ANI Pharmaceuticals Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 06:00
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Please read the following discussion in conjunction with Item 1A. ("Risk Factors") and our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Some of the statements in the following discussion are forward-looking statements. See the discussion about forward-looking statements on page 1 of this Annual Report on Form 10-K, as actual results may differ materially from those contained in any forward-looking statements.
This section generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2024 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 28, 2025.
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 Brands businesses.
On September 16, 2024, the Company acquired Alimera. In connection with the Merger, 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, including 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. The Company ceased operations at another manufacturing facility in Oakville, Ontario as of March 31, 2023. In February 2024, our Canadian subsidiary entered into an agreement for the purchase and sale of the Oakville site, for a purchase price of $19.2 million Canadian Dollars, or approximately $14.2 million, based on the then-current exchange rate. The sale closed on March 28, 2024. 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.
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 "2024 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 ($74.9 million of which remains undrawn), which may be used for revolving credit loans, swingline loans and letters of credit.
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 were 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.
On September 16, 2024, ANI drew the full $325.0 million of principal under the 2024 Credit Agreement, with proceeds used to finance the acquisition of Alimera, including fees, costs and expenses incurred in connection with the acquisition. As of December 31, 2025, the revolving credit facility remains undrawn, and $74.9 million is available for borrowing, subject to the satisfaction of certain conditions. The 2024 Credit Agreement and the revolving credit facility mature on September 16, 2029.
Recent Developments
Purchase of SWK Royalty
Pursuant to a Royalty Purchase Agreement dated as of December 17, 2020, EyePoint sold its right to receive royalty payments on future sales of ILUVIEN to SWK Funding LLC ("SWK") under the existing collaboration agreement entered into in July 2017 between EyePoint and the Company (the "RPA Transaction"). In connection with the RPA Transaction, the Company agreed to pay such royalty payments directly to SWK (see Note 11 "Goodwill and Intangible Assets" to the notes to the consolidated financial statements).
On June 19, 2024, Alimera entered into a letter agreement with SWK, pursuant to which the parties agreed to a lower fixed royalty payment of 3.125% (the "Alternative Royalty") on combined sales of ILUVIEN and YUTIQ. The letter agreement included a buy-out of the Alternative Royalty at Alimera's option at any time during the period within six (6) months after a change of control of Alimera, after which SWK would have no further right to receive any payments under the letter agreement or the RPA (the "Buy-Out Option"). On March 17, 2025, the Company exercised the Buy-Out Option and paid SWK $17.3 million with cash on hand, and as such, no further royalty is due to SWK on net revenues after January 1, 2025.
Acquisition of Alimera Sciences, Inc.
At the effective time of the Merger (the "Effective Time"), each share of common stock, par value $0.01 per share, of Alimera (the "Alimera Common Stock") outstanding immediately prior to the Effective Time including each Alimera RSA, Alimera PSU, Alimera RSU, and Alimera Warrant (each as defined below), but excluding any treasury shares or shares owned by the Company, merger subsidiaries or any other subsidiary of the Company or Alimera), was canceled and ceased to exist and was converted into the right to receive (i) $5.50 in cash ("Closing Cash Consideration"), and (ii) one contingent value right (a "CVR"), which represents the right to receive the milestone payments subject to the terms and conditions set forth in the CVR Agreement entered into on September 16, 2024 (clauses (i) and (ii) collectively, the "Merger Consideration"). The Company also repaid $72.5 million of Alimera debt.
Each CVR entitles the holder to receive milestone payments for 2026 and 2027. The milestone payments for each CVR equals the product (rounded to thenearest 1/100 of $0.01) of $0.25 multiplied by a fraction (which is no case will exceed one), and (i) for 2026, equals the amount, if any, by which the 2026 Net Revenue (as defined therein) exceeds $140.0 million, divided by $10.0 million (subject to adjustment for the exercise price of eligible options), and (ii) for 2027, equals the amount, if any, by which the 2027 Net Revenue exceeds $160.0 million, divided by $15.0 million (subject to adjustment for the exercise price of applicable Alimera Options).
In addition to the amounts payable to the holders thereof in connection with the Merger, all of the outstanding awards of restricted stock with respect to shares of Alimera Common Stock (each, an "Alimera RSA"), each Alimera Performance Stock Unit ("Alimera PSU"), each Alimera Restricted Stock Unit ("Alimera RSU") and each Alimera warrant ("Alimera Warrant") that were outstanding immediately prior to the Effective Time were automatically canceled and converted into the right to receive one (1) CVR per share of Alimera Common Stock then underlying the applicable instrument.
Each stock option previously granted by Alimera to purchase Alimera Common Stock (each, an "Alimera Option") that was outstanding and unexercised as of the Effective Time and which had a per share exercise price that was less than the Closing Cash Consideration was, in addition to the amounts payable to the holders thereof in connection with the Closing, automatically canceled and converted into the right to receive one (1) CVR per share of Alimera Common Stock then underlying such Alimera Option. No other Alimera Options were cancelled and converted into the right to receive a CVR, provided that each Alimera Option with a per share exercise price greater than or equal to the Closing Cash Consideration but less than the Total Consideration (as defined in the Merger Agreement) may receive a payment in connection with the payout of the CVRs (if any). See Note 3 "Business Combination" to the notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information on the acquisition.
Capital Structure
On March 8, 2021, concurrently with the acquisition of Novitium, and as financing for a portion of the acquisition, the Company entered into an Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership (the "PIPE Investor"), pursuant to which the PIPE Investor purchased 25,000 shares of Series A Convertible Preferred Stock (the "PIPE Shares"), for a purchase price of $1,000 per share and an aggregate purchase price of $25.0 million on November 19, 2021. The PIPE Shares were classified as mezzanine equity because the shares were mandatorily redeemable for cash upon a change in control, an event that was not solely within the Company's control.
The PIPE Shares accrued dividends at 6.50% per year on a cumulative basis, payable in cash or in-kind, and participated, on a pro-rata basis, in any dividends that would be declared with respect to the Company's common stock. The PIPE Shares were convertible into common shares at the conversion price of $41.4662 (i) beginning two years after their issuance date, at the election of ANI, if the volume-weighted average price of the common stock for any 20 trading days out of 30 consecutive trading days exceeds 170% of the conversion price, or (ii) at any time after issuance, at the election of the PIPE Investor.
On August 14, 2025, the PIPE Investor converted 5,000 PIPE Shares into 120,580 shares of common stock based on the conversion price of $41.4662 per share. On September 26, 2025, the Company elected mandatory conversion of the remaining 20,000 outstanding PIPE Shares into 482,320 shares of common stock based on the conversion price of $41.4662 per share, as the conditions for conversion had been satisfied. There were no shares of Series A Convertible Preferred Stock outstanding as of December 31, 2025.
