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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.07pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.09pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.23pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
disrupt+3
investigation+3
failure+2
delays+2
negatively+2
Positive rising
beneficially+2
success+1
achieve+1
assure+1
alliances+1
Risk Factors (Item 1A)
20,598 words
Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. In deciding whether to invest in our common stock, you should consider carefully the following risk factors, as well as the other information included in this Annual Report on Form 10-K. The materialization of any of these risks could have a material adverse effect on our business, results of operations and financial condition.
Operational and Competitive Risks
If we cannot successfully develop or commercialize new products, our operating results will suffer.
Developing and commercializing a new product is time consuming, costly and subject to numerous obstacles. Our future results of operations depend on our ability to successfully commercialize new products in a timely manner. Key challenges include:
• developing products in a timely and cost-efficient manner and in compliance with regulatory requirements, including delays associated with the FDA review listing and approval process, any policy, regulatory or other changes to FDA processes, and our ability to obtain required regulatory approvals in a timely manner, or at all, and maintain such approvals if obtained;
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
investigation+3
decline+2
negative+1
against+1
investigations+1
Positive rising
effective+2
favorable+2
alliance+2
positive+1
collaboration+1
MD&A (Item 7)
8,034 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Amneal Pharmaceuticals, Inc. (the “Company”, “we,” “us,” or “our”) is a diversified, global biopharmaceutical company that develops, manufactures, markets, and distributes a diverse portfolio of essential medicines. Our Affordable Medicines segment includes retail generics, injectables, and biosimilars. In our Specialty segment, we offer a portfolio of branded pharmaceuticals focused primarily on central nervous system and endocrine disorders. Through our AvKARE segment, we are a distributor of pharmaceuticals and other products for the U.S. federal government, retail, and institutional markets. We operate principally in the U.S., India, and Ireland . Refer to the section “Segments” below for an overview of our segments.
Prior to the Reorganization (as defined herein), we were a holding company, whose principal assets were common units (the “Amneal Common Units”) of Amneal Pharmaceuticals, LLC (“Amneal”). As of September 30, 2023, we held 50.4% of the Amneal Common Units and the group, together with their affiliates and certain assignees, who owned Amneal when it was a private company (the “Amneal Group”) held the remaining 49.6%. On November 7, 2023, we implemented a plan pursuant to which we and Amneal reorganized and simplified our corporate structure by eliminating our umbrella partnership-C-corporation structure and converting to a more traditional structure whereby all stockholders hold their voting and economic interests directly through the public company (the “Reorganization”). Effective with the Reorganization, we hold 100% of the Amneal Common Units and consolidate the financial statements of Amneal and its subsidiaries. Refer to Note 1. Nature of Operations in our consolidated financial statements for additional information about the Reorganization.
• the success of our clinical testing process to ensure the safety and effectiveness of new products or bioequivalence to the reference listed drug;
• legal action may be brought against our generic drug products by our branded drug product competitors, including patent infringementclaims among others;
• securing, on commercially reasonable terms, raw materials, including APIs and other key ingredients necessary to develop of our drug products; and
• scaling-up manufacturing to meet demand in compliance with regulatory requirements.
Because of these hurdles, some of our products may not receive necessary regulatory approvals on a timely basis or at all, which may result in unsuccessful development or commercialization of new products.
Separately, product licensing involves inherent risks including uncertainties due to matters that may affect the achievement of milestones, as well as potential contractual disagreements with regard to terms such as license scope or termination rights. If any of our products, when acquired or developed and approved, cannot be successfully or timely commercialized, our operating results could be adversely affected. We cannot guarantee that any investment we make in developing, marketing or licensing products will be recouped, even if we are successful in commercializing those products.
We face intense competition in the pharmaceutical industry from both brand and generic drug product companies, which could significantly limit our growth and materially adversely affect our financial results.
The pharmaceutical industry is highly competitive. The principal competitive factors in the pharmaceutical market include:
• introduction of other generic drug manufacturers’ products in direct competition with our generic drug products;
• introduction of authorized generic drug products in direct competition with our generic or branded products, particularly during exclusivity periods;
• the ability of generic drug product competitors to quickly enter the market after the expiration of patents or exclusivity periods of our branded products, diminishing the amount and duration of significant profits;
• consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups;
• the willingness of generic drug customers, including wholesale and retail customers, to switch among products of different pharmaceutical manufacturers;
• pricing pressures by competitors and customers, even if similar price savings are not passed on to consumers;
• a company’s reputation as a manufacturer and distributor of quality products;
• a company’s level of service (including maintaining sufficient inventory levels for timely deliveries);
• a company’s ability to use and integrate artificial intelligence;
• product appearance and labeling; and
• a company’s breadth of product offerings.
Many of our competitors have longer operating histories and greater financial, R&D, marketing and other resources than we do. Consequently, they may be able to develop products and/or processes competitive with, or superior to, ours. Furthermore, we may not be able to (i) differentiate our products, (ii) successfully develop or introduce new products, on a timely basis or at all, that are less costly, (iii) integrate new systems or technology, such as AI, as quickly or successfully, or (iv) offer customers payment and other commercial terms as favorable as those offered by our competitors. The markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and significant change. We expect competition to intensify as technology advances and consolidation continues. New developments by other manufacturers and distributors could render our products uncompetitive or obsolete.
Our principal competitors in the U.S. generic and biosimilar pharmaceutical market, where we primarily compete, are Teva Pharmaceutical Industries Ltd., Viatris Inc., Sandoz Group, Pfizer Inc., Fresenius Kabi KGaA, Hikma Pharmaceuticals PLC, Dr. Reddy’s Laboratories Ltd., Amphastar Pharmaceuticals, Inc., Sun Pharmaceutical Industries Ltd., Lupin Pharmaceuticals, Inc., Zydus Pharmaceuticals USA Inc., and Aurobindo Pharma Limited. Our principal competitors in the specialty pharmaceutical market include Supernus Pharmaceuticals, Inc., Jazz Pharmaceuticals PLC, AbbVie Inc. and Alkermes PLC. Our competitors in the AvKARE segment are other wholesalers, including Cardinal Health, Inc., Cencora, Inc., McKesson Drug Co., and manufacturers / re-packagers such as Golden State Medical Supply.
The products produced by these companies, among others, collectively compete with the majority of our products. We also face price competition generally as other generic manufacturers enter the market. Any such price competition may be especially pronounced where our competitors source their products from jurisdictions where production costs may be lower (sometimes significantly) than our production costs. Any of these factors could result in reductions in our sales prices and gross margin. This price competition has led to an increase in demands for downward price adjustments by generic pharmaceutical distributors. Our principal strategy in addressing our competition is to offer customers a consistent supply of our generic drug products, as well as to pursue product opportunities with the potential for limited competition, such as high-barrier-to-entry FTF or FTM products. We cannot provide assurance, however, that this strategy will enable us to compete successfully in the generic drug product industry or that we will be able to develop and implement any new or additional viable strategies.
Competition in the generic drug industry has also increased due to the proliferation of authorized generic pharmaceutical products. Authorized generic drug products are generic drug products that are introduced by brand companies, either directly or through third parties, under the brand’s NDA approval. Authorized generics do not face any regulatory barriers to introduction and are not prohibited from sale during the 180-day marketing exclusivity period granted to the FTF ANDA applicant. The sale of authorized generics adversely impacts the market share of a generic drug product that has been granted 180 days of marketing exclusivity. Authorized generic drug products present a significant source of competition for us and can materially decrease the profits that we could receive as an otherwise exclusive marketer of a generic drug product. Such actions have the effect of reducing the potential market share and profitability of our generic drug products and may inhibit us from developing and introducing generic pharmaceutical drug products corresponding to certain branded drugs.
If we fail to obtain exclusive marketing rights for our products or fail to introduce our products to the market timely, our revenues, gross margin and operating results may decline significantly.
The Hatch-Waxman amendments to the FDCA provide for a period of 180 days of generic marketing exclusivity for any applicant that is first to file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to the corresponding branded drug (commonly referred to as a “Paragraph IV certification”). “First filers” are often able to price the applicable generic drug to yield relatively high gross margins during this 180-day marketing exclusivity period.
With respect to our generic products, ANDAs containing Paragraph IV certifications often become subject to patent litigation that can be both lengthy and costly. There is no certainty that we will prevail in any such litigation, that we will be the first to file, or, if we are granted the 180-day marketing exclusivity period, that we will not forfeit such period. Even where we are awarded marketing exclusivity, we may be required to share our exclusivity period with other first filers. In addition, branded drug product companies often authorize a generic version of the corresponding branded drug product to be sold during any period of marketing exclusivity that is awarded, which reduces gross margins during the marketing exclusivity period. Branded drug product companies may also reduce the price of their branded drug product to compete directly with generic drug products entering the market, which would similarly have the effect of reducing gross margins. Furthermore, timely commencement of the litigation by the patent owner imposes an automatic stay of ANDA approval by the FDA for 30 months, unless the case is decided in the ANDA applicant’s favor during that period. Finally, if the court decision is adverse to the ANDA applicant, the ANDA approval will be delayed until the challenged patent expires, and the applicant forfeits the 180-day marketing exclusivity.
Our future profitability depends, to a significant extent, upon our ability to introduce, on a timely basis, new generic drug products that are either the first-to-market (or among the first-to-market) or that otherwise can gain significant market share. The timeliness of our product introductions is dependent upon, among other things, the timing of regulatory approval of our products, which to a large extent is outside of our control, as well as the timing of the introduction of competing products. As additional distributors introduce comparable generic pharmaceutical products, price competition intensifies, market access narrows, and product sales prices and gross margins decline, often significantly and rapidly, regardless of whether consumers ultimately pay less for the drug. Accordingly, our revenues and future profitability are dependent, in large part, upon our ability or the ability of our development partners to file ANDAs with the FDA in a timely and effective manner or, alternatively, to enter into contractual relationships with other parties that have obtained marketing exclusivity. We cannot provide any assurance that we will be able to develop and introduce successful products in the future within the time constraints necessary to be successful. If we or our development partners are unable to continue to timely and effectively file ANDAs with the FDA or to partner with other parties that have obtained marketing exclusivity, our revenues, gross margin and operating results may decline significantly, and our prospects and business may be materially adversely affected.
With respect to our branded products, generic equivalents for branded pharmaceutical products are typically sold at lower prices than the branded products. The regulatory approval process in the U.S. and European Union exempts generic products from costly and time-consuming clinical trials to demonstrate their safety and efficacy and relies instead on the safety and efficacy of prior products. After the introduction of a competing generic product, a significant percentage of the prescriptions previously written for the branded product often switch to the generic version. In addition, legislation enacted in most U.S. states allows, or in some instances mandates, a pharmacist to dispense an available generic equivalent when filling a prescription for a branded product, in the absence of specific instructions from the prescribing physician. Pursuant to the provisions of the Hatch-Waxman Act, manufacturers of branded products often bring lawsuits to enforce their patent rights against generic products released prior to the expiration of branded products’ patents, but it is possible for generic manufacturers to offer generic products while such litigation is pending. As a result, branded products typically experience a significant loss in revenues and gross profit following the introduction of a competing generic product, even if subject to an existing patent. Our branded pharmaceutical products are or may become subject to competition from generic equivalents because either (i) there is no proprietary protection for some of the branded pharmaceutical products we sell, (ii) our patent protection expired or (iii) our patent protection is not sufficiently broad or enforceable. For example, in 2025, we lostexclusivity for RYTARY ® , an extended-release oral capsule formulation of carbidopa-levodopa for the treatment of Parkinson’s disease.
As our competitors introduce their own generic equivalents of our generic drug products, our revenues and gross margin from such products generally decline, often rapidly.
Revenues and gross margin derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that we believe are unique to the generic pharmaceutical industry. As the patent(s) for a brand name product or the statutory marketing exclusivity period (if any) expires, the first generic manufacturer to receive regulatory approval for a generic equivalent of the product is often able to capture a substantial share of the market. However, as other generic manufacturers receive regulatory approvals for their own generic versions, that market share, and the price of that product, will typically decline depending on several factors, including the number of competitors, the price of the branded product and the pricing strategy of the new competitors. We often experience significant competition for many of our generic products, which from time to time, has resulted in a significant decline in our revenue and gross margin. We cannot provide assurance that we will be able to continue to develop such products or that the number of our competitors for any given product will not increase to such an extent that we may stop marketing a generic drug product for which we previously obtained approval, which may have a material adverse impact on our revenues and gross margin.
The illegal distribution and sale by third parties of counterfeit versions of our products or of stolen products could have a negative impact on our reputation and a material adverse effect on our business, results of operations and financial condition.
Third parties could illegally distribute and sell counterfeit versions of our products, which do not meet the rigorous manufacturing and testing standards that our products undergo. Counterfeit products are frequently unsafe or ineffective and can be life-threatening because they may contain harmful substances, the wrong dose of the API or no API at all. However, to distributors and users, counterfeit products may be visually indistinguishable from the authentic version.
Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product. It is possible that adverse events caused by unsafecounterfeit products will mistakenly be attributed to
the authentic product. In addition, thefts of inventory at warehouses, plants or while in-transit, which are not properly stored and which are sold through unauthorized channels, could adversely impact patient safety, our reputation and our business.
Public loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting or theft could have a material adverse effect on our business, results of operations and financial condition.
Our business is highly dependent on market perceptions of us and the safety and quality of our products.
Our success depends on how the market views our Company and the safety and quality of our products. Incidents of product misuse may occur, and these events, among others, could result in additional regulatory controls (including requirements for additional labeling and REMS programs), product recalls, and product liability actions, and result in additional political, regulatory, and other scrutiny. The reporting of adverse safety events involving our products, including instances of product misuse, and public perceptions about such events, could cause our product sales to decline or experience periods of volatility. If any of our products or similar products that other companies distribute are subject to market withdrawal or recall or misused or are proven to be, or are claimed to be, harmful to consumers, and if any negative publicity associated with any of the foregoing occurs, then this could have a material adverse effect on our reputation, business, results of operations, and financial condition.
We also face risks resulting from public criticism of drug pricing resulting from prices charged by competitors and peer companies for new products as well as price increases by competitors and peer companies on older products that the public has deemed excessive. Even if we may have reduced the prices we charge our customers for certain products, often consumers do not see similar reductions in the prices they paid. Any downward pricing pressure on the price of certain of our products arising from social or political pressure to lower the cost of pharmaceutical products could have a material adverse impact on our business, results of operations and financial condition.
Accompanying the press and media coverage of pharmaceutical pricing practices and public complaints about the same, has been increasing U.S. federal and state legislative and enforcement interest with respect to drug pricing. For instance, the DOJ issued subpoenas to pharmaceutical companies, including us, seeking information about the sales, marketing and pricing of certain generic drugs. See Note 19. Commitments and Contingencies for additional information on the DOJ investigation and other governmental inquiries. In addition to the effects of any investigations or claims brought against us, our business, results of operations and financial condition could also be adversely affected if any such inquiries, of us or of other pharmaceutical companies or the industry more generally, were to result in legislative or regulatory proposals that limit our ability to increase the prices of our products.
A substantial portion of our total revenues is expected to be derived from sales of a limited number of products.
