NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
1.
|
BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS
|
Overview
ANI Pharmaceuticals, Inc. and subsidiary, ANIP Acquisition
Company (together, the “Company,” “we,” or “us”) is an integrated specialty pharmaceutical
company developing, manufacturing, and marketing branded and generic prescription pharmaceuticals. Our targeted areas of product
development currently include narcotics, oncolytics (anti-cancers), hormones and steroids, and complex formulations involving extended
release and combination products. We have two pharmaceutical manufacturing facilities located in Baudette, Minnesota, which are
capable of producing oral solid dose products, as well as liquids and topicals, narcotics, and potent products that must be manufactured
in a fully-contained environment. Our strategy is to continue to use these manufacturing assets to develop, produce, and distribute
niche generic pharmaceutical products.
On June 19, 2013, pursuant to a merger agreement
dated as of April 12, 2013, ANIP Acquisition Company d/b/a ANI Pharmaceuticals, Inc. ("ANIP") became a wholly-owned subsidiary
of BioSante Pharmaceuticals, Inc. (“BioSante”) in an all-stock, tax-free reorganization (the "Merger"). The
Merger was accounted for as a reverse acquisition, pursuant to which ANIP was considered the acquiring entity for accounting purposes.
BioSante was renamed ANI Pharmaceuticals, Inc. We now operate under the leadership of the ANIP management team and our board of
directors is comprised of two former BioSante directors and five former ANIP directors. As such, ANIP's historical results of operations
replace BioSante's historical results of operations for all periods prior to the Merger. The results of operations of both companies
are included in our consolidated financial statements for all periods after completion of the Merger.
Basis of Presentation
The accompanying unaudited interim condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”). In our opinion, the accompanying unaudited interim condensed consolidated financial statements include
all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results
of operations and cash flows. The condensed consolidated balance sheet at December 31, 2013, has been derived from audited financial
statements of that date. The interim condensed consolidated results of operations are not necessarily indicative of the results
that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements
prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules and regulations prescribed by the United
States Securities and Exchange Commission. We believe that the disclosures provided herein are adequate to make the information
presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with
the audited financial statements and notes previously distributed in our annual report on Form 10-K for the year ended December
31, 2013. Certain prior period information has been reclassified to conform to the current period presentation.
Principles of Consolidation
The condensed consolidated financial statements include
the accounts of ANI Pharmaceuticals, Inc. and its wholly owned subsidiary, ANIP. All significant inter-company accounts and transactions
are eliminated in consolidation.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
1.
|
BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS
– continued
|
Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during
the reporting period. In the accompanying unaudited condensed consolidated financial statements, estimates are used for, but not
limited to, stock-based compensation, allowance for doubtful accounts, accruals for chargebacks, returns and other allowances,
allowance for inventory obsolescence, allowances for contingencies and litigation, fair value of long-lived assets, deferred taxes
and valuation allowance, and the depreciable lives of long-lived assets. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In July 2013, the
Financial
Accounting Standards Board (“FASB”) issued guidance
for the presentation of an unrecognized
tax benefit when a net operating loss ("NOL") carryforward, a similar tax loss, or a tax credit carryforward exists.
The guidance requires an entity to present in the financial statements an unrecognized tax benefit, or a portion of an unrecognized
tax benefit, as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward.
If the NOL carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax
law of the jurisdiction or the tax law of the jurisdiction does not require the entity to use, and the entity does not intend to
use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability
and will not be combined with deferred tax assets. This guidance does not require any additional recurring disclosures and
is
effective for fiscal years beginning after December 15, 2013.
T
he adoption of this guidance
did not have a material impact on our financial statements.
In May 2014, the FASB issued guidance for revenue
recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific
guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance
obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue.
The
new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts
with customers.
The standard is effective for our reporting year beginning January 1, 2017 and early adoption is not permitted.
We are currently evaluating the impact, if any,
that this new accounting pronouncement will have on our financial statements.
We have evaluated all other issued and unadopted
Accounting Standards Updates and believe the adoption of these standards will not have a material impact on our results of operations,
financial position, or cash flows.
|
2.
|
Revenue Recognition
AND RELATED ALLOWANCES
|
Revenue Recognition
Revenue
is recognized for product sales and contract manufacturing product sales upon passing of risk and title to the customer, when estimates
of the selling price and discounts, rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential
adjustments are reasonably determinable, collection is reasonably assured, and we have no further performance obligations. Contract
manufacturing arrangements are typically less than two weeks in duration, and therefore the revenue is recognized upon completion
of the aforementioned factors rather than using a proportional performance method of revenue recognition. The estimates for discounts,
rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments reduce gross revenues
to net revenues in the accompanying
unaudited condensed
consolidated
statements of operations, and are presented as current liabilities or reductions in accounts receivable in the accompanying
unaudited condensed
consolidated balance sheets (see “Accruals for
Chargebacks, Returns, and Other Allowances”). Historically, we have not entered into revenue arrangements with multiple elements.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
2.
|
Revenue Recognition
AND RELATED ALLOWANCES –
continued
|
Occasionally,
we engage in contract services, which include product development services, laboratory services, and royalties on net sales of
certain contract manufactured products. For these services, revenue is recognized according to the terms of the agreement with
the customer, which sometimes include substantive, measurable risk-based milestones, and when
we have a contractual right
to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably
assured
, and we have no further performance obligations under the
agreement
.
