any patents. Our issued patents and those that may issue in the future, or those licensed to us, may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related products or the length of term of patent protection that we may have for our products. In addition, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies or duplicate any technology we develop. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before such product can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent. We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. 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. These products are sold under our own label. Customers O ur customers purchase and distribute our products. Our customers include major national wholesalers. Our products are sold by major retail pharmacy chains, distributors, national mail order houses, 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 conce ntration 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 years ended December 31, 2024 and 2023, approximately 64% and 70% of our net revenues were attributable to four customers, respectively. For the year ended December 31, 2022, three customers accounted for approximately 59% of our net revenues. In addition, as noted below, our customers also distribute our products. The loss of any of these customers , including in their role as distributors, could have a material adverse effect on our business. Due to 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. In the Rare Disease business, specifically for Cortrophin Gel, there is a limited distribution network and a select group of specialty pharmacies which can dispense product to appropriate patients. We contract and engage with the largest health insurance payers across the appropriate channels and classes of trade. For ILUVIEN and YUTIQ, our sales personnel focus on physician offices, clinics, pharmacies and hospitals in the U.S. and in European countries where we seek to engage end users to purchase our products. 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. 18 Ta b l e of Contents Sales, Marketing, and Distribution We market, sell, and distribute our products in the United States and internationally. Our products are distributed through the following channels: • Wholesalers . We conduct business with the three major wholesalers in the United States: Cencora, Inc., Cardinal Health, and McKesson. • Retail Market Chains . We conduct business with all the major retail chains in the United States which includes CVS, Rite Aid, Kroger, Walmart, and Walgreens. • Distributors and Specialty Pharmacies . We have contracts with several major distributors and specialty pharmacies in the United States, including Anda, Smith Drug Company, Morris Dickson, CVS Caremark, Accredo, OptumRx, and CuraScript. We also have various agreements with international distributors for our ILUVIEN product. • Group Purchasing Organizations . 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 and Brands segment we contract with specialty pharmacies. • Hospitals, Clinics, and Physicians . In our Rare Disease and Brands segment, specifically for ILUVIEN and YUTIQ, we contract with certain hospital systems, clinics, and physician offices. Competition 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 brands portfolio of 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. 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, 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. 19 Ta b l e of Contents 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 Generic pharmaceutical markets in which we do business include, but are not limited to: • Amneal Pharmaceuticals, Inc., Apotex Inc., Aurobindo Pharma, Camber Pharmaceuticals Inc., Hikma Pharmaceuticals plc, Lupin Pharmaceuticals, Inc., Rising Pharmaceuticals, Inc., Strides Pharma Inc., Sun Pharmaceutical Industries Ltd., Teva Pharmaceuticals USA, Inc., Viatris Inc., and Zydus Pharmaceuticals USA. The principal competitor for Cortrophin Gel is Acthar ® Gel marketed by Mallinckrodt Pharmaceuticals. The principal competitors for ILUVIEN and YUTIQ are: DME Competitors • Eylea © (aflibercept) 4 mg and Eylea ® HD (aflibercept) 8 mg, marketed by Regeneron in the U.S. and by Bayer in the EEA; Vabysmo ® (faricimab-svoa), marketed by Genentech; Avastin © (bevacizumab), Lucentis © (ranibizumab injection), marketed by Genentech (Roche) in the U.S. and Novartis in the rest of the world; Ozurdex © (dexamethasone intravitreal implant), marketed by Allergan, an AbbVie company. NIU-PS Competitors • Ozurdex © (dexamethasone intravitreal implant), marketed by Allergan, an AbbVie company; Xipere ® (triamcinolone acetonide injectable suspension 40 mg/ml) marketed by Bausch & Lomb; Retisert ® , marketed by Bausch and Lomb; Humira© (adalimumab), marketed by AbbVie. Product Liability Product liability litigation represents an inherent risk to all firms in the pharmaceutical industry. We utilize traditional third-party insu rance 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 2025, we have 897 employees, of which 720 are located in the United States, 112 in India, 28 in the United Kingdom, 18 in Germany, 11 in Portugal, 8 in Ireland, and 1 in Canada. We also utilize agency resources as well as 