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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission file number 001-36509

AMPHASTAR PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)

Delaware

 

33-0702205

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

11570 6th Street

 

Rancho Cucamonga, CA

 

91730

(Address of principal executive offices)

(zip code)

(909) 980-9484

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Securities registered pursuant to Section 12(b) of the Act:

T

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

AMPH

The NASDAQ Stock Market LLC

The number of shares outstanding of the registrant’s only class of common stock as of August 2, 2023 was 48,855,602.

Table of Contents

AMPHASTAR PHARMACEUTICALS, INC.

TABLE OF CONTENTS

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

Special Note About Forward-Looking Statements

Part I. FINANCIAL INFORMATION

PAGE

Item 1. Financial Statements (unaudited):

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

1

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022

2

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022

3

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022

4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022

5

Notes to Condensed Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3. Quantitative and Qualitative Disclosure about Market Risk

43

Item 4. Controls and Procedures

43

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

44

Item 1A. Risk Factors

44

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and, Issuer Purchases of Equity Securities

53

Item 3. Defaults Upon Senior Securities

53

Item 4. Mine Safety Disclosures

53

Item 5. Other Information

53

Item 6. Exhibits

55

Signatures

56

Table of Contents

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains “forward-looking statements” that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the following words: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. Forward-looking statements relate to future events or future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by the forward-looking statements. These forward-looking statements include, but are not limited to, statements about:

our expectations regarding the sales and marketing of our products;
our expectations regarding our newly acquired product, BAQSIMI®, including with respect to our ability to increase our revenues and derive certain benefits as a result of our acquisition of BAQSIMI®;
our ability to successfully acquire and integrate assets, including our ability to integrate BAQSIMI®;
our expectations regarding our manufacturing and production and the integrity of our supply chain for our products, including the risks associated with our single source suppliers;
our business and operations in general, including: any resurgence of the COVID-19 pandemic, adverse impacts of the Russia-Ukraine conflict and related macroeconomic conditions on our business, financial condition, operations, cash flows and liquidity;
our ability to attract, hire, and retain highly skilled personnel;
interruptions to our manufacturing and production as a result of natural catastrophic events or other causes beyond our control such as power disruptions or widespread disease outbreaks, such as any resurgence of the COVID-19 pandemic and the Russia-Ukraine conflict;
global, national and local economic and market conditions, specifically with respect to geopolitical uncertainty, including the Russia-Ukraine conflict, inflation and rising interest rates;
the timing and likelihood of U.S. Food and Drug Administration, or FDA, approvals and regulatory actions on our product candidates, manufacturing activities and product marketing activities;
our ability to advance product candidates in our platforms into successful and completed clinical trials and our subsequent ability to successfully commercialize our product candidates;
cost and delays resulting from the extensive pharmaceutical regulations to which we are subject;
our ability to compete in the development and marketing of our products and product candidates;
our expectations regarding the business of our Chinese subsidiary, Amphastar Nanjing Pharmaceuticals, Ltd., or ANP;
the potential for adverse application of environmental, health and safety and other laws and regulations on our operations;
our expectations for market acceptance of our new products and proprietary drug delivery technologies, as well as those of our active pharmaceutical ingredient, or API, customers;
the effects of reforms in healthcare regulations and reductions in pharmaceutical pricing, reimbursement and coverage;
our expectations in obtaining insurance coverage and adequate reimbursement for our products from third-party payers;
the amount of price concessions or exclusion of suppliers adversely affecting our business;
variations in intellectual property laws, our ability to establish and maintain intellectual property protection for our products and our ability to successfully defend our intellectual property in cases of alleged infringement;
the implementation of our business strategies, product development strategies and technology utilization;
the potential for exposure to product liability claims;
our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions, divestitures or investments, including the anticipated benefits of such acquisitions, divestitures or investments;
our ability to expand internationally;
economic and industry trends and trend analysis;
our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
the impact of trade tariffs, export or import restrictions, or other trade barriers;
the impact of Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare reforms in the countries in which we operate including the potential for drug price controls;
the impact of global and domestic tax reforms;
the timing for completion and the validation of the new construction at our ANP and Amphastar facilities;
the timing and extent of share buybacks; and
our financial performance expectations, including our expectations regarding our backlog, revenue, cost of revenue, gross profit or gross margin, operating expenses, including changes in research and development, sales and marketing and general and administrative expenses, and our ability to achieve and maintain future profitability.

Table of Contents

You should read this Quarterly Report and the documents that we reference elsewhere in this Quarterly Report completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. In light of the significant risks and uncertainties to which our forward-looking statements are subject, you should not place undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. We discuss many of these risks and uncertainties in greater detail in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2022, particularly in Item 1A. “Risk Factors.” These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report regardless of the time of delivery of this Quarterly Report, and such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report.