Accruals for Chargebacks, Returns and Other Allowances
Our generic and branded product revenues are typically
subject to agreements with customers allowing chargebacks, product returns, administrative fees, and other rebates and prompt payment
discounts. We accrue for these items at the time of sale and continually monitor and re-evaluate the accruals as additional information
becomes available. We adjust the accruals at the end of each reporting period, to reflect any such updates to the relevant facts
and circumstances. Accruals are relieved upon receipt of payment from the customer or upon issuance of credit to the customer.
The following table summarizes activity in the balance
sheet for accruals and allowances for the six-month periods ended June 30, 2014 and 2013, respectively:
(in thousands)
|
|
Accruals for Chargebacks, Returns and Other Allowances
|
|
|
|
|
|
|
|
|
|
Administrative
|
|
|
Prompt
|
|
|
|
|
|
|
|
|
|
Fees and Other
|
|
|
Payment
|
|
|
|
Chargebacks
|
|
|
Returns
|
|
|
Rebates
|
|
|
Discounts
|
|
Balance at December 31, 2013
|
|
|
4,076
|
|
|
|
736
|
|
|
|
735
|
|
|
|
332
|
|
Accruals/Adjustments
|
|
|
19,327
|
|
|
|
561
|
|
|
|
2,360
|
|
|
|
742
|
|
Credits Taken Against Reserve
|
|
|
(17,070
|
)
|
|
|
(346
|
)
|
|
|
(1,974
|
)
|
|
|
(734
|
)
|
Balance at June 30, 2014
|
|
$
|
6,333
|
|
|
$
|
951
|
|
|
$
|
1,121
|
|
|
$
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012
|
|
|
5,662
|
|
|
|
411
|
|
|
|
231
|
|
|
|
242
|
|
Accruals/Adjustments
|
|
|
12,183
|
|
|
|
853
|
|
|
|
850
|
|
|
|
430
|
|
Credits Taken Against Reserve
|
|
|
(13,003
|
)
|
|
|
(914
|
)
|
|
|
(553
|
)
|
|
|
(449
|
)
|
Balance at June 30, 2013
|
|
$
|
4,842
|
|
|
$
|
350
|
|
|
$
|
528
|
|
|
$
|
223
|
|
Credit Concentration
Our customers are primarily wholesale distributors,
chain drug stores, group purchasing organizations, and pharmaceutical companies.
During the three month period ended June 30, 2014,
three customers represented 29%, 22%, and 14% of net revenues. During the six month period ended June 30, 2014, these same three
customers represented 26%, 19%, and 16% of net revenues. As of June 30, 2014, accounts receivable from these customers totaled
$6.2 million. During the three month period ended June 30, 2013, three customers represented 31%, 16%, and 12% of net revenues.
During the six month period ended June 30, 2013, these same three customers represented 28%, 17%, and 13% of net revenues.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
Summary
On June 19, 2013, BioSante acquired ANIP in an all-stock,
tax-free reorganization. We are operating under the leadership of the ANIP management team and the board of directors is comprised
of two former directors from BioSante and five former ANIP directors.
BioSante issued to ANIP stockholders shares of BioSante
common stock such that the ANIP stockholders owned 57% of the combined company’s shares outstanding, and the former BioSante
stockholders owned 43%. In addition, immediately prior to the Merger, BioSante distributed to its then current stockholders contingent
value rights (“CVR”) providing payment rights arising from a future sale, transfer, license or similar transaction(s)
involving BioSante’s LibiGel
®
(female testosterone gel).
The Merger was accounted for as a reverse
acquisition pursuant to which ANIP was considered the acquiring entity for accounting purposes. As such, ANIP's historical
results of operations replace BioSante's historical results of operations for all periods prior to the Merger. BioSante, the
accounting acquiree, was a publicly-traded pharmaceutical company focused on developing high value, medically-needed
products. ANIP entered into the Merger to secure additional capital and gain access to capital market opportunities as a
public company. The results of operations of both companies are included in our consolidated financial statements for all
periods after completion of the Merger.
Transaction Costs
In conjunction with the Merger, we incurred approximately
$7.1 million in transaction costs, which were expensed in the periods in which they were incurred. These costs include:
Category
|
|
(in thousands)
|
|
Legal fees
|
|
$
|
1,227
|
|
Accounting fees
|
|
|
122
|
|
Consulting fees
|
|
|
119
|
|
Monitoring and advisory fees
|
|
|
390
|
|
Transaction bonuses
|
|
|
4,801
|
|
Other
|
|
|
429
|
|
Total transaction costs
|
|
$
|
7,088
|
|
Of the total expenses, $5.5 million and $5.7 million
was incurred and expensed in the three and six months ended June 30, 2013, respectively. For the three months ended June 30, 2013,
$4.8 million was recognized as selling, general and administrative expense, $0.3 million as interest expense, and $0.4 million
as other expense. For the six months ended June 30, 2013, $5.0 million was recognized as selling, general and administrative expense,
$0.3 million as interest expense, and $0.4 million as other expense. No transaction-related expenses were incurred in the three
or six months ended June 30, 2014.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
3.
|
BUSINESS COMBINATION – continued
|
Purchase Consideration and Net Assets Acquired
The fair value of BioSante’s common stock used
in determining the purchase price was $1.22 per share, the closing price on June 19, 2013, which resulted in a total purchase consideration
of $29.8 million. The fair value of all additional consideration, including the vested BioSante stock options and CVRs, was immaterial.
