ANI Pharmaceuticals Inc.

11/05/2026 | Press release | Distributed by Public on 11/05/2026 05:59

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements (unaudited) and the accompanying notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, the audited consolidated financial statements and the accompanying notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Form 10-K"), as well as the information contained under Management's Discussion and Analysis of Financial Condition and Results of Operations and "Risk Factors" contained in the 2025 Form 10-K, and Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q, and other information provided from time to time in our other filings with the SEC. This discussion contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth under "Risk Factors" in our 2025 Form 10-K and this Quarterly Report on Form 10-Q.
EXECUTIVE OVERVIEW
ANI Pharmaceuticals is a diversified bio-pharmaceutical company. The Company's mission is "Serving Patients, Improving Lives" by developing, manufacturing, and commercializing therapeutics through its Rare Disease, Generics and Other, and Brands businesses.
On September 16, 2024, the Company acquired Alimera Sciences, Inc. ("Alimera"). In connection with the acquisition of Alimera, the Company added a growing and durable franchise, ILUVIEN (fluocinolone acetonide intravitreal implant) 0.19 mg, which has received marketing authorization and reimbursement in the United States ("U.S.") and 24 countries for the treatment of diabetic macular edema ("DME") and YUTIQ (fluocinolone acetonide intravitreal implant) 0.18 mg, available in the U.S. for the treatment of non-infectious uveitis affecting the posterior segment of the eye ("NIU-PS"). Subsequent to the acquisition of Alimera, we expanded the label for ILUVIEN to include an indication for chronic NIU-PS in addition to its then-current indication in DME in the U.S.
The Company owns and operates three pharmaceutical manufacturing facilities, which include two facilities in Baudette, Minnesota, and one in East Windsor, New Jersey, which collectively are 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.
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-orientation that seeks to deliver on our purpose of "Serving Patients, Improving Lives."
Our strategy is driven by the following key growth drivers:
Building a Successful Rare Disease and Brands Segment
We spend significant time, effort and resources in expanding our Rare Disease and Brands segment which consists of our Rare Disease and Brands portfolio of products.
We acquired the NDAs for Purified Cortrophin® Gel (Repository Corticotropin Injection USP) ("Cortrophin Gel") and Cortrophin-ZincTM in January 2016 and executed long-term supply agreements with a supplier of our primary raw material for corticotropin API, a supplier of corticotropin 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 U.S. Food and Drug Administration ("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.
On February 28, 2025, the FDA approved a prefilled syringe format for Cortrophin Gel. This new presentation became available in 40 USP units/0.5 mL and 80 USP units/mL single-dose options through Cortrophin Gel's established specialty pharmacy network during the second quarter of 2025. The prefilled syringe reduces administration steps for patients using Cortrophin Gel, which remains available in 5 mL and 1 mL vials.
During 2026, we have built a dedicated sales organization focused on acute gouty arthritis flares, an indication unique to Cortrophin Gel within the ACTH class. Our dedicated sales force is focused on the appropriate patient population through podiatry and primary care physicians, while our existing sales organization will continue to focus on appropriate acute gouty arthritis flare patients seen by rheumatologists and nephrologists.
In September 2024, we acquired ILUVIEN and YUTIQ (together, the "Retina Franchise") in connection with the acquisition of Alimera. The acquisition of Alimera strengthened our Rare Disease business and expanded our footprint beyond the U.S. through Alimera's direct marketing operations in Germany, the United Kingdom ("UK"), Portugal, and Ireland, as well as its partnerships in Europe, Asia, and the Middle East. We believe that the Retina Franchise is durable with high barriers to genericization and a clear role for patients in need of alternative therapeutic options. Importantly, the addition of Alimera expanded the reach of the ophthalmology sales team and we believe there will be significant overlap between high potential prescribers of Cortrophin Gel and the Retina Franchise.
As noted above, during March 2025, the FDA approved an expanded label for ILUVIEN (fluocinolone acetonide intravitreal implant) to include an indication for the treatment of chronic NIU-PS in addition to the then-current indication of DME. During the second quarter of 2025, we transitioned promotional efforts in the U.S. from YUTIQ to ILUVIEN with its combined label of DME and NIU-PS.