Unless expressly indicated or the context requires otherwise, references in this Quarterly Report to “Amphastar,” “the Company,” “we,” “our,” and “us” refer to Amphastar Pharmaceuticals, Inc. and our subsidiaries.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMPHASTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

    

June 30, 

    

December 31, 

2023

2022

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

148,595

$

156,098

Restricted cash

2,685

235

Short-term investments

14,541

19,664

Restricted short-term investments

 

2,200

 

2,200

Accounts receivable, net

 

104,715

 

88,804

Inventories

 

104,617

 

103,584

Income tax refunds and deposits

 

1,329

 

171

Prepaid expenses and other assets

 

5,872

 

7,563

Total current assets

 

384,554

 

378,319

Property, plant, and equipment, net

 

278,526

 

238,266

Finance lease right-of-use assets

657

753

Operating lease right-of-use assets

26,327

25,554

Investment in unconsolidated affiliate

1,462

2,414

Goodwill and intangible assets, net

 

625,603

 

37,298

Other assets

 

20,269

 

20,856

Deferred tax assets

 

40,868

 

38,527

Total assets

$

1,378,266

$

741,987

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

217,536

$

84,242

Income taxes payable

 

17,696

 

4,571

Current portion of long-term debt

 

12,920

 

3,046

Current portion of operating lease liabilities

3,133

3,003

Total current liabilities

 

251,285

 

94,862

Long-term reserve for income tax liabilities

 

7,225

 

7,225

Long-term debt, net of current portion and unamortized debt issuance costs

 

488,280

 

72,839

Long-term operating lease liabilities, net of current portion

24,407

23,694

Deferred tax liabilities

 

201

 

144

Other long-term liabilities

 

17,633

 

14,565

Total liabilities

 

789,031

 

213,329

Commitments and contingencies

Stockholders’ equity:

Preferred stock: par value $0.0001; 20,000,000 shares authorized; no shares issued and outstanding

 

 

Common stock: par value $0.0001; 300,000,000 shares authorized; 59,068,477 and 48,818,806 shares issued and outstanding as of June 30, 2023 and 58,110,231 and 48,112,069 shares issued and outstanding as of December 31, 2022, respectively

 

6

 

6

Additional paid-in capital

 

471,110

 

455,077

Retained earnings

 

323,880

 

271,723

Accumulated other comprehensive loss

 

(8,324)

 

(8,624)

Treasury stock

 

(197,437)

 

(189,524)

Total equity

589,235

528,658

Total liabilities and stockholders’ equity

$

1,378,266

$

741,987

See Accompanying Notes to Condensed Consolidated Financial Statements.

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AMPHASTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

Three Months Ended

Six Months Ended

 

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

 

Net revenues

$

145,712

$

123,467

$

285,734

$

243,835

Cost of revenues

 

72,974

 

60,111

 

139,156

 

124,653

Gross profit

 

72,738

 

63,356

 

146,578

 

119,182

Operating expenses:

Selling, distribution, and marketing

 

6,718

 

5,756

 

13,827

11,275

General and administrative

 

12,281

 

9,979

 

25,764

22,449

Research and development

 

16,843

 

22,798

 

36,658

39,021

Total operating expenses

 

35,842

 

38,533

 

76,249

 

72,745

Income from operations

 

36,896

 

24,823

 

70,329

 

46,437

Non-operating income (expenses):

Interest income

 

1,030

 

229

 

1,954

410

Interest expense

 

(3,602)

 

(397)

 

(4,000)

(752)

Other income (expenses), net

 

(1,516)

 

(1,504)

 

(1,906)

6,089

Total non-operating income (expenses), net

 

(4,088)

 

(1,672)

 

(3,952)

 

5,747

Income before income taxes

 

32,808

 

23,151

 

66,377

 

52,184

Income tax provision

 

6,383

 

5,551

 

13,135

9,628

Income before equity in losses of unconsolidated affiliate

26,425

17,600

53,242

42,556

Equity in losses of unconsolidated affiliate

(301)

(254)

(1,086)

(957)

Net income

$

26,124

$

17,346

$

52,156

$

41,599

Net income per share:

Basic

$

0.54

$

0.35

$

1.08

$

0.86

Diluted

$

0.49

$

0.33

$

0.99

$

0.79

Weighted-average shares used to compute net income per share:

Basic

 

48,404

 

48,864

 

48,202

48,501

Diluted

 

53,102

 

53,227

 

52,536

52,603

See Accompanying Notes to Condensed Consolidated Financial Statements.

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AMPHASTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; in thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

 

Net income

$

26,124

$

17,346

$

52,156

$

41,599

Other comprehensive income (loss), net of income taxes

Foreign currency translation adjustment

 

(56)

 

(1,464)

 

300

(1,944)

Total other comprehensive income (loss)

 

(56)

 

(1,464)

 

300

 

(1,944)

Total comprehensive income

$

26,068

$

15,882

$

52,456

$

39,655

See Accompanying Notes to Condensed Consolidated Financial Statements.