Refer to the Liquidity and Capital Resources below for further discussion of changes to our capital structure during 2025 and 2024.
Product Launches
Refer to our website at www.anipharmaceuticals.com for information on the products, including indications/treatments.
General
Impacts to our 2025and 2024results 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:
|
Year Ended December 31, |
|||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Net Revenues | $ | 883,366 | $ | 614,376 | |||||||
| Operating Expenses | |||||||||||
| Cost of sales (excluding depreciation and amortization) | 341,310 | 250,210 | |||||||||
| Research and development | 51,664 | 44,581 | |||||||||
| Selling, general, and administrative | 317,745 | 249,636 | |||||||||
| Depreciation and amortization | 91,417 | 67,731 | |||||||||
| Contingent consideration fair value adjustment | (31,012) | (619) | |||||||||
| Loss (gain) on disposal of assets | 382 | (5,347) | |||||||||
| Intangible asset impairment charge | 767 | 7,600 | |||||||||
| Operating Income | 111,093 | 584 | |||||||||
| Unrealized gain on investment in equity securities | 2,824 | 6,307 | |||||||||
| Interest expense, net | (20,060) | (17,602) | |||||||||
| Other income (expense), net | 1,934 | (4,033) | |||||||||
| Loss on extinguishment of debt | - | (7,468) | |||||||||
|
Income (Loss) Before (Benefit) Expense for Income Taxes
|
95,791 | (22,212) | |||||||||
|
Income tax expense (benefit)
|
17,454 | (3,690) | |||||||||
| Net Income (Loss) | $ | 78,337 | $ | (18,522) | |||||||
The following table sets forth, for the periods indicated, items in our consolidated statements of operations as a percentage of net revenues.
|
Year Ended December 31,
|
|||||||||||
| 2025 | 2024 | ||||||||||
| Net Revenues | 100.0 | % | 100.0 | % | |||||||
| Operating Expenses | |||||||||||
| Cost of sales (excluding depreciation and amortization) | 38.6 | % | 40.7 | % | |||||||
| Research and development | 5.8 | % | 7.3 | % | |||||||
| Selling, general, and administrative | 36.0 | % | 40.6 | % | |||||||
| Depreciation and amortization | 10.3 | % | 11.0 | % | |||||||
| Contingent consideration fair value adjustment | (3.5) | % | (0.1) | % | |||||||
| Loss (gain) on disposal of assets | - | % | (0.9) | % | |||||||
| Intangible asset impairment charge | 0.1 | % | 1.2 | % | |||||||
| Operating Income | 12.7 | % | 0.2 | % | |||||||
| Unrealized gain on investment in equity securities | 0.3 | % | 1.0 | % | |||||||
| Interest expense, net | (2.3) | % | (2.9) | % | |||||||
| Other income (expense), net | 0.2 | % | (0.7) | % | |||||||
| Loss on extinguishment of debt | - | % | (1.2) | % | |||||||
| Income (Loss) Before Expense (Benefit) for Income Taxes | 10.9 | % | (3.6) | % | |||||||
| Income tax expense (benefit) | 2.0 | % | (0.6) | % | |||||||
| Net Income (Loss) | 8.9 | % | (3.0) | % | |||||||
Results of Operations for the Years Ended December 31, 2025 and 2024
Net Revenue
|
Year Ended December 31, |
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| (in thousands) | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||
| Rare Disease and Brands | ||||||||||||||||||||||||||
| Cortrophin Gel | $ | 347,778 | $ | 198,085 | $ | 149,693 | 75.6 | % | ||||||||||||||||||
| ILUVIEN and YUTIQ | 74,868 | 31,514 | 43,354 | N/M | ||||||||||||||||||||||
| Rare Disease total net revenues | $ | 422,646 | $ | 229,599 | $ | 193,047 | 84.1 | % | ||||||||||||||||||
| Brands | 61,308 | 64,743 | (3,435) | (5.3) | % | |||||||||||||||||||||
| Rare Disease and Brands total net revenues | $ | 483,954 | $ | 294,342 | $ | 189,612 | 64.4 | % | ||||||||||||||||||
| Generics and Other | ||||||||||||||||||||||||||
| Generic pharmaceutical products | 384,110 | 301,004 | 83,106 | 27.6 | % | |||||||||||||||||||||
| Royalties and other pharmaceutical services | 15,302 | 19,030 | (3,728) | (19.6) | % | |||||||||||||||||||||
| Generics and Other total net revenues | $ | 399,412 | $ | 320,034 | $ | 79,378 | 24.8 | % | ||||||||||||||||||
| Total net revenues | $ | 883,366 | $ | 614,376 | $ | 268,990 | 43.8 | % | ||||||||||||||||||
"N/M" - not meaningful percentage due to the acquisition of ILUVIEN and YUTIQ on September 16, 2024.
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 royalties on net sales of certain products, and other pharmaceutical services. 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 year ended December 31, 2025 were $883.4 million compared to $614.4 million for the same period in 2024, an increase of $269.0 million, or 43.8%, 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, was $484.0 million during the year ended December 31, 2025, an increase of $189.6 million, compared to $294.3 million for the same period in 2024.
•Net revenues for Rare Disease pharmaceutical products were $422.6 million during the year ended December 31, 2025, an increase of $193.0 million from $229.6 million for the same period in 2024. This increase was driven by increased volume of Cortrophin Gel from overall ACTH market growth and market share gains, and a full year of sales from ILUVIEN and YUTIQ. ILUVIEN and YUTIQ were acquired from Alimera in September 2024.
•Net revenues for Brands portfolio of pharmaceutical products were $61.3 million during the year ended December 31, 2025, a decrease of $3.4 million compared to $64.7 million for the same period in 2024, driven by a net decrease in demand for certain products.
•Net revenues for Generic and Other pharmaceutical products were $399.4 million during the year ended December 31, 2025, an increase of 24.8% compared to $320.0 million for the same period in 2024, primarily as a result of the following:
•Generic pharmaceutical products net revenues were $384.1 million during the year ended December 31, 2025, an increase of $83.1 million over the prior year. This increase was driven by the December 2024 launch of Prucalopride Tablets, which included CGT designation and corresponding 180 day exclusivity that expired in late June 2025, increased volumes from the benefit of new product launches during 2025, inclusive of a partnered generic product launched in Q3 2025, along with annualization of new product launches that occurred during 2024. The Company launched a total of 13 and 17 new products in 2025 and 2024, respectively. From a product perspective, in addition to the products cited above, the increase was principally driven by revenues from year over year increases in products such as Ketoconazole, Nitazoxanide, and Thyroid Tablets, among others.