The following presents the final allocation of the purchase consideration to the assets acquired and liabilities assumed on June
19, 2013:
|
|
(in thousands)
|
|
Total purchase consideration
|
|
$
|
29,795
|
|
Assets acquired
|
|
|
|
|
Cash and cash equivalents
|
|
|
18,198
|
|
Restricted cash
|
|
|
2,260
|
|
Teva license intangible asset
|
|
|
10,900
|
|
Other tangible assets
|
|
|
79
|
|
Deferred tax assets, net
|
|
|
-
|
|
Goodwill
|
|
|
1,838
|
|
Total assets
|
|
|
33,275
|
|
Liabilities assumed
|
|
|
|
|
Accrued severance
|
|
|
2,965
|
|
Other liabilities
|
|
|
515
|
|
Total liabilities
|
|
|
3,480
|
|
Total net assets acquired
|
|
$
|
29,795
|
|
The Teva license is related to a generic male
testosterone gel product and is being amortized on a straight-line basis over its estimated useful life of 11 years.
Goodwill, which is not tax deductible since the transaction was structured as a tax-free exchange, is considered an
indefinite-lived asset and relates primarily to intangible assets that do not qualify for separate recognition. As a result
of purchase accounting related to the Merger, we established deferred tax assets of $9.6 million, deferred tax liabilities of
$3.9 million, and a valuation allowance of $5.7 million, netting to deferred tax assets of $0.
Pro Forma Condensed Combined Financial Information
(unaudited)
The following unaudited pro forma condensed combined
financial information summarizes the results of operations for the periods indicated as if the Merger had been completed as of
January 1, 2012. Pro forma information reflects adjustments relating to (i) elimination of the interest on ANIP’s senior
and convertible debt, (ii) elimination of monitoring and advisory fees payable to two ANIP investors, (iii) elimination of transaction
costs, and (iv) amortization of intangibles acquired. The pro forma amounts do not purport to be indicative of the results that
would have been obtained if the Merger had occurred as of January 1, 2012 or that may be obtained in the future.
(in thousands)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2013
|
|
|
2013
|
|
Net revenues
|
|
$
|
6,152
|
|
|
$
|
11,858
|
|
Net loss
|
|
$
|
(3,352
|
)
|
|
$
|
(4,870
|
)
|
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
4.
|
Earnings/(LOSS)
per Share
|
Basic
earnings/(loss) per share is
computed
by dividing net income
available
to common shareholders
by the weighted-average number of shares of common
stock outstanding during the period.
Our unvested restricted shares and certain of our outstanding
warrants contain non-forfeitable rights to dividends, and therefore are considered to be participating securities; the calculation
of basic and diluted earnings/(loss) per share excludes from the numerator net income (but not net loss) attributable to the unvested
restricted shares and to the participating warrants, and excludes the impact of those shares from the denominator.
The numerator for earnings per share for the three and six months ended June 30, 2014 is calculated for basic and diluted earnings
per share as follows:
(in thousands)
|
|
Three months ended
June 30, 2014
|
|
|
Six months ended
June 30, 2014
|
|
|
|
Basic
|
|
|
Diluted
|
|
|
Basic
|
|
|
Diluted
|
|
Net (loss)/income
|
|
$
|
(2,363
|
)
|
|
$
|
(2,363
|
)
|
|
$
|
996
|
|
|
$
|
996
|
|
Net income allocated to warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Net income allocated to restricted stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
Net (loss)/income allocated to common shares
|
|
$
|
(2,363
|
)
|
|
$
|
(2,363
|
)
|
|
$
|
985
|
|
|
$
|
985
|
|
For
periods of net income, and when the effects are not anti-dilutive, we calculate diluted earnings per share by dividing
net income available to common shareholders by the weighted-average number of shares outstanding plus the impact of all
potential dilutive common shares,
consisting primarily of common stock options, unvested restricted stock awards, and
stock purchase warrants,
using the treasury stock method. For
periods of net income, a
nti-dilutive shares consist of out-of-the-money Class C Special stock, out-of-the-money common
stock options, out-of-the-money warrants exercisable for common stock, and certain participating securities, if the effect of
including both the income allocated to the participating security and the impact of the potential common shares would be
anti-dilutive. Anti-dilutive shares have been excluded from the computation of diluted earnings/(loss) per share
For periods of net loss, diluted loss per share is
calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive. For periods
of net loss, anti-dilutive shares consist of Class C Special stock, common stock options, unvested restricted stock awards, and
warrants exercisable for common stock (and prior to the Merger, equity-linked securities, convertible preferred stock, and stock
purchase warrants exercisable for preferred stock), and have been excluded from the computation of diluted earnings (loss) per
share. Prior to the Merger (Note 3), anti-dilutive shares included equity-linked securities, convertible preferred stock, and stock
purchase warrants exercisable for preferred stock. The number of anti-dilutive shares, which have been excluded from the computation
of diluted earnings/(loss) per share, was 1.1 million and 4.4 million for the three month periods ended June 30, 2014 and 2013,
respectively and 0.7 million and 4.6 million for the six month periods ended June 30, 2014 and 2013, respectively.
As of June 30, 2014, we had 434 thousand options
outstanding to purchase common stock, 79 thousand unvested restricted stock awards, and 535 thousand warrants to purchase common
stock.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
Inventories consist of the following as of:
(in thousands)
|
|
June 30,
2014
|
|
|
December 31,
2013
|
|
Raw materials
|
|
$
|
3,452
|
|
|
$
|
1,480
|
|
Packaging materials
|
|
|
784
|
|
|
|
766
|
|
Work-in-progress
|
|
|
272
|
|
|
|
162
|
|
Finished goods
|
|
|
1,447
|
|
|
|
1,152
|
|
|
|
|
5,955
|
|
|
|
3,560
|
|
Reserve for excess/obsolete inventories
|
|
|
(43
|
)
|
|
|
(42
|
)
|
Inventories, net
|
|
$
|
5,912
|
|
|
$
|
3,518
|
|
Vendor Concentration
We source the raw materials
for our products, including active pharmaceutical ingredients (“API”), from both domestic and international suppliers.
