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 ~~September~~June 30, ~~2022~~2023


☐			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 001-38485

Amneal Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware			32-0546926
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
Amneal Pharmaceuticals, Inc. 400 Crossing Boulevard, Bridgewater, NJ			08807
(Address of principal executive offices)			(Zip Code)

(908) 947-3120

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	AMRX	New York Stock Exchange

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 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 ☒

As of ~~October 28, 2022,~~July 31, 2023, there were ~~151,475,789~~154,194,960 shares of Class A common stock outstanding and 152,116,890 shares of Class B common stock outstanding, both with a par value of $0.01.

Amneal Pharmaceuticals, Inc.

Table of Contents


Cautionary Note Regarding Forward-Looking Statements			2

PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)	4
		Consolidated Statements of Operations	4
		Consolidated Statements of Comprehensive Income (Loss)	5
		Consolidated Balance Sheets	6
		Consolidated Statements of Cash Flows	7
		Consolidated Statements of Changes in Stockholders' Equity	9
		Notes to Consolidated Financial Statements	11
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4738
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5851
	Item 4.	Controls and Procedures	5851

PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	5952
	Item 1A.	Risk Factors	5952
	Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchase of Equity Securities	5952
	Item 3.	Defaults Upon Senior Securities	5952
	Item 4.	Mine Safety Disclosures	5952
	Item 5.	Other Information	5952
	Item 6.	Exhibits	6054

Signatures			6155

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and Amneal Pharmaceuticals, Inc.’s other publicly available documents contain “forward-looking statements” within the meaning of the safe harbor provisions of the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. Management and representatives of Amneal Pharmaceuticals, Inc. and its subsidiaries ~~(the “Company”~~(“the Company”, “we”, “us”, or “our”) also may from time to time make forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future. Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates” and other words of similar meaning in conjunction with, among other things: discussions of future operations; ~~expectations regarding supply chain disruptions, inflationary pressures and rising interest rates,~~ expected operating results and financial performance; impact of planned acquisitions and dispositions; our strategy for growth; product development; regulatory approvals; ~~our expectations regarding litigation matters, including settlements thereof;~~ market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of our control. Investors should realize that if underlying assumptions prove inaccurate, known or unknown risks or uncertainties materialize, or other factors or circumstances change, our actual results and financial condition could vary materially from expectations and projections expressed or implied in our forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements.

Summary of Material Risks

Risks and uncertainties that make an investment in the Company speculative or risky or that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to:

•our ability to successfully develop, license, acquire and commercialize new products on a timely basis;

•the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices;

•our ability to obtain exclusive marketing rights for our products;

•our ability to manage our growth through acquisitions and otherwise;

•our revenues derived from the sales of a limited number of products, a substantial portion of which are through a limited number of customers;

•the continuing trend of consolidation of certain customer groups;

•our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods;

•our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, and the impact of interest rate fluctuations on such indebtedness;

•our ability to ~~manage our growth through acquisitions and otherwise;~~

•secure satisfactory terms when negotiating a refinancing or~~our dependence on the sales of a limited number of products for a substantial portion of our total revenues;~~

•~~the continuing trend of consolidation of certain customer groups;~~ other new indebtedness;

•our dependence on third-party ~~suppliers and distributors~~agreements for ~~raw materials for~~a portion of our ~~products and certain finished goods and any associated supply chain disruptions;~~product offerings;

•legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives;

•~~the impact of severe weather and natural disasters that could cause disruptions in manufacturing and our supply chain;~~

•~~the impact of the ongoing COVID-19 pandemic and variant strains;~~

•risks related to federal regulation of arrangements between manufacturers of branded and generic products;

•our reliance on certain licenses to proprietary technologies from time to time;

•the significant amount of resources we expend on research and development;

•the risk of product liability and other claims against us by consumers and other third ~~parties and the impact of adverse judgements or settlements;~~parties;

•risks related to changes in the regulatory environment, including U.S. federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws;

•changes to Food and Drug Administration product approval requirements;

•the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers;

•our ~~dependence on third-party agreements for a portion of our product offerings;~~

•~~the impact of global~~potential expansion into additional international markets subjecting us to increased regulatory, economic, ~~conditions, including any economic effects stemming from adverse geopolitical events, an economic downturn, inflation,~~social and ~~rising interest rates;~~political uncertainties;

•our ability to identify, make and integrate acquisitions or investments in complementary businesses and products on advantageous terms;

•the impact of global economic, political or other catastrophic events, including recent events affecting the financial services industry;

•our ability to attract, hire and retain highly skilled personnel;

•our obligations under a tax receivable agreement may be significant;

•the high concentration of ownership of our Class A ~~common stock~~Common Stock and the fact that we are controlled by ~~a group of stockholders, together with their affiliates~~the Amneal Group; and ~~certain assignees, who owned Amneal Pharmaceuticals, LLC when it was a private company; and~~

•such other factors as may be set forth elsewhere in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, particularly in the section 1A. Risk Factors and our public filings with the SEC.

Investors should carefully read our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, including the section 1A. Risk Factors, for a description of certain risks that could, among other things, cause our actual results to differ materially from those expressed in our forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described herein and in our Annual Report to be a complete statement of all potential risks and uncertainties. The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Operations

(unaudited; in thousands, except per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net revenue	Net revenue	$	545,557	$	528,593	$	1,602,545	$	1,556,773	Net revenue	$	599,046	$	559,355	$	1,156,586	$	1,056,988
Cost of goods sold	Cost of goods sold	350,653		329,394		1,027,439		953,514		Cost of goods sold	379,025		358,836		758,379		681,898
Cost of goods sold impairment charges		674		688		5,786		688
Gross profit	Gross profit	194,230		198,511		569,320		602,571		Gross profit	220,021		200,519		398,207		375,090
Selling, general and administrative	Selling, general and administrative	100,071		91,397		297,542		268,280		Selling, general and administrative	105,570		98,806		207,666		197,471
Research and development	Research and development	50,235		48,927		153,781		149,973		Research and development	37,799		50,748		76,489		103,546
In-process research and development impairment charges		—		—		—		710
Intellectual property legal development expenses	Intellectual property legal development expenses	1,411		1,627		2,996		6,574		Intellectual property legal development expenses	820		821		2,464		1,585
Acquisition, transaction-related and integration expenses	Acquisition, transaction-related and integration expenses	39		134		714		7,219		Acquisition, transaction-related and integration expenses	—		241		—		675
Charges related to legal matters, net		285		19,000		249,836		19,000
Charges (insurance recoveries) for property losses and associated expenses		—		8,186		(1,911)		8,186
Restructuring and other charges	Restructuring and other charges	581		425		1,312		788		Restructuring and other charges	82		—		592		731
Change in fair value of contingent consideration	Change in fair value of contingent consideration	(1,425)		300		(1,495)		300		Change in fair value of contingent consideration	(6,364)		(270)		(3,907)		(70)
Other operating income		(1,320)		—		(2,495)		—
Insurance recoveries for property losses and associated expenses										Insurance recoveries for property losses and associated expenses	—		(1,911)		—		(1,911)
Charges related to legal matters, net										Charges related to legal matters, net	2,017		251,877		1,581		249,551
Other operating expense (income)										Other operating expense (income)	13		(1,175)		(1,211)		(1,175)
Operating income (loss)	Operating income (loss)	44,353		28,515		(130,960)		141,541		Operating income (loss)	80,084		(198,618)		114,533		(175,313)
Other (expense) income:	Other (expense) income:									Other (expense) income:
Interest expense, net	Interest expense, net	(42,391)		(34,400)		(111,349)		(102,368)		Interest expense, net	(50,857)		(35,623)		(100,172)		(68,958)
Foreign exchange loss, net		(5,491)		(29)		(12,933)		(185)
Loss on refinancing		—		—		(291)		—
Foreign exchange gain (loss), net										Foreign exchange gain (loss), net	421		(5,429)		2,322		(7,442)
Other income, net	Other income, net	5,709		3,871		15,061		8,697		Other income, net	12		6,939		3,551		9,061
Total other expense, net	Total other expense, net	(42,173)		(30,558)		(109,512)		(93,856)		Total other expense, net	(50,424)		(34,113)		(94,299)		(67,339)
Income (loss) before income taxes	Income (loss) before income taxes	2,180		(2,043)		(240,472)		47,685		Income (loss) before income taxes	29,660		(232,731)		20,234		(242,652)
Provision for income taxes		4,570		4,049		8,459		7,056
Net (loss) income		(2,390)		(6,092)		(248,931)		40,629
(Benefit from) provision for income taxes										(Benefit from) provision for income taxes	(23)		7,350		645		3,889
Net income (loss)										Net income (loss)	29,683		(240,081)		19,589		(246,541)
Less: Net (income) loss attributable to non-controlling interests	Less: Net (income) loss attributable to non-controlling interests	(299)		1,855		123,716		(23,628)		Less: Net (income) loss attributable to non-controlling interests	(17,766)		119,273		(14,615)		124,015
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest		(2,689)		(4,237)		(125,215)		17,001
Net income (loss) attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest										Net income (loss) attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest	11,917		(120,808)		4,974		(122,526)
Accretion of redeemable non-controlling interest	Accretion of redeemable non-controlling interest	—		—		(438)		—		Accretion of redeemable non-controlling interest	—		—		—		(438)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.		$	(2,689)	$	(4,237)	$	(125,653)	$	17,001
Net income (loss) attributable to Amneal Pharmaceuticals, Inc.										Net income (loss) attributable to Amneal Pharmaceuticals, Inc.	$	11,917	$	(120,808)	$	4,974	$	(122,964)

Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:
Net income (loss) per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:										Net income (loss) per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:
Basic	Basic	$	(0.02)	$	(0.03)	$	(0.83)	$	0.11	Basic	$	0.08	$	(0.80)	$	0.03	$	(0.82)
Diluted	Diluted	$	(0.02)	$	(0.03)	$	(0.83)	$	0.11	Diluted	$	0.08	$	(0.80)	$	0.03	$	(0.82)
Weighted-average common shares outstanding:	Weighted-average common shares outstanding:									Weighted-average common shares outstanding:
Basic	Basic	151,393		149,290		150,765		148,771		Basic	153,738		150,993		152,928		150,445
Diluted	Diluted	151,393		149,290		150,765		151,655		Diluted	154,887		150,993		154,575		150,445

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited; in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net (loss) income $ (2,390) $ (6,092) $ (248,931) $ 40,629
Less: Net (income) loss attributable to non-controlling interests (299) 1,855 123,716 (23,628)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest (2,689) (4,237) (125,215) 17,001
Accretion of redeemable non-controlling interest — — (438) —
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. (2,689) (4,237) (125,653) 17,001
Other comprehensive (loss) income:
Foreign currency translation adjustments arising during the period (9,243) (1,164) (24,950) (7,348)
Unrealized gain on cash flow hedge, net of tax 32,639 2,711 100,333 24,187
Less: Other comprehensive income attributable to non-controlling interests (11,725) (781) (37,905) (8,531)
Other comprehensive income attributable to Amneal Pharmaceuticals, Inc. 11,671 766 37,478 8,308
Comprehensive income (loss) attributable to Amneal Pharmaceuticals, Inc. $ 8,982 $ (3,471) $ (88,175) $ 25,309


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	29,683	$	(240,081)	$	19,589	$	(246,541)
Less: Net (income) loss attributable to non-controlling interests	(17,766)		119,273		(14,615)		124,015
Net income (loss) attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest	11,917		(120,808)		4,974		(122,526)
Accretion of redeemable non-controlling interest	—		—		—		(438)
Net income (loss) attributable to Amneal Pharmaceuticals, Inc.	11,917		(120,808)		4,974		(122,964)
Other comprehensive income (loss):
Foreign currency translation adjustments arising during the period	260		(11,628)		2,057		(15,707)
Unrealized gain (loss) on cash flow hedge, net of tax	8,312		14,070		(5,958)		67,694
Less: Other comprehensive (income) loss attributable to non-controlling interests	(4,263)		(1,225)		1,973		(26,180)
Other comprehensive income (loss) attributable to Amneal Pharmaceuticals, Inc.	4,309		1,217		(1,928)		25,807
Comprehensive income (loss) attributable to Amneal Pharmaceuticals, Inc.	$	16,226	$	(119,591)	$	3,046	$	(97,157)

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Balance Sheets

(unaudited; in thousands, except per share amounts)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	87,335	$	247,790	Cash and cash equivalents	$	109,284	$	25,976
Restricted cash	Restricted cash	8,556		8,949		Restricted cash	5,298		9,251
Trade accounts receivable, net	Trade accounts receivable, net	628,737		662,583		Trade accounts receivable, net	674,736		741,791
Inventories	Inventories	543,858		489,389		Inventories	550,558		530,735
Prepaid expenses and other current assets	Prepaid expenses and other current assets	149,650		110,218		Prepaid expenses and other current assets	81,764		103,565
Related party receivables	Related party receivables	1,696		1,179		Related party receivables	149		500
Total current assets	Total current assets	1,419,832		1,520,108		Total current assets	1,421,789		1,411,818
Property, plant and equipment, net	Property, plant and equipment, net	470,150		514,158		Property, plant and equipment, net	459,108		469,815
Goodwill	Goodwill	599,504		593,017		Goodwill	599,206		598,853
Intangible assets, net	Intangible assets, net	1,159,005		1,166,922		Intangible assets, net	1,015,376		1,096,093
Operating lease right-of-use assets	Operating lease right-of-use assets	34,252		39,899		Operating lease right-of-use assets	34,031		38,211
Operating lease right-of-use assets - related party	Operating lease right-of-use assets - related party	18,566		20,471		Operating lease right-of-use assets - related party	16,566		17,910
Financing lease right-of-use assets	Financing lease right-of-use assets	64,468		64,475		Financing lease right-of-use assets	61,570		63,424
Other assets	Other assets	108,262		20,614		Other assets	93,240		103,217
Total assets	Total assets	$	3,874,039	$	3,939,664	Total assets	$	3,700,886	$	3,799,341
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	531,462	$	525,345	Accounts payable and accrued expenses	$	512,719	$	538,199
Current portion of liabilities for legal matters	Current portion of liabilities for legal matters	176,094		58,000		Current portion of liabilities for legal matters	77,011		107,483
Revolving credit facility		60,000		—
Revolving credit facilities						Revolving credit facilities	120,000		60,000
Current portion of long-term debt, net	Current portion of long-term debt, net	29,940		30,614		Current portion of long-term debt, net	30,405		29,961
Current portion of operating lease liabilities	Current portion of operating lease liabilities	10,266		9,686		Current portion of operating lease liabilities	9,861		8,321
Current portion of operating and financing lease liabilities - related party		2,809		2,636
Current portion of operating lease liabilities - related party						Current portion of operating lease liabilities - related party	2,992		2,869
Current portion of financing lease liabilities	Current portion of financing lease liabilities	3,557		3,101		Current portion of financing lease liabilities	3,219		3,488
Related party payables - short term	Related party payables - short term	3,867		47,861		Related party payables - short term	21,143		2,479
Total current liabilities	Total current liabilities	817,995		677,243		Total current liabilities	777,350		752,800
Long-term debt, net	Long-term debt, net	2,607,217		2,680,053		Long-term debt, net	2,549,177		2,591,981
Note payable - related party	Note payable - related party	39,279		38,038		Note payable - related party	40,560		39,706
Operating lease liabilities	Operating lease liabilities	26,366		32,894		Operating lease liabilities	28,296		32,126
Operating lease liabilities - related party	Operating lease liabilities - related party	16,653		18,783		Operating lease liabilities - related party	14,388		15,914
Financing lease liabilities	Financing lease liabilities	61,311		60,251		Financing lease liabilities	59,836		60,769
Related party payables - long term	Related party payables - long term	10,296		9,619		Related party payables - long term	9,123		9,649
Other long-term liabilities	Other long-term liabilities	78,258		38,903		Other long-term liabilities	39,282		87,468
Total long-term liabilities	Total long-term liabilities	2,839,380		2,878,541		Total long-term liabilities	2,740,662		2,837,613
Commitments and contingencies (Notes 5 and 13)
Commitments and contingencies (Notes 5 and 19)						Commitments and contingencies (Notes 5 and 19)
Redeemable non-controlling interests	Redeemable non-controlling interests	22,375		16,907		Redeemable non-controlling interests	32,106		24,949
Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Preferred stock, $0.01 par value, 2,000 shares authorized, none issued at both September 30, 2022 and December 31, 2021		—		—
Class A common stock, $0.01 par value, 900,000 shares authorized at both September 30, 2022 and December 31, 2021; 151,426 and 149,413 shares issued at September 30, 2022 and December 31, 2021, respectively		1,513		1,492
Class B common stock, $0.01 par value, 300,000 shares authorized at both September 30, 2022 and December 31, 2021; 152,117 shares issued at both September 30, 2022 and December 31, 2021		1,522		1,522
Preferred stock, $0.01 par value, 2,000 shares authorized, none issued at both June 30, 2023 and December 31, 2022						Preferred stock, $0.01 par value, 2,000 shares authorized, none issued at both June 30, 2023 and December 31, 2022	—		—
Class A common stock, $0.01 par value, 900,000 shares authorized at both June 30, 2023 and December 31, 2022; 154,050 and 151,490 shares issued at June 30, 2023 and December 31, 2022, respectively						Class A common stock, $0.01 par value, 900,000 shares authorized at both June 30, 2023 and December 31, 2022; 154,050 and 151,490 shares issued at June 30, 2023 and December 31, 2022, respectively	1,540		1,514
Class B common stock, $0.01 par value, 300,000 shares authorized at both June 30, 2023 and December 31, 2022; 152,117 shares issued at both June 30, 2023 and December 31, 2022						Class B common stock, $0.01 par value, 300,000 shares authorized at both June 30, 2023 and December 31, 2022; 152,117 shares issued at both June 30, 2023 and December 31, 2022	1,522		1,522
Additional paid-in capital	Additional paid-in capital	683,745		658,350		Additional paid-in capital	708,233		691,629
Stockholders' accumulated deficit	Stockholders' accumulated deficit	(401,850)		(276,197)		Stockholders' accumulated deficit	(401,209)		(406,183)
Accumulated other comprehensive income (loss)		12,539		(24,827)
Accumulated other comprehensive income						Accumulated other comprehensive income	8,083		9,939
Total Amneal Pharmaceuticals, Inc. stockholders' equity	Total Amneal Pharmaceuticals, Inc. stockholders' equity	297,469		360,340		Total Amneal Pharmaceuticals, Inc. stockholders' equity	318,169		298,421
Non-controlling interests	Non-controlling interests	(103,180)		6,633		Non-controlling interests	(167,401)		(114,442)
Total stockholders' equity	Total stockholders' equity	194,289		366,973		Total stockholders' equity	150,768		183,979
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,874,039	$	3,939,664	Total liabilities and stockholders' equity	$	3,700,886	$	3,799,341

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(unaudited; in thousands)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net (loss) income		$	(248,931)	$	40,629
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net income (loss)						Net income (loss)	$	19,589	$	(246,541)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	179,119		172,223		Depreciation and amortization	115,261		117,511
Unrealized foreign currency loss		12,893		(94)
Unrealized foreign currency (gain) loss						Unrealized foreign currency (gain) loss	(1,561)		8,014
Amortization of debt issuance costs and discount	Amortization of debt issuance costs and discount	6,489		6,873		Amortization of debt issuance costs and discount	4,523		4,388
Loss on refinancing		291		—
Loss on refinancing - revolving credit facility						Loss on refinancing - revolving credit facility	—		291
Intangible asset impairment charges	Intangible asset impairment charges	5,786		1,398		Intangible asset impairment charges	1,283		5,112
Insurance recoveries for property and equipment losses		(1,000)		—
Non-cash property losses		—		5,152
Change in fair value of contingent consideration						Change in fair value of contingent consideration	(3,907)		(70)
Stock-based compensation	Stock-based compensation	24,016		20,670		Stock-based compensation	14,157		16,327
Inventory provision	Inventory provision	28,884		39,290		Inventory provision	41,806		17,748
Change in fair value of contingent consideration		(1,495)		300
Insurance recoveries for property and equipment losses						Insurance recoveries for property and equipment losses	—		(1,000)
Other operating charges and credits, net	Other operating charges and credits, net	7,077		3,965		Other operating charges and credits, net	3,364		3,449
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Trade accounts receivable, net	Trade accounts receivable, net	33,570		10,894		Trade accounts receivable, net	66,976		(26,561)
Inventories	Inventories	(91,326)		(65,643)		Inventories	(60,526)		(65,395)
Prepaid expenses, other current assets and other assets	Prepaid expenses, other current assets and other assets	(34,380)		(27,493)		Prepaid expenses, other current assets and other assets	31,898		(119,747)
Related party receivables	Related party receivables	(517)		7,201		Related party receivables	351		(159)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	165,437		(32,819)		Accounts payable, accrued expenses and other liabilities	(107,760)		273,947
Related party payables	Related party payables	2,479		(3,987)		Related party payables	2,913		7,508
Net cash provided by operating activities		88,392		178,559
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	128,367		(5,178)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(34,941)		(30,230)		Purchases of property, plant and equipment	(21,691)		(15,842)
Deposits for future acquisition of property, plant, and equipment		(2,388)		(2,655)
Saol Acquisition						Saol Acquisition	—		(84,714)
Acquisition of intangible assets	Acquisition of intangible assets	(41,800)		(500)		Acquisition of intangible assets	(1,488)		(10,000)
Acquisitions of businesses, net of cash acquired		(84,714)		(73,828)
Deposits for future acquisition of property, plant and equipment						Deposits for future acquisition of property, plant and equipment	(842)		(3,955)
Proceeds from insurance recoveries for property and equipment losses	Proceeds from insurance recoveries for property and equipment losses	1,000		—		Proceeds from insurance recoveries for property and equipment losses	—		1,000
Net cash used in investing activities	Net cash used in investing activities	(162,843)		(107,213)		Net cash used in investing activities	(24,021)		(113,511)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Payments of deferred financing and refinancing costs	Payments of deferred financing and refinancing costs	(1,663)		—		Payments of deferred financing and refinancing costs	—		(1,622)
Payments of principal on debt, revolving credit facility, financing leases and other		(105,618)		(68,240)
Borrowings on revolving credit facility		85,000		—
Payments of principal on debt, revolving credit facilities, financing leases and other						Payments of principal on debt, revolving credit facilities, financing leases and other	(87,566)		(63,010)
Borrowings on revolving credit facilities						Borrowings on revolving credit facilities	100,000		85,000
Proceeds from exercise of stock options	Proceeds from exercise of stock options	662		834		Proceeds from exercise of stock options	—		239
Employee payroll tax withholding on restricted stock unit vesting	Employee payroll tax withholding on restricted stock unit vesting	(3,483)		(2,595)		Employee payroll tax withholding on restricted stock unit vesting	(2,033)		(3,291)
Payments of deferred consideration for acquisitions - related party						Payments of deferred consideration for acquisitions - related party	—		(43,998)
Acquisition of redeemable non-controlling interest						Acquisition of redeemable non-controlling interest	—		(1,722)
Tax distributions to non-controlling interests	Tax distributions to non-controlling interests	(13,131)		(36,678)		Tax distributions to non-controlling interests	(35,557)		(9,917)
Acquisition of redeemable non-controlling interest		(1,722)		—
Payments of deferred consideration for acquisitions - related party		(44,498)		—
Payments of principal on financing lease - related party		—		(93)
Repayment of related party note		—		(1,000)
Net cash used in financing activities	Net cash used in financing activities	(84,453)		(107,772)		Net cash used in financing activities	(25,156)		(38,321)
Effect of foreign exchange rate on cash	Effect of foreign exchange rate on cash	(1,944)		(76)		Effect of foreign exchange rate on cash	165		(1,547)
Net decrease in cash, cash equivalents, and restricted cash		(160,848)		(36,502)
Net increase (decrease) in cash, cash equivalents, and restricted cash						Net increase (decrease) in cash, cash equivalents, and restricted cash	79,355		(158,557)
Cash, cash equivalents, and restricted cash - beginning of period	Cash, cash equivalents, and restricted cash - beginning of period	256,739		347,121		Cash, cash equivalents, and restricted cash - beginning of period	35,227		256,739
Cash, cash equivalents, and restricted cash - end of period	Cash, cash equivalents, and restricted cash - end of period	$	95,891	$	310,619	Cash, cash equivalents, and restricted cash - end of period	$	114,582	$	98,182
Cash and cash equivalents - end of period	Cash and cash equivalents - end of period	$	87,335	$	302,655	Cash and cash equivalents - end of period	$	109,284	$	91,979
Restricted cash - end of period	Restricted cash - end of period	8,556		7,964		Restricted cash - end of period	5,298		6,203
Cash, cash equivalents, and restricted cash - end of period	Cash, cash equivalents, and restricted cash - end of period	$	95,891	$	310,619	Cash, cash equivalents, and restricted cash - end of period	$	114,582	$	98,182

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows (continued)

(unaudited; in thousands)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest	Cash paid for interest	$	92,215	$	91,678	Cash paid for interest	$	88,705	$	57,322
Cash paid for income taxes, net		$	9,942	$	11,583
Cash received (paid), net for income taxes						Cash received (paid), net for income taxes	$	3,917	$	(6,747)

Supplemental disclosure of non-cash investing and financing activity:	Supplemental disclosure of non-cash investing and financing activity:					Supplemental disclosure of non-cash investing and financing activity:
Tax distributions to non-controlling interests						Tax distributions to non-controlling interests	$	18,285	$	—
Contingent consideration for acquisition						Contingent consideration for acquisition	$	—	$	8,796
Payable for acquisition of intangible assets	Payable for acquisition of intangible assets	$	—	$	1,500	Payable for acquisition of intangible assets	$	1,000	$	31,500
Deferred consideration for acquisition - related party		$	—	$	30,099
Contingent consideration for acquisition - related party		$	8,796	$	6,100
Payments for restricted stock unit tax vesting		$	61	$	9

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Changes in ~~Stockholders'~~Stockholders’ Equity

(unaudited; in thousands)


		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital				Stockholders' Accumulated Deficit		Accumulated Other Comprehensive Income		Non- Controlling Interests			Total Equity				Redeemable Non-Controlling Interests				Class A Common Stock						Class B Common Stock			Additional Paid-in Capital				Stockholders' Accumulated Deficit				Accumulated Other Comprehensive Income				Non- Controlling Interests				Total Equity				Redeemable Non-Controlling Interests
		Shares	Amount		Shares	Amount												Shares								Amount			Shares			Amount
Balance at July 1, 2022		151,196	$	1,510	152,117	$	1,522			$	675,588			$	(399,161)	$	868				$	(107,336)			$	172,991		$	17,885
Net (loss) income		—	—		—	—		—				(2,689)		—		(4,924)			(7,613)				5,223
Balance at March 31, 2023																										Balance at March 31, 2023	153,321			$	1,532		152,117	$	1,522			$	700,722			$	(413,126)			$	3,764			$	(159,746)			$	134,668			$	27,527
Net income																										Net income	—			—			—	—		—				11,917				—				10,315				22,232				7,451
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—	—		—				—		(4,610)		(4,633)			(9,243)				—			Foreign currency translation adjustments	—			—			—	—		—				—				131				129				260				—
Stock-based compensation	Stock-based compensation	—	—		—	—		7,689				—		—		—			7,689				—			Stock-based compensation	—			—			—	—		6,561				—				—				—				6,561				—
Exercise of stock options		154	2		—	—		422				—		—		(1)			423				—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	Restricted stock unit vesting, net of shares withheld to cover payroll taxes	76	1		—	—		46				—		—		(163)			(116)				—			Restricted stock unit vesting, net of shares withheld to cover payroll taxes	729			8			—	—		950				—				10				(1,030)				(62)				—
Unrealized gain on cash flow hedge, net of tax	Unrealized gain on cash flow hedge, net of tax	—	—		—	—		—				—		16,281		16,358			32,639				—			Unrealized gain on cash flow hedge, net of tax	—			—			—	—		—				—				4,178				4,134				8,312				—
Tax distributions	Tax distributions	—	—		—	—		—				—		—		(2,481)			(2,481)				(733)			Tax distributions	—			—			—	—		—				—				—				(21,203)				(21,203)				(2,872)
Balance at September 30, 2022		151,426	$	1,513	152,117	$	1,522	$	683,745			$	(401,850)	$	12,539	$	(103,180)		$	194,289			$	22,375
Balance at June 30, 2023																										Balance at June 30, 2023	154,050			$	1,540		152,117	$	1,522	$	708,233			$	(401,209)			$	8,083			$	(167,401)			$	150,768			$	32,106

Class A Common
Stock Class B Common
Stock Additional
Paid-in Capital Stockholders'
Accumulated Deficit Accumulated
Other
Comprehensive (Loss) Income Non-
Controlling Interests Total Equity Redeemable Non-Controlling Interests
Shares Amount Shares Amount
Balance at January 1, 2022 149,413 $ 1,492 152,117 $ 1,522 $ 658,350 $ (276,197) $ (24,827) $ 6,633 $ 366,973 $ 16,907
Net (loss) income — — — — — (125,215) — (133,343) (258,558) 9,627
Foreign currency translation adjustments — — — — — — (12,426) (12,524) (24,950) —
Stock-based compensation — — — — 24,016 — — — 24,016 —
Exercise of stock options 208 2 — — 615 — — 45 662 —
Restricted stock unit vesting, net of shares withheld to cover payroll taxes 1,805 19 — — 764 — (112) (4,164) (3,493) —
Unrealized gain on cash flow hedge, net of tax — — — — — — 49,904 50,429 100,333 —
Tax distributions, net — — — — — — — (9,811) (9,811) (3,320)
Reclassification of redeemable non-controlling interest — — — — — (438) — (445) (883) 883
Acquisition of redeemable non-controlling interest — — — — — — — — — (1,722)
Balance at September 30, 2022 151,426 $ 1,513 152,117 $ 1,522 $ 683,745 $ (401,850) $ 12,539 $ (103,180) $ 194,289 $ 22,375


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive Income		Non- Controlling Interests		Total Equity		Redeemable Non-Controlling Interests
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	151,490	$	1,514	152,117	$	1,522	$	691,629	$	(406,183)	$	9,939	$	(114,442)	$	183,979	$	24,949
Net income	—	—		—	—		—		4,974		—		1,627		6,601		12,988
Foreign currency translation adjustments	—	—		—	—		—		—		1,029		1,028		2,057		—
Stock-based compensation	—	—		—	—		14,157		—		—		—		14,157		—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	2,560	26		—	—		2,447		—		72		(4,602)		(2,057)		—
Unrealized gain on cash flow hedge, net of tax	—	—		—	—		—		—		(2,957)		(3,001)		(5,958)		—
Tax distributions	—	—		—	—		—		—		—		(48,011)		(48,011)		(5,831)
Balance at June 30, 2023	154,050	$	1,540	152,117	$	1,522	$	708,233	$	(401,209)	$	8,083	$	(167,401)	$	150,768	$	32,106

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Changes in ~~Stockholders'~~Stockholders’ Equity

(unaudited; in thousands)

Class A Common
Stock Class B Common
Stock Additional
Paid-in Capital Stockholders'
Accumulated Deficit Accumulated
Other
Comprehensive Loss Non-
Controlling Interests Total Equity Redeemable Non-Controlling Interests
Shares Amount Shares Amount
Balance at July 1, 2021 149,209 $ 1,490 152,117 $ 1,522 $ 642,657 $ (265,583) $ (33,979) $ 44,165 $ 390,272 $ 14,112
Net (loss) income — — — — — (4,237) — (3,546) (7,783) 1,691
Foreign currency translation adjustments — — — — — — (577) (587) (1,164) —
Stock-based compensation — — — — 7,708 — — — 7,708 —
Exercise of stock options 53 1 — — 149 — (6) 9 153 —
Restricted stock unit vesting, net of shares withheld to cover payroll taxes 70 1 — — 25 — (8) (165) (147) —
Unrealized gain on cash flow hedge, net of tax — — — — — — 1,343 1,368 2,711 —
Tax distributions — — — — — — — (8,584) (8,584) (543)
Balance at September 30, 2021 149,332 $ 1,492 152,117 $ 1,522 $ 650,539 $ (269,820) $ (33,227) $ 32,660 $ 383,166 $ 15,260


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Non- Controlling Interests		Total Equity		Redeemable Non-Controlling Interests
	Shares	Amount		Shares	Amount
Balance at March 31, 2022	150,775	$	1,506	152,117	$	1,522	$	666,799	$	(278,353)	$	(349)	$	16,282	$	407,407	$	16,420
Net (loss) income	—	—		—	—		—		(120,808)		—		(121,320)		(242,128)		2,047
Foreign currency translation adjustments	—	—		—	—		—		—		(5,792)		(5,836)		(11,628)		—
Stock-based compensation	—	—		—	—		8,262		—		—		—		8,262		—
Exercise of stock options	47	—		—	—		128		—		—		—		128		—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	374	4		—	—		399		—		—		(636)		(233)		—
Unrealized gain on cash flow hedge, net of tax	—	—		—	—		—		—		7,009		7,061		14,070		—
Tax distributions	—	—		—	—		—		—		—		(2,887)		(2,887)		(582)
Balance at June 30, 2022	151,196	$	1,510	152,117	$	1,522	$	675,588	$	(399,161)	$	868	$	(107,336)	$	172,991	$	17,885


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Non- Controlling Interests		Total Equity		Redeemable Non-Controlling Interests
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	149,413	$	1,492	152,117	$	1,522	$	658,350	$	(276,197)	$	(24,827)	$	6,633	$	366,973	$	16,907
Net (loss) income	—	—		—	—		—		(122,526)		—		(128,419)		(250,945)		4,404
Foreign currency translation adjustments	—	—		—	—		—		—		(7,816)		(7,891)		(15,707)		—
Stock-based compensation	—	—		—	—		16,327		—		—		—		16,327		—
Exercise of stock options	54	—		—	—		193		—		—		46		239		—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	1,729	18		—	—		718		—		(112)		(4,001)		(3,377)		—
Unrealized gain on cash flow hedge, net of tax	—	—		—	—		—		—		33,623		34,071		67,694		—
Tax distributions, net	—	—		—	—		—		—		—		(7,330)		(7,330)		(2,587)
Reclassification of redeemable non-controlling interest	—	—		—	—		—		(438)		—		(445)		(883)		883
Acquisition of redeemable non-controlling interest	—	—		—	—		—		—		—		—		—		(1,722)
Balance at June 30, 2022	151,196	$	1,510	152,117	$	1,522	$	675,588	$	(399,161)	$	868	$	(107,336)	$	172,991	$	17,885

Class A Common
Stock Class B Common
Stock Additional
Paid-in Capital Stockholders'
Accumulated Deficit Accumulated
Other
Comprehensive Loss Non-
Controlling Interests Total Equity Redeemable Non-Controlling Interests
Shares Amount Shares Amount
Balance at January 1, 2021 147,674 $ 1,475 152,117 $ 1,522 $ 628,413 $ (286,821) $ (41,318) $ 41,661 $ 344,932 $ 11,804
Net income — — — — — 17,001 — 17,958 34,959 5,670
Foreign currency translation adjustments — — — — — — (3,626) (3,722) (7,348) —
Stock-based compensation — — — — 20,670 — — — 20,670 —
Exercise of stock options 302 3 — — 835 — (40) 36 834 —
Restricted stock unit vesting, net of shares withheld to cover payroll taxes 1,356 14 — — 621 — (177) (3,062) (2,604) —
Unrealized gain on cash flow hedge, net of tax — — — — — — 11,934 12,253 24,187 —
Tax distributions — — — — — — — (34,464) (34,464) (2,214)
Non-controlling interests from the KSP Acquisition — — — — — — — 2,000 2,000 —
Balance at September 30, 2021 149,332 $ 1,492 152,117 $ 1,522 $ 650,539 $ (269,820) $ (33,227) $ 32,660 $ 383,166 $ 15,260

The accompanying notes are an integral part of these consolidated financial statements.

