Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following is a discussion and analysis of the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in Item 8 under the heading “Financial Statements and Supplementary Data.” This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements. These risks, uncertainties and other factors include among others, those identified under the “Special Note About Forward-Looking Statements,” above and described in greater detail elsewhere in this Annual Report on Form 10-K, particularly in Item 1A, under the heading “Risk Factors.”
In this section, we generally discuss the results of our operations for the year ended December 31, 2025, compared to the year ended December 31, 2024. For a discussion of the year ended December 31, 2024, to the year ended December 31, 2023, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025, which discussion is hereby incorporated herein by reference.
Overview
We are a biopharmaceutical company focusing on developing, manufacturing, and commercializing technically challenging generic and proprietary injectable, inhalation, and intranasal products, as well as active pharmaceutical ingredient, or API products. We currently manufacture and sell over 25 prescription pharmaceutical products, and an over-the-counter product, Primatene MIST®.
Our largest products by net revenues currently include BAQSIMI®, Primatene MIST®, epinephrine, glucagon, and lidocaine.
We are currently developing a portfolio of generic abbreviated new drug applications, or ANDAs, biologics license applications, or BLAs, including biosimilar insulin product candidates, and proprietary product candidates, which are in various stages of development and target a variety of indications. One ANDA and one biosimilar insulin candidate are currently on file with the FDA.
To complement our internal growth and expertise, we have in-licensed several early-stage proprietary products and have made several strategic acquisitions of companies, products and technologies. These acquisitions collectively have strengthened our core injectable and inhalation product technology infrastructure by providing additional manufacturing, marketing, and research and development capabilities, including the ability to manufacture raw materials, APIs, and other components for our products.
Macroeconomic Trends and Uncertainties
Recent worldwide events and macroeconomic factors, such as international trade relations, tariffs, new legislation and regulations, changes in administration, taxation or monetary policy changes, public sector budgetary cycles and funding authorization in the United States, political and civil unrest, global conflicts, supply chain disruptions, heightened inflationary pressures, and fluctuating interest rates, as well as rising healthcare costs among other factors, also increase volatility in the global economy and continue to pose challenges to our business. For example, there is significant uncertainty relating to tariffs. While all of our finished products and four of our APIs are manufactured in the United States, we import APIs, starting materials for APIs, and components from various countries.
See “Part I – Item 1A, Risk Factors” for further discussion of the potential adverse impact of unfavorable global and geopolitical economic conditions on our business, results of operations and financial conditions.
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Recent Developments
In August 2025, the FDA approved our Iron Sucrose Injection, USP 50mg/2.5mL, 100mg/5mL, and 200mg/10mL in single-dose vials, which we launched in the third quarter of 2025.
In August 2025, we entered into a License Agreement with Nanjing Anji Biotechnology Co., Ltd., or Anji, pursuant to which Anji has granted an exclusive license to certain intellectual property controlled by Anji to develop, make, use and commercialize products incorporating or comprising certain compounds, including three identified products, or Licensed Products, in the United States and Canada. During the year ended December 31, 2025, we made an earnest payment and upfront payment totaling $6.0 million to Anji upon the signing of the License agreement. The agreement is also subject to potential development milestone payments, as well as sales milestone and royalty payments. For more information regarding the Anji license agreement, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 17. Commitments and Contingencies.”
In December 2025, the FDA approved our Teriparatide Injection, USP 560mcg/2.24mL in single-patient-use prefilled pen, which we launched in December 2025.
In January 2026, we entered into a License Agreement with Nanjing Hanxin Pharmaceutical Technology Co., Ltd., or Hanxin, pursuant to which Hanxin has granted an exclusive license to a fully synthetic corticotropin (ACTH) analog, now designated AMP-110, in the United States and Canada. AMP-110 is designed to address inflammatory and autoimmune conditions with a potentially improved safety profile compared to porcine-derived ACTH products. In January 2026, we made an upfront payment of $2.0 million to Hanxin upon signing the License Agreement. The agreement is also subject to potential development milestone payments, as well as sales milestone and royalty payments. For more information regarding the Hanxin license agreement, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 20. Subsequent Events.”
In February 2026, the FDA approved our Ipratropium Bromide HFA inhalation aerosol, 17 mcg/actuation, which we plan to launch early in the second quarter of 2026.
Business Segments
Our performance is assessed and resources are allocated based on one reportable segment, pharmaceutical products.
For more information regarding our segments, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 5. – Segment Reporting.”