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AMPHASTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited; in thousands, except share data)

Common Stock

Accumulated

Treasury Stock

Additional

Other

Paid-in

Retained

Comprehensive

Shares

Amount

Capital

Earnings

loss

Shares

Amount

Total

Balance as of December 31, 2022

 

58,110,231

$

6

$

455,077

$

271,723

$

(8,624)

 

(9,998,162)

$

(189,524)

$

528,658

Net income

 

 

 

 

26,032

 

 

 

 

26,032

Other comprehensive income

 

 

 

 

 

356

 

 

 

356

Purchase of treasury stock

 

 

 

 

 

 

(263,131)

(8,015)

 

(8,015)

Issuance of common stock in connection with the Company's equity plans

 

330,300

 

 

(4,565)

 

 

 

 

 

(4,565)

Share-based compensation expense

 

 

 

6,111

 

 

 

 

 

6,111

Balance as of March 31, 2023

 

58,440,531

$

6

$

456,623

$

297,755

$

(8,268)

 

(10,261,293)

$

(197,539)

$

548,577

Net income

 

 

 

 

26,124

 

 

 

 

26,124

Other comprehensive loss

 

 

 

 

 

(56)

 

 

 

(56)

Purchase of treasury stock

 

 

 

 

 

 

(3,585)

(129)

 

(129)

Issuance of treasury stock in connection with the Company's equity plans

 

 

(231)

 

 

 

15,207

231

 

Issuance of common stock in connection with the Company's equity plans

 

627,946

 

 

9,853

 

 

 

 

 

9,853

Share-based compensation expense

 

 

 

4,865

 

 

 

 

 

4,865

Balance as of June 30, 2023

 

59,068,477

$

6

$

471,110

$

323,880

$

(8,324)

 

(10,249,671)

$

(197,437)

$

589,235

Common Stock

Accumulated

Treasury Stock

Additional

Other

Paid-in

Retained

Comprehensive

Shares

Amount

Capital

Earnings

loss

Shares

Amount

Total

Balance as of December 31, 2021

 

56,440,202

$

6

$

422,423

$

180,337

$

(6,765)

 

(8,725,290)

$

(150,479)

$

445,522

Net income

 

 

 

 

24,253

 

 

 

 

24,253

Other comprehensive loss

 

 

 

 

 

(480)

 

 

 

(480)

Purchase of treasury stock

 

 

 

 

 

 

(51,168)

(1,229)

 

(1,229)

Issuance of treasury stock in connection with the Company's equity plans

(428)

33,231

428

Issuance of common stock in connection with the Company's equity plans

 

1,055,200

 

 

6,437

 

 

 

 

 

6,437

Share-based compensation expense

 

 

 

5,022

 

 

 

 

 

5,022

Balance as of March 31, 2022

 

57,495,402

$

6

$

433,454

$

204,590

$

(7,245)

 

(8,743,227)

$

(151,280)

$

479,525

Net income

 

 

 

 

17,346

 

 

 

 

17,346

Other comprehensive loss

 

 

 

 

 

(1,464)

 

 

 

(1,464)

Purchase of treasury stock

 

 

 

 

 

 

(189,840)

(6,118)

 

(6,118)

Issuance of treasury stock in connection with the Company's equity plans

 

 

(430)

 

 

 

29,019

430

 

Issuance of common stock in connection with the Company's equity plans

 

400,935

 

 

5,783

 

 

 

 

 

5,783

Share-based compensation expense

 

 

 

4,235

 

 

 

 

 

4,235

Balance as of June 30, 2022

 

57,896,337

$

6

$

443,042

$

221,936

$

(8,709)

 

(8,904,048)

$

(156,968)

$

499,307

See Accompanying Notes to Condensed Consolidated Financial Statements.

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AMPHASTAR PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Six Months Ended

June 30, 

    

2023

    

2022

Cash Flows From Operating Activities:

Net income

$

52,156

$

41,599

Reconciliation to net cash provided by operating activities:

Loss on disposal of assets

 

7

 

(58)

Impairment of long-lived assets

2,700

Loss (gain) on interest rate swaps and foreign currency transactions, net

2,434

(298)

Depreciation of property, plant, and equipment

 

12,121

 

11,411

Amortization of product rights, trademarks, and patents

 

471

 

504

Operating lease right-of-use asset amortization

1,825

1,709

Amortization of debt issuance costs and debt modification costs

3,249

192

Equity in losses of unconsolidated affiliate

1,086

957

Share-based compensation expense

 

10,976

 

9,257

Changes in operating assets and liabilities:

Accounts receivable, net

 

(10,533)

 

(2,178)

Inventories

 

(767)

 

(7,422)

Prepaid expenses and other assets

 

740

 

468

Income tax refunds, deposits, and payable, net

 

11,967

 

(14,235)

Operating lease liabilities

(1,750)

(1,468)

Accounts payable and accrued liabilities

 

8,623

 

13,142

Net cash provided by operating activities

 

95,305

 

53,580

Cash Flows From Investing Activities:

BAQSIMI® acquisition

 

(500,829)

 

Purchases and construction of property, plant, and equipment

 

(18,531)

 

(12,101)

Proceeds from the sale of property, plant and equipment

 

 

421

Purchase of investments

(19,774)

(12,004)

Maturity of investments

25,151

6,391

Deposits and other assets

 

(932)

 

3

Net cash used in investing activities

 

(514,915)

 

(17,290)

Cash Flows From Financing Activities:

Proceeds from equity plans, net of withholding tax payments

 