We expect that we will continue to derive a substantial portion of our revenue from sales of a limited number of products. For the year ended December 31, 2025, our significant product families (defined as our top five products by annual revenue including both our Affordable Medicines and Specialty segments) accounted for 25% of our consolidated net revenue. The sale of our products may be significantly influenced by market conditions, as well as regulatory actions. We may experience decreases in the sale of our products in the future as a result of actions taken by our competitors, such as price reductions, or as a result of regulatory actions related to our products or to competing products, which could have a material impact on our results of operations. Actions which could be taken by our competitors, which may materially and adversely affect our business, results of operations and financial condition, may include, without limitation, pricing changes and entering or exiting the market for specific products.
Our approved products may not achieve expected levels of market acceptance.
Even if we receive regulatory approvals for our new products, such products’ success depends upon market acceptance. Levels of market acceptance for our new products could be affected by several factors, including:
• the availability and pricing of alternative products from our competitors;
• the timing of our market entry;
• the ability to market our products effectively at the retail level;
• the perception of patients and the healthcare community, including third-party payers, regarding the safety, efficacy and benefits of our drug products compared to those of competing products;
• the healthcare providers’ willingness to prescribe medication based on perceptions, training, personal experiences and guidelines;
• the willingness of payers and insurance companies to cover or add products to their formularies;
• the willingness of hospitals and integrated delivery systems to stock or approve products on their formularies; and
• the acceptance of our products by government and private formularies.
Some of these factors will not be in our control, and our products may not achieve expected levels of market acceptance. Additionally, increasingly sophisticated studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by the industry, government agencies and others which can call into question the utilization, safety and efficacy of products currently or previously marketed by us. In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or other risk management programs such as the need for a patient registry.
We may discontinue the manufacture and distribution of certain existing products, which may adversely impact our business, results of operations and financial condition.
We continually evaluate the performance of our products and may determine that it is in our best interest to discontinue the manufacture and distribution of certain of our products. We cannot guarantee that we have correctly forecasted, or will correctly forecast in the future, the appropriate products to discontinue or that our decision to discontinue various products is prudent if market conditions change. In addition, we cannot assure you that the discontinuance of products will reduce our operating expenses or will not cause us to incur material charges associated with such a decision. In the event that we decide to sell the discontinued product, we may not be able to find a purchaser for such products or the purchase price obtained may not be equal to at least the book value of the net assets for such products. Other risks include managing the expectations of, and maintaining good relations with, our customers who previously purchased products from among our discontinued products, which could prevent us from selling other products to them in the future. Moreover, we may incur other significant liabilities and costs associated with our discontinuance of products, which could have a material adverse effect on our business, results of operations and financial condition.
Manufacturing or quality control problems may damage our reputation for quality production, demand costly remedial activities and negatively impact our business, results of operations and financial condition.
We must comply with requirements of the FDA, DEA and other healthcare regulators with respect to the manufacture, labeling, sale, distribution, marketing, advertising, promotion and development of pharmaceutical products. We must register our facilities, whether located in the U.S. or elsewhere, with the FDA as well as regulatory authorities outside the U.S., and our products must be made in a manner consistent with cGMP, or similar standards in each territory in which we manufacture. The failure of one of our facilities, or a facility of one of our third-party suppliers, to comply with applicable laws or regulations may lead to breach of representations made to our customers or to regulatory or government action against us related to products made in that facility.
In addition, the FDA, DEA and other agencies periodically inspect our manufacturing facilities. Following an inspection, agencies have in the past issued, and may in the future issue, a notice listing conditions that are believed to violate cGMP or other regulations, or a warning letter for violations of “regulatory significance” that may result in enforcement action if not promptly and adequatelycorrected. For example, in August 2025, the FDA issued a Warning Letter to our manufacturing facility in Gujarat, India, following an inspection that identified certain deficiencies. The inspection has been classified as Official Action Indicated. While we are actively implementing corrective actions and engaging with the FDA, we cannot assure that these actions will be deemed adequate or that additional enforcement actions will not occur. Further, although we remain committed to continuing to improve our quality control and manufacturing practices the FDA may not be satisfied with our corrective actions or our quality control and manufacturing systems and standards. Failure to comply strictly with these regulations and requirements, or our failure to remedy any deficiencies, may damage our reputation and lead to financial penalties, compliance expenditures, the recall or seizure of products, total or partial suspension of production and/or distribution, withdrawal or suspension of the applicable regulator’s review of our submissions, enforcement actions, injunctions and criminalprosecution. Further, other federal agencies, our customers and partners in our alliance, development, collaboration and other partnership agreements with respect to our products and services may take any such FDA observations or warning letters into account when considering the award of contracts or the continuation or extension of such partnership agreements. Because regulatory approval to manufacture a drug is site-specific, the delay and cost of remedial actions, or obtaining approval to manufacture at a different facility, could negatively impact our business. Any failure by us to comply with applicable laws and regulations and/or any actions by the FDA and other agencies as described above could have a material adverse effect on our business and financial results.
Our profitability depends on our major customers. If these relationships do not continue as expected, our business, condition (financial and otherwise), prospects and results of operations could materially suffer.
Our four largest customers, Cencora, Inc., McKesson Drug Co., Cardinal Health, Inc. and CVS Health Corporation, accounted for approximately 71%, 70% and 70% of total net sales of products for the years ended December 31, 2025, 2024 and 2023, respectively. The loss of any one or more of these or any other major customer or the substantial reduction in orders from any one or more of our major customers could have a material impact on our future operating results and financial condition. In total, we currently have over 1,300 customers (including over 1,100 customers specific to our AvKARE segment), some of which are part of large purchasing groups.
Customer consolidation could cause declines in sales volume and the prices of our products, which could have a material adverse effect on our business, financial position and results of operations.
Our ability to successfully commercialize any generic or branded pharmaceutical product depends in large part upon the acceptance of the product by third parties, including pharmacies, government formularies, other retailers, physicians and patients. Therefore, our success will depend in large part on market acceptance of our products. We rely on a relatively small number of drug wholesalers and retail drug chains to distribute our products. Drug wholesalers and retail drug chains have undergone, and are continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing our business. Additionally, the emergence of large buying groups representing independent retail pharmacies and other drug distributors, and the prevalence and influence of managed care organizations and similar institutions, potentially enable such groups to demand larger price discounts on our products. For example, large wholesalers and retailer customers have formed alliances, such as Walgreens and Cencora, Inc., Rite Aid and McKesson Drug Company, and CVS Caremark and Cardinal Health. The result of these developments may have a material adverse effect on our business, financial position and results of operations.
Supply chain disruptions could have a material adverse effect on our business, financial position and results of operations.
We purchase the bulk of the raw materials essential to our manufacturing business, particularly the chemical compounds comprising the API, as well as certain finished goods, from third parties. If we experience supply interruptions or delays, or if a supplier discontinues the sale of certain products, we may have to obtain substitute materials or products, which in turn would require us to obtain amended or additional regulatory approvals, subjecting us to additional expenditures of significant time and resources. In addition, changes in our raw material suppliers could result in significant delays in production, higher raw material costs and loss of sales and customers, because regulatory authorities must generally approve raw material sources for pharmaceutical products, which may be time consuming. For example, we may need as long as 24-30 months to find and qualify a new sole-source supplier. If we receive less than one year’s notice of termination from a sole-source supplier that intends to cease supplying raw materials, it could result in disruption of our ability to produce the drug involved. Any significant supply interruption could have a material adverse effect on our business, condition (financial and otherwise), prospects and results of operations. To date, although we have experienced occasional interruptions in supplies, we have experienced no significant difficulties in obtaining raw materials. However, because the federal drug application process requires specification of raw material suppliers, if raw materials from a specified supplier were to become unavailable, FDA approval of a new supplier would be required. The amount of time required for the FDA to qualify a new supplier and confirm that our manufacturing processes meet the necessary standards could cause delays and could, depending on the particular product, have a material adverse effect on our results of operations and financial condition.
Changes in trade policy, including the imposition of tariffs may affect our business, results of operations and financial condition.
We are subject to certain trade and tariff requirements imposed by the U.S. and various foreign governments. The great majority of our net sales rely on finished dosage forms (“FDF”) or API produced in the U.S. or India. We have limited reliance on imports from Europe and China, and no reliance on imports from Mexico or Canada.
Since taking office in 2025, President Trump has announced a number of tariff actions, and while there are currently no reciprocal tariffs on pharmaceutical products imported into the U.S., this can change at any moment. On February 1, 2025, the Administration imposed a 10% tariff on all products from China under the International Emergency Economic Powers Act , (50 U.S.C. 1701 et seq) (the “IEEPA”), and related authorities as announced in the Federal Register Notice and Executive Order 14195 dated February 1, 2025 (as amended). On February 20, 2026, the Supreme Court of the United States issued an opinion ruling that President Trump’s tariffs exceeded presidential authority under the IEEPA, which had the effect of invalidating the tariffs imposed thereunder to date.
On April 14, 2025, the Department of Commerce Bureau of Industry and Security (“DOCBIS”) announced that it had initiated, as of April 1, 2025, a broad investigation under section 232 of the Trade Expansion Act to determine the effects on national security of imports of pharmaceuticals (i.e. FDF, API, key starting materials, derivatives, and medical countermeasures), including whether trade remedies such as tariffs should be imposed. This investigation covers both generic and brand products. On September 26, 2025, DOCBIS announced that it had initiated, as of September 2, 2025, a separate Section 232 national security investigation of imports of personal protective equipment, medical consumables (including syringes and intravenous bags), and medical equipment (including devices). These Section 232 investigations are ongoing. On February 20, 2026, President Trump imposed a 10% global tariff for 150 days under Section 122 of the Trade Act of 1974 . FDF and API are exempt from the Section 122 tariff as of the date of this filing.
Given the global nature of pharmaceutical supply chains, any changes to historically prevailing tariff requirements could impact us and our industry by increasing costs, affecting product availability, and/or disrupting supply chains. The Company is closely monitoring these tariff and trade developments, which remain uncertain and unpredictable.
A U.S. government shutdown could adversely impact our regulatory, operational and financial performance.
We rely heavily on timely interactions with the FDA, the DEA, and other agencies of the U.S. federal government for, among other things, new product reviews and approvals, procurement quotas for controlled substances, facility inspections, and regulatory guidance. During a government shutdown, delays in these interactions could negatively impact our regulatory, operational and financial performance.
Additionally, our AvKARE segment provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, predominantly focused on the U.S. Department of Defense and the U.S. Department of Veterans Affairs. Interruptions in government contracting and procurement processes, and slower payment cycles to distributors which AvKARE uses to do business with these governmental agencies, could also negatively impact our operational and financial performance.
The time necessary to develop generic drugs may adversely affect whether, and the extent to which, we receive a return on our capital.
Developing a new generic drug product often starts several years before the brand-name drug equivalent patent expires. The development process, including drug formulation, testing, and FDA review and approval, often takes three or more years, and is informed by factors outside of our control, including but not limited to, FDA staffing and policy changes. This process requires that we expend considerable capital to pursue activities that do not yield near-term returns. Also, because of the significant time necessary to develop a product, the actual market for a product at the time it is available for sale may be significantly less than the originally projected market. If this were to occur, our potential return on our investment in developing the product, if approved for marketing by the FDA, would be adversely affected and we may never receive a return on our investment in the product. It is also possible for the manufacturer of the brand-name product for which we are developing a generic drug to obtain approvals from the FDA to switch the brand-name drug from the prescription market to the over-the-counter (“OTC”) market. If this were to occur, we would be prohibited from marketing our product other than as an OTC drug, in which case revenues could be substantially less than we anticipated.
The risks and uncertainties inherent in conducting clinical trials could delay or prevent the development and commercialization of our own branded products, which could have a material adverse effect on our business, results of operations and financial condition.
With respect to our branded products which do not qualify for the FDA’s abbreviated application procedures, we must demonstrate through clinical trials that these products are safe and effective for use. We have only limited experience in conducting and supervising clinical trials. The process of completing clinical trials and preparing an NDA may take several years and requires substantial resources. Our studies and filings may not result in FDA approval to market our new drug products and, if the FDA grants approval, we cannot predict the timing of any approval, which is informed by factors outside of our control, including but not limited to, FDA staffing and policy changes. There are substantial filing fees for NDAs that are not refundable if FDA approval is not obtained.
There are a number of risks and uncertainties associated with clinical trials. The results of clinical trials may not be indicative of results from large scale testing. Clinical trials are often conducted with patients having advanced stages of disease and, as a result, during the course of treatment these patients can die or sufferadverse medical effects for reasons that may not be related
to the pharmaceutical agents being tested, but which nevertheless affect the clinical trial results. In addition, side effects experienced by the patients may cause delay of approval or limit the profile of an approved product. Moreover, our clinical trials may not demonstrate sufficient safety and efficacy to obtain approval from the FDA or foreign regulatory authorities. The FDA or foreign regulatory authorities may not agree with our assessment of the clinical data or they may interpret it differently. Such regulatory authorities may require additional or expanded clinical trials. Even if the FDA or foreign regulatory authorities approve certain products developed by us, we cannot provide assurance that such regulatory authorities will not subject marketing of such products to certain limits on indicated use.
Developing and commercializing branded pharmaceutical products is generally more costly than developing and commercializing generic products. To grow and achievesuccess in our branded product business, we must continually identify, develop, acquire and license new products that we can ultimately market. Difficulties and uncertainties inherently exist in pharmaceutical R&D, resulting in a high rate of failure in new drug discovery and development. Failure can occur at any point in the process, including late in the process after substantial investment. New product candidates that appear promising in development may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns, inability to obtain necessary regulatory approvals and payer reimbursement, limited scope of approved uses, difficulty or excessive costs to manufacture, or infringement of the patents or IP rights of others. Products that do reach the market may ultimately be subject to recalls or other suspensions in sales. Delays and uncertainties in the FDA or foreign regulatory approval processes can result in delays in product launches and lost market opportunity. Because of a high rate of failure in the R&D process of new products, a significant risk exists that funds invested in R&D will not generate financial returns. We cannot be certain when or whether any of our products currently under development will be approved or launched or whether, once launched, such products will be commercially successful. We may be required to spend several years and incur substantial expense in completing certain clinical trials. The length of time, number of trial sites and patients required for clinical trials vary substantially, and we may have difficulty finding a sufficient number of sites and subjects to participate in our trials. Delays in planned clinical trials can result in increased development costs, delays in regulatory approvals and delays in product candidates reaching the market. We rely on independent third-party clinical investigators to recruit subjects and conduct clinical trials in accordance with applicable study protocols and laws and regulations. If regulatory authorities determine that we have not complied with regulations in the development of a product candidate, they may refuse to accept trial data from the site and/or not approve the product candidate, and we would not be able to market and sell that product. If we are not able to market and sell our products after significant expenditures to develop and test them, our business and results of operations could be materially and adversely affected.
A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in clinical trials, even in advanced clinical trials after showing positive results in earlier clinical trials. The completion of clinical trials for our product candidates may be delayed or halted for a variety of reasons in addition to the reasons noted above. In addition, our product candidates could be subject to competition for clinical study sites and patients from other therapies under development which may delay the enrollment in or initiation of our clinical trials.