Results of Operations
Year ended December 31, 2025 compared to year ended December 31, 2024
Net revenues
Year Ended December 31, Change
2025 2024 Dollars %
(in thousands)
Net revenues
as % of net revenues 49 % 51 %
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The increase in product revenues, net, for 2025 was primarily due to the following changes:
Year Ended December 31, Change
2025 2024 Dollars %
(in thousands)
Product revenues, net:
Product Revenues, net
BAQSIMI® sales increased primarily due to an increase in unit volume, as we assumed full distribution responsibilities globally at the beginning of 2025. Total BAQSIMI® sales growth, including units sold by Lilly in 2024 which were accounted for in other revenues, was 12%. Primatene MIST® sales increased primarily due to an increase in unit volumes driven by our continued marketing efforts. The decrease in sales of epinephrine was due to a decrease in unit volume, impacting sales by $13.4 million, as well as a lower average selling price, which impacted sales by $10.0 million, primarily as a result of increased competition for our multi-dose epinephrine vial product. The decrease in sales of glucagon was due to a lower average selling price, which impacted sales by $24.3 million, as well as a decrease in unit volumes, impacting sales by $14.9 million, as a result of competition and the continued shift to ready to use glucagon products such as BAQSIMI®. The increase in other products was primarily due to an increase in albuterol sales of $14.7 million and iron sucrose sales of $4.4 million, which were launched in August 2024 and August 2025, respectively, as well as an increase in sales for several other products including sodium bicarbonate and atropine due to an increase in demand caused by other supplier shortages. This increase was partially offset by a decrease in sales of enoxaparin of $9.9 million and dextrose of $9.6 million due to increased competition.
We anticipate that sales of glucagon will continue to decline in the future due to competitive dynamics. We also anticipate that sales of epinephrine and other products will continue to fluctuate depending on the ability of our competitors to supply market demands.
Other Revenues
As we completed the assumption of distribution responsibilities globally for BAQSIMI® at the beginning of 2025, all BAQSIMI® related revenues in the current period are recognized in product revenues, net. Other revenues in the previous period include the portion of BAQSIMI® sales made by Lilly on our behalf under the TSA, which amounted to $19.2 million during the year ended December 31, 2024, based on total BAQSIMI® sales of $37.6 million as reported to us by Lilly, which was recognized on a net basis, similar to a royalty arrangement.
Backlog
A significant portion of our customer shipments in any period relate to orders received and shipped in the same period, generally resulting in low product backlog relative to total shipments at any time. We had no significant backlog as of December 31, 2025. Historically, our backlog has not been a meaningful indicator in any given period of our ability to achieve any particular level of overall revenue or financial performance.
Gross Margins
In 2024, under the TSA, the portion of revenues relating to BAQSIMI® sales made by Lilly on our behalf were reported on a net basis, similar to a royalty arrangement with no amount reported as cost of revenues resulting in increased gross margins for that period. Gross margins were also impacted by lower pricing for glucagon and epinephrine multi-dose vials, both of which are higher-margin products, as well as an increase in labor costs.
The decrease in gross margins was partially offset by the increase in sales of Primatene MIST®, which is a higher-margin
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product. Additionally, cost control efforts across the business partially offset the impact of pricing declines.
Selling, distribution, and marketing, and general and administrative
Year Ended December 31, Change
(in thousands)
The increase in selling, distribution and marketing expenses was primarily due to expenses related to the expansion of our sales and marketing efforts related to BAQSIMI®, including expenses related to our co-promotion contract with MannKind, and sales efforts related to Primatene MIST®. The increase in general and administrative expense was primarily related to a legal settlement, which increased expenses by $23.1 million.
We expect that selling, distribution and marketing expenses will continue to increase due to the increase in marketing expenditures for BAQSIMI® and Primatene MIST®. Legal fees may fluctuate from period to period due to the timing of patent challenges and other litigation matters.
Research and development
Year Ended December 31, Change
2025 2024 Dollars %
(in thousands)
Research and development expenses consist primarily of costs associated with the research and development of our product candidates including the cost of developing APIs. We expense research and development costs as incurred.
Research and development expenses increased primarily due to the $6.0 million payment for the licensing agreement that we entered into with Anji in the third quarter of 2025. Additionally, we had an increase in clinical trial expense, primarily for our insulin and inhalation pipeline products, as well as an increase in depreciation expense. This was partially offset by a decrease in material and supply expenses.
We have made, and expect to continue to make, substantial investments in research and development to expand our product portfolio and grow our business. We expect that research and development expenses will increase on an annual basis due to increased clinical trials costs related to our insulin and inhalation product candidates. These expenditures will include costs of APIs developed internally as well as APIs purchased externally for use in research and development, the cost of purchasing reference listed drugs and the costs of performing the clinical trials. As we undertake new and challenging research and development projects, we anticipate that the associated costs will increase significantly over the next several quarters and years.
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Non-operating expenses, net
Year Ended December 31, Change
(in thousands)
Non-operating expenses:
Total non-operating expenses, net $ (16,779) $ (15,655) $ (1,124) 7 %
The change in non-operating expenses, net is primarily a result of:
Income tax provision
Year Ended December 31, Change
2025 2024 Dollars %
(in thousands)
Effective tax rate 21 % 16 %
Our effective tax rate for the year ended December 31, 2025 increased in comparison to the year ended December 31, 2024, primarily due to lower excess tax benefit from share-based compensation. For more information regarding our income taxes, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 14. – Income Taxes.”