Amneal Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(unaudited)

1. Nature of Operations

Amneal Pharmaceuticals, Inc. (the “Company”) is a global pharmaceutical company ~~specializing in developing, manufacturing, marketing~~that develops, manufactures, markets, and ~~distributing high-value generic~~distributes a diverse portfolio of essential medicines, including complex generics and specialty branded ~~specialty pharmaceutical products across a broad array of dosage forms and therapeutic areas.~~ pharmaceuticals. The Company operates principally in the United States (the “U.S.”), India, and Ireland, and sells to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly. The Company is a holding company, whose principal assets are common units (“Amneal Common Units”) of Amneal Pharmaceuticals, LLC (“Amneal”).

~~In 2018,~~The Company held 50.3% of Amneal completed the acquisition of Impax Laboratories, Inc. (“Impax”), a generic and specialty pharmaceutical company. In 2020, Amneal 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”) (collectively, the “Rondo Acquisitions”). AvKARE, LLC is one of the largest private label providers of generic pharmaceuticals in the U.S. federal agency sector, primarily focused on serving the Department of DefenseCommon Units and the ~~Department of Veterans Affairs. R&S is a national pharmaceutical wholesaler focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.~~

~~The~~ group, ~~of investors,~~ together with their affiliates and certain assignees, who owned Amneal when it was a private company (the “Members”~~) held 50.1% of Amneal Common Units and~~ or the ~~Company~~“Amneal Group”) held the remaining ~~49.9%~~49.7% as of ~~September~~June 30, ~~2022.~~2023.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), should be read in conjunction with the Company’s annual audited financial statements for the year ended December 31, ~~2021~~2022 included in the Company’s ~~2021~~2022 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in annual financial statements have been omitted from the accompanying unaudited consolidated financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the ~~Company's~~Company’s financial position as of ~~September~~June 30, ~~2022,~~2023, cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 and the results of its operations, its comprehensive income (loss) and its changes in stockholders’ equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. The consolidated balance sheet data at December 31, ~~2021~~2022 was derived from the Company’s audited annual financial statements, but does not include all disclosures required by ~~generally accepted accounting principles in the United States of America.~~U.S. GAAP.

Except for the updates included in this note, the accounting policies of the Company are set forth in Note 2. Summary of Significant Accounting Policies contained in the Company’s ~~2021~~2022 Annual Report on Form 10-K.

Use of Estimates

The preparation of financial statements requires the Company's management to make estimates and assumptions that affect the reported financial position at the date of the financial statements and the reported results of operations during the reporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The following are some, but not all, of such estimates: the determination of chargebacks, sales returns, rebates, billbacks, valuation of intangible and other assets acquired in business combinations, allowances for accounts receivable, accrued liabilities, liabilities for legal matters, initial and subsequent valuation of contingent consideration recognized in business combinations, stock-based compensation, valuation of inventory balances, the determination of useful lives for product rights and the assessment of expected cash flows used in evaluating goodwill and other long-lived assets for impairment. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

~~Government Assistance (Topic 832): Disclosures by Business Entities About Government Assistance~~

~~In November 2021, the FASB issued ASU 2021-10,~~ ~~Government Assistance (Topic 832)~~, ~~Disclosures by Business Entities About Government Assistance~~, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is effective for the Company’s annual disclosures as of and for the year ending December 31, 2022, with early adoption permissible. The Company elected to adopt this guidance during the quarter ended June 30, 2022 in connection with the recognition of cash incentive related to the India Production Linked Incentive Scheme for the Pharmaceutical Sector (“PLI Scheme”). Refer to ~~Note 19. Government Grants, for additional information.~~

~~Recently Issued Accounting Pronouncements~~

~~In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides elective amendments for entities that have contracts, hedging relationships and other transactions~~ ~~that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform~~. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. In January 2021, the FASB issued ASU 2021-01, ~~Reference Rate Reform (Topic 848)~~, to expand and clarify the scope of Topic 848 to include derivative instruments on discounting transactions. The amendments in this ASU are effective in the same timeframe as ASU 2020-04. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers(“ASU 2021-08”), which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers(“ASC 606”). The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. ~~The new standard is~~ASU 2021-08 was effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company ~~does~~adopted ASU 2021-08 effective January 1, 2023 and will apply the guidance to subsequent acquisitions. The adoption of ASU 2021-08 did not ~~expect this standard~~have an impact on the Company’s consolidated financial statements because the Company did not acquire a business during the three and six months ended June 30, 2023.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides elective amendments for entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), to expand and clarify the scope of Topic 848 to include derivative instruments on discounting transactions. In December 2022, the FASB issued ASU 2022-06, Reference Rate reform (Topic 848): Deferral of the Sunset Date of Topic 848, which deferred the sunset date of Topic 848, Reference Rate Reform to December 31, 2024. The Company adopted ASU 2020-04 during the three months ended June 30, 2023 (refer to Note 15. Debt and Note 18. Financial Instruments for additional information). The adoption of ASU 2020-04 did not have a material impact on ~~its~~the Company’s consolidated financial statements.

~~Reclassification~~Reclassifications

The prior period balance related to ~~liabilities for legal proceedings~~cost of ~~$58.0~~goods sold impairment charges of $5.1 million, formerly included in ~~accounts payable~~a separate income statement caption for both the three and ~~accrued expenses as of December 31, 2021,~~six months ended June 30, 2022, has been reclassified to be included within the income statement caption cost of goods sold to conform with the current period presentation.

The prior period balance ~~sheet~~related to loss on refinancing of $0.3 million, formerly included in a separate income statement caption ~~current portion of liabilities~~ for ~~legal matters~~both the three and six months ended June 30, 2022, has been reclassified to be included within the income statement caption other income, net to conform to the current period ~~presentation in the consolidated balance sheets.~~presentation.

3. ~~Acquisitions~~Acquisition

Saol Baclofen Franchise Acquisition

On December 30, 2021, the Company entered into an asset purchase agreement with certain entities affiliated with Saol International Limited (collectively, “Saol”), a private specialty pharmaceutical company, pursuant to which it agreed to acquire Saol’s baclofen franchise, including Lioresal®, LYVISPAH™, and a pipeline product under development (the “Saol Acquisition”). The Saol Acquisition ~~expands~~expanded the Company’s commercial institutional and specialty portfolio in neurology ~~while adding~~and added commercial infrastructure in advance of its entry into the biosimilar institutional market. The transaction closed on February 9, 2022.

Consideration for the Saol Acquisition included $84.7 million, paid at closing with cash on hand, and contingent royalty payments based on annual net sales for certain acquired assets, beginning in June 2023. ~~Cash paid at closing included $1.1 million for inventory acquired in excess of the normalized level, as defined in the asset purchase agreement (working capital adjustment).~~

For the nine months ended September 30, 2022, the Company incurred $0.1 million in transaction costs associated with the Saol Acquisition, which was recorded in acquisition, transaction-related and integration expenses (none for the three months ended September 30, 2022).

~~The Saol Acquisition was accounted for under the acquisition method of accounting, with Amneal as the accounting acquirer.~~ ~~The purchase price was calculated as follows (in thousands):~~


~~Cash~~	$	~~84,714~~
~~Contingent consideration (royalties)~~ ~~(1)~~	~~8,796~~
~~Fair value of consideration transferred~~	$	~~93,510~~

~~(1)The estimated fair value of contingent consideration on the acquisition date was $8.8 million~~ ~~and~~ ~~was based on significant Level 3 inputs that were not observable in the market. Key assumptions included the discount rate, projected year of payments and expected net product sales.~~ Refer to Note 3. ~~Note 10. Fair Value Measurements~~Acquisitions~~, for additional information on the methodology and determination of this liability.~~

~~The following is a summary of the purchase price allocation for the Saol Acquisition (in thousands):~~


	~~Final Fair Values as of~~ ~~February 9, 2022~~
~~Inventory~~	$	~~2,162~~
~~Prepaid expenses and other current assets~~	98
~~Goodwill~~	~~7,553~~
~~Intangible assets~~	~~83,815~~
~~Total assets acquired~~	~~93,628~~
~~Accounts payable and accrued expenses~~	~~118~~
~~Fair value of consideration transferred~~	$	~~93,510~~

~~The acquired intangible assets are being amortized over their estimated useful lives as follows (in thousands):~~

Final Fair Value Weighted-Average
Useful Life (in years)
Marketed product rights $ 83,815 11.6

The estimated fair value of the identifiable intangible assets was determined using the “income approach,” which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. The assumptions, including the expected projected cash flows, utilized in the purchase price allocation and in determining the purchase price were based on management's best estimates as of the closing date of the Saol Acquisition on February 9, 2022.

Some of the more significant assumptions inherent in the development of those asset valuations included the estimated net cash flows for each year for each asset (including net revenues, cost of sales, selling and marketing costs and working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream, as well as other factors. The underlying assumptions used to prepare the ~~discounted cash flow analysis may change; accordingly, for these and other reasons, actual results may vary significantly from estimated results.~~

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized. Of the total goodwill acquired in connection with the Saol Acquisition, $5.2 million was allocated to the Company’s Generics segment and $2.4 million was allocated to the Company’s Specialty segment.

~~From the acquisition date of February 9, 2022 to September 30, 2022, the Saol Acquisition contributed net revenue and an operating loss of $14.9 million and $4.6 million, respectively.~~ ~~For the three months ended September 30, 2022, the Saol Acquisition contributed net revenue and an operating loss of $5.6 million and $2.6 million, respectively.~~

~~Puniska Healthcare Pvt. Ltd.~~

On November 2, 2021, the Company entered into a definitive agreement to acquire Puniska Healthcare Pvt. Ltd. (“Puniska”), a privately held manufacturer of parenteral and injectable drugs in India, and land in a transaction valued at $93.0 million (the “Puniska Acquisition”). Upon execution of the agreement, the Company paid $72.9 million with cash on hand for approximately 74% of the equity interests of Puniska. Upon approval of the transaction by the government of India in March 2022, the Company paid, with cash on hand, an additional $1.7 million for the remaining 26% of the equity interests of Puniska (included in redeemable non-controlling interests in the Company’s consolidated balance sheet as of December 31, 2021) and $14.2 million for the satisfaction of a preexisting payable to the sellers (included in related party payables-short term in the Company’s consolidated balance sheet as of December 31, 2021). During December 2021, the Company paid $4.3 million with cash2022 Annual Report on ~~hand for land associated with the Puniska Acquisition.~~

~~There were no transaction costs associated with the Puniska Acquisition for the three and nine months ended September 30, 2022.~~

The Puniska Acquisition, excluding the land acquired in December 2021, was accounted for under the acquisition method of accounting, with Amneal as the accounting acquirer. The preliminary purchase price was calculated as follows (in thousands):


~~Cash~~ ~~(1)~~	$	~~72,880~~
~~Payable to sellers~~ ~~(2)~~	~~14,162~~
~~Fair value of consideration transferred~~	$	~~87,042~~

~~(1)~~ ~~Cash includes the payment made upon execution of the agreement.~~

~~(2)~~ ~~Due to the short-term nature of the payable to the sellers, the principal amount approximates fair value.~~

~~The following is a summary of the preliminary purchase price allocation for the Puniska Acquisition (in thousands):~~


	~~Preliminary Fair Values as of~~ ~~November 2, 2021~~
~~Cash~~	$	~~165~~
~~Trade accounts receivable, net~~	~~232~~
~~Inventories~~	~~1,092~~
~~Prepaid expenses and other current assets~~	~~4,473~~
~~Property, plant and equipment~~	~~53,423~~
~~Goodwill~~	~~30,091~~
~~Operating lease-right-of-use assets~~	~~234~~
~~Other assets~~	~~1,303~~
~~Total assets acquired~~	~~91,013~~
~~Accounts payable and accrued expenses~~	~~1,732~~
~~Operating lease liabilities~~	~~234~~
~~Other long-term liabilities~~	~~263~~
~~Total liabilities assumed~~	~~2,229~~
~~Redeemable non-controlling interests~~	~~1,742~~
~~Fair value of consideration transferred~~	$	~~87,042~~

Goodwill is calculated as the excess of the consideration transferred and fair value of the redeemable non-controlling interests over the net assets recognized. All of the goodwill acquired in connection with the Puniska Acquisition was allocated to the Company’s Generics segment.

~~Kashiv Specialty Pharmaceuticals, LLC Acquisition~~

~~On January 11, 2021, the Company and Kashiv Biosciences, LLC (a related party, see~~ ~~Note 15. Related Party Transactions) (“Kashiv”) entered into a definitive agreement for Amneal to acquire a 98% interest in Kashiv Specialty Pharmaceuticals, LLC~~

~~(“KSP”), a subsidiary of Kashiv focused on the development of innovative drug delivery platforms, novel 505(b)(2) drugs and complex generics (the “KSP Acquisition”).~~

On April 2, 2021, the Company completed the KSP Acquisition. Under the terms of the transaction, the cash portion of the consideration was $104.5 million, comprised of a purchase price of $100.1 million (including initial and deferred consideration) and a working capital adjustment of $4.4 million. The initial cash purchase price was funded by cash on hand. For further detail of the purchase price, refer to the table below.

~~Transaction costs associated with the KSP Acquisition were~~ ~~$3.1 million f~~or the nine months ended September 30, 2021 and were included in acquisition, transaction-related and integration expenses (none for the three months ended September 30, 2021 and for the three and nine months ended September 30, 2022).

~~The KSP Acquisition was accounted for under the acquisition method of accounting, with Amneal as the accounting acquirer.~~

~~The purchase price was calculated as follows (in thousands):~~


~~Cash, including working capital payments~~	$	~~74,440~~
~~Deferred consideration~~ ~~(1)~~	~~30,099~~
~~Contingent consideration (regulatory milestones)~~ ~~(2)~~	~~500~~
~~Contingent consideration (royalties)~~ ~~(2)~~	~~5,200~~
~~Settlement of Amneal trade accounts payable due to KSP~~ ~~(3)~~	~~(7,117)~~
~~Fair value consideration transferred~~	$	~~103,122~~

~~(1)~~The deferred consideration was stated at the fair value estimate of $30.1 million, which is the $30.5 million contractually stated amount less a $0.4 million discount. The deferred consideration consisted of $30.0 million, which the Company paid in January 2022 and $0.5 million, which the Company paid during the three months ending September 30, 2022. As the deferred consideration is non-interest bearing, the Company, using guideline companies and market borrowings with comparable risk profiles, discounted the deferred consideration at 1.7% over the period from April 2, 2021 to the maturity dates, for a fair value of $30.1 million on the date of acquisition. This discount was amortized to interest expense over the life of the deferred consideration utilizing the effective interest rate method.

~~(2)~~ Kashiv is eligible to receive up to an additional $8.0 million in contingent payments upon the achievement of certain regulatory milestones and potential royalty payments from high single-digits to mid double-digits, depending on the amount of aggregate annual net sales for certain future pharmaceutical products. The estimated fair value of contingent consideration on the acquisition date was ~~$5.7 million,~~ based on significant Level 3 inputs that were not observable in the market. Key assumptions included the discount rate, probability of achievement of milestones, projected year of payments and expected net product sales. Refer to ~~Note 10. Fair Value Measurements~~,Form 10-K for additional ~~information on the methodology and determination of this liability.~~information.

~~(3)~~ ~~Represented trade accounts payable due to KSP that were effectively settled upon closing of the KSP Acquisition.~~

~~The following is a summary of the purchase price allocation for the KSP Acquisition (in thousands):~~


	Final Fair Values as of April 2, 2021
~~Cash~~	$	~~112~~
~~Restricted cash~~	~~500~~
~~Prepaid expenses and other current assets~~	~~381~~
~~Property, plant and equipment~~	~~5,375~~
~~Goodwill~~	~~43,530~~
~~Intangible assets~~	~~56,400~~
~~Operating lease right-of-use assets~~	~~9,367~~
~~Total assets acquired~~	~~115,665~~
~~Accounts payable and accrued expenses~~	~~1,239~~
~~Operating lease liability~~	~~9,177~~
~~Related party payable~~	~~127~~
~~Total liabilities assumed~~	~~10,543~~
~~Non-controlling interests~~	~~2,000~~
~~Fair value of consideration transferred~~	$	~~103,122~~

~~Total acquired intangible assets of $56.4 million were comprised of marketed product rights of $29.4 million and in-process research and development (“IPR&D”) of $27.0 million.~~

~~The acquired intangible assets are being amortized over their estimated useful lives as follows (in thousands):~~

Fair Value Weighted-Average
Useful Life (in years)
Marketed product rights $ 29,400 5.9

The estimated fair value of the IPR&D and identifiable intangible assets was determined using the “income approach”, which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. The assumptions, including the expected projected cash flows, utilized in the purchase price allocation and in determining the purchase price were based on management’s best estimates as of the closing date of the KSP Acquisition on April 2, 2021.

Some of the more significant assumptions inherent in the development of those asset valuations included the estimated net cash flows for each year for each asset or product (including net revenues, cost of sales, R&D, selling and marketing costs and working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream, as well as other factors. The underlying assumptions used to prepare the discounted cash flow analysis may change; accordingly, for these and other reasons, actual results may vary significantly from estimated results.

Goodwill is calculated as the excess of the consideration transferred and fair value of the non-controlling interests over the net assets recognized. Of the total goodwill acquired in connection with the KSP Acquisition, $40.8 million was allocated to the Company’s Generics segment and $2.7 million was allocated to the Company’s Specialty segment.

4. Revenue Recognition

The Company recognizes revenue in accordance with ASC ~~606,~~ ~~Revenue from Contracts with Customers~~.606. Revenue is recognized when the Company transfers control of its products to the customer, which typically occurs at a point-in-time, either upon shipment or delivery. Substantially all of the Company’s net revenues relate to products which are transferred to the customer at a point-in-time.

License Agreements

Refer to Note 5. Alliance and Collaboration for further information related to revenue recognition associated with a license agreement with multiple performance obligations.

Concentration of Revenue

The following table summarizes revenues from each of ~~our~~the Company’s customers which individually accounted for 10% or more of ~~our~~its total net revenue:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Customer A 21 % 18 % 20 % 21 %
Customer B 17 % 20 % 17 % 20 %
Customer C 23 % 25 % 23 % 24 %
Customer D 9 % 9 % 11 % 10 %

1712


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Customer A	24	%	19	%	23	%	19	%
Customer B	16	%	17	%	15	%	17	%
Customer C	20	%	21	%	20	%	22	%
Customer D	11	%	11	%	10	%	11	%

Disaggregated Revenue

The ~~Company's~~Company’s significant therapeutic classes for its Generics and Specialty segments and sales channels for its AvKARE segment, as determined based on net revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, are set forth below (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Generics
Anti-Infective $ 4,957 $ 9,406 $ 16,768 $ 24,996
Hormonal/ Allergy 119,726 107,614 334,403 325,971
Antiviral (1)
5,782 9,762 17,649 1,560
Central Nervous System 96,877 91,263 286,789 294,182
Cardiovascular System 28,926 35,692 84,422 107,137
Gastroenterology 17,129 17,172 51,280 56,333
Oncology 12,240 21,203 47,872 73,683
Metabolic Disease/Endocrine 9,276 12,893 30,497 26,331
Respiratory 8,720 8,233 26,503 26,874
Dermatology 17,327 14,860 48,741 42,556
Other therapeutic classes 29,101 18,983 86,790 39,857
International and other 205 46 1,194 592
Total Generics net revenue 350,266 347,127 1,032,908 1,020,072
Specialty
Hormonal/ Allergy 22,012 16,422 65,751 49,230
Central Nervous System 61,785 68,869 185,309 201,710
Other therapeutic classes 5,687 7,454 20,511 26,371
Total Specialty net revenue 89,484 92,745 271,571 277,311
AvKARE
Distribution 66,057 48,048 190,560 141,863
Government Label 26,000 29,898 72,739 90,142
Institutional 8,297 7,873 20,672 18,832
Other 5,453 2,902 14,095 8,553
Total AvKARE net revenue 105,807 88,721 298,066 259,390
Total net revenue $ 545,557 $ 528,593 $ 1,602,545 $ 1,556,773

~~(1)~~ Antiviral net revenue for the nine months ended September 30, 2021 reflected lower demand and increased returns activity for Oseltamivir (generic Tamiflu®) above historical levels due to decreased influenza activity during the onset of the COVID-19 pandemic.


		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Generics
	Anti-infective	$	6,092	$	5,566	$	11,266	$	11,811
	Hormonal / allergy	126,435		118,309		231,286		214,677
	Antiviral	3,597		1,296		29,071		11,867
	Central nervous system	83,604		108,787		168,186		189,912
	Cardiovascular system	33,146		32,043		65,649		55,496
	Gastroenterology	19,905		17,531		34,269		34,151
	Oncology	28,546		18,424		39,124		35,632
	Metabolic disease/ endocrine	14,936		9,988		24,201		21,221
	Respiratory	11,136		12,118		23,951		17,783
	Dermatology	17,949		17,937		35,953		31,414
	Other therapeutic classes	27,809		22,329		53,704		57,689
	International and other	546		567		847		989
	Total Generics net revenue	373,701		364,895		717,507		682,642
Specialty
	Hormonal / allergy	29,011		24,320		53,774		43,739
	Central nervous system	59,563		65,356		119,702		123,524
	Other therapeutic classes	8,420		7,325		15,196		14,824
	Total Specialty net revenue	96,994		97,001		188,672		182,087
AvKARE
	Distribution	83,795		64,240		167,025		124,503
	Government label	29,870		22,280		54,386		46,739
	Institutional	8,982		6,060		17,844		12,375
	Other	5,704		4,879		11,152		8,642
	Total AvKARE net revenue	128,351		97,459		250,407		192,259
	Total net revenue	$	599,046	$	559,355	$	1,156,586	$	1,056,988

A rollforward of the major categories of sales-related deductions for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 is as follows (in thousands):

Contract
Charge - Backs
and Sales
Volume
Allowances Cash Discount
Allowances Accrued
Returns
Allowance Accrued
Medicaid and
Commercial
Rebates
Balance at December 31, 2021 $ 503,902 $ 23,642 $ 161,978 $ 85,737
Provision related to sales recorded in the period 2,389,025 79,658 61,052 90,308
Credits/payments issued during the period (2,517,447) (81,342) (77,616) (96,379)
Balance at September 30, 2022 $ 375,480 $ 21,958 $ 145,414 $ 79,666

1813


	Contract Charge - Backs and Sales Volume Allowances		Cash Discount Allowances		Accrued Returns Allowance		Accrued Medicaid and Commercial Rebates
Balance at December 31, 2022	$	573,592	$	27,454	$	145,060	$	86,030
Provision related to sales recorded in the period	1,619,720		54,566		34,997		114,905
Credits/payments issued during the period	(1,767,481)		(51,805)		(47,125)		(103,395)
Balance at June 30, 2023	$	425,831	$	30,215	$	132,932	$	97,540

5. Alliance and Collaboration

The Company has entered into several alliance, collaboration, license, distribution and similar agreements with respect to certain of its products and services with third-party pharmaceutical companies. The consolidated statements of operations include revenue recognized under agreements the Company has entered into to develop marketing and/or distribution relationships with its partners to fully leverage the technology platform and revenue recognized under development agreements which generally obligate the Company to provide research and development (“R&D”) services over multiple periods. The ~~Company's~~Company’s significant arrangements are discussed below.

License Agreement

On December 28, 2022, Amneal signed a long-term license agreement with Orion Corporation (“Orion”), a globally operating Finnish pharmaceutical company, to commercialize a number of its complex generic products in most parts of Europe, Australia and New Zealand (the “Orion Agreement”). The initial term of the Orion Agreement commences upon commercial launch of the products and will continue for eight years. The Orion Agreement will automatically renew for successive two-year terms unless either party declines such renewal in writing at least one year in advance.

Under the terms of the Orion Agreement, Amneal granted Orion licenses to certain generic products commercially available in the U.S. today and select high-value pipeline products currently under development. In addition, Amneal will be responsible for the performance of all R&D activities to be conducted to obtain regulatory approval for each product. Amneal is entitled to be reimbursed for a percentage of mutually agreed upon R&D expenses from Orion. Orion will be responsible for preparing and filing regulatory documentation, along with paying any application fees seeking regulatory approval for the products.

Upon achieving regulatory approval for products, Amneal will be responsible for manufacturing and supplying products to Orion. Orion will be responsible for all commercialization and marketing activities for the territories described above. Amneal will earn revenue for supplying products to Orion at the greater of: (i) cost plus a stated margin, or (ii) a fixed percentage of the net selling price, as defined in the Orion Agreement.

Upon signing of the Orion Agreement, Amneal was entitled to an upfront, non-refundable payment of €20.0 million, or $21.4 million (based on the exchange rate as of that date), which was collected in January 2023. Amneal is eligible to receive certain one-time sales-based milestones in the aggregate of €45.0 million, or $49.0 million, based on the exchange rate as of June 30, 2023, contingent upon whether Orion achieves certain annual sales targets.

The Orion Agreement is within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”). The Company identified performance obligations related to: (1) the grant of a license of functional intellectual property (“IP”), (2) the performance of R&D activities, and (3) the supply of products. The Company evaluated that the grant of licenses is in the scope of ASC 606, whereas the performance of R&D activities is in the scope of ASC 730-20, Research and Development Arrangements, because the Company determined that performing R&D activities on behalf of other parties is not part of the ordinary activities of its business. The Company records reimbursement received from Orion for R&D activities as a reduction of R&D expense. The Company concluded each future purchase order from Orion represents a separate contract. Amneal will record revenue related to each purchase order when it transfers control of the products to Orion. At December 31, 2022, Amneal had not performed any reimbursable R&D activities under the Orion Agreement or supplied any products to Orion.

The Company determined that the transaction price under the arrangement was the upfront payment of $21.4 million, which was allocated to the performance obligations based on their relative standalone selling prices. The remaining sales-based milestones payments are variable consideration and were not included in the transaction price because they were fully constrained under ASC 606.

For the year ended December 31, 2022, the Company recognized $8.0 million in license revenue related to the delivery of functional IP, which was recorded in net revenues. The remaining $13.4 million of the transaction price was allocated to the

R&D activities performance obligation and was recorded as deferred income, of which $6.7 million was recorded in accounts payable and accrued expenses and $6.7 million was recorded in other long-term liabilities as of December 31, 2022. During the six months ended June 30, 2023, the Company recognized $0.6 million as a reduction to R&D expense related to services performed under the Orion Agreement (none during the three months ended June 30, 2023). As of June 30, 2023, deferred income of $8.6 million and $4.2 million, respectively, was recorded in accounts payable and accrued expenses and other long-term liabilities. As of June 30, 2023, no products have been supplied by Amneal under the Orion Agreement.

Biosimilar Licensing and Supply Agreement

On May 7, 2018, the Company entered into a licensing and supply agreement with Mabxience S.L. for its biosimilar candidate for Avastin® (bevacizumab). The supply agreement was subsequently amended on March 2, 2021 and the licensing agreement was amended on March 4, 2021. Pursuant to the agreement, the Company will be the exclusive partner in the U.S. market and will pay development and regulatory milestone payments as well as commercial milestone payments on reaching pre-agreed sales targets in the market to Mabxience, up to $78.3 million. For the nine months ended September 30, 2021, the Company recognized $9.5 million of research and development expense under this agreement (none for the three months ended September 30, 2021 and the three and nine months ended September 30, 2022).

On April 13, 2022, the Food and Drug Administration (“(the “FDA”) approved the Company’s biologics license application for bevacizumab-maly, a biosimilar referencing Avastin®. In connection with this regulatory approval and associated activity, the Company ~~incurred~~paid milestones of $26.5 million ~~during the nine months ended September 30,~~in 2022, ~~(none during the three months ended September 30, 2022). The milestones, of~~ which ~~$10.0 million was paid during the three months ended June 30, 2022 and $16.5 million was paid during the three months ended September 30, 2022, have been~~were capitalized as product rights intangible assets and ~~will be~~are being amortized to cost of sales over their estimated useful lives of 7 years.

Agreements with Kashiv Biosciences, LLC

For details on the Company’s related party agreements with Kashiv, refer to Note ~~15.~~21. Related Party Transactions in this Form 10-Q and Note 24. Related Party Transactions in the Company’s ~~2021~~2022 Annual Report on Form 10-K.

6. ~~(Loss) Earnings per Share~~Government Grants

~~Basic (loss) earnings per share~~

In November 2021, Amneal Pharmaceuticals Private Limited, a subsidiary of the ~~Company’s class A common stock~~Company in India, was selected as one of 55 companies to participate in the India Production Linked Incentive Scheme for the Pharmaceutical Sector (“PLI Scheme”). The government of India established the PLI Scheme to make India’s domestic manufacturing more globally competitive and to create global champions within the pharmaceutical sector by encouraging investment and product diversification with a focus on manufacturing complex and high value goods.

Under the PLI Scheme, the Company is ~~computed by dividing net (loss)~~eligible to receive up to 10 billion Indian rupees, or approximately $121.9 million (based on the exchange rate as of June 30, 2023), over a maximum six-year period, starting in 2022. To be eligible to receive the cash incentives, Amneal must achieve (i) minimum cumulative expenditures towards developmental and/or capital investments and (ii) a minimum percentage growth in sales of eligible products.

