Amneal Pharmaceuticals Inc

Previous wording

Amneal Pharmaceuticals, Inc. (the “Company”, “we,” “us,” or “our”) is a global pharmaceutical company that develops, manufactures, markets, and distributes a diverse portfolio of essential medicines, including retail generics, injectables, biosimilars and specialty branded pharmaceuticals. We operate principally in the United States (“U.S.”), India, and Ireland, and sell to wholesalers, distributors, hospitals, governmental agencies, chain pharmacies and individual pharmacies, either directly or indirectly.

Current wording

Amneal Pharmaceuticals, Inc. (the “Company”, “we,” “us,” or “our”) is a global biopharmaceutical company that develops, manufactures, markets, and distributes a diverse portfolio of essential medicines. Our Affordable Medicines segment includes retail generics, injectables, and biosimilars. In our Specialty segment, we offer a portfolio of branded pharmaceuticals focused primarily on central nervous system and endocrine disorders. Through our AvKARE segment, we are a distributor of pharmaceuticals and other products for the U.S. federal government, retail, and institutional markets. We operate principally in the United States (“U.S.”), India, and Ireland.

Previous wording

The following discussion and analysis for the three and nine months ended September 30, 2024 should also be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements for the year ended December 31, 2023 included in our 2023 Annual Report on Form 10-K.

Current wording

The following discussion and analysis for the three months ended March 31, 2025 should also be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements for the year ended December 31, 2024 included in our 2024 Annual Report on Form 10-K.

Previous wording

We have three reportable segments: Generics, Specialty, and AvKARE.

Current wording

We have three reportable segments: Affordable Medicines, Specialty, and AvKARE. Refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K for a description of our segments. During the fourth quarter of 2024, we changed the name of our Generics segment to “Affordable Medicines” to reflect the full product offering of the segment. The name change did not result in any change to the composition of our reportable segments and, therefore, did not result in any change to our historical results.

Previous wording

While it is difficult to accurately measure the impact of inflation, we estimate our business will experience an increase in costs due to inflation of approximately $10.0 million to $15.0 million for the year ending December 31, 2024, excluding the impact of interest rates. Notwithstanding our estimates, rising inflationary pressures due to higher input costs, including higher material, transportation, labor and other costs, could exceed our expectations, which would further adversely impact our operating results in future periods.

Current wording

While it is difficult to accurately measure the impact of inflation, we do not currently expect a material impact related to inflation for the year ending December 31, 2025. Notwithstanding our estimates, rising inflationary pressures due to higher input costs, including higher material, transportation, tariff impacts on supply, labor and other costs, could exceed our expectations, which would further adversely impact our operating results in future periods.

Previous wording

•Growth in our Generics segment net revenue of $137.6 million, primarily due to new generic products launched in 2024 and 2023, which include biosimilars that contributed $47.0 million of year-over-year growth and other new generic products that contributed $90.2 million of year-over-year growth, and strong volume growth, partially offset by price erosion. Net revenue for thenine months ended September 30, 2023 included a non-recurring customer order of $21.0 million.

Current wording

•Growth in our Affordable Medicines segment net revenue of $23.4 million, primarily due to new products launched in 2025 and 2024, which contributed $40.8 million of year-over-year growth, and strong volume growth, partially offset by price erosion.

Previous wording

•Growth in our AvKARE segment net revenue of $27.6 million, primarily driven bygrowth in our distribution channel and government label channel which resulted from new product introductions.

Current wording

•Growth in our AvKARE segment net revenue of $9.8 million, primarily driven bygrowth in our government label channel resulting from new product introductions, partially offset by a decline in our lower margin distribution channel.

Previous wording

Cost of goods sold increased 11.7% for thethree months ended September 30, 2024 as compared to the prior year period. The increase in cost of goods sold was primarily due to increased AvKARE and Generics volume, increased plant and freight costs, and an increased inventory provision, partially offset by efficiencies in our supply costs.

Current wording

Cost of goods sold increased 4.4% for the three months ended March 31, 2025 as compared to the prior year period. The increase in cost of goods sold was primarily due to increased Affordable Medicines and AvKARE volume, increased amortization related to CREXONT® andincreased plant and freight costs, partially offset by manufacturing efficiencies.