On July 4, 2025, the One Big Beautiful Bill Act, or OBBB Act, was enacted into law. The OBBB Act includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBB Act did not result in any material adjustments to our total income tax provision for the year ended December 31, 2025.
Liquidity and Capital Resources
Cash Requirements and Sources
We need capital resources to maintain and expand our business. We expect our cash requirements to increase significantly as we sponsor clinical trials for, seek regulatory approvals of, and develop, manufacture and market our current development stage product candidates and pursue strategic acquisitions of businesses or assets. Our future capital expenditures include projects to upgrade, expand, and improve our manufacturing facilities in the United States and China, including a significant increase in capital expenditures over the next few years. We plan to fund this facility expansion with cash flows from operations.
Our cash obligations include the principal and interest payments due on our existing loans, and finance and operating lease payments. In addition, upon the achievement of various development, regulatory and commercial milestones for agreements, we have entered into with third parties, we are contractually obligated to pay additional amounts that, in the aggregate, are significant. These payments are contingent upon the occurrence of various future events, substantially all
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of which have a high degree of uncertainty of occurring, and any resulting cash requirements are managed through our operating budgeting processes. These obligations are not recorded on our consolidated balance sheets. As of December 31, 2025, the maximum amount that may be payable in the future for agreements we have entered into with third parties is approximately $1.0 billion. These obligations are further described below and throughout this Annual Report on Form 10-K.
As of December 31, 2025, our foreign subsidiaries collectively held $15.7 million in cash and cash equivalents. Cash or cash equivalents held at foreign subsidiaries are not available to fund the parent company’s operations in the United States. We believe that our cash reserves, operating cash flows, and borrowing availability under our credit facilities will be sufficient to fund our operations for at least the next 12 months from the filing of this Annual Report on Form 10-K. We expect additional cash flows to be generated in the longer term from future product launches, although there can be no assurance as to the receipt of regulatory approval for any product candidates that we are developing or the timing of any product launches, which could be lengthy or ultimately unsuccessful.
Working capital increased $117.6 million to $477.9 million at December 31, 2025, compared to $360.3 million at December 31, 2024.
Debt and Borrowing Capacity
Our outstanding debt obligations are summarized as follows:
December 31,
(in thousands)
As of December 31, 2025, we had $219.5 million in unused borrowing capacity under revolving lines of credit with Wells Fargo Bank, China Merchant Bank, and Industrial and Commercial Bank of China Limited.
The weighted average interest rates on lines of credit as of December 31, 2025 and 2024 were 3.4% and 4.0%, respectively. For our loans with Wells Fargo Bank, we have entered into fixed interest rate swap contracts to exchange the variable interest rates for fixed interest rates.
For more information regarding our outstanding indebtedness, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 13. – Debt.”
Contractual Obligations and Commitments
Operating Lease Obligations
As of December 31, 2025 we had a total of $55.2 million of minimum rental payments due under operating leases. Of that amount, $10.6 million is due within 12 months as of December 31, 2025. For more information regarding our operating lease obligations see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements –Note. 17 – Commitments and Contingencies.”
Milestone Obligations
BAQSIMI®
The terms of our Purchase Agreement with Lilly require us to make future sales-based milestone payments aggregating up to $575.0 million based on achievement of specified net sales amounts. As of December 31, 2025, we have not triggered any milestones and therefore no amounts have been recognized or paid. The amount and timing of such future obligations are unknown and uncertain.
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Licensing Agreement with Anji
The terms of the license agreement with Anji require us to make cash payments to Anji of up to $42.0 million in development-based milestone payments and up to $225.0 million in sales-based milestone payments, subject to the achievement of the applicable development and sales milestone events respectively. Additionally, we are obligated to make royalty payments of 5% on net sales, not to exceed a maximum annual amount of $22.5 million each calendar year for each Licensed Product and a maximum accumulated amount of $60.0 million for each of the three Licensed Products. We are also required to pay Anji a certain percentage of sublicense income received from the sublicense transactions. As of December 31, 2025, we have not triggered any milestones and therefore no amounts have been recognized or paid. The amount and timing of such future obligations are unknown and uncertain.
Purchase Obligations
We have certain purchase obligations under which we are required to make minimum payments for items including, but not limited to inventory and raw materials. As of December 31, 2025, we had an aggregate amount of approximately $37.5 million of purchase obligations.
Cash Flows
The following table summarizes our cash flow activities for the years ended December 31, 2025 and 2024.
Year Ended December 31,
(in thousands)
Statement of Cash Flow Data:
Net cash provided by (used in)
Effect of exchange rate changes on cash 210 (190)
Net increase in cash, cash equivalents, and restricted cash $ 18,568 $ 7,313
Sources and Use of Cash
Operating Activities
Net cash provided by operating activities was $156.1 million for the year ended December 31, 2025, which included net income of $98.1 million. Non-cash items comprised primarily of $66.6 million of depreciation and amortization, which includes $31.6 million related to depreciation of property, plant and equipment; $25.1 million related to amortization of intangible assets; $6.5 million related to amortization of operating lease right-of-use assets; $3.4 million related to amortization of discounts, premiums, and debt issuance costs; and share-based compensation expense of $27.3 million.
