ANI Pharmaceuticals(US:ANIP)2024-08-06 10:57PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for ANI Pharmaceuticals, Inc Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, along with detailed notes Condensed Consolidated Financial Statements This subsection contains the core unaudited financial tables for the period, including balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $920,753 | $904,422 | | Cash and cash equivalents | $240,110 | $221,121 | | Inventories | $125,448 | $111,196 | | Intangible assets, net | $183,078 | $209,009 | | Total Liabilities | $440,143 | $446,823 | | Non-current debt, net | $284,394 | $284,819 | | Total Stockholders' Equity | $455,760 | $432,749 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $138,040 | $116,547 | $275,470 | $223,333 | | Operating Income | $5,169 | $12,402 | $25,481 | $22,297 | | Net (Loss) Income | ($2,287) | $6,245 | $15,920 | $7,684 | | Diluted (Loss) Income Per Share | ($0.14) | $0.29 | $0.70 | $0.36 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $35,683 | $42,050 | | Net Cash Provided by (Used in) Investing Activities | $4,484 | ($9,179) | | Net Cash (Used in) Provided by Financing Activities | ($21,178) | $75,602 | | Net Change in Cash | $18,989 | $108,473 | Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of accounting policies and specific line items, covering the Alimera merger, restructuring, debt, and legal contingencies - On June 21, 2024, the company entered into an agreement to acquire Alimera Sciences, Inc. for $5.50 per share in cash plus a contingent value right (CVR)5253 - The Alimera transaction will be financed with $280.0 million in committed debt, incurring approximately $3.5 million in transaction costs in Q2 202457 - The company sold its Oakville, Ontario property on March 28, 2024, for approximately $14.2 million, resulting in a gain of approximately $5.3 million61 Revenue by Segment (in thousands) | Segment | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Generics, Established Brands, and Other | $88,847 | $189,340 | | Rare Disease | $49,193 | $86,130 | | Total Net Revenues | $138,040 | $275,470 | - As of June 30, 2024, the company had $292.5 million in principal outstanding on its Term Facility with an interest rate of 11.44%64 - The $40.0 million Revolving Facility remained undrawn as of June 30, 202466 - The company is involved in several legal proceedings, including a royalty dispute with CG Oncology, patent litigation regarding a pitolisant hydrochloride drug product, and various ranitidine-related lawsuits128130132 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results of operations, covering strategy, recent developments, operating results, and liquidity Executive Overview and Strategy Management outlines the company's strategy, centered on scaling the Rare Disease platform and strengthening the Generics and Established Brands segment - The company's core strategy is to deliver sustainable growth by scaling its Rare Disease business, led by Cortrophin Gel, and strengthening its Generics business through enhanced development and focus on niche opportunities165166 - The pending acquisition of Alimera is a key strategic move intended to strengthen the Rare Disease business and expand the company's footprint internationally into Europe, Asia, and the Middle East167 - The company continues to invest in its Rare Disease platform to support growth in new areas like pulmonology, ophthalmology, and gout for its ACTH products168 Results of Operations This subsection provides a detailed comparative analysis of financial performance, breaking down changes in revenues, costs, and expenses Q2 2024 vs. Q2 2023 Revenue Performance (in thousands) | Segment | Q2 2024 Revenue | Q2 2023 Revenue | % Change | | :--- | :--- | :--- | :--- | | Generic pharmaceutical products | $73,964 | $63,317 | 16.8% | | Established brands, royalties, etc. | $14,883 | $28,926 | (48.5)% | | Rare disease pharmaceutical products | $49,193 | $24,304 | 102.4% | | Total Net Revenues | $138,040 | $116,547 | 18.4% | - The 102.4% increase in Rare Disease revenue was driven by increased volume of Cortrophin Gel in its third year of launch193 - Selling, general, and administrative (SG&A) expenses increased by 36.3% to $52.8 million in Q2 2024, driven by continued investment in the Rare Disease segment, legal expenses, and costs related to the pending Alimera acquisition197 - For the six months ended June 30, 2024, net income was $15.9 million, a significant increase from $7.7 million in the prior year period, boosted by a $5.3 million gain on the sale of the Oakville property and a $6.9 million unrealized gain on an equity investment15216218 Liquidity and Capital Resources The company details its sources of liquidity, including cash from operations and credit facilities, and analyzes cash flow activities - As of June 30, 2024, the company had $240.1 million in cash and cash equivalents and $40.0 million available under its Revolving Facility12224 - The company has secured a commitment for $280.0 million in debt financing to fund the pending acquisition of Alimera225 Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Operating Activities | $35,683 | $42,050 | | Investing Activities | $4,484 | ($9,179) | | Financing Activities | ($21,178) | $75,602 | - Key cash outflows in H1 2024 included a $12.5 million contingent consideration payment related to the Novitium acquisition and $10.0 million for treasury stock purchases for restricted stock vests232 Quantitative and Qualitative Disclosures About Market Risk The company states no material changes in its exposure to market risks, including interest rate, equity, and foreign currency exchange rate risks - There have been no material changes in the company's exposure to market risks, including interest rate, equity, and foreign currency exchange rate risk, since the end of the 2023 fiscal year234 Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024236 - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls237 PART II — OTHER INFORMATION This part covers legal proceedings, new risk factors related to the Alimera acquisition, equity security sales, and other miscellaneous items Legal Proceedings This section incorporates by reference legal proceedings detailed in Note 13, covering commercial, patent, and ranitidine-related litigation - This item refers to Note 13, Commitments and Contingencies, for a full description of the company's ongoing legal matters238 Risk Factors This section introduces new significant risk factors related to the pending Alimera acquisition, including merger completion, debt, international operations, and supply chain - The pending merger with Alimera is subject to conditions beyond the company's control, and failure to complete it could have a material adverse effect on the business and stock price240 - The company will incur substantial debt ($280.0 million committed) to finance the Alimera acquisition, which could impact future cash flow and operational flexibility251 - The acquisition will materially increase international operations, exposing the company to new risks related to foreign regulations, currency exchange, tax laws, and supply chain complexities256258 - Post-merger, the company will have increased reliance on single-source third-party manufacturers for Alimera's products, with one key supplier for YUTIQ receiving an FDA warning letter in July 2024, potentially affecting supply265266 Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities and discloses share repurchases from employees for tax withholding obligations - There were no sales of unregistered securities during the quarter269 Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2024 | 13,259 | $66.92 | | May 2024 | 5,816 | $65.02 | | June 2024 | 553 | $62.62 | | Total | 19,628 | $66.23 | - All shares purchased were transferred from employees to satisfy tax withholding obligations on vested restricted stock awards and were not part of a formal repurchase plan270 Other Items (3, 4, 5, 6) This section confirms no defaults on senior securities, non-applicability of mine safety disclosures, no Rule 10b5-1 trading plan changes, and references exhibits - Item 3: No defaults upon senior securities271 - Item 4: Mine Safety Disclosures are not applicable272 - Item 5: No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the quarter271 - Item 6: A list of exhibits filed with the Form 10-Q is provided272273