Generally, only a single source of API is qualified for use in each product due to the costs and time required to validate a second
source of supply. As a result, we are dependent upon our current vendors to supply reliably the API required for ongoing product
manufacturing. During the three months ended June 30, 2014, we purchased approximately 34% of our inventory from two suppliers.
During the six months ended June 30, 2014, we purchased approximately 40% of our inventory from the same two suppliers. As of June
30, 2014, amounts payable to these suppliers was $0.2 million. During the three months ended June 30, 2013, we purchased approximately
36% of our inventory from three suppliers. During the six months ended June 30, 2013, we purchased approximately 40% of our inventory
from the same three suppliers.
|
6.
|
PROPERTY, PLANT, AND EQUIPMENT
|
Property, plant, and equipment consist
of the following as of:
(in thousands)
|
|
June 30,
2014
|
|
|
December 31,
2013
|
|
Land
|
|
$
|
87
|
|
|
$
|
87
|
|
Buildings
|
|
|
3,682
|
|
|
|
3,682
|
|
Machinery, furniture and equipment
|
|
|
4,230
|
|
|
|
3,736
|
|
Construction in progress
|
|
|
106
|
|
|
|
229
|
|
|
|
|
8,105
|
|
|
|
7,734
|
|
Less: accumulated depreciation
|
|
|
(3,480
|
)
|
|
|
(3,197
|
)
|
Property, Plant and Equipment, net
|
|
$
|
4,625
|
|
|
$
|
4,537
|
|
Depreciation expense for the three month periods
ended June 30, 2014 and 2013 totaled $146 thousand and $134 thousand, respectively.
Depreciation expense for the six month periods ended June 30, 2014 and 2013 totaled $283 thousand and $266 thousand, respectively.
During the
three and six month periods ended June 30, 2014 and 2013
,
there was no material interest capitalized into construction in progress.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
7.
|
GOODWILL AND INTANGIBLE ASSETS
|
Goodwill
As a result of the Merger (Note
3), we recorded goodwill of $1.8 million in our one reporting unit. We assess the recoverability of the carrying value of goodwill
as of October 31 of each year, and whenever events occur or circumstances changes that would, more likely than not, reduce the
fair value of our reporting unit below its carrying value. There have been no events or changes in circumstances that would have
reduced the fair value of our reporting unit below its carrying value from the most recent assessment on October 31, 2013, through
June 30, 2014. No impairment losses were recognized during the three and six months ended June 30, 2014 or 2013.
Acquisition of Abbreviated
New Drug Applications
On December 26, 2013
,
we entered into an agreement to purchase (the “Teva Purchase Agreement”) Abbreviated New Drug Applications
(“ANDAs”) to produce 31 generic drug products from Teva Pharmaceuticals (“Teva”) for $12.5 million in
cash an
d a percentage of future gross profits from product sales
.
According to the terms of the Teva Purchase Agreement, Teva was required to provide soft copy materials and transfer
ownership of the ANDAs to us within five business days of signing the Teva Purchase Agreement, and we were required to pay
the first installment of $8.5 million upon receipt thereof. Teva provided the soft copy materials and transferred ownership
of the ANDAs to us on January 2, 2014 and we paid the first installment of $8.5 million to Teva on January 2, 2014. Teva was
also required to provide hard copy materials to us within 90 days of signing the Teva Purchase Agreement. Teva provided the
hard copy materials on March 5, 2014 and we paid the $4.0 million
balance on March 6, 2014.
The drug products include 20 solid-oral immediate release products,
four extended release products and seven liquid products. We performed an assessment of the assets purchased and determined that
this transaction was an asset purchase and not a business combination. The ANDAs are being amortized in full over their useful
lives, averaging 10 years.
Definite-Lived Intangible Assets
The components of our definite-lived intangible assets
are as follows:
(in thousands)
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Amortization
Period
|
|
Acquired ANDA intangible assets
|
|
$
|
12,577
|
|
|
$
|
(686
|
)
|
|
$
|
60
|
|
|
$
|
(55
|
)
|
|
|
3-10 years
|
|
Reglan
®
intangible asset
|
|
|
100
|
|
|
|
(100
|
)
|
|
|
100
|
|
|
|
(100
|
)
|
|
|
2 years
|
|
Teva license intangible asset
|
|
|
10,900
|
|
|
|
(991
|
)
|
|
|
10,900
|
|
|
|
(496
|
)
|
|
|
11 years
|
|
|
|
$
|
23,577
|
|
|
$
|
(1,777
|
)
|
|
$
|
11,060
|
|
|
$
|
(651
|
)
|
|
|
|
|
Our acquired ANDA and Reglan intangible assets consist
of the exclusive rights, including all of the applicable technical data and other relevant information, to produce certain pharmaceutical
products that we acquired from various companies, including those acquired pursuant to the
Teva
Purchase Agreement. The Teva license was acquired as part of the Merger (Note 3). Definite-lived intangible assets are
stated at the lower of cost or fair value, net of amortization using the straight line method over the expected useful lives of
the product rights. Amortization expense was $0.6 million and $13 thousand for the three months ended June 30, 2014 and 2013,
respectively. Amortization expense was $1.1 million and $25 thousand for the six months ended June 30, 2014 and 2013, respectively.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
7.
|
GOODWILL AND INTANGIBLE ASSETS – continued
|
We test for impairment of definite-lived intangible
assets when events or circumstances indicate that the carrying value of the assets may not be recoverable. No such triggering events
were identified during the three months or six months ended June 30, 2014 and 2013 and therefore no impairment loss was recognized
in the three or six months ended June 30, 2014 or 2013.