We plan to continue to expand our Rare Disease business, through a combination of organic growth and acquisitions. While we execute against our strategic initiatives that we believe will result in 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 Brands portion of the Rare Disease and Brands segment is comprised of various branded products. We have grown our Brands portfolio of products through acquisitions. We have acquired the NDAs for and market Atacand, Atacand HCT, Arimidex, Casodex, Inderal LA, Inderal XL, InnoPran XL, Inzirqo, Lithobid, Oxistat, Vancocin, 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
We plan to strengthen our Generics and Other segment through continued investment in our research and development capabilities 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 most recent business acquisition in the Generics and Other segment was the acquisition of Novitium Pharma LLC ("Novitium") in 2021, which included Novitium's 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 ("PIV"), and competitive generic therapy ("CGT") designation filings.
Additionally, we plan to continue to seek opportunities to enhance our capabilities through strategic partnerships and acquisitions of assets and businesses.
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 and competitive environment for that product. 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.
Products
A complete list of our generic and branded pharmaceutical products and descriptions is posted on our website, www.anipharmaceuticals.com. Information on, or accessible through, our website is not a part of, and is not incorporated into, this report or any other SEC filing.
GENERAL
Impacts to our third quarter 2026 and 2025 results of operations, including to net revenues, operating expenses, interest and other expense, net, and income taxes are described below.
The following table summarizes our results of operations for the periods indicated:
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2026 2025 2026 2025
Net Revenues $ 290,777 $ 227,813 $ 794,283 $ 636,306
Operating Expenses
Cost of sales (excluding depreciation and amortization) 111,531 93,389 305,271 241,041
Research and development 12,997 12,304 38,344 39,403
Selling, general, and administrative 94,862 76,656 260,178 234,955
Depreciation and amortization 19,552 22,632 60,111 68,804
Contingent consideration fair value adjustment (538) (14,470) (1,342) (25,285)
Loss on disposal of assets - 295 - 295
Intangible asset impairment charge - 767 - 767
Operating income 52,373 36,240 131,721 76,326
Unrealized (loss) gain on investment in equity securities (35) 3,140 6,459 2,551
Interest expense, net (3,056) (4,727) (10,461) (15,649)
Other (expense) income, net (241) (853) (1,360) 1,084
Income Before Income Tax Expense 49,041 33,800 126,359 64,312
Income tax expense 13,892 7,183 37,007 13,465
Net Income $ 35,149 $ 26,617 $ 89,352 $ 50,847
The following table sets forth, for the periods indicated, items in our unaudited condensed consolidated statements of operations as a percentage of net revenues:
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Net Revenues 100 % 100 % 100 % 100 %
Operating Expenses
Cost of sales (excluding depreciation and amortization) 38.4 % 41.0 % 38.4 % 37.9 %
Research and development 4.5 % 5.4 % 4.8 % 6.2 %
Selling, general, and administrative 32.6 % 33.6 % 32.8 % 36.9 %
Depreciation and amortization 6.7 % 9.9 % 7.6 % 10.8 %
Contingent consideration fair value adjustment (0.2) % (6.4) % (0.2) % (4.0) %
Loss on disposal of assets - % 0.1 % - % - %
Intangible asset impairment charge - % 0.3 % - % 0.1 %
Operating income 18.0 % 16.1 % 16.6 % 12.1 %
Unrealized (loss) gain on investment in equity securities - % 1.4 % 0.8 % 0.4 %
Interest expense, net (1.1) % (2.1) % (1.3) % (2.5) %
Other (expense) income, net (0.1) % (0.4) % (0.2) % 0.2 %
Income Before Income Tax Expense 16.8 % 15.0 % 15.9 % 10.2 %
Income tax expense 4.8 % 3.2 % 4.7 % 2.1 %
Net Income 12.0 % 11.8 % 11.2 % 8.1 %
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2026 AND 2025
Net Revenue
Three Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Rare Disease and Brands
Cortrophin Gel $ 138,655 $ 101,850 $ 36,805 36.1 %
ILUVIEN(1)
22,254 16,600 5,654 34.1 %
Rare Disease total net revenues $ 160,909 $ 118,450 $ 42,459 35.8 %
Brands 9,978 10,675 (697) (6.5) %
Brand royalties and other revenues 11,460 - 11,460 N/M
Rare Disease and Brands total net revenues $ 182,347 $ 129,125 $ 53,222 41.2 %
Generics and Other
Generic pharmaceutical products 104,455 94,375 10,080 10.7 %
Other generic revenues 3,975 4,313 (338) (7.8) %
Generics and Other total net revenues $ 108,430 $ 98,688 $ 9,742 9.9 %
Total net revenues $ 290,777 $ 227,813 $ 62,964 27.6 %
____________________________________________
(1)There were no sales of YUTIQ during the three months ended September 30, 2026 and 2025, as the Company transitioned U.S. promotional efforts from YUTIQ to ILUVIEN, which has a combined label of DME and NIU-PS as of the second quarter of 2025.