Additionally, for the year ended December 31, 2025, there was a net cash outflow from changes in operating assets and liabilities of $66.0 million, which resulted primarily from increases in inventories and accounts receivable, and the net change in income tax. The increase in inventories was primarily due to the increased purchases of finished product, raw materials and components for BAQSIMI®, as we assumed full responsibility for the supply chain from Lilly. The increase in accounts receivables was primarily due to the timing of sales.
Net cash provided by operating activities was $213.4 million for the year ended December 31, 2024, which included net income of $159.5 million. Non-cash items comprised primarily of $63.2 million of depreciation and amortization, which includes $28.2 million related to depreciation of property, plant and equipment; $24.7 million related to amortization of intangible assets; $4.2 million related to amortization of operating lease right-of-use assets; $6.0 million related to amortization of discounts, premiums, and debt issuance costs; and share-based compensation expense of $24.4 million. Additionally, for the year ended December 31, 2024, there was a net cash outflow from changes in operating assets and liabilities of $14.5 million, which resulted primarily from an increase in accounts receivables, an increase in inventories, as well as an increase in prepaid expenses and other assets, which was partially offset by an increase in accounts payable and accrued liabilities. The increase in accounts receivables was primarily due to the increase in sales. The increase in
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inventories was primarily due to the increased purchases of finished product, raw materials and components for BAQSIMI®. Accounts payable and accrued liabilities increased primarily due to the increase in accrued customer fees and rebates associated with BAQSIMI® sales, as we continued to assume distribution responsibilities for BAQSIMI® from Lilly to our customers in the United States and certain other countries throughout 2024.
Investing Activities
Net cash used in investing activities was $70.3 million for the year ended December 31, 2025, primarily as a result of $34.9 million in purchases of property, plant, and equipment, which included $22.3 million incurred in the United States, $3.0 million in France, and $9.6 million in China, as well as a net cash outflow of $28.8 million from sales and purchases of investments during the period.
Net cash used in investing activities was $124.9 million for the year ended December 31, 2024, primarily due to the payment of $129.0 million relating to the BAQSIMI® acquisition, $41.0 million in purchases of property, plant, and equipment, which included $16.6 million incurred in the United States, $2.9 million in France, and $21.5 million in China. This was partially offset by a net cash inflow of $49.2 million from sales and purchases of investments during the period.
Financing Activities
Net cash used in financing activities was $67.4 million for the year ended December 31, 2025, primarily as a result of $75.6 million used to purchase treasury stock. This was partially offset by $2.9 million in net proceeds from the settlement of share-based compensation awards under our equity plan, as well as $6.2 million of net proceeds from borrowings on our line of credit in China.
Net cash used in financing activities was $81.0 million for the year ended December 31, 2024, primarily as a result of $85.5 million used to purchase treasury stock and $4.9 million used to settle share-based compensation awards under our equity plan and for tax payments related to the net share settlement of options exercised. Additionally, we made $8.3 million in principal payments on our long-term debt, primarily as a result of paying off the mortgage loan with East West Bank. This was partially offset by $18.4 million of net proceeds from borrowings on our line of credit in China.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition and results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies, which we discuss further below. While our significant accounting policies are more fully described in Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2. – Summary of Significant Accounting Policies”, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our audited consolidated financial statements.
Revenue Recognition
Product revenues, net
Our net revenues consist principally of revenues generated from the sale of our pharmaceutical products. Generally, we recognize revenues at the time of product delivery to our customers in accordance with ASC, 606 Revenue from Contracts with Customers. In some cases, revenues are recognized at the time of shipment when stipulated by the terms of the sale agreements. Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers, after the customer has accepted test samples of the products to be shipped.
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The consideration we receive in exchange for our goods or services is only recognized when it is probable that a significant reversal will not occur. The consideration to which we expect to be entitled includes a stated list price, less various forms of variable consideration. We make significant estimates for related variable consideration at the point of sale, including chargebacks, rebates, product returns, other discounts and allowances.
We establish allowances for estimated chargebacks, rebates and product returns based on a number of qualitative and quantitative factors, including:
● contract pricing and return terms of our agreements with customers;
● wholesaler inventory levels and turnover;
● historical chargeback and product return rates;
● shelf lives of our products, which is generally two years;
● direct communication with customers;
● anticipated introduction of competitive products or authorized generics; and
● anticipated pricing strategy changes by us and/or our competitors.
Although we believe that our estimates and assumptions are reasonable as of the date when made, actual results may differ significantly from these estimates. Our financial position, results of operations and cash flows may be materially and negatively impacted if actual returns exceed our estimated allowances for returns.