Expected future amortization expense is
as follows:
(in thousands)
|
|
|
|
2014 (remainder of the year)
|
|
$
|
1,122
|
|
2015
|
|
|
2,243
|
|
2016
|
|
|
2,243
|
|
2017
|
|
|
2,243
|
|
2018
|
|
|
2,243
|
|
2019 and thereafter
|
|
|
11,706
|
|
Total
|
|
$
|
21,800
|
|
|
8.
|
STOCK-BASED COMPENSATION
|
All stock options and restricted stock are granted
under the ANI Pharmaceuticals, Inc. Fourth Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”). As of
June 30, 2014, 659 thousand shares of our common stock remained available for issuance under the 2008 Plan.
On April 1, 2014, the Board of Directors approved grants of
options to purchase 59 thousand shares of common stock and 30 thousand shares of restricted stock to our officers and options to
purchase 16 thousand shares of common stock to non-employee directors. While the stock options were granted with no restrictions,
the restricted stock was granted subject to shareholder approval of an increase in the total restricted stock available for grant
under the 2008 Plan. The increase in total restricted stock available for grant under the 2008 Plan was approved by shareholders
at the May 22, 2014 annual meeting and the restricted stock was granted as of May 22, 2014.
On July 12, 2013 and August 1, 2013, our Board of
Directors approved grants to employees of stock options to purchase 325 thousand shares of ANI stock under the 2008 Plan, subject
to shareholder approval of an increase in the total shares available for issuance under the 2008 Plan. The increase in total shares
was approved by shareholders at the May 22, 2014 annual meeting, at which time we began recognizing stock-based compensation expense
related to these awards.
In 2013, the Board of Directors granted options to
purchase 21 thousand shares of common stock and 50 thousand shares of restricted stock to non-officer directors under the 2008
Plan.
Total expense related to stock options for both the
three and six months ended June 30, 2014 was $1.9 million, $1.3 million of which was a catch-up charge related to the
325 thousand stock options previously approved by the Board of Directors on July 12, 2013 and August 1, 2013 and granted at the
May 22, 2014 annual meeting. Total expense related to restricted stock grants for the three and six months ended June 30, 2014
was $79 thousand and $121 thousand, respectively. Total expense related to both stock options and restricted stock grants was $0
for the three and six months ended June 30, 2013.
No options were exercised and 60 thousand options
expired during the three months ended June 30, 2014. Options to purchase 30 thousand shares of common stock were exercised and
60 thousand options expired during the six month period ended June 30, 2014. No options were exercised and no options expired during
the three and six months ended June 30, 2013. No restricted stock vested or was forfeited during the three and six months ended
June 30, 2014 or 2013.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
On March 10, 2014, we completed a follow-on public offering
of 1.6 million shares of our common stock at a public offering price of $31.00 per share (the “March 2014 Offering”).
We received gross proceeds of $50.0 million, or net proceeds of $46.7 million after deducting costs of $3.3 million, including
the underwriters’ fees and commissions, as well as expenses directly related to the March 2014 Offering
.
The number of shares sold in the
March 2014
Offering includes the exercise in full by the underwriters
of their option to purchase an additional
0.2 million
shares of common stock.
In January 2014, warrants to purchase an aggregate of 20 thousand
shares of common stock were exercised at $9.00 per share. Warrants to purchase an aggregate of 19 thousand and 131 thousand shares
of common stock expired unexercised during the three and six months ended June 30, 2014, respectively.
We use 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 measurement of a deferred tax asset is reduced, if necessary, by a valuation
allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Based upon historical
losses and uncertainty of future taxable income, we have fully reserved for all net deferred tax assets as of June 30, 2014 and
December 31, 2013.
For interim periods, we recognize an income
tax provision/(benefit) based on our estimated annual effective tax rate expected for the entire year. We calculate income tax
benefits related to stock-based compensation arrangements using the with and without method.
We use 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,
as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For
those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
We have not identified any uncertain income tax positions that could have a material impact on the financial statements. We are
subject to taxation in various jurisdictions and remain subject to examination by taxing jurisdictions for the years 1998 and all
subsequent periods due to the availability of
NOL
carryforwards.
We recognize interest and penalties accrued on any
unrecognized tax exposures as a component of income tax expense. We did not have any amounts accrued relating to interest and penalties
as of June 30, 2014 and December 31, 2013.
The effective tax rates for the three and six months
ended June 30, 2014 were (5.3)% and 2.9% of pre-tax (loss)/income reported in the period, respectively, calculated based on the
estimated annual effective rate anticipated for the year ending December 31, 2014. The Company has elected to exclude the impacts
from significant pre-tax non-recognized subsequent events from its estimated annual effective rate. Our estimated annual effective
rate is primarily driven by our forecasted pre-tax income, estimated temporary and permanent differences, and the use of our existing
NOLs. Changes in the estimated annual effective rate during the year are primarily driven by periodic changes to our forecasted
pre-tax income. The utilization of our NOL carryforwards will be limited in future years as prescribed by Section 382 of the U.S.
Internal Revenue Code. For the comparable three and six month periods ended June 30, 2013, we did not have tax provisions due to
the projected loss for the year, accumulated losses, which resulted in NOL carryforwards, and a full valuation allowance.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
11.
|
COMMITMENTS AND CONTINGENCIES
|
Operating Leases
We lease equipment under operating
leases that expire in May 2017. We also lease office space under operating leases that expire beginning in February 2016 through
September 2018. Future minimum lease payments due under these leases total $242 thousand as of June 30, 2014.