We derive substantially all of our revenues from sales of our Rare Disease, Brands and Generics portfolios of pharmaceutical products, as well as from other sources of revenue such as milestones, royalties on net sales of certain products, and other pharmaceutical services. Our Rare Disease products face competition from other brand products in many of the therapeutic categories in which they are sold. Essentially all of our Generics products face competition from other generic products, as do many of our Brands products, and we expect them to continue to face competition from generic products in the future. The primary means of competition among generic manufacturers are pricing, contract terms, service levels, and reliability. Increased competition generally results in decreased average selling prices of generic and brands products over time. In addition, 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.
Net revenues for the three months ended September 30, 2026 were $290.8 million compared to $227.8 million for the same period in 2025, an increase of 27.6%, primarily as a result of the following:
•Net revenues from Rare Disease and Brands, which includes our Rare Disease and Brands portfolios of pharmaceutical products, royalties, and other revenues were $182.3 million during the three months ended September 30, 2026, an increase of $53.2 million, compared to $129.1 million for the same period in 2025.
•Net revenues for Rare Disease pharmaceutical products were $160.9 million during the three months ended September 30, 2026, an increase of $42.5 million from $118.5 million for the same period in 2025. This increase was driven by increased volume of Cortrophin Gel from overall ACTH market growth and market share gains, driven by both the contribution from the expansion to capture the opportunity in acute gouty arthritis flares and the existing specialty areas of Nephrology, Neurology, Rheumatology, Ophthalmology, and Pulmonology. ILUVIEN net revenues were $22.3 million during the three months ended September 30, 2026, an increase of $5.7 million compared to $16.6 million in the prior year period.
•Net revenues for Brands portfolio of pharmaceutical products were $10.0 million during the three months ended September 30, 2026, a decrease of $0.7 million compared to $10.7 million for the same period in 2025, driven by a net decrease in demand for certain products during the third quarter.
•Net revenues for Brand royalties and other revenues during the three months ended September 30, 2026, includes royalties of approximately $9.5 million and $2.0 million of revenue associated with achievement of development milestones satisfied over time related to the Harmony Agreement.
•Net revenues from Generics and Other, which includes our generic pharmaceutical products, sales of contract manufactured products, royalties on contract manufactured products, and other pharmaceutical services, were $108.4 million during the three months ended September 30, 2026, an increase of 9.9% compared to $98.7 million for the same period in 2025, primarily as a result of the following:
•Generic pharmaceutical products net revenues were $104.5 million during the three months ended September 30, 2026, an increase of $10.1 million over the prior year. This increase was driven by increased volumes from the new product launches during 2026 and 2025 and revenue from existing products in the portfolio. From a product perspective, the increase was principally driven by year over year revenue increases in products such as Carbamazepine and Clomiphene, among others.
•Other generic net revenues were down modestly for the three months ended September 30, 2026, compared to the same time in the prior year due to fewer contract manufacturing shipments during the current period.
Cost of Sales (Excluding Depreciation and Amortization)
Three Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Cost of sales (excluding depreciation and amortization) $ 111,531 $ 93,389 $ 18,142 19.4 %
Cost of sales consists of direct labor, including manufacturing and packaging, active and inactive pharmaceutical ingredients, freight costs, packaging components, royalties payable, and profit-sharing arrangements. Cost of sales does not include depreciation and amortization expense, which is reported as a separate component of operating expenses on our unaudited condensed consolidated statements of operations.