The following table summarizes activity in each of our product revenue allowance categories for the years ended December 31, 2025 and 2024:
Chargebacks and Management fees
Rebates(1) Product Returns(2) and Incentives(3)
(in thousands)
Credits and payments issued to third parties (260,361) (6,917) (60,166)
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standard Board, or FASB, issued Accounting Standard Update, or ASU, 2023-09, Income taxes (Topic 740): Improvements to Income Tax Disclosures, which requires entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation table, as well as disclosure of income taxes paid disaggregated by jurisdiction. The disclosure requirements will be applied prospectively. We adopted this guidance on December 31, 2025 and updated our disclosures to conform to this tax disclosure requirements. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.
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In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting-Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) included within income statement expense captions. The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The standard updates are to be applied prospectively with the option for retrospective application. We are currently evaluating the impact of disclosure requirements related to the new standard on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt– Debt with Conversion and Other Options, (subtopic 470-20). The update is intended to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20 for (a) convertible debt instruments with cash conversion features and (b) debt instruments that are not currently convertible. ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025. We are currently evaluating the impact of the new standard on our consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU amends the existing standard to remove all references to prescriptive and sequential software development project stages. Under this guidance, eligible software development costs will begin to be capitalized when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. In evaluating whether it is probable the project will be completed; management is required to consider whether there is significant uncertainty associated with the development activities of the software. This guidance is effective for all annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. The guidance may be applied on a prospective basis, a modified basis for in-process projects, or a retrospective basis. We are currently evaluating the impact of the new standard on our consolidated financial statements and related disclosures.
Government Regulation
Our products and facilities are subject to regulation by a number of federal and state governmental agencies. The FDA in particular, maintains oversight of the formulation, manufacture, distribution, packaging, and labeling of all of our products. The Drug Enforcement Administration, or DEA, maintains oversight over our products that are considered controlled substances.
Our manufacturing facilities as well as our CMOs are subject to periodic inspection by the FDA to ensure that they are operating in compliance with cGMP requirements. We believe that as of December 31, 2025, all of our manufacturing facilities and our CMOs are in compliance with all applicable regulations of federal and state governmental agencies, including all those of the FDA and DEA. Throughout 2025, we had inspections conducted by various regulatory agencies at some of our manufacturing facilities, which resulted in no critical observations.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The following discussion provides forward-looking quantitative and qualitative information about our potential exposure to market risk. Market risk represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings. We are exposed to market risk for changes in the market values of our investments (Investment Risk), the impact of interest rate changes (Interest Rate Risk), and the impact of foreign currency exchange changes (Foreign Currency Exchange Risk).
Investment Risk
We regularly review the carrying value of our investments and identify and recognize losses, for income statement purposes, when events and circumstances indicate that any declines in the fair values of such investments below our accounting basis are other than temporary. As of December 31, 2025, none of our investments experienced any declines in fair value that we believe are other than temporary. We do not enter into investments for trading or speculative purposes.
As of December 31, 2025, we had $11.2 million deposited in six banks located in China, $3.8 million deposited in one bank located in France, and $0.7 million deposited in one bank located in the United Kingdom. We also maintained $111.4 million in cash equivalents that include money market accounts as of December 31, 2025. Additionally, we maintain approximately $96.1 million in investment grade corporate and municipal bonds as of December 31, 2025. The remaining amounts of our cash equivalents as of December 31, 2025, are in non-interest bearing accounts.
As of December 31, 2024, we had $6.7 million deposited in six banks located in China, $1.8 million deposited in one bank located in France, and $0.7 million deposited in one bank located in the United Kingdom. We also maintained $102.1 million in cash equivalents that include money market accounts as of December 31, 2024. Additionally, we maintain approximately $54.4 million in investment grade corporate and municipal bonds as of December 31, 2024. The remaining amounts of our cash equivalents as of December 31, 2024, are in non-interest bearing accounts.
We maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. Interest bearing and non-interest bearing accounts we hold at banking institutions are guaranteed by the Federal Deposit Insurance Corporation, or FDIC, up to $250,000. Substantially all of our cash balances held at banking institutions are in excess of FDIC coverage. We consider this to be a normal business risk.
Interest Rate Risk
Our primary exposure to market risk is interest rate sensitive investments and credit facilities, which are affected by changes in the general level of U.S. interest rates. Due to the nature of our short-term investments, we believe that we are not subject to any material interest rate risk with respect to our short-term investments. In an effort to manage interest-rate exposures, we may enter into derivative contracts to achieve an acceptable balance between fixed- and floating-rate debt.
As of December 31, 2025, we had $610.4 million in long-term debt and finance leases outstanding, all of which have either a fixed interest rate or are locked-in fixed interest rates through swap contracts.
As of December 31, 2024, we had $601.9 million in long-term debt and finance leases outstanding, all of which have either a fixed interest rate or are locked-in fixed interest rates through swap contracts.
For more information regarding our debt agreements and interest rate swap contracts, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 13. – Debt.”
Foreign Currency Exchange Risk
Our products are primarily sold in the U.S. domestic market, and have little exposure to foreign currency price fluctuations. Our operations in France are exposed to market risk related to changes in foreign currency exchange rates, because our sales contracts are frequently denominated in euros, which are subject to fluctuations relative to the USD.