The FDA or foreign regulatory authorities may require us to conduct unanticipated additional clinical trials, which could result in additional expense and delays in bringing our product candidates to market. Any failure or delay in completing clinical trials for our product candidates would prevent or delay the commercialization of our product candidates. We cannot assure you that our expenses related to clinical trials will lead to the development of brand-name drugs that will generate revenues in the near future. Delays or failure in the development and commercialization of our own branded products could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to execute acquisitions or other strategic transactions, or successfully integrate such acquisitions or manage our growth therefrom, it could have a material adverse effect on our business.
We may seek to expand our business through complementary or strategic acquisitions of other businesses, products or assets, or through joint ventures, strategic agreements or other arrangements. Any such transactions may involve significant integration challenges, operational complexities (such as receipt of stockholder and/or regulatory approvals) and time consumption, adversely affect liquidity and require substantial resources and effort. It may disrupt our ongoing businesses, which may adversely affect our relationships with customers, employees, regulators and others with whom we conduct business. Further, if we are unable to realize synergies or other benefits expected to result from any such transactions, or to generate additional revenue to offset any unanticipatedinability to realize these expected synergies or benefits, our growth and ability to compete may be impaired, which would require us to focus additional resources on the integration of operations rather than other profitable areas of our business, and may otherwise cause a material adverse effect on our business, results of operations and financial condition. Acquisitions may also have hidden costs, including unforeseen pre-acquisition liabilities or the impairment of customer relationships or certain acquired assets such as goodwill. We may also incur costs and inefficiencies to the extent
an acquisition expands the industries, markets or geographies in which we operate due to our limited exposure to and experience in a given industry, market or region. Finally, acquisitions can also involve litigation and/or post-transaction disputes, including with the counterparty regarding purchase price or other working capital adjustment or liabilities for which we believe we were indemnified under the relevant transaction agreements, among other matters.
The use of legal, regulatory and legislative strategies by brand competitors, including authorized generics and citizen’s petitions, as well as the potential impact of proposed legislation, may have an adverse effect on our business.
Brand drug companies often pursue strategies that may serve to prevent or delay competition from our generic alternatives to their branded products. These strategies may include, but are not limited to, using certain tactics with our regulators that could delay our product approvals, restricting our access to samples needed for our testing or using the legal system or other IP-related or regulatory mechanisms to severelydelay or disrupt our process. These and other strategies by brand competitors, as well as the potential impact of proposed legislation, may increase our costs associated with the introduction or marketing of our generic products, delay or prevent such introduction and/or significantly reduce the profit potential of our products.
We depend on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
Significant disruptions to our IT systems or breaches of information security could adversely affect our business. We regularly collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such information. Additionally, our IT systems are critical to our ability to store electronic and financial information and to manage a variety of business processes and activities, including manufacturing, financial, logistics, sales, marketing and administrative functions. We depend on our IT infrastructure to communicate internally and externally with employees, customers, suppliers and others. We also use IT networks and systems to comply with regulatory, legal and tax requirements. We have outsourced significant elements of our IT infrastructure; as a result we manage independent vendor relationships with third-parties who are responsible for maintaining significant elements of our IT systems and infrastructure and who may or could have access to our confidential information. The size and complexity of our IT systems, and those of our third-party vendors, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners, vendors, or malicious third parties using phishing or ransomware attacks. Our systems may be susceptible to intentional or accidental physical damage to the infrastructure maintained by us or by third parties, including as a result of extreme weather events, such as fires, floods, hurricanes, or tornadoes or as the result of the use of AI or other new technologies. For example, in 2024, CrowdStrike Holdings, Inc., a cybersecurity vendor, distributed a faulty software update that caused widespread problems with computers running Microsoft Windows as their operating system, which impacted individual, business and government users globally. While the Company was impacted by this faulty update, affected systems were remediated within seven business days, with minimal disruption and no material impact to the Company.
Maintaining the secrecy of confidential, proprietary, and/or trade secret information is important to our competitive business position. We continually assess these threats and make investments to increase internal protection, detection, and response capabilities, as well as ensure our third-party providers have required capabilities and controls, to mitigate these risks. Like other public companies, our computer systems and those of our third-party vendors and service providers are regularly subject to, and will continue to be the target of, computer viruses, malware or other malicious code (including ransomware), unauthorized access, cyber-attacks or other computer-related penetrations, which have caused, and may continue to cause, disruptions to our operations. For example, we have been the victim of attempted phishing email attacks, some of which have been successful in evading detection and blocking. While we have experienced threats to our data and systems, to date, we are not aware that we have experienced a material cyber-security breach. Over time, however, the sophistication of these threats continues to increase. Our reliance on unsupported and vulnerable operating systems and other software in certain cases may increase both the likelihood and potential severity of cyber incidents. The preventative actions we take to reduce the risk of cyber incidents and protect our information may be insufficient. Our efforts may not prevent service interruptions or security breaches in our systems or the unauthorized or inadvertentwrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidentalloss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business position. Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, financial position, results of operations and/or cash flow.
Failure to successfully implement a new enterprise resource planning system could have a material adverse effect on our business, results of operations and financial condition.
We rely on information technology systems for critical functions, including supply chain management, transaction processing, finance, human resources, sales order management, compliance, and reporting. In 2025, we began a multi-year enterprise resource planning (“ERP”) system implementation for certain parts of our business to integrate and modernize these processes. If the ERP system is not implemented as planned or does not operate effectively, it could disrupt operations, increase costs, and impair our ability to manage our business and maintain effective internal control over financial reporting.
Artificial intelligence-based platforms may present new risks and challenges to our business.
AI technologies may exacerbate existing risks, including risks associated with data privacy, cybersecurity, IP, healthcare fraud and abuse, drug development and manufacturing, and risks to patients or human subjects in clinical trials. AI introduces new risks, due to the autonomous nature of the technology, which, in some cases, may be deployed to perform tasks, inform decisions, automate decisions, and make predictions, sometimes using unverified or false information. AI may amplify biased and discriminatory decision making, perform unreliably and malfunction, generate difficult-to-interpret insights, and cause direct harm to individuals or groups.
Regulators are proposing, adopting, and implementing new AI laws and regulations. Such laws and regulations may require us to change our business practices and policies and may create substantial compliance-related costs. Regulators are also using existing laws and regulations to take enforcement actions related to the deployment of AI in ways that result in non-compliance. If we fail to comply with AI laws and regulations, we may be subject to sanctions, fines, and reputational damage, orders to stop certain processing of personal data, orders to delete certain data or destroy AI algorithms derived from data collects, legal action on behalf of impacted individuals or other enforcement or actions. If we or our vendors using AI technologies fail to take steps to protect our confidential data, trade secrets, IP and personal data, we may be subject to legal, regulatory, financial, and reputational risks.
AI technologies present significant opportunities and risks to our business. Harnessing AI’s transformative potential may enable us to speed up the discovery and development of new drugs, optimize our manufacturing processes, and drive efficiencies. Our failure to use AI technologies in a way that maintains trust, quality, and control in our business activities and to capitalize on opportunities presented by AI may also place us at a competitive disadvantage. Investments in AI may not realize the benefits that were anticipated. Failure to address AI risks could reduce our ability to deliver strategic objectives.
The majority of our products are produced at a limited number of locations, and a business interruption at one or more of these locations or within our supply chain could have a material adverse effect on our business, financial position and results of operations.
We produce the majority of the products that we manufacture at our manufacturing facilities in New York, New Jersey and India, as well as at certain third-party suppliers, one of which is located in Taiwan. Disruptions at these facilities or within our supply chain can occur for many reasons, including events unrelated to us or beyond our control, such as fires and other industrial accidents, floods and other severe weather events, natural disasters, environmental incidents or other catastrophes, utility and transportation infrastructure disruptions, shortages of raw materials, pandemic diseases or viral contagions, and acts of war or terrorism. For example, in November 2023, the Houthi movement, which controls parts of Yemen, began attacking merchant ships in the Red Sea disrupting global supply chains. Although conditions improved at times during 2024, attacks and threats continued into 2025, and shipping disruptions could resume or worsen. Natural disasters and adverse weather conditions can be caused or exacerbated by climate change, and the spate of extreme weather events experienced over the past several years presents an alarming trend. Extreme weather events have compromised our facilities in the past and may do so in the future. Furthermore, work stoppages, whether union-organized or not, can also disrupt operations. Business interruption could also be caused by compliance failures. A significant disruption at any of these facilities or otherwise within our supply chain, even on a short-term basis, could impair our ability to produce and ship products to the market on a timely basis or at all, which could have a material adverse effect on our business, financial position and results of operations.
Catastrophic events, including severe weather events, war and terrorist attacks, may negatively affect our business and results of operations.
We rely on our internal technology systems and websites to run our business as well as our or our third-party partners’ physical facilities, such as our R&D or manufacturing premises. In addition, we rely on third-party hosted services. A disruption, infiltration or failure of these systems, facilities or third-party hosted services in the event of a hurricane, tsunami, tornado,
earthquake, wildfire or flooding or other weather event, power loss, telecommunications failure, software or hardware malfunctions, pandemics, cyber-attack, war, terrorist attack or other catastrophic event that our disaster recovery plans do not adequately address, could cause system interruptions, reputational harm, loss of IP, delays in our product development, lengthy interruptions in our services, breaches of data security and loss of critical data. Any of these events could prevent us from conducting our day-to-day activities and could disrupt the operation of our supply chain. For example, we source some of our APIs from the Middle East region, and the armed conflicts that have escalated in the area since October 2023 could threaten our ability to obtain these important inputs. Additionally, the heightened military conflict between India and Pakistan in May 2025 created regional instability that could disrupt suppliers and logistics partners located in South Asia. Separately, certain of our products utilize a contract manufacturing company in Taiwan, and an escalation of tensions between China and Taiwan could impair or prevent altogether our ability to source these products. A catastrophic event that results in the destruction or disruption of any of our or our third-party partners’ business centers, manufacturing facilities, data centers, R&D facilities, or our critical business or IT systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. The adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event. Additionally, the impacts of the changing weather on water resources may result in water scarcity, limiting our ability to access sufficient high-quality water in certain locations, which may increase operational costs. Our business interruption plans may be insufficient to mitigate these, and any other, catastrophic events.
Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to governance and sustainability-related matters, that could expose us to numerous risks.
We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations, including the SEC, the Nasdaq Stock Market LLC (“Nasdaq”) and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity, making compliance more difficult and uncertain. In addition, certain regulators, customers, investors, employees and other stakeholders focus on sustainability matters and related disclosures. Concern over climate change and the impacts of severe weather events may also result in new or additional legal or regulatory requirements designed to mitigate the effects of those impacts on the environment and businesses. If such laws or regulations are more stringent than current legal or regulatory obligations, we may experience disruption in, or an increase in the costs associated with sourcing, manufacturing and distribution of our products, as well as an increase in costs associated with monitoring, tracking and reporting sustainability-related information to regulatory bodies, which may adversely affect our business, results of operations or financial condition. At the same time, regulators and legislators have increasingly expressed or pursued opposing views, legislation and investment expectations with respect to sustainability initiatives, including the enactment or proposal of “anti-ESG” legislation or policies. These opposing views may also be adopted by certain of our investors.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, uncertainty, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. For example, in 2023 the State of California passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, laws which would, if they survive an ongoing legal challenge, impose broad climate-related disclosure obligations on certain companies doing business in California, including us. Other U.S. states’ legislatures are considering enactment of similar rules and regulations. In addition, the European Union (“EU”) enacted the Corporate Sustainability Reporting Directive (“CSRD”) legislation in January 2023 which requires certain reporting and disclosure relating to sustainability matters for companies whose business and assets exceed certain thresholds within EU countries, including non-EU groups with EU subsidiaries. During 2025, CSRD was subject to proposals that, when adopted (which is expected during 2026), would significantly reduce the scope and substance of the reporting obligations; however, due to our subsidiaries in Ireland, the CSRD’s so-called “third country” requirements may apply to us for reporting in 2029 in respect of the 2028 financial year, depending on the level of revenue generated by such subsidiaries, which would require significant preparatory work to comply with the reporting rules. Developing and acting on initiatives within the scope of sustainability, and collecting, measuring and reporting sustainability-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards and differing proposals offered by various regulatory bodies. We may also communicate certain initiatives and goals regarding environmental matters, workforce management and talent retention, responsible sourcing, social investments or other sustainability-related matters in our responsible business report or other public documents. These initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Further, statements about our sustainability-related initiatives and goals, and progressagainst those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, for any revisions to these goals, or for failure to achieve such goals. If our sustainability-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieveprogress with respect to these goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.
Our future success depends on our ability to attract and retain talented employees and consultants.
Our future success depends, to a substantial degree, upon the continued service of the members of our management team. The loss of the services of members of our management team, or their inability to perform services on our behalf, could have a material adverse effect on our business, condition (financial and otherwise), prospects and results of operations. Our success also depends, to a large extent, upon the contributions of our sales, marketing, scientific and quality assurance staff. We compete with brand and generic pharmaceutical manufacturers for qualified personnel, and our competitors may offer more favorable employment opportunities than we do. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we could experience constraints that would adversely affect our ability to sell and market our products effectively, to meet the demands of our strategic partners in a timely fashion, and to support our R&D programs. In particular, our sales and marketing efforts depend on the ability to attract and retain skilled and experienced sales, marketing and quality assurance representatives. Although we believe that we have been successful in attracting and retaining skilled personnel in all areas of our business, we cannot provide assurance that we can continue to attract, train and retain such personnel. Any failure in this regard could limit the rates at which we generate sales and develop or acquire new products.
IP and Licensing Risks
Federal regulation of arrangements between manufacturers of branded and generic products could adversely affect our business.
We are involved in numerous patent litigations in which we challenge the validity or enforceability of innovator companies’ listed patents and/or their applicability to our generic and/or biosimilar pharmaceutical products, as well as patent infringementlitigation in which other generic/biosimilar companies challenge the validity or enforceability of our patents and/or their applicability to their generic/biosimilar pharmaceutical products, and therefore settling patent litigations has been and is likely to continue to be an important part of our business. As part of the Medicare Prescription Drug and Modernization Act of 2003, companies, including us, are required to file with the FTC and the DOJ agreements entered into between branded and generic and/or biosimilar pharmaceutical companies related to the manufacture, marketing and sale of generic/biosimilar versions of branded drugs for their review. In June 2013, the U.S. Supreme Court in its decision in FTC v. Actavis determined that “reverse payment” patent settlement agreements between brand and generic/biosimilar companies could violate the antitrust laws. The Supreme Court held that such settlement agreements are neither immune from antitrust attack nor presumptively illegal but rather should be analyzed under the “Rule of Reason” test to determine whether they violate the federal antitrust laws. This holding has resulted in heightened scrutiny of such settlement agreements by the FTC and state and local authorities, and has increased the risk of liability in pending antitrustlitigation brought by private plaintiffs. The FTC has brought actions against parties to such settlement agreements, including us, and we have become subject to increased FTC investigations or enforcement actions arising from such settlement agreements. Further, private plaintiffs, including direct and indirect purchasers of our products, have also become more active in bringing private litigationclaimsagainst us and other brand and generic/biosimilar pharmaceutical companies alleging that such settlement agreements violate the antitrust laws. Accordingly, we have in the past received and may receive formal or informal requests from the FTC for information about a particular settlement agreement, and there is a risk that the FTC, state and local authorities, or private plaintiffs, may commence an action against us allegingviolations of the antitrust laws. We have been and are currently involved in private antitrust actions involving certain settlement agreements as described in Note 19. Commitments and Contingencies — Other Litigation Related to the Company’s Business.