For the three months ended September 30, 2026, cost of sales increased to $111.5 million from $93.4 million for the same period in 2025, an increase of $18.1 million, or 19.4%. The increase is primarily due to significant net growth in sales volumes of pharmaceutical products and significant growth of royalty bearing products, including Cortrophin Gel, and other products in our portfolio.
Cost of sales, as a percentage of net revenues, decreased to 38.4% from 41.0% for the three months ended September 30, 2026, compared to the same period in 2025, primarily due to a favorable shift in product mix year over year in conjunction with revenue recognized under the Harmony Agreement, tempered by an increase in sales of products that bear a royalty payable.
During the three months ended September 30, 2026, approximately 22% of our raw inventory purchases were from one domestic supplier. During the three months ended September 30, 2025, approximately 21% of our raw inventory purchases were from one domestic supplier.
Other Operating Expenses, net
Three Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Research and development $ 12,997 $ 12,304 $ 693 5.6 %
Selling, general, and administrative 94,862 76,656 18,206 23.8 %
Depreciation and amortization 19,552 22,632 (3,080) (13.6) %
Contingent consideration fair value adjustment (538) (14,470) 13,932 96.3 %
Loss on disposal of assets - 295 (295) (100.0) %
Intangible asset impairment charge - 767 (767) (100.0) %
Total other operating expenses, net $ 126,873 $ 98,184 $ 28,689 29.2 %
For the three months ended September 30, 2026, total other operating expenses, net increased to $126.9 million from $98.2 million for the same period in 2025, an increase of $28.7 million, or 29.2%, primarily as a result of the following factors:
•Research and development expenses during the three months ended September 30, 2026 increased from $12.3 million to $13.0 million, an increase of approximately $0.7 million, primarily due to timing of activity associated with ongoing and new projects to support future growth of Rare Disease and Generics.
•Selling, general, and administrative expenses increased from $76.7 million to $94.9 million, an increase of approximately $18.2 million, primarily resulting from increased investment in Rare Disease sales and marketing infrastructure, related to our expansion of the Rare Disease team which is targeting opportunities in acute gouty arthritis, and an overall increase in activities to support the growth of our business, tempered by lower legal costs, compared to the same period in 2025.
•Depreciation and amortization expense was $19.6 million for the three months ended September 30, 2026, compared to $22.6 million for the same period in 2025, a decrease of approximately $3.1 million, primarily related to certain definite-lived intangibles that have been fully amortized during 2025.
•We recognized a net gain of approximately $0.5 million for the three months ended September 30, 2026 related to changes in our contingent consideration liabilities, which are measured at fair value. The net gain resulted from the adjustment of future forecasted cash flows and includes primarily: (1) a $0.3 million reduction related to the Alimera contingent value rights; and (2) a $0.2 million decrease in contingent consideration related to the Novitium acquisition.
•We recognized losses related to the disposal of certain manufacturing equipment and an impairment charge related to one definite-lived intangible asset totaling approximately $1.1 million during the three months ended September 30, 2025. There were no similar items in the three months ended September 30, 2026.
Other Expense, net
Three Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Unrealized (loss) gain on investment in equity securities $ (35) $ 3,140 $ (3,175) (101.1) %
Interest expense, net (3,056) (4,727) 1,671 35.4 %
Other expense, net (241) (853) 612 71.7 %
Total other expense, net $ (3,332) $ (2,440) $ (892) (36.6) %
For the three months ended September 30, 2026, we recognized total other expense, net of $3.3 million as compared to total other expense, net of $2.4 million for the same period in 2025.
•We recorded an unrealized loss on investment in equity securities of approximately $35.0 thousand for the three months ended September 30, 2026, compared to an unrealized gain of approximately $3.1 million in the same period in 2025, which is based on the mark to market fair value of equity securities held in CG Oncology as of the balance sheet date.
•Interest expense, net for the three months ended September 30, 2026 consists primarily of coupon interest expense on borrowings under our outstanding debt and amortization of deferred financing costs on these debt instruments, interest income earned on our bank balances, and interest earned on our interest rate swap. Interest income earned on our bank balances increased approximately $1.0 million, interest expense related to our outstanding debt decreased approximately $0.7 million, and capitalized interest related to construction in progress increased approximately $0.2 million resulting in a decrease in interest expense, net, of approximately $2.0 million. This impact was partially offset by a decrease of interest earned on our interest rate swap of approximately $0.2 million, compared to the same period in the prior year.