Rent expense for the three months ended June 30,
2014 and 2013 totaled $19 thousand and $10 thousand, respectively.
Rent expense for the six months ended June 30, 2014
and 2013 totaled $36 thousand and $14 thousand, respectively.
Government Regulation
Our products and facilities are subject to regulation
by a number of federal and state governmental agencies. The Food and Drug Administration (“FDA”), in particular, maintains
oversight of the formulation, manufacture, distribution, packaging and labeling of all of our products. The Drug Enforcement Administration
(“DEA”) maintains oversight over our products that are controlled substances.
Unapproved Products
Two of our products, Esterified Estrogen with Methyltestosterone
tablets (“EEMT”) and Opium Tincture, are marketed without approved New Drug Applications (“NDAs”) or ANDAs.
In March 2014, we formally requested a pre-IND meeting with the FDA to discuss applying for an NDA for our Opium Tincture product.
During the three months ended June 30, 2014 and 2013, net revenues for these products totaled $3.8 million and $1.8 million, respectively.
During the six months ended June 30, 2014 and 2013, net revenues for these products totaled $10.5 million and $3.3 million, respectively.
The FDA’s policy with respect to the continued
marketing of unapproved products is stated in the FDA’s September 2011 compliance policy guide,
Marketed New Drugs without
Approved NDAs or ANDAs
. Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement
against such unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher
priority to enforcement action against products in certain categories, such as those marketed as unapproved drugs with potential
safety risks or that lack evidence of effectiveness. We believe that, so long as we comply with applicable manufacturing and labeling
standards, the FDA will not take action against us under the current enforcement policy. There can be no assurance, however, that
the FDA will continue this policy or not take a contrary position with any individual product or group of products. If the FDA
were to take a contrary position, we may be required to seek FDA approval for these products or withdraw such products from the
market. If we decide to withdraw the products from the market, our net revenues for generic pharmaceutical products would decline
materially, and if we decide to seek FDA approval, we would face increased expenses and might need to suspend sales of the products
until such approval was obtained, and there are no assurances that we would receive such approval.
In addition, one group of products that we manufacture
on behalf of a contract customer is marketed by that customer without an approved NDA. If the FDA took enforcement action against
such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market. Our
contract manufacturing revenues for these unapproved products for the three months ended June 30, 2014 and 2013 were $0.1 million
and $0.8 million, respectively. Our contract manufacturing revenues for these unapproved products for the six months ended June
30, 2014 and 2013 were $0.5 million and $1.2 million, respectively.
We receive royalties on the net sales of a group
of contract-manufactured products, which are marketed by the contract customer without an approved NDA. If the FDA took enforcement
action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from
the market. Our royalties on the net sales of these unapproved products for each of the three months ended June 30, 2014 and 2013
were $0.1 million. Our royalties on the net sales of these unapproved products for each of the six months ended June 30, 2014 and
2013 were $0.1 million and $0.2 million.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
11.
|
COMMITMENTS AND CONTINGENCIES – continued
|
In October 2012, we received a telephone call requesting a meeting
with the FDA representatives from the Minneapolis district of the FDA to discuss continued manufacturing and distribution of the
Opium 10mg/mL Solution 118mL product (“Opium Tincture”), which is a non-NDA Product. That meeting was held on October
25, 2012 by conference telephone call and included FDA representatives from the Office of Compliance at the Center for Drug Evaluation
and Research. Our counsel sent a letter to the FDA on November 9, 2012 in support of our position. On April 2, 2014, we received
communication from the FDA confirming that the inspection was closed.
Shareholder Class Action and Derivative Lawsuits
On February 3, 2012, a purported class action lawsuit was filed
in the United States District Court for the Northern District of Illinois under the caption Thomas Lauria, on behalf of himself
and all others similarly situated v. BioSante Pharmaceuticals, Inc. and Stephen M. Simes, naming BioSante Pharmaceuticals, Inc.
and our former President and Chief Executive Officer, Stephen M. Simes, as defendants. The complaint alleges that certain of our
disclosures relating to the efficacy of LibiGel
®
and its commercial potential were false and/or misleading and that
such false and/or misleading statements had the effect of artificially inflating the price of our securities resulting in violations
of Section 10(b) of the Exchange Act, Rule 10b-5 and Section 20(a) of the Exchange Act.
Although a substantially similar complaint was filed
in the same court on February 21, 2012, such complaint was voluntarily dismissed by the plaintiff in April 2012. The plaintiff
sought to represent a class of persons who purchased our securities between February 12, 2010 and December 15, 2011, and sought
unspecified compensatory damages, equitable and/or injunctive relief, and reasonable costs, expert fees and attorneys’ fees
on behalf of such purchasers. On November 6, 2012, the plaintiff filed a consolidated amended complaint. On December 28, 2012,
we and Mr. Simes filed motions to dismiss the consolidated amended complaint. On September 11, 2013, the Illinois district court
judge granted defendants’ motions to dismiss, without prejudice, and gave plaintiffs 28 days to file an amended complaint.
The plaintiffs did not file an amended complaint and the matter has been concluded.
On May 7, 2012, Jerome W. Weinstein, a purported
stockholder of BioSante, filed a shareholder derivative action in the United States District Court for the Northern District of
Illinois under the caption Weinstein v. BioSante Pharmaceuticals, Inc. et al., naming our directors as defendants and BioSante
as a nominal defendant. A substantially similar complaint was filed in the same court on May 22, 2012 and another substantially
similar complaint was filed in the Circuit Court for Cook County, Illinois, County Department, Chancery Division, on June 27, 2012.