5,288

 

12,220

Purchase of treasury stock

 

(8,143)

 

(7,346)

Debt issuance costs

(14,150)

(89)

Proceeds from issuance of long-term debt

 

500,000

 

Principal payments on long-term debt

 

(68,432)

 

(1,131)

Net cash provided by financing activities

 

414,563

 

3,654

Effect of exchange rate changes on cash

 

(6)

(140)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(5,053)

 

39,804

Cash, cash equivalents, and restricted cash at beginning of period

 

156,333

126,588

Cash, cash equivalents, and restricted cash at end of period

$

151,280

$

166,392

Noncash Investing and Financing Activities:

Deferred payment for BAQSIMI® acquisition

$

127,276

$

Capital expenditures included in accounts payable

$

3,681

$

5,539

Operating lease right-of-use assets in exchange for operating lease liabilities

$

2,598

$

1,777

Supplemental Disclosures of Cash Flow Information:

Interest paid, net of capitalized interest

$

2,772

$

1,167

Income taxes paid

$

1,322

$

23,964

See Accompanying Notes to Condensed Consolidated Financial Statements.

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AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. General

Amphastar Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, hereinafter referred to as the “Company”) is a bio-pharmaceutical company that focuses primarily on developing, manufacturing, marketing, and selling technically challenging generic and proprietary injectable, inhalation, and intranasal products, including products with high technical barriers to market entry. Additionally, the Company sells insulin active pharmaceutical ingredient, or API, products. Most of the Company’s products are used in hospital or urgent care clinical settings and are primarily contracted and distributed through group purchasing organizations and drug wholesalers. The Company’s insulin API products are sold to other pharmaceutical companies for use in their own products and are being used by the Company in the development of injectable finished pharmaceutical products. The Company’s inhalation product, Primatene MIST®, is primarily distributed through drug retailers.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2022 and the notes thereto as filed with the Securities and Exchange Commission, or SEC, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles, or GAAP, have been condensed or omitted from the accompanying condensed consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from the audited financial statements. The accompanying interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the Company’s consolidated financial position, results of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the periods presented. Unless otherwise noted, all such adjustments are of a normal, recurring nature. The Company’s results of operations, comprehensive income (loss) and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and are prepared in accordance with GAAP. Certain prior period amounts have been reclassified within the operating activities of the condensed consolidated statements of cash flows to conform to the current period presentation. All intercompany activity has been eliminated in the preparation of the condensed consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the consolidated financial position, results of operations, and cash flows of the Company.

The Company’s subsidiaries include: (1) International Medication Systems, Limited, or IMS, (2) Armstrong Pharmaceuticals, Inc., or Armstrong, (3) Amphastar Nanjing Pharmaceuticals Inc., or ANP, (4) Amphastar France Pharmaceuticals, S.A.S., or AFP, (5) Amphastar UK Ltd., or AUK, (6) International Medication Systems (UK) Limited, or IMS UK, and (7) Amphastar Medication Co., LLC, or Amphastar Medication.

Investments in Unconsolidated Affiliate

The Company applies the equity method of accounting for investments when it has significant influence, but not controlling interest in the investee. Judgment regarding the level of influence over each equity method investment includes key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the earnings or losses resulting from these investments is reported as “Equity in losses of unconsolidated affiliate” in the accompanying consolidated

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AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

statements of operations. Investments accounted for using the equity method may be reported on a lag of up to three months if financial statements of the investee are not available in sufficient time for the investor to apply the equity method as of the current reporting date. The determination of whether an investee’s results are recorded on a lag is made on an investment-by-investment basis.

The carrying value of equity method investments is reported as “Investment in unconsolidated affiliate” in the accompanying consolidated balance sheets. The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s earnings or losses and dividends paid, if any.

The Company assesses equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment. No such impairment was identified for any of the periods presented.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The principal accounting estimates include: fair value of acquired assets, determination of allowances for credit losses, fair value of financial instruments, allowance for discounts, provision for chargebacks and rebates, provision for product returns, adjustment of inventory to its net realizable value, impairment of investments, long-lived and intangible assets and goodwill, accrual for workers’ compensation liabilities, litigation reserves, stock price volatility for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.

Foreign Currency

The functional currency of the Company, its domestic subsidiaries, its Chinese subsidiary ANP, and its U.K. subsidiary, AUK, is the U.S. Dollar, or USD. ANP maintains its books of record in Chinese yuan. These books are remeasured into the functional currency of USD using the current or historical exchange rates. The resulting currency remeasurement adjustments and other transactional foreign currency exchange gains and losses are reflected in the Company’s condensed consolidated statements of operations.

The Company’s French subsidiary, AFP, maintains its book of record in euros. AUK’s subsidiary, IMS UK, maintains its book of record in British pounds. These local currencies have been determined to be the subsidiaries’ respective functional currencies. Activities in the statements of operations are translated to USD using average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transactions. Translation adjustments are reflected in stockholders’ equity and are included as a component of other accumulated comprehensive income (loss). The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other accumulated comprehensive income (loss).