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Our Chinese subsidiary, ANP, maintains its books of record in Chinese yuan. These books are remeasured into the functional currency of USD, using the current or historical exchange rates. The resulting currency remeasurement adjustments and other transactional foreign exchange gains and losses are reflected in our consolidated statement of operations.
Our French subsidiary, AFP, maintains its books of record in euros. AUK’s subsidiary, IMS UK, maintains its books of record in British pounds. These local currencies have been determined to be the subsidiaries’ respective functional currencies. Activities in the statements of operations are translated to USD using average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transactions. Translation adjustments are reflected in stockholders’ equity and are included as a component of other accumulated comprehensive income (loss). The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other accumulated comprehensive income (loss).
We are also exposed to the potential earnings effects from intercompany foreign currency assets and liabilities that arise from normal trade receivables and payables and other intercompany loans.
As of December 31, 2025, a theoretical 10% unfavorable change in the exchange rate of the U.S. dollar strengthening against the foreign currencies to which we have exposure would result in approximately $0.1 million reduction of foreign currency gains, and approximately $3.6 million reduction in other comprehensive income.
As of December 31, 2024, a theoretical 10% unfavorable change in the exchange rate of the U.S. dollar strengthening against the foreign currencies to which we have exposure would result in approximately $1.2 million reduction of foreign currency gains, and approximately $3.1 million reduction in other comprehensive income.
As of December 31, 2025 and 2024, our foreign subsidiaries had cash balances denominated in foreign currencies in the amount of $7.7 million and $6.6 million, respectively.
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Item 8. Financial Statements and Supplementary Data.
Index to Amphastar Pharmaceuticals, Inc. Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 101
Consolidated Balance Sheets 103
Consolidated Statements of Operations 104
Consolidated Statements of Comprehensive Income 105
Consolidated Statements of Stockholders’ Equity 106
Consolidated Statements of Cash Flows 107
Notes to Consolidated Financial Statements 108
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Amphastar Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Amphastar Pharmaceuticals, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Reserves for chargebacks and rebates
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/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1998.
Irvine, California
February 26, 2026
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AMPHASTAR PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, December 31,
ASSETS
Current assets:
Restricted cash 235 235
Restricted short-term investments 2,200 2,200
Income tax refunds and deposits 17,167 1,747
Prepaid expenses and other assets 13,152 18,214
Finance lease right-of-use assets 221 383
Operating lease right-of-use assets 42,931 46,899
Long-term investments — 10,996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 148,348 $ 157,057
Current portion of long-term debt 1,641 234
Current portion of operating lease liabilities 7,928 6,804
Long-term reserve for income tax liabilities 5,926 6,957
Commitments and contingencies (see Note 17)
Stockholders’ equity:
Accumulated other comprehensive loss (5,314) (9,181)
See accompanying notes to consolidated financial statements.
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AMPHASTAR PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
Net revenues:
Operating expenses:
Non-operating expenses:
Other income (expenses), net 23 4,076 (3,929)
Equity in losses of unconsolidated affiliate — (573) (1,981)
Net income per share:
Weighted-average shares used to compute net income per share:
See accompanying notes to consolidated financial statements.
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AMPHASTAR PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Year Ended December 31,
Other comprehensive income (loss), net of income taxes
Foreign currency translation adjustment 3,867 (695) 298
Change in pension obligations — (8) (152)
Total other comprehensive income (loss) 3,867 (703) 146
See accompanying notes to consolidated financial statements.
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Amphastar Pharmaceuticals, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Common Stock Accumulated Treasury Stock
Additional Other
Paid-in Retained Comprehensive
Shares Amount Capital Earnings loss Shares Amount Total
Other comprehensive income — — — — 146 — — 146
Share-based compensation expense — — 20,242 — — — — 20,242
Other comprehensive loss — — — — (703) — — (703)
Share-based compensation expense — — 24,368 — — — — 24,368
Other comprehensive income — — — — 3,867 — — 3,867
Share-based compensation expense — — 27,277 — — — — 27,277
See accompanying notes to consolidated financial statements.
