ANI Pharmaceuticals, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. Results include Novitium only from its acquisition on November 19, 2021.
Business context
ANI develops, manufactures, and markets branded and generic prescription drugs and provides contract manufacturing and development services. At year-end it reported four manufacturing facilities and a portfolio of 101 products. Its strategy centers on launching Purified Cortrophin Gel, expanding niche generics and established brands, and growing its contract development and manufacturing business.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Net revenue | $216.1 million | $208.5 million |
| Operating loss | $39.8 million | $16.0 million |
| Net loss | $42.6 million | $22.5 million |
| Operating cash flow | $3.3 million | $15.3 million |
| Investing cash flow | $(105.5) million | $(68.3) million |
| Financing cash flow | $194.6 million | $(1.4) million |
- Generic product revenue was $143.6 million, down 2.5%; branded product revenue was $47.6 million, down 0.8%; contract manufacturing revenue increased 8.9% to $10.0 million.
- Royalty and other income rose to $15.0 million from $4.0 million, principally due to an $11.2 million final Yescarta-related royalty. ANI does not expect further royalties under that arrangement.
- Cost of sales, excluding depreciation and amortization, was $100.6 million, or 46.5% of revenue, versus $87.2 million, or 41.8%, in 2020. On this basis, gross profit was approximately $115.5 million and gross margin approximately 53.5%, compared with $121.3 million and 58.2% in 2020.
- Year-end cash and cash equivalents were $100.3 million, versus $7.9 million. Current assets were $321.8 million and current liabilities $87.5 million; the company reported a 3.7 working-capital ratio. Restricted cash of $5.0 million was reported separately.
- Debt at year-end included a $300 million senior secured term loan; the balance sheet reported debt, net of financing costs, of $287.4 million in total. The $40 million revolving facility was undrawn. Term-loan interest was 6.75% at year-end; maturity is November 2027. The debt is secured by substantially all company and domestic-subsidiary assets and carries financial covenants.
Material changes versus 2020
- Revenue increased 3.7%, but operating and net losses widened. Cost of sales rose 15.4%; selling, general and administrative expense rose 29.7%, reflecting Novitium transaction costs and Cortrophin pre-launch selling and marketing costs.
- Operating cash flow fell by $11.9 million, reflecting the net loss, working-capital changes, acquisition transaction costs, Cortrophin launch preparation, litigation payments, and higher income-tax payments.
- Novitium was acquired for net consideration of approximately $206.2 million, including cash, ANI shares, and contingent consideration. It contributed $7.7 million in revenue and a $1.4 million net loss from acquisition through year-end. ANI also acquired product rights from Sandoz for $20.7 million.
- ANI refinanced prior debt with a new $300 million term loan and $40 million revolving facility, issued $25 million of convertible preferred stock, and raised $69.7 million net from a public common-stock offering.
Outlook, risks, contingencies, and unusual items
- The FDA approved Cortrophin Gel on October 29, 2021; full-scale U.S. commercial launch was announced for January 24, 2022. Management expected commercialization expenditures to increase materially in 2022. The filing provides no specific revenue or earnings guidance.
- ANI halted further sales of Inderal LA and its authorized generic, Propranolol ER, while evaluating an N-nitroso-propranolol impurity and engaging with the FDA. The filing estimated these products at approximately 5% of forecast 2022 revenue excluding Cortrophin; future supply and regulatory outcomes were uncertain.
- Two unapproved products, EEMT and Opium Tincture, represented 7% of 2021 revenue. Continued sales depend on the FDA’s enforcement approach; the company may need to seek approval or withdraw them.
- Customer concentration is significant: three wholesalers accounted for 68% of 2021 revenue and approximately 92% of year-end accounts receivable. ANI also relies generally on single qualified API sources; alternative-source approval can take four to 18 months.
- ANI paid $8.4 million to settle the Arbor litigation in 2021. A separate $1.9 million Azurity royalty settlement was recorded in 2021 cost of sales; the February 2022 settlement also requires a royalty of 20% of gross margin on specified product sales for a contractually defined term. Bystolic antitrust claims and patent litigation concerning proposed treprostinil remain among the disclosed proceedings.
- Other notable charges included $9.4 million of Novitium transaction costs, $14.0 million of Cortrophin pre-launch selling and marketing costs, and a $2.4 million intangible-asset impairment. Novitium earn-outs could total up to $46.5 million; the year-end fair value was $31.0 million.
- COVID-19 continued to suppress prescriptions early in 2021 and caused supply-chain delays, although management said market prescription levels appeared near pre-pandemic levels by year-end. Inflation, generic price competition, healthcare reimbursement changes, regulatory compliance, and acquisition integration remain risks.
- The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting. Novitium was excluded from the 2021 internal-control assessment while integration was underway.
Important facts for investors to verify
- Track Cortrophin uptake, payer coverage, manufacturing capacity, and the pace and cost of the rare-disease commercial buildout.
- Monitor the FDA’s review of the NNP impurity, the halted Inderal LA/Propranolol ER sales, and any supply or recall consequences.
- Assess whether Novitium integration, acquired pipeline products, and contingent milestones deliver the expected growth and returns.
- Review debt service, covenant headroom, variable-rate exposure, and the effect of the $40 million undrawn revolver on liquidity.
- Evaluate wholesaler concentration, chargeback and rebate estimates, and exposure from EEMT and Opium Tincture remaining unapproved.