•Net revenues from royalties and other pharmaceuticals were down modestly between December 31, 2025 and the prior year due to fewer contract manufacturing shipments during the current year.
Cost of Sales (Excluding Depreciation and Amortization)
|
Year Ended December 31, |
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| (in thousands) | 2025 | 2024 | Change | % Change | |||||||||||||||||||
| Cost of sales (excluding depreciation and amortization) | $ | 341,310 | $ | 250,210 | $ | 91,100 | 36.4 | % | |||||||||||||||
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 consolidated statements of operations.
For the year ended December 31, 2025, cost of sales increased to $341.3 million from $250.2 million for the same period in 2024, an increase of $91.1 million or 36.4%. 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 38.6% for the year ended December 31, 2025, from 40.7% for the same period in 2024, primarily due to the non-recurrence of $13.6 million of inventory step-up related to the acquisition of Alimera during 2024.
During the years ended December 31, 2025 and 2024, 17% and 12%, respectively, of our raw material inventory purchases were from one domestic supplier.
Other Operating Expenses, net
|
Year Ended December 31, |
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| (in thousands) | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||
| Research and development | $ | 51,664 | $ | 44,581 | $ | 7,083 | 15.9 | % | ||||||||||||||||||
| Selling, general, and administrative | 317,745 | 249,636 | 68,109 | 27.3 | % | |||||||||||||||||||||
| Depreciation and amortization | 91,417 | 67,731 | 23,686 | 35.0 | % | |||||||||||||||||||||
| Contingent consideration fair value adjustment | (31,012) | (619) | (30,393) | 4910.0 | % | |||||||||||||||||||||
| Loss (gain) on disposal of assets | 382 | (5,347) | 5,729 | (107.1) | % | |||||||||||||||||||||
| Intangible asset impairment charge | 767 | 7,600 | (6,833) | (89.9) | % | |||||||||||||||||||||
| Total other operating expenses | $ | 430,963 | $ | 363,582 | $ | 67,381 | 18.5 | % | ||||||||||||||||||
For the year ended December 31, 2025, other operating expenses, net, increased to $431.0 million from $363.6 million for the same period in 2024, an increase of $67.4 million, or 18.5%, primarilyas a result of the following factors:
•Research and development expenses increased from $44.6 million to $51.7 million, an increase of 15.9%, primarily due to a higher level of activity associated with ongoing and new projects to support future growth of our Generics and Rare Disease portfolios. Generics and Rare Disease expenses increased by approximately $6.0 million and $0.8 million, respectively, as compared to the year ended December 31, 2024.
•Selling, general, and administrative expenses increased from $249.6 million to $317.7 million, an increase of 27.3%, due to increased employment related costs, investment in Rare Disease sales and marketing infrastructure (including our new, larger ophthalmology sales and marketing team) and activities, legal expenses, and an overall increase in activities to support the growth of our business during the year ended December 31, 2025; offset by a decrease of approximately $16.0 million related to transaction and integration costs for the acquisition of Alimera, and $15.4 million related to severance and equity payments to former Alimera employees incurred during the year ended December 31, 2024, which did not recur during the year ended December 31, 2025.
•Depreciation and amortization expense was $91.4 million for the year ended December 31, 2025, compared to $67.7 million for the same period in 2024, an increase of approximately $23.7 million, primarily related to the increase in amortization expense of the acquired intangible assets, ILUVIEN and YUTIQ. Amortization expense for these assets totaled $32.9 million for the year ended December 31, 2025 compared to a partial year of amortization expense totaling $9.6 million for the year ended December 31, 2024, an increase of approximately $23.3 million. These assets were acquired in September 2024 from Alimera.
•We recognized a gain of $31.0 million for the year ended December 31, 2025 related to reductions in contingent consideration liabilities, which are measured at fair value. These reductions resulted from the adjustment of future forecasted cash flows and the corresponding decrease in expected future payments, including: (1) a $21.0 million reduction related to the accrued Alimera licensor payments; (2) a $7.6 million reduction related to the Alimera contingent value rights; and (3) a $2.6 million reduction in contingent consideration related to the acquisition of Novitium.
•We recognized a loss related to the disposal of certain manufacturing equipment of approximately $0.4 million during the year ended December 31, 2025, and a gain related to the sale of the former Oakville, Ontario manufacturing site of approximately $5.3 million during the year ended December 31, 2024.
•We recognized an impairment charge related to one definite-lived intangible asset of approximately $0.8 million during the year ended December 31, 2025. We recognized an impairment charge related to a portfolio of definite-lived intangible assets of $3.6 million and IPR&D of approximately $4.0 million during the fourth quarter of 2024.
Other Expense, net
|
Year Ended December 31, |
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| (in thousands) | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||
| Unrealized gain on investment in equity securities | $ | 2,824 | $ | 6,307 | $ | (3,483) | (55.2) | % | ||||||||||||||||||
| Interest expense, net | (20,060) | (17,602) | (2,458) | 14.0 | % | |||||||||||||||||||||
| Other income (expense), net | 1,934 | (4,033) | 5,967 | (148.0) | % | |||||||||||||||||||||
| Loss on extinguishment of debt | - | (7,468) | 7,468 | (100.0) | % | |||||||||||||||||||||
| Total other expense, net | $ | (15,302) | $ | (22,796) | $ | 7,494 | (32.9) | % | ||||||||||||||||||
For the year ended December 31, 2025, we recognized total other expense, net of $15.3 million as compared to total other expense, net of $22.8 million for the same period in 2024, a decrease of $7.5 million.
•We recorded an unrealized gain on investment in equity securities of approximately $2.8 million for the year ended December 31, 2025, compared to an unrealized gain of $6.3 million in the same period in 2024, 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 year ended December 31, 2025 consists primarily of coupon interest expense on borrowings under our outstanding debt and amortization of deferred financings 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 and interest rate swaps decreased approximately $2.0 million and $1.4 million, respectively. This impact was partially offset by a decrease in interest expense related to our outstanding debt of approximately $1.1 million, compared to the prior year.
•Other income (expense), net for the years ended December 31, 2025 and 2024 consists primarily of unrealized foreign exchange gains related to our Alimera UK subsidiary. During 2024, other expense, net primarily consisted of the fees paid to JPMorgan Chase Bank, N.A. and Blackstone Credit & Insurance of $2.8 million pursuant to the terms of the debt commitment letter, dated June 21, 2024, entered into in connection with the acquisition of Alimera, in addition to foreign exchange losses.