Previous wording

Selling, general, and administrative (“SG&A”) expenses for the three months ended September 30, 2024 increased 5.0% as compared to the prior year period, primarily due to increases in employee compensation and promotion associated with ONGENTYS® and CREXONT®.

Current wording

SG&A expenses for the three months ended March 31, 2025 increased 5.1% as compared to the prior year period, primarily due to increases in employee compensation and launch costs associated with CREXONT®, partially offset by a reduction in legal expenses primarily resulting from insurance coverage for certain legal fees.

Previous wording

For the nine months ended September 30, 2024, charges related to legal matters, net of $94.9 million were primarily associated with a settlement in principle on the primary financial terms for a nationwide resolution to the opioids cases that have been filed and that might have been filed against us by political subdivisions and Native American tribes across the U.S. Refer to Note 17. Commitments and Contingencies for additional information.

Current wording

For the three months ended March 31, 2024, charges related to legal matters, net of$94.4 million were primarily associated with a settlement in principle on the primary financial terms for a nationwide resolution to the opioids cases that have been filed and that might have been filed against us by political subdivisions and Native American tribes across the U.S. Refer to Note 16. Commitments and Contingencies for additional information.

Previous wording

Total other expense, net for the three months ended September 30, 2024 increased 39.3% as compared to the prior year period. The increase was primarily driven by a $14.6 million increase in interest expense as a result of higher rates on our variable-rate debt and an increase in the amount outstanding on our revolving credit facility and a $10.7 million increase in our tax receivable agreement liability (refer to Note 5. Income Taxes for additional information), partially offset by a gain resulting from favorable period-over-period foreign exchange rates primarily driven by the Euro.

Current wording

Total other expense, net for the three months ended March 31, 2025 decreased 3.0% as compared to the prior year period. The decrease was primarily driven by an $8.8 million decrease in interest expense as a result of lower rates and lower amounts outstanding on our variable-rate debt and the favorable impact of foreign exchange, partially offset by an $8.7 million period-over-period increase in our tax receivable agreement liability.

Previous wording

For the nine months ended September 30, 2024, our provision for income taxes and effective tax rate were$13.4 million and(33.9)%, respectively, as compared to a benefit from income taxes and effective tax rate of$(1.4) million and(3.3)%, respectively, for the nine months ended September 30, 2023. The period-over-period changes in the provision for income taxes and effective tax rate primarily related to changes in the jurisdictional mix of income and a discrete Indian tax benefit of approximately $2.9 million from the utilization of a loss carryforward during the three months ended September 30, 2023.

Current wording

For the three months ended March 31, 2025, our provision for income taxes and effective tax rate were$12.9 million and 34.3%, respectively, as compared to$6.2 million and(8.2)%, respectively, for the three months ended March 31, 2024. The period-over-period changes in the provision for income taxes and effective tax rate primarily related to differences in jurisdictional mix of income, the utilization of net operating losses in the prior period and discrete items related to share-based compensation in the current period.

Previous wording

Generics net revenue for the nine months ended September 30, 2024 increased 12.4% as compared to the prior year period, primarily due to new generic products launched in 2024 and 2023, which include biosimilars that contributed $47.0 million of year-over-year growth and other new generic products that contributed $90.2 million of year-over-year growth, and strong volume growth, partially offset by price erosion. Net revenue for thenine months ended September 30, 2023 included a non-recurring customer order of $21.0 million.

Current wording

Affordable Medicines net revenue for the three months ended March 31, 2025 increased 6.0% as compared to the prior year period, primarily due to new products launched in 2025 and 2024, which contributed $40.8 million of year-over-year growth, and strong volume growth, partially offset by price erosion.

Previous wording

Generics cost of goods sold for the three months ended September 30, 2024 increased 5.5% as compared to the prior year period, primarily due to costs associated with increased sales volume and increased plant and freight costs, partially offset by efficiencies in our supply costs.

Current wording

Affordable Medicines cost of goods sold for the three months ended March 31, 2025 increased 1.1% as compared to the prior year period, primarily due to costs associated with increased sales volume and increased plant and freight costs, partially offset by manufacturing efficiencies.

Previous wording

Generics SG&A expense for the three months ended September 30, 2024 decreased 7.7% as compared to the prior year period, primarily due to reduced legal fees, partially offset by increases in employee compensation.