The Company concluded the PLI Scheme is government assistance in the form of a grant and, in the absence of specific accounting guidance under U.S. GAAP, the Company has analogized to International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance. The Company evaluated the PLI Scheme to be a grant related to income ~~attributable to Amneal Pharmaceuticals, Inc. by~~and will recognize the ~~weighted-average number~~cash incentives on a systematic basis in other operating income. For the six months ended June 30, 2023, the Company recognized $1.2 million of ~~shares~~other operating income from the PLI Scheme (immaterial for the three months ended June 30, 2023). For the three and six months ended June 30, 2022, the Company recognized $1.2 million of ~~class A common stock outstanding during~~other operating income from the ~~period. Diluted (loss) earnings per share~~PLI Scheme. As of ~~class A common stock is computed by dividing net (loss) income attributable to Amneal Pharmaceuticals, Inc. by~~June 30, 2023 and December 31, 2022, the ~~weighted-average number~~Company recorded a corresponding receivable from the government of ~~shares~~India of ~~class A common stock outstanding, adjusted to give effect to potentially dilutive securities.~~

~~The following table sets forth reconciliations of the numerators~~$5.2 million and ~~denominators used to compute basic~~$4.0 million, respectively, within prepaid expenses and ~~diluted (loss) earnings per share of class A common stock (in thousands, except per share amounts):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Numerator:
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. $ (2,689) $ (4,237) $ (125,653) $ 17,001
Denominator:
Weighted-average shares outstanding - basic 151,393 149,290 150,765 148,771
Effect of dilutive securities:
Stock options — — — 785
Restricted stock units — — — 2,099
Weighted-average shares outstanding - diluted 151,393 149,290 150,765 151,655
Net (loss) earnings per share attributable to Amneal Pharmaceuticals, Inc.’s class A common stockholders:
Basic $ (0.02) $ (0.03) $ (0.83) $ 0.11
Diluted $ (0.02) $ (0.03) $ (0.83) $ 0.11
other current assets.

1915

Shares of the Company's class B common stock do not share in the earnings or losses of the Company and, therefore, are not participating securities. As such, separate presentation of basic and diluted (loss) earnings per share of class B common stock under the two-class method has not been presented.

~~The following table presents potentially dilutive securities excluded from the computations of diluted (loss) earnings per share of class A common stock (in thousands):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Stock options 2,728 (1) 3,102 (1) 2,728 (1) 347 (3)
Restricted stock units 10,874 (1) 8,171 (1) 10,874 (1) —
Performance stock units 7,266 (1) 5,184 (1) 7,266 (1) 5,184 (4)
Shares of class B common stock 152,117 (2) 152,117 (2) 152,117 (2) 152,117 (2)

~~(1)~~Excluded from the computation of diluted earnings per share of class A common stock because the effect of their inclusion would have been anti-dilutive since there was a net loss attributable to the Company during the period.

~~(2)~~Shares of class B common stock are considered potentially dilutive shares of class A common stock. Shares of class B common stock have been excluded from the computations of diluted (loss) earnings per share because the effect of their inclusion would have been anti-dilutive under the if-converted method.

~~(3)~~Excluded from the computation of diluted earnings per share of class A common stock because the exercise price of the stock options exceeded the average market price of the class A common stock during the period (out-of-the-money).

~~(4)Excluded from the computation of diluted earnings per share of class A common stock because the performance vesting conditions were not met during the period.~~

7. Income Taxes

For the three months ended ~~September~~June 30, ~~2022,~~2023, the Company’s benefit from income taxes and effective tax rate were both immaterial, as compared to a provision for income taxes and effective tax rate of $7.4 million and (3.2)%, respectively, for the three months ended June 30, 2022. For the six months ended June 30, 2023, the Company’s provision for income taxes and effective tax ~~rates~~rate were ~~$4.6~~$0.6 million and ~~209.6%~~3.2%, respectively, as compared to ~~$4.0~~$3.9 million and ~~(198.2)~~(1.6)%, respectively, for the ~~three~~six months ended ~~September~~June 30, ~~2021. T~~he2022. The period-over-period ~~change~~changes in the provision for income taxes was primarily related to a change in the jurisdictional mix of ~~foreign income.~~

For the nine months ended September 30, 2022, the Company’s provision for income taxes and effective tax rates were $8.5 million and (3.5)%, respectively, compared to $7.1 million and 14.8%, respectively, for the nine months ended September 30, 2021. The period-over-period change in the provision for income taxes was primarily related to a change in the mix of foreign income and a discrete benefit as a result of the completion of an Internal Revenue Service examination and Joint Committee review of the 2012-2018 federal income tax returns, which enabled the Company to recognize previously unrecognized tax ~~benefits.~~benefits during the three and six months ended June 30, 2022.

~~As of September 30, 2019, the~~The Company established a valuation allowance on its deferred tax assets (“DTAs”) based upon all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies. ~~The~~Since first establishing a valuation allowance, the Company ~~estimated that as of September 30, 2019, it had~~has generated a cumulative consolidated three-year pre-tax ~~loss, which continued as of December 31, 2021.~~losses through June 30, 2023. As a result of the ~~initial September~~losses through June 30, ~~2019 and December 31, 2021 analyses,~~2023, the Company determined that it ~~remained~~is more likely than not that it ~~would~~will not realize the benefits of its gross ~~deferred tax assets (“DTAs”)~~DTAs and therefore maintained its valuation allowance. As of June 30, 2023 and December 31, ~~2021,~~2022, this valuation allowance was ~~$416.6~~$435.4 million and $434.9 million, respectively, and it reduced the carrying value of these gross DTAs ~~net of the impact of the reversal of taxable temporary differences,~~ to zero. ~~As of September 30, 2022, based on its evaluation of available positive and negative evidence, the Company has maintained its position with respect to the valuation allowance.~~

The Company entered into a tax receivable agreement (“TRA”) for which it is generally required to pay the holders of Amneal Common Units 85% of the applicable tax savings, if any, in U.S. federal and state income tax that it is deemed to realize as a result of certain tax attributes of their Amneal Common Units sold to the Company (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. In conjunction with the valuation allowance recorded on the DTAs, ~~at September 30, 2019,~~ the Company reversed the accrued TRA ~~liability.~~liability of $192.8 million during 2019.

The projection of future taxable income involves significant judgment. Actual taxable income may differ from the Company’s estimates, which could significantly impact the timing of the recognition of the contingent liability under the TRA. As noted above, the Company has determined it is more-likely-than-not it will be unable to utilize all of its DTAs subject to the TRA; therefore, as of ~~September~~June 30, ~~2022,~~2023, the Company has not recognized the contingent liability under the TRA related to the tax savings it may realize from common units sold or exchanged. If utilization of these DTAs becomes more likely than not in the future, at such time, Amneal will recognize a liability under the TRA as a result of basis adjustments under Internal Revenue Code Section 754. As of both ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the contingent liability associated with the TRA was approximately ~~$206.3 million.~~$202.7 million, out of which approximately $1.9 million was recorded.

The timing and amount of any payments under the TRA may vary depending upon a number of factors, including the timing and number of Amneal Common Units sold or exchanged for the ~~Company's~~Company’s class A common stock, the price of the ~~Company's~~Company’s class A common stock on the date of sale or exchange, the timing and amount of the ~~Company's~~Company’s taxable income, and the tax rate in effect at the time of realization of the ~~Company's~~Company’s taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from the use of the ~~TRA's~~TRA’s attributes). Further sales or exchanges occurring subsequent to ~~September~~June 30, ~~2022~~2023 could result in future Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal Common Units. These obligations could be incremental to and substantially larger than the approximate ~~$206.3~~$202.7 million contingent liability as of ~~September~~June 30, ~~2022~~2023 described above. Under certain conditions, such as a change of control or other early termination event, the Company could be obligated to make TRA payments in advance of tax benefits being realized. Payments could also be in excess of the tax savings that the Company may ultimately realize.

Any future recognition of these TRA liabilities will be recorded through charges in the Company’s consolidated statements of operations. However, if the tax attributes are not utilized in future years, it is reasonably possible no amounts would be paid under the ~~TRA.~~TRA in excess of the $1.9 million accrued as of June 30, 2023. Should the Company determine that a DTA with a valuation allowance is realizable in a subsequent period, the related valuation allowance will be reversed and, if a resulting TRA payment is determined to be probable, a corresponding TRA liability will be recorded.

8. Earnings (Loss) per Share

Basic earnings (loss) per share of the Company’s class A common stock is computed by dividing net income (loss) attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of class A common stock outstanding during the period. Diluted earnings (loss) per share of class A common stock is computed by dividing net income (loss) attributable to

Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of class A common stock outstanding, adjusted to give effect to potentially dilutive securities.

The ~~U.S. federal government has recently signed into law~~following table sets forth reconciliations of the ~~Inflation Reduction Act~~numerators and denominators used to compute basic and diluted earnings (loss) per share of ~~2022 (the “IRA”) which, among other things, imposes a minimum “book” tax on certain large corporations and creates a new excise tax on~~class A common stock ~~repurchases made by certain publicly traded corporations after December 31, 2022. Although~~(in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator:
Net income (loss) attributable to Amneal Pharmaceuticals, Inc.	$	11,917	$	(120,808)	$	4,974	$	(122,964)
Denominator:
Weighted-average shares outstanding - basic	153,738		150,993		152,928		150,445
Effect of dilutive securities:
Restricted stock units	1,149		—		1,647		—
Weighted-average shares outstanding - diluted	154,887		150,993		154,575		150,445
Net income (loss) per share attributable to Amneal Pharmaceuticals, Inc.’s class A common stockholders:
Basic	$	0.08	$	(0.80)	$	0.03	$	(0.82)
Diluted	$	0.08	$	(0.80)	$	0.03	$	(0.82)

Shares of the Company’s class B common stock do not share in the earnings or losses of the Company ~~continues to evaluate~~and, therefore, are not participating securities. As such, separate presentation of basic and diluted earnings (loss) per share of class B common stock under the ~~impact~~two-class method has not been presented.

The following table presents potentially dilutive securities excluded from the computations of diluted earnings (loss) per share of class A common stock (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Stock options	2,629	(1)	2,919	(2)	2,629	(1)	2,919	(2)
Restricted stock units	—		10,989	(2)	—		10,989	(2)
Performance stock units	7,012	(3)	7,427	(2)	7,012	(3)	7,427	(2)
Shares of class B common stock	152,117	(4)	152,117	(4)	152,117	(4)	152,117	(4)

(1)Excluded from the computation of diluted earnings per share of class A common stock because the exercise price of the ~~IRA on its consolidated financial statements as it awaits further guidance,~~stock options exceeded the average market price of class A common stock during the period (out-of-the-money).

(2)Excluded from the computation of diluted loss per share of class A common stock because the effect of their inclusion would have been anti-dilutive since there was a net loss attributable to the Company ~~does~~during the period.

(3)Excluded from the computation of diluted earnings per share of class A common stock because the performance vesting conditions were not ~~currently expect a material impact.~~met during the period.

(4)Shares of class B common stock are considered potentially dilutive shares of class A common stock. Shares of class B common stock have been excluded from the computations of diluted loss per share because the effect of their inclusion would have been anti-dilutive under the if-converted method.

9. Trade Accounts Receivable, Net

Trade accounts receivable, net was comprised of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Gross accounts receivable	Gross accounts receivable	$	1,028,124	$	1,191,792	Gross accounts receivable	$	1,133,348	$	1,344,959
Allowance for credit losses	Allowance for credit losses	(1,949)		(1,665)		Allowance for credit losses	(2,566)		(2,122)
Contract charge-backs and sales volume allowances	Contract charge-backs and sales volume allowances	(375,480)		(503,902)		Contract charge-backs and sales volume allowances	(425,831)		(573,592)
Cash discount allowances	Cash discount allowances	(21,958)		(23,642)		Cash discount allowances	(30,215)		(27,454)
Subtotal	Subtotal	(399,387)		(529,209)		Subtotal	(458,612)		(603,168)
Trade accounts receivable, net	Trade accounts receivable, net	$	628,737	$	662,583	Trade accounts receivable, net	$	674,736	$	741,791

Concentration of Receivables

Trade accounts receivable from customers representing 10% or more of the Company’s total trade accounts receivable were as follows:

September 30,
2022 December 31,
2021
Customer A 35 % 37 %
Customer B 20 % 24 %
Customer C 28 % 25 %


	June 30, 2023		December 31, 2022
Customer A	36	%	41	%
Customer B	26	%	25	%
Customer C	22	%	21	%

9.10. Inventories

Inventories were comprised of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Raw materials	Raw materials	$	220,030	$	214,508	Raw materials	$	235,679	$	224,607
Work in process	Work in process	76,161		47,802		Work in process	55,253		58,522
Finished goods	Finished goods	247,667		227,079		Finished goods	259,626		247,606
Total inventories	Total inventories	$	543,858	$	489,389	Total inventories	$	550,558	$	530,735

11. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets were comprised of the following (in thousands):


	June 30, 2023		December 31, 2022
Deposits and advances	$	3,360	$	1,821
Prepaid insurance	5,949		8,090
Prepaid regulatory fees	1,771		5,298
Income and other tax receivables	13,394		12,881
Prepaid taxes	11,617		16,593
Other current receivables (1)	14,473		33,133
Chargebacks receivable (2)	10,987		8,605
Other prepaid assets	20,213		17,144
Total prepaid expenses and other current assets	$	81,764	$	103,565

(1)Other current receivables as of December 31, 2022 include a $21.4 million receivable for an upfront payment associated with the Orion Agreement, which was collected in January 2023. Refer to Note 5. Alliance and Collaboration for additional information.

(2)When a sale occurs on a contract item in the Company’s AvKARE segment, the difference between the cost paid to the manufacturer by the Company and the contract cost that the end customer has with the manufacturer is rebated back to the Company by the manufacturer. The Company establishes a chargeback (rebate) receivable and a reduction to cost of goods sold in the same period as the related sale.

12. Goodwill and Other Intangible Assets

The changes in goodwill for the six months ended June 30, 2023 and for the year ended December 31, 2022 were as follows (in thousands):


	June 30, 2023		December 31, 2022
Balance, beginning of period	$	598,853	$	593,017
Goodwill acquired during the period	—		7,553
Adjustment during the period for the acquisition of Puniska Healthcare Pvt. Ltd.	—		3,075
Currency translation	353		(4,792)
Balance, end of period	$	599,206	$	598,853

As of June 30, 2023, $366.3 million, $163.4 million, and $69.5 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. As of December 31, 2022, $366.3 million, $163.1 million, and $69.5 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. For the year ended December 31, 2022, goodwill acquired during the period was associated with the Saol Acquisition. Refer to Note 3. Acquisition for additional information.

Intangible assets as of June 30, 2023 and December 31, 2022 were comprised of the following (in thousands):


	June 30, 2023							December 31, 2022
	Weighted-Average Amortization Period (in years)	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Amortizing intangible assets:
Product rights	7.2	$	1,221,412	$	(643,771)	$	577,641	$	1,222,762	$	(573,281)	$	649,481
Other intangible assets	3.7	133,800		(86,420)		47,380		133,800		(77,943)		55,857
Subtotal		$	1,355,212	$	(730,191)	$	625,021	$	1,356,562	$	(651,224)	$	705,338
In-process research and development		390,355		—		390,355		390,755		—		390,755
Total intangible assets		$	1,745,567	$	(730,191)	$	1,015,376	$	1,747,317	$	(651,224)	$	1,096,093

Amortization expense related to intangible assets for the three months ended June 30, 2023 and 2022, was $40.8 million and $42.0 million, respectively. Amortization expense related to intangible assets for the six months ended June 30, 2023 and 2022, was $81.9 million and $82.9 million, respectively.

The following table presents future amortization expense for the next five years and thereafter, excluding $390.4 million of in-process research and development (“IPR&D”) intangible assets (in thousands):


	Future Amortization
Remainder of 2023	$	81,134
2024	163,031
2025	124,719
2026	74,102
2027	52,575
2028	30,808
Thereafter	98,652
Total	$	625,021

The Company reviews intangible assets with finite lives for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Indefinite-lived intangible assets, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually.

Interim Goodwill and In-Process Research and Development Intangible Asset Impairment Tests

On June 30, 2023, the Company received a complete response letter (“CRL”) from the FDA regarding its new drug application for IPX203 for the treatment of Parkinson’s disease. The CRL indicated that although an adequate scientific bridge was established for the safety of one ingredient, levodopa, based on pharmacokinetic studies, it was not adequately established for the other ingredient, carbidopa, and the FDA has requested additional information. The CRL did not identify any issues with respect to the efficacy or manufacturing of IPX203. The Company will work closely with the FDA to address its comments and plans to meet with the agency in the third quarter of 2023 to align on the best path forward.

Based on the Company’s evaluation of the CRL and in connection with the preparation of the Company’s financial statements for the three and six months ended June 30, 2023, the Company updated its estimate of the fair value of the IPX203 IPR&D intangible asset as of June 30, 2023. The Company’s estimate of fair value used a probability-weighted income approach that discounts expected future cash flows to present value using a discount rate of 12.5%. Other valuation inputs included the potential launch date, estimated revenue and operating margin, and the probability of technical and regulatory success. Because the estimated fair value of the IPX203 IPR&D intangible asset exceeded its carrying value by 49% as of June 30, 2023, the Company concluded that the asset was not impaired.

Additionally, in light of the significance of IPX203 to the Specialty reporting unit, the Company performed an interim goodwill impairment test for its Specialty reporting unit, which is the same as the Company’s Specialty reportable segment, as of June 30, 2023. The fair value of the Specialty reporting unit was determined by combining both the income and market approaches. In performing this test, the Company utilized a long-term growth rate of 1% and a discount rate of 11.5% in its estimation of fair value. Other Specialty reporting unit valuation inputs included expected potential launch dates, estimated revenue and operating margin, and the probability of technical and regulatory success of IPR&D assets, the most significant of which is IPX203. The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical performance by management. Because the estimated fair value of the Specialty reporting unit exceeded its carrying value by 90% as of June 30, 2023, the Company concluded that its Specialty reporting unit goodwill was not impaired.

While management believes the assumptions used in the interim IPX203 IPR&D intangible asset impairment test were reasonable and commensurate with the views of a market participant, changes in key assumptions, including increasing the discount rate, lowering forecasts for revenue and operating margin, delaying the potential launch date, and lowering the probability of technical and regulatory success, could result in material future impairments of the Company’s IPX203 IPR&D intangible asset.

~~10.~~13. Other Assets

Other assets were comprised of the following (in thousands):


	June 30, 2023		December 31, 2022
Interest rate swap (1)	$	79,628	$	85,586
Security deposits	3,576		3,523
Long-term prepaid expenses	2,034		3,711
Deferred revolving credit facility costs	1,926		2,206
Other long term assets	6,076		8,191
Total	$	93,240	$	103,217

(1)Refer to Note 17. Fair Value Measurements and Note 18. Financial Instruments for information about the Company’s interest rate swap.

14. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses were comprised of the following (in thousands):


	June 30, 2023		December 31, 2022
Accounts payable	$	139,527	$	165,980
Accrued returns allowance (1)	132,932		145,060
Accrued compensation	45,650		54,038
Accrued Medicaid and commercial rebates (1)	97,540		86,030
Accrued royalties	27,172		19,309
Commercial chargebacks and rebates	10,226		10,226
Accrued professional fees	15,201		11,386
Accrued other	44,471		46,170
Total accounts payable and accrued expenses	$	512,719	$	538,199

(1)Refer to Note 4. Revenue Recognition for a rollforward of the balance from December 31, 2022 to June 30, 2023.

15. Debt

The following is a summary of the Company’s indebtedness under its term loans (in thousands):


	June 30, 2023		December 31, 2022
Term Loan due May 2025	$	2,550,376	$	2,563,876
Rondo Term Loan due January 2025	39,750		72,000
Total debt	2,590,126		2,635,876
Less: debt issuance costs	(10,544)		(13,934)
Total debt, net of debt issuance costs	2,579,582		2,621,942
Less: current portion of long-term debt	(30,405)		(29,961)
Total long-term debt, net	$	2,549,177	$	2,591,981

There have been no material changes in the Company’s long-term debt since December 31, 2022, except as disclosed below. Refer to Note 16. Debt in the Company’s 2022 Annual Report on Form 10-K for additional information and definitions of terms used in this note.

In January 2023, the Company borrowed $80.0 million under the New Revolving Credit Facility to fund an $83.9 million payment related to the Opana ER® antitrust litigation settlement agreements (refer to Note 19. Commitments and Contingencies). In March 2023, the Company repaid $40.0 million of its borrowings on the New Revolving Credit Facility from cash on hand. As of June 30, 2023, the Company had $100.0 million in borrowings and $245.9 million of available capacity under the New Revolving Credit Facility.

During the three and six months ended June 30, 2023, the Company repaid $7.3 million and $32.3 million, respectively, of principal outstanding on the Rondo Term Loan, of which $27.8 million was prepaid as of June 30, 2023. Additionally, the Company borrowed $20.0 million under the Rondo Revolving Credit Facility during the second quarter of 2023 for working capital purposes. As of June 30, 2023, $20.0 million was outstanding under the Rondo Revolving Credit Facility and there was $10.0 million of available capacity.

Reference Rate Reform

On May 31, 2023, the Company executed an amendment to the Term Loan (the “Amended Term Loan”), which changed the variable reference rate from the London interbank offered rate (“LIBOR”) to the one-month adjusted term secured overnight financing rate (“SOFR”), subject to a floor of (0.11448%) plus 3.5%.

The Company also executed an amendment to the related interest rate swap (the “Amended Swap ”) that: (i) set a new fixed rate equal to 1.366%, (ii) changed the referenced floating rate from LIBOR to the one-month SOFR and (iii) established a floating

rate floor of (0.11448%). After adopting ASC 848, Reference Rate Reform and electing certain applicable practical expedients, the Company determined that the amendments do not modify its existing accounting conclusions. As a result, the Company determined that the hedging relationship between the Amended Swap and the Amended Term Loan remained highly effective.

On April 20, 2023, the Company executed an amendment to the Rondo Revolving Credit Facility, which changed the variable reference rate in the Rondo Term Loan from LIBOR to the one-month adjusted term SOFR, subject to a floor of 0.1% plus 2.25%.

The amendments to the term loans and swap agreement did not have a material impact on the Company’s consolidated financial statements as of June 30, 2023 or for the three and six months then ended.

16. Other Long-Term Liabilities

Other long-term liabilities were comprised of the following (in thousands):


	June 30, 2023		December 31, 2022
Uncertain tax positions	$	473	$	563
Long-term portion of liabilities for legal matters (1)	752		49,442
Long-term compensation	21,175		16,737
Contingent consideration (2)	10,110		11,997
Other long-term liabilities	6,772		8,729
Total other long-term liabilities	$	39,282	$	87,468

(1) Refer to Note 19. Commitments and Contingencies for additional information.

(2) Refer to Note 17. Fair Value Measurements for additional information.

17. Fair Value Measurements

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and also includes instruments for which the determination of fair value requires significant judgment or estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


				Fair Value Measurement Based on									Fair Value Measurement Based on
September 30, 2022		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2023										June 30, 2023	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets	Assets									Assets
Interest rate swap asset (1)		$	88,860	$	—	$	88,860	$	—
Interest rate swap (1)										Interest rate swap (1)	$	79,628	$	—	$	79,628	$	—
Liabilities	Liabilities									Liabilities
Deferred compensation plan liabilities (2)	Deferred compensation plan liabilities (2)	$	9,558	$	—	$	9,558	$	—	Deferred compensation plan liabilities (2)	$	9,940	$	—	$	9,940	$	—
Contingent consideration liabilities (3)	Contingent consideration liabilities (3)	$	13,201	$	—	$	—	$	13,201	Contingent consideration liabilities (3)	$	11,520	$	—	$	—	$	11,520

December 31, 2021
December 31, 2022										December 31, 2022
Assets										Assets
Interest rate swap (1)										Interest rate swap (1)	$	85,586	$	—	$	85,586	$	—
Liabilities	Liabilities									Liabilities
Interest rate swap liability (1)		$	11,473	$	—	$	11,473	$	—
Deferred compensation plan liabilities (2)	Deferred compensation plan liabilities (2)	$	13,883	$	—	$	13,883	$	—	Deferred compensation plan liabilities (2)	$	9,674	$	—	$	9,674	$	—
Contingent consideration liability (3)	Contingent consideration liability (3)	$	5,900	$	—	$	—	$	5,900	Contingent consideration liability (3)	$	15,427	$	—	$	—	$	15,427

(1)The fair value measurement of the Company’s interest rate swap classified within Level 2 of the fair value hierarchy is a model-derived valuation as of a given date in which all significant inputs are observable in active markets including certain financial information and certain assumptions regarding past, present, and future market conditions. Refer to N~~ote 11.~~Note 18. Financial Instruments for information on the Company's interest rate swap.

(2)These liabilities are recorded at the value of the amount owed to the plan participants, with changes in value recognized as compensation expense. The calculation of the deferred compensation plan obligation is derived from observable market data by reference to hypothetical investments selected by the participants.

(3)The fair value measurement of contingent consideration liabilities has been classified as Level 3 recurring liabilities as the valuations require judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for various inputs, the estimated fair values could be higher or lower than what the Company determined. As of ~~September~~June 30, 2023 and December 31, 2022, the contingent consideration liability associated with the Saol Acquisition included ~~$0.4~~$0.5 million and $0.1 million, respectively, recorded in accounts payable and accrued expenses and ~~$7.9~~$10.1 million and $12.0 million, respectively, recorded in other-longer term liabilities. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022, the contingent consideration liability associated with the ~~KSP Acquisition~~acquisition of Kashiv Specialty Pharmaceuticals, LLC (“KSP”) was valued at approximately ~~$4.9~~$0.9 million and ~~$5.9~~$3.3 million,, respectively, and recorded within related party payables - long term. ~~Refer to~~ ~~Note 3. Acquisitions~~ ~~for additional information related to contingent consideration associated with the KSP Acquisition and the Saol Acquisition.~~

There were no transfers between levels in the fair value hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

Contingent consideration

On April 2, 2021, the Company completed the acquisition of KSP, ~~Acquisition,~~ which provides for contingent milestone payments of up to an aggregate of $8.0 million (undiscounted) upon the achievement of certain regulatory milestones, as well as contingent royalty payments that are tiered depending on the aggregate annual net sales for certain future pharmaceutical products.

On February 9, 2022, the Company completed the Saol Acquisition, which provides for contingent royalty payments that are tiered depending on the aggregate annual net sales for certain pharmaceutical products, beginning in 2023.

There were no contingent royalty payments for the six months ended June 30, 2023.

The following table provides a reconciliation of the contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

Nine Months Ended
September 30, 2022 Year Ended December 31, 2021
Balance, beginning of period $ 5,900 $ —
Addition due to the Saol Acquisition 8,796 —
Addition due to the KSP Acquisition — 5,700
Change in fair value during the period (1,495) 200
Balance, end of period $ 13,201 $ 5,900



	Six Months Ended June 30, 2023
Balance, beginning of period	$	15,427
Change in fair value during the period	(3,907)
Balance, end of period	$	11,520

The fair value measurement of the contingent consideration liabilities were determined based on significant unobservable inputs, including the discount rate, the cost of debt, estimated probabilities of success, timing of achieving specified regulatory milestones and the estimated amount of future sales of the acquired products. The contingent consideration liabilities were estimated by applying a probability-weighted expected payment model for contingent milestone payments and Monte Carlo simulation models for contingent royalty payments, which were then discounted to present value. Changes to the fair values of the contingent consideration liabilities can result from changes to one or a number of the aforementioned inputs. If different assumptions were used for various inputs, the estimated fair value could be higher or lower than what the Company determined.

The following table summarizes the significant unobservable inputs used in the fair value measurement of ~~our~~the Company’s material contingent consideration liabilities as of ~~September~~June 30, ~~2022:~~2023:


Contingent Consideration Liability	Contingent Consideration Liability	Fair Value as of September 30, 2022 (in thousands)		Unobservable input		Range				Weighted Average(1)	Contingent Consideration Liability		Fair Value as of June 30, 2023 (in thousands)			Unobservable input		Range				Weighted Average(1)
Regulatory Milestones (KSP Acquisition)		$420		Discount rate		9.2%	-	9.9%		9.3%
				Probability of payment		1.8%	-	20.0%		17.0%
				Projected year of payment		2024	-	2027		2024
Royalties (KSP Acquisition)		$4,500		Discount rate		13.5%	-	13.5%		13.5%
			Probability of payment		1.8%	-	20.0%		17.8%
			Projected year of payment		2024	-	2032		2029
Royalties (Saol Acquisition)	Royalties (Saol Acquisition)		$8,281		Discount rate		17.3%	-	17.3%		17.3%	Royalties (Saol Acquisition)			td0,600		Discount rate		17.4%	-	17.4%		17.4%
				Projected year of payment		2023	-	2033		2025				Projected year of payment			2023	-	2033		2027

(1) Unobservable inputs were weighted by the relative fair value of each product candidate acquired.

Assets and Liabilities Not Measured at Fair Value on a Recurring Basis

The carrying amounts of cash, accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these instruments.

The Term Loan, as defined in Note ~~17.~~16. Debt in the Company’s ~~2021~~2022 Annual Report on Form 10-K, is in the Level 2 category within the fair value level hierarchy. The fair value was determined using market data for valuation. The fair value of the Term Loan at ~~September~~June 30, ~~2022~~2023 was approximately ~~$2.1~~$2.5 billion as compared to approximately ~~$2.6~~$2.3 billion at December 31, ~~2021.~~2022.

The Rondo Term Loan, as defined in Note ~~17.~~16. Debt in the Company’s ~~2021~~2022 Annual Report on Form 10-K, is in the Level 2 category within the fair value level hierarchy. The fair value of the Rondo Term Loan at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$80.8~~$39.6 million and ~~$139.0~~$70.9 million, respectively.

The Sellers Notes, as defined in Note 16. Debt in the Company’s 2022 Annual Report on Form 10-K, are in the Level 2 category within the fair value level hierarchy. The fair value of the Sellers Notes at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$38.7~~$40.4 million and ~~$38.0~~$39.1 million, respectively.

Refer to Note 1716. Debt in ~~our 2021~~the Company’s 2022 Annual Report on Form 10-K for detailed information about ~~our~~its indebtedness, including definitions of terms.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

There were no non-recurring fair value measurements during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

~~11.~~18. Financial Instruments

The Company uses an interest rate swap to manage its exposure to market risks for changes in interest rates.

Interest Rate Risk

Interest income earned on cash and cash equivalents may fluctuate as interest rates change; however, due to their relatively short maturities, the Company does not hedge these assets or their investment cash flows because the impact of interest rate risk is not material. The Company is exposed to interest rate risk on its debt obligations. The ~~Company's~~Company’s debt obligations consist of variable-rate and fixed-rate debt instruments. The ~~Company's~~Company’s primary objective is to achieve the lowest overall cost of funding while managing the variability in cash outflows within an acceptable range. ~~In order to~~To achieve this objective, the Company has entered into an interest rate swap on the Term Loan.

Interest Rate Derivative – Cash Flow Hedge

The interest rate swap involves the periodic exchange of payments without the exchange of underlying principal or notional amounts. In October 2019, the Company entered into an interest rate lock agreement for a total notional amount of $1.3 billion to hedge part of the Company's interest rate exposure associated with the variability in future cash flows from changes in the one-month LIBOR associated with the Term Loan. On May 31, 2023 the Company executed the Amended Swap Agreement that, among other things, changed the variable reference rate from LIBOR to the one-month SOFR (refer to Note 15. Debt).

As of ~~September~~June 30, ~~2022,~~2023, the total gain, net of income taxes, related to the Company’s cash flow hedge was ~~$88.9~~$79.6 million, of which ~~$44.0~~$39.7 million was recognized in accumulated other comprehensive income and ~~$44.9~~$39.9 million was recognized in non-controlling interests.