Antitrustinvestigations and claims are generally expensive and time consuming, and we can give no assurance as to the timing or outcome of such investigations or claims or of any future private litigation or government action alleging that one of our settlement agreements violatesantitrust laws. The impact of federal regulation of arrangements between manufacturers of brand and generic/biosimilar products, further legislation and the potential for private-party lawsuits associated with such arrangements could adversely affect our business.
From time to time we may need to rely on licenses to proprietary technologies, which may be difficult or expensive to obtain.
We may need to obtain licenses to patents and other proprietary rights held by third parties to develop, manufacture and market products. If we are unable to timely obtain these licenses on commercially reasonable terms, our ability to commercially market our products may be inhibited or prevented, which could have a material adverse effect on our business, results of operations and financial condition.
Our competitors or other third parties may allege that we are infringing upon their IP, forcing us to expend substantial resources in litigation, the outcome of which is uncertain. Any unfavorable outcome of such litigation, including losses related to “at-risk” product launches, could have a material adverse effect on our business, financial position and results of operations.
Companies that produce branded pharmaceutical products routinely bring litigationagainst ANDA filers or similar applicants that seek regulatory approval to manufacture and market generic forms of their branded products alleging patent infringement or other violations of IP rights. Patent holders may also bring patent infringement suits against companies that are currently marketing and selling approved generic products. Similarly, companies that produce biologics may bring litigationagainst abbreviated Biologics License Application (“aBLA”) filers that seek regulatory approval to manufacture and market biosimilars. Litigation often involves significant expense and can delay or prevent introduction or sale of our generic and/or biosimilar products. If valid and enforceable patents are infringed by our products, we would need to delay selling the infringing generic product unless we could obtain a license from the patent holder, and, if we were already selling the infringing product, cease selling and potentially destroy existing product stock.
There may be situations in which we may make business and legal judgments to market and sell products that are subject to claims of alleged patent infringement prior to final resolution of those claims by the courts, based upon our belief that such patents are invalid, unenforceable, or are not infringed by our marketing and sale of such products. This is referred to in the pharmaceutical industry as an “at-risk” launch. The risk involved in an at-risk launch can be substantial because, if a patent holder ultimately prevails against us, the remedies available to such holder may include, among other things, damages measured by the profits lost by the patent holder or treble damages, which can be significantly higher than the profits we make from selling the generic or biosimilar version of the product. We may also be harmed by the loss of any value of such inventory that we are unable to market or sell.
We expend a significant amount of resources on research and development, including milestones on in-licensed products, which may not lead to successful product introductions.
Much of our development effort is focused on technically difficult-to-formulate products and/or products that require advanced manufacturing technology. We expend significant resources on R&D primarily to enable us to manufacture and market FDA-approved pharmaceuticals in accordance with FDA regulations. We have entered into, and may in the future enter into, agreements that require us to make significant milestone payments upon achievement of various R&D events and regulatory approvals. As we continue to develop and in-license new products, we will likely incur increased research and licensing expenses. Because of the inherent risk associated with R&D efforts in the industry, particularly with respect to new drugs, our R&D expenditures may not result in the successful introduction of FDA-approved pharmaceutical products. Additionally, after we or our development partners submit an ANDA or aBLA, the FDA may request that additional studies be conducted. As a result, we may be unable to reasonably determine the total R&D costs required to develop a particular product. Finally, we cannot be certain that any investment made in developing products will be recovered, even if we are successful in commercialization. To the extent that we expend significant resources on R&D efforts and are not ultimately able to successfully introduce new products as a result of those efforts, our business, financial position and results of operations may be materially adversely affected.
We depend on our ability to protect our IP and proprietary rights.
Our success depends on our ability to protect and defend the IP rights associated with our current and future products. If we fail to protect our IP adequately, competitors may manufacture and market products similar to, or that may be confused with, our products, and our generic competitors may obtain regulatory approval to make and distribute generic versions of our branded products. Some patent applications in the U.S. are maintained in secrecy or are not published until the resulting patents issue. We also cannot be certain that patents will be issued with respect to any of our patent applications or that any existing or future patents issued to or licensed by us will provide competitive advantages for our products or will not be challenged, invalidated, circumvented or held unenforceable in proceedings commenced by our competitors or other third parties. Furthermore, our patent rights may not prevent or limit our present and future competitors from developing, making, importing, using or commercializing products that are functionally similar to our products. We rely particularly on trade secrets, trademarks, unpatented proprietary expertise and continuing innovation that we seek to protect, in part, by registering and using marks; and by entering into confidentiality agreements with licensees, suppliers, employees, consultants and other parties. We use this approach to protecting our IP in large part because few of our products are protected by patents. We cannot provide assurance that these agreements will not be breached or circumvented. We also cannot be certain that we will have recourse to adequate remedies in the event of a breach of such agreements. Disputes may arise concerning the ownership of IP or the applicability of
confidentiality agreements. We cannot be sure that our trade secrets and proprietary technology will not be independently developed or otherwise become known by our competitors or, if patents are not issued with respect to our internally developed products, that we will be able to maintain the confidentiality of information relating to these products. In addition, efforts to ensure our IP rights may be costly, time-consuming and/or ultimately unsuccessful. We cannot be sure that we will have the resources to protect our own rights againstinfringement by third parties. Our inability to protect our IP and proprietary rights could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Legal and Regulatory Risks
We are involved in various legal proceedings and may be involved in future legal proceedings, all of which are uncertain, and existing and future proceedings may require us to incur substantial expense to defend and/or expose us to substantial liability.
The development, manufacture and sale of our drug products involves an inherent risk of product liability and other claims and the associated adverse publicity, and insurance against such potential claims is expensive and may be difficult to obtain. Litigation is inherently subject to uncertainties and we may be required to expend substantial amounts in the defense or resolution of this and similar matters. We regularly monitor the use of our products for trends or increases in reports of adverse events or product complaints, and regularly report such matters to the FDA. In some cases, an increase in adverse event reports may be an indication that there has been a change in a product’s specifications or efficacy. Such changes could lead to a recall of the product in question or, in some cases, increases in product liability claims related to the product in question. If the coverage limits for product liability and other insurance policies are not adequate, or if certain of our products are excluded from coverage, a claim brought against us, whether covered by insurance or not, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
In the ordinary course of our business, we may also be subject to a variety of other types of claims, proceedings, investigations and litigation initiated by government agencies or third parties. These matters may include compliance matters, product regulation or safety, taxes, employee benefit plans, employment discrimination, health and safety, environmental, antitrust, securities law, customs, import/export, government contract compliance, financial controls or reporting, IP, allegations of misrepresentation, falseclaims or false statements, commercial claims, claims regarding promotion of our products and services, or other similar matters. In addition, government investigations related to the use of our generic drug products may cause reputational harm to us. Negative publicity, whether accurate or inaccurate, about the efficacy, safety or side effects of our generic drug products or product categories, whether involving us or a competitor, could materially reduce market acceptance of our products, cause consumers to seek alternatives to our products, result in product withdrawals and cause our stock price to decline. Negative publicity could also result in an increased number of product liability claims, whether or not these claims have a basis in scientific fact. Any such claims, proceedings, investigations or litigation, regardless of the merits, might result in substantial costs to defend or settle, restrictions on product use or sales, or otherwise injure our business.
We manufacture and derive a portion of our revenue from the sale of pharmaceutical products in the opioid class of drugs. HHS has declared the widespread addiction to and abuse of such products a public health emergency, and the federal government has also announced plans to increase federal oversight on opioid sale and consumption. These plans, along with changing public and clinical perceptions of opioid products and the risks relating to their use may result in the imposition of even stricter regulation of such products and further restrictions on their sale and use. For instance, the DEA has recently increased its scrutiny and regulation over the manufacture, distribution and sale of opioid products, which may require us to incur significant expenses to comply with such regulations. As discussed in further detail in Note 19. Commitments and Contingencies , we received a subpoena from the DEA in December 2025 related to certain controlled substance-related activities. We derive substantial revenues from the sale of certain controlled drug substances that are subject to specific aggregate production quotas established and administered by the DEA in accordance with governing laws and regulations. Our inability to secure our quota allocation, the DEA’s decision to allocate quota in an amount less than the amount we requested, or a delay by the government in the issuance of the quota for these substances can result in a substantial impact to our revenues.
State governments have also taken steps to impose surcharges or taxes on opioid manufacturers or distributors. Any new or stricter regulations imposed by governmental authorities such as the DEA related to opioid products, as well as a potential increase in opioid-related litigation involving us, could result in material adverse effects on our business and results of operations. Refer to Note 19. Commitments and Contingencies — Civil Prescription Opioid Litigation for more information regarding opioid-related litigation, including a nationwide settlement in principle, involving us.
We are subject to United States federal and state laws related to healthcare fraud and abuse and health information privacy and security, and the failure to comply with such laws may adversely affect our business.
In the U.S., many of our products are eligible for reimbursement under federal and state health care programs such as Medicaid, Medicare, TRICARE, and/or state pharmaceutical assistance programs, and as a result, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are, and will be, applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business.
The domestic and foreign laws that may affect our ability to operate include, but are not limited to: (i) the U.S. Anti-Kickback Statute, which applies to our marketing and research practices, educational programs, pricing policies and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, as a means of inducing, or in exchange for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; (ii) U.S. federal civil and criminalfalseclaims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third - party payers that are false or fraudulent; (iii) the U.S. Health Insurance Portability and Accountability Act of 1996, (“HIPAA”), which among other things created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters, and HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and our implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information and place restrictions on the use of such information for marketing communications; (iv) the U.S. Physician Payments Sunshine Act, which among other things, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under a federal healthcare program to report annually information related to “payments or other transfers of value” made to physicians, physician assistants, advanced practice nurses and teaching hospitals, and ownership and investment interests held by certain healthcare professionals and their immediate family members, and similar state laws; (v) the government pricing rules applicable to the Medicaid, Medicare Part B, 340B Drug Pricing Program, the U.S. Department of Veterans Affairs program, the TRICARE program, and state price reporting laws; and (vi) state and foreign law equivalents of each of the above U.S. laws, such as anti-kickback and falseclaims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health and other sensitive information in certain circumstances, such as the requirements under the European Union’s General Data Protection Regulation and certain U.S. state privacy laws, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Violations of certain of these laws, including the fraud and abuse laws may result in severepenaltiesagainst us and/or our responsible employees, including jail sentences, large fines, and the exclusion of our products from reimbursement under federal and state programs. Additionally, these risks may be compounded by our rapid international expansion, as each international jurisdiction has its own legal and regulatory requirements. Defense of litigationclaims and government investigations can be costly, time-consuming, and distract management, and it is possible that we could incur judgments or enter into settlements that would require us to change the way we operate our business. We are committed to conducting the sales and marketing of our products in compliance with the healthcare fraud and abuse laws, but certain applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity, a governmental authority may take a position contrary to a position we have taken, or should an employee violate these laws without our knowledge, a governmental authority may impose civil and/or criminal sanctions.
Any adverse outcome in these types of actions, or the imposition of penalties or sanctions for failing to comply with fraud and abuse laws, could adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash flows. Some of the statutes and regulations that govern our activities, such as federal and state anti-kickback and falseclaims laws, are broad in scope, and while exemptions and safe harbors protecting certain common activities exist, they are often narrowly drawn. While we manage our business activities to comply with these statutory provisions, due to their breadth, complexity and, in certain cases, uncertainty of application, it is possible that our activities could be subject to challenge by various government agencies. In particular, the FDA, the DOJ, the FTC, and other agencies have increased their enforcement activities with respect to the sales, marketing, research and similar activities of pharmaceutical companies in recent years, and many pharmaceutical companies have been subject to government investigations related to these practices. A determination that we are in violation of these and/or other government regulations and legal requirements may result in civil damages and penalties, criminalfines and prosecution, administrative remedies, the recall of products, the total or partial suspension of manufacturing and/or distribution activities, seizure of products, injunctions, whistleblower lawsuits, failure to obtain approval of pending product applications, withdrawal of existing product approvals, exclusion from participation in government healthcare programs and other sanctions.
Any of these types of investigations or enforcement actions could affect our ability to commercially distribute our products and could materially and adversely affect our business, financial condition, results of operations and cash flows.
Approvals for our new generic drug products may be delayed or become more difficult to obtain if the FDA institutes changes to its approval requirements. Similarly, the FDA could change the approval or post-approval regulatory requirements for new drug applications.
Congress may institute changes to the FDA’s user fee structures, such as implementing new or additional fees similar to the fees imposed under GDUFA III, which may make it more difficult or expensive for us to obtain approval for our new generic products. The FDA may also implement changes to the ANDA approval or post-approval regulatory requirements that may directly affect some of our ANDA filings pending approval from the FDA or our already-approved products, such as changes to guidance from the FDA regarding bioequivalency requirements for particular drugs. Such changes may cause our development of such generic drugs to be significantly more difficult or result in delays in FDA approval or result in our decision to abandon or terminate certain projects or the marketing of certain approved products. Any changes in FDA requirements may make it more difficult for us to file ANDAs or obtain approval of our ANDAs and generate revenues and thus may have a material adverse effect on our business, results of operations and financial condition.
Healthcare reform and a reduction in the coverage and reimbursement levels by governmental authorities, HMOs, MCOs or other third-party payers may adversely affect our business.
As part of commercializing our products, we have obtained authorization to receive reimbursement at varying levels for the cost of certain products and related treatments from governmental authorities and private health insurers and other organizations, such as HMOs and managed care organizations (“MCOs”). The drug pricing reforms in the IRA have impacted, and may impact in the future, the prices of certain of our products. For example, rebates related to the IRA reduced our net revenue for each of the years ended December 31, 2025 and 2024 by $8.0 million. The trend toward managed healthcare in the U.S., the growth of organizations such as HMOs and MCOs, and legislative proposals to reform healthcare and government insurance programs could significantly influence the purchase of pharmaceutical products, resulting in lower prices and a reduction in product demand. The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law on March 23, 2010 and March 30, 2010, respectively. These laws are referred to herein as “healthcare reform.” A number of provisions of the healthcare reform laws continue to have a negative impact on the price of our products sold to U.S. government entities. For example, the legislation includes measures that (i) significantly increase Medicaid rebates through the expansion of the program; (ii) substantially expand the Public Health System (340B) program to allow other entities to purchase prescription drugs at substantial discounts; (iii) extend the Medicaid rebate rate to a significant portion of Managed Medicaid enrollees; (iv) apply a 75% discount to Medicare Part D beneficiary spending in the coverage gap for branded and authorized generic prescription drugs; and (v) levy a significant excise tax on the industry to fund healthcare reform. Such cost containment measures and healthcare reform affect our ability to sell our products and have a material adverse effect on our business, results of operations and financial condition. Additionally, the Medicare Part D Prescription Drug Benefit established a voluntary outpatient prescription drug benefit for Medicare beneficiaries (primarily the elderly over 65 and the disabled). These beneficiaries may enroll in private drug plans. There are multiple types of Part D plans and numerous plan sponsors, each with its own formulary and product access requirements. The plans have considerable discretion in establishing formularies and tiered co-pay structures and in placing prior authorization and other restrictions on the utilization of specific products. In addition, Part D plan sponsors are permitted and encouraged to negotiate rebates with manufacturers. The Medicare Part D program, which went into effect January 1, 2006, is administered by the CMS within HHS.