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. Our Purpose and Core Values Our human capital management strategy is guided by our purpose and core values. Our purpose is Serving Patients, Improving Lives. Our core values are Patient First, Teamwork, Innovation, Integrity & Compliance, Accountability & Transparency, and Commitment to Excellence. We believe that our purpose and core values provide clarity, a shared language, and ultimately create what is distinctive about our company and our culture. We are motivated to bring our best to ANI every day by the patients we serve, the people we work with, the direct impact we have on the work, and the learning, growth and development opportunities we provide. Culture, Engagement, and Diversity, Equity, and Inclusion We believe that attracting, retaining, and promoting engagement for talented employees is critical to the success of our business, and we take pride in our values, culture, and communities. We are committed to creating a diverse, equitable, and inclusive work environment within all levels of the business. As of the end of 2024, approximately 42% of our workforce identified as female and approximately 58% identified as male. In the same period, approximately 45% of our workforce identified as a person of color or indigenous person, with approximately 55% identifying as white. 20 Ta b l e of Contents Furthermore, we do not tolerate discrimination or harassment of any kind against anyone, or the use of child or forced labor. We value employee input, and conduct focus groups and survey employees on specific topics (e.g. approximately 30% of our employees participated in a benefits and wellness survey in 2024). We offer ongoing training and career development to all employees, both through curriculum developed internally, and through external resourc es (e.g. LinkedIn Learning). Together, we own our culture and participate in ongoing open dialogue as we strive for continued growth. At ANI, we believe that no one should go without medicines that they need. In December 2022, we formed the ANI Rare Disease Patient Assistance Program, Inc. (“ANI PAP”) for the purpose of providing certain medicine for free to patients in the United States who do not have prescription drug or health insurance coverage and who, without assistance, cannot afford their medicine. In addition, ANI has provided patient-related financial support to nonprofit organizations that are aligned with ANI’s mission to address unmet needs. Our charitable contributions support initiatives and programs that advance medical care or patient care within the Company's therapeutic areas of focus. Total Rewards ANI’s Total Rewards Philosophy is grounded in pay for performance and seeks to provide compensation and benefits that are competitive within the pharmaceuticals industry, as well as competitive with local employers for jobs of a cross-industry nature. We pay fair and competitive salaries, short-term incentives, and long-term incentives that are informed by external market rates and internal equity. We recognize and reward employee performance, productivity, and alignment with ANI’s Core Values. We believe that a holistic rewards strategy should also go beyond compensation and benefits to consider elements such as wellness, recognition, and purpose. We support flexible and remote working arrangements throughout the business, as we are able. Health and Safety Management and Training We are committed to the safety and health of our employees, patient-customers, and the public. It is critical within our mission to ensure we keep our employees and customers safe while accomplishing our business goals. 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 and Sustainability ANI is committed to Serving Patients, Improving Lives, both directly though our high-quality products, and through our environmental stewardship and sustainability practices. We strive to minimize waste and emissions, promote reuse and recycling, and conserve resources. We continue to increase our efforts and have formed an Environmental, Social, and Governance ("ESG") Steering Committee to oversee cross-functional initiatives. The ESG Steering Committee reports to our Board of Directors through our Nominating and Governance Committee and is committed to providing progress updates at least twice per year. Available Information We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (“SEC”). We make available free of charge on our website (www.anipharmaceuticals.com) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to those filings as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Also posted on our website in the “Investors – Corporate Governance” section are our Corporate Governance Guidelines, Code of Ethics and the charters for the Audit and Finance, Compensation, and Nominating and Corporate Governance Committees. Information on, or accessible through, our website is not a part of, and is not incorporated into, this report or any other SEC filing. Copies of our SEC filings or corporate governance materials are available without charge upon written request to Investor Relations, c/o ANI Pharmaceuticals, Inc., 210 Main Street West, Baudette, Minnesota, 56623. 21 Ta b l e of Contents