ANI Pharmaceuticals, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022; comparisons are to the corresponding 2021 periods. Unaudited results. ANI develops, manufactures, and markets generic, established-brand, and rare-disease pharmaceuticals. Its Rare Disease segment currently consists of Purified Cortrophin Gel, launched in January 2022. Novitium, acquired in November 2021, contributed revenue and additional costs in 2022.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Net revenue | $83.8 million | $52.1 million | $222.2 million | $155.2 million |
| Operating loss | $5.0 million | $3.6 million | $37.1 million | $16.1 million |
| Net loss | $8.6 million | $4.4 million | $43.7 million | $18.5 million |
| Loss per share, basic and diluted | $0.55 | $0.37 | $2.76 | $1.53 |
| Operating cash flow | Not presented quarterly | Not presented quarterly | $(26.8) million | $15.5 million |
Revenue and margins: Q3 revenue grew 61.0%; nine-month revenue grew 43.1%. Generic product sales rose 51.2% in Q3 and 49.2% year to date, primarily reflecting Novitium products and higher volumes, partly offset by lower selling prices. Cortrophin Gel contributed $12.6 million in Q3 and $24.1 million year to date. Established-brand sales declined 31.4% in Q3 and 18.7% year to date. Cost of sales excluding depreciation and amortization was 39.2% of revenue in Q3 versus 46.9% a year earlier; for nine months it was 46.1% versus 43.0%. Management attributed the Q3 improvement partly to Cortrophin Gel and royalty/service revenue mix; the year-to-date comparison was affected by $11.2 million of 2021 Kite royalty revenue with no associated cost of goods sold.
Expenses and segment results: Q3 R&D was $7.7 million and SG&A was $30.1 million, up 211.8% and 75.1%, respectively. Nine-month R&D was $17.1 million and SG&A was $90.9 million, up 107.8% and 69.5%. Higher spending included Cortrophin Gel launch and sales-force costs, Novitium activity, and acquired-intangible amortization. Q3 segment EBITDA was $22.1 million for Generics, Established Brands, and Other, and a loss of $2.4 million for Rare Disease; nine-month figures were $52.1 million and a $19.5 million loss, respectively. Segment EBITDA excludes corporate/unallocated expenses and is not GAAP operating income.
Cash, liquidity, and debt: At September 30, cash and cash equivalents were $56.3 million, restricted cash was $5.0 million, and current assets were $309.4 million against current liabilities of $81.6 million. Long-term debt, net of financing costs, was $285.9 million; the reported current debt net of costs was $0.9 million, while the principal schedule shows $3.0 million due within the current portion. Gross term-loan principal was approximately $297.8 million, at a 9.14% interest rate. The $40 million revolving facility was undrawn and available subject to conditions. Nine-month operating, investing, and financing cash flows were $(26.8) million, $(12.6) million, and $(4.6) million, respectively; cash and cash equivalents declined $44.0 million from year-end 2021. Operating cash use reflected losses and working-capital increases, including receivables and inventory. Management said available resources, anticipated collections and revenue, and revolver availability should cover working-capital needs and debt obligations for at least 12 months.
Material changes, outlook, and risks
- ANI reported no specific numerical revenue or earnings guidance in the provided filing text. Management expects 2022 Cortrophin commercialization spending to be significantly higher than in 2021.
- ANI plans to cease operations at its Oakville, Ontario facility by Q1 2023, transition most products to U.S. sites, and seek a buyer. The filing cautions that a sale, timing, and proceeds are uncertain. Year-to-date restructuring expense was $4.1 million; further employee-related and accelerated-depreciation charges were expected.
- Material unusual items included a $2.5 million Q3 and $2.1 million year-to-date contingent-consideration fair-value expense; the 2021 comparison included an $8.4 million Arbor legal settlement expense. ANI recognized a $13.3 million year-to-date income-tax benefit.
- Risks highlighted include supply-chain disruption and reliance on single-source API suppliers; generic price competition and prescription trends; FDA and other regulatory matters; product-liability and other litigation; and execution of the Oakville transition. Three customers represented 80% of accounts receivable at quarter-end. One supplier represented about 13% of inventory purchases for the first nine months.
- Pending matters include Bystolic antitrust litigation, ranitidine-related cases involving ANI and/or Novitium, and an October 2022 patent complaint concerning a product manufactured by Novitium; ANI disputes liability. The filing does not provide a clear estimate of reasonably possible losses for these matters.
Important facts for investors to verify
- Whether Cortrophin Gel revenue growth and commercialization costs translate into improving Rare Disease segment economics and cash generation.
- Whether operating cash use, receivables, inventory, and customer concentration remain manageable as the business grows.
- Debt-service capacity under the high-rate term loan, covenant compliance, and the conditions attached to the $40 million revolver.
- Progress, costs, supply continuity, and potential proceeds from the Oakville closure and facility transition.
- Developments in material litigation, regulatory matters, API sourcing, and the integration of Novitium.