The CMS has issued extensive regulations and other sub-regulatory guidance documents implementing the Medicare Part D benefit, and the Office of Inspector General has issued regulations and other guidance in connection with the Medicare Part D program. The federal government can be expected to continue to issue guidance and regulations regarding the obligations of Part D sponsors and their subcontractors. Participating drug plans may establish drug formularies that exclude coverage of specific drugs and payment levels for drugs negotiated with Part D drug plans may be lower than reimbursement levels available through private health plans or other payers. Moreover, beneficiary co - insurance requirements could influence which products are recommended by physicians and selected by patients. There is no guarantee that any drug that we market will be offered by drug plans participating under the Medicare Part D program or of the terms of any such coverage, or that covered drugs will be reimbursed at amounts that reflect current or historical levels. Additionally, any reimbursement granted may not be maintained, or limits on reimbursement available from third-party payers may reduce the demand for, or negatively affect the price of those products, which could significantly harm our business, results of operations, financial condition and cash flows. We may also be subject to lawsuits relating to reimbursement programs that could be costly to defend, divert management’s attention and adversely affect our operating results. Most state Medicaid programs have established preferred drug lists, and the process, criteria and timeframe for obtaining placement on the preferred drug list varies from state to state.
Under the Medicaid drug rebate program, a manufacturer must pay a rebate for Medicaid utilization of a product. The rebate for single source products (including authorized generics) is based on the greater of (i) a specified percentage of the product’s average manufacturer price or (ii) the difference between the product’s average manufacturer price and the best price offered by the manufacturer. The rebate for multiple source products is a specified percentage of the product’s average manufacturer price. In addition, many states have established supplemental rebate programs as a condition for including a drug product on a preferred drug list. The profitability of our products may depend on the extent to which they appear on the preferred drug lists of a significant number of state Medicaid programs and the amount of the rebates that must be paid to such states.
There is significant fiscal pressure on the Medicare and Medicaid programs, and the introduction and enactment of new laws and amendments to existing laws to lower the costs of the program are possible. Such laws and amendments could materially adversely affect our anticipated revenues and results of operations. For example, enacted in July 2025, OBBBA contains provisions that may reduce future Medicare reimbursement rates due to deficit-driven sequestration provisions. Similarly, certain provisions contained in OBBBA may have the effect of reducing participation in Medicaid on a national basis. Changes to Medicaid eligibility or enrollment procedures could reduce the number of covered individuals and decrease demand for our products. Due to the uncertainties regarding the outcome of future healthcare reform initiatives and their enactment and implementation, we cannot predict which, if any, of the future reform proposals will be adopted or the effect such adoption may have on our business. Future rulemaking and reform, including repeal of existing laws, including healthcare reform laws, with respect to the healthcare and pharmaceutical industries, could increase rebates, reduce prices or the rate of price increases for healthcare products and services, or require additional reporting and disclosure. We cannot predict the timing or impact of any future rule making, reform or repeal of healthcare laws.
We depend on third-party agreements for a portion of our product offerings and any failure to maintain these arrangements or enter into similar arrangements with new partners could result in a material adverse effect.
We have broadened our product offering by entering into a variety of third-party agreements covering any combination of joint development, supply, marketing and/or distribution of products. We cannot provide assurance that the development, supply, marketing and/or distribution efforts of our contractual partners will continue to be successful, that we will be able to renew such agreements or that we will be able to enter into new agreements with favorable terms for additional products. Any alteration to, or termination of, our current distribution and marketing agreements, failure to enter into new and similar agreements, or interruption of our product supply under such agreements, could have a material adverse effect on our business, condition (financial and otherwise), prospects or results of operations.
The testing required for the regulatory approval of our products is conducted primarily by independent third parties. Any failure by any of these third parties to perform this testing properly and in a timely manner may have an adverse effect upon our ability to obtain regulatory approvals.
Our applications for regulatory approval of our products, including both internally developed and in - licensed products, incorporate the results of testing and other information that is conducted or gathered primarily by independent third parties (including, for example, manufacturers of raw materials, testing laboratories, contract research organizations or independent research facilities). Our ability to obtain and maintain regulatory approval of the products being tested is dependent upon the quality of the work performed by these third parties, the quality of the third parties’ facilities, and the accuracy of the information provided by third parties. We have little or no control over any of these factors. If this testing is not performed properly, our ability to obtain or maintain regulatory approvals, and to launch or continue selling products, could be restricted or delayed.
Our reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate programs are complex and may involve subjective decisions. Any determination that we have failed to comply with those obligations could subject us to penalties and sanctions, which could have a material adverse effect on our business.
The regulations applicable to us regarding reporting and payment obligations with respect to Medicaid reimbursement and rebates and other governmental programs are complex. Our calculations and methodologies are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could adversely affect us and our business. In addition, because our processes for these calculations and the judgments involved in making these calculations involve, and will continue to involve, subjective decisions and complex methodologies, these calculations are subject to the risk of error and misjudgment. Any governmental agencies that have commenced (or that may commence) an investigation of us could impose, based on a claim of violation of anti - fraud and falseclaims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal health care programs (including Medicaid and Medicare). Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with respect to how to properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority may
take a position contrary to a position that we have taken and may impose civil and/or criminal sanctions on us. Any such penalties, sanctions, or exclusion from federal health care programs could have a material adverse effect on our business, financial position and results of operations. From time to time we conduct routine reviews of our government pricing calculations. These reviews may have an impact on government price reporting and rebate calculations used to comply with various government regulations regarding reporting and payment obligations.
Investigations and litigation concerning the calculation of average wholesale prices may adversely affect our business.
Many government and third-party payers, including Medicare, Medicaid, HMOs and others, reimburse doctors and others for the purchase of certain prescription drugs based on a drug’s average wholesale price (“AWP”). In the past several years, state and federal government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to AWP, as a result of which certain agencies have suggested that reporting of inflated AWPs by manufacturers has led to excessive payments for prescription drugs. Numerous pharmaceutical companies have been named as defendants in actions brought by various State Attorneys General and have faced state law qui tam actions brought on behalf of various states, alleging generally that the defendantsdefrauded state Medicaid systems by purportedly reporting or causing the reporting of AWP and/or “Wholesale Acquisition Costs” that exceeded the actual selling price of the defendants’ prescription drugs. These cases generally seek some combination of actual damages, and/or double damages, treble damages, compensatory damages, statutory damages, civil penalties, disgorgement of excessive profits, restitution, disbursements, counsel fees and costs, litigation expenses, investigative costs, injunctive relief, punitivedamages, imposition of a constructive trust, accounting of profits or gains derived through the alleged conduct, expert fees, interest and other relief that the court may have deemed proper.
We can give no assurance that we will be able to settle current or future actions on terms that we deem reasonable, or that such settlements or adverse judgments, if entered, will not exceed the amount of any liability we have recorded. Accordingly, such actions could adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Failure to comply with our government contracting regulations could adversely affect our business and results of operations.
Our AvKARE segment generates a substantial amount of its net revenue from government contracts. Contracts with federal, state, and local governmental customers are subject to various procurement regulations, contract provisions and other requirements relating to their formation, administration and performance, and are subject to regular audits and investigations. Any failure by us to comply with the government contracting regulations could result in the imposition of various civil and criminalpenalties, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from future government business. Such failures could also cause reputational damage to our business. In addition, some of AvKARE’s contracts provide for termination by the government, without cause. If one or more of our government contracts is suspended or terminated, or if there are executive or congressional actions that block, freeze or otherwise impact federal government spending, including government shutdowns, or if we are suspended, debarred or otherwise restricted from future government work, our business, results of operations and financial condition could suffer.
Risks Relating to Our Indebtedness
We have a substantial amount of indebtedness, which could adversely affect our financial health.
As of December 31, 2025, we had $2.7 billion of total indebtedness, comprised of $2.1 billion and $600.0 million in borrowings outstanding on the Term Loan Due 2032 and Senior Notes Due 2032, respectively. As of December 31, 2025, we had an ability to borrow up to an additional $678.2 million under our revolving credit facilities, comprised of $595.2 million and $83.0 million of available capacity under the 2025 Revolving Credit Facility (as defined and described in Note 14. Debt ) and the Amended and Restated Rondo Revolving Credit Facility, respectively.
Our substantial level of indebtedness could have important consequences. For example, it could:
• increase our vulnerability to adverse economic and industry conditions;
• limit our ability to obtain additional financing for future working capital, capital expenditures, raw materials, strategic acquisitions and other general corporate requirements;
• expose us to unhedged interest rate fluctuations because the interest on certain debt under the credit facilities is imposed at variable rates;
• require us to dedicate a substantial portion of our cash flow from operations to payments on our debt (including interest payments), thereby reducing the availability of cash flow for operations and other purposes;
• make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness;
• limit our ability to refinance indebtedness or increase the associated costs;
• require us to sell assets to reduce debt or influence the decision about whether to do so;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business; and
• place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturn.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors which may be beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. As of December 31, 2025, we had approximately $2.7 billion of total indebtedness. During 2026, we expect to make $21.0 million in principal payments on the Term Loan Due 2032. No principal is due on the Senior Notes Due 2032 until maturity. We expect to make interest payments totaling $193.9 million, excluding the impact of our interest rate swap, during 2026 related to the Term Loan Due 2032 and Senior Notes Due 2032. Refer to Note 14. Debt and “ Commitments and Contractual Obligations ” under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. Our credit agreements restrict our ability to dispose of assets and use the proceeds from those dispositions and also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or obtain proceeds in an amount sufficient to meet any debt service obligations when due. Any of these circumstances, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations, including our indebtedness.
If we cannot make scheduled payments on our debt, we will be in default and, as a result:
• our debt holders could declare all outstanding principal and interest to be due and payable;
• the lenders under our credit agreements could terminate their commitments to lend us capital; and
• we could be forced into bankruptcy or liquidation.
The terms of our credit agreements restrict our operations, particularly our ability to respond to changes or to take certain actions.
Our credit agreements contain a number of restrictive covenants that impose operating and financial restrictions on us and may limit our ability to, among other things: incur additional indebtedness; pay dividends or make other distributions or repurchase or redeem capital stock; prepay, redeem or repurchase certain debt; make loans and investments or sell assets.
A breach of the covenants under such credit agreements could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross - acceleration or cross - default provision applies which could have a material adverse effect on our business, operations and financial results. In the event our lenders accelerated the repayment of the borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the credit agreements would likely have a material adverse effect on us. As a result of these restrictions, we may be limited in how we conduct business,
unable to raise additional financing and unable to compete effectively. These restrictions may affect our ability to grow in accordance with our strategy.
Economic, Political and Financial Risks
Our current operations in, and potential expansion into additional international markets subjects us to increased regulatory oversight both in those international markets and domestically as well as regulatory, economic, social and political uncertainties, which could cause a material adverse effect on our business, financial position and results of operations.
We are subject to certain risks associated with having substantial assets and operations located in foreign jurisdictions, including our operations in India and Ireland, as well as related to our distribution activities being initiated in new geographies outside the U.S. and India. Over the past several years, we have significantly expanded our Indian operations, and we may in the future expand our international business and operations in these jurisdictions or into jurisdictions in which we have limited operating experience, including with respect to seeking regulatory approvals, marketing or selling products.
Our international operations may be adversely affected by general economic conditions (including inflation, expropriation and other government actions), economic and fiscal policy (including changes in exchange rates and controls, tariffs, interest rates and taxation policies), changes in IP protections and remedies, trade regulations, tax laws, and increased government regulation (including those affecting approval, production, pricing, and marketing of, reimbursement for and access to our products). With respect to India, our operations could also be adversely affected by any reversal of India’s recent economic liberalization and deregulation policies, as well as social instability and other political, economic or diplomatic developments in the future. In addition to risks specific to India, our international operations may also be affected by broader geopolitical and economic conditions in other regions, such as the realignment of alliances. Some markets have, from time to time, experienced instances of civil unrest and hostilities, both internally and with neighboring countries. Rioting, military activity, terrorist attacks, armed hostilities or unstable government and legal systems could cause our operations in such jurisdictions to be adversely affected or suspended. We generally do not have insurance for losses and interruptions caused by terrorist attacks, military conflicts and wars. In addition, our international operations may subject us to heightened scrutiny under the Foreign Corrupt Practices Act or similar anti-bribery laws, and could subject us to liability under such laws despite our efforts to comply. Some emerging market countries may be particularly vulnerable to periods of financial or political instability or significant currency fluctuations or may have limited resources for healthcare spending. As a result of these and other factors, our strategy to grow in emerging markets may not be successful, and growth rates in these markets may not be sustainable. Government financing and economic pressures can lead to negative pricing pressure in various markets where governments take an active role in setting prices, access criteria (e.g., through health technology assessments) or other means of cost control. Further, notwithstanding our compliance programs, there can be no assurances that our policies will prevent our employees or agents from violating any applicable laws or protect us from any such violations. Additionally, we cannot predict the nature, scope or impact of any future regulatory requirements that may apply to our expanding international operations or how foreign governments will interpret existing or new laws.
Escalating geopolitical tensions or military conflict between India and Pakistan could disrupt our operations, supply chain, or workforce in the region, potentially resulting in production delays, increased costs, or reduced availability of key materials. Any sustained instability in the region could also impair our ability to maintain reliable logistics, regulatory continuity, or business continuity planning across affected jurisdictions.
We may make acquisitions of, or investments in, complementary businesses or products, which may be on terms that may not turn out to be commercially advantageous, or may require additional debt or equity financing, which could increase our leverage and/or dilute equity holders.
While we regularly review the potential acquisition of technologies, products, product rights and complementary businesses and are currently evaluating, and intend to continue to evaluate, potential product and/or company acquisitions and other business development opportunities, we may not be able to identify suitable acquisition or investment candidates. In addition, to the extent that we do identify candidates that we believe to be suitable, we cannot provide any assurance that we will be able to reach an agreement with the selling party or parties or consummate the transaction on terms that are commercially advantageous to us or at all. If we make any acquisitions or investments, we may finance such acquisitions or investments through our cash reserves, debt financing, which may increase our leverage, or by issuing additional equity interests, which could dilute the holdings of our then - existing shareholders. If, due to capital constraints, we require financing, we cannot provide any assurance that we will be able to obtain such financing when needed on acceptable terms or at all.
Global economic conditions could harm us.