•We recorded a loss on debt extinguishment of approximately $7.5 million, comprised of the write-off of unamortized deferred financing fees related to the Credit Facility during 2024. On August 13, 2024, the Company entered into the Notes (as described in Note 7 "2.25% Convertible Senior Notes" in the Notes to the Consolidated Financial Statements). The proceeds of the Notes were used to repay the 2021 Credit Facility in its entirety, approximately $294.0 million, comprised of $292.5 million of unpaid principal, $1.2 million in accrued and unpaid interest, and $0.3 million of legal fees. There was no comparable transaction during the year ended December 31, 2025.
Income Tax Expense (Benefit)
|
Year Ended December 31, |
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| (in thousands) | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||
| Income tax expense (benefit) | $ | 17,454 | $ | (3,690) | $ | 21,144 | 573.0 | % | ||||||||||||||||||
Income tax expense (benefit)consists of current and deferred components, which include changes in our deferred tax assets, our deferred tax liabilities, and our valuation allowance. See Note 16 "Income Taxes" in the notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.
For the year ended December 31, 2025, our income tax expense was approximately $17.5 million. Our effective tax rate of approximately 18.2% of pre-tax income for the current year was determined based on our pre-tax income, statutory tax rates and the tax impacts of certain items including the UK valuation allowance, the U.S. federal research and development credit, certain non-deductible items such as contingent consideration and stock based compensation.
For the year ended December 31, 2024, our income tax benefit was approximately $3.7 million. Our effective tax rate of approximately 16.6% of pre-tax loss or the year ended December 31, 2024 was determined based on our pre-tax loss, statutory tax rates and the tax impacts of certain items including the U.S. federal research and development credit, certain non-deductible items, and stock based compensation.
Liquidity and Capital Resources
The following table highlights selected liquidity and working capital information from our consolidated balance sheets.
| (in thousands) |
December 31, 2025 |
December 31, 2024 |
||||||||||||
| Cash and cash equivalents | $ | 285,585 | $ | 144,861 | ||||||||||
| Restricted cash | 36 | 33 | ||||||||||||
| Accounts receivable, net | 281,082 | 221,726 | ||||||||||||
| Inventories | 143,067 | 136,782 | ||||||||||||
| Prepaid income taxes | 11,027 | 772 | ||||||||||||
| Prepaid expenses and other current assets | 23,189 | 17,975 | ||||||||||||
| Investment in equity securities | 9,131 | 6,307 | ||||||||||||
| Total current assets | $ | 753,117 | $ | 528,456 | ||||||||||
| Current debt, net of deferred financing costs | $ | 17,268 | $ | 9,172 | ||||||||||
| Accounts payable | 62,583 | 45,656 | ||||||||||||
| Accrued royalties | 48,497 | 22,626 | ||||||||||||
| Accrued compensation and related expenses | 37,897 | 37,725 | ||||||||||||
| Accrued government rebates | 43,154 | 18,714 | ||||||||||||
| Income taxes payable | 1,291 | 5,622 | ||||||||||||
| Income taxes payable - foreign | 948 | 1,899 | ||||||||||||
| Returned goods reserve | 49,504 | 39,274 | ||||||||||||
| Current contingent consideration | 167 | 29 | ||||||||||||
| Accrued expenses and other | 16,803 | 13,735 | ||||||||||||
| Total current liabilities | $ | 278,112 | $ | 194,452 | ||||||||||
As of December 31, 2025 and 2024, we had $285.6 million and $144.9 million, respectively, in unrestricted cash and cash equivalents.
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.
Our working capital ratio, defined as total current assets divided by total current liabilities, is 2.7 as of December 31, 2025. We believe that our financial resources, consisting of net current working capital of approximately $475.0 million, anticipated future operating revenue and corresponding collections from customers, and available borrowings of under our revolving credit facility,of which $74.9 million is available as of December 31, 2025, will be sufficient to enable us to meet our working capital requirements, debt obligations, and other liability 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.
Consolidation among wholesale distributors, chain drug stores, and group purchasing organizations has resulted in a smaller number of companies each controlling a larger share of pharmaceutical distribution channels. Our net revenues were concentrated among three customers, which represented 22%, 17%, and 14% of our net revenues during the year ended December 31, 2025. As of December 31, 2025 accounts receivable from these three customers totaled approximately 64% of accounts receivable, net. Our net revenues were concentrated among four customers, which represented 25%, 16%, 12%, and 11% of our net revenues during the year ended December 31, 2024. As of December 31, 2024, accounts receivable from these four customers totaled approximately 70% of accounts receivable, net. As a result, negotiated payment terms with these customers have a material impact on our liquidity and working capital.
Our Cortrophin Gel product accounted for approximately 39%and 32% of our net revenues in 2025 and 2024, respectively. We pay to Merck Sharpe & Dohme B.V. ("Merck") quarterly contingent consideration in the form of a perpetual, tiered royalty expressed as a percentage of Cortrophin Gel net sales. In 2025, annual revenues of Cortrophin Gel reached a level by which we surpassed the highest royalty tier for incremental net sales. To the extent that we achieve higher revenues in future periods, our blended royalty rate will increase. During 2023, 2024 and 2025, the blended Merck royalty rate approximated 10%, the upper teens, and the low twenties, respectively. We currently anticipate the blended royalty rate to be in the high twenties in 2026. Solely for illustrative purpose, if annual net sales were to increase toward one billion dollars, the blended royalty rate would increase into the 30% range.
Sources and Uses of Cash
The 2024 Credit Facility
On August 13, 2024, the Company, as lead borrower, entered into the 2024 Credit Agreement with JPMorgan Chase Bank, N.A., and other financial institutions (together, the "Lenders"), which provides for aggregate principal commitments consisting of (i) a senior secured term loan facility in an aggregate principal amount of $325.0 million(the "Term Loan A" or "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").
The 2024 Credit Facility is secured by a lien on substantially all of the personal property owned by the Company and its material wholly-owned domestic subsidiaries and is guaranteed by all of the Company's material wholly-owned domestic subsidiaries. The 2024 Credit Facility matures on the date that is five years following the closing date of the 2024 Credit Agreement, provided that if any of the Notes remain outstanding on the date that is 91 days prior to the maturity date of the Notes, the 2024 Credit Facility will mature on such date unless certain terms are met.
At the Company's option, loans under the 2024 Credit Facility accrue interest at a per annum rate equal to (i) the alternate base rate or (ii) the adjusted term SOFR rate for an interest period of one, three or six months, plus a spread depending on the Company's first lien net leverage ratio, between 1.25% and 2.00% in the case of ABR loans and between 2.25% and 3.00% in the case of adjusted term SOFR rate loans. A commitment fee accrues on the unutilized commitments under the TLA Revolver and, from and after the date that is two months after the closing date of the 2024 Credit Agreement, the TLA at a per annum rate equal between 0.25% and 0.40% depending on the Company's first lien net leverage ratio.