•Other expense, net, for the three months ended September 30, 2026 and 2025 consists primarily of unrealized foreign exchange gains and losses related to our Alimera UK subsidiary.
Income Tax Expense
Three Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Income tax expense $ 13,892 $ 7,183 $ 6,709 93.4 %
Income tax expense consists of current and deferred components, which include changes in our deferred tax assets, our deferred tax liabilities, and our valuation allowance. See Note 11 "Income Taxes" in the notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
For the three months ended September 30, 2026, our income tax expense was approximately $13.9 million. Our effective tax rate of 28.3% of pre-tax income for the current period was determined based on our pre-tax income, statutory tax rates and the tax impacts of certain discrete items for the three months ended September 30, 2026, which impact our income tax expense in the period in which they occur. The effective tax rate differed from the federal statutory rate of 21% primarily due to state taxes and disallowed officers' compensation.
For the three months ended September 30, 2025, our income tax expense was approximately $7.2 million. Our effective tax rate of 21.3% of pre-tax income for the period was determined based on our pre-tax income, statutory tax rates and the tax impacts of certain discrete items for the three months ended September 30, 2025, which impact our income tax expense in the period in which they occur. The effective tax rate differed from the federal statutory rate of 21% primarily due to excess tax benefits recognized upon settlement of stock-based compensation and non-taxable adjustments to the fair value of certain contingent liabilities related to the acquisition of Alimera.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2026 AND 2025
Net Revenue
Nine Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Rare Disease and Brands
Cortrophin Gel $ 330,900 $ 236,347 $ 94,553 40.0 %
ILUVIEN and YUTIQ(1)
60,227 55,025 5,202 9.5 %
Rare Disease total net revenues $ 391,127 $ 291,372 $ 99,755 34.2 %
Brands 34,119 48,993 (14,874) (30.4) %
Brand royalties and other revenues 50,731 - 50,731 N/M
Rare Disease and Brands total net revenues $ 475,977 $ 340,365 $ 135,612 39.8 %
Generics and Other
Generic pharmaceutical products 308,908 283,350 25,558 9.0 %
Other generic revenues 9,398 12,591 (3,193) (25.4) %
Generics and Other total net revenues $ 318,306 $ 295,941 $ 22,365 7.6 %
Total net revenues $ 794,283 $ 636,306 $ 157,977 24.8 %
________________________________________
(1)There were no sales of YUTIQ during the nine months ended September 30, 2026, as the Company transitioned U.S. promotional efforts from YUTIQ to ILUVIEN, which has a combined label of DME and NIU-PS as of the second quarter of 2025.
Net revenues for the nine months ended September 30, 2026 were $794.3 million compared to $636.3 million for the same period in 2025, an increase of 24.8%, primarily as a result of the following:
•Net revenues from Rare Disease and Brands, which includes our Rare Disease and Brands portfolios of pharmaceutical products, royalties, and other revenues were $476.0 million during the nine months ended September 30, 2026, an increase of $135.6 million, compared to $340.4 million for the same period in 2025.
•Net revenues for Rare Disease pharmaceutical products were $391.1 million during the nine months ended September 30, 2026, an increase of $99.8 million from $291.4 million for the same period in 2025. This increase was driven by increased volume of Cortrophin Gel from overall ACTH market growth and market share gains, driven by both the contribution from the expansion to capture the opportunity in acute gouty arthritis flares and the existing specialty areas of Nephrology, Neurology, Rheumatology, Ophthalmology, and Pulmonology. Net revenues for ILUVIEN were $60.2 million during the nine months ended September 30, 2026, an increase of $5.2 million from $55.0 million compared to the prior year period.
•Net revenues for Brands portfolio of pharmaceutical products were $34.1 million during the nine months ended September 30, 2026, a decrease of $14.9 million compared to $49.0 million for the same period in 2025, driven by a net decrease in demand for certain products, compared to the same time in the prior year.
•Net revenues for Brand royalties and other revenues during the nine months ended September 30, 2026, includes a $15.0 million upfront payment, associated royalties of approximately $25.7 million, and $10.0 million of revenue associated with achievement of development milestones satisfied over time, related to the Harmony Agreement.