A summary of the fair values of derivative instruments in the consolidated balance sheets was as follows (in thousands):

September 30, 2022 December 31, 2021
Derivatives Designated as Hedging Instruments Balance Sheet
Classification Fair Value Balance Sheet
Classification Fair Value
Variable-to-fixed interest rate swap Other assets $ 88,860 Other long-term liabilities $ 11,473

~~12. Goodwill and Other Intangible Assets~~

~~The changes in goodwill for the nine months ended September 30, 2022 and for the year ended December 31, 2021 were as follows (in thousands):~~

September 30,
2022 December 31,
2021
Balance, beginning of period $ 593,017 $ 522,814
Goodwill acquired during the period 7,553 70,584
Adjustment during the period for Puniska Acquisition 3,075 —
Currency translation (4,141) (381)
Balance, end of period $ 599,504 $ 593,017

As of September 30, 2022, $366.3 million, $163.7 million, and $69.5 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. As of December 31, 2021, $363.9 million, $159.6 million, and $69.5 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. For the nine months ended September 30, 2022, goodwill acquired during the period was associated with the Saol Acquisition. For the year ended December 31, 2021, goodwill acquired during the period was associated with the Puniska Acquisition and the KSP Acquisition. Refer to ~~Note 3. Acquisitions~~ ~~for additional information.~~

~~Intangible assets at September 30, 2022 and December 31, 2021 were comprised of the following (in thousands):~~

September 30, 2022 December 31, 2021
Weighted-Average
Amortization Period
(in years) Cost Accumulated
Amortization Net Cost Accumulated
Amortization Net
Amortizing intangible assets:
Product rights 7.7 $ 1,240,071 $ (547,330) $ 692,741 $ 1,122,612 $ (436,902) $ 685,710
Other intangible assets 4.3 133,800 (72,961) 60,839 133,800 (58,013) 75,787
Subtotal $ 1,373,871 $ (620,291) $ 753,580 $ 1,256,412 $ (494,915) $ 761,497
In-process research and development 405,425 — 405,425 405,425 — 405,425
Total intangible assets $ 1,779,296 $ (620,291) $ 1,159,005 $ 1,661,837 $ (494,915) $ 1,166,922

~~During the nine months ended September 30, 2022, the Company recognized $83.8 million~~ ~~of marketed product rights intangible assets associated with the purchase price allocation of the Saol Acquisition.~~ During the nine months ended September 30, 2021, the Company recognized $56.4 million of intangible assets associated with the purchase price allocation of the KSP Acquisition, consisting of $29.4 million of marketed product rights and $27.0 million of IPR&D. Product rights are amortized to cost of goods sold over their estimated useful lives. ~~Refer to~~ ~~Note 3. Acquisitions~~ ~~for additional information on the purchase price allocation associated with the Saol Acquisition and the final purchase price allocation associated with the KSP Acquisition.~~

~~Amortization expense related to intangible assets was as follows (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Amortization $ 44,545 $ 43,809 $ 127,446 $ 129,001

~~The following table presents future amortization expense for the next five years and thereafter, excluding $405.4 million of IPR&D intangible assets (in thousands):~~

Future
Amortization
Remainder of 2022 $ 45,498
2023 161,613
2024 158,692
2025 120,790
2026 71,891
Thereafter 195,096
Total $ 753,580

For the three and nine months ended September 30, 2022, the Company recognized $0.7 million and $5.8 million, respectively, of intangible asset impairment charges, which were recognized in cost of goods sold impairment charges. The impairment charge for the three months ended September 30, 2022 was related to a product that is no longer expected to be sold to a key customer, and therefore the asset is not expected to be recoverable. The impairment charges for the nine months ended September 30, 2022 relates to the aforementioned charge, and a marketed product that experienced significant price erosion without an offsetting increase in customer demand, resulting in significantly lower than expected future margins.

For the three months ended September 30, 2021, the Company recognized $0.7 million of intangible asset impairments, which were recognized in cost of goods sold impairment charges. The impairment charges were related to two marketed products, which experienced significant price erosion during 2021.

For the nine months ended September 30, 2021, the Company recognized $1.4 million of intangible asset impairment charges, of which $0.7 million was recognized in cost of goods sold impairment charges and $0.7 million was recognized in in-process research and development impairment charges. The cost of goods sold impairment charges were related to the two aforementioned marketed products and the in-process research and development impairment charges related to one IPR&D product, which experienced a delay in its estimated launch date.

June 30, 2023

December 31, 2022

Derivatives Designated as Hedging Instruments

Balance Sheet
Classification

Fair Value

Balance Sheet
Classification

Fair Value

Variable-to-fixed interest rate swap

Other assets

79,628

Other assets

85,586

~~13.~~19. Commitments and Contingencies

Commitments

Commercial Manufacturing, Collaboration, License, and Distribution Agreements

The Company continues to seek to enhance its product line and develop a balanced portfolio of differentiated products through product acquisitions and in-licensing. Accordingly, the Company, in certain instances, may be contractually obligated to make potential future development, regulatory, and commercial milestone, royalty and/or profit-sharing payments in conjunction with collaborative agreements or acquisitions that the Company has entered with third parties. The Company has also licensed certain technologies or intellectual property from various third parties. The Company is generally required to make upfront payments as well as other payments upon successful completion of regulatory or sales milestones. The agreements generally permit the Company to terminate the agreement with no significant continuing obligation. The Company could be required to make significant payments pursuant to these arrangements. These payments are contingent upon the occurrence of certain future events and, given the nature of these events, it is unclear when, if ever, the Company may be required to pay such amounts. Further, the timing of any future payment is not reasonably estimable. Refer to Note 5. Alliance and Collaboration for additional information. Certain of these arrangements are with related parties. Refer to Note ~~15.~~21. Related Party Transactions for additional information.

2725

Contingencies

Legal Proceedings

The Company's legal proceedings are complex, constantly evolving, and subject to uncertainty. As such, the Company cannot predict the outcome or impact of its significant legal proceedings which are set forth below. Additionally, the Company manufactures and derives a portion of its revenue from the sale of pharmaceutical products in the opioid class of drugs and may therefore face claims arising from the regulation and/or consumption of such products. While the Company believes it has meritorious claims and/or defenses to the matters described below (and intends to vigorously prosecute and defend them), the nature and cost of litigation is unpredictable, and an unfavorable outcome of such proceedings could include damages, fines, penalties and injunctive or administrative remedies. For any proceedings where losses are probable and reasonably capable of estimation, the Company accrues a potential loss. When the Company has a probable loss for which a reasonable estimate of the liability is a range of losses and no amount within that range is a better estimate than any other amount, the Company records the loss at the low end of the range. While these accruals have been deemed reasonable by the Company’s management, the assessment process relies heavily on estimates and assumptions that may ultimately prove inaccurate or incomplete. Additionally, unforeseen circumstances or events may lead the Company to subsequently change its estimates and assumptions. Unless otherwise indicated below, the Company is unable at this time to estimate the possible loss or the range of loss, if any, associated with such legal proceedings and claims. Any such claims, proceedings, investigations or litigation, regardless of the merits, might result in substantial costs to defend or settle, borrowings under ~~our~~the Company’s debt agreements, restrictions on product use or sales, or otherwise harm ~~our~~the Company’s business. The ultimate resolution of any or all claims, legal proceedings or investigations are inherently uncertain and difficult to predict, could differ materially from ~~our~~the Company’s estimates and could have a material adverse effect on ~~the Company's~~its results of operations and/or cash flows in any given accounting period, or on ~~the Company's~~its overall financial condition. The Company currently intends to vigorously prosecute and/or defend these proceedings as appropriate. From time to time, however, the Company may settle or otherwise resolve these matters on terms and conditions that it believes to be in its best ~~interest~~. interest. An insurance recovery, if any, is recorded in the period in which it is probable the recovery will be realized.

~~Charges (insurance recoveries)~~ For the three and six months ended June 30, 2023, charges related to legal matters, net were ~~comprised~~$2.0 million and $1.6 million, respectively. For the three and six months ended June 30, 2022, charges related to legal matters, net were $251.9 million and $249.6 million, respectively, and primarily consisted of a charge for the settlement of the ~~following (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Opana ER® antitrust litigation $ — $ — $ 262,837 $ —
Securities class action - Cambridge Retirement System v. Amneal — 19,000 (15,500) 19,000
Galeas v. Amneal — — 1,200 —
Other 285 — 1,299 —
Total $ 285 $ 19,000 $ 249,836 $ 19,000

Opana ER® antitrust litigation of $262.8 million, net of insurance recoveries associated with a securities class action settled during 2022.

Liabilities for legal matters were comprised of the following (in thousands):

Matter September 30, 2022 December 31, 2021
Opana ER® Antitrust Litigation(1)
$ 173,000 $ —
Opana ER® Antitrust Litigation - Accrued Interest 937 —
Securities Class Action - Fleming v. Impax(2)
— 33,000
Securities Class Action - Cambridge Retirement System v. Amneal(2)
— 25,000
Galeas vs. Amneal 1,200 —
Other
957 —
Current portion of liabilities for legal matters $ 176,094 $ 58,000
Opana ER® Antitrust Litigation $ 50,000 $ —
Imputed interest (1,743) —
Accrued interest 468 —
Long-term portion of liabilities for legal matters (included in other long-term liabilities) $ 48,725 $ —

~~(1)~~During June 2022 and July 2022, the Company paid $100.0 million and $15.0 million, respectively, into a settlement escrow account, of which $73.0 million remains as of September 30, 2022 after payment of $42.0 million in court-approved claims from the escrow account to certain plaintiffs during July 2022.

~~(2)~~ During July 2022 and August 2022, respectively, the securities class actions Fleming v. Impax and Cambridge Retirement System v. Amneal were settled for $33.0 million and $25.0 million, respectively, upon final approval by the court.

~~As of September 30, 2022, the remaining payments associated with the Opana ER® antitrust litigation settlement agreements and the Preliminary Settlement Agreements (as defined below) are as follows:~~


	~~Amount Due~~
~~December 2022~~	$	~~16,056~~
~~January 2023~~	~~83,944~~
~~January 2024~~	~~50,000~~
	~~150,000~~
~~Add: Escrow account balance as of September 30, 2022~~	~~73,000~~
~~Undiscounted liability as of September 30, 2022~~	$	~~223,000~~

3% interest is payable on the amounts due in December 2022, January 2023, and January 2024. The Company includes the interest accrual on these amounts as a component of the current portion of liabilities for legal matters. Additional interest of 2.7% was imputed on the $50.0 million long-term liability due in January 2024, resulting in an initial discount of $2.2 million, which will be amortized to interest expense over the life of the liability using the effective interest method.

As noted above, payments made with respect to litigation that has not been finally settled are recorded as escrow deposit assets. Upon final approval by the court, escrow deposit assets funded by the Company and its insurers will be used to satisfy the associated accrued liabilities. Refer to ~~Note 17. Prepaid Expenses and Other Current Assets~~ ~~for additional information on settlement escrow deposits.~~


Matter	June 30, 2023		December 31, 2022
Opana ER® antitrust litigation	$	50,000	$	83,944
Opana ER® antitrust litigation-accrued interest	1,590		1,423
Opana ER® antitrust litigation-imputed interest	(736)		—
Civil prescription opioid litigation	21,222		17,993
Other	4,935		4,123
Current portion of liabilities for legal matters	$	77,011	$	107,483

Opana ER® antitrust litigation	$	—	$	50,000
Opana ER ® antitrust litigation-accrued interest	—		847
Opana ER ® antitrust litigation-imputed interest	—		(1,405)
Prescription Opioid Litigation	752		—
Long-term portion of liabilities for legal matters (included in other long-term liabilities)	$	752	$	49,442

Refer to the respective discussions below for additional information on the significant matters in the tables above.

Refer to Note 21. Commitments and Contingencies in our Annual Report on Form 10-K for a general discussion of Medicaid Reimbursement and Price Reporting Matters

The Company is required to provide pricing information to state agencies, including agencies that administer federal Medicaid programs. Certain state agencies have alleged that manufacturers have reported improper pricing information, which allegedly caused them to overpay reimbursement costs. Other agencies have alleged that manufacturers have failed to timely file required reports concerning pricing information. Liabilities are periodically established by the Company for any potential claims or settlements of overpayment. The Company intends to vigorously defend against any such claims. The ultimate settlement of any potential liability for such claims may be higher or lower than estimated. and Patent Litigation.

2926

~~Patent Litigation~~

There is substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture, use, and sale of new products which are the subject of conflicting patent and intellectual property claims. One or more patents often cover the brand name products for which the Company is developing generic versions and the Company typically has patent rights covering the Company’s branded products.

Under federal law, when a drug developer files an Abbreviated New Drug Application (“ANDA”) for a generic drug seeking approval before expiration of a patent which has been listed with the FDA as covering the brand name product, the developer must certify its product will not infringe the listed patent(s) and/or the listed patent is invalid or unenforceable (commonly referred to as a “Paragraph IV” certification). Notices of such certification must be provided to the patent holder, who may file a suit for patent infringement within 45 days of the patent holder’s receipt of such notice. If the patent holder files suit within the 45-day period, the FDA can review and tentatively approve the ANDA, but generally is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered in favor of the generic drug developer, or 30 months from the date the notice was received, whichever is sooner. The Company’s Generics segment is typically subject to patent infringement litigation brought by branded pharmaceutical manufacturers in connection with the Company’s Paragraph IV certifications seeking an order delaying the approval of the Company’s ANDA until expiration of the patent(s) at issue in the litigation.

When a drug developer files an Abbreviated Biologics License Application (“aBLA”) seeking approval to manufacture and market a biosimilar product, there are also procedures in place to resolve patent disputes early in the process if the parties choose to do so. To engage these legal provisions, an aBLA filer must produce a copy of the aBLA and relevant manufacturing information to the reference drug manufacturer shortly after the FDA accepts the aBLA for filing. This triggers what is termed the “patent dance” and begins a series of exchanges that will ultimately define the scope of a resulting patent litigation related to the product that is the subject of the aBLA. Notably, 60 days after receiving the aBLA and manufacturing information, the Biologics Application sponsor must provide a list of patents that are potentially infringed by the aBLA product. Within 60 days of receiving that list, the aBLA filer must provide its positions of why the disclosed patents are invalid or will not be infringed by the aBLA product. The patent owner can then respond to the non-infringement and invalidity positions, and the parties will negotiate the scope of litigation related to the disclosed patents. This “patent dance” is optional, but can provide certainty regarding the scope of litigation and can be valuable in settlement negotiations. If the parties do not resolve the dispute over the course of the “patent dance”, the case will proceed to patent litigation. There is no stay of FDA approval for biosimilar products, providing opportunities for the aBLA filer to launch while litigation is pending, which need to be carefully assessed.

The uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict. For the Company’s Generics segment, the potential consequences in the event of an unfavorable outcome in such litigation include delaying the launch of its generic products until patent expiration. If the Company were to launch its generic product prior to successful resolution of a patent litigation, the Company could be liable for potential damages measured by the profits lost by the branded product manufacturer rather than the profits earned by the Company if it is found to infringe a valid, enforceable patent, or enhanced treble damages in cases of willful infringement. For the Company’s Specialty segment, an unfavorable outcome may significantly accelerate generic competition ahead of expiration of the patents covering the Company’s branded products. All such litigation typically involves significant expense.

The Company is generally responsible for all the patent litigation fees and costs associated with current and future products not covered by its alliance and collaboration agreements. The Company has agreed to share legal expenses with respect to third-party and Company products under the terms of certain of the alliance and collaboration agreements. The Company records the costs of patent litigation as expense in the period when incurred for products it has developed, as well as for products which are the subject of an alliance or collaboration agreement with a third-party.

~~Patent Defense Matter~~

~~Biogen International GMBH, et al. v. Amneal Pharmaceuticals LLC, et al. (Dimethyl Fumarate)~~

In June 2017, Biogen International GMBH (“Biogen”) filed suit against Amneal and various other generic manufacturers in the United States District Court for the District of Delaware (“D. Del.”) alleging patent infringement based on the filing of ANDAs by Amneal and others for generic alternatives to Biogen’s Tecfidera® (dimethyl fumarate) capsules product (Biogen International GMBH, et al. v. Amneal Pharmaceuticals LLC, et al., No. 1:17-cv-00823-MN). Biogen also filed suit in June 2017 against Mylan Pharmaceuticals Inc. (“Mylan”) in the United States District Court for the Northern District of West Virginia (“N.D. W. Va.”) relating to Mylan’s own ANDA for Tecfidera®. On June 18, 2020, the N.D. W. Va. court issued an

order finding the sole Biogen patent at issue invalid. Biogen appealed the order (the “Mylan Appeal”) to the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”). On September 22, 2020, the D. Del. court entered judgment in favor of the defendants (including Amneal), adopting the finding of invalidity made by the N.D. W. Va. court. Biogen appealed the D. Del. Order (“the Amneal Consolidated Appeal”).

~~Amneal, like Mylan and several other generic manufacturers, launched its generic dimethyl fumarate capsule products “at-risk,” pending the outcome of Biogen’s appeal of the N.D. W. Va. order.~~

On November 30, 2021, the Federal Circuit affirmed the N.D. W. Va. court’s order that Biogen’s patent is invalid: on March 23, 2022, issued a mandate in the Mylan Appeal as to the invalidity of the patent; and on June 16, 2022, Biogen filed a cert petition with the Supreme Court of the United States (the “U.S. Supreme Court”) which was denied on October 3, 2022. On October 31, 2022, the Federal Circuit dismissed Biogen’s consolidated appeals.

Other Litigation Related to the Company’s Business

Opana ER® FTC Matters

On ~~February 25, 2014, Impax~~July 12, 2019, the Company received a Civil Investigative Demand (“CID”) from the Federal Trade Commission ~~(“FTC”~~(the “FTC”) concerning its investigation into the drug Opana® ER and its generic equivalents. On March 30, 2016, the FTC filed a complaint against Impax, Endo Pharmaceuticals Inc. (“Endo”), and others in the United States District Court for the Eastern District of Pennsylvania, alleging that Impax and Endo violated antitrust laws when they entered into a June 2010 settlement agreement that resolved patent litigation in connection with the submission of Impax’s ANDA for generic original Opana® ER. In October 2016, the Court granted Impax’s motion to sever, formally terminating the suit against Impax. In January 2017, the FTC filed a Part 3 Administrative Complaint against Impax with similar allegations regarding the 2010 settlement. Following trial, in May 2018, the Administrative Law Judge ruled in favor of Impax and dismissed the Complaint in its entirety. FTC Complaint Counsel appealed the decision to the full Commission, and in March 2019, the FTC issued an Opinion & Order reversing the Administrative Law Judge’s decision. The Opinion & Order did not provide for any monetary damages but prevented Impax from entering into future agreements containing certain terms. Impax filed a Petition for Review of the FTC’s Opinion & Order with the United States Court of Appeals for the Fifth Circuit, and on April 13, 2021, the Fifth Circuit issued a decision denying Impax’s Petition for Review, effectively affirming the FTC’s Opinion & Order. On September 10, 2021, Impax filed a petition for writ of certiorari in the U.S. Supreme Court, which was denied in December 2021.

~~On July 12, 2019, the Company received a CID from the FTC~~ concerning an August 2017 settlement agreement between Impax Laboratories, Inc. (“Impax”) and Endo Pharmaceuticals Inc. (“Endo”), which resolved a subsequent patent infringement and breach of contract dispute between the parties regarding the ~~above-referenced~~ June 2010 settlement agreement related to Opana® ER. The Company cooperated with the FTC regarding the CID. On January 25, 2021, the FTC filed a complaint against Endo, Impax and Amneal in the ~~United States~~U.S. District Court for the District of Columbia, alleging that the 2017 settlement violated antitrust laws. In April 2021, the Company filed a motion to dismiss the FTC’s complaint, which the District Court granted on March 24, 2022. The FTC appealed the District Court’s decision in May 2022, which appeal remains pending. The Company believes it has strong defenses to the FTC’s allegations and intends to vigorously defend the action, however, no assurance can be given as to the timing or outcome of the litigation.

Opana ER® Antitrust Litigation

From June 2014 to April 2015, ~~several~~a number of complaints styled as class actions on behalf of direct purchasers and indirect purchasers (or end-payors) and several separate individual complaints on behalf of certain direct purchasers (the “opt-out plaintiffs”) of Opana ER® were filed against Endo and ~~Impax.~~

~~In December 2014,~~Impax and consolidated into multi-district litigation (“MDL”) in the ~~United States Judicial Panel on Multidistrict Litigation (the “JPML”) transferred the actions to the United States~~U.S. District Court for the Northern District of Illinois (“N.D. Ill.”) for coordinated pretrial proceedings, as In Re: Opana ER Antitrust Litigation (MDL No. 2580) (“MDL”). In each case, the complaints allege that Endo engaged in an anticompetitive scheme by, among other things, entering into an anticompetitive settlement agreement with Impax to delay generic competition of Opana ER® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages, and equitable relief, including disgorgement and restitution.Illinois.

~~In June 2022,~~ Impax subsequently entered into ~~a preliminary~~ settlement ~~agreement~~agreements with the class of direct purchasers that, if all conditions are satisfied, would result in the resolution of substantially all the direct purchasers’ and individual complainants’ underlying claims and lawsuits in the MDL. At the same time, Impax entered into a settlement agreement with individual complainants that resolved all of ~~their claims and lawsuits in~~ the ~~MDL. Subsequently, Impax entered into a separate preliminary settlement agreement with~~Plaintiffs that were subsequently approved by the class of indirect purchasers that, if all conditions are satisfied, would result in the resolution of substantially all the indirect purchasers’ underlying claims and lawsuits in the MDL. The preliminary settlement agreements are referred to herein collectively as the “Preliminary Settlement Agreements,” and the direct purchaser plaintiffs, indirect purchaser plaintiffs,

~~and individual complainants are referred to herein collectively as “the Plaintiffs.” On November 3, 2022, the~~ ~~N.D. Ill. approved the direct purchasers’ settlement.~~

court. Pursuant to the settlement agreements, the Company ~~has~~ agreed to pay a total of $265.0 million between 2022 and mid-January 2024 to resolve substantially all of the ~~Plaintiffs’~~plaintiffs’ claims. The cumulative amount of payments made by the Company pursuant to the settlement agreements was $215.0 million as of June 30, 2023, of which $83.9 million was paid during January 2023, primarily using borrowings under the New Revolving Credit Facility (refer to Note 15. Debt). As of June 30, 2023, the liability for the remaining settlement payment of $50.0 million and 3% stated interest ~~is due on $150.0~~thereon was included in the current portion of liabilities for legal matters. The remaining imputed interest of $0.7 million ~~payable between December 2022 and mid-January 2024.~~as of June 30, 2023 will be recognized to interest expense during the final payment period. The settlement agreements are not an admission of liability or fault by Impax, the Company or its subsidiaries, and with respect to the Preliminary Settlement Agreements between Impax and the purported classes of (i) direct purchaser plaintiffs and (ii) indirect purchaser plaintiffs, they are subject to court approval.subsidiaries. Upon ~~satisfaction of the relevant pre-conditions, including but not limited to~~ court approval of the final settlement agreements as discussed above, substantially all the claims and lawsuits in the litigation ~~will have been~~were resolved. During the nine months ended September 30, 2022, the Company recorded a pre-tax charge of $262.8 million associated with the settlement agreements and the Preliminary Settlement Agreements. Imputed interest of $2.2 million will be recognized to interest expense during the payment period.

~~Sergeants Benevolent Association Health & Welfare Fund v. Actavis, PLC, et. al.~~

In August 2015, a complaint styled as a class action was filed against Forest Laboratories (a subsidiary of Actavis plc) and numerous generic drug manufacturers, including Amneal, in the United States District Court for the Southern District of New York involving patent litigation settlement agreements between Forest Laboratories and the generic drug manufacturers concerning generic versions of Forest’s Namenda IR product. The complaint (as amended on February 12, 2016) asserts federal and state antitrust claims on behalf of indirect purchasers, who allege in relevant part that during the class period they indirectly purchased Namenda® IR or its generic equivalents in various states at higher prices than they would have absent the defendants’ allegedly unlawful anticompetitive conduct. Plaintiff seeks, among other things, unspecified monetary damages, and equitable relief, including disgorgement and restitution. On September 13, 2016, the Court stayed the indirect purchaser plaintiff’s claims pending factual development or resolution of claims brought in a separate, related complaint by direct purchasers (in which the Company is not a defendant). On September 10, 2018, the Court lifted the stay and referred the case to the assigned Magistrate Judge for supervision of supplemental, non-duplicative discovery in advance of mediation to be scheduled in 2019. The parties thereafter participated in supplemental discovery, as well as supplemental motion-to-dismiss briefing. On December 26, 2018, the Court granted in part and denied in part motions to dismiss the indirect purchaser plaintiff’s claims. On January 7, 2019, Amneal, its relevant co-defendants, and the indirect purchaser plaintiff informed the Magistrate Judge that they had agreed to mediation, which occurred in April 2019. In June 2019, the Company reached a settlement with the plaintiff, subject to Court approval. On September 10, 2019, the Court entered an order preliminarily approving the settlement and indefinitely staying the case as to the settling defendants (including the Company), until the disposition of the claims against the non-settling defendants. The remaining defendants have recently settled with the plaintiff. All parties will file proposed materials seeking final approval of the settlements and to finally resolve the case on November 8, 2022, after which time the settlement will be subject to final approval from the Court. The amount of the settlement was not material to the Company's consolidated financial statements.

~~Attorney General of the State of Connecticut Interrogatories and Subpoena Duces Tecum~~

On July 14, 2014, Impax received a subpoena and interrogatories from the State of Connecticut Attorney General (“Connecticut AG”) concerning its investigation into sales of Impax's generic product, digoxin. According to the Connecticut AG, the investigation concerned whether anyone engaged in a contract, combination, or conspiracy in restraint of trade or commerce which had the effect of (i) fixing, controlling, or maintaining prices or (ii) allocating or dividing customers or territories relating to the sale of digoxin. Impax cooperated in the investigation and produced documents and information in response to the subpoena in 2014 and 2015. However, no assurance can be given as to the timing or outcome of this investigation.

United States Department of Justice Investigations

On November 6, 2014, Impax disclosed that one of its sales representatives received a grand jury subpoena from the Antitrust Division of the United States Department of Justice (the “DOJ”). On March 13, 2015, Impax received a grand jury subpoena from the DOJ requesting the production of information and documents regarding the sales, marketing, and pricing of four generic prescription medications. Impax ~~has~~ cooperated in the investigation and produced documents and information in response to the subpoenas from 2014 to 2016. However, no assurance can be given as to the timing or outcome of the investigation.

On April 30, 2018, Impax received a CID from the Civil Division of the DOJ (the “Civil Division”). The CID requests the production of information and documents regarding the pricing and sale of Impax’s pharmaceuticals and interactions with other generic pharmaceutical manufacturers regarding whether generic pharmaceutical manufacturers engaged in market allocation and price-fixing agreements, paid illegal remuneration, and caused false claims to be submitted to the federal government. Impax has cooperated with the Civil Division’s investigation. However, no assurance can be given as to the timing or outcome of the investigation.

~~Impax~~On May 15, 2023, Amneal received a CID from the Civil Division requesting information and documents related to the manufacturing and shipping of diclofenac sodium 1% gel labeled as “prescription only.” The Company has cooperated with the Civil Division’s investigation. However, no assurance can be given as to the timing or outcome of the investigation.

In Re Generic Pharmaceuticals Pricing Antitrust Litigation

Since March 2016, multiple putative antitrust class action complaints have been filed on behalf of direct purchasers, indirect purchasers (or end-payors), and indirect resellers, as well as individual complaints on behalf of certain direct and indirect purchasers, and municipalities (the “opt-out plaintiffs”) against manufacturers of generic drugs, including Impax and the Company. The complaints allege a conspiracy to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or customers for various generic drugs in violation of federal and state antitrust and consumer protection laws. Plaintiffs seek unspecified monetary damages and equitable relief, including disgorgement and restitution. The lawsuits have been

consolidated in an MDL in the United States District Court for the Eastern District of Pennsylvania (In re Generic Pharmaceuticals Pricing Antitrust Litigation, No. 2724, (E.D. Pa.)).

On May 10, 2019, Attorneys General of 43 States and the Commonwealth of Puerto Rico filed a complaint in the United States District Court for the District of Connecticut against various manufacturers and individuals, including the Company, alleging a conspiracy to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or customers for multiple generic drugs. On November 1, 2019, the State Attorneys General filed an Amended Complaint on behalf of nine additional states and territories. On June 10, 2020, Attorneys General of 46 States, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Territory of Guam, the U.S. Virgin Islands, and the District of Columbia filed a new complaint against various manufacturers and individuals, including the Company, alleging a conspiracy to fix prices, rig bids, and allocate markets or customers for additional generic drugs. Plaintiff ~~States~~states seek unspecified monetary damages and penalties and equitable relief, including disgorgement and restitution. On September 9, 2021, the State Attorneys General filed an Amended Complaint on behalf of California in addition to the original ~~Plaintiff States. On March 30, 2022, the State of Alabama voluntarily dismissed all its claims in~~plaintiff states.

Both the May 10, 2019 and June 10, 2020 lawsuits have been incorporated into MDL No. 2724, and the June 10, 2020 lawsuit has been selected for bellwether status. The State of Alabama and the Territory of Guam have both voluntarily dismissed all of their claims in the two actions against all defendants, including the Company, without prejudice. ~~These lawsuits have been incorporated into MDL No. 2724.~~ On February 27, 2023, the Court addressed defendants’ motions to dismiss the June 10, 2020 bellwether action, holding that the states may not pursue certain federal remedies, and otherwise denying Amneal’s joint and individual motion to dismiss.

Fact and document discovery in MDL No. 2724 are proceeding. ~~In May 2021,~~No trial date has been set.

On July 1, 2023, 152 hospital systems, health care centers, and retail pharmacies filed a complaint in the ~~court issued~~United States District Court for the Northern District of California against manufacturers of generic drugs, including Impax and the Company. Like the complaints that were previously consolidated in MDL No. 2724, the complaint claims that defendants engaged in an unlawful conspiracy to fix, maintain and/or stabilize the prices, rig bids, and allocate markets or customers for various generic drugs in violation of federal and state antitrust and consumer protection laws, and seeks unspecified monetary damages and equitable relief, including disgorgement and restitution. Plaintiffs also filed a ~~revised order designating certain plaintiffs’ complaints regarding two generic drug products to proceed~~notice that they are asserting claims based on the same alleged conspiracy as ~~bellwether cases, along~~plaintiffs in MDL No. 2724, and that they believe transfer and coordination of their case with the ~~Plaintiff States’ June 10, 2020, complaint involving the Company. No final scheduling order has yet been issued for this matter.~~MDL may be appropriate.

On June 3, 2020, the Company and Impax were also named in a putative class action complaint filed in the Federal Court of Canada in Toronto, Ontario against numerous generic pharmaceutical manufacturers, on behalf of a putative class of individuals who purchased generic drugs in the private sector from 2012 to the present (Kathryn Eaton v. Teva Canada Limited, et. al., No. T-607-20). The complaint alleges price fixing, among other claims. On August 23, 2022, the plaintiff filed a second amended complaint. On May 30, 2023, the plaintiff served materials for their motion to certify the action as a class proceeding, define the class and certify the common questions to be decided, among other things. The ~~case~~Court has ~~otherwise~~ not ~~progressed to date.~~set a date for the return of the plaintiff’s motion.

Civil Prescription Opioid Litigation

The Company and certain of its affiliates have been named as defendants in ~~various matters~~over 900 cases filed in state and federal courts relating to the sale of prescription opioid pain relievers. Plaintiffs in these actions include state Attorneys General, county and municipal governments, hospitals, ~~Indian~~Native American tribes, pension funds, third-party payors, and individuals. Plaintiffs seek unspecified monetary damages and other forms of relief based on various causes of action, including negligence, public nuisance, unjust enrichment, and civil conspiracy, as well as alleged violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), state and federal controlled substances laws and other statutes. All cases involving the Company also name other manufacturers, distributors, and retail pharmacies as defendants, and there are numerous other cases involving allegations relating to prescription opioid pain relievers against other manufacturers, distributors, and retail pharmacies in which the Company and its affiliates are not named.

Nearly all cases pending in federal district courts have been consolidated for pre-trial proceedings in an MDL in the United States District Court for the Northern District of Ohio (In re: National Prescription Opiate Litigation, Case No. 17-mdl-2804). ~~There are approximately 915 cases in the MDL in which the Company or its affiliates have been named as defendants.~~ The Company is also named in ~~approximately 119~~various state court cases pending in ~~eleven~~nine states. ~~The Company has filed motions to dismiss in many of these cases.~~ No firm trial dates have been set except in ~~Alabama (July 24, 2023)~~Texas (May 20, 2024 (Dallas County) and September 30, 2024 (Bexar County)).

The Company ~~is not involved in the September 2022 trial in New Mexico previously reported because of the tentative~~reached a settlement ~~the Company reached~~agreement with the New Mexico Attorney General ~~in May 2022~~ to resolve ~~the New Mexico Attorney General’s~~its claims against the ~~Company. The~~ Company, ~~anticipates a final determination regarding approval to be made following~~which was finalized on April 24, 2023. A Consent Judgment dismissing the ~~trial as to the plaintiff’s claims against the non-settling defendants.~~case was entered on May 15, 2023.

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On August 3, 2022, the Company and certain of its affiliates were named as defendants in a Complaint filed in Tennessee state court, along with numerous other manufacturers, distributors, retailers, and healthcare providers, in which it is alleged the defendants are liable in civil damages to six minors who allegedly were born with neonatal abstinence syndrome (“NAS”) allegedly as a result of their biological mothers’ alleged use of diverted prescription opioid medications. The plaintiffs’ claim against each defendant in that case requires plaintiffs to prove by clear and convincing evidence that the defendant intentionally participated in Tennessee in that state’s illegal drug market as defined in the Tennessee Drug Dealer Liability Act. The Company ~~intends to file~~reached a motion to dismiss the complaint. The Company also was named in two NAS cases in West Virginia state court which have been consolidated with other West Virginia state court NAS cases before the West Virginia Mass Litigation Panel (“WV MLP”). All NAS cases before the WV MLP have been stayed through December 30, 2022. On November 1, 2022, the Company entered into a preliminary settlement agreement to resolve all pending litigation brought by West Virginia political ~~subdivisions.~~subdivisions, which was signed on May 25, 2023. The two neonatal abstinence syndrome cases in West Virginia state court were dismissed on May 31, 2023.

~~Securities Class Actions~~

The Company reached a preliminary settlement with a group of private hospitals in Alabama (the “Alabama Hospitals”) in June 2023 to resolve the hospitals’ claims against the Company. The Company anticipates a final determination approving the settlement in 2023.