The 2024 Credit Agreement contains usual and customary representations and warranties of the parties for credit facilities of this type, subject to customary exceptions and materiality standards. In addition, the Company is required to maintain a first lien net leverage ratio not to exceed 3.00:1.00 (provided, that the Company may elect to increase the ratio to 3.50:1.00 for four consecutive fiscal quarters following the consummation of a material acquisition) and a minimum interest coverage ratio of 3.00 to 1.00.
The 2024 Credit Agreement also contains certain customary covenants including but not limited to restrictions on the amount of debt the Company and its restricted subsidiaries may incur and payments the Company and its restricted subsidiaries may make, and events of default, as well as, in the event of an occurrence of an event of default, customary remedies for the Lenders, including the acceleration of any amounts outstanding under the 2024 Credit Agreement.
On September 16, 2024 the Company drew the full $325.0 million of principal under the Term Loan A and used the proceeds to finance the acquisition of Alimera, including fees, costs and expenses incurred in connection with the transaction. As of December 31, 2025, $74.9million is available for borrowing under the TLA Revolver subject to certain conditions. The TLA and the TLA Revolver mature on September 16, 2029. The 2024 Credit Facility contains certain contingent acceleration clauses, none of which have been triggered as of December 31, 2025. The contractual interest rate under the Term Loan A was approximately6.33% at December 31, 2025.
2.25%Convertible Senior Notes Due 2029
On August 7, 2024, the Company entered into a purchase agreement (the "Purchase Agreement") with the initial purchasers (the "Initial Purchasers") relating to the issuance of the $275.0 million aggregate principal amount of the e "Notes." Pursuant to the terms of the Purchase Agreement, the Company granted the Initial Purchasers an option to purchase up to an additional $41.3 million aggregate principal amount of Notes (the "Option") for settlement at any time during the thirteen days beginning on, and including, August 7, 2024, which Option was exercised in full on August 8, 2024.
On August 13, 2024 (the "Closing Date" or "Issue Date"), the Company completed an offering of $316.25 million aggregate principal amount of Notes. The Notes were issued pursuant to an indenture (the "Indenture") dated as of August 13, 2024 between the Company and U.S. Bank Trust Company, National Association ("Trustee"). The Notes are due September 1, 2029, unless earlier repurchased, redeemed, or converted. The Notes will 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. 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 were approximately $306.8 million. After payment of the cost of entering into the Capped Call transactions, the Company used the remainder of the net proceeds from the Notes offering, together with cash on hand, to repay the Company's 2021 Credit Agreement, dated as of November 19, 2021, by and among the Company, certain of the Company's subsidiaries, as guarantors, Truist Bank, as administrative agent and other parties thereto, as amended, supplemented or otherwise modified from time to time (as amended, the "2021 Credit Agreement").
The Notes are the Company's senior, unsecured obligations and are (i) equal in right of payment with the Company's existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company's existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company's existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company's subsidiaries.
Prior to the close of business on the business day immediately preceding June 1, 2029, holders of the Notes will have the right to convert their Notes only upon the occurrence of certain events as set forth in the Indenture. All or any portion of the Notes may be converted prior to June 1, 2029 at the holders' option upon the occurrence of any of the following: (i) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2024, if the last reported sale price per share of the Company's common stock exceeds 130% of the conversion price of the Notes for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (ii) during the five consecutive business days immediately after any ten consecutive trading day period (such ten consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company's common stock on such trading day and the conversion rate of the Notes on such trading day; (iii) upon the occurrence of certain corporate events or distributions on the Company's common stock, as described in the Indenture; or (iv) if the Company calls such Notes for redemption.
On or after June 1, 2029 until the close of business on the second scheduled trading day immediately before the maturity date of the Notes, holders may convert all or any portion of their Notes at any time at their election. The initial conversion rate for the Notes is 13.4929 shares of the Company's common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $74.11 per share of the Company's common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a "Make-Whole Fundamental Change" (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for holders that convert their Notes in connection with such Make-Whole Fundamental Change, as described in the Indenture.
Upon conversion of the Notes, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election, in respect of the remainder, if any, of the Company's conversion obligation.
Capped Call Transactions
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. The Capped Calls each have an initial strike price of $114.02, which represents a premium of 100% over the last reported sale price of the Company's common stock on August 7, 2024. The Company used approximately $40.6million of the net proceeds from the offering of the Notes to pay premiums on the Capped Calls.
The Capped Calls are expected to generally to reduce potential dilution to the Company's common stock upon any conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reductions and/or offset subject to a cap, based on the cap price of the Capped Calls. The Capped Calls cover, subject to anti-dilution adjustments, approximately 4.3 millionshares of the Company's common stock.
The Capped Calls will expire upon the maturity of the Notes. The Capped Calls are separate transactions entered into by the Company with the financial institution counterparties thereto, the Capped Calls are not part of the terms of the Notes and the Capped Calls do not change the holders' rights under the Notes. The Capped Calls do not meet the criteria for separate accounting as a derivative as they meet the criteria for equity classification, and the capped call transaction premiums are recorded as a reduction to Additional Paid-In Capital within Shareholders' Equity, net of deferred income taxes.
2021 Credit Agreement Debt Extinguishment
The proceeds of the Notes were used to repay the 2021 Credit Agreement with Truist Bank and other lenders, in its entirety, approximately $294.0 million, comprised of $292.5 million of unpaid principal, $1.2 million in accrued and unpaid interest, and $0.3 million of legal fees. In connection with the issuance of the Notes, the Company recorded a loss on debt extinguishment in the consolidated statement of operations for the year ended December 31, 2024, amounting to approximately $7.5 million, comprised of the write-off unamortized deferred financing fees related to the Credit Facility as of August 13, 2024.
Accrued Licensor Payments
On May 17, 2023, Alimera entered into the Product Rights Agreement with EyePoint, which granted Alimera an exclusive and sublicensable right and license under EyePoint's and its affiliates' interest in certain of EyePoint's and its affiliates' intellectual property to develop, manufacture, sell, commercialize and otherwise exploit certain products, including YUTIQ, for the treatment and prevention of uveitis in the entire world, except Europe, the Middle East and Africa, where the Company already has such rights pursuant to the A&R Collaboration Agreement, and except for China, Hong Kong, Macau, Taiwan, Brunei, Burma (Myanmar), Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam, where Ocumension holds a license from EyePoint. Pursuant to the agreement, Alimera paid EyePoint an upfront payment of an upfront payment of $75.0 million and has also made four quarterly guaranteed payments to EyePoint totaling $7.5 million during the year ended December 31, 2024.