•Net revenues from Generics and Other, which includes our generic pharmaceutical products, sales of contract manufactured products, royalties on contract manufactured products, and other pharmaceutical services, were $318.3 million during the nine months ended September 30, 2026, an increase of $22.4 million compared to $295.9 million for the same period in 2025, primarily as a result of the following:
•Generic pharmaceutical products net revenues were $308.9 million during the nine months ended September 30, 2026, an increase of $25.6 million over the prior year. This increase was driven by increased volumes from new product launches during 2026 and 2025 and revenue from existing products in the portfolio. From a product perspective, the increase was principally driven by year over year revenue increases in products such as Vancomycin, among others.
•Other generic net revenues were down for the nine months ended September 30, 2026, compared to the same time in the prior year due to fewer contract manufacturing shipments during the period.
Cost of Sales (Excluding Depreciation and Amortization)
Nine Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Cost of sales (excluding depreciation and amortization) $ 305,271 $ 241,041 $ 64,230 26.6 %
For the nine months ended September 30, 2026, cost of sales increased to $305.3 million from $241.0 million for the same period in 2025, an increase of $64.2 million, or 26.6%. The increase is primarily due to significant net growth in sales volumes of pharmaceutical products and significant growth of royalty bearing products, including Cortrophin Gel, and other products in our portfolio.
Cost of sales, as a percentage of net revenues, increased to 38.4% from 37.9% for the nine months ended September 30, 2026, compared to the same period in 2025, primarily due to a shift in product mix year over year, an increase in sales of products that bear a royalty payable, and the non-recurrence of prior year sales from Prucalopride. These effects were somewhat tempered by the revenue recognized under the Harmony Agreement.
During the nine months ended September 30, 2026, approximately 26% of our raw material inventory purchases were from one domestic supplier. During the nine months ended September 30, 2025, approximately 22% of our raw material inventory purchases were from one domestic supplier.
Other Operating Expenses, net
Nine Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Research and development $ 38,344 $ 39,403 $ (1,059) (2.7) %
Selling, general, and administrative 260,178 234,955 25,223 10.7 %
Depreciation and amortization 60,111 68,804 (8,693) (12.6) %
Contingent consideration fair value adjustment (1,342) (25,285) 23,943 94.7 %
Loss on disposal of assets - 295 (295) (100.0) %
Intangible asset impairment charge - 767 (767) (100.0) %
Total other operating expenses, net $ 357,291 $ 318,939 $ 38,352 12.0 %
For the nine months ended September 30, 2026, total other operating expenses, net increased to $357.3 million from $318.9 million for the same period in 2025, an increase of $38.4 million, or 12.0%, primarily as a result of the following factors:
•Research and development expenses during the nine months ended September 30, 2026 decreased from $39.4 million to $38.3 million, a decrease of approximately $1.1 million, primarily due to timing of activity associated with ongoing and new projects to support future growth of Rare Disease and Generics.
•Selling, general, and administrative expenses increased from $235.0 million to $260.2 million, an increase of approximately $25.2 million, and includes increased investment in Rare Disease sales and marketing infrastructure, related to our expansion of the Rare Disease team which is targeting opportunities in acute gouty arthritis, and an overall increase in activities to support the growth of our business, compared to the same period in 2025, offset by a litigation settlement received of $9.0 million, and a decrease of approximately $2.9 million in transaction and integration costs related to the Alimera acquisition.
•Depreciation and amortization expense was $60.1 million for the nine months ended September 30, 2026, compared to $68.8 million for the same period in 2025, a decrease of approximately $8.7 million, primarily related to certain definite-lived intangibles that have been fully amortized during 2025.
•We recognized a net gain of approximately $1.3 million for the nine months ended September 30, 2026 related to changes in our contingent consideration liabilities, which are measured at fair value. The net gain resulted from the adjustment of future forecasted cash flows and includes primarily: (1) a $1.2 million reduction related to the Alimera contingent value rights; and (2) a $0.1 million reduction in contingent consideration related to the Novitium acquisition.
•We recognized losses related to the disposal of certain manufacturing equipment and an impairment charge related to one definite-lived intangible asset totaling approximately $1.1 million during the nine months ended September 30, 2025. There were no similar items during the nine months ended September 30, 2026.