The suits generally related to the same events that are the subject of the class action litigation described above. The complaints
alleged breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment as causes of action occurring from
at least February 2010 through December 2011. The complaints sought unspecified damages, punitive damages, costs and disbursements,
and unspecified reforms and improvements in our corporate governance and internal control procedures.
On
September 24, 2012, the United States District Court consolidated the two shareholder derivative cases before it and on November
20, 2012, the plaintiffs filed their consolidated amended complaint. On January 11, 2013, the defendants filed a motion to dismiss
the amended complaint. On September 11, 2013, the Illinois district court judge granted defendants’ motions to dismiss, without
prejudice, and gave plaintiffs 28 days to file an amended complaint. The plaintiffs did not file an amended complaint and the district
court matter has been concluded
.
On November 27, 2012, the plaintiff in the shareholder
derivative action pending in Illinois state court filed an amended complaint. On January 18, 2013, the defendants filed a motion
to dismiss the amended complaint. On July 1, 2013, the Illinois state court judge granted defendants’ motions to dismiss,
without prejudice, and gave plaintiffs until July 31, 2013 to file an amended complaint. On September 9, 2013, the Illinois state
court judge granted defendants’ motion to dismiss, with prejudice. On October 9, 2013, the plaintiffs filed a notice of
appeal to Illinois state appellate court. The plaintiffs reached a settlement with the Company’s insurance carrier in June
2014, which consisted of a one-time payment of $60,000. On July 2, 2014, the Illinois state appellate court granted the plaintiffs
motion for voluntary dismissal with prejudice, which concluded the matter.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
11.
|
COMMITMENTS AND CONTINGENCIES – continued
|
Louisiana Medicaid Lawsuit
On September 11, 2013,
the Attorney General of the State of Louisiana filed a lawsuit in Louisiana state court against numerous pharmaceutical companies,
including us, under various state laws, alleging that each defendant caused the state’s Medicaid agency to provide reimbursement
for drug products that allegedly were not approved by the FDA and therefore allegedly not reimbursable under the federal Medicaid
program. The lawsuit relates to three cough and cold prescription products manufactured and sold by our former Gulfport, Mississippi
operation, which was sold in September 2010. Through its lawsuit, the state seeks unspecified damages, statutory fines, penalties,
attorneys’ fees and costs. On October 15, 2013, the defendants removed the lawsuit to the U.S. District Court. On November 14,
2013, the state filed a motion to remand the lawsuit to the Louisiana state court. While we cannot predict the outcome of the
lawsuit at this time, it could be subject to material damages, penalties and fines. We intend to vigorously defend against all
claims in the lawsuit.
Other Commitments and Contingencies
All manufacturers of the drug Reglan and its generic
equivalent metoclopramide, including us, are facing allegations from plaintiffs in various states claiming bodily injuries as
a result of ingestion of metoclopramide or its brand name Reglan prior to the FDA's February 2009 Black Box warning requirement.
We have been named and served in 92 separate complaints, including three in Pennsylvania, nine in New Jersey, and 80 in California,
covering 2,944 plaintiffs in total. In August 2012, we were dismissed with prejudice from all New Jersey cases. We consider our
exposure to this litigation to be limited due to several factors: (1) the only generic metoclopramide manufactured by us prior
to the implementation of the FDA's warning requirement was an oral solution introduced after May 28, 2008; (2) our market share
for the oral solution was a very small portion of the overall metoclopramide market; and (3) once we received a request for change
of labeling from the FDA, we submitted our proposed changes within 30 days, and such changes were subsequently approved by the
FDA. At the present time, we are unable to assess the likely outcome of the remaining cases. Our insurance company has assumed
the defense of this matter. In addition, our insurance company renewed our product liability insurance on September 1, 2012 and
2013 with absolute exclusions for claims related to Reglan and metoclopramide. We are unable to predict the outcome of these matters
and the possible loss or range of loss, if any, associated with their resolution or any potential effect the legal action may
have on our operations. Furthermore, we cannot provide assurances that the outcome of these matters will not have an adverse effect
on our business, results of operations, financial condition, and cash flow. Like all pharmaceutical manufacturers, we in the future
may be exposed to other product liability claims, which could harm our business, results of operations, financial condition, and
cash flows.
|
12.
|
FAIR VALUE DISCLOSURES
|
Fair value is the price that would be received from
the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement
date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs
used in measuring fair value.
Financial Assets and Liabilities Measured at Fair
Value on a Recurring Basis
The inputs used in measuring the fair value of cash
and cash equivalents are considered to be level 1 in accordance with the three-tier fair value hierarchy. The fair market
values are based on period-end statements supplied by the various banks and brokers that held the majority of our funds. The fair
value of short-term financial instruments (primarily accounts receivable, prepaid expenses, accounts payable, accrued expenses,
borrowings under line of credit, and other current liabilities) approximate their carrying values because of their short-term nature.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
12.
|
FAIR VALUE
DISCLOSURES – continued
|
Our CVRs, which were granted coincident with the
Merger, are considered contingent consideration and are classified as liabilities. As such, the CVRs were recorded as purchase
consideration at their estimated fair value, using level 3 inputs, and are marked to market each reporting period until settlement.
The fair value of CVRs is estimated using the present value of our projection of the expected payments pursuant to the terms of
the CVR agreement, which is the primary unobservable input. If our projection or expected payments were to increase substantially,
the value of the CVRs could increase as a result. The present value of the liability was calculated using a discount rate of 15%.
We determined that the fair value of the CVRs, and the changes in such fair value, was immaterial as of and for the three and
six months ended June 30, 2014.
Prior to the Merger, ANIP’s warrants to purchase
common and preferred stock were classified as derivative liabilities and were measured at fair value using level 3 inputs.