Global efforts to contain health care costs continue to exert pressure on product pricing and market access to pharmaceutical products. In many international markets, government - mandated pricing actions have reduced prices of patented drugs, and it is possible that the U.S. may adopt similar measures to reduce drug prices to consumers. Some countries may be subject to periods of financial instability, may have reduced resources to spend on healthcare or may be subject to economic sanctions, and our business in these countries may be disproportionately affected by these changes. Continued concerns about the systemic impact of potential geopolitical issues and economic policy uncertainty, particularly in areas in which we operate, could potentially cause economic and market instability in the future and could adversely affect our business, including our financial performance. These conditions may also result in decreased consumer spending, including spending on our products.
Challenging economic conditions have resulted, and may continue to result, in tighter credit conditions. The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which could adversely affect the ability of our third-party distributors, partners, manufacturers and suppliers to buy inventory or raw materials and to perform their obligations under agreements with us, which could disrupt our operations and adversely affect our financial performance.
We have increased exposure to tax liabilities, including foreign tax liabilities.
As a U.S. company with subsidiaries in, among other countries, India, Switzerland, Ireland and the United Kingdom, we are subject to, or potentially subject to, income and other taxes in these jurisdictions as well as the U.S. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. Changes in tax laws or tax rulings may have a significant adverse impact on our effective tax rate. In addition, we have potential tax exposures resulting from the varying application of statutes, regulations and interpretations, which include exposures on intercompany terms of cross-border arrangements among foreign subsidiaries in relation to various aspects of our business, including R&D activities and manufacturing. Tax authorities in various jurisdictions may disagree with, and subsequently challenge, the amount of profits taxed in such jurisdictions. Any such challenges may result in increased tax liability, including accrued interest and penalties, which would cause our tax expense to increase and may have a material adverse effect on our business, financial position and results of operations and our ability to satisfy our debt obligations.
In addition, many countries are implementing legislation and other guidance to align their international tax rules with the Organization for Economic Co-operation and Development’s (“OECD”) Base Erosion and Profit Shifting recommendations and action plan that aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules, and nexus - based tax incentive practices. The OECD has issued a two-pillar approach to global taxation, focusing on global profit allocation and a global minimum tax rate. The “Pillar One” global profit allocation proposal currently applies only to the largest and most profitable multinational enterprises and, as proposed, generally applies to companies with global revenues exceeding €20 billion (approximately $23 billion using the exchange rate as of December 31, 2025). The “Pillar Two” proposal focuses on a global minimum tax of at least 15%. Legislation for the Pillar Two proposal, applying to us, has been enacted in Ireland, and was effective with the financial year beginning on January 1, 2024. As the tax rates of the other jurisdictions in which we operate exceed 15%, we do not believe there is any potential additional exposure besides in Ireland.
We assessed that no top-up tax under Pillar Two of the OECD Inclusive Framework on Base Erosion and Profit Shifting is expected to be due for the year ended December 31, 2025. This assessment is based on the application of safe harbor provisions available in all relevant jurisdictions including UK, Germany, Ireland, Switzerland, U.S. and India.
Changes in tax laws could have a material adverse effect on our business, results of operations, or financial condition.
The recently enacted OBBBA introduces significant changes to U.S. healthcare programs, including Medicaid, Medicare, and Affordable Care Act marketplaces. These changes may reduce federal healthcare spending and alter eligibility requirements, which could result in fewer individuals having health coverage. Reduced coverage could lead to lower prescription volumes and decreased demand for our products. Additionally, OBBBA includes provisions that may increase compliance obligations and administrative complexity for manufacturers participating in government programs. These changes could require additional resources and may increase our costs. The full impact of OBBBA is uncertain and will depend on implementation details and potential state-level actions. These developments could adversely affect our business, results of operations, or financial condition.
In certain circumstances, we issue price adjustments and other sales allowances to our customers. Although we may establish liabilities based on our estimates of these amounts, if estimates are incorrect and the liabilities are inadequate, it may result in adjustments to these liabilities that may have a material adverse effect on our financial position and results of operations.
As described above, the first company to file an ANDA containing a Paragraph IV certification that successfullychallenges the patent(s) on a branded product may be granted 180 days of generic market exclusivity by the FDA for such generic product. At the expiration of such exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug (in some instances, price declines have exceeded 90%). When we experience price declines following a period of generic marketing exclusivity, or at any time when a competitor enters the market or offers a lower price with respect to a product we are selling, we may, at our discretion, decide to lower the price of our product to retain market share and provide price adjustments to our customers for the difference between our new (lower) price and the price at which we previously sold the product which is still held in inventory by such customers. We accrue for these adjustments when the expected value of an adjustment is greater than zero, based on contractual pricing, actual net sales, accrual rates based on historical average rates, and estimates of the level of inventory of its products in the distribution channel that remain subject to these adjustments. There are also circumstances under which we may decide not to provide price adjustments to certain customers, and consequently, as a matter of business strategy, we may risk a greater level of sale returns of products in a customer’s existing inventory and lose future sales volume to competitors rather than reduce our pricing.
Based on estimates, we establish liabilities for sales allowances including, but not limited to: sales discounts and returns, chargebacks, sales volume rebates, shelf stocks, cash discounts, and Medicaid rebate obligations at the time of sale. Although we believe our liabilities are adequate as of the date of this report, we cannot provide assurances that our reserves will ultimately prove to be adequate. Increases in sales allowances may exceed our estimates for a variety of reasons, including unanticipated competition or an unexpected change in one or more of our contractual relationships. We will continue to evaluate the effects of competition and will record a price adjustment liability if and when we deem it necessary. Any failure to establish adequate liabilities with respect to sales allowances may result in a material adverse effect on our financial position and results of operations.
If we determine that our goodwill and other intangible assets have become impaired, we may record significant impairment charges, which would adversely affect our results of operations.
Goodwill and other intangible assets represent a significant portion of our assets. Goodwill is the excess of cost over the fair market value of net assets acquired in business combinations. In the future, goodwill and intangible assets may increase as a result of future acquisitions. We review our goodwill and indefinite lived intangible assets at least annually for impairment. We review our 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. Impairment may result from, among other things, deterioration in the performance of acquired businesses, adverse market conditions and adverse changes in applicable laws or regulations, including changes that restrict the activities of an acquired business.
Generic pharmaceuticals have faced regular and increasing price erosion each year, placing even greater importance on our ability to continually introduce new products. If these trends continue or worsen, or if we experience further difficulty in this market or the specialty market, our revenues and profits in our Affordable Medicines and Specialty segments may continue to be affected adversely. A decline in our market capitalization, even if otherwise due to macroeconomic or industry - wide factors, could put pressure on the carrying value of our goodwill in both our Affordable Medicines and Specialty segments and cause us to conduct an interim impairment test. A determination that all or a portion of our goodwill or other intangible assets is impaired, although a non-cash charge against earnings, could have a material adverse effect on our results of operations and financial condition.
Risks Related to Our Tax Receivable Agreement
We are required under a tax receivable agreement to make cash payments in respect of certain tax benefits to which we may become entitled, and we expect that the payments we will be required to make will be substantial.
We are a party to a tax receivable agreement (“TRA”) with each of the members of the Amneal Group. On November 7, 2023, the TRA was amended as part of the Reorganization, and it may be further amended or supplemented from time to time. Under the November 7, 2023 amendment, the parties agreed to reduce our future obligation to pay 85% of the realized tax benefits subject to the TRA to 75% of such realized tax benefits. Therefore, under the TRA, we will be required to make cash payments to the Members and their permitted transferees equal to 75% of certain attributed tax benefits, if any, that we actually realize. The amount of cash payments that we will be required to make under the TRA may be significant.
For the years ended December 31, 2025, 2024 and 2023, we recorded expenses associated with the TRA in total other expense, net of $6.6 million, $50.7 million and $3.1 million, respectively, as a result of the realization of cash tax savings from the TRA attributes for those years. As of December 31, 2025 and 2024, we had a TRA liability of $57.5 million and $53.9 million, respectively. Should we determine that deferred tax assets (“DTAs”) subject to the TRA with a valuation allowance are realizable in a future period, the related valuation allowance will be reversed and if a resulting TRA payment is determined to be probable, a corresponding liability will be recorded. As a result, our future results of operations and earnings could be significantly impacted by these matters. However, if the tax attributes are not utilized in future years, it is reasonably possible no amounts would be paid under the TRA. If utilization of our DTAs becomes more-likely-than-not in the future, at such time, we could incur obligations approximating the $129.1 million unrecorded contingent TRA liability as of December 31, 2025.
The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing and amount of our taxable income and the tax rate in effect at the time of realization of the taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from the use of the TRA’s attributes).
In certain cases, payments under the TRA to the Members or their permitted transferees may be accelerated or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the TRA.
The TRA continues to provide that upon certain mergers, asset sales, other forms of business combinations or other changes of control or if, at any time, we elect an early termination of the TRA, then our obligations under the TRA to make payments would be based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the TRA. The parties agreed that there was no change of control from the Reorganization.
As a result of the foregoing, we could be required to make payments under the TRA that (i) are greater than the actual benefits we ultimately realize in respect of the tax benefits that are subject to the TRA and (ii) are based on the present value of the anticipated future tax benefits that are the subject of the TRA, which payment may be required to be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, our obligations under the TRA could have a substantial negative impact on our liquidity and could have the effect of delaying or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. There can be no assurance that we will be able to fund or finance our obligations under the TRA.
We will not be reimbursed for any payments made to the Members or their permitted transferees under the TRA in the event that any tax benefits are disallowed.
Payments under the TRA will be based on the tax reporting positions that we determine, and the Internal Revenue Service or another tax authority may challenge all or part of the tax benefits we claim, as well as other related tax positions we take, and a court could sustain such challenge. If the outcome of any such challenge would reasonably be expected to materially adversely affect a recipient’s rights or obligations (including the amount or timing of payments) under the TRA, then we will not be permitted to settle or fail to contest such challenge without the consent of the Members. We will not be reimbursed for any cash payments previously made to the Members or their permitted transferees under the TRA in the event that any tax benefits initially claimed by us and for which payment has been made to the Members or their permitted transferees are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by us to the Members or their permitted transferees will be netted against any future cash payments that we might otherwise be required to make to Members or their permitted transferees under the terms of the TRA. However, we might not determine that we have effectively made an excess cash payment to the Members or their permitted transferees for a number of years following the initial time of such payment. As a result, payments could be made under the TRA in excess of the tax savings that we ultimately realize in respect of the tax attributes with respect to the Members or their permitted transferees.
Risks Related to Our Class A Common Stock
The Amneal Group owns nearly a majority of our outstanding Class A Common Stock. The interests of the Amneal Group may differ from the interests of our other stockholders.
As of December 31, 2025, the Amneal Group controlled approximately 48% of the voting power of all of our outstanding shares of common stock. Accordingly, the Amneal Group has substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation, or sale of all or substantially all of our assets or any other significant corporate transactions. These stockholders could also play a significant role in delaying or
preventing a change of control of the Company, even if such a change of control would benefit our other stockholders. This concentrated control could discourage a potential investor from seeking to acquire Class A common stock and, as a result, might harm the market price of that Class A common stock.
Pursuant to the Third Amended and Restated Stockholders Agreement, dated November 7, 2023 (as amended to date, the “Stockholders Agreement”), the Amneal Group has the ability to designate and elect a number of directors to our board of directors (the “Board of Directors”) equal to the to the product of (x) the percentage of the shares of our common stock beneficially owned by Amneal Group and (y) the total number of directors comprising the Board of Directors, rounded up to the nearest whole number, provided, that such rounding shall not result in the Amneal Group having the right to designate a majority of the total number of directors comprising the Board of Directors when the Amneal Group beneficially owns 50% or less of the outstanding shares of our common stock. As of December 31, 2025, five of ten members of our Board have been designated by the Amneal Group. The Amneal Group has significant influence over all matters submitted to our stockholders for approval, including changes in capital structure, transactions requiring stockholder approval under Delaware law and corporate governance, subject to the terms of the Stockholders Agreement relating to the Amneal Group's agreement to vote in favor of directors not designated by the Amneal Group and such other matters that are set forth in the Stockholders Agreement. The Amneal Group may have different interests than our other stockholders and may make decisions adverse to such interests.
In the ordinary course of their business activities, the Amneal Group may engage in activities where their interests conflict with our interests or those of our other stockholders. Our certificate of incorporation provides that the Amneal Group have no duty to refrain from engaging in the same business activities or similar business activities or lines of business in which we operate. The Amneal Group also may pursue business opportunities with any of our clients, customers or vendors that may be com plementary to our business and, as a result, those acquisition opportunities may not be available to us.
The Amneal Group could also transfer its significant holdings in us to a third-party by transferring its shares. In addition, members of the Amneal Group have pledged shares of our Class A common stock to secure borrowings, and other members of the Amneal Group could enter into similar arrangements. In connection with these arrangements, we have entered into agreements with certain Amneal Group members and the lending institutions to whom their securities may be pledged. The voluntary or forced sale of some or all of these shares pursuant to a margin call or otherwise could cause our stock price to decline and negatively impact our business.
Future sales of shares by the Amneal Group could cause our Class A Common Stock price to decline.
The significant amount of our Class A common stock held by the Amneal Group is eligible for sale or transfer (subject to certain continuing restrictions). The Amneal Group may elect to sell their shares. If some or all of these shares are sold, or if it is perceived that they will be sold, the trading price of our Class A common stock could decline.
We are a holding company with nominal net worth and depend on dividends and distributions from our subsidiaries.
We are a holding company with nominal net worth and will not have any material assets or conduct any business operations other than our investments in our subsidiaries. Our business operations are conducted primarily out of our direct operating subsidiary, Amneal, and its subsidiaries. As a result, our ability to satisfy our financial obligations and, notwithstanding any restrictions on payment of dividends under our existing indebtedness, our ability to pay dividends, if any, is dependent upon cash dividends and distributions or other transfers from our subsidiaries, including from Amneal.
We do not anticipate that we will pay any cash dividends in the foreseeable future.
We expect that we will retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our Class A common stock will be the sole source of gain for our stockholders for the foreseeable future. The payment of future cash dividends, if any, will be at the discretion of our Board of Directors and will be dependent upon our earnings, financial condition, capital requirements and other factors as our Board of Directors may deem relevant.
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 and under the heading Forward-Looking Statements in this Annual Report on Form 10-K. The following discussion and analysis, as well as other sections in this report, should be read in conjunction with the consolidated financial statements and related notes to consolidated financial statements included elsewhere herein.
For a discussion of our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, see “Results of Operations” and “Liquidity and Capital Resources” under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission on February 28, 2025.
Overview
Segments
We have three reportable segments: Affordable Medicines, Specialty, and AvKARE.
Affordable Medicines
Our Affordable Medicines segment includes over 280 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. We focus on developing products that have substantial barriers-to-entry due to 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 our financial results. The entrance into the market of additional competition generally has a negative impact on the volume and/or pricing of the affected products. Additionally, pricing is determined by market place dynamics and is often affected by factors outside of our 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 disorders, including Parkinson’s disease, and endocrine disorders. Significant products within our Specialty segment include CREXONT ® (combination of carbidopa and levodopa extended release capsules), RYTARY ® (extended release oral capsule formulation of carbidopa-levodopa), UNITHROID ® (levothyroxine sodium), and Brekiya ® (dihydroergotamine mesylate) injection. In September 2024, we began selling CREXONT ® , which is indicated for the treatment of Parkinson’s disease, Parkinson’s disease caused by infection or inflammation of the brain, or Parkinson’s disease-like symptoms that may result from carbon monoxide or manganese
poisoning in adults. RYTARY ® is indicated for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or manganese intoxication. UNITHROID ® , indicated for the treatment of hypothyroidism, is sold under a license and distribution agreement with Jerome Stevens Pharmaceuticals, Inc.