Royalties are payable to EyePoint from 2025 to 2028 at 30% of annual U.S. net sales of certain products (including YUTIQ and ILUVIEN) in excess of certain thresholds, beginning at $70.0 million in 2025, and increasing annually thereafter (the "Accrued Licensor Payments"). There were no payments made in 2025, as the minimum threshold for payment was not met. Upon making the quarterly payments in the aggregate amount of $7.5 million in 2024, the licenses and rights granted to the Company automatically became perpetual and irrevocable.
Equity Financing
In May2023, through a public offering, we completed the issuance and sale of 2,183,545shares of our common stock, resulting in net proceeds after issuance costs of approximately $80.6 million, which was used to acquire and invest in additional businesses, technologies, products or assets, to fund our commercialization efforts, including, but not limited to, sales and marketing and consulting expenses related thereto, and for general corporate purposes.
Uses of Cash
Our primary cash requirements are to fund operations of the rare disease portion of our Rare Disease and Brands segment, research and development programs and collaborations, to support general and administrative activities, to purchase equipment and machinery to expand our manufacturing capabilities as our product lines grow, and to expand our business and product pipeline through acquisitions of products and companies. We are continually evaluating potential asset acquisitions and business combinations. Our future capital requirements will depend on many factors, including, but not limited to:
•product mix and pricing for product sales and contract manufacturing;
•pricing and payment terms with customers;
•costs of raw materials and payment terms with suppliers;
•capital expenditures and equipment purchases to support product launches; and
•business and product acquisitions.
Discussion of Cash Flows
The following table summarizes the net cash and cash equivalents provided by (used in) operating activities, investing activities, and financing activities for the periods indicated:
| Year Ended December 31, | ||||||||||||||
| (in thousands) |
2025
|
2024
|
||||||||||||
| Operating Activities | $ | 185,225 | $ | 64,017 | ||||||||||
| Investing Activities | $ | (34,321) | $ | (404,719) | ||||||||||
| Financing Activities | $ | (9,944) | $ | 264,945 | ||||||||||
Net Cash Provided by Operations
Net cash provided by operating activities was $185.2 million for the year ended December 31, 2025, compared to net cash provided by operating activities of $64.0 million during the same period in 2024, an increase of $121.2 million. The increase in cash provided by operating activities primarily resulted from our net income of $78.3 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 year ended December 31, 2025 was $34.3 million, principally due to the payment for the exercise of the Buy-Out Option and purchase of other intangible assets of approximately $20.5 million and capital expenditures of approximately $13.8 million. Net cash used in investing activities for the year ended December 31, 2024 was $404.7 million, principally due to the acquisition of Alimera of approximately $401.3 million and capital expenditures of approximately $16.2 million. These cash outflows were offset by proceeds received from the sale of Oakville, Ontario manufacturing site in March 2024 of approximately $13.5 million.
Net Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was $9.9 million for the year ended December 31, 2025, principally resulting from $12.2 million of treasury stock purchases for restricted stock vesting events, principal payments on our 2024 Credit Facility of $10.2 million, offset by proceeds received from stock option exercises and ESPP purchases of approximately $13.6 million. Net cash provided by financing activities for the year ended December 31, 2024 was $264.9 million, principally resulting from proceeds from the 2024 Credit Facility of $325.0 million, proceeds from the offering of the Notes of $316.3 million, tempered by the repayment of the 2021 Credit Facility of $292.5 million, purchase of the capped calls of $40.6 million, payments of debt issuance costs related to the Notes and 2024 Credit Facility of $17.4 million, $12.5 million paid the Company Members of Novitium, and $11.0 million of treasury stock purchase, and other items.
Contractual Obligations
We believe our available cash and cash equivalents along with our ability to generate operating cash flow and continued access to debt markets are sufficient to fund existing and planned cash requirements. Our contractual obligations and commitments as of December 31, 2025are comprised of principal payments on debt, interest payments on debt, operating leases, purchase obligations, dividends, and contingent consideration.
2024 Credit Agreement
Our largest contractual obligation relates to our principal payments on our interest payments on our debt. As of December 31, 2025, the outstanding principal under our 2024 Credit Agreement was approximately $312.8 million. At the Company's option, loans under the 2024 Credit Facility accrue interest at a per annum rate equal to (i) the alternate base rate or (ii) the adjusted term SOFR rate for an interest period of one, three or six months, plus a spread depending on the Company's first lien net leverage ratio, between 1.25% and 2.00% in the case of ABR loans and between 2.25% and 3.00% in the case of adjusted term SOFR rate loans. A commitment fee accrues on the unutilized commitments under the TLA Revolver and, from and after the date that is two months after the closing date of the 2024 Credit Agreement, the TLA at a per annum rate equal between 0.25% and 0.40% depending on the Company's first lien net leverage ratio. The cash interest rate under the Term Loan A was approximately 6.33% at December 31, 2025. See Note 6 "2024 Credit Agreement" in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information and timing on our principal payments on debt.
An interest rate swap is used to manage changes in SOFR-based variable interest rates underlying a portion of the borrowing under the 2024 Credit Agreement. Pursuant to the terms of the swap agreement, ANI pays the counterparty an effective fixed rate of 2.313%. As of December 31, 2025, the notional value of the interest rate swap was $139.4 million. See Note 8 "Derivative Financial Instruments and Hedging Activity" in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information.
2.25% Convertible Senior Notes Due 2029
On August 13, 2024, the Company completed an offering of $316.25 million aggregate principal amount of Notes. The Notes were issued pursuant to the Indenture dated as of August 13, 2024 between the Company and the Trustee. The Notes are due September 1, 2029, unless earlier repurchased, redeemed, or converted. The Notes will 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. See Note 7 "2.25% Convertible Senior Notes Due 2029" in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information and timing on our principal payments on debt.
Leases
Our leases are primarily operating leases for warehouse, office space, and office equipment. As leasesexpire,we do not anticipate difficulty in negotiating renewals or finding other satisfactory space if the premise becomes unavailable. See Note 17 "Commitments and Contingencies" in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional discussion and timing of payments related to these operating lease obligations.
PIPE Shares
Our PIPE Shares accrued dividends at 6.50% per year on a cumulative basis, payable in cash or in-kind. During the third quarter of 2025, all of the PIPE Shares were converted into shares of the Company, and as such, no dividends were payable in the fourth quarter of 2025 or in the future. See Note 13 "Mezzanine and Stockholders' Equity" in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional discussion of dividends.