The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature were a $0.1 million loss and a $0.5 million gain for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2022, the unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature were a $2.1 million loss and a $2.7 million loss, respectively.

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AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Comprehensive Income

The Company’s comprehensive income includes its foreign currency translation gains and losses as well as its share of other comprehensive income from its equity method investments.

Acquisitions

The Company evaluates acquisitions and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and substantive processes that have the ability to create outputs, which would meet the definition of a business.

Acquisitions meeting the definition of business combinations are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. In a business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition. Direct transaction costs are recognized as part of the cost of an asset acquisition. The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis, with the exception of non-qualifying assets. Goodwill is not recognized in an asset acquisition. When a transaction accounted for as an asset acquisition includes an in-process research and development, or IPR&D, asset, the IPR&D asset is only capitalized if it has an alternative future use other than in a particular research and development project. Asset acquisitions may include contingent consideration arrangements that encompass obligations to make future payments to sellers contingent upon the achievement of future financial targets. Contingent consideration, including assumed contingent considerations, is not recognized until all contingencies are resolved and the consideration is paid or becomes payable (unless contingent considerations meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired), at which point the consideration is allocated to the assets acquired based on their relative fair values at the acquisition date, with the exception of non-qualifying assets.

Judgments are used in determining estimates of useful lives of long-lived assets. Useful life estimates are based on, among other factors, estimates of expected future net cash flows, the assessment of each asset’s life cycle, and the impact of competitive trends on each asset’s life cycle and other factors. These judgments can materially impact the estimates used to allocate purchase consideration to assets acquired and liabilities assumed, and the resulting timing and amounts charged to or recognized in current and future operating results. For these and other reasons, actual results may vary significantly from estimated results.

Advertising Expense

Advertising expenses, primarily associated with Primatene MIST®, are recorded as they are incurred, except for expenses related to the development of a major commercial or media campaign, which are expensed in the period in which the commercial or campaign is first presented, and are reflected as a component of selling, distribution and marketing in the Company’s condensed consolidated statements of operations. For the three and six months ended June 30, 2023, advertising expenses were $2.9 million and $6.2 million, respectively. For the three and six months ended June 30, 2022, advertising expenses were $2.5 million and $4.9 million, respectively.

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AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Financial Instruments

The carrying amounts of cash and cash equivalents, short-term investments, restricted cash and short-term investments, accounts receivable, accounts payable, accrued expenses, and short-term borrowings approximate fair value due to the short maturity of these items. The majority of the Company’s long-term obligations consist of variable rate debt, and their carrying value approximates fair value as the stated borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities. The Company at times enters into interest rate swap contracts to manage its exposure to interest rate changes and its overall cost of long-term debt. The Company’s interest rate swap contracts exchange the variable interest rates for fixed interest rates.

From time to time, the Company may enter into forward currency contracts to lock in currency exchange rates to manage its foreign currency exchange rate exposure. The Company’s interest rate swaps and forward currency contracts have not been designated as hedging instruments and, therefore are recorded at their fair values at the end of each reporting period with changes in fair value recorded in other income (expenses) on the condensed consolidated statements of operations. As of June 30, 2023, the Company did not have any unsettled forward currency contracts to purchase foreign currency. As of December 31, 2022, the Company had an unsettled forward currency contract to purchase foreign currency with a fair value of approximately $0.2 million, based on Level 2 inputs, which was recorded as a liability in the accounts payable and accrued liabilities line in the condensed consolidated balance sheets.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and highly liquid investments with original maturities of three months or less.

Investments

Investments as of June 30, 2023 and December 31, 2022 consisted of certificates of deposit and investment grade corporate and municipal bonds with original maturity dates between three and fifteen months.

Restricted Cash

Restricted cash is collateral required for the Company to guarantee certain vendor payments in France and China. As of June 30, 2023 and December 31, 2022, the restricted cash balance was $2.7 million and $0.2 million, respectively.

Restricted Short-Term Investments

Restricted short-term investments consist of certificates of deposit that are collateral for standby letters of credit to qualify for workers’ compensation self-insurance. The certificates of deposit have original maturities greater than three months, but less than one year. As of June 30, 2023 and December 31, 2022, the balance of restricted short-term investments was $2.2 million.

Deferred Income Taxes

The Company utilizes the liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statements and the tax basis of assets and liabilities using enacted tax rates. A valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized.

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AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Debt Issuance Costs

Debt issuance costs related to non-revolving debt are recognized as a reduction to the related debt balance in the accompanying condensed consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method. Debt issuance costs associated with revolving debt are capitalized within other long-term assets on the condensed consolidated balance sheets and are amortized to interest expense over the term of the related revolving debt.

Impairment of Long Lived Assets, including Identifiable Definite-Lived Intangible Assets

The Company assesses long-term and identifiable definite-lived intangible assets or asset groups for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset or an asset group, further impairment analysis is performed. An impairment loss is measured as the amount by which the carrying amount of the asset or asset groups exceeds the fair value (assets to be held and used) or fair value less cost to sell (assets to be disposed of). The Company also assesses the useful lives of its assets periodically to determine whether events and circumstances warrant a revision to the remaining useful life. Changes in the useful life are adjusted prospectively by revising the remaining period over which the asset is amortized.