Current wording

Affordable Medicines R&D expenses for the three months ended March 31, 2025 decreased 9.9% as compared to the prior year period, primarily due to a decrease in in-licensing and upfront milestone payments of $3.3 million and reduced project spend, partially offset by increases in employee compensation.

Previous wording

For the nine months ended September 30, 2024, charges related to legal matters, net of $94.9 million were primarily associated with a settlement in principle on the primary financial terms for a nationwide resolution to the opioids cases that have been filed and that might have been filed against us by political subdivisions and Native American tribes across the U.S. Refer to Note 17. Commitments and Contingencies for additional information.

Current wording

For the three months ended March 31, 2024, charges related to legal matters, net of $94.4 million were primarily associated with a settlement in principle on the primary financial terms for a nationwide resolution to the opioids cases that have been filed and that might have been filed against us by political subdivisions and Native American tribes across the U.S. Refer to Note 16. Commitments and Contingencies for additional information.

Previous wording

AvKARE SG&A expense for the nine months ended September 30, 2024 increased 8.3% as compared to the prior year period, primarily due to higher sales-related expenses, increases in employee compensation and higher professional fees, partially offset by reduced logistic costs.

Current wording

AvKARE SG&A expense for the three months ended March 31, 2025 increased 5.3% as compared to the prior year period, primarily due to increases in employee compensation and higher sales-related expenses.

Previous wording

Our primary source of liquidity is cash generated from operations, available cash on hand, and borrowings under debt financing arrangements (as defined and discussed in Note 16. Debt in our 2023 Annual Report on Form 10-K). We have access to$455.2 million of available capacity under the Amended New Revolving Credit Facility and$28.0 million of available capacity under the Amended Rondo Revolving Credit Facility as of September 30, 2024. We believe these sources are sufficient to fund our planned operations, meet our interest and contractual obligations, including acquisitions, and provide sufficient liquidity over the next 12 months from the date of filing of this Form 10-Q. However, our ability to satisfy our working capital requirements and debt obligations will depend upon economic conditions, our ability to negotiate and maintain satisfactory terms under our borrowing and debt facilities in the future, and demand for our products, which are factors that may be out of our control. Our primary uses of capital resources are to fund operating activities, including R&D expenses associated with new product filings, and pharmaceutical product manufacturing expenses, license payments, spending on production facility expansions, capital equipment, acquisitions, and legal settlements.

Current wording

Our primary source of liquidity is cash generated from operations, available cash on hand, and borrowings under debt financing arrangements (as defined and discussed in Note 15. Debt in our 2024 Annual Report on Form 10-K). As of March 31, 2025, we had access to$305.2 million of available capacity under the Amended New Revolving Credit Facility and$28.0 million of available capacity under the Amended Rondo Revolving Credit Facility. On April 9, 2025, the Company executed an amendment to the Amended Rondo Revolving Credit Facility to increase (i) the borrowing capacity from $70 million to $125.0 million and (ii) the letter of credit commitment from $60 million to $90 million, and extend the maturity to April 9, 2030. We believe these sources are sufficient to fund our planned operations, meet our interest and contractual obligations, including acquisitions, and provide sufficient liquidity over the next 12 months from the date of filing of this Quarterly Report on Form 10-Q. However, our ability to satisfy our working capital requirements and debt obligations will depend upon economic conditions, the impact of international trade policy, including tariffs, our ability to negotiate and maintain satisfactory terms under our borrowing and debt facilities in the future, and demand for our products, which are factors that may be out of our control. Our primary uses of capital resources are to fund operating activities, including R&D expenses associated with new product filings, and pharmaceutical product manufacturing expenses, license payments, spending on production facility expansions, capital equipment, acquisitions, and legal settlements.

Previous wording

We estimate that we will invest approximately $60.0 million to $70.0 million during 2024 for capital expenditures to support and grow our existing operations, primarily related to investments in manufacturing facilities and equipment, and information technology.

Current wording

We estimate that we will invest approximately $120.0 million during 2025 for capital expenditures to support and grow our existing operations, primarily related to investments in manufacturing equipment, information technology, and facilities. Our 2025 estimate includes capital expenditures for our collaboration and supply agreement with Metsera, Inc. (“Metsera”), of which we expect Metsera to reimburse us approximately $20.0 million. We expect such reimbursements to primarily be included in our cash flows from financing activities.