Novitium Contingent Consideration
Consideration of the Novitium acquisition included $46.5 million in contingent future earn-out payments. The contingent consideration is based on the achievement of certain milestones, including milestones on gross profit of Novitium portfolio products over a 24-month period, regulatory filings completed during this 24-month period, and a percentage of net profits on certain products that are launched in the future. Pursuant to the terms of the Novitium Merger Agreement, the Company paid $12.5 million of cash consideration to the Company Members for the achievement of the ANDA Filing Earn-Out. On February 22, 2024, the Company paid $12.5 million to Novitium related to the achievement of the milestone. See Note 12 "Fair Value" in the notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information on our contingent consideration.
Pursuant to the terms of the Novitium Merger Agreement, the Company owes 20% of net profit generated by sales of certain 505(b)(2) Products, to the Company Members. The payments are due on a quarterly basis, within 45 calendar days of each quarter end, until the earlier to occur of (i) the sum of all such payments being equal to $21.5 million in the aggregate and (ii) the tenth anniversary of FDA approval of the applicable 505(b)(2) Product (the "505(b)(2) Earn-Out"). During the year ended December 31, 2025, the Company paid approximately $26 thousand for payment of the 505(b)(2) Earn-Out to the Company Members.
Alimera Contingent Value Rights
In connection with the acquisition of Alimera, purchase consideration included $8.7 million in contingent value rights which provided for future contingent payments, based on the achievement of Net Revenue milestones in 2026 and 2027. The fair value of the contingent value rights as of December 31, 2025 was approximately $1.4 million.See Note 3 and Note 12 "Business Combination" and "Fair Value," respectively, in the notes to the consolidated financial statements in Part II, Item8. of this Annual Report on Form 10-K for additional information on the contingent consideration.
Accrued Licensor Payments
The Company will also pay royalties to EyePoint from 2025 to 2028 at 30% of annual U.S. net sales of certain products (including YUTIQ and ILUVIEN) in excess of certain thresholds, beginning at $70.0 million in 2025, and increasing annually thereafter. Upon making the quarterly payments in the aggregate amount of $7.5 million in 2024, the licenses and rights granted to the Company automatically became perpetual and irrevocable. The present value of the remaining payments to EyePoint for years 2026 to 2028 will continue to be revalued at an appropriate discount rate for the Company at each reporting date until they are settled. The fair value of the remaining future payments as of December 31, 2025 was zero. See Note 12 "Fair Value" in the notes to the consolidated financial statements in Part II, Item8. of this Annual Report on Form 10-K for additional information on the licensor payments.
We expect to continue to incur significant expenditures in support of our commercial launch of Cortrophin Gel, including costs related to service contracts and increased headcount.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles ("GAAP") and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assumptions and estimates that affect the amounts reported. Our significant accounting policies are discussed in Note 1, "Description of Business and Summary of Significant Accounting Policies" of the Notes to the consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K describes the significant accounting policies and methods used in the preparation of the Company's consolidated financial statements. On an ongoing basis, we evaluate these estimates and assumptions, including those described below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Due to the estimation processes involved, the following summarized accounting policies and their application are considered to be critical to understanding our business operations, financial condition, and operating results.
Revenue Recognition
Revenues are primarily derived from sales of generic, rare disease, and brands portfolio of pharmaceutical products, royalties, and other pharmaceutical services. Revenue is recognized when our obligations under the terms of our contracts with customers are satisfied, which generally occurs when control of the products we sell is transferred to the customer. Variable consideration is estimated after the consideration of applicable information that is reasonably available. The Company generally does not have incremental costs to obtain contracts that would otherwise not have been incurred. The Company does not adjust revenue for the promised amount of consideration for the effects of a significant financing component because our customers generally pay us within 100 days.
The Company's gross product revenue is subject to a variety of deductions, which are estimated and recorded in the same period that the revenue is recognized, and primarily represent chargebacks, rebates, prompt payment (cash) discounts, Medicaid and other government pricing programs, price protection and shelf stock adjustments, sales returns, and other potential adjustments. Those deductions represent estimates of rebates and discounts related to gross sales for the reporting period and, as such, knowledge and judgment of market conditions and practice are required when estimating the impact of these revenue deductions on gross sales for a reporting period.
Historically, the Company's changes of estimates reflecting actual results or updated expectations have not been material to our overall business. If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our future experience, our results could be materially affected. The sensitivity of our estimates can vary by program, type of customer and geographic location. However, estimates associated with governmental allowances, Medicaid and other performance-based contract rebates are most at risk for material adjustment because of the extensive time delay between the recording of the accrual and its ultimate settlement, an interval that can generally range up to one year. Because of this time lag, in any given quarter, our adjustments to actual can incorporate revisions of several prior quarters.
Chargebacks
If actual results were not consistent with our estimates, the Company could be exposed to losses or gains that could be material, as changes to chargeback estimates could cause an increase or decrease in revenue recognized during the year and increase or decrease accounts receivable. If there were a 1% change in the chargeback estimates throughout the year, our net revenues would be affected by $6.8 million for the year ended December 31, 2025.
Government Rebates
If actual results were not consistent with our estimates as related to government rebates, the Company could be exposed to losses or gains that could be material, as changes to government rebate estimates could cause an increase or decrease in revenue recognized during the year and decrease or increase the government rebate reserve. If there were a 10% change in the government rebate estimates throughout the year, our net revenues would be affected by $7.8 million for the year ended December 31, 2025.
Returns
If actual results were not consistent with our estimates, the Company could be exposed to losses or gains that could be material, as changes to returns estimates could cause an increase or decrease in revenue recognized during the year and decrease or increase the returned goods reserve. If there were a 10% change in the returns estimates throughout the year, our net revenues would be affected by $3.7 million for the year ended December 31, 2025.
Administrative Fees and Other Rebates
If actual results were not consistent with our estimates, the Company could be exposed to losses or gains that could be material, as changes to these estimates could cause an increase or decrease in revenue recognized during the year and increase or decrease accounts receivable. If there were a 10% change in the administrative fees estimates throughout the year, our net revenues would be affected by $8.7 million for the year ended December 31, 2025.
Prompt Payment Discounts
If customers do not take 100% of available discounts as we estimate, the Company could need to re-adjust our methodology for calculating the prompt payment discount reserve. If there were a 10% decrease in the prompt payment discounts estimates throughout the year, our net revenues would increase by $3.6 million for the year ended December 31, 2025.
Impairment of Goodwill and Intangible Assets
Goodwill
The Company allocates goodwill to reporting units based on the reporting unit expected to benefit from the business combination. The Company evaluates its reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (October 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.
Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.