On January 13, 2023, Amneal Pharmaceuticals, Inc., Amneal, and Amneal Pharmaceuticals of New York, LLC (“Amneal New York”), received a subpoena from the New York Attorney General, seeking information regarding its business concerning opioid-containing products. The Company is cooperating with the request and providing responsive information.

~~On April 17, 2017, New York Hotel Trades Council & Hotel Association~~Based on the settlement agreements with the states of New ~~York City, Inc. Pension Fund filed~~Mexico and West Virginia and an amended putative class action complaint in the United States District Court for the Northern District of California against Impax and four former Impax officers alleging violations of Sections 10(b) and 20(a)assessment of the ~~Securities Exchange Act of 1934 and Rule 10b-5 (Fleming v. Impax Laboratories Inc~~., et al., No. 4:16-cv-6557-HSG). Plaintiff alleges that Impax (1) concealed collusion with competitors to fix the price of the generic drug digoxin; (2) concealed anticipated erosion in the price of generic drug diclofenac; and (3) overstated the value of the generic drug budesonide. In June 2021, Plaintiffs (New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund, and Sheet Metal Workers’ Pension Fund of Southern California, Arizona and Nevada, who had filed various motions to intervene as a plaintiff in the case) and defendants reached a tentative agreement to settle all claims in the case for $33.0 million, subject to certain terms and conditions and subject to court approval. The district court entered an order granting preliminary approval of the settlement on November 22, 2021 and held a fairness hearing on March 31, 2022. On July 15, 2022, the district court entered an order granting final approval of the settlement. On July 21, 2022, a stipulated final judgment was entered, effectively terminating this matter before the district court. The settlement was fully covered by insurance and was paid from an escrow account (refer to ~~Note 17. Prepaid Expenses and Other Current Assets for amounts deposited into a settlement escrow account~~).

On December 18, 2019, Cambridge Retirement System filed a putative class action complaint in the Superior Court of New Jersey, Somerset County against the Company and certain current or former officers alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (~~Cambridge Retirement System v. Amneal Pharmaceuticals, Inc., et al.~~, No. SOM-L-1701-19). Plaintiffs allege that the May 7, 2018, amended registration statement and prospectus issued in connection with the Amneal/Impax business combination was materially false and/or misleading because it failed to disclose that Amneal allegedly engaged in anticompetitive conduct to fix generic drug prices. Plaintiffs filed a motion for class certification on October 30, 2020, and in April 2021 filed a second amended complaint including similar allegations regarding a November 2017 registration statement and prospectus issued in connection with the Amneal/Impax business combination. In February 2022, the parties reached a tentative agreement to settle the claims, subject to, among other things, the negotiation and court approval of a definitive settlement agreement. On March 28, 2022, the parties executed a settlement agreement for $25.0 million. On April 29, 2022, the court preliminarily approved the settlement. On August 16, 2022, the court gave final approval to the settlement. For the nine months ended September 30, 2022,information available, the Company recorded ~~insurance recoveries of $15.5~~an $18.0 million charge for the year ended December 31, 2022, related to ~~this case. The final~~the majority of the MDL and state court cases. Based on an increase in the number of political subdivision cases and the preliminary settlement ~~for $25.0 million was paid from an escrow account which was funded both by insurance recoveries~~with the Alabama Hospitals, the Company recorded charges of ~~$15.5~~$2.0 million and ~~cash paid~~$4.0 million for the three and six months ended June 30, 2023, respectively. For the remaining cases, primarily brought by other hospitals, pension funds, third-party payors and individuals, the Company has not recorded a liability as of ~~$9.5 million (refer to~~ ~~Note 17. Prepaid Expenses~~June 30, 2023 and ~~Other Current Assets for amounts deposited into~~December 31, 2022, because it concluded that a ~~settlement escrow account~~).loss was not probable and estimable.

United States Department of Justice / Drug Enforcement Administration Subpoenas

On July 7, 2017, Amneal ~~Pharmaceuticals of~~ New York ~~LLC~~ received an administrative subpoena issued by the Long Island, NY District Office of the Drug Enforcement Administration (the “DEA”) requesting information related to compliance with certain recordkeeping and reporting requirements. On or about April 12, 2019 and May 28, 2019, the Company received grand jury subpoenas from the U.S. Attorney’s Office for the Eastern District of New York (the “USAO”) relating to similar topics concerning the Company’s suspicious order monitoring program and its compliance with the Controlled Substances Act. The Company is cooperating with the USAO in responding to the subpoenas and has entered civil and criminal ~~amended~~ tolling agreements with the USAO through approximately November ~~14, 2022.~~15, 2023. It is not ~~currently~~ possible to determine the exact outcome of these investigations.

On March 14, 2019, Amneal received a subpoena ~~(the “Subpoena”)~~ from ~~the~~an Assistant U.S. ~~Attorney’s Office~~Attorney (“AUSA”) for the Southern District of Florida. The ~~Subpoena requests~~subpoena requested information and documents generally related to the marketing, sale, and distribution of

oxymorphone. The Company ~~has cooperated and produced documents in response~~intends to cooperate with the ~~Subpoena.~~AUSA regarding the subpoena. However, no assurance can be given as to the timing or outcome of ~~the~~its underlying investigation.

On October 7, 2019, Amneal received a subpoena from the New York State Department of Financial Services seeking documents and information related to sales of opioid products in the state of New York. The Company is cooperating with the request and providing responsive information. It is not ~~currently~~ possible to determine the exact outcome of this investigation.

Ranitidine Litigation

The Company and its affiliates have been named as defendants, along with numerous other brand and generic pharmaceutical manufacturers, wholesale distributors, ~~and~~ retail pharmacy chains, and repackagers of ranitidine-containing products, in In re Zantac/Ranitidine NDMA Litigation ~~(MDL~~(MDL No. 2924), pending in the Southern District of Florida. Plaintiffs allege that defendants failed to disclose and/or concealed the alleged inherent presence of N-Nitrosodimethylamine (or “NDMA”) in brand-name Zantac® or generic ranitidine and the alleged associated risk of cancer. Consolidated groups of (a) personal injury plaintiffs, (b) economic loss/medical monitoring class action plaintiffs, and (c) third-party payor plaintiffs have each filed master complaints against brand and generic pharmaceutical manufacturers, distributors, retailers, and repackagers of ranitidine-containing products. The Company or its affiliates have been named in the three master complaints and approximately 313 personal injury short form complaints. On December 31, 2020, the Court dismissed in full the three master complaints against the generic manufacturers, including the Company and its affiliates, with leave to file amended complaints on certain claims relating to manufacturing, storage, and transportation. Plaintiffs filed amended complaints in February 2021, and Defendants filed various motions to dismiss the amended complaints in March 2021. On July 8, 2021, the MDL court dismissed all claims by all plaintiffs against the generic drug manufacturers, including the Company and its affiliates, without leave to file further amended complaints. Plaintiffs ~~have~~ appealed the MDL court’s ~~dismissal~~dismissals to the 11th ~~Circuit Court of Appeals, which has consolidated the appeals of the personal injury cases. The~~ 11th Circuit Court of ~~Appeals~~Appeals. On November 7, 2022, the 11th Circuit affirmed the MDL court’s dismissal of cases brought by third-party payors. The 11th Circuit has not established a briefing schedule yet in ~~personal injury cases appeals.~~the appeals of the other cases.

On June 18, 2020, Amneal was named in a lawsuit filed in New Mexico brought by the New Mexico Attorney General alleging claims of public nuisance, negligence, and violations of consumer protection laws against various brand and generic manufacturers and store-brand distributors of Zantac®/Ranitidine. Plaintiff seeks unspecified compensatory and punitive damages, as well as abatement, medical monitoring, restitution, and injunctive relief. The Company ~~filed a motion to dismiss on May 17, 2021,~~ and filed a notice of supplemental authority based on the MDL court’s July 2021 dismissal order. The Court denied the motion on August 17, 2021. The Company filed a motion to dismiss based on lack of personal jurisdiction on January 26, 2022. On September 22, 2022, the Court ordered the parties to participate in 90 days of reciprocal jurisdictional discovery.

On November 12, 2020, Amneal was named in a public nuisance and consumer protection lawsuit filed in state court in Baltimore, Maryland, on behalf of the Mayor and City Council of Baltimore. Defendants removed the case to federal court and on April 1, 2021, the case was remanded to state court. On August 23, 2021, the Company filed a motion to dismiss, which was granted.

On October 1, 2021, Amneal and Amneal Pharmaceuticals of New York, LLC, were named as defendants in two Pennsylvania state court complaints, along with twenty-five other defendants, including brand-name manufacturers, generic manufacturers, and one Pennsylvania-based pharmacy. The complaint track cases are being coordinated in the Philadelphia County Court of Common Pleas with other Pennsylvania ranitidine cases in which the Company is not a party under what is known as a Mass Tort Program (MTP). The Complaints track the dismissed master personal injury complaint from the MDL and were removed and subsequently transferred to the MDL on November 9, 2021. The cases were remanded to Pennsylvania state court on April 22, 2022. The Company filed preliminary objections in one case on May 18, 2022, which remain pending, and intends to file preliminary objections in the second case following a coordinated briefing schedule. Amneal entities have been named in three additional cases filed on September 27, 2022, each of which will be part of the MTP.

In a lawsuit filed on February 8, 2022 by Gary Ross in Illinois state court, Amneal and Amneal Pharmaceuticals of New York, LLC, were named as defendants, along with twenty other defendants, including brand-name manufacturers, generic manufacturers, and retailers in which plaintiff claimed personal injury from use of ranitidine. The generic drug manufacturers filed a motion to dismiss in that case on March 28, 2022 which remains pending. On March 1, 2022, plaintiff Barbara Martin filed a lawsuit in Illinois state court naming Amneal, Amneal Pharmaceuticals of New York, LLC, and Amneal Pharmaceuticals, Inc., along with seven other defendants, including brand-name manufacturers, generic manufacturers, and retailers. Plaintiff has attempted to serve only Amneal Pharmaceuticals of New York, LLC. The Company filed a motion to dismiss on May 6, 2022. In addition, the Company and/or its affiliates ~~as well as multiple other defendants including other generic drug manufacturers,~~ have also been named as defendants in ~~six multi-plaintiff cases filed in three different Illinois counties~~

various state lawsuits in which ~~plaintiffs allege injuries in the form of various cancers from the use of ranitidine. At the appropriate time,~~ the Company ~~intends~~has already filed motions to dismiss or plans to file motions to dismiss in the future. Three of those ~~cases.~~

~~The Company and/or its affiliates, as well as multiple~~cases brought by individuals and pending in Cook County, Illinois have trial dates: Gross (June 5, 2024), Snider (October 23, 2024), and Tucker (January 16, 2025). Another case in New Mexico has a September 15, 2025, trial date. There are no trial dates in any of the other defendants including other generic drug manufacturers, have been named in seven multi-plaintiff cases filed in California during August and September 2022, in which plaintiffs allege injuries in the form of various cancers from the use of ranitidine. At the appropriate time, the Company intends to file motions to dismiss in those cases.

On September 26, 2022, Amneal Pharmaceuticals of New York, LLC was named as one of multiple defendants in a single-plaintiff case filed in Suffolk County, New York, alleging injuries in the form of bladder cancer from the use of ranitidine. At the appropriate time, the Company intends to file a motion to dismiss.

Metformin Litigation

Amneal and AvKARE, Inc. were named as defendants, along with numerous other manufacturers, retail pharmacies, and wholesalers, in several putative class action lawsuits pending in the United States District Court for the District of New Jersey

(“D.N.J.”), consolidated as In Re Metformin Marketing and Sales Practices Litigation ~~(No.~~(No. 2:20-cv-02324-MCA-MAH). The lawsuits ~~all~~either 1) allege ~~that defendants made and sold to putative class members generic metformin products that were “adulterated” or “contaminated” with NDMA.~~

An economic loss ~~complaint filed on behalf of consumers and third-party payors who purchased or paid or made reimbursements for metformin alleges that plaintiffs suffered economic losses~~ in connection with their ~~purchases~~purchase or reimbursements due to the purported contamination. On May 20, 2021, the Court granted Defendants’ motion to dismiss the economic loss complaint, and Plaintiffs filed an amended complaint on June 21, 2021. Defendants again moved to dismiss, and on March 30, 2022, the Court granted in part and denied in part Defendants’ second motion to dismiss. Plaintiffs filed a second amended complaint on May 6, 2022. Defendants again moved to dismiss on June 3, 2022, and briefing is complete. Initial limited discovery took place, but further discovery has been stayed pending the outcomealleged contamination of ~~the third motion to dismiss. Additionally,~~generic metformin products with NDMA or 2) are seeking medical monitoring ~~class action complaints were filed on behalf of consumers who consumed allegedly contaminated metformin allege~~or evaluation due to alleged “cellular damage, genetic harm, and/or are at an increased risk of developing cancer” ~~and seek medical monitoring, including evaluation and treatment. These cases~~from consuming allegedly contaminated metformin. The parties are currently ~~stayed.~~ engaged in discovery.

On March 29, 2021, a plaintiff filed a complaint in the United States District Court for the Middle District of Alabama asserting claims against manufacturers of Valsartan, Losartan, and Metformin based on the alleged presence of nitrosamines in those products. The only allegations against ~~Amneal~~the Company concern ~~Metformin. (Davis~~Metformin (Davis v. Camber Pharmaceuticals, Inc., et al., C.A. No. 2:21-00254 (M.D. Ala.) (the “Davis Action”)). On May 5, 2021, the ~~JPML~~United States Judicial Panel on Multidistrict Litigation (the “JPML”) transferred the Davis Action into the In re: Valsartan, Losartan, and Irbesartan Products Liability Litigation multi-district litigation for pretrial proceedings.

On October 29, 2021, three plaintiffs filed a complaint in the District Court of Douglas County, Nebraska asserting claims against Amneal based on the alleged presence of nitrosamines in metformin. On January 10, 2022, Amneal removed the case to the United States District Court for the District of Nebraska. (Conrad et al v. Amneal Pharmaceuticals, Inc., No. 22-cv-00011-BCB-SMB (D. Neb.)). Amneal moved to dismiss the complaint on March 3, 2022, and on March 31, 2022, one plaintiff filed an amended complaint. Amneal moved to dismiss the amended complaint on June 1, 2022. On September 1, 2022, the Court granted Amneal’s motion to dismiss, and ordered the Plaintiff to show cause as to why the case should not be dismissed against the remaining defendant, Amneal Pharmaceuticals Pvt. Ltd. On September 15, 2022, the Plaintiff filed a notice of voluntary dismissal as to Amneal Pharmaceuticals Pvt. Ltd., resulting in the case being completely dismissed.

Xyrem® (Sodium Oxybate) Antitrust Litigation

Amneal has been named as a defendant, along with Jazz Pharmaceuticals, Inc. (“Jazz”) and numerous other manufacturers of generic versions of Jazz’s Xyrem® (sodium oxybate), in several ~~putative~~ class action lawsuits filed in the United States District Court for the Northern District of California and the United States District Court for the Southern District of New York, alleging that the generic manufacturers entered into anticompetitive agreements with Jazz in connection with ~~settling~~the settlement of patent litigation related to Xyrem®. ~~Plaintiffs seek unspecified monetary damages and penalties as well as equitable relief, including disgorgement and restitution. On December 16, 2020, the JPML transferred the~~The actions tohave been consolidated in the United States District Court for the Northern District of California for ~~consolidated~~ pretrial proceedings ~~consolidated as~~ (In re Xyrem (Sodium Oxybate) Antitrust Litigation ~~(No.~~, No. 5:~~20-md-02966-LHK)~~20-md-02966-LHK (N.D. Cal.)). ~~Plaintiffs filed a consolidated amended class complaint in March 2021, which Defendants moved to dismiss.~~On August 13, 2021, the Court granted in part and denied in part Defendants’ motion, dismissing the federal damages claims and several state-law claims, while permitting the remaining claims to proceed. Discovery is currently ongoing.

On January 9, 2023, Amneal reached a settlement in principle with the class plaintiffs and executed a settlement agreement on February 28, 2023. The remaining opt-out plaintiffs in the federal case are United Healthcare Services, Inc., Humana Inc., Molina Healthcare Inc., and Health Care Services Corporation.

In a separate action in California state court filed by Aetna Inc., another opt-out plaintiff, the court held that it lacks jurisdiction over several defendants, including Amneal, on December 27, 2022, and later issued an order dismissing Amneal without prejudice. On January 27, 2023, Aetna filed an amended complaint identifying several parties, including Amneal, as alleged non-party co-conspirators.

Value Drug Company v. Takeda Pharmaceuticals U.S.A., Inc.

On August 5, 2021, Value Drug Company filed a purported class action lawsuit in the United States District Court for the Eastern District of Pennsylvania against Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”) and numerous other manufacturers of generic versions of Takeda’s Colcrys® (colchicine), including Amneal, alleging that the generic manufacturers conspired with Takeda to restrict output of generic ~~Colcrys~~Colcrys® in order to maintain higher prices, in violation of the antitrust laws. ~~The Company, along with the other defendants, moved to dismiss for failure to state a claim, and on December 28, 2021, the Court granted the motion in full, with leave to amend.~~ On January 18, 2022, Plaintiff filed its amended complaint, making substantively the same antitrust allegations, but alleging that the violations were effectuated by either a single overarching conspiracy or a series of bilateral conspiracies. The Company moved to dismiss the amended complaint for failure to state a claim. On March 30, 2022, the Court granted in part and denied in party defendants’ motion, dismissing the newly pled bilateral conspiracy claims but allowing the revised overarching conspiracy claim to proceed against all defendants. PlaintiffApril 10, 2023, plaintiff filed a motion for leave to amend its complaint to add 18 former absent class ~~certification~~members as plaintiffs, which the Court subsequently granted. Plaintiffs’ second amended complaint did not add any new legal theories or allegations. On April 14, 2023, the Court entered a scheduling order requiring the new plaintiffs to provide discovery on their claims by May 1, 2023, and setting a 22-day jury trial to begin on September ~~6, 2022, and the defendants opposed it on September 21, 2022. That motion remains pending, and discovery is ongoing. Trial is scheduled to begin in February~~5, 2023.

~~Galeas v. Amneal Pharmaceuticals, Inc.~~

On July 27, 2021, Cesy Galeas filed a purported class action lawsuit in the U.S. District Court for the Eastern District of New York against Amneal Pharmaceuticals, Inc., alleging that the payment schedule for certain workers violated New York Labor Law. Specifically, the purported class, which presently consists of one named plaintiff contends that the Company paid the employees all owed wages, but did so bi-weekly, instead of weekly. In March 2022, the parties reached an agreement to settle the claims for $1.2 million, subject to, among other things, court approval of the contemplated settlement agreement. The parties filed a motion to approve the settlement agreement on July 13, 2022 and the Court granted the same on September 28, 2022. A third-party administrator will now begin the process of notifying class members with instructions on how to submit claims. The Company recorded a $1.2 million charge associated with this matter for the nine months ended September 30, 2022.

Russell Thiele, et al. v. Kashiv Biosciences, LLC, et.al.

On March 22, 2022, two purported Amneal Pharmaceuticals, Inc. stockholders filed a stockholder derivative lawsuit in the Court of Chancery of the State of Delaware against Kashiv and certain members of the Company’s Board of Directors. The Company is named as a nominal defendant. ~~The suit alleges~~For additional details of the claim, refer to Note 21. Commitments and Contingencies of our 2022 Annual Report on Form 10-K. On May 2, 2023, the parties entered into a final settlement agreement that, if approved by the ~~Company’s January 2021 acquisition of a 98% interest in KSP, then a wholly owned subsidiary of Kashiv, was unfair~~court, would fully resolve this matter. Pursuant to the settlement, the Company ~~that~~has agreed to amend the ~~defendant Directors breached fiduciary duties~~January 11, 2021 Membership Interest Purchase Agreement with Kashiv to reduce certain royalties on future sales payable by Kashiv, adopt certain governance changes, and pay to plaintiffs’ counsel a court-ordered attorneys’ fees and expense award in an amount of ~~loyalty~~$1.9 million. The Court of Chancery approved the final settlement agreement on July 27, 2023.

Indian Tax Authority Matters

Amneal Pharmaceuticals Pvt. Ltd. (“Amneal Pvt.”), RAKS Pharmaceuticals Pvt. Ltd., and ~~good faith~~Puniska Healthcare Pvt. Ltd. (“Puniska”), which are subsidiaries of the Company, are currently involved in ~~connection~~litigations with ~~the transaction,~~Indian tax authorities concerning Central Excise Tax, Service Tax, Goods & Services Tax, and ~~that the transaction unjustly enriched Kashiv~~Value Added Tax for various periods of time between 2014 and 2017. These subsidiaries have contested certain of ~~the defendants who had a financial interest in Kashiv. The suit,~~these assessments, which ~~is allegedly brought on the Company’s behalf, seeks among other remedies rescission~~are at various stages of the transaction and unspecified monetary damages. Defendants moved to dismiss the complaint for failure to state a claim and failure to plead demand futility on June 3, 2022, and Plaintiffs filed an amended complaint on July 29, 2022. Defendants moved to dismiss the amended complaint on September 23, 2022, on the same grounds set forthadministrative process. The Company strongly believes its Indian subsidiaries have meritorious defenses in the ~~original motion to dismiss.~~

~~14. Segment Information~~

~~The Company has three reportable segments: Generics, Specialty, and AvKARE.~~

~~Generics~~

Generics develops, manufactures and commercializes complex oral solids, injectables, ophthalmics, liquids, topicals, softgels, inhalation products and transdermals across a broad range of therapeutic categories. Generics’ retail and institutional portfolio contains many difficult-to-manufacture products or products that have a high barrier-to-entry, such as oncologics, anti-infectives and supportive care products for healthcare providers.

~~Specialty~~

Specialty delivers proprietary medicines to the U.S. market. The Company offers a growing portfolio in core therapeutic categories including central nervous system disorders, endocrinology, parasitic infections and other therapeutic areas. The Company's specialty products are marketed through skilled specialty sales and marketing teams, who call on neurologists, movement disorder specialists, endocrinologists and primary care physicians in key markets throughout the U.S. Specialty also has a number of product candidates that are in varying stages of development.matter.

3730

~~AvKARE~~

AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a wholesale distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, as well as medical and surgical products. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

~~Chief Operating Decision Markers~~

The Company’s chief operating decision makers evaluate the financial performance of the Company’s segments based upon segment operating income (loss). Items below operating income (loss) are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision makers. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in “Corporate and Other.” The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision makers.

The tables below present segment information reconciled to total Company financial results, with segment operating income (loss) including gross profit less direct selling, general and administrative expenses, research and development expenses, and other operating expenses to the extent specifically identified by segment (in thousands):

Three Months Ended September 30, 2022
Generics (1)
Specialty
AvKARE (1)
Corporate
and Other
Total
Company
Net revenue $ 350,266 $ 89,484 $ 105,807 $ — $ 545,557
Cost of goods sold 217,997 43,719 88,937 — 350,653
Cost of goods sold impairment charges 674 — — — 674
Gross profit 131,595 45,765 16,870 — 194,230
Selling, general and administrative 30,259 22,201 13,216 34,395 100,071
Research and development 41,987 8,248 — — 50,235
Intellectual property legal development expenses 1,369 42 — — 1,411
Acquisition, transaction-related and integration expenses 16 15 — 8 39
Charges related to legal matters, net 285 — — — 285
Change in fair value of contingent consideration — (1,425) — — (1,425)
Restructuring and other charges 507 — — 74 581
Other operating income (1,320) — — — (1,320)
Operating income (loss) $ 58,492 $ 16,684 $ 3,654 $ (34,477) $ 44,353

Nine Months Ended September 30, 2022
Generics (1)
Specialty
AvKARE (1)
Corporate
and Other
Total
Company
Net revenue $ 1,032,908 $ 271,571 $ 298,066 $ — $ 1,602,545
Cost of goods sold 640,450 130,363 256,626 — 1,027,439
Cost of goods sold impairment charges 5,786 — — — 5,786
Gross profit 386,672 141,208 41,440 — 569,320
Selling, general and administrative 84,410 69,772 39,361 103,999 297,542
Research and development 129,382 24,399 — — 153,781
Intellectual property legal development expenses 2,919 77 — — 2,996
Acquisition, transaction-related and integration expenses 24 47 — 643 714
Charges related to legal matters, net 2,442 — — 247,394 249,836
Charges (insurance recoveries) for property losses and associated expenses (1,911) — — — (1,911)
Restructuring and other charges 713 — — 599 1,312
Change in fair value of contingent consideration — (1,495) — — (1,495)
Other operating income (2,495) — — — (2,495)
Operating income (loss) $ 171,188 $ 48,408 $ 2,079 $ (352,635) $ (130,960)

Three Months Ended September 30, 2021
Generics (1)
Specialty
AvKARE (1)
Corporate
and Other Total
Company
Net revenue $ 347,127 $ 92,745 $ 88,721 $ — $ 528,593
Cost of goods sold 208,670 47,303 73,421 — 329,394
Cost of goods sold impairment charges 688 — — — 688
Gross profit 137,769 45,442 15,300 — 198,511
Selling, general and administrative 15,941 22,211 14,683 38,562 91,397
Research and development 34,999 13,928 — — 48,927
Intellectual property legal development expenses 1,584 43 — — 1,627
Acquisition, transaction-related and integration expenses — — — 134 134
Charges related to legal matters, net — — — 19,000 19,000
Charges (insurance recoveries) for property losses and associated expenses 8,186 — — — 8,186
Restructuring and other charges — — — 425 425
Change in fair value of contingent consideration — 300 — — 300
Operating income (loss) $ 77,059 $ 8,960 $ 617 $ (58,121) $ 28,515

Nine Months Ended September 30, 2021
Generics (1)
Specialty
AvKARE (1)
Corporate
and Other
Total
Company
Net revenue $ 1,020,072 $ 277,311 $ 259,390 $ — $ 1,556,773
Cost of goods sold 598,122 144,184 211,208 — 953,514
Cost of goods sold impairment charges 688 — — — 688
Gross profit 421,262 133,127 48,182 — 602,571
Selling, general and administrative 46,500 62,748 41,986 117,046 268,280
Research and development 114,547 35,426 — — 149,973
In-process research and development charges 710 — — — 710
Intellectual property legal development expenses 6,506 68 — — 6,574
Acquisition, transaction-related and integration expenses — 16 1,422 5,781 7,219
Charges related to legal matters, net — — — 19,000 19,000
Charges (insurance recoveries) for property losses and associated expenses 8,186 — — — 8,186
Restructuring and other charges 80 — — 708 788
Change in fair value of contingent consideration — 300 — — 300
Operating income (loss) $ 244,733 $ 34,569 $ 4,774 $ (142,535) $ 141,541

~~(1)Operating results for the sale of Amneal products by AvKARE are included in Generics.~~

~~15. Related Party Transactions~~

The Company has various business agreements with certain parties in which there is some common ownership. However, the Company does not directly own or manage any of such related parties. Except as disclosed below, as of and for the three and nine months ended September 30, 2022, there were no material changes to our related party agreements or relationships as described in ~~Note 24. Related Party Transactions~~ ~~and~~ ~~Note 22. Stockholders’ Equity~~ ~~in our2021 Annual Report on Form 10-K.~~

~~Amendment to Kashiv Biosciences LLC License and Commercialization Agreement~~

In 2017 Kashiv and Amneal entered into an exclusive license and commercialization agreement (the “Kashiv Biosimilar Agreement”) to distribute and sell two biosimilar products, Filgrastim and Pegfilgrastim, in the U.S. Kashiv is responsible for development, regulatory filings, obtaining FDA approval, and manufacturing, and Amneal is responsible for marketing, selling, and pricing activities. The term of the agreement is 10 years from the respective product’s launch date.

The Kashiv Biosimilar Agreement provided for potential future milestone payments to Kashiv of up to $183.0 million, as follows: (i.) up to $22.5 million relating to regulatory approval and execution, (ii.) up to $43.0 million for successful delivery of commercial launch inventory, (iii.) up to $50.0 million depending on the number of competitors at launch for one product, and (iv.) between $15.0 million and $67.5 million for the achievement of cumulative net sales for both products.

In July 2022, the Company and Kashiv amended the Kashiv Biosimilar Agreement to, among other things, (i.) eliminate milestones related to the manufacturing and delivery of the Kashiv products, (ii.) revise the net sales milestones to provide for future milestone payments by the Company to Kashiv of up to $37.5 million for the achievement of cumulative combined net sales goals for both products, and (iii.) adjust the supply price of product that Kashiv manufacturers and supplies to the Company, which will lower the cost per unit of both products.

The remaining milestones are subject to reaching certain commercial sales volume objectives. In addition, the agreement provides for Amneal to pay a profit share equal to 50% of net profits, after considering manufacturing and marketing costs.

On May 27, 2022, the FDA approved the Company’s biologic license application, associated with the amended Kashiv Biosimilar Agreement, for Pegfilgrastim-pbbk. In connection with this regulatory approval and associated activity, the Company incurred a milestone of $15.0 million during the nine months ended September 30, 2022, payable to Kashiv. The milestone was capitalized as an intangible asset and will be amortized to cost of sales over an estimated useful life of 8.3 years. The Company paid Kashiv $15.0 million during August 2022 related to this milestone.

~~The following table summarizes the Company’s related party transactions (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
Related Party and Nature of Transaction Caption in Balance Sheet and Statement of Operations 2022 2021 2022 2021
Kashiv Biosciences LLC
Parking space lease (1)
Cost of goods sold $ 25 $ 24 $ 75 $ 74
Development and commercialization agreements - various products (1)
Research and development — — — 32
License and commercialization agreement - Filgrastim and Pegfilgrastim - regulatory approval milestone for Filgrastim(1)
Selling, general and administrative — — 5,000 —
Development and commercialization agreement - Ganirelix Acetate and Cetrorelix Acetate (1)
Research and development 104 146 1,827 790
Development and commercialization agreements - various products (2)
Research and development — — — 150
Profit sharing - various products (2)
Cost of goods sold — — — 2,680
Commercial product support for EluRyng and other products (2)
Inventory and cost of goods sold — — — 1,239
K127 development and commercialization agreement (2)
Research and development — — — 3,000
Transition services associated with the KSP Acquisition Selling, general and administrative — — — 300
Development and commercialization - Consulting Research and development — — — 500
License and commercialization agreement - Filgrastim and Pegfilgrastim - regulatory approval milestone for Pegfilgrastim-pbbk(1)
Intangible asset — — 15,000 —
Total $ 129 $ 170 $ 21,902 $ 8,765
LAX Hotel, LLC (3)
Financing lease Inventory and cost of goods sold $ — $ — $ — $ 217
Interest component of financing lease Interest expense — — — 362
Total $ — $ — $ — $ 579
Other Related Parties
Kanan, LLC - operating lease Inventory and cost of goods sold $ 526 $ 526 $ 1,578 $ 1,577
Sutaria Family Realty, LLC - operating lease Inventory and cost of goods sold $ 305 $ 297 $ 906 $ 883
PharmaSophia, LLC - research and development services income Research and development $ (15) $ (15) $ (45) $ (314)
Apace KY, LLC d/b/a Apace Packaging LLC - packaging agreement Inventory and cost of goods sold $ 800 $ 3,030 $ 2,222 $ 8,547
Tracy Properties LLC - operating lease Selling, general and administrative $ 155 $ 136 $ 426 $ 398
AzaTech Pharma LLC - supply agreement Inventory and cost of goods sold $ 1,340 $ 1,302 $ 3,992 $ 3,282
AvPROP, LLC - operating lease Selling, general and administrative $ 46 $ 41 $ 136 $ 118
Avtar Investments, LLC consulting services Selling, general and administrative $ 47 $ 126 $ 216 $ 301
TPG Operations, LLC consulting services Selling, general and administrative $ — $ — $ 19 $ —
Alkermes Inventory and cost of goods sold $ 64 $ — $ 171 $ —
R&S Solutions - logistics services Selling, general and administrative $ 26 $ — $ 65 $ —

~~(1)~~ ~~Agreement between Amneal and Kashiv was not affected by the KSP Acquisition (refer to~~ ~~Note 3. Acquisitions~~ ~~for additional information).~~

~~(2)~~ Agreement between Amneal and Kashiv was acquired with KSP and has become a transaction among Amneal’s consolidated subsidiaries subsequent to the transaction closing on April 2, 2021. The disclosure relates to the historical agreement as a related party transaction through April 2, 2021 (refer to ~~Note 3. Acquisitions~~ ~~for additional information).~~

~~(3)~~ ~~During January 2021, LAX Hotel LLC sold its interests in the leased buildings to an unrelated third-party. Therefore, this lease was no longer a related party transaction subsequent to that date.~~

~~The following table summarizes the amounts due to or from the Company for related party transactions (in thousands):~~

September 30, 2022 December 31, 2021
Kashiv - deferred consideration associated with the KSP Acquisition (1)
$ — $ 30,500
Kashiv - various agreements 987 314
Sellers of Puniska - consideration for acquisition (2)
— 14,225
Apace Packaging LLC - packaging agreement 1,148 560
AzaTech Pharma LLC - supply agreement 1,197 1,783
Avtar Investments LLC - consulting services 54 37
Sellers of AvKARE LLC and R&S - accrued interest on Sellers Notes (3)
442 442
R&S Solutions - logistics services 6 —
Alkermes 33 —
Related party payables - short term $ 3,867 $ 47,861
PharmaSophia, LLC - research and development agreement $ 1,127 $ 1,081
Sellers of AvKARE LLC and R&S - state tax indemnification 531 68
Kashiv - various agreements 11 14
Apace Packaging, LLC - packaging agreement 1 16
Tracy Properties 26 —
Related party receivables - short term $ 1,696 $ 1,179
Kashiv - contingent consideration (4)
$ 4,920 $ 5,900
Sellers of AvKARE LLC and R&S - accrued interest on Sellers Notes (3)
5,376 3,719
Related party payables - long term $ 10,296 $ 9,619

~~(1)~~ ~~As discussed in~~ ~~Note 3. Acquisitions,~~ the purchase price for the KSP Acquisition included a contractually stated amount of deferred consideration of $30.5 million. The deferred consideration consisted of $30.0 million, which the Company paid during January 2022, and $0.5 million, which the Company paid during the three months ended September 30, 2022.