The fair value of stock purchase warrants was determined using a two-step process that included valuing ANIP's equity using both
market and discounted cash flow methods, and then apportioning that value, using an equity allocation model, to each of ANIP's
classes of stock. These models require the use of unobservable inputs such as fair value of ANIP's common and preferred stock,
expected term, anticipated volatility, future interest and interest rates, expected cash flows and the number of outstanding common
and preferred shares as of a future date. We determined that the fair value of the derivative liabilities, and the changes in
such fair value, was immaterial as of and for the three and six months ended June 30, 2013. All such stock purchase warrants expired
in connection with the Merger.
The following table presents our financial assets
and liabilities accounted for at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, by level within the
fair value hierarchy:
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Fair Value at
June
30, 2014
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CVRs
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Description
|
|
Fair Value at
December 31, 2013
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CVRs
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-Financial Assets and Liabilities Measured
at Fair Value on a Recurring Basis
We do not have any non-financial assets and liabilities
that are measured at fair value on a recurring basis.
Non-Financial Assets and Liabilities Measured
at Fair Value on a Non-Recurring Basis
We measure our long-lived assets, including property,
plant and equipment, intangible assets and goodwill, at fair value on a non-recurring basis. These assets are recognized at fair
value when they are deemed to be other-than-temporarily impaired. No such fair value impairment was recognized in the three and
six months ended June 30, 2014 and 2013.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
13.
|
COLLABORATIVE
ARRANGEMENTS
|
Sofgen Pharmaceuticals
In April 2014, we entered into a collaboration agreement
with Sofgen Pharmaceuticals (“Sofgen”) to develop an oral soft gel prescription product (the “April 2014 Sofgen
Agreement”). The product will be subject to an ANDA filing once developed. In general, Sofgen will be responsible for the
development, manufacturing and regulatory submission of the product, including preparation of the ANDA, and we will provide payments
based on the completion of certain milestones. Upon approval, Sofgen will manufacture the drug and we will be responsible for
the marketing and distribution, under our label, of the product in the United States, providing a percentage of profits from sales
of the drug to Sofgen.
Under the April 2014 Sofgen Agreement, Sofgen will
own all the rights, title and interest in the product. During the term of the April 2014 Sofgen Agreement, both parties are prohibited
from developing, selling or distributing any product in the United States that is identical or bioequivalent to the product covered
under the April 2014 Sofgen Agreement. The April 2014 Sofgen Agreement can be terminated or amended under certain specified circumstances.
The April 2014 Sofgen Agreement has an initial term of ten years from the launch of the product, which term will automatically
renew for two year terms until either party terminates the agreement.
We recognize the costs incurred with respect to
the April 2014 Sofgen Agreement as expense and classify the expenses based on the nature of the costs. We have recorded $9 thousand
of research and development expense related to the April 2014 Sofgen Agreement. No revenue has yet been recognized with respect
to the April 2014 Sofgen Agreement.
Dexcel Pharma Technologies Ltd
In June 2014, we entered into a collaboration agreement
with Dexcel Pharma Technologies Ltd (“Dexcel”) to commercialize and sell a generic drug product (the “June 2014
Dexcel Agreement”). The product is subject to FDA approval of an ANDA filing. In general, Dexcel will be responsible for
the manufacturing and regulatory submission of the product, including obtaining approval of the ANDA, and we will provide payments
based on the completion of certain milestones. Upon approval, Dexcel will manufacture the drug and we will be responsible for
the marketing and distribution, under our label, of the product in the United States, providing a percentage of profits from sales
of the drug to Dexcel.
Under the June 2014 Dexcel Agreement, Dexcel will
own all the rights, title and interest in the product. During the term of the June 2014 Dexcel Agreement, both parties are prohibited
from developing, selling, or distributing any product in the United States that is identical or bioequivalent to the product covered
under the June 2014 Dexcel Agreement. The June 2014 Dexcel Agreement can be terminated or amended under certain specified circumstances.
The June 2014 Dexcel Agreement has an initial term of five years from the launch of the product, which term can be renewed for
two year terms if both parties agree, until either party terminates the agreement.
We recognize the costs incurred with respect to
the June 2014 Dexcel Agreement as expense and classify the expenses based on the nature of the costs. We have not yet incurred
any expense related to the June 2014 Dexcel Agreement and no revenue has yet been recognized with respect to the June 2014 Dexcel
Agreement.
Acquisition of Lithobid
®
Product Rights
In July 2014
,
we entered into an agreement to purchase (the “Lithobid Purchase Agreement”) the product rights to Lithobid from Noven
Therapeutics, LLC (“Noven”) for $11.0 million in cash up front, and $1.0 million in cash if certain approvals are
received from the FDA on or before June 30, 2015. Pursuant to the terms of the Lithobid Purchase Agreement, we acquired the intellectual
property rights and NDA associated with Lithobid, as well as raw material inventory.
The product rights intangible asset
will be amortized over its estimated useful life of ten years.
ANI PHARMACEUTICALS, INC.
and
subsidiary
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
|
14.
|
SUBSEQUENT
EVENTS – continued
|
Acquisition of Vancocin
®
Product
Rights
In August 2014
,
we entered into an agreement to purchase (the “Vancocin Purchase Agreement”) the product rights to Vancocin
from Shire ViroPharma Incorporated (“Shire”) for $11.0 million in consideration. Pursuant to the terms of the
Vancocin Purchase Agreement, we acquired the U.S. intellectual property rights and NDA associated with Vancocin, two related
ANDAs, and certain equipment and inventory.
The product rights intangible asset will be amortized over its estimated useful
life of ten years.