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AMPHASTAR PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
Cash Flows From Operating Activities:
Reconciliation to net cash provided by operating activities:
Loss on disposal of assets 39 9 475
Impairment of long-lived assets — — 2,700
Depreciation of property, plant, and equipment 31,647 28,249 25,205
Operating lease right-of-use asset amortization 6,506 4,238 3,742
Equity in losses of unconsolidated affiliate — 573 1,981
Changes in reserve for uncertain tax positions (1,032) 891 (1,159)
Changes in operating assets and liabilities:
Prepaid expenses and other assets (3,530) (10,726) (2,728)
Income tax refunds, deposits, and payable, net (24,843) 6,834 (3,319)
Operating lease liabilities (5,609) (3,750) (3,589)
Accounts payable and accrued liabilities (4,559) 63,563 13,237
Cash Flows From Investing Activities:
Purchase of intangible assets (2,250) — —
Cash Flows From Financing Activities:
Proceeds from borrowing under lines of credit 6,216 18,433 —
Proceeds from issuance of long-term debt — — 845,000
Principal payments on long-term debt (223) (8,263) (318,658)
Effect of exchange rate changes on cash 210 (190) (282)
Noncash Investing and Financing Activities:
Deferred payment for BAQSIMI® acquisition $ — $ — $ 121,699
Capital expenditures included in accounts payable $ 7,741 $ 5,622 $ 4,454
Supplemental Disclosures of Cash Flow Information:
See accompanying notes to consolidated financial statements
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business
Amphastar Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, hereinafter referred to as the “Company”), is a biopharmaceutical company that focuses on developing, manufacturing, and commercializing technically challenging generic and proprietary injectable, inhalation, and intranasal products, including products with high technical barriers to market entry. Additionally, the Company sells active pharmaceutical ingredient, or API, products. Most of the Company’s products are contracted and distributed through group purchasing organizations, drug wholesalers, and drug retailers. The Company’s insulin API products are sold to other pharmaceutical companies for use in their own products and are being used by the Company in the development of injectable pharmaceutical products.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, and are prepared in accordance with United States generally accepted accounting principles, or GAAP. All intercompany activity has been eliminated in the preparation of the consolidated financial statements. In the opinion of management, the accompanying consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the consolidated financial position, results of operations, and cash flows of the Company.
The Company’s subsidiaries include: (1) International Medication Systems, Limited, or IMS, (2) Armstrong Pharmaceuticals, Inc., or Armstrong, (3) Amphastar Nanjing Pharmaceuticals Inc., or ANP, (4) Amphastar France Pharmaceuticals, S.A.S., or AFP, (5) Amphastar UK Ltd.,or AUK, and (6) International Medication Systems (UK) Limited, or IMS UK.
Investment in Unconsolidated Affiliate
The Company applies the equity method of accounting for investments when it has significant influence, but not controlling interest in the investee. The Company’s proportionate share of the earnings or losses resulting from these investments is reported as “Equity in losses of unconsolidated affiliate” in the accompanying consolidated statements of operations. Investments accounted for using the equity method may be reported on a lag of up to three months if financial statements of the investee are not available in sufficient time for the investor to apply the equity method as of the current reporting date.
The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s earnings or losses and dividends paid, if any.
Use of Estimates
The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The principal accounting estimates include: fair value of financial instruments, allowance for credit losses, discounts, chargebacks and rebates, product returns, adjustment of inventory to its net realizable value, impairment of investments, long-lived and intangible assets and goodwill, litigation reserves, stock price volatility for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.
Foreign Currency
The functional currency of the Company, its domestic subsidiaries, its Chinese subsidiary ANP, and its U.K. subsidiary, AUK, is the U.S. Dollar, or USD. ANP maintains its books of record in Chinese yuan. These books are remeasured into the functional currency of USD using the current or historical exchange rates. The resulting currency remeasurement
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
adjustments and other transactional foreign currency exchange gains and losses are reflected in the Company’s accompanying consolidated statements of operations.
The Company’s French subsidiary, AFP, maintains its books of record in euros. AUK’s subsidiary, IMS UK, maintains its books of record in British pounds. These local currencies have been determined to be the subsidiaries’ respective functional currencies. Activities in the statements of operations are translated to USD using average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transactions. Translation adjustments are reflected in stockholders’ equity and are included as a component of other comprehensive income. The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other accumulated comprehensive income.
The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature for the years ended December 31, 2025, 2024, and 2023 were a $4.0 million gain, a $1.9 million loss, and a $1.1 million gain, respectively.
Comprehensive Income
The Company’s comprehensive income includes its foreign currency translation gains and losses and changes in pension obligations.
Acquisitions
The Company evaluates acquisitions and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and substantive processes that have the ability to create outputs, which would meet the definition of a business.
Acquisitions meeting the definition of business combinations are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. In a business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition. Direct transaction costs are recognized as part of the cost of an asset acquisition. The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis, with the exception of non-qualifying assets. Goodwill is not recognized in an asset acquisition. When a transaction accounted for as an asset acquisition includes an in-process research and development, or IPR&D, asset, the IPR&D asset is only capitalized if it has an alternative future use other than in a particular research and development project. Asset acquisitions may include contingent consideration arrangements that encompass obligations to make future payments to sellers contingent upon the achievement of future financial targets. Contingent consideration, including assumed contingent considerations, is not recognized until all contingencies are resolved and the consideration is paid or becomes payable (unless contingent considerations meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired), at which point the consideration is allocated to the assets acquired based on their relative fair values at the acquisition date, with the exception of non-qualifying assets.
Judgments are used in determining estimates of useful lives of long-lived assets. Useful life estimates are based on, among other factors, estimates of expected future net cash flows, the assessment of each asset’s life cycle, and the impact of competitive trends on each asset’s life cycle and other factors. These judgments can materially impact the estimates used to allocate purchase consideration to assets acquired and liabilities assumed, and the resulting timing and amounts
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
charged to or recognized in current and future operating results. For these and other reasons, actual results may vary significantly from estimated results.