Previous wording

Over the next 12 months, we expect to make substantial payments, including monthly interest and quarterly principal amounts due for our Term Loan Due 2028, monthly interest and the remaining principal balance on our Term Loan Due 2025, monthly interest on our Amended New Credit Facility, and contractual payments for leased premises. Refer to Note 16. Debt, Note 18. Leases, and Commitments and Contractual Obligations under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K for additional information on our indebtedness and leases, respectively.

Current wording

Over the next 12 months, we expect to make substantial payments, including monthly interest and quarterly principal amounts due for our Term Loan Due 2028, monthly interest on our Amended New Credit Facility, and contractual payments for leased premises. Refer to Note 12. Debt in this Quarterly Report on Form 10-Q and Note 15. Debt, Note 17. Leases, and Commitments and Contractual Obligations under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K for additional information.

Previous wording

In late April 2024, we reached a nationwide settlement in principle on the primary financial terms, with no admission of wrongdoing, for a nationwide resolution to the opioids cases that have been filed and that might have been filed by Attorneys

Current wording

In late April 2024, we reached a nationwide settlement in principle on the primary financial terms, with no admission of wrongdoing, for a nationwide resolution to the opioids cases that have been filed and that might have been filed by Attorneys General, political subdivisions and Native American tribes. Refer to Note 16. Commitments and Contingencies for additional information.

Previous wording

In 2018, we entered into a tax receivable agreement (“TRA”) for which we were generally required to pay the other holders of Amneal Common Units 85% of the applicable tax savings, if any, in U.S. federal and state income tax that we were deemed to realize as a result of certain tax attributes of their Amneal Common Units sold to us (or exchanged in a taxable sale) and that are created as a result of (i) the sales of their Amneal Common Units for shares of Class A common stock and (ii) tax benefits attributable to payments made under the TRA. As part of the Reorganization (as defined in Note 1. Nature of Operations in our 2023 Annual Report on Form 10-K), the TRA was amended to reduce our future obligation to pay 85% of the realized tax benefits subject to the TRA to 75% of such realized benefits. As of both September 30, 2024 and December 31, 2023, the contingent TRA liability, including the impact of the amendment, was approximately $185.0 million.

Current wording

As part of the Reorganization (as defined in Note 1. Nature of Operations in our 2024 Annual Report on Form 10-K), the tax receivable agreement (“TRA”) was amended to reduce our future obligation to pay 85% of the realized tax benefits subject to the TRA to 75% of such realized benefits. As of March 31, 2025, the contingent TRA liability, including the impact of the amendment, was approximately $123.1 million. During the three months ended March 31, 2025, the Company made payments of $3.0 million associated with the TRA.

Previous wording

The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing and amount of our taxable income, and the corporate tax rate in effect at the time of realization of our taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from the use of the TRA’s attributes). Because the Amneal Group (as defined in Item 1. Businessin the Company’s 2023 Annual Report on Form 10-K) has exchanged all of its Amneal Common Units pursuant to the Reorganization, the primary remaining factor that could increase the contingent TRA liability is an increase in the effective tax rate. Since the combined rate for federal and state and local income taxes, as of September 30, 2024, has not changed significantly since December 31, 2023, the contingent TRA liability has not changed significantly during 2024. In addition, any future payments under the TRA may create additional basis adjustments, which may result in an additional layer of depreciation and amortization allocable to the Company, resulting in additional TRA payments. The timing and amount of payments may also be accelerated under certain conditions, such as a change of control or other early termination event, which could give rise to our obligation to make TRA payments in advance of tax benefits being realized. For further information, refer to Item 1A. Risk Factors in our 2023 Annual Report on Form 10-K and Note 5. Income Taxesin this Form 10-Q.

Current wording

The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing and amount of our taxable income, and the corporate tax rate in effect at the time of realization of our taxable income. The timing and amount of payments may also be accelerated under certain conditions, such as a change of control or other early termination event, which could give rise to our obligation to make TRA payments in advance of tax benefits being realized. For further information, including our recognized current and long-term liabilities for the TRA, refer to Note 4. Income Taxes in this Quarterly Report on Form 10-Q and Item 1A. Risk Factors and Note 6. Income Taxesin our 2024 Annual Report on Form 10-K.