New product launches are an important growth driver. Brekiya ® autoinjector, approved by the FDA in May 2025 and launched in the U.S. in October 2025, is the first and only ready-to-use autoinjector formulation of dihydroergotamine mesylate indicated for the acute treatment of migraine, with or without aura, and for the acute treatment of cluster headache in adults.
Our Specialty products are marketed through skilled specialty sales and marketing teams, who call on neurologists, movement disorder specialists, endocrinologists and primary care physicians throughout the U.S. Our Specialty segment also has other product candidates that are in varying stages of development.
For Specialty products, the majority of such products’ 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 substantial and rapid declines in the branded product’s sales. In 2025, an authorized generic version of RYTARY ® was launched, and the Company anticipates multiple generic versions of RYTARY ® to be introduced in the future.
In 2025, CREXONT ® continued to grow within our Specialty segment. CREXONT ® was added to three large national formularies, which expanded total U.S. insurance coverage from about 30% of covered lives at the end of 2024 to over 50% at the end of 2025. In December 2025, we announced new positive interim results from our ongoing Phase 4 ELEVATE-PD study, including significant increases in daily “Good On” time and reductions in “Off” time.
AvKARE
Our AvKARE segment provides pharmaceuticals primarily to governmental agencies, predominantly focused on serving the U.S. Department of Defense and the U.S. Department of Veterans Affairs. AvKARE is also a re-packager of bottle and unit dose pharmaceuticals and vitamins under the registered names of AvKARE and AvPAK. AvKARE is also a wholesale distributor of pharmaceuticals, over the counter drugs and medical supplies to its retail and institutional customers that are located throughout the U.S. focused primarily on entities that provide care to low-income and uninsured patients. Operating results for the sale of Amneal products by AvKARE are included in our Affordable Medicines reportable segment.
Certain Market, Industry, and Geopolitical Factors
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 Item 1. Business and Item 1A. Risk Factors in this Form 10-K.
Inflation
While it is difficult to accurately measure the impact of inflation, we estimate our business did not experience a material increase in costs due to inflation for the year ended December 31, 2025. We do not expect a material impact related to inflation for the year ending December 31, 2026. Notwithstanding our estimates, rising inflationary pressures due to higher input costs, including higher material, transportation, labor and other costs, could exceed our expectations and may adversely impact our operating results in future periods.
Trade Policy and Tariffs
We are subject to certain trade and tariff requirements imposed by the U.S. and various foreign governments. The great majority of our net sales rely on FDF or API produced in the U.S. or India. We have limited reliance on imports from Europe and China, and no reliance on imports from Mexico or Canada.
Since taking office in 2025, President Trump has announced a number of tariff actions, and while there are currently no reciprocal tariffs on pharmaceutical products imported into the U.S., this can change at any moment. On February 1, 2025, the Administration imposed a 10% tariff on all products from China under the International Emergency Economic Powers Act , (50 U.S.C. 1701 et seq) (the “IEEPA”), and related authorities as announced in the Federal Register Notice and Executive Order 14195 dated February 1, 2025 (as amended). On February 20, 2026, the Supreme Court of the United States issued an opinion
ruling that President Trump’s tariffs exceeded presidential authority under the IEEPA, which had the effect of invalidating the tariffs imposed thereunder to date.
On April 14, 2025, the Department of Commerce Bureau of Industry and Security (“DOCBIS”) announced that it had initiated, as of April 1, 2025, a broad investigation under section 232 of the Trade Expansion Act to determine the effects on national security of imports of pharmaceuticals (i.e. FDF, API, key starting materials, derivatives, and medical countermeasures), including whether trade remedies such as tariffs should be imposed. This investigation covers both generic and brand products. On September 26, 2025, DOCBIS announced that it had initiated, as of September 2, 2025, a separate Section 232 national security investigation of imports of personal protective equipment, medical consumables (including syringes and intravenous bags), and medical equipment (including devices). These Section 232 investigations are ongoing. On February 20, 2026, President Trump imposed a 10% global tariff for 150 days under Section 122 of the Trade Act of 1974 . FDF and API are exempt from the Section 122 tariff as of the date of this filing.
Given the global nature of pharmaceutical supply chains, any changes to historically prevailing tariff requirements could impact us and our industry by increasing costs, affecting product availability, and/or disrupting supply chains. The Company is closely monitoring these tariff and trade developments and will take actions to reduce or minimize any material negative impact.
One Big Beautiful Bill Act
On July 4, 2025, President Trump signed OBBBA, which includes a broad range of tax reform provisions affecting businesses, including, but not limited to, extending or making permanent certain business and international tax measures initially established under the 2017 Tax Cuts and Jobs Act and eliminating the requirement to capitalize and amortize U.S.-based research and experimental expenditures over five years, making these expenditures fully deductible in the period incurred. These provisions resulted in a reduction of the Company’s current income tax liabilities of $7.8 million during the year ended December 31, 2025.
Results of Operations
Consolidated Results
The following table sets forth our summarized, consolidated results of operations (dollars in thousands):
Years Ended December 31,
Change
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative
Research and development
Intellectual property legal development expenses
Restructuring and other charges
(Credit) charges related to legal matters, net
Other operating income
Operating income
Total other expense, net
Income (loss) before income taxes
Provision for income taxes
Net income (loss)
nm - not meaningful
Net Revenue
Net revenue for the year ended December 31, 2025 increased 8.0% from the prior year primarily due to:
• Growth in our Affordable Medicines segment of $60.3 million, primarily due to new products launched in 2025 and 2024, which contributed $122.6 million of year-over-year growth, and strong volume growth, partially offset by price erosion.
• Growth in our Specialty segment of $82.8 million, primarily driven by increases of $58.1 million and $23.7 million of CREXONT ® and UNITHROID ® , respectively, and growth in our non-promoted products. This growth was partially offset by a year-over-year decrease of $6.0 million in out-licensing revenue associated with IPX203.
• Growth in our AvKARE segment of $81.8 million, primarily driven by g rowth in our government label channel resulting from new product introductions, partially offset by a decline in our lower margin distribution channel .
Cost of Goods Sold and Gross Profit
Cost of goods sold increased 7.4% for the year ended December 31, 2025 as compared to the prior year. The increase in cost of goods sold was primarily due to increased sales volume from all segments, impairment charges related to non-promoted products of $22.8 million, and increased plant and freight costs, partially offset by manufacturing efficiencies.
Gross profit as a percentage of net revenue increased to 36.9% for the year ended December 31, 2025 from 36.5% in the prior year, primarily as a result of the factors noted above and favorable product mix, as low margin distribution sales decreased.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2025 increased 10.6% as compared to the prior year primarily due to increases in employee compensation and launch costs associated with CREXONT ® and the Brekiya ® autoinjector.
Research and Development
Research and development (“R&D”) expenses for the year ended December 31, 2025 decreased 2.4% from the prior year primarily due to a decrease in in-licensing and upfront milestone payments of $7.5 million, partially offset by an increase in employee compensation.
(Credit) Charges Related to Legal Matters, Net
For the year ended December 31, 2024, (credit) charges related to legal matters, net of $96.7 million were primarily associated with an Affordable Medicines settlement in principle on the primary financial terms for a nationwide resolution to the opioids cases that have been filed and that might have been filed against us by political subdivisions and Native American tribes across the U.S. Refer to Note 19. Commitments and Contingencies for additional information .
Other Operating Income
Other operating income for the year ended December 31, 2025 was primarily comprised of income earned from the India Production Linked Incentive Scheme for the Pharmaceutical Sector (the “PLI Scheme”).
Total Other Expense, Net
Total other expense, net decreased 16.2% for the year ended December 31, 2025. The decrease was primarily driven by a $44.1 million favorable year‑over‑year change in tax receivable agreement liability during the year (see Note 5. Income Taxes ), a $17.5 million decrease in interest expense due to lower interest rates and lower outstanding balances on our variable‑rate debt, and favorable foreign currency movements, primarily related to the Euro, partially offset by a $31.4 million loss recognized in connection with the refinancing of our debt in August 2025 (see Note 14. Debt ).
Provision For Income Taxes
The provision for income taxes was $11.3 million and $18.9 million for the years ended December 31, 2025 and 2024 , respectively. The effective tax rates for the years ended December 31, 2025 and 2024 were 8.1% and (34.3)%, respectively. The year-over-year changes in the provision for income taxes and effective tax rate primarily reflected differences in income by jurisdiction, the impact of OBBBA, and items related to share based compensation in the current year. Refer to Note 5. Income Taxes for additional information.
Affordable Medicines
The following table sets forth the results of operations for our Affordable Medicines segment (dollars in thousands):
Years Ended December 31,
Change
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative
Research and development
Intellectual property legal development expenses
Restructuring and other charges
(Credit) charges related to legal matters, net
Other operating income
Operating income
nm - not meaningful
Net Revenue
Affordable Medicines net revenue for the year ended December 31, 2025 increased 3.6% as compared to the prior year, primarily due to new products launched in 2025 and 2024, which contributed $122.6 million of year-over-year growth, and strong volume growth, partially offset by price erosion.
Cost of Goods Sold and Gross Profit
Affordable Medicines cost of goods sold for the year ended December 31, 2025 increased 5.0% compared to the prior year primarily due to increased sales volume and increased plant and freight costs, partially offset by manufacturing efficiencies.
Affordable Medicines gross profit as a percentage of net revenue decreased to 39.2% for the year ended December 31, 2025 from 40.0% in the prior year as a result of the factors described above.
Selling, General, and Administrative
Affordable Medicines SG&A for the year ended December 31, 2025 increased by 9.9% compared to the prior year primarily due to increases in employee compensation, costs of our international expansion, and shipping costs.
Research and Development
Affordable Medicines R&D expense for the year ended December 31, 2025 decreased 9.2% as compared to the prior year primarily due to decreases in in-licensing and upfront milestone payments of $13.5 million and reduced project spend, partially offset by increased employee compensation.
(Credit) Charges Related to Legal Matters, Net
For the year ended December 31, 2024, the Affordable Medicines charges related to legal matters, net of $96.7 million , were primarily associated with a settlement in principle on the primary financial terms for a nationwide resolution to the opioids cases that have been filed and that might have been filed against us by political subdivisions and Native American tribes across the U.S. Refer to Note 19. Commitments and Contingencies for additional information.
Other Operating Income
Other operating income for the year ended December 31, 2025 was primarily comprised of income earned from the PLI Scheme.
Specialty
The following table sets forth the results of operations for our Specialty segment (dollars in thousands):
Years Ended December 31,
Change
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative
Research and development
Intellectual property legal development expenses
Restructuring and other charges
Other operating income
Operating income
nm - not meaningful
Net Revenue
Specialty net revenue for the year ended December 31, 2025 increased 18.6% as compared to the prior year, primarily driven by increases of $58.1 million and $23.7 million of CREXONT ® and UNITHROID ® , respectively, and growth in our non-promoted products. This growth was partially offset by a year-over-year decrease of $6.0 million in out-licensing revenue associated with IPX203.
Cost of Goods Sold and Gross Profit
Specialty cost of goods sold for the year ended December 31, 2025 increased 21.2% as compared to the prior year primarily due to an impairment charge related to a non-promoted product of $22.1 million (r efer to Note 11. Goodwill and Other Intangible Assets for additional information) and increased sales volume and product mix.
Specialty gross profit as a percentage of net revenue decreased to 53.5% for the year ended December 31, 2025 as compared to 54.5% in the prior year as a result of the factors described above.
Selling, General, and Administrative
Specialty SG&A expense for the year ended December 31, 2025 increased 23.8% as compared to the prior year primarily due to launch costs associated with CREXONT ® and the Brekiya ® autoinjector and increases in employee compensation.
Research and Development
Specialty R&D expense for the year ended December 31, 2025 increased 59.2% as compared to the prior year primarily due to increased in-licensing and upfront milestone payments of $6.0 million and higher project spend.
AvKARE
The following table sets forth the results of operations for our AvKARE segment (dollars in thousands):
Years Ended December, 31
Change
Net revenue
Cost of goods sold
Gross profit
Selling, general and administrative
Operating income
Net Revenue
AvKARE net revenue for the year ended December 31, 2025 increased 12.3% as compared to the prior year primarily driven by g rowth in our government label channel resulting from new product introductions, partially offset by a decline in our lower margin distribution channel .
Cost of Goods Sold and Gross Profit
AvKARE cost of goods sold for the year ended December 31, 2025 increased 6.9% as compared to the prior year primarily due to higher sales in our government label channel and an increase in our inventory provision, partially offset by decreased sales in our lower margin distribution channel.
Gross profit as a percentage of net revenue increased to 19.7% for the year ended December 31, 2025 from 15.6% in the prior year primarily as a result of the factors noted above.
Selling, General, and Administrative
AvKARE SG&A expense for the year ended December 31, 2025 increased 4.1% as compared to the prior year primarily due to increases in employee compensation and shipping costs.
Liquidity and Capital Resources
Our primary source of liquidity is cash generated from operations, available cash and borrowings under debt financing arrangements (as defined and described in Note 14. Debt ), including $595.2 million of available capacity under our 2025 Revolving Credit Facility and $83.0 million of available capacity under the Amended and Restated Rondo Revolving Credit Facility as of December 31, 2025 . We believe these sources are sufficient to fund our planned operations, meet our interest and contractual obligations and provide sufficient liquidity over the next 12 months. However, our ability to satisfy our working capital requirements and debt obligations will depend upon economic conditions, our ability to negotiate and maintain satisfactory terms under our borrowing and debt facilities in the future, and demand for our products, which are factors that may be out of our control. Our primary uses of capital resources are to fund operating activities, including R&D expenses associated with new product filings, and pharmaceutical product manufacturing expenses, license payments, spending on production facility expansions, capital equipment, acquisitions, and legal settlements.
We estimate that we will invest approximately $110.0 million during 2026 for capital expenditures to support and grow our existing operations, primarily related to investments in manufacturing equipment, IT and facilities. Our 2026 estimate is net of expected contributions from Metsera, Inc. under our collaboration and supply agreement.
Debt Instruments
Over the next 12 months, we expect to make substantial payments for monthly interest and quarterly principal amounts due for our Term Loan Due 2032, semi-annual interest payments on our Senior Notes Due 2032, and contractual payments for leased premises. Refer to Note 14. Debt , Note 16. Leases, and Commitments and Contractual Obligations under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
Annually, we are also required to calculate the amount of excess cash flow payments, as defined in our term loan agreements. Based on the results of the excess cash flows calculations for the years ended December 31, 2025, 2024 and 2023, no excess cash flows principal payments were required.