Shipping and Handling Costs
For the years ended December 31, 2025, 2024, and 2023, the Company included shipping and handling costs of approximately $8.1 million, $8.0 million and $7.0 million, respectively, in selling, distribution and marketing expenses in the accompanying consolidated statements of operations.
Advertising Expense
Advertising expenses, primarily associated with Primatene MIST®, are recorded as they are incurred, except for expenses related to the development of a major commercial or media campaign, which are expensed in the period in which the commercial or campaign is first presented, and are reflected as a component of selling, distribution and marketing in the Company’s consolidated statements of operations. For the years ended December 31, 2025, 2024, and 2023, advertising expenses were $10.2 million, $10.5 million, and $10.4 million, respectively.
Research and Development Costs
Research and development costs are charged to expense as incurred and consist of costs incurred to further the Company’s research and development activities. These include salaries and related employee benefits, costs associated with clinical trials, nonclinical research and development activities, regulatory activities, license fees, milestone payments upon the achievement of clinical, or regulatory events, materials, supplies, research-related overhead expenses and fees paid to external service providers.
The Company has entered into, and may continue to enter into, license agreements to access and utilize certain technology. In each case, the Company evaluates if the license agreement results in the acquisition of an asset or a business. To date, none of the Company's license agreements have been considered an acquisition of a business. For asset acquisitions, the upfront payments to acquire such licenses, as well as any future milestone payments made before product approval that do not meet the definition of a derivative, are immediately recognized as research and development expense in the statements of operations when paid or become payable, provided there is no alternative future use of rights in other research and development projects.
Financial Instruments
The Company’s accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings and long-term obligations. The Company considers the carrying amounts of current assets and liabilities on the consolidated balance sheets to approximate the fair value of these financial instruments due to the short maturity of these items. The carrying value of the Company’s long-term obligations, with the exception of the convertible debt (See Note 13) approximates their fair value, as the stated borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities. The Company at times enters into interest rate swap contracts to manage its exposure to interest rate changes and its overall cost of long-term debt. The Company’s interest rate swap contracts exchange the variable interest rates for fixed interest rates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and highly liquid investments with original maturities of three months or less.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investments
Investments as of December 31, 2025 and 2024 consisted of certificates of deposit and investment grade corporate, agency, and municipal bonds with original maturity dates between three and thirty-six months.
Restricted Cash
Restricted cash is collateral required for the Company to guarantee certain vendor payments in France. As of December 31, 2025 and 2024, the restricted cash balance was $0.2 million.
Restricted Short-Term Investments
Restricted short-term investments consist of certificates of deposit that are collateral for standby letters of credit to qualify for workers’ compensation self-insurance. The certificates of deposit have original maturities greater than three months, but less than one year. As of December 31, 2025 and 2024, the balance of restricted short-term investments was $2.2 million.
Accounts receivable and Allowance for Credit Losses
Accounts receivable generally consists of amounts due from the Company’s customers, which primarily includes pharmaceutical wholesalers and drug retailers. Accounts receivable is recorded net of discounts, chargebacks, allowances and other adjustments. The Company evaluates the collectability of accounts receivable based on a combination of factors. When the Company is aware of circumstances that may impair a customer’s ability to pay subsequent to the original sale, the Company records a specific allowance to reduce the amounts receivable to the amount that the Company reasonably believes to be collectable. For all other customers, the Company recognizes an allowance for credit losses based on factors that include the length of time the receivables are past due, industry and geographic concentrations, the current economic conditions and historical collection experience. As of December 31, 2025 and 2024, the Company's allowance for credit losses was $3.3 million and $3.5 million, respectively.
Inventories
Inventories consist of currently marketed products. The Company states inventory at the lower of cost or net realizable value. Cost is determined in a manner that approximates the first-in, first-out method. Provisions are made for slow moving, unsellable, or obsolete items. Net realizable value is determined using the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose.
The Company may produce or purchase inventories prior to or with the expectation of receiving regulatory approval in the near term, based on operational decisions about the most effective use of existing resources. This inventory is referred to as pre-launch inventory. It is the Company’s accounting policy that the pre-launch inventory is capitalized if it has a probable future economic benefit at the time it is purchased or manufactured. If regulatory approval is received and previously expensed pre-launch inventory is sold, such sales may contribute up to a 100% margin to the Company’s operating results. Pre-launch inventory costs include cost of work in process, materials, and finished drug products. For the years ended December 31, 2025, 2024, and 2023, the Company did not have material capitalized pre-launch inventory.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment
Property, plant and equipment are stated at cost or, in the case of assets acquired in a business combination, at fair value on the purchase date. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives of the related assets as follows:
Buildings 20 - 31 years
Machinery and equipment 3 - 12 years
Furniture and fixtures 3 - 7 years
Automobiles 4 - 5 years
Leasehold improvements Lesser of remaining lease term or useful life
Intangible Assets, net