Litigation, Commitments and Contingencies

Litigation, commitments and contingencies are accrued when management, after considering the facts and circumstances of each matter as then known to management, has determined it is probable a liability will be found to have been incurred and the amount of the loss can be reasonably estimated. When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is recorded. Legal fees are expensed as incurred. Due to the inherent uncertainties surrounding gain contingencies, the Company generally does not recognize potential gains until they are realized.

Recent Accounting Pronouncements

The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

Note 3. BAQSIMI® Acquisition

On June 30, 2023, the Company completed its acquisition of BAQSIMI® glucagon nasal powder, or BAQSIMI® pursuant to an asset purchase agreement, or the Purchase Agreement, with Eli Lilly & Company, or Lilly, dated April 21, 2023. In connection with the closing of the transaction, or the Closing, the Company paid Lilly $500.0 million in cash. In addition, the Company is required to pay Lilly a $125.0 million guaranteed payment on the first anniversary of the closing. The Company is also required to pay Lilly $4.0 million upon the assignment of certain contracts to the Company after the first anniversary of the Closing, but no later than 18 months after the Closing. The Company may also be required to pay additional contingent consideration of up to $450.0 million to Lilly based on the achievement of certain milestones. In addition, the Company assumed certain contingent consideration of Lilly, which would require the Company to pay up to an aggregate of $125.0 million based on the achievement of annual net sales milestones of $350.0 million, $400.0 million and $600.0 million.

The Purchase Agreement provides that the contingent consideration that may become payable to Lilly would be achieved as follows: (i) a one-time payment of $100.0 million if the Company achieves annual net sales of $175.0 million or more of BAQSIMI® and certain related products, or the Milestone Products, in any one year during the first five years after the Closing; (ii) up to two payments of $100 million each if the Company achieves annual net sales of $200.0 million or

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Table of Contents

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

more of Milestone Products in any one year during the first five years after the Closing; and (iii) a one-time payment of $150.0 million if the Company achieves total cumulative net sales of $950.0 million or more of the Milestone Products for the first five years after the Closing.

The Company has accounted for the BAQSIMI® acquisition as an asset acquisition in accordance with Accounting Standard Codification, or ASC, 805, Business Combinations, as substantially all the fair value of the assets acquired is concentrated in a single identifiable asset, BAQSIMI® product rights. The BAQSIMI® product rights include the license for the BAQSIMI® intellectual property, regulatory documentation, marketing authorizations, and domain names, which are considered a single asset as they are inextricably linked. As an asset acquisition, the cost to acquire the group of assets, including transaction costs, is allocated to the individual assets acquired based on their relative fair values, with the exception of non-qualifying assets.

The relative fair values of identifiable assets from the acquisition of BAQSIMI® are based on estimates of fair value using assumptions that the Company believes are reasonable.

Manufacturing Services Agreement

In connection with the Closing, the Company entered into a Manufacturing Services Agreement, or the MSA, with Lilly, pursuant to which Lilly has agreed, for a period of time not to exceed 18 months, to provide certain manufacturing, packaging, labeling and supply services for BAQSIMI® directly or through third-party contractors to the Company in connection with its operation of the development, manufacture, and commercialization of BAQSIMI®. Upon termination of the MSA, the Company will be obligated to purchase all API, components, and finished goods on hand at prices agreed upon in the MSA.

Transition Services Agreement

In connection with the Closing, the Company entered into a Transition Services Agreement, or the TSA, with Lilly pursuant to which Lilly has agreed, for a period of time not to exceed 18 months, to provide certain services to the Company to support the transition of BAQSIMI® operations to the Company, including with respect to the conduct of certain clinical, regulatory, medical affairs, and commercial sales channel activities.

The following table summarizes the aggregate amount paid for the assets acquired by the Company in connection with the acquisition of BAQSIMI®:

Fair Value

(in thousands)

Cash payment

    

$

500,000

Fair value of deferred cash payment

121,699

Transaction costs

6,406

Total purchase price

$

628,105

The total purchase price was allocated to the acquired assets based on their relative fair values, as follow:

Fair Value

(in thousands)

Property, plant, and equipment

    

$

34,426

BAQSIMI® product rights

 

591,338

Deferred tax assets

2,341

Total assets acquired

$

628,105

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AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company is amortizing the acquired intangible asset on a straight line basis over its estimated useful life of 24 years (See Note 10 for additional information).

The fair value of the deferred cash payment is being accreted to the full $129.0 million amount over a one-year period through interest expense.

Credit Agreement

On June 30, 2023, in conjunction with the Company’s acquisition of BAQSIMI®, the Company entered into a $700.0 million syndicated credit agreement, or the Credit Agreement, by and among the Company, certain subsidiaries of the Company, as guarantors, certain lenders, and Wells Fargo Bank, National Association, or Wells Fargo, as Administrative Agent (in such capacity, “Agent”).

The Credit Agreement provides for a senior secured term loan in an aggregate principal amount of $500.0 million, or the Term Loan. The Term Loan matures on the June 30, 2028.