Other Expense, net
Nine Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Unrealized gain on investment in equity securities $ 6,459 $ 2,551 $ 3,908 153.2 %
Interest expense, net (10,461) (15,649) 5,188 33.2 %
Other (expense) income, net (1,360) 1,084 (2,444) (225.5) %
Total other expense, net $ (5,362) $ (12,014) $ 6,652 55.4 %
For the nine months ended September 30, 2026, we recognized total other expense, net of $5.4 million as compared to total other expense, net of $12.0 million for the same period in 2025.
•We recorded an unrealized gain on investment in equity securities of approximately $6.5 million for the nine months ended September 30, 2026, compared to an unrealized gain of approximately $2.6 million in the same period in 2025, which is based on the mark to market fair value of equity securities held in CG Oncology as of the balance sheet date.
•Interest expense, net for the nine months ended September 30, 2026 consists primarily of coupon interest expense on borrowings under our outstanding debt and amortization of deferred financing costs on these debt instruments, interest income earned on our bank balances, and interest earned on our interest rate swap. Interest income earned on our bank balances increased approximately $3.5 million, interest expense related to our outstanding debt decreased approximately $2.1 million, and capitalized interest related to construction in progress increased approximately $0.4 million resulting in a decrease in interest expense, net, of approximately $6.0 million. This impact was partially offset by a decrease of interest earned on our interest rate swap of approximately $0.7 million, compared to the same period in the prior year.
•Other (expense) income, net, for the nine months ended September 30, 2026 and 2025 consists primarily of unrealized foreign exchange gains and losses related to our Alimera UK subsidiary.
Income Tax Expense
Nine Months Ended September 30,
(in thousands) 2026 2025 Change % Change
Income tax expense $ 37,007 $ 13,465 $ 23,542 174.8 %
For the nine months ended September 30, 2026, our income tax expense was approximately $37.0 million. Our effective tax rate of 29.3% of pre-tax income for the current period was determined based on our pre-tax income, statutory tax rates and the tax impacts of certain discrete items for the nine months ended September 30, 2026, which impact our income tax expense in the period in which they occur. The effective tax rate differed from the federal statutory rate of 21% primarily due to state taxes and disallowed officers' compensation partially offset by excess tax benefits recognized upon settlement of stock-based compensation.
For the nine months ended September 30, 2025, we recognized income tax expense of approximately $13.5 million, an effective tax rate of 20.9% of pre-tax income reported in the period, as well as the net effect of certain discrete items for the nine months ended September 30, 2025 which impact our income tax expense in the period in which they occur. The effective tax rate differed from the federal statutory rate of 21% primarily due to excess tax benefits recognized upon settlement of stock-based compensation, favorable return to provision adjustments attributable to certain foreign tax returns filed during the period, and non-taxable adjustments to the fair value of certain contingent liabilities related to the acquisition of Alimera.
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is cash generated from operations, available cash on hand, and borrowings under the 2024 Credit Facility and the Notes as discussed and defined in Note 4 "2024 Credit Agreement" and Note 5 "2.25% Convertible Senior Notes" in the notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
On August 13, 2024, we entered into a credit agreement (the "2024 Credit Agreement") with JPMorgan Chase Bank, N.A., and other financial institutions, 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 (the "TLA"), 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 (the "TLA Revolver" and together with the TLA, the "2024 Credit Facility"). As of September 30, 2026, the outstanding principal under our 2024 Credit Agreement was approximately $300.6 million, with $74.9 million remaining available for borrowing under the TLA Revolver. We also maintain an interest rate swap with a notional value of $139.4 million at an effective fixed rate of 2.313% to manage SOFR-based variable interest rate exposure on a portion of the borrowings under the 2024 Credit Agreement.
On August 13, 2024, the Company completed an offering of $316.3 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. The Notes accrue interest at a rate of 2.25% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2025.