The carrying value of goodwill at December 31, 2025 was approximately $62.5 million. As part of the Novitium acquisition on November 19, 2021, we acquired goodwill of $24.6 million in the Generics and Other reporting unit. As a result of the acquisition of Alimera, on September 16, 2024, the Company recorded goodwill of $34.3 million in the Rare Disease reporting unit. The Company believes it is unlikely that there will be a material change in the future estimates or assumptions used to test for impairment losses on goodwill. However, if actual results are not consistent with our estimates or assumptions, we could be exposed to an impairment charge that could be material.
Impairments of Long-Lived Assets
The Company reviews its long-lived assets, including intangible assets with finite lives, for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company evaluates assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value which is generally an expected present value cash flow technique. The Company's policy in determining whether an impairment indicator exists comprises measurable operating performance criteria as well as other qualitative measures. Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a product in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. If the Company's assumptions are not correct, there could be an impairment loss in subsequent periods or, in the case of a change in the estimated useful life of the asset, a change in amortization expense.
Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset's fair value is less than its carrying amount. Otherwise, no further impairment testing is required. The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We consider many factors in evaluating whether the value of its intangible assets with indefinite lives may not be recoverable, including, but not limited to the discount rate, terminal growth rates, general economic conditions, our outlook and market performance of our industry and recent and forecasted financial performance. We recognized approximately $0.8 of impairment charges during the year ended December 31, 2025, related to one product for which the Company has ceased commercialization. We recognized an impairment loss of $4.0 million during the three months ended December 31, 2024 related to IPR&D which was acquired as part of the Novitium acquisition during 2021, and also recorded an impairment loss of $3.6 million on a basket of definite-lived intangible assets.
Contingent Consideration
Accrued Licensor Payments
The terms of the Product Rights Agreement between the Company and EyePoint include the potential payment of future consideration that is contingent upon the achievement of annual U.S. net sales of certain products (including YUTIQ and ILUVIEN) in excess of certain thresholds, beginning at $70 million in 2025, increasing annually thereafter. The fair value of the Accrued Licensor Payments was zero at December 31, 2025. Significant inputs used in the measurement of the fair value include discount rates and probabilities of achievement of net revenue. Changes in fair value, which incorporate changes in assumptions and the passage of time, are recognized as an operating expense in the consolidated statements of operations. These changes resulted in a decrease of the fair value of the liability of approximately $21.0 million during the year ended December 31, 2025, as no further payments are anticipated to be made in fiscal 2026 to 2028.
Novitium Contingent Consideration
The fair value of the Novitium contingent consideration was $8.3 million and $10.9 millionat December 31, 2025 and 2024, respectively. The fair value of contingent consideration is remeasured to the estimated fair value each reporting period with the change recognized as an operating expense in our consolidated statements of operations. Changes in fair value can result from changes in assumptions such as discount rates, probabilities or estimates of revenue and profits, and probability of achieving regulatory milestones, as well as the passage of time. These changes resulted in a decrease of the fair value of the liability of approximately $2.6 million during the year ended December 31, 2025.
Alimera Contingent Value Rights
The fair value of the Alimera Contingent Value Rights consideration was $1.4 million and $9.0 million at December 31, 2025 and 2024, respectively.The fair value of Alimera Contingent Value Rights is remeasured to the estimated fair value each reporting period with the change recognized as an operating expense in our consolidated statements of operations. Changesin fair value can result from changes in assumptions such as discount rates, probabilities or estimates of future revenue and profits, as well as the passage of time. These changes resulted in a gain recognized in our consolidated statement of operations of $7.6 million during the year ended December 31, 2025.
Stock-Based Compensation
Stock-based compensation cost for stock options is determined at the grant date using an option pricing model and stock-based compensation cost for restricted stock is based on the closing market price of the stock at the grant date. The value of the awards and units are recognized as expense on a straight-line basis over the employee's requisite service period. Awards may also be issued in the form of Performance Stock Units ("PSUs") to certain employees of the Company. PSUs represent the right to receive an amount of cash, a number of shares of common stock or a combination of both, contingent upon the achievement of specified performance and market objectives during a specified performance period. The related share-based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant and is recognized straight-line over the vesting term.
Valuation of stock awards requires us to make assumptions and to apply judgment to determine the fair value of the awards. These assumptions and judgments include estimating the future volatility of our stock price and dividend yields. Changes in these assumptions can affect the fair value estimate.
The following table summarizes stock-based compensation expense incurred for ESPP, stock options, restricted stock awards, restricted stock units, performance-based restricted stock units, and Inducement grants included in our consolidated statements of operations:
| (in thousands) | Years Ended December 31, | ||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Selling, general, and administrative | $ | 33,982 | $ | 26,534 | $ | 19,036 | |||||||||||
| Research and development | 2,144 | 1,533 | 910 | ||||||||||||||
| Cost of sales | 1,803 | 1,277 | 706 | ||||||||||||||
| $ | 37,929 | $ | 29,344 | $ | 20,652 | ||||||||||||
Stock-based compensation cost for stock options is determined at the grant date using an option pricing model and stock-based compensation cost for restricted stock is based on the closing market price of the stock at the grant date. The value of the awards and units are recognized as expense on a straight-line basis over the employee's requisite service period.
Valuation of stock awards and units require us to make assumptions and to apply judgment to determine the fair value of the awards. These assumptions and judgments include estimating the future volatility of our stock price and dividend yields. Changes in these assumptions can affect the fair value estimate.
Changes in estimates could affect compensation expense within individual periods. If there were to be a 10% change in our stock-based compensation expense for the year, our Income (Loss) Before Expense (Benefit) for Income Taxeswould be affected by $3.8 millionfor the year ended December 31, 2025.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.
The Company uses a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company has not identified any uncertain income tax positions that could have a material impact on the consolidated financial statements. The Company is subject to taxation in various U.S. jurisdictions, Canada, India, the UK, Ireland, Portugal, and Germany and all of its income tax returns remain subject to examination by tax authorities due to the availability of net operating loss carryforwards. To the extent the Company is required to pay amounts in excess of our established liability, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an increase in our effective income tax rate in the period of resolution.
The Company considers potential tax effects resulting from discontinued operations and gains and losses included in other comprehensive income (loss) and record intra-period tax allocations, when those effects are deemed material. Our effective income tax rate is also affected by changes in tax law, our level of earnings, and the results of tax audits.
Although the Company believes that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material.
Legal and Other Contingencies
The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our consolidated financial statements.
Recent Accounting Standards
For information on recent accounting standards, see Note 1 "Description of Business and Summary of Significant Accounting Policies" of the Notes to the consolidated financial statements in Part II, Item 8. of this Form 10-K.
ANI Pharmaceuticals Inc. published this content on February 27, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 27, 2026 at 12:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]