~~(2)~~ ~~As discussed in~~ ~~Note 3. Acquisitions,~~ the purchase price for the Puniska Acquisition included $14.2 million due to the sellers for the satisfaction of a preexisting payable upon approval of the transaction by the government of India. The Company satisfied this liability in March 2022.

~~(3)~~ ~~Represents accrued interest on the Sellers Notes associated with the Rondo Acquisitions, as defined and discussed in~~ ~~Note 3. Acquisitions and Divestitures~~ ~~and~~ ~~Note 17. Debt~~ ~~in the Company’s 2021 Annual Report on Form 10-K.~~

~~(4)~~ ~~The contingent consideration liability was associated with the KSP Acquisition. Refer to~~ ~~Note 3. Acquisitions~~ ~~for additional information.~~

~~Puniska Acquisition - Redeemable Non-Controlling Interests~~

~~The Company paid $1.7 million for the remaining 26% equity interest of Puniska (included in redeemable non-controlling interests in the Company’s consolidated balance sheet as of December 31, 2021) upon approval of the Puniska Acquisition by the government of India in March 2022.~~

~~16.~~20. Stockholders’ Equity and Redeemable Non-Controlling Interests

On May 9, 2023, the stockholders of the Company approved an amendment and restatement of the Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan (the “Stock Plan”), which authorizes an additional 20 million shares of class A common stock available for issuance under the Stock Plan, resulting in a total shares reserved under the Stock Plan of 57 million shares, and extends the term of the Stock Plan until May 9, 2033.

Non-Controlling Interests

The Company consolidates the financial statements of Amneal and its subsidiaries and records non-controlling interests for the portion of Amneal’s economic interests that is not held by the Company. Non-controlling interests are adjusted for capital transactions that impact the non-publicly held economic interests in Amneal.

Under the terms of ~~Amneal's~~Amneal’s limited liability company agreement, as amended, Amneal is obligated to make tax distributions to its members. During the three and ~~nine~~six months ended ~~September~~June 30, 2023, the Company recorded net tax distributions of $21.20 million and $48.01 million, respectively, as a reduction of non-controlling interests. During the three and six months ended June 30, 2022, the Company recorded net tax distributions of ~~$2.5~~

$2.89 million and ~~$9.8~~$7.33 million, respectively, as a reduction of non-controlling interests. ~~For the three and nine months ended September 30, 2021, the Company recorded tax distributions of $8.6 million and $34.5 million, respectively, as a reduction of non-controlling interests.~~

~~As discussed in~~ ~~Note 3~~. ~~Acquisitions, the~~The Company acquired a 98% interest in KSP on April 2, 2021. The sellers of KSP, a related party, hold the remaining ~~interest.~~interests. The Company attributes 2% of the net income or loss of KSP to the non-controlling interests.

Redeemable Non-Controlling Interests

~~As discussed in~~ ~~Note 1~~. ~~Nature of Operations, the~~The Company acquired a 65.1% controlling interest in both AvKARE Inc., a Tennessee corporation, now a limited liability company (“AvKARE, LLC”), and Dixon-Shane, LLC ~~and~~d/b/a R&S Northeast LLC, a Kentucky limited liability company (“R&S”), in 2020. The sellers of AvKARE, LLC and R&S hold the remaining 34.9% interest (“Rondo Class B Units”) in the holding company that directly owns the acquired companies (“Rondo”). Beginning on January 1, 2026, the holders of the Rondo Class B Units have the right (“Put Right”) to require the Company to acquire the Rondo Class B Units for a purchase price that is based on a multiple of Rondo’s earnings before income taxes, depreciation, and amortization (EBITDA) if certain financial targets and other conditions are met. Additionally, beginning on January 31, 2020, the Company has the right to acquire the Rondo Class B Units based on the same value and conditions as the Put Right. The Rondo Class B Units are also redeemable by the holders upon a change in control.

~~Since~~ Because the redemption of the Rondo Class B Units is outside of the ~~Company's~~Company’s control, the units have been presented outside of stockholders’ equity as redeemable non-controlling interests. Upon closing of the Rondo Acquisitions, the redeemable non-controlling interests were recorded as a component of the fair value of consideration transferred at an estimated fair value of $11.0 million. The fair value of the redeemable non-controlling interests was estimated using the Monte-Carlo simulation approach under the option pricing framework, which considers the redemption rights of both the Company and the holders of the Rondo Class B Units.

The Company attributes 34.9% of the net income or loss associated with Rondo to redeemable non-controlling interests. The Company will also accrete the redeemable non-controlling interests to redemption value upon an event that makes redemption probable. For the three and ~~nine~~six months ended ~~September~~June 30, 2023, the Company recorded tax distributions of $2.87 million and $5.83 million as a reduction of redeemable non-controlling interests, respectively. For the three and six months ended June 30, 2022, the Company recorded tax distributions of ~~$0.7~~$0.58 million and $3.3 million as a reduction of redeemable non-controlling interests, respectively. For the three and nine months ended September 30, 2021, the Company recorded tax distributions of $0.5 million and $2.2$2.59 million as a reduction of redeemable non-controlling interests, respectively.

Redeemable Non-Controlling Interests - Puniska

~~As discussed in~~ ~~Note 3. Acquisitions, the~~The Company acquired 74% of the equity interests in Puniska on November 2, 2021. Amneal was required pursuant to the purchase agreement to acquire the remaining 26% of Puniska upon approval of the transaction by the government of India.~~Since~~ Because approval of the government of India was outside of the Company’s control, upon closing of the acquisition of Puniska, ~~Acquisition,~~ the equity interests of Puniska that the Company did not own were presented outside of ~~stockholders'~~stockholders’ equity as redeemable non-controlling interests. The Company attributed 26% of the net losses of Puniska to the redeemable non-controlling interests.

Upon approval of the transaction by the government of India in March 2022, the Company paid the $1.7 million redemption value for the remaining 26% of the equity interests of Puniska. For the ~~nine~~six months ended ~~September~~June 30, 2022, thethe Company recorded accretion of $0.9 million to increase the redeemable non-controlling interests to redemption value.

4331

Changes in Accumulated Other Comprehensive (Loss) Income by Component (in thousands):

Foreign
currency
translation
adjustments Unrealized (loss) gain on cash
flow hedge, net
of tax Accumulated
other
comprehensive
(loss) income
Balance December 31, 2020 $ (14,497) $ (26,821) $ (41,318)
Other comprehensive loss before reclassification (4,255) 20,972 16,717
Reallocation of ownership interests (93) (133) (226)
Balance December 31, 2021 (18,845) (5,982) (24,827)
Other comprehensive loss before reclassification (12,426) 49,904 37,478
Reallocation of ownership interests (136) 24 (112)
Balance September 30, 2022 $ (31,407) $ 43,946 $ 12,539

~~17. Prepaid Expenses and Other Current Assets~~

~~Prepaid expenses and other current assets are comprised of the following (in thousands):~~

September 30,
2022 December 31,
2021
Deposits and advances $ 2,168 $ 1,174
Prepaid insurance 10,603 7,962
Prepaid regulatory fees — 3,710
Income and other tax receivables 12,465 8,850
Prepaid taxes 16,715 16,085
Escrow deposits for legal settlements(1)
73,000 33,000
Other current receivables 9,366 9,770
Other prepaid assets 17,600 17,309
Chargebacks receivable (2)
7,733 12,358
Total prepaid expenses and other current assets $ 149,650 $ 110,218


	Foreign currency translation adjustments		Unrealized (loss) gain on cash flow hedge, net of tax		Accumulated other comprehensive (loss) income
Balance December 31, 2021	$	(18,845)	$	(5,982)	$	(24,827)
Other comprehensive loss before reclassification	(13,394)		48,270		34,876
Reallocation of ownership interests	(143)		33		(110)
Balance December 31, 2022	(32,382)		42,321		9,939
Other comprehensive loss before reclassification	1,029		(2,957)		(1,928)
Reallocation of ownership interests	(270)		342		72
Balance June 30, 2023	$	(31,623)	$	39,706	$	8,083

~~(1)~~Escrow deposits for legal settlements included preliminary settlement escrow deposits by the Company’s insurers of $33.0 million as of December 31, 2021, associated with insured securities class action lawsuits. As of September 30, 2022, escrow deposits for legal settlements included $73.0 million associated with the Opana ER® antitrust litigation settlement agreements and Preliminary Settlement agreements. Refer to Note ~~13. Commitments and Contingencies~~22. Stockholders’ Equity ~~for additional details regarding these matters.~~

~~(2)~~When a sale occurs on a contract item, the difference between the cost paid to the manufacturer by the Company and the contract cost that the end customer has with the manufacturer is rebated back to the Company by the manufacturer. The Company establishes a chargeback (rebate) receivable and a reduction to cost of goods sold in the same period as the related sale.

~~18. Other Assets~~

~~Other assets were comprised of the following (in thousands):~~

September 30,
2022 December 31,
2021
Interest rate swap (1)
$ 88,860 $ —
Security deposits 3,743 3,895
Long-term prepaid expenses 5,031 5,896
Deferred revolving credit facility costs 2,356 1,603
Other long term assets 8,272 9,220
Total $ 108,262 $ 20,614

~~(1)Refer to~~ ~~Note 10. Fair Value Measurements~~ ~~and~~ ~~Note 11. Financial Instruments~~ ~~for information about the Company’s interest rate swap.~~

~~19. Government Grants~~

In November 2021, Amneal Pharmaceuticals Private Limited, a subsidiary of the Company in India, was selected as one of 55 companies to participate in the PLI Scheme. The government of India established the PLI Scheme to make India’s domestic manufacturing more globally competitive and to create global champions within the pharmaceutical sector by encouraging investment and product diversification with a focus on manufacturing complex and high value goods.

Under the PLI Scheme, the Company is eligible to receive up to 10 billion Indian rupees, or approximately $122.7 million (based on conversion rates as of September 30, 2022), over a maximum six-year period, starting in 2022. To be eligible to receive the cash incentives, Amneal must achieve (i) minimum cumulative expenditures towards developmental and/or capital investments and (ii) a minimum percentage growth in sales of eligible products.

The Company has concluded the PLI Scheme is government assistance in the form of a grant and, in the absence of specific accounting guidance under U.S. GAAP, the Company has analogized to International Accounting Standards 20, ~~Accounting for Government Grants and Disclosure of Government Assistance~~. The Company has evaluated the PLI Scheme to be a grant related to income and will recognize the cash incentives in the consolidated statements of operations on a systematic basis within other operating income. For the three and nine months ended September 30, 2022, the Company recognized $1.3 million and $2.5 million, respectively, of other operating income associated with the PLI Scheme. Receivables from the government of India of $1.7 million and $0.8 million, respectively, were recorded within prepaid and other current assets and other long-term assets as of September 30, 2022, respectively, based on the terms of the PLI Scheme.

~~20. Debt~~

~~The following is a summary of the Company’s total indebtedness (in thousands):~~

September 30, 2022 December 31, 2021
Term Loan due May 2025 $ 2,570,626 $ 2,590,876
Rondo Term Loan due January 2025 82,000 139,250
Other — 624
Total debt 2,652,626 2,730,750
Less: debt issuance costs (15,469) (20,083)
Total debt, net of debt issuance costs 2,637,157 2,710,667
Less: current portion of long-term debt (29,940) (30,614)
Total long-term debt, net $ 2,607,217 $ 2,680,053

~~There have been no material changes~~ in the Company’s ~~long-term debt since December 31, 2021, except as disclosed below. Refer to~~ ~~Note 17. Debt~~ ~~in our 2021~~2022 Annual Report on Form 10-K for additional information.

~~On June 2, 2022,~~

21. Related Party Transactions

The Company has various business agreements with certain parties in which there is some common ownership. However, the Company entered into a revolving credit agreement (the “New Credit Agreement”), which amended the existing senior secured asset backed revolving credit facility (the “Revolving Credit Facility”). The New Credit Agreement (i) replaced the Revolving Credit Facility with a $350.0 million senior secured revolving credit facility (the “New Revolving Credit Facility”) that matures on June 2, 2027, (ii) provides for up to $25.0 milliondoes not directly own or manage any of ~~the New Revolving Credit Facility to be available~~such related parties. Except as disclosed below, as of and for the ~~purpose of issuing letters of credit; (iii) provides for up~~three and six months ended June 30, 2023, there were no material changes to $35.0 million of the New Revolving Credit Facility to be available for the purpose of issuing swingline loans; (iv) allows the the Company to request an incremental increase in the revolving facility commitments by up to $150.0 million; and (v) terminated the revolving credit facility commitments of lenders under the Revolving Credit Facility.

~~Interest is payable on the New Revolving Credit Facility at a rate equal to the alternate base rate (“ABR”)~~our related party agreements or the secured overnight financing rate (“SOFR”), plus an applicable margin, in each case, subject to a ABR floor of 1.00% or a SOFR floor of 0.00%, as applicable. The applicable margin for the New Revolving Credit Facility is initially 0.25% per annum for ABR loans and 1.25% per annum for SOFR loans. The applicable margin on borrowings under the New Revolving Credit Facility thereafter will adjust ranging from 0.25% to 0.50% per annum for ABR loans and from 1.25% to 1.50% per annum for SOFR loans determined by the average historical excess availability. The proceeds of any loans made under the New Revolving Credit Facility can be used for capital expenditures, acquisitions, working capital needs and other general purposes, subject to covenantsrelationships as described ~~below.~~ in Note 24. Related Party Transactions and Note 22. Stockholders’ Equity in our2022 Annual Report on Form 10-K.

The ~~Company pays a commitment fee based on~~following table summarizes the ~~average daily unused amount of the New Revolving Credit Facility at a rate of 0.25% per annum.~~Company’s related party transactions (in thousands):


		Three months ended June 30,				Six months ended June 30,
Related Party and Nature of Transaction	Caption in Balance Sheet and Statement of Operations	2023		2022		2023		2022
Kashiv Biosciences LLC
Parking space lease	Research and development	$	33	$	25	$	50	$	50
License and commercialization agreement - Filgrastim and Pegfilgrastim - regulatory approval milestone for Filgrastim	Selling, general and administrative	—		—		—		5,000
Development and commercialization agreement - Ganirelix Acetate and Cetrorelix Acetate	Research and development	—		1,706		50		1,723
License and commercialization agreement - Filgrastim and Pegfilgrastim - regulatory approval milestone for Pegfilgrastim	Intangible asset	—		15,000		—		15,000
Development and commercialization agreement - Filgrastim and Pegfilgrastim - Royalty expense (Releuko)	Cost of goods sold	—		—		144		—
Storage agreement	Research and development	(34)		—		(82)		—
Inventory purchases under development and commercialization agreement - Filgrastim and Pegfilgrastim (Releuko)	Inventory and cost of goods sold	499		—		499		—
Total		$	498	$	16,731	$	661	$	21,773

Other Related Parties
Kanan, LLC - operating lease	Inventory and cost of goods sold	$	592	$	526	$	1,158	$	1,052
Sutaria Family Realty, LLC - operating lease	Inventory and cost of goods sold	$	314	$	305	$	619	$	601
PharmaSophia, LLC - research and development services income	Research and development	$	—	$	(15)	$	—	$	(30)
Apace KY, LLC d/b/a Apace Packaging LLC - packaging agreement	Inventory and cost of goods sold	$	3,731	$	964	$	5,567	$	1,422
Tracy Properties LLC - operating lease	Selling, general and administrative	$	94	$	136	$	263	$	271
AzaTech Pharma LLC - supply agreement	Inventory and cost of goods sold	$	1,969	$	1,431	$	2,544	$	2,652
AvPROP, LLC - operating lease	Selling, general and administrative	$	43	$	50	$	90	$	90
Avtar Investments, LLC - consulting services	Research and development	$	9	$	85	$	197	$	169
TPG Operations, LLC - consulting services	Selling, general and administrative	$	—	$	—	$	—	$	19
Alkermes	Inventory and cost of goods sold	$	88	$	77	$	90	$	107
R&S Solutions - logistics services	Selling, general and administrative	$	20	$	20	$	40	$	39
Members - tax receivable agreement (TRA liability)	Other expense	$	405	$	—	$	1,231	$	—

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~~Subject~~The following table summarizes the amounts due to ~~the refinancing, there was a decrease in the borrowing capacity of certain lenders between the New Revolving Credit Facility and the Revolving Credit Facility. As a result,~~or from the Company ~~recorded $0.3 million charge~~ for ~~the nine months ended September 30, 2022 in loss on refinancing. Additionally, the Company incurred costs of $1.6 million~~related party transactions (in thousands):


	June 30, 2023		December 31, 2022
Sellers of AvKARE LLC and R&S - state tax indemnification	$	—	$	486
Kashiv - various agreements	28		12
Asana BioSciences, LLC	2		2
Apace KY, LLC d/b/a Apace Packaging LLC - packaging agreement	119		—
Related party receivables - short term	$	149	$	500

Kashiv - various agreements	$	100	$	110
Apace Packaging, LLC - packaging agreement	1,070		756
AzaTech Pharma LLC - supply agreement	1,113		863
Avtar Investments LLC - consulting services	89		72
Sellers of AvKARE LLC and R&S - accrued interest on Sellers Notes	442		442
Members - tax receivable agreement	631		201
R&S Solutions LLC - logistics services	7		7
Alkermes Plc	36		28
Members - tax distributions	17,655		—
Related party payables - short term	$	21,143	$	2,479

Kashiv - contingent consideration (1)	$	860	$	3,290
Sellers of AvKARE LLC and R&S - accrued interest on Sellers Notes	7,034		5,929
Members - tax receivable agreement	1,229		430
Related party payables - long term	$	9,123	$	9,649

(1) The contingent consideration liability was associated with the ~~Credit Agreement, which was capitalized as deferred financing costs~~acquisition of KSP. Refer to Note 17. Fair Value Measurements for additional information.

TPG is a significant stockholder of the Company. A Managing Director of TPG is an observer of the Company’s Board. TPG Capital BD, LLC (“TPG Capital”) has been providing the Company with advice and assistance with respect to the ~~remaining unamortized costs associated with~~planned refinancing or replacement of certain indebtedness of the ~~New Revolving Credit Facility,~~Company and will receive a customary fee, in an amount to be ~~amortized over~~negotiated, contingent on the ~~life~~closing of a transaction. For the three and six months ended June 30, 2023, the Company did not incur any costs related to services provided by TPG Capital.

22. Segment Information

The Company has three reportable segments: Generics, Specialty, and AvKARE.

Generics

The Company’s Generics segment includes a retail and institutional portfolio of approximately 260 product families covering an extensive range of dosage forms and delivery systems, including both immediate and extended release oral solids, powders, liquids, sterile injectables, nasal sprays, inhalation and respiratory products, biosimilar products, ophthalmics, films, transdermal patches and topicals.

Specialty

The Company’s Specialty segment is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical products, with a focus on products addressing central nervous system disorders, including Parkinson’s disease, and endocrine disorders.

AvKARE

The Company’s AvKARE segment provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs.

AvKARE is also a wholesale distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, and medical and surgical products. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the U.S. focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

Chief Operating Decision Makers

The Company’s chief operating decision makers evaluate the financial performance of the ~~New Credit Agreement.~~Company’s segments based upon segment operating income (loss). Items below operating income (loss) are not reported by segment, because they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in “Corporate and Other.” The Company does not report balance sheet information by segment because it is not reviewed by the Company’s chief operating decision makers.

The ~~New Credit Agreement contains certain negative covenants that, among~~tables below present segment information reconciled to total Company financial results, with segment operating income or loss, including gross profit less direct selling expenses, R&D expenses, and other ~~things and subject~~operating expenses to ~~certain exceptions, restrict~~ the ~~Company’s and certain subsidiaries’ ability to incur additional debt or guarantees, grant liens, make loans, acquisitions or other investments, dispose~~extent specifically identified by segment (in thousands):


Three Months Ended June 30, 2023	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	373,701	$	96,994	$	128,351	$	—	$	599,046
Cost of goods sold	225,189		46,512		107,324		—		379,025
Gross profit	148,512		50,482		21,027		—		220,021
Selling, general and administrative	28,040		22,759		14,015		40,756		105,570
Research and development	31,108		6,691		—		—		37,799
Intellectual property legal development expenses	801		19		—		—		820
Restructuring and other charges	—		82		—		—		82
Change in fair value of contingent consideration	—		(6,364)		—		—		(6,364)
Charges related to legal matters, net	2,017		—		—		—		2,017
Other operating expense	13		—		—		—		13
Operating income (loss)	$	86,533	$	27,295	$	7,012	$	(40,756)	$	80,084


Six Months Ended June 30, 2023	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	717,507	$	188,672	$	250,407	$	—	$	1,156,586
Cost of goods sold	455,740		89,703		212,936		—		758,379
Gross profit	261,767		98,969		37,471		—		398,207
Selling, general and administrative	55,640		45,138		26,955		79,933		207,666
Research and development	63,467		13,022		—		—		76,489
Intellectual property legal development expenses	2,425		39		—		—		2,464
Restructuring and other charges	99		82		—		411		592
Change in fair value of contingent consideration	—		(3,907)		—		—		(3,907)
(Credit) charges related to legal matters, net	(427)		—		—		2,008		1,581
Other operating income	(1,211)		—		—		—		(1,211)
Operating income (loss)	$	141,774	$	44,595	$	10,516	$	(82,352)	$	114,533


Three Months Ended June 30, 2022	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	364,895	$	97,001	$	97,459	$	—	$	559,355
Cost of goods sold	228,535		42,791		87,510		—		358,836
Gross profit	136,360		54,210		9,949		—		200,519
Selling, general and administrative	26,558		23,171		12,735		36,342		98,806
Research and development	44,174		6,574		—		—		50,748
Intellectual property legal development expenses	778		43		—		—		821
Acquisition, transaction-related and integration expenses	8		32		—		201		241
Change in fair value of contingent consideration	—		(270)		—		—		(270)
Insurance recoveries for property losses and associated expenses	(1,911)		—		—		—		(1,911)
Charges related to legal matters, net	483		—		—		251,394		251,877
Other operating income	(1,175)		—		—		—		(1,175)
Operating income (loss)	$	67,445	$	24,660	$	(2,786)	$	(287,937)	$	(198,618)


Six Months Ended June 30, 2022	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	682,642	$	182,087	$	192,259	$	—	$	1,056,988
Cost of goods sold	427,565		86,644		167,689		—		681,898
Gross profit	255,077		95,443		24,570		—		375,090
Selling, general and administrative	54,151		47,571		26,145		69,604		197,471
Research and development	87,395		16,151		—		—		103,546
Intellectual property legal development expenses	1,550		35		—		—		1,585
Acquisition, transaction-related and integration expenses	8		32		—		635		675
Restructuring and other charges	206		—		—		525		731
Change in fair value of contingent consideration	—		(70)		—		—		(70)
Insurance recoveries for property losses and associated expenses	(1,911)		—		—		—		(1,911)
Charges related to legal matters, net	2,157		—		—		247,394		249,551
Other operating income	(1,175)		—		—		—		(1,175)
Operating income (loss)	$	112,696	$	31,724	$	(1,575)	$	(318,158)	$	(175,313)

(1)Operating results for the sale of assets, merge, dissolve, liquidate or consolidate, pay dividends or other payments on capital stock, make optional payments or modify certain debt instruments, modify certain organizational documents, enter into arrangements that restrict the ability to pay dividends or grant liens, or enter into or consummate transactions with affiliates. The New Revolving Credit Facility also includes a financial covenant whereby the Company must maintain a minimum fixed-charge coverage ratio if certain borrowing conditionsAmneal products by AvKARE are met. The New Revolving Credit Facility contains customary events of default, subject to certain exceptions. Upon the occurrence of certain events of default, the obligations under the New Revolving Credit Facility may be accelerated and the commitments may be terminated.

~~As of September 30, 2022, the Company had $60.0 million~~included in ~~borrowings under the New Revolving Credit Facility.~~

During the nine months ended September 30, 2022, the Company repaid $57.3 million of outstanding principal of the Rondo Term Loan. Additionally, the Company repaid the remaining $0.6 million in principal of other debt obligations in June 2022.Generics.

~~21.~~23. Insurance Recoveries for Property Losses and Associated Expenses

On September 1, 2021, Tropical Storm Ida brought extreme rainfall and flash flooding to New Jersey that caused damage to two of the Company’s facilities. Operations at these facilities were closed for the majority of September 2021 in order to assess the damage, make repairs and restore operations.

The Company concluded that all inventory on-hand at the time of the flooding was damaged and unsellable and that a majority of the equipment was damaged beyond repair. In addition, the Company incurred significant costs to repair both facilities. ~~Accordingly, the Company recorded $8.2 million of charges for property losses and associated expenses for both of the three and nine months ended September 30, 2021.~~ The Company has insurance policies for property damage, inventory losses and business interruption. Insurance recoveries are recorded in the periods when it is probable they will be realized. During each of the ~~nine~~three and six months ended ~~September~~June 30, 2022, insurance recoveries of $1.9 million associated with property damage and inventory losses were ~~received. Charges (insurance recoveries)~~received and recorded in insurance recoveries for property losses and associated ~~expenses was comprised of the following (in thousands):~~expenses.

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Impairment of equipment $ — $ 4,202 $ — $ 4,202
Impairment of inventory — 950 — 950
Repairs and maintenance expenses — 2,025 — 2,025
Salaries and benefits — 1,009 — 1,009
Total property losses and associated expenses — 8,186 — 8,186
Less: Insurance recoveries received — — (1,911) —
$ — $ 8,186 $ (1,911) $ 8,186

24. Subsequent Events

During July 2023, the Company repaid $30.0 million of borrowings on the New Revolving Credit Facility from cash on hand and borrowed an additional $10.0 million under the Rondo Revolving Credit Facility for working capital purposes.

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

Amneal Pharmaceuticals, Inc. (the ~~“Company,”~~“Company”, “we,” “us,” or “our”) is a global pharmaceutical company ~~specializing in developing, manufacturing, marketing~~that develops, manufactures, markets, and ~~distributing high-value generic pharmaceutical products across~~distributes a ~~broad array~~diverse portfolio of ~~dosage forms~~essential medicines, including complex generics and ~~therapeutic areas, as well as~~specialty branded ~~products and biosimilar products.~~pharmaceuticals. We operate principally in the United States (the “U.S.”), India, and Ireland, and sell to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly.

~~The Company is~~ We are a holding company, whose principal assets are common units (“Amneal Common Units”) of Amneal Pharmaceuticals, LLC (“Amneal”). ~~In 2018, Amneal completed the acquisition of Impax Laboratories, Inc. (“Impax”), a generic and specialty pharmaceutical company.~~

The ~~group~~Company held 50.3% of ~~investors,~~Amneal Common Units and the group, together with their affiliates and certain assignees, who owned Amneal when it was a private company, ~~(the “Members”) held 50.1% of Amneal Common Units and the Company~~ held the remaining ~~49.9%~~49.7% as of ~~September~~June 30, ~~2022.~~2023. The Company is Amneal’s sole managing member, having the sole voting power to make all of Amneal’s business decisions and control its management. Therefore, the Company consolidates the financial statements of Amneal and its subsidiaries. The Company records non-controlling interests for the portion of Amneal’s economic interests that it does not hold.

The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Item 1A. Risk Factors in our ~~2021~~2022 Annual Report on Form 10-K and under the heading Cautionary Note Regarding Forward-Looking Statements included elsewhere in this Quarterly Report on Form 10-Q.

The following discussion and analysis for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 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, ~~2021~~2022 included in our ~~2021~~2022 Annual Report on Form 10-K.

Overview

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

Generics

Our Generics segment includes ~~over 250~~approximately 260 product families covering an extensive range of dosage forms and delivery systems, including both immediate and extended release oral solids, powders, liquids, sterile injectables, nasal sprays, inhalation and respiratory products, ophthalmics, films, transdermal patches and topicals. We focus on developing products with substantial barriers-to-entry resulting from complex drug formulations or manufacturing, or legal or regulatory challenges. Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition. As such, the timing of new product introductions can have a significant impact on the Company’s financial results. The entrance into the market of additional competition generally has a negative impact on the volume ~~and /~~ and/or pricing of the affected products. Additionally, pricing is determined by market place dynamics and is often affected by factors outside of the Company’s control.

Specialty

Our Specialty segment is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical products, with a focus on products addressing ~~central nervous system (“CNS”)~~CNS disorders, including ~~migraine~~Parkinson’s disease, and ~~Parkinson’s disease.~~endocrine disorders. Our portfolio of products includes Rytary®, an extended release oral capsule formulation of carbidopa-levodopa for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or manganese intoxication. In addition to Rytary®, our promoted Specialty portfolio also includes Unithroid® (levothyroxine sodium), for the treatment of hypothyroidism, which is sold under a license and distribution agreement with Jerome Stevens Pharmaceuticals, Inc., and ~~Emverm® (mebendazole) 100 mg chewable tablets, for~~Lyvispah® (baclofen), a unique dissolvable granule formulation used to treat muscle stiffness, spasms and pain from multiple sclerosis.

Our Specialty products are marketed through skilled specialty sales and marketing teams, who call on neurologists, movement disorder specialists, endocrinologists and primary care physicians in key markets throughout the ~~treatment~~U.S. Our Specialty segment also has a number of ~~pinworm, whipworm, common roundworm, common hookworm and American hookworm~~product candidates that are in ~~single or mixed infections.~~varying stages of development.

For Specialty products, the majority of the product’s commercial value is usually realized during the period in which the product has market exclusivity. In the U.S., when market exclusivity expires and generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product’s sales. ~~For example, the pediatric exclusivity of the AstraZeneca patent licensed to Impax for Zomig® Nasal Spray expired in May 2021, and we lost market exclusivity in the fourth quarter of 2021.~~

4738

On June 30, 2023, we received a complete response letter (“CRL”) from the Food and Drug Administration regarding our new drug application for IPX203 for the treatment of Parkinson’s disease. Refer to Note 12. Goodwill and Other Intangible Assets for further information on the CRL and our interim goodwill and in-process research and development intangible asset impairment tests. Refer to the information under the heading “If we are unable to successfully develop or commercialize new products, our operating results will suffer.” in the Operational and Competitive Risks section of Item 1A. Risk Factors in our 2022 Annual Report on Form 10-K for additional information associated with the risk related to FDA approval of IPX203.

AvKARE

Our AvKARE segment provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies. AvKARE is a re-packager of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, which service the Department of Defense and Department of ~~Veterans~~Veteran Affairs as well as institutional customers. AvKARE is also a wholesale distributor of pharmaceuticals, over the counter products and medical supplies to institutional customers which are located throughout the ~~United States of America~~U.S. focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

The Pharmaceutical Industry

The pharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. For a more detailed explanation of our business and its risks, refer to our ~~2021~~2022 Annual Report on Form 10-K, as supplemented by Part II, Item 1A “Risk Factors” of our subsequent Quarterly Reports on Form 10-Q.

~~COVID-19 Pandemic~~

In March 2020, the World Health Organization designated the outbreak of a novel strain of coronavirus (“COVID-19”) as a global pandemic. Governments and businesses around the world took unprecedented actions to mitigate the spread of COVID-19, including imposing restrictions on movement and travel such as quarantines and shelter-in-place requirements, and restricting or prohibiting outright some or all commercial and business activity, including the manufacture and distribution of certain goods and the provision of non-essential services.

To the extent that the pandemic (and variant strains) continues or worsens, national, state, local and international governments may impose additional restrictions or extend the restrictions already in place. The worsening of the pandemic and the related safety and business operating restrictions could result in a number of adverse impacts to our business, including, but not limited to, additional disruption to the economy and our customers, additional work restrictions, supply chains being interrupted or slowed, and rising supply prices. Also, governments may impose other laws, regulations, or taxes that could adversely impact our business, financial condition, or results of operations. Further, depending on the extent to which our customers are affected, they could delay or reduce purchases of products we provide. The potential effects of the pandemic also could impact us in a number of other ways including, but not limited to, reductions to our profitability, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential impairment of the carrying amount of goodwill or other definite-lived assets.