The Credit Agreement also provides a senior secured revolving credit facility, or the Revolving Credit Facility, in an aggregate principal amount of $200.0 million, with a $15.0 million letter of credit sublimit and a $15.0 million swingline loan sublimit. The Revolving Credit Facility matures on June 30, 2028. As of June 30, 2023, the Company had no borrowings outstanding under the Revolving Credit Facility.

Proceeds from the Term Loan were used to finance the acquisition of BAQSIMI®.

Note 4. Revenue Recognition

In accordance with ASC 606 Revenue from Contracts with Customers, revenue is recognized at the time that the Company’s customers obtain control of the promised goods.

Generally, revenue is recognized at the time of product delivery to the Company’s customers. In some cases, revenue is recognized at the time of shipment when stipulated by the terms of the sale agreements.

The consideration the Company receives in exchange for its goods or services is only recognized when it is probable that a significant reversal will not occur. The consideration to which the Company expects to be entitled includes a stated list price, less various forms of variable consideration. The Company makes significant estimates for related variable consideration at the point of sale, including chargebacks, rebates, product returns, other discounts and allowances.

The Company’s payment terms vary by types and locations of customers and the products or services offered. Payment terms differ by jurisdiction and customers, but payment is generally required in a term ranging from 30 to 75 days from date of shipment or satisfaction of the performance obligation. For certain products or services and certain customer types, the Company may require payment before products are delivered or services are rendered to customers.

Provisions for estimated chargebacks, rebates, discounts, product returns and credit losses are made at the time of sale and are analyzed and adjusted, if necessary, at each balance sheet date.

Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers.

The Company’s accounting policy is to review each agreement involving contract development and manufacturing services to determine if there are multiple revenue-generating activities that constitute more than one unit of accounting.

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AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Revenues are recognized for each unit of accounting based on revenue recognition criteria relevant to that unit. The Company does not have any revenue arrangements with multiple performance obligations.

Service revenues derived from research and development contracts are recognized over time based on progress toward satisfaction of the performance obligation. For each performance obligation satisfied over time, the Company assesses the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation. For the three and six months ended June 30, 2023, revenues from research and development services at ANP were $1.2 million and $1.3 million, respectively. For the three and six months ended June 30, 2022, revenues from research and development services at ANP were $0.7 million and $1.3 million, respectively.

Provision for Chargebacks and Rebates

The provision for chargebacks and rebates is a significant estimate used in the recognition of revenue. Wholesaler chargebacks relate to sales terms under which the Company agrees to reimburse wholesalers for differences between the gross sales prices at which the Company sells its products to wholesalers and the actual prices of such products that wholesalers resell under the Company’s various contractual arrangements with third parties such as hospitals and group purchasing organizations in the United States. Rebates include primarily amounts paid to retailers, payers, and providers in the United States, including those paid to state Medicaid programs, and are based on contractual arrangements or statutory requirements. The Company estimates chargebacks and rebates using the expected value method at the time of sale to wholesalers based on wholesaler inventory stocking levels, historic chargeback and rebate rates, and current contract pricing.

The provision for chargebacks and rebates is reflected as a component of net revenues. The following table is an analysis of the chargeback and rebate provision:

Six Months Ended

June 30, 

2023

2022

(in thousands)

Beginning balance

    

$

26,606

    

$

20,167

Provision for chargebacks and rebates

 

143,792

 

96,593

Credits and payments issued to third parties

 

(141,584)

 

(94,526)

Ending balance

$

28,814

$

22,234

Changes in the provision for chargebacks from period to period are primarily dependent on the Company’s sales to its wholesalers, the level of inventory held by wholesalers, and the wholesalers’ customer mix. Changes in the provision for rebates from period to period are primarily dependent on retailer’s and other indirect customers’ purchases. The approach that the Company uses to estimate chargebacks has been consistently applied for all periods presented. Variations in estimates have been historically small. The Company continually monitors the provision for chargebacks and rebates and makes adjustments when it believes that the actual chargebacks and rebates may differ from the estimates. The settlement of chargebacks and rebates generally occurs within 20 days to 60 days after the sale to wholesalers. The provision for chargebacks and rebates is recorded within accounts receivable and/or accounts payable and accrued liabilities depending on whether the Company has the right to offset with the customer.

Of the provision for chargebacks and rebates as of June 30, 2023 and December 31, 2022, $21.8 million and $20.5 million were included as a reduction to accounts receivable, net, on the condensed consolidated balance sheets, respectively. The remaining provision as of June 30, 2023 and December 31, 2022 of $7.0 million and $6.1 million, respectively, which were included in accounts payable and accrued liabilities in the condensed consolidated balance sheets.

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Table of Contents

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accrual for Product Returns

The Company offers most customers the right to return qualified excess or expired inventory for partial credit; however, API product sales are generally non-returnable. The Company’s product returns primarily consist of the returns of expired products from sales made in prior periods. Returned products cannot be resold. At the time product revenue is recognized, the Company records an accrual for product returns estimated using the expected value method. The accrual is based, in part, upon the historical relationship of product returns to sales and customer contract terms. The Company also assesses other factors that could affect product returns including market conditions, product obsolescence, and new competition. Although these factors do not normally give the Company’s customers the right to return products outside of the regular return policy, the Company realizes that such factors could ultimately lead to increased returns. The Company analyzes these situations on a case-by-case basis and makes adjustments to the product return reserve as appropriate.