Previous wording

In 2020, we acquired a 65.1% controlling interest in both AvKARE Inc., a Tennessee corporation, now a limited liability company (“AvKARE, LLC”), and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability company (“R&S”). The sellers of AvKARE, LLC and R&S (the “AvKARE Sellers”) hold the remaining 34.9% interest in the holding company that directly owns the acquired companies (“Rondo”). We attribute 34.9% of the net income or loss associated with Rondo to redeemable non-controlling interests. During the nine months ended September 30, 2024 and 2023, we made cash tax distributions of $14.4 million and $10.3 million, respectively, to the AvKARE Sellers.

Current wording

In 2020, we acquired a 65.1% controlling interest in both AvKARE Inc., a Tennessee corporation, now a limited liability company (“AvKARE, LLC”), and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability company (“R&S”). The sellers of AvKARE, LLC and R&S (the “AvKARE Sellers”) hold the remaining 34.9% interest in the holding company that directly owns the acquired companies (“Rondo”). We attribute 34.9% of the net income or loss associated with Rondo to redeemable non-controlling interests. During the three months ended March 31, 2025 and 2024, we made cash tax distributions of $0.1 million and $0.6 million, respectively, to the AvKARE Sellers. During April 2025, we made cash tax distributions of $4.8 million to the AvKARE Sellers.

Previous wording

The following table sets forth our summarized, consolidated cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

Current wording

The following table sets forth our summarized, consolidated cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Previous wording

Net cash provided by operating activities was $177.0 million for the nine months ended September 30, 2024 as compared to $209.8 million in the prior year period. The decrease in net operating cash flows for the nine months ended September 30, 2024 as compared to the prior year period was primarily driven by (i) lower collections of outstanding accounts receivable due to timing of sales in the quarter ended December 31, 2022, which benefited the nine months ended September 30, 2023 and (ii) receipt of a $21.4 million upfront payment associated with thelicense agreement with Orion Corporation during the nine months ended September 30, 2023, partially offset by (i) increased profitability adjusted for non-cash items, (ii) lower period over period payments associated with the Opana ER® antitrust litigation settlement and (iii) favorable working capital movements, most notably an increase in days payables outstanding.

Current wording

Net cash provided by operating activities was $7.4 million for the three months ended March 31, 2025 as compared to net cash used in operating activities of $4.4 million in the prior year period. The period-over-period increase was primarily driven by (i) payment of $52.4 million associated with the Opana ER® antitrust litigation settlement during the three months ended March 31, 2024, (ii) higher period-over-period collections of outstanding receivables, and(iii)increased profitability adjusted for non-cash items, partially offset by a decrease in accounts payables due to timing.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $46.9 million as compared to $37.5 million in the prior year period. The period-over-period increase in net cash used in investing activities was primarily due to the payment of a $9.5 million sales-based milestone related tothe licensing and supply agreement with mAbxience S.L. for its biosimilar candidate for Avastin® (bevacizumab) and higher capital expenditures, partially offset by $5.0 million in proceeds from the sale of a subsidiary in India to a subsidiary of Kashiv (refer to Note 19. Related Party Transactions for additional information).

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 was $17.8 million as compared to $19.8 million in the prior year period. The period-over-period decrease in net cash used in investing activities was primarily due to a decrease in acquired intangible assets primarily driven by the payment of a sales-based milestone related to a licensing and supply agreement in the prior year period, partially offset by higher capital expenditures.

Previous wording

Net cash used in financing activities was $150.6 million for the nine months ended September 30, 2024 as compared to $111.7 million in the prior year period. For the nine months ended September 30, 2024 and 2023, total debt repayments (including payments on the Sellers Notes), net of borrowings were $127.3 million and $38.8 million, respectively. The period-over-period increase in net cash used in financing activities was also due to an increase in employee payroll tax withholding on restricted stock unit vesting, partially offset bya period-over-period decrease in tax distributions to non-controlling interests of $53.4 million.

Current wording

Net cash used in financing activities was $39.2 million for the three months ended March 31, 2025 as compared to $23.2 million in the prior year period. The period-over-period increase in net cash used in financing activities was primarily due to an increase in employee payroll tax withholding on restricted stock unit and performance stock unit vesting.