Although not currently expected, any supply chain disruptions may significantly impact our 2022 results of operations and cash flows. Increasing infection rates and the introduction of new and more easily transmitted variants of COVID-19 could cause material disruptions to our global supply chains and cause labor shortages, as well as reduce the number of physician visits in general.

We continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by national, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers, and shareholders. Until the ultimate extent and duration of the pandemic is known, we cannot predict the ultimate effects the pandemic may have on our business, in particular with respect to demand for our products, our strategy, and our prospects, the effects on our customers, or the impact on our financial results.

Inflation

While it is difficult to accurately measure the impact of inflation, we ~~currently expect~~estimate our business will experience an ~~inflationary impact~~increase in costs due to ~~income (loss) before income taxes~~inflation of approximately ~~$30~~$20.0 million for the year ending December 31, ~~2022,~~2023, excluding the impact of rising interest rates. However, 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.

Uncertainties in Financial Markets

In March 2023, certain U.S. and international government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in financial markets. While these events have not had a material direct impact on our operations, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions, our ability to access cash or enter into new financing arrangements on favorable terms, or at all, may be threatened, which could have a material adverse effect on our business, financial condition and results of operations.

4839

Results of Operations

Comparison of Three Months Ended June 30, 2023 to Three Months Ended June 30, 2022

Consolidated Results

The following table sets forth our summarized, consolidated results of operations for the three ~~and nine~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Increase (Decrease)
		2022		2021		2022		2021			2023		2022		$		%
Net revenue	Net revenue	$	545,557	$	528,593	$	1,602,545	$	1,556,773	Net revenue	$	599,046	$	559,355	$	39,691	7.1	%
Cost of goods sold	Cost of goods sold	350,653		329,394		1,027,439		953,514		Cost of goods sold	379,025		358,836		20,189		5.6	%
Cost of goods sold impairment charges		674		688		5,786		688
Gross profit	Gross profit	194,230		198,511		569,320		602,571		Gross profit	220,021		200,519		19,502		9.7	%
Selling, general and administrative	Selling, general and administrative	100,071		91,397		297,542		268,280		Selling, general and administrative	105,570		98,806		6,764		6.8	%
Research and development	Research and development	50,235		48,927		153,781		149,973		Research and development	37,799		50,748		(12,949)		(25.5)	%
In-process research and development impairment charges		—		—		—		710
Intellectual property legal development expenses	Intellectual property legal development expenses	1,411		1,627		2,996		6,574		Intellectual property legal development expenses	820		821		(1)		(0.1)	%
Acquisition, transaction-related and integration expenses	Acquisition, transaction-related and integration expenses	39		134		714		7,219		Acquisition, transaction-related and integration expenses	—		241		(241)		(100.0)	%
Charges related to legal matters, net		285		19,000		249,836		19,000
Charges (insurance recoveries) for property losses and associated expenses		—		8,186		(1,911)		8,186
Restructuring and other charges	Restructuring and other charges	581		425		1,312		788		Restructuring and other charges	82		—		82		nm
Change in fair value of contingent consideration	Change in fair value of contingent consideration	(1,425)		300		(1,495)		300		Change in fair value of contingent consideration	(6,364)		(270)		(6,094)		nm
Other operating income		(1,320)		—		(2,495)		—
Insurance recoveries for property losses and associated expenses										Insurance recoveries for property losses and associated expenses	—		(1,911)		1,911		(100.0)	%
Charges related to legal matters, net										Charges related to legal matters, net	2,017		251,877		(249,860)		(99.2)	%
Other operating expense (income)										Other operating expense (income)	13		(1,175)		1,188		nm
Operating income (loss)	Operating income (loss)	44,353		28,515		(130,960)		141,541		Operating income (loss)	80,084		(198,618)		278,702		(140.3)	%
Total other expense, net	Total other expense, net	(42,173)		(30,558)		(109,512)		(93,856)		Total other expense, net	(50,424)		(34,113)		(16,311)		47.8	%
Income (loss) before income taxes	Income (loss) before income taxes	2,180		(2,043)		(240,472)		47,685		Income (loss) before income taxes	29,660		(232,731)		262,391		(112.7)	%
Provision for income taxes		4,570		4,049		8,459		7,056
Net (loss) income		$	(2,390)	$	(6,092)	$	(248,931)	$	40,629
(Benefit from) provision for income taxes										(Benefit from) provision for income taxes	(23)		7,350		(7,373)		(100.3)	%
Net income (loss)										Net income (loss)	$	29,683	$	(240,081)	$	269,764	(112.4)	%

nm - not meaningful

Net Revenue

Net revenue for the three months ended ~~September~~June 30, ~~2022 was $545.6 million, an increase of 3% as compared to $528.6 million for the three months ended September 30, 2021. The increase~~2023 increased 7.1% from the prior year period ~~was attributable to the following:~~primarily due to:

•Growth in our Generics segment of ~~$3.1~~$8.8 million, ~~was~~ primarily due to ~~volume growth and an increase in~~ new generics products launched in 2023 and 2022 that contributed revenue growth of $11.2 million, the launch of biosimilars and ~~2021~~ ~~of $4.3 million,~~ strong volume growth, partially offset by continued price erosion.

•Growth in our AvKARE segment of $30.9 million, due to growth in our distribution and government label channels driven by new product introductions.

Specialty segment net revenue ~~decreased $3.3~~of $97.0 million was flat compared to the prior year period as growth in ~~our promoted products, including Rytary® and~~ Unithroid® ~~which increased 12% and 39%, respectively,~~of 23.6% was ~~driven by favorable pricing and volume growth that continues to remain strong,~~ offset by ~~loss~~a 4.2% decline in Rytary® due to timing of ~~exclusivity on Zomig® nasal spray~~shipments as we continue to experience strong total prescription growth and ~~declines~~a decline in our non-promoted products.

Cost of Goods Sold and Gross Profit

•Cost of goods sold increased 5.6% for the three months ended June 30, 2023 as compared to the prior year period. The increase in cost of goods sold was primarily due to increased volume across our Generics and AvKARE ~~segment~~segments and product mix.

Gross profit as a percentage of net revenue ~~grew $17.1~~increased to 36.7% for the three months ended June 30, 2023 from 35.8% in the prior year period primarily as a result of the factors noted above.

Selling, General, and Administrative

Selling, general, and administrative (“SG&A”) expenses for the three months ended June 30, 2023 increased 6.8% from the prior year period primarily due to increases in employee compensation and higher freight charges driven by increased sales volume.

Research and Development

Research and development (“R&D”) expenses for the three months ended June 30, 2023 decreased 25.5% compared to the prior year period primarily due to lower project spend of $8.8 million partially resulting from timing of regulatory filing fees and operating efficiencies in our infrastructure.

Change in Fair Value of Contingent Consideration

Refer to Note 17. Fair Value Measurements for information about the estimation of our contingent consideration liabilities. The $6.1 million decrease in the change in fair value of contingent consideration for the three months ended June 30, 2023 as compared to the prior year period was primarily driven by a decrease in the associated forecasted revenues.

Insurance Recoveries for Property Losses and Associated Expenses

During the three months ended June 30, 2022, insurance recoveries of $1.9 million associated with property damage and inventory losses were received and recorded in insurance recoveries for property losses and associated expenses.

Charges Related to Legal Matters, Net

For the three months ended June 30, 2023, we recorded a charge of $2.0 million for civil prescription opioid litigation. For the three months ended June 30, 2022, we recorded a net charge of $251.9 million primarily consisting of a charge for the settlement of Opana® ER antitrust litigation of $262.8 million, net of insurance recoveries associated with a securities class action settled during 2022.

Total Other Expense, Net

Total other expense, net for the three months ended June 30, 2023 increased 47.8% compared to the prior year period. This increase was primarily driven by a $15.2 million increase in interest expense as a result of higher rates on our variable rate debt and increased amounts outstanding on our revolving credit facilities.

(Benefit From) Provision For Income Taxes

For the three months ended June 30, 2023, the Company’s benefit from income taxes and effective tax rate were both immaterial, as compared to a provision for income taxes and effective tax rate of $7.4 million and (3.2)%, respectively, for the three months ended June 30, 2022. The period-over-period change in the provision for income taxes was primarily related to a change in the jurisdictional mix of income and a discrete benefit as a result of the completion of an Internal Revenue Service examination and Joint Committee review of the 2012-2018 federal income tax returns, which enabled the Company to recognize previously unrecognized tax benefits during the three months ended June 30, 2022.

Generics

The following table sets forth results of operations for our Generics segment for the three months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Increase (Decrease)
	2023		2022		$		%
Net revenue	$	373,701	$	364,895	$	8,806	2.4	%
Cost of goods sold	225,189		228,535		(3,346)		(1.5)	%
Gross profit	148,512		136,360		12,152		8.9	%
Selling, general and administrative	28,040		26,558		1,482		5.6	%
Research and development	31,108		44,174		(13,066)		(29.6)	%
Intellectual property legal development expenses	801		778		23		3.0	%
Acquisition, transaction-related and integration expenses	—		8		(8)		nm
Insurance recoveries for property losses and associated expenses	—		(1,911)		1,911		(100.0)	%
Charges related to legal matters, net	2,017		483		1,534		317.6	%
Other operating expense (income)	13		(1,175)		1,188		nm
Operating income	$	86,533	$	67,445	$	19,088	28.3	%

nm - not meaningful

Net Revenue

Generics net revenue for the three months ended June 30, 2023 increased 2.4% compared to the prior year period primarily due to new generics products launched in 2023 and 2022 that contributed revenue growth of $11.2 million, the launch of biosimilars and strong volume growth, partially offset by continued price erosion.

Cost of Goods Sold and Gross Profit

Generics cost of goods sold for the three months ended June 30, 2023 decreased 1.5% compared to the prior year period primarily due to lower intangible asset impairment charges and favorable product mix, partially offset by the costs associated with increased sales volume and an increased inventory provision.

Generics gross profit as a percentage of net revenue increased to 39.7% for the three months ended June 30, 2023 from 37.4% in the prior year period primarily as a result of the factors noted above.

Selling, General, and Administrative

Generics SG&A expense for the three months ended June 30, 2023 increased 5.6% compared to the prior year period primarily due to an increase in employee compensation and higher freight charges due to increased sales volume, partially offset by lower legal fees.

Research and Development

Generics R&D expenses for the three months ended June 30, 2023 decreased 29.6% compared to the prior year period primarily due to a decrease in project spend of $7.9 million partially due to timing of regulatory filing fees and operating efficiencies in our infrastructure.

Insurance Recoveries for Property Losses and Associated Expenses

Charges Related to Legal Matters, Net

For the three months ended June 30, 2023, we recorded a charge of $2.0 million for civil prescription opioid litigation. Charges related to legal matters, net for the three months ended June 30, 2022 were immaterial.

Specialty

The following table sets forth results of operations for our Specialty segment for the three months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Increase (Decrease)
	2023		2022		$		%
Net revenue	$	96,994	$	97,001	$	(7)	nm
Cost of goods sold	46,512		42,791		3,721		8.7	%
Gross profit	50,482		54,210		(3,728)		(6.9)	%
Selling, general and administrative	22,759		23,171		(412)		(1.8)	%
Research and development	6,691		6,574		117		1.8	%
Intellectual property legal development expenses	19		43		(24)		(55.8)	%
Acquisition, transaction-related and integration expenses	—		32		(32)		(100.0)	%
Restructuring and other charges	82		—		82		nm
Change in fair value of contingent consideration	(6,364)		(270)		(6,094)		nm
Operating income	$	27,295	$	24,660	$	2,635	10.7	%

nm - not meaningful

Net Revenue

Specialty net revenue for the three months ended June 30, 2023 was flat compared to the prior year period as growth in Unithroid® of 23.6% was partially offset by a 4.2% decline in Rytary® due to timing of shipments as we continue to experience strong total prescription growth and a decline in our non-promoted products.

Cost of Goods Sold and Gross Profit

Specialty cost of goods sold for the three months ended June 30, 2023 increased 8.7% compared to the prior year period. Specialty gross profit as a percentage of net revenue decreased to 52.0% for the three months ended June 30, 2023 from 55.9% in the prior year period, primarily due to unfavorable product mix.

Selling, General, and Administrative

Specialty SG&A expense for the three months ended June 30, 2023 decreased 1.8% compared to the prior year period primarily due to a decrease in third party marketing spend for our promoted products, partially offset by increased compensation costs.

Research and Development

Specialty R&D expenses for the three months ended June 30, 2023 increased 1.8% compared to the prior year period primarily due to higher employee compensation and overhead costs, partially offset by reduced project spend.

Change in Fair Value of Contingent Consideration

Refer to Note 17. Fair Value Measurements for information about the estimation of our contingent consideration liabilities. The $6.1 million increase in the change in fair value of contingent consideration for the three months ended June 30, 2023 as compared to the prior year period was primarily driven by a decrease in the related liability as a result of a decrease in the associated forecasted revenues.

AvKARE

The following table sets forth results of operations for our AvKARE segment for the three months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Increase (Decrease)
	2023		2022		$		%
Net revenue	$	128,351	$	97,459	$	30,892	31.7	%
Cost of goods sold	107,324		87,510		19,814		22.6	%
Gross profit	21,027		9,949		11,078		111.3	%
Selling, general and administrative	14,015		12,735		1,280		10.1	%
Operating income (loss)	$	7,012	$	(2,786)	$	9,798	(351.7)	%

Net Revenue

AvKARE net revenue for the three months ended June 30, 2023 increased 31.7% as compared to the prior year period primarily due to growth in our distribution ~~channel.~~and government channels driven by new product introductions.

Cost of Goods Sold and Gross Profit

AvKARE cost of goods sold for the three months ended June 30, 2023 increased 22.6% as compared to the prior year period, and gross profit as a percentage of net revenue increased to 16.4% for the three months ended June 30, 2023 from 10.2% in the prior year period primarily due to the increase in sales through our higher margin government channel and a lower inventory provision.

Selling, General and Administrative

AvKARE SG&A expense for the three months ended June 30, 2023 increased 10.1% as compared to the prior year period primarily due to higher employee compensation.

Comparison of Six Months Ended June 30, 2023 to Six Months Ended June 30, 2022

Consolidated Results

The following table sets forth our summarized, consolidated results of operations for the six months ended June 30, 2023 and 2022 (in thousands):


	Six Months Ended June 30,				Increase (Decrease)
	2023		2022		$		%
Net revenue	$	1,156,586	$	1,056,988	$	99,598	9.4	%
Cost of goods sold	758,379		681,898		76,481		11.2	%
Gross profit	398,207		375,090		23,117		6.2	%
Selling, general and administrative	207,666		197,471		10,195		5.2	%
Research and development	76,489		103,546		(27,057)		(26.1)	%
Intellectual property legal development expenses	2,464		1,585		879		55.5	%
Acquisition, transaction-related and integration expenses	—		675		(675)		(100.0)	%
Restructuring and other charges	592		731		(139)		(19.0)	%
Change in fair value of contingent consideration	(3,907)		(70)		(3,837)		nm
Insurance recoveries for property losses and associated expenses	—		(1,911)		1,911		(100.0)	%
Charges related to legal matters, net	1,581		249,551		(247,970)		(99.4)	%
Other operating income	(1,211)		(1,175)		(36)		3.1	%
Operating income (loss)	114,533		(175,313)		289,846		(165.3)	%
Total other expense, net	(94,299)		(67,339)		(26,960)		40.0	%
Income (loss) before income taxes	20,234		(242,652)		262,886		(108.3)	%
Provision for income taxes	645		3,889		(3,244)		(83.4)	%
Net income (loss)	$	19,589	$	(246,541)	$	266,130	(107.9)	%

nm - not meaningful

Net Revenue

Net revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2022 was $1,602.5 million, an increase of 3% as compared to $1,556.8 million for the nine months ended September 30, 2021. The increase~~2023 increased 9.4% from the prior year period ~~was attributable to the following:~~primarily due to:

•Growth in our Generics segment of ~~$12.8~~$34.9 million ~~was~~ primarily due to new generics products launched in ~~2022~~2023 and ~~2021~~2022 that contributed net revenue growth of ~~$7.7~~$20.7 million, the ~~favorable year-over-year impact~~launch of ~~lower returns relating to Oseltamivir (generic Tamiflu®),~~biosimilars and volume ~~growth. These increases were~~growth, partially offset by continued price erosion. Net revenue for the six months ended June 30, 2023 included a non-recurring customer order of $21.0 million.

•Growth in Specialty segment net revenue ~~decreased $5.7~~of $6.6 million ~~as compared to the prior year period,~~primarily driven by ~~the loss~~increases in net revenue of ~~exclusivity of Zomig® nasal spray as well as a decline~~30.0% and 4.2% in ~~our other non-promoted products. Net revenue from~~ our promoted products ~~including~~Unithroid® and Rytary® ~~and Unithroid®, increased 7% and 33%~~, respectively, asresulting from continued strong prescription growth ~~remained strong for both products.~~and favorable pricing.

•Growth in our AvKARE segment net revenue ~~grew $38.7~~of $58.1 million ~~as compared to the prior year period due to~~ primarily driven by growth in our distribution, ~~channel.~~government label and institutional channels driven by growth in new product introductions.

Cost of Goods Sold and Gross Profit

Cost of goods sold ~~including impairment charges,~~ increased ~~6%, or $21.2 million, to $351.3 million~~ 11.2%for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 as ~~compared to $330.1 million for the three months ended September 30, 2021. The increase in cost of goods sold, including impairment charges, was primarily due~~ ~~to increased Generics and AvKARE volume and increased freight charges, partially offset by the impact of the loss of exclusivity on Zomig® nasal spray.~~

~~Gross profit for the three months ended September 30, 2022 was~~ ~~$194.2 million~~ (36% of total net revenue) as compared to gross profit of $198.5 million (38% of total net revenue) for the three months ended September 30, 2021. Our gross profit as a percentage of net revenue decreased compared to the prior year ~~period primarily as a result of the factors discussed above.~~

~~Cost of goods sold, including impairment charges, increased 8%, or $79.0 million, to $1,033.2 million for the nine months ended September 30, 2022 as compared to $954.2 million~~ ~~for the nine months ended September 30, 2021~~.period. The increase in cost of goods sold was primarily due to increased ~~Generics and~~ AvKARE volume ~~increased freight costs, a reduction in operating efficiency benefits realized as compared to the prior year period,~~ and ~~a $5.1 million period over period~~an increase in ~~intangible asset impairment charges.~~the inventory provision. Cost of goods sold for the six months ended June 30, 2023 included $11.0 million associated with the non-recurring customer order in our Generics segment discussed above.

Gross profit for the nine months ended September 30, 2022 was $569.3 million (36% of total net revenue) as compared to gross profit of $602.6 million (39% of total net revenue) for the nine months ended September 30, 2021. Our gross profit as a percentage of net revenue decreased ~~compared~~ to 34.4% for the six months ended June 30, 2023 from 35.5% in the prior year period primarily as a result of the factors ~~discussed~~noted above.

Selling, General, and Administrative

~~Selling, general, and administrative (“~~SG~~&A”)~~&A expenses for the ~~three~~six months ended ~~September~~June 30, ~~2022 was $100.1 million, as compared to $91.4 million for the three months ended September 30, 2021. The $8.7 million increase~~2023 increased 5.2% from the prior year period ~~was~~ primarily due to ~~$6.9 million of~~increases in employee compensation, higher freight charges driven by increased sales volume and higher costs associated with our biosimilar launches, ~~including the Saol Acquisition (as defined~~partially offset by a decrease of $5.0 million associated with a regulatory approval in~~Note 3. Acquisitions~~ ~~to the financial statements included in this Form 10-Q), an increase in employee compensation, and increased freight charges as fuel costs increased.~~

~~SG&A expenses for the nine months ended September 30, 2022 were $297.5 million, as compared to $268.3 million for~~ the prior year period. The $29.3 million increase from the prior year period was primarily due to $16.4 million of costs associated with our biosimilar launches, including the Saol Acquisition and a $5.0 million expense associated with a biosimilar regulatory approval, an increase in employee compensation, and increased freight charges as fuel costs increased.

Research and Development

~~Research and development (“~~R~~&D”)~~&D expenses for the ~~three~~six months ended ~~September~~June 30, ~~2022 were $50.2 million, as compared to $48.9 million for the three months ended September 30, 2021. The $1.3 million increase~~2023 decreased 26.1% compared to the prior year period ~~was~~ primarily ~~attributable~~due to ~~costs~~reduced project spend of ~~$2.8~~$12.5 million, ~~associated with acquired businesses in 2021, partially offset by operating efficiencies.~~

R&D expenses for the nine months ended September 30, 2022 were $153.8 million, as compared to $150.0 million for the nine months ended September 30, 2021. The $3.8 million increase compared to the prior year period was primarily attributable to increased compensation and other costs, including $15.6 million of costs associated with businesses acquired in 2021, partially offset by decreasesa decrease in in-licensing and upfront milestone payments of ~~$12.4 million.~~$5.6 million, and operating efficiencies in our infrastructure.

Intellectual Property Legal Development Expense

Intellectual property legal development expenses include, but are not limited to, costs associated with formulation assessments, patent challenge opinions and strategy, and litigation expenses to defend our intellectual property. Intellectual property legal development expenses for the ~~three~~six months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ were ~~$1.4~~$2.5 million and $1.6 million, respectively. Expenses may vary based on the number of individual cases and corresponding litigation outstanding in a particular period.

~~Intellectual property legal development expenses~~Change in Fair Value of Contingent Consideration

Refer to Note 17. Fair Value Measurements for information about the estimation of our contingent consideration liabilities. The $3.8 million decrease in the change in fair value of contingent consideration (income) for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 were $3.0 million and $6.6 million, respectively. The period-over-period decrease of $3.6 million was due to the timing of specific cases. Expenses may vary based on the number of individual cases and corresponding litigation outstanding in a particular period.

2023

~~Acquisition, Transaction-Related and Integration Expenses~~

Acquisition, transaction-related and integration expenses were immaterial for the three months ended September 30, 2022 and 2021. Acquisition, transaction-related and integration expenses were $0.7 million for the nine months ended September 30, 2022 as compared to ~~$7.2 million~~the prior year period was primarily driven by a decrease in the related liability as a result of a decrease in the associated forecasted revenues.

Insurance Recoveries for ~~the nine months ended September 30, 2021.~~

~~Acquisition, transaction-related~~Property Losses and integration expenses for the nine months ended September 30, 2022 were primarily related to the Saol Acquisition, which closed on February 9, 2022. For the nine months ended September 30, 2021, acquisition, transaction-related and integration expenses were primarily related to the KSP Acquisition, which closed on April 2, 2021, and integration expenses related to the businesses that comprise our AvKARE segment. Refer to ~~Note 3. Acquisitions~~ ~~for additional information.~~

~~Charges Related to Legal Matters, Net~~

For the three and nine months ended September 30, 2022, we recorded charges related to legal matters, net, of $0.3 million and $249.8 million, respectively. The net charges for the nine months ended September 30, 2022 were primarily comprised of charges associated with Opana® ER antitrust litigation, net of insurance recoveries associated with securities class actions. For the three and nine months ended September 30, 2021, we recorded charges of $19.0 million for securities class actions. Refer to ~~Note 13. Commitments and Contingencies~~ ~~for additional information.~~

~~(Insurance recoveries) Property losses and associated expenses~~

On September 1, 2021, Tropical Storm Ida brought extreme rainfall and flash flooding to New Jersey that caused damage to two of our facilities. The Company concluded that all inventory on-hand at the time of the flooding was damaged and unsellable and that a majority of the equipment was damaged beyond repair. In addition, the Company incurred significant costs to repair both facilities. Accordingly, the Company recorded $8.2 million of charges for property losses and associated expenses for both of the three and nine months ended September 30, 2021.Associated Expenses

During the ~~nine~~six months ended ~~September~~June 30, 2022, insurance recoveries of $1.9 million associated with property damage and inventory losses were received and recorded in ~~charges (insurance recoveries)~~insurance recoveries for property losses and associated expenses.

Charges Related to Legal Matters, Net

For the six months ended June 30, 2023, charges related to legal matters, net was $1.6 million, primarily comprised of $4.1 million in charges associated with prescription opioid litigation, offset by a litigation settlement gain. For the six months ended June 30, 2022, we recorded a net charge of $249.6 million primarily comprised of charges associated with Opana® ER antitrust litigation, net of insurance recoveries associated with a securities class action.

Other Operating Income

Other operating income for the ~~three~~six months ended June 30, 2023 and ~~nine month periods ended September 30,~~ 2022 ~~of $1.3 million and $2.5 million, respectively,~~ was comprised of income earned from the India Production Linked Incentive Scheme for the Pharmaceutical Sector. Refer to Note ~~19.~~6. Government Grants for additional information.

Total Other Expense, Net

Total other expense, net ~~was $42.2 million~~ for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 increased 40.0% as compared to ~~$30.6 million for the three months ended September 30, 2021. Overall, the increase from~~ the prior year ~~period~~period. The increase was primarily driven by a ~~$5.5~~$31.2 million ~~unfavorable period-over-period impact of net foreign exchange gains and losses and higher~~increase in interest expense ~~partially offset by an increase in the benefit related to~~as a ~~previously~~result of higher rates on our variable rate debt and increased amounts outstanding ~~contingent liability.~~on our revolving credit facilities.

Total other expense, net was $109.5 million for the nine months ended September 30, 2022 as compared to $93.9 million for the nine months ended September 30, 2021. Overall, the increase from the prior year period was driven by a $12.7 million unfavorable period-over-period impact of net foreign exchange gains and losses and higher interest expense, partially offset by an increase in the benefit related to a previously outstanding contingent liability.

Provision For Income Taxes

For the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, our provision for income taxes and effective tax rates were ~~$4.6~~$0.6 million and ~~209.6%~~3.2% and ~~$4.0~~$3.9 million and ~~(198.2)~~(1.6)%, respectively. TheThe period-over-period change ~~in the provision for income taxes~~ was primarily related to a change in the jurisdictional mix of ~~foreign income.~~

~~For the nine months ended September 30, 2022 and 2021, our provision for income taxes and effective tax rates were $8.5 million and (3.5)% and $7.1 million and 14.8%, respectively.~~ ~~The period-over-period change in the provision for income taxes was primarily related to a change in the mix of foreign~~ income and a discrete benefit ~~as a result~~resulting from of the completion of an Internal

Revenue Service examination and Joint Committee review of the 2012-2018 federal income tax returns, which enabled the Company to recognize previously unrecognized tax ~~benefits.~~benefits in the six months ended June 30, 2022.

~~Net (Loss) Income~~

We recognized a net loss for the three months ended September 30, 2022 of $2.4 million as compared to net loss of $6.1 million for the three months ended September 30, 2021. The period-over-period change was attributable to the factors discussed above.

We recognized a net loss for the nine months ended September 30, 2022 of $248.9 million as compared to net income of $40.6 million for the nine months ended September 30, 2021. The period-over-period change was attributable to the factors discussed above, including the charge for the nine months ended September 30, 2022 related to legal matters of $262.8 million associated with the Opana® ER antitrust litigation.

Generics

The following table sets forth results of operations for our Generics segment for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Six Months Ended June 30,				Increase (Decrease)
		2022		2021		2022		2021			2023		2022		$		%
Net revenue	Net revenue	$	350,266	$	347,127	$	1,032,908	$	1,020,072	Net revenue	$	717,507	$	682,642	$	34,865	5.1	%
Cost of goods sold	Cost of goods sold	217,997		208,670		640,450		598,122		Cost of goods sold	455,740		427,565		28,175		6.6	%
Cost of goods sold impairment charges		674		688		5,786		688
Gross profit	Gross profit	131,595		137,769		386,672		421,262		Gross profit	261,767		255,077		6,690		2.6	%
Selling, general and administrative	Selling, general and administrative	30,259		15,941		84,410		46,500		Selling, general and administrative	55,640		54,151		1,489		2.7	%
Research and development	Research and development	41,987		34,999		129,382		114,547		Research and development	63,467		87,395		(23,928)		(27.4)	%
In-process research and development impairment charges		—		—		—		710
Intellectual property legal development expenses	Intellectual property legal development expenses	1,369		1,584		2,919		6,506		Intellectual property legal development expenses	2,425		1,550		875		56.5	%
Acquisition, transaction-related and integration expenses	Acquisition, transaction-related and integration expenses	16		—		24		—		Acquisition, transaction-related and integration expenses	—		8		(8)		(100.0)	%
Charges related to legal matters, net		285		—		2,442		—
Charges (insurance recoveries) for property losses and associated expenses		—		8,186		(1,911)		8,186
Restructuring and other charges	Restructuring and other charges	507		—		713		80		Restructuring and other charges	99		206		(107)		nm
Insurance recoveries for property losses and associated expenses										Insurance recoveries for property losses and associated expenses	—		(1,911)		1,911		(100.0)	%
(Credit) charges related to legal matters, net										(Credit) charges related to legal matters, net	(427)		2,157		(2,584)		(119.8)	%
Other operating income	Other operating income	(1,320)		—		(2,495)		—		Other operating income	(1,211)		(1,175)		(36)		3.1	%
Operating income (loss)		$	58,492	$	77,059	$	171,188	$	244,733
Operating income										Operating income	$	141,774	$	112,696	$	29,078	25.8	%

nm - not meaningful

Net Revenue

Generics net revenue ~~was $350.3 million~~ for the ~~three~~six months ended ~~September~~June 30, 2023 increased 5.1% compared to the prior year period primarily due to favorable timing of new generics products launched in 2023 and 2022 ~~an increase~~that contributed net revenue growth of ~~$3.1~~$20.7 million, the launch of biosimilars and volume growth, partially offset by continued price erosion. Net revenue for the six months ended June 30, 2023 included a non-recurring customer order of $21.0 million.

Cost of Goods Sold and Gross Profit

Generics cost of goods sold for the six months ended June 30, 2023 increased 6.6% as compared to the prior year period primarily due to the costs associated with increased sales volume ~~growth~~ and an ~~increase in new products launched in 2022 and 2021~~increased inventory provision. Cost of ~~$4.3~~goods sold for the six months ended June 30, 2023 included $11.0 million ~~partially offset by continued price erosion.~~associated with the non-recurring customer order discussed above.

Generics gross profit as a percentage of net revenue ~~was $1,032.9 million~~decreased to 36.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2022, an increase of $12.8 million as compared to~~2023 from 37.4% in the prior year ~~period. The increase~~period primarily related to new products launched in 2022 and 2021 that contributed revenue growth of $7.7 million, the favorable year-over-year impact of lower returns relating to Oseltamivir (generic Tamiflu®), and volume growth. These increases were partially offset by continued price erosion.

~~Cost of Goods Sold and Gross Profit~~

Generics cost of goods sold, including impairment charges, for the three months ended September 30, 2022 was $218.7 million, an increase of $9.3 million compared the prior year period. The increase in cost of goods sold was primarily attributable to increased volume and inflationary pressure on freight.

Generics gross profit for the three months ended September 30, 2022 was $131.6 million (38% of net revenue) as compared to gross profit of $137.8 million (40% of net revenue) for the three months ended September 30, 2021 as a result of the factors ~~described above.~~

Generics cost of goods sold, including impairment charges, for the nine months ended September 30, 2022 was $646.2 million, an increase of $47.4 million as compared to the nine months ended September 30, 2021. The increase in cost of goods sold was primarily attributable to increased volume, increased freight costs, and a reduction in operating efficiencies period-over-period.

Generics gross profit for the nine months ended September 30, 2022 was $386.7 million (37% of net revenue) as compared to gross profit of $421.3 million (41% of net revenue) for the nine months ended September 30, 2021 as a result of the factors describednoted above.

Selling, General, and Administrative

Generics SG&A expense for the ~~three~~six months ended ~~September~~June 30, ~~2022 was $30.3 million, as~~2023 increased 2.7% compared to ~~$15.9 million for the three months ended September 30, 2021. The increase over~~ the prior year period ~~was~~ primarily due to ~~$6.9 million of~~an increase in employee compensation, higher freight charges driven by increased sales volume and costs associated with our biosimilar launches, ~~including the Saol Acquisition, an increase in employee compensation, and increased freight charges as fuel costs increased.~~

Generics SG&A expense for the nine months ended September 30, 2022 was $84.4 million, as compared to $46.5 million for the nine months ended September 30, 2021. The increase over the prior year period was primarily attributed to $16.4 millionpartially offset by a decrease of ~~costs associated with our biosimilar launches, including the Saol Acquisition and a~~ $5.0 million ~~expense~~ associated with a biosimilar regulatory approval ~~an increase~~ in ~~employee compensation, increased freight charges due to rising fuel costs, and increased legal fees.~~the prior year period.