The provision for product returns is reflected as a component of net revenues. The following table is an analysis of the product return liability:

Six Months Ended

June 30, 

2023

2022

(in thousands)

Beginning balance

    

$

19,451

    

$

21,677

Provision for product returns

 

2,160

 

2,929

Credits issued to third parties

 

(2,825)

 

(3,341)

Ending balance

$

18,786

$

21,265

Of the provision for product returns as of June 30, 2023 and December 31, 2022, $13.8 million and $14.9 million, were included in accounts payable and accrued liabilities on the condensed consolidated balance sheets, respectively. The remaining provision as of June 30, 2023 and December 31, 2022 of $5.0 million and $4.6 million, were included in other long-term liabilities, respectively. For the six months ended June 30, 2023 and 2022, the Company’s aggregate product return rate was 1.2% and 1.6% of qualified sales, respectively.

Note 5. Net Income per Share

Basic net income per share is calculated based upon the weighted-average number of shares outstanding during the period. Diluted net income per share gives effect to all potentially dilutive shares outstanding during the period, such as stock options, non-vested restricted stock units and shares issuable under the Company’s Employee Stock Purchase Plan, or ESPP.

For the three and six months ended June 30, 2023, options to purchase 45,464 shares of stock, with a weighted-average exercise price of $46.01 per share, were excluded in the computation of diluted net income per share because the effect would be anti-dilutive.

For the three and six months ended June 30, 2022, options to purchase 12,296 and 706,411 shares of stock, respectively, with a weighted-average exercise price of $37.41 per share and $34.79 per share, respectively, were excluded in the computation of diluted net income per share because the effect would be anti-dilutive.

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Table of Contents

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the calculation of basic and diluted net income per share for each of the periods presented:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

2022

2023

2022

(in thousands, except per share data)

Basic and dilutive numerator:

    

    

    

    

    

    

    

    

 

Net income

$

26,124

$

17,346

$

52,156

$

41,599

Denominator:

Weighted-average shares outstanding — basic

 

48,404

48,864

48,202

48,501

Net effect of dilutive securities:

Incremental shares from equity awards

 

4,698

4,363

4,334

4,102

Weighted-average shares outstanding — diluted

 

53,102

 

53,227

 

52,536

 

52,603

Net income per share — basic

$

0.54

$

0.35

$

1.08

$

0.86

Net income per share — diluted

$

0.49

$

0.33

$

0.99

$

0.79

Note 6. Segment Reporting

The Company’s business is the development, manufacture, and marketing of pharmaceutical products. The Company has identified two reporting segments that each report to the Chief Operating Decision Maker, or CODM, as defined in ASC 280, Segment Reporting. The Company’s performance is assessed and resources are allocated by the CODM based on the following two reportable segments:

Finished pharmaceutical products
APIs

The finished pharmaceutical products segment manufactures, markets and distributes Primatene MIST®, glucagon, enoxaparin, naloxone, phytonadione, lidocaine, epinephrine, various critical and non-critical care drugs, as well as certain contract manufacturing and contract research revenues. The API segment manufactures and distributes recombinant human insulin API and porcine insulin API for external customers and internal product development.

BAQSIMI® related revenues and cost of sales will be accounted for as a component of the finished pharmaceutical products segment, but as the transaction closed on June 30, 2023, no amounts were recorded in revenue or cost of sales in the three and six months ended June 30, 2023.

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Table of Contents

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Selected financial information by reporting segment is presented below:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

2022

2023

2022

(in thousands)

Net revenues:

    

    

    

    

    

    

    

    

 

Finished pharmaceutical products

$

142,866

$

120,123

$

278,876

$

236,669

API

 

2,846

3,344

6,858

7,166

Total net revenues

 

145,712

 

123,467

 

285,734

 

243,835

Gross profit (loss):

Finished pharmaceutical products

 

77,067

 

67,084

 

153,243

 

124,023

API

 

(4,329)

(3,728)

(6,665)

(4,841)

Total gross profit

 

72,738

 

63,356

 

146,578

 

119,182

Operating expenses

 

35,842

 

38,533

 

76,249

 

72,745

Income from operations

 

36,896

 

24,823

 

70,329

 

46,437

Non-operating income

 

(4,088)

 

(1,672)

 

(3,952)

 

5,747

Income before income taxes

$

32,808

$

23,151

$

66,377

$

52,184

The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis. The Company does not identify total assets by segment for internal purposes, as the Company’s CODM does not assess performance, make strategic decisions, or allocate resources based on assets.

The amount of net revenues in the finished pharmaceutical product segment is presented below:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

2022

2023

2022

(in thousands)

Finished pharmaceutical products net revenues:

    

    

    

    

    

    

    

 

Glucagon

$

27,276

$

11,795

$

52,972

$

22,779