Our primary contractual obligations over the next twelve months consist of quarterly principal payments and monthly interest on the 2024 Credit Facility and semi-annual interest payments on the Notes, as discussed in Note 4 "2024 Credit Agreement" and Note 5 "2.25% Convertible Senior Notes" in the notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In May 2026, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $100.0 million of our common stock (the "Share Repurchase Program"). During the three months ended September 30, 2026, we repurchased 102,492 shares of our common stock for an aggregate purchase price of approximately $7.5 million, including direct costs, and approximately $92.5 million remained available for repurchase under the Share Repurchase Program as of September 30, 2026. In addition, from October 1, 2026 through November 2, 2026, we repurchased 173,143 shares of our common stock for an aggregate
purchase price of approximately $12.5 million, including direct costs. The specific timing and amount of any future repurchases will depend on available capital resources, market conditions and other factors, and we are not obligated to repurchase any shares. See Note 9 "Stockholders' Equity" in the notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
As of September 30, 2026 and December 31, 2025, we had $420.8 million and $285.6 million, respectively, in unrestricted cash and cash equivalents. The majority of our cash balances are held in interest bearing and non-interest bearing accounts in U.S.-based financial institutions that are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $250 thousand. The majority of our cash balances are in excess of FDIC coverage, which we consider to be a normal business risk. In addition, we have cash and cash equivalents held in international bank accounts that are denominated in various foreign currencies, specifically in Canada, the United Kingdom, Germany, Ireland, Portugal, and India.
We are focused on expanding our business and product pipeline through acquisitions of products and companies as well as internal research and development. We are continually evaluating potential asset acquisitions and business combinations. To finance such acquisitions, we might raise additional equity capital, incur additional debt, or both.
We believe that our financial resources, consisting of current working capital, anticipated future operating revenue and corresponding collections from customers, and available borrowings under the 2024 Credit Facility, will be sufficient to enable us to meet our working capital requirements and debt obligations for at least the next 12 months from the date of filing of this report, and for the foreseeable future thereafter. If our assumptions underlying estimated revenue and expenses are wrong, or if our cash requirements change materially as a result of shifts in our business or strategy, we could require additional financing. If we are not able to maintain profitability in future years or are not able to continue to generate cash from operations as anticipated and additional capital is needed to support operations, we may be unable to obtain such financing, or obtain it on favorable terms, in which case we may be required to curtail development of new products, limit expansion of operations, or accept financing terms that are not as attractive as desired.
Discussion of Cash Flows
The following table summarizes the net cash and cash equivalents provided by operating activities, used in investing activities, and used in financing activities for the periods indicated:
Nine Months Ended September 30,
(in thousands) 2026 2025
Operating Activities $ 198,830 $ 154,858
Investing Activities $ (27,880) $ (32,918)
Financing Activities $ (36,092) $ (5,308)
Net Cash Provided by Operations
Net cash provided by operating activities was $198.8 million for the nine months ended September 30, 2026, compared to net cash provided by operating activities of $154.9 million during the same period in 2025, an increase of $44.0 million. The increase in cash provided by operating activities primarily resulted from our net income of $89.4 million adjusted for non-cash items, and an increase in our working capital accounts driven by the growth of our business.
Net Cash Used in Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2026 was $27.9 million, which includes the acquisition of intangible assets of approximately $5.3 million and capital expenditures of approximately $22.6 million. Net cash used in investing activities for the nine months ended September 30, 2025 was $32.9 million, principally due to the payment for the exercise of an option by the Company to buy out royalties owed to SWK Funding LLC in connection with the Company's acquisition of Alimera and purchases of other intangible assets, which together totaled approximately $20.3 million, and capital expenditures of approximately $12.6 million.
Net Cash Used in Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2026 was $36.1 million, resulting from $21.5 million of treasury stock purchases for restricted stock vests, principal payments on our 2024 Credit Facility of $12.2 million, and $7.0 million paid for the repurchase of our common stock, offset by proceeds received from stock option exercises and 2016 Employee Stock Purchase Plan ("ESPP") purchases of approximately $4.7 million. Net cash used in financing activities for the nine months ended September 30, 2025 was $5.3 million, principally resulting from $11.6 million of treasury stock purchases for restricted stock vests, principal payments on our 2024 Credit Facility of $6.1 million, offset by proceeds received from stock option exercises and ESPP purchases.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes to our critical accounting policies and estimates as disclosed in Part II, Item 8. Consolidated Financial Statements, Note 1, "Description of Business and Summary of Significant Accounting Policies" in our 2025 Form 10-K.
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