Research and Development

Generics R&D expenses for the ~~three~~six months ended ~~September~~June 30, ~~2022 was $42.0 million, an increase of $7.0 million~~2023 decreased 27.4% compared to the ~~three months ended September 30, 2021. The increase was~~prior year period primarily ~~associated with increased~~due to reduced project ~~spending as our complex portfolio continued to advance, inflationary pressures and the costs associated with acquired businesses in 2021~~spend of ~~$3.0~~$10.3 million, ~~relating to complex generics, offset, in part, by a decrease in~~decreased in-licensing and upfront milestone payments of ~~$1.0 million.~~

~~Generics R&D expenses for the nine months ended September 30, 2022 was $129.4~~$3.1 million ~~an increase of $14.8 million as compared to the nine months ended September 30, 2021. The increase was primarily associated with increased project spending as~~and operating efficiencies in our complex portfolio continued to advance, inflationary pressures and the costs associated with acquired businesses in 2021 of $12.5 million relating to complex generics, offset, in part, by a decrease in in-licensing and upfront milestone payments of $9.5 million.infrastructure, including reduced employee compensation costs.

Intellectual Property Legal Development Expenses

Intellectual property legal development expenses include, but are not limited to, costs associated with formulation assessments, patent challenge opinions and strategy, and litigation expenses to defend our intellectual property. Intellectual property legal development expenses for the ~~three~~six months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ were ~~$1.4~~$2.4 million and $1.6 million, respectively. Expenses may vary based on the number of individual cases and corresponding litigation outstanding in a particular period.

Intellectual property legal development expenses for the nine months ended September 30, 2022 and 2021 were $2.9 million and $6.5 million, respectively. The period-over-period decrease of $3.6 million was due to the timing of specific cases. Expenses may vary based on the number of individual cases and corresponding litigation outstanding in a particular period.

~~Charges (Insurance Recoveries)~~Insurance Recoveries for Property ~~losses~~Losses and Associated Expenses

~~On September 1, 2021, Tropical Storm Ida brought extreme rainfall and flash flooding to New Jersey that caused damage to two of our facilities. The Company concluded that all inventory on-hand at~~During the time of the flooding was damaged and unsellable and that a majority of the equipment was damaged beyond repair. In addition, the Company incurred significant costs to repair both facilities. Accordingly, the Company recorded $8.2 million of charges for property losses and associated expenses for both of the three and ninesix months ended ~~September 30, 2021.~~

~~During the nine months ended September~~June 30, 2022, insurance recoveries of $1.9 million associated with property damage and inventory losses were received and recorded in ~~charges (insurance recoveries)~~insurance recoveries for property losses and associated expenses.

(Credit) Charges Related to Legal Matters, Net

For the six months ended June 30, 2023, a litigation settlement gain was partially offset by $4.1 million of charges associated with prescription opioid litigation. For the six months ended June 30, 2022, we recorded charges of $2.2 million for employment and other legal proceedings.

Other Operating Income

Other operating income for the ~~three and nine month~~six months periods ended ~~September~~June 30, ~~2022 of $1.3 million~~2023 and ~~$2.5 million, respectively,~~2022 was comprised of income earned from the India Production Linked Incentive Scheme for the Pharmaceutical Sector. Refer to Note ~~19.~~6. Government Grants for additional information.

Specialty

The following table sets forth results of operations for our Specialty segment for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Six Months Ended June 30,				Increase (Decrease)
		2022		2021		2022		2021			2023		2022		$		%
Net revenue	Net revenue	$	89,484	$	92,745	$	271,571	$	277,311	Net revenue	$	188,672	$	182,087	$	6,585	3.6	%
Cost of goods sold	Cost of goods sold	43,719		47,303		130,363		144,184		Cost of goods sold	89,703		86,644		3,059		3.5	%
Gross profit	Gross profit	45,765		45,442		141,208		133,127		Gross profit	98,969		95,443		3,526		3.7	%
Selling, general and administrative	Selling, general and administrative	22,201		22,211		69,772		62,748		Selling, general and administrative	45,138		47,571		(2,433)		(5.1)	%
Research and development	Research and development	8,248		13,928		24,399		35,426		Research and development	13,022		16,151		(3,129)		(19.4)	%
Intellectual property legal development expenses	Intellectual property legal development expenses	42		43		77		68		Intellectual property legal development expenses	39		35		4		11.4	%
Acquisition, transaction-related and integration expenses	Acquisition, transaction-related and integration expenses	15		—		47		16		Acquisition, transaction-related and integration expenses	—		32		(32)		(100.0)	%
Restructuring and other charges										Restructuring and other charges	82		—		82		nm
Change in fair value of contingent consideration	Change in fair value of contingent consideration	(1,425)		300		(1,495)		300		Change in fair value of contingent consideration	(3,907)		(70)		(3,837)		nm
Operating income	Operating income	$	16,684	$	8,960	$	48,408	$	34,569	Operating income	$	44,595	$	31,724	$	12,871	40.6	%

nm - not meaningful

Net Revenue

Specialty net revenue for the ~~three~~six months ended ~~September~~June 30, ~~2022 was $89.5 million, a decrease of $3.3 million as~~2023 increased 3.6% compared to the ~~three months ended September 30, 2021,~~prior year period, primarily driven by ~~the loss~~increases in net revenue of ~~exclusivity of Zomig® nasal spray~~30.0% and ~~a decline~~4.2% in ~~our other non-promoted products. Net revenue from~~ our promoted products ~~including~~Unithroid® and Rytary® ~~and Unithroid®, increased 12% and 39%~~, respectively, asresulting from continued strong prescription growth ~~remained strong for both products.~~

Specialty net revenue for the nine months ended September 30, 2022 was $271.6 million, a decrease of $5.7 million as compared to the nine months ended September 30, 2021, driven by the loss of exclusivity of Zomig® nasal spray and a decline in our other non-promoted products. Net revenue from our promoted products, including Rytary® and Unithroid®, increased 7% and 33%, respectively as prescription growth remained strong for both products.favorable pricing.

Cost of Goods Sold and Gross Profit

Specialty cost of goods sold for the three months ended September 30, 2022 was $43.7 million as compared to $47.3 million for the three months ended September 30, 2021. Specialty gross profit for the three months ended September 30, 2022 was $45.8 million (51% of net revenue) as compared to gross profit of $45.4 million (49% of net revenue) for the three months ended September 30, 2021. The increase in gross profit primarily related to the decrease in revenues, offset by product mix, including the loss of exclusivity on Zomig® nasal spray, which had lower margin.

Specialty cost of goods sold for the ~~nine~~six months ended ~~September~~June 30, ~~2022 was $130.4 million~~2023 increased 3.5% as compared to ~~$144.2 million for~~ the ~~nine months ended September 30, 2021.~~prior year period, primarily due to an increase in net revenue. Specialty gross profit as a percentage of net revenue was flat at 52.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2022 was $141.2 million (52% of net revenue)~~2023 as compared to ~~gross profit of $133.1 million (48% of net revenue) for~~52.4% in the nine months ended September 30, 2021. The increase in gross profit primarily related to the decrease in revenues, offset by product mix, including the loss of exclusivity on Zomig® Nasal Spray which had lower margin.

prior year period.

Selling, General, and Administrative

Specialty SG&A expense ~~was $22.2 million~~ for ~~both~~ the ~~three~~six months ended ~~September~~June 30, ~~2022 and 2021,~~2023 decreased 5.1% as ~~operating efficiencies offset inflationary pressures.~~

~~Specialty SG&A expense was $69.8 million for the nine months ended September 30, 2022, an increase of $7.0 million~~ compared to the ~~nine months ended September 30, 2021. The increase was driven by an increase~~prior year period primarily due to a decrease in ~~in-person sales and~~third party marketing ~~efforts following the onset of the COVID-19 pandemic.~~spend for our promoted products.

Research and Development

Specialty R&D expenses for the ~~three~~six months ended ~~September~~June 30, ~~2022 were $8.2 million,~~2023 decreased 19.4% as compared to ~~$13.9 million for the three months ended September 30, 2021. The $5.7 million decrease from~~ the prior year period ~~was~~ primarily ~~attributable~~due to ~~a decrease in project spend as the IPX study wound down.~~

Specialty R&D expenses for the nine months ended September 30, 2022 were $24.4 million, as compared to $35.4 million for the nine months ended September 30, 2021. The $11.0 million decrease from the prior year period was primarily attributable to a decrease in project costs as our IPX203 study wound down and a decrease in in-licensing and upfront milestone payments of ~~$2.9~~$2.5 million.

Change in Fair Value of Contingent Consideration

Refer to Note 17. Fair Value Measurements for information about the estimation of our contingent consideration liabilities. The $3.8 million decrease in the change in fair value of contingent consideration (income) for the six months ended June 30, 2023 as compared to the prior year period was primarily driven by a decrease in the related liability as a result of a decrease in the corresponding forecasted revenues.

AvKARE

The following table sets forth results of operations for our AvKARE segment for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Six Months Ended June 30,				Increase (Decrease)
		2022		2021		2022		2021			2023		2022		$		%
Net revenue	Net revenue	$	105,807	$	88,721	$	298,066	$	259,390	Net revenue	$	250,407	$	192,259	$	58,148	30.2	%
Cost of goods sold	Cost of goods sold	88,937		73,421		256,626		211,208		Cost of goods sold	212,936		167,689		45,247		27.0	%
Gross profit	Gross profit	16,870		15,300		41,440		48,182		Gross profit	37,471		24,570		12,901		52.5	%
Selling, general and administrative	Selling, general and administrative	13,216		14,683		39,361		41,986		Selling, general and administrative	26,955		26,145		810		3.1	%
Acquisition, transaction-related and integration expenses		—		—		—		1,422
Operating income		$	3,654	$	617	$	2,079	$	4,774
Operating income (loss)										Operating income (loss)	$	10,516	$	(1,575)	$	12,091	nm

nm - not meaningful

Net Revenue

AvKARE net revenue for the ~~three~~six months ended ~~September~~June 30, ~~2022 was $105.8 million, an increase of $17.1 million~~2023 increased 30.2% as compared to the ~~three months ended September 30, 2022,~~prior year period, primarily driven by growth in our distribution, ~~channel~~.

~~AvKARE net revenue for the nine months ended September 30, 2022 was $298.1 million, an increase of $38.7 million as compared to the nine months ended September 30, 2021, driven by~~government label and institutional channels resulting from growth in ~~our distribution channel.~~new product introductions.

Cost of Goods Sold and Gross Profit

AvKARE cost of goods sold for the ~~three~~six months ended ~~September~~June 30, ~~2022 was $88.9 million~~2023 increased 27.0% as compared to ~~$73.4 million for~~ the three months ended September 30, 2021. AvKARE gross profit for the three months ended September 30, 2022 was $16.9 million (16% of net revenue) as compared to gross profit of $15.3 million (17% of net revenue) for the three months ended September 30, 2021. The decrease inprior year period, and gross profit as a percentage of net revenue increased to 15.0% for the six months ended June 30, 2023 from 12.8% in the prior year period, primarily ~~related~~due to the increase in sales through our ~~lower margin distribution channel.~~

AvKARE cost of goods sold for the nine months ended September 30, 2022 was $256.6 million as compared to $211.2 million for the nine months ended September 30, 2021. AvKARE gross profit for the nine months ended September 30, 2022 was $41.4 million (14% of net revenue) as compared to gross profit of $48.2 million (19% of net revenue) for the nine months ended September 30, 2021. The decrease in gross profit primarily related to the increase in sales through our lower margin distribution channel and a decrease in sales through our higher margin ~~governmental label~~government channel.

Selling, General and Administrative

AvKARE SG&A expense ~~was $13.2 million~~ for the ~~three~~six months ended ~~September~~June 30, ~~2022 as~~2023 increased 3.1% compared to ~~$14.7 million in~~ the prior year ~~period. SG&A expense decreased period-over-period~~period primarily due to ~~a decrease in amortization expense.~~

AvKARE SG&A expense was $39.4 million for the nine months ended September 30, 2022 as compared to $42.0 million for the prior year period. SG&A expense decreased period-over-period primarily due to a decrease in amortization expense.higher employee compensation.

Liquidity and Capital Resources

On June 2, 2022, the Company entered into a revolving credit agreement (the “New Credit Agreement”), which amended the existing senior secured asset based revolving credit facility (the “Revolving Credit Facility”). The New Credit Agreement (i) replaced the Revolving Credit Facility with a $350.0 million senior secured revolving credit facility (the “New Revolving Credit Facility”) that matures on June 2, 2027, (ii) provides for up to $25.0 million of the New Revolving Credit Facility to be available for the purpose of issuing letters of credit; (iii) provides for up to $35.0 million of the New Revolving Credit Facility to be available for the purpose of issuing swingline loans; (iv) allows the the Company to request an incremental increase in the revolving facility commitments by up to $150.0 million; and (v) terminated the revolving credit facility commitments of lenders under the Revolving Credit Facility.

Interest is payable on the New Revolving Credit Facility at a rate equal to the alternate base rate (“ABR”) or the secured overnight financing rate (“SOFR”), plus an applicable margin, in each case, subject to a ABR floor of 1.00% or a SOFR floor of 0.00%, as applicable. The applicable margin for the New Revolving Credit Facility is initially 0.25% per annum for ABR loans and 1.25% per annum for SOFR loans. The applicable margin on borrowings under the New Revolving Credit Facility thereafter will adjust ranging from 0.25% to 0.50% per annum for ABR loans and from 1.25% to 1.50% per annum for SOFR loans determined by the average historical excess availability. The proceeds of any loans made under the New Revolving Credit Facility can be used for capital expenditures, acquisitions, working capital needs and other general purposes, subject to covenants as described below. The Borrower pays a commitment fee based on the average daily unused amount of the New Revolving Credit Facility at a rate of 0.25% per annum.

Our primary source of liquidity is cash generated from operations, available cash on hand, and borrowings under debt financing arrangements, including ~~$285.9~~$245.9 million of available capacity, as of June 30, 2023, on our New Revolving Credit ~~facility~~Facility, as ~~of September 30, 2022.~~defined in Note 16. Debt in our 2022 Annual Report on Form 10-K. Refer to Note ~~17.~~16. Debt in our ~~2021~~2022 Annual Report on Form 10-K for additional ~~information.~~information on our debt.As of June 30, 2023, there was $10.0 million of available capacity under the Rondo Revolving Credit Facility. 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 ~~impact of the COVID-19 pandemic,~~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 research and development expenses associated with new product filings, and pharmaceutical product manufacturing expenses, license payments, spending on production facility expansions and capital equipment, acquisitions, and settlements of litigation. As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to sources of liquidity, particularly our cash flows from operations, and financial condition. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

We estimate that we will invest approximately ~~$65.0~~$50.0 million to ~~$75.0~~$60.0 million during ~~2022~~2023 for capital expenditures to support and grow our existing operations, primarily related to investments in manufacturing equipment, information technology and facilities.

During the six months ended June 30, 2023, we prepaid $27.8 million of principal outstanding on the Rondo Term Loan. Over the next 12 months, we expect to make substantial payments, including~~$100.0~~ a $50.0 million ~~in payments~~payment associated with the ~~Preliminary Settlement Agreements for the Opana® ER~~Opana ER® antitrust litigation ~~(refer to~~ ~~Note 13. Commitments and Contingencies~~),settlement agreements, monthly interest and quarterly principal amounts due for our debt instruments, including our Term Loan and Rondo Term Loan, as well as contractual payments for leased premises. Refer to Note 1716. Debt

and Note ~~12.~~18. Leases in our ~~2021~~2022 Annual Report on Form 10-K and Note 15. Debt in this Form 10-Q for additional information on our indebtedness and leases, respectively.

We are party to a tax receivable agreement (“TRA”) that requires us to make cash payments to the Members other than the Company, in respect of certain tax benefits that we may realize or may be deemed to realize as a result of sales or exchanges of Amneal Common Units by the ~~Members (refer to~~ ~~Note 1. Nature of Operations~~).Members. The timing and amount of any payments under the TRA will also vary, depending upon a number of factors including the timing and number of Amneal Common Units sold

or exchanged for our class A common stock, the price of our class A common stock on the date of sale or exchange, the timing and amount of our taxable income, and the tax rate in effect at the time of realization of our taxable income. The ~~tax receivable agreement~~TRA also requires that we make an accelerated payment to the Members equal to the present value of all future payments due under the agreement upon certain change of control and similar transactions. Further sales or exchanges occurring subsequent to ~~September~~June 30, ~~2022~~2023 could result in future Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal Common Units. These obligations could be incremental to and substantially larger than the approximate ~~$206.3~~$202.7 million contingent liability as of ~~September~~June 30, ~~2022~~2023 (refer to Note 7. Income Taxes). As a result of the foregoing, our obligations under the ~~tax receivable agreement~~TRA could have a substantial negative impact on our liquidity. For further details, refer to Item 1A. Risk Factors in our ~~2021~~2022 Annual Report on Form 10-K.

In addition, pursuant to the limited liability operating agreement of Amneal, as amended, in connection with any tax period, we will be required to make distributions to Amneal's members, on a pro rata basis in proportion to the number of Amneal Common Units held by each member, of cash until each member (other than Amneal) has received an amount at least equal to its assumed tax liability and Amneal has received an amount sufficient to enable it to timely satisfy all of its U.S. federal, state and local and non-U.S. tax liabilities, and meet its obligations pursuant to the TRA. During the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~September 30, 2021,~~2022, we made cash tax distributions of ~~$3.3~~$29.73 million and ~~$2.2~~$7.33 million (net), respectively, to the Members. During July 2023, we made cash tax distributions of $17.7 million.

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 six months ended June 30, 2023 and 2022, we made cash tax distributions of $5.83 million and $2.59 million, respectively, to the ~~Members.~~AvKARE Sellers.

As of ~~September~~June 30, ~~2022,~~2023, our cash and cash equivalents consist of cash on deposit and highly liquid investments. A portion of our cash flows are derived outside the ~~United States.~~U.S. As a result, we are subject to market risk associated with changes in foreign exchange rates. We maintain cash balances at both U.S. based and foreign country based commercial banks. At various times during the year, our cash balances held in the ~~United States~~U.S. may exceed amounts that are insured by the Federal Deposit Insurance Corporation (FDIC). We make our investments in accordance with our investment policy. The primary objectives of our investment policy are liquidity and safety of principal.

Cash Flows

~~(in~~The following table sets forth our summarized, consolidated cash flows for the six months ended June 30, 2023 and 2022 (in thousands):


		Nine Months Ended September 30,					Six Months Ended June 30,				Increase (Decrease)
		2022		2021			2023		2022		$		%
Cash provided by (used in):	Cash provided by (used in):					Cash provided by (used in):
Operating activities	Operating activities	$	88,392	$	178,559	Operating activities	$	128,367	$	(5,178)	$	133,545	nm
Investing activities	Investing activities	(162,843)		(107,213)		Investing activities	(24,021)		(113,511)		89,490		(78.8)	%
Financing activities	Financing activities	(84,453)		(107,772)		Financing activities	(25,156)		(38,321)		13,165		(34.4)	%
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(1,944)		(76)		Effect of exchange rate changes on cash	165		(1,547)		1,712		(110.7)	%
Net decrease in cash, cash equivalents, and restricted cash		$	(160,848)	$	(36,502)
Net increase (decrease) in cash, cash equivalents, and restricted cash						Net increase (decrease) in cash, cash equivalents, and restricted cash	$	79,355	$	(158,557)	$	237,912	(150.0)	%

nm - not meaningful

Cash Flows from Operating Activities

Net cash provided by operating activities was ~~$88.4~~$128.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$178.6~~$5.2 million used in operating activities for the ~~nine months ended September 30, 2021.~~ prior year period. The ~~decrease~~increase in operating cash flows from the prior year period was primarily driven by increased profitability adjusted for non-cash items, favorable collections of outstanding accounts receivable due to timing of sales in the quarter ended December 31, 2022 and a $14.5 million decrease in cash payments ~~of $115.0 million into an escrow account associated with~~related to the ~~Opana® ER~~Opana ER® antitrust litigation settlement ~~agreements and Preliminary Settlement Agreements. Refer to~~ ~~Note 13. Commitments and Contingencies.~~agreements.

Cash Flows from Investing Activities

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$162.8~~$24.0 million as compared to ~~$107.2~~$113.5 million for the ~~nine months ende~~prior year period~~d September 30, 2021.~~. The ~~increase~~decrease in net cash used in investing activities from the prior year period ~~of $55.6 million~~ was primarily due to ~~an increase in~~$84.7 million of cash paid ~~for intangible assets associated~~to acquire the baclofen franchise from entities affiliated with ~~marketed product licenses and business acquisitions.~~Saol International Limited during the prior year period.

Cash Flows from Financing Activities

Net cash used in financing activities was ~~$84.5~~$25.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$107.8~~$38.3 million for the ~~nine months ended September 30, 2021.~~prior year period. The decrease in net cash used in financing activities from the prior year period ~~of $23.3 million~~ was primarily due to ~~$85.0~~a $44.0 million ~~in borrowings under the New Revolving Credit Facility (refer to~~ ~~Note 20. Debt) and a $23.5 million decrease in tax distributions, partially offset by $44.5 million paid~~payment for deferred consideration associated with the ~~KSP~~acquisitions of

~~Acquisition~~Kashiv Specialty Pharmaceuticals, LLC and Puniska Healthcare Pvt. Ltd. in the ~~Puniska Acquisition (refer to~~ ~~Note 3. Acquisitions~~)prior year period, lower prepayments on the Rondo Term Loan, and an increase in ~~principal payments made~~net borrowings under our revolving credit facilities, partially offset by a $25.6 million increase in tax distributions to non-controlling interests. Refer to Note 15. Debt in this Form 10-Q and Note 16. Debt in our 2022 Annual Report on ~~borrowings~~Form 10-K for details of ~~$37.4 million.~~our debt, including defined terms.

Commitments and Contractual Obligations

The contractual obligations of the Company are set forth in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s ~~2021~~2022 Annual Report on Form 10-K. ~~Other than the contractual obligations noted below (shown in thousands),~~As of June 30, 2023, there have been no material changes to the disclosure presented in our ~~2021~~2022 Annual Report on Form 10-K.

Payments Due by Period
Contractual Obligations Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years
Opana ER® antitrust litigation Preliminary Settlement Agreements(1)
$ 150,000 $ 100,000 $ 50,000 $ — $ —
Interest associated with the Opana ER® antitrust litigation Preliminary Settlement Agreements (1)
4,220 1,805 2,415 — —
Total $ 154,220 $ 101,805 $ 52,415 $ — $ —

~~(1)~~ ~~Refer to~~ ~~Note 13. Commitments and Contingencies~~ ~~for additional information.~~

The foregoing table does not include milestone payments potentially payable by the Company under its collaboration agreements and licenses. Such milestone payments are dependent upon the occurrence of specific and contingent events, and not the passage of time. A discussion of our significant contingent milestones is contained in ~~Note 5. Alliance and Collaboration~~ ~~and~~ ~~Note 24. Related Party Transactions~~ ~~in our 2021 Annual Report on Form 10-K and~~ ~~Note 6. Alliance and Collaboration~~ ~~and~~ ~~Note 15. Related Party Transactions~~ ~~in this Form 10-Q.~~

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of ~~September~~June 30, ~~2022.~~2023.

Critical Accounting Policies and Estimates

For a discussion of the Company’s critical accounting policies and estimates, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2021~~2022 Annual Report on Form 10-K. There have been no material changes to the disclosures presented in our ~~2021~~2022 Annual Report on Form 10-K.

Recently Issued Accounting Standards

Recently issued accounting standards are discussed in Note 2. Summary of Significant Accounting Policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has not been any material change in our assessment of market risk as set forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in our ~~2021~~2022 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

5851

Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

During the quarter ended ~~September~~June 30, ~~2022,~~2023, there were no changes in our internal control over financial reporting which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our system of internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system of internal control are met. The design of our control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that the design of any particular control will always succeed in achieving its objective under all potential future conditions.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

Information pertaining to legal proceedings can be found in Note ~~13.~~19. Commitments and Contingencies and is incorporated by reference herein.

Item 1A. Risk Factors

There have been no material changes to the disclosures presented in our ~~2021~~2022 Annual Report on Form 10-K under Item 1A. Risk Factors.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~On May 9, 2023, the stockholders of the Company approved an amendment and restatement of the Amneal Pharmaceuticals, Inc. 2018 Incentive Award Plan (the “Stock Plan”), which (1) authorizes an additional 20 million shares of Class A common stock available for issuance under the Stock Plan, resulting in a new Share (as defined in the Stock Plan) reserve under the Stock Plan of 57 million shares, (2) extends the term of the Stock Plan until May 9, 2033, and (3) contains certain other technical modifications to the predecessor plan. The material terms of the Stock Plan are summarized in the Company’s Proxy Statement for the 2023 Annual Meeting of Stockholders of the Company as filed with the Securities and Exchange Commission on March 24, 2023 (the “2023 Proxy Statement”) under the heading “Proposal 4 Approval of Amended and Restated Incentive

5952

Award Plan”. The foregoing description of the Stock Plan is qualified in its entirety by reference to the actual terms of the Stock Plan, as amended, which is filed hereto as Exhibit 10.1.

Item 6. Exhibits


Exhibit No.						Description of Document

10.1						~~Employment~~ Amneal Pharmaceuticals , Inc. 2018 Incentive Award Plan, as amended and restated.*†

10.2						Amendment No. 1 to T erm Loan Credit Agreement, dated as of May 30, 2023, entered into by and among ~~Amneal~~A mneal Pharmaceuticals ~~Inc and Gustavo~~ ~~Pesquin~~LLC , ~~dated~~ ~~September 1, 2022~~the Guarantors, and JPM ~~(incorporated by reference to Exhibit 10.1 to the C~~o ~~mpany~~’s ~~Current Report~~ on F ~~orm 8-K~~ f ~~iled on September 6, 2022)~~organ . Chase Bank †, N.A. as administrative agent .*

10.3						Amendment No.1 to Revolving Credit and Term Loan Agreement, dated as of April 20, 2023, by and among Rondo Holdings, LLC, Rondo Intermediate Holdings, LLC, the Subsidiary Loan Parties party hereto, the Lenders party hereto and Truist Bank as Administrative Agent.*

31.1						Certification of the President and Co - Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2						Certification of the Co - Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.3						Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1						Certification of the President and Co - Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2						Certification of the Co - Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.3						Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**



101						The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022~~2023 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (ii) Consolidated Statements of Comprehensive Income (Loss) for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (iii) Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, (iv) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (v) Consolidated Statements of Changes in Stockholders' Equity for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 and (vi) Notes to Consolidated Financial Statements.*

104						Cover Page Interactive Data File – The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022~~2023 is formatted in Inline XBRL (included as Exhibit 101).


*			Filed herewith
**			This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C. 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
†			Denotes management compensatory plan or arrangement.

6054

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: ~~November 7, 2022~~August 8, 2023	Amneal Pharmaceuticals, Inc.
		(Registrant)

	By:	/s/ Anastasios Konidaris
		Anastasios Konidaris
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

6155


	Final Fair Value		Weighted-Average Useful Life (in years)
Marketed product rights	$	83,815	11.6



	Nine Months Ended September 30, 2022		Year Ended December 31, 2021
Balance, beginning of period	$	5,900	$	—
Addition due to the Saol Acquisition	8,796		—
Addition due to the KSP Acquisition	—		5,700
Change in fair value during the period	(1,495)		200
Balance, end of period	$	13,201	$	5,900


	Future Amortization
Remainder of 2022	$	45,498
2023	161,613
2024	158,692
2025	120,790
2026	71,891
Thereafter	195,096
Total	$	753,580


Three Months Ended September 30, 2022	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	350,266	$	89,484	$	105,807	$	—	$	545,557
Cost of goods sold	217,997		43,719		88,937		—		350,653
Cost of goods sold impairment charges	674		—		—		—		674
Gross profit	131,595		45,765		16,870		—		194,230
Selling, general and administrative	30,259		22,201		13,216		34,395		100,071
Research and development	41,987		8,248		—		—		50,235
Intellectual property legal development expenses	1,369		42		—		—		1,411
Acquisition, transaction-related and integration expenses	16		15		—		8		39
Charges related to legal matters, net	285		—		—		—		285
Change in fair value of contingent consideration	—		(1,425)		—		—		(1,425)
Restructuring and other charges	507		—		—		74		581
Other operating income	(1,320)		—		—		—		(1,320)
Operating income (loss)	$	58,492	$	16,684	$	3,654	$	(34,477)	$	44,353


Nine Months Ended September 30, 2022	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	1,032,908	$	271,571	$	298,066	$	—	$	1,602,545
Cost of goods sold	640,450		130,363		256,626		—		1,027,439
Cost of goods sold impairment charges	5,786		—		—		—		5,786
Gross profit	386,672		141,208		41,440		—		569,320
Selling, general and administrative	84,410		69,772		39,361		103,999		297,542
Research and development	129,382		24,399		—		—		153,781
Intellectual property legal development expenses	2,919		77		—		—		2,996
Acquisition, transaction-related and integration expenses	24		47		—		643		714
Charges related to legal matters, net	2,442		—		—		247,394		249,836
Charges (insurance recoveries) for property losses and associated expenses	(1,911)		—		—		—		(1,911)
Restructuring and other charges	713		—		—		599		1,312
Change in fair value of contingent consideration	—		(1,495)		—		—		(1,495)
Other operating income	(2,495)		—		—		—		(2,495)
Operating income (loss)	$	171,188	$	48,408	$	2,079	$	(352,635)	$	(130,960)


Three Months Ended September 30, 2021	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	347,127	$	92,745	$	88,721	$	—	$	528,593
Cost of goods sold	208,670		47,303		73,421		—		329,394
Cost of goods sold impairment charges	688		—		—		—		688
Gross profit	137,769		45,442		15,300		—		198,511
Selling, general and administrative	15,941		22,211		14,683		38,562		91,397
Research and development	34,999		13,928		—		—		48,927
Intellectual property legal development expenses	1,584		43		—		—		1,627
Acquisition, transaction-related and integration expenses	—		—		—		134		134
Charges related to legal matters, net	—		—		—		19,000		19,000
Charges (insurance recoveries) for property losses and associated expenses	8,186		—		—		—		8,186
Restructuring and other charges	—		—		—		425		425
Change in fair value of contingent consideration	—		300		—		—		300
Operating income (loss)	$	77,059	$	8,960	$	617	$	(58,121)	$	28,515


Nine Months Ended September 30, 2021	Generics (1)		Specialty		AvKARE (1)		Corporate and Other		Total Company
Net revenue	$	1,020,072	$	277,311	$	259,390	$	—	$	1,556,773
Cost of goods sold	598,122		144,184		211,208		—		953,514
Cost of goods sold impairment charges	688		—		—		—		688
Gross profit	421,262		133,127		48,182		—		602,571
Selling, general and administrative	46,500		62,748		41,986		117,046		268,280
Research and development	114,547		35,426		—		—		149,973
In-process research and development charges	710		—		—		—		710
Intellectual property legal development expenses	6,506		68		—		—		6,574
Acquisition, transaction-related and integration expenses	—		16		1,422		5,781		7,219
Charges related to legal matters, net	—		—		—		19,000		19,000
Charges (insurance recoveries) for property losses and associated expenses	8,186		—		—		—		8,186
Restructuring and other charges	80		—		—		708		788
Change in fair value of contingent consideration	—		300		—		—		300
Operating income (loss)	$	244,733	$	34,569	$	4,774	$	(142,535)	$	141,541


	September 30, 2022		December 31, 2021
Kashiv - deferred consideration associated with the KSP Acquisition (1)	$	—	$	30,500
Kashiv - various agreements	987		314
Sellers of Puniska - consideration for acquisition (2)	—		14,225
Apace Packaging LLC - packaging agreement	1,148		560
AzaTech Pharma LLC - supply agreement	1,197		1,783
Avtar Investments LLC - consulting services	54		37
Sellers of AvKARE LLC and R&S - accrued interest on Sellers Notes (3)	442		442
R&S Solutions - logistics services	6		—
Alkermes	33		—
Related party payables - short term	$	3,867	$	47,861

PharmaSophia, LLC - research and development agreement	$	1,127	$	1,081
Sellers of AvKARE LLC and R&S - state tax indemnification	531		68
Kashiv - various agreements	11		14
Apace Packaging, LLC - packaging agreement	1		16
Tracy Properties	26		—
Related party receivables - short term	$	1,696	$	1,179

Kashiv - contingent consideration (4)	$	4,920	$	5,900
Sellers of AvKARE LLC and R&S - accrued interest on Sellers Notes (3)	5,376		3,719
Related party payables - long term	$	10,296	$	9,619


	Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Opana ER® antitrust litigation Preliminary Settlement Agreements(1)	$	150,000	$	100,000	$	50,000	$	—	$	—
Interest associated with the Opana ER® antitrust litigation Preliminary Settlement Agreements (1)	4,220		1,805		2,415		—		—
Total	$	154,220	$	101,805	$	52,415	$	—	$	—