Civil Prescription Opioid Litigation
In late April 2024, we reached a nationwide settlement in principle on the primary financial terms, with no admission of wrongdoing, for a nationwide resolution to the opioids cases that have been filed and that might have been filed by Attorneys General, political subdivisions and Native American tribes. During July 2025, we deposited an aggregate of $24.2 million into dedicated accounts as a step in the process to finalize a definitive settlement agreement. These deposits remained our property until a definitive settlement agreement was reached and no amounts were disbursed in 2025.
On January 23, 2026, we determined that we will make effective our nationwide agreement to settle a substantial majority of the opioids-related claims brought against us by various states and subdivisions (the “Nationwide Opioids Settlement Agreement”), having previously secured sufficient participation by those states and subdivisions, including all eligible state and territorial Attorneys General and all subdivisions that previously sued us. The Nationwide Opioids Settlement Agreement was effective on January 29, 2026 and we made our first installment payment of $23.8 million to the trust administrator on that date. An additional installment payment of $12.1 million was made on February 26, 2026. Refer to Note 19. Commitments and Contingencies and Note 25. Subsequent Events for additional information.
Tax Receivable Agreement
As part of the Reorganization (as defined in Note 1. Nature of Operations ), our existing tax receivable agreement (“TRA”) was amended to reduce our future obligation to pay 85% of the realized tax benefits subject to the TRA to 75% of such realized benefits. As of December 31, 2025, the unrecorded contingent TRA liability, including the impact of the amendment, was $129.1 million. During the year ended December 31, 2025, we made payments of $3.0 million, associated with the TRA. Subsequent to year‑end, in January 2026, we made TRA payments totaling $38.8 million. These payments had been fully accrued as a liability as of December 31, 2025.
The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing and amount of our taxable income, and the corporate tax rate in effect at the time of realization of our taxable income. The timing and amount of payments may also be accelerated under certain conditions, such as a change of control or other early termination event, which could give rise to our obligation to make TRA payments in advance of tax benefits being realized.
For further information, refer to Part I., Item 1A. Risk Factors and Note 5. Income Taxes .
Tax-related and Other Distributions
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 (the “Rondo Class B Units”) 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 years ended December 31, 2025, 2024 and 2023, we made cash tax and other distributions of $43.8 million, $19.8 million and $14.2 million, respectively, to the AvKARE Sellers. There was no liability for tax and other distributions payable to the AvKARE Sellers as of December 31, 2025 or 2024.
Biosimilar Licensing and Supply Agreement - Denosumab
Pursuant to a licensing and supply agreement with mAbxience S.L. (“mAbxience”) for two denosumab biosimilars referencing Prolia ® and XGEVA ® , the Company paid mAbxience $7.5 million in February 2026 upon the achievement of regulatory milestones. These amounts had been accrued as of December 31, 2025. Refer to Note 4. Alliance and Collaboration for additional information.
Rondo Redeemable Non-Controlling Interests
Beginning on January 1, 2026, the holders of the Rondo Class B Units have a put right to require us to purchase their units for a purchase price that is based on a multiple of Rondo’s earnings before income taxes, depreciation, and amortization subject to
the satisfaction of certain financial targets and other conditions. As of December 31, 2025, no conditions have been met that would make redemption probable or otherwise certain.
Cash Balances
At December 31, 2025, our cash and cash equivalents consist of cash on deposit and highly liquid investments. A portion of our cash flows are derived outside the 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 U.S. may exceed amounts that are insured by the Federal Deposit Insurance Corporation. 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
For a discussio n comparing our cash flows for the fiscal years 2024 to 2023, see Cash Flows under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K.
The following table sets forth our summarized, consolidated cash flows for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
Change
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net increase in cash, cash equivalents, and restricted cash
nm - not meaningful
Cash Flows from Operating Activities
Net cash provided by operating activities was $340.0 million for the year ended December 31, 2025 as compared to $295.1 million for the prior year. Excluding the $52.4 million Opana ER ® antitrustlitigation settlement payment made in the prior year, net cash from operating activities decreased year-over-year as increases in cash earnings and lower interest rates in the current year were more than offset by changes in working capital.
Cash Flows from Investing Activities
Net cash used in investing activities was $112.3 million for the year ended December 31, 2025 as compared to $63.0 million for the prior year. The year-over-year increase in net cash used in investing activities was primarily due to an increase in capital expenditures and deposits for future acquisition of property, plant, and equipment in the current year, partially offset by proceeds from the sale of a subsidiary in the prior year.
Cash Flows from Financing Activities
Net cash used in financing activities of $31.5 million for the year ended December 31, 2025 as compared to $211.8 million for the prior year. The year-over-year decrease in net cash used in financing activities was primarily due to a net increase in cash inflows from debt of $167.3 million, primarily as a result of the refinancing of our debt in the current year (refer to Note 14. Debt ), repayment of notes payable - related party of $44.2 million in the prior year, and cash received from an alliance party of $6.4 million in the current year, partially offset by an increase of $24.0 million in tax and other cash and other distributions to non-controlling interests and an increase in employee payroll tax withholdings on restricted stock unit and performance stock unit vesting of $14.3 million.
Commitments and Contractual Obligations
Our contractual obligations as of December 31, 2025 were as follows (in thousands):
Payments Due by Period
Total
Less
Than 1
Year
Years
Years
More
Than 5
Years
Principal payments on Term Loan Due 2032 (1)
Interest payments on Term Loan Due 2032 (1)
Principal payments on Senior Notes Due 2032 (1)
Interest payments on Senior Notes Due 2032 (1)
Operating lease obligations (2)
Financing lease obligation (3)
Tax receivable agreement liability (4)
Non-cancelable marketing and royalty obligations (5)
Total
(1) A description of our Term Loan Due 2032 and Senior Notes Due 2032, and related debt service and interest requirements is contained in Note 14. Debt. Interest on our Term Loan Due 2032 and Senior Notes Due 2032 was calculated based on applicable rates at December 31, 2025, excluding the impact of our interest rate swap.
(2) Amounts represent future minimum rental payments under non-cancelable facility leases. A discussion of our operating lease obligations is contained in Note 16. Leases .
(3) Amounts primarily represent future minimum rental payments under a non-cancelable financing lease obligation for a production facility in New York. A discussion of our financing lease obligations is contained in Note 16. Leases .
(4) Represents the tax receivable agreement liability as of December 31, 2025. A discussion of our tax receivable agreement, including the unrecorded contingent liability, is contained in Note 5. Income Taxes .
(5) Represents minimum sales and marketing spending obligations, a minimum royalty obligation, and a minimum purchase obligation.
The foregoing table does not include milestone payments potentially payable by us under our collaboration agreements. Such 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 4. Alliance and Collaboration and Note 22. Related Party Transactions.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2025.
Critical Accounting Policies
Our significant accounting policies are described in Note 2. Summary of Significant Accounting Policies .
Included within these policies are certain policies which contain critical accounting estimates and, therefore, have been deemed to be “critical accounting policies.” Critical accounting estimates are those which require management to make assumptions about matters that were uncertain at the time the estimate was made and for which the use of different estimates, which reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur from period to period could have a material impact on our financial condition or results of operations. We have identified the following to be our critical accounting policies: certain sales-related deductions, business combinations, impairment of goodwill and intangible assets, income taxes and contingencies.
Certain Sales-Related Deductions
Our gross product revenue is subject to a variety of deductions, which are estimated and recorded in the same period that the revenue is recognized. Certain deductions represent estimates of rebates related to gross sales for the reporting period and, as such, knowledge and judgment of market conditions and practice are required when estimating the impact of these revenue deductions on gross sales for a reporting period.
Historically, our changes of estimates reflecting actual results or updated expectations have not been material to our overall business. If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our future experience, our results could be materially affected. The sensitivity of our estimates can vary by program, type of customer and geographic location. However, estimates associated with Medicaid rebates and sales returns are most at risk for material adjustment because of the extensive time delay between the recording of the accrual and its ultimate settlement, an interval that can generally range up to one year. Because of this time lag, in any given quarter, our adjustments to actual can incorporate revisions of several prior quarters.
Business Combinations
We account for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. The consolidated financial statements and results of operations reflect an acquired business after the completion of the acquisition. The fair value of the consideration paid is assigned to the underlying net assets of the acquired business based on their respective fair values as determined using a market participant concept. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill.
Intangible assets are amortized over the estimated useful life of the asset. Significant judgments are used in determining the estimated fair values assigned to the assets acquired and liabilities assumed and in determining estimates of useful lives of long-lived assets. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future net cash flows, estimates of appropriate discount rates used to present value expected future net cash flow streams, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream, as well as other factors. These judgments can materially impact the estimates used to allocate acquisition date fair values to assets acquired and liabilities assumed and the future useful lives. For these and other reasons, actual results may vary significantly from estimated results.
Impairment of Goodwill and Intangible Assets
Goodwill
Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to annual impairment testing during the fourth quarter of each year, or more frequent testing if events or circumstances indicate that the carrying amount may not be recoverable.
We may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. In performing this assessment, we consider a range of qualitative factors, which may include general economic conditions, industry performance, our operating outlook, and recent and projected financial performance, among others. If, based on this assessment, we conclude that it is more likely than not that a reporting unit’s fair value exceeds its carrying amount, no further testing is required. If the qualitative assessment does not support that conclusion, we proceed to perform a quantitative impairment test.
When a quantitative test is required, we estimate the fair value of each reporting unit using a combination of income and market approaches. If the reporting unit’s carrying amount exceeds its fair value, we record a goodwill impairment charge equal to the lesser of (i) the total amount of goodwill allocated to that reporting unit or (ii) the amount by which the reporting unit’s carrying amount exceeds its fair value.
Goodwill is allocated and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below the operating segment level. Our reportable segments are the same as the respective operating segments and reporting units. As of December 31, 2025, $366.3 million, $159.7 million, and $69.5 million of goodwill was allocated to our Specialty, Affordable Medicines, and AvKARE segments, respectively. During the fourth quarter of 2025, we performed a qualitative assessment for each reporting unit. There was no impairment of goodwill in any reporting unit for the year ended December 31, 2025. For more information about goodwill, including our annual impairment test, see Note 11. Goodwill and Other Intangible Assets .
The determination of fair value in a quantitative assessment would require us to make significant estimates and assumptions. These estimates and assumptions primarily include but are not limited to: the selection of appropriate peer group companies, the discount rate, terminal growth rates, forecasts of revenue, operating income, depreciation and amortization, restructuring charges and capital expenditures.
Significant judgment is used in determining these assumptions, and changes in any of these assumptions could have a material impact on our consolidated results of operations. Additionally, future events and factors may impact future results and the outcome of subsequent goodwill impairment testing. For a list of these factors, see Item 1A. Risk Factors .
Intangible Assets
We review our long-lived assets, including 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. We evaluate assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value which is generally an expected present value cash flow technique. Our policy in determining whether an impairment indicator exists comprises measurable operating performance criteria as well as other qualitative measures. Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a product in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of the assets. If our assumptions are not correct, there could be an impairmentloss in subsequent periods or, in the case of a change in the estimated useful life of the asset, a change in amortization expense.
Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairmentloss is recognized in an amount equal to that excess. We consider many factors in evaluating whether the value of its intangible assets with indefinite lives may not be recoverable, including, but not limited to the discount rate, terminal growth rates, general economic conditions, our outlook and market performance of our industry and recent and forecasted financial performance.
For the year ended December 31, 2025, we recognized $22.8 million of intangible asset impairment charges in cost of goods sold. The charges primarily related to a Specialty segment product right for which the Company significantly reduced the cash flow forecast after receipt of a complete response letter dated July 22, 2025 from the U.S. Food and Drug Administration regarding a supplemental new drug application. For the year ended December 31, 2024, intangible asset impairment charges were not material.
Income Taxes
We record valuation allowances against our DTAs when it is more likely than not that all or a portion of a DTA will not be realized. We routinely evaluate the realizability of our DTAs by assessing the likelihood that our DTAs will be recovered based on all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions, including projected new product launches, revenue growth, and operating margins, among others.
A valuation allowance, if needed, reduces DTAs to the amount expected to be realized. When determining the amount of net DTAs that are more likely than not to be realized, we assess all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, projected future earnings, carryback and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a DTA. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income to outweigh objective negative evidence of recent financial reporting losses.
As of December 31, 2025, based upon all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax loss and income 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, we determined that it is more likely than not that we will not realize the benefits of our gross DTAs. Accordingly, as of December 31, 2025, this valuation allowance was $586.6 million and reduced the carrying value of these gross DTAs, net of the impact of the reversal of taxable temporary differences, to zero.
As described in Item 1A. Risk Factors and Note 5. Income Taxes , we are a party to a TRA under which we are generally required to pay to the Amneal Group 75% of the applicable tax savings, if any, in U.S. federal and state income tax that we are deemed to realize and that are created as a result of tax benefits attributable to payments made under the TRA.
The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing and amount of our taxable income, and the tax rate in effect at the time of realization of the our taxable income. Because the Amneal Group has sold or exchanged all of their Amneal Common Units, effective with the Reorganization, there is no longer the associated risk of increased future obligations under the TRA (i.e., there cannot be further sales or exchanges giving rise to increased TRA liability occurring subsequent to December 31, 2023).
The projection of future taxable income involves significant judgment. Actual taxable income may differ materially from our estimates, which could significantly impact the timing and payment of the TRA. As noted above, we have determined it is more-likely-than-not we will be unable to utilize all of our DTAs subject to the TRA; and, as of December 31, 2025 and 2024, we had not recognized the entire contingent liability under the TRA related to the tax savings we may realize from Amneal Common Units sold or exchanged. If utilization of these DTAs becomes more-likely-than-not in the future, at such time, these contingent TRA liabilities (which amount to approximately $129.1 million as of December 31, 2025, as a result of basis adjustments under Internal Revenue Code Section 754) will be recorded through charges to our 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 in excess of the $57.5 million accrued as of December 31, 2025. Should we 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.
Contingencies
We are involved in various litigation, government investigations and other legal proceedings that arise from time to time in the ordinary course of business. Our legal proceedings are complex, constantly evolving and subject to uncertainty. As such, we cannot predict the outcome or impact of our legal proceedings.
While we believe we have valid claims and/or defenses for the matters described in Note 19. Commitments and Contingencies, the nature of litigation is unpredictable and the outcome of the proceedings could include damages, fines, penalties and injunctive or administrative remedies. For any proceedings where losses are probable and reasonably capable of estimation, we accrue for a potential loss. When we have 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, we record the loss at the low end of the range. While these accruals have been deemed reasonable by our management, the assessment process relies heavily on estimates and assumptions that may ultimately prove inaccurate or incomplete. Additionally, unforeseen circumstances or events may lead us to subsequently change our estimates and assumptions. The process of analyzing, assessing and establishing reserve estimates relative to legal proceedings involves a high degree of judgment.
The ultimate resolution of any or all claims, legal proceedings or investigations are inherently uncertain and difficult to predict, could differ materially from our estimates and could have a material adverse effect on our results of operations and/or cash flows in any given accounting period, or on our overall financial condition.
For further details, refer to Note 19. Commitments and Contingencies .
Recently Issued Accounting Standards
Recently issued accounting standards are discussed in Note 2. Summary of Significant Accounting Policies .
