BUSINESS COMBINATION

12 Months Ended

Dec. 31, 2023

On November 19, 2021, the Company acquired all of the interests of Novitium pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 2021. This acquisition was accounted for as a business combination.

The total consideration consisted of cash of approximately $88.1 million, 2,466,654 restricted shares of common stock valued at $91.2 million, and up to $46.5 million in additional contingent consideration. Additionally, the Company agreed to pay certain debts of Novitium in the amount of $8.5 million. The contingent consideration is based on the achievement of certain milestones, including milestones on gross profit of Novitium portfolio products over a 24-month period, regulatory filings completed during this 24-month period, and a percentage of net profits on certain products that are launched in the future. As of the acquisition date, the contingent consideration had a fair value of $30.8 million. Total consideration including cash, restricted shares and contingent consideration, net of cash acquired of $12.1 million was $206.5 million at the date of purchase.

The fair value of the contingent consideration was $24.0 million and $35.1 million as of December 31, 2023 and 2022, respectively. Refer to Note 10 for changes in contingent consideration and changes in fair value.

The cash consideration was funded in part by borrowings under the credit facility (Note 5) and through issuance of convertible preferred stock shares. Concurrently with the execution of the Merger Agreement, the Company entered into an Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership (the “PIPE Investor”), pursuant to which the PIPE Investor agreed to purchase, 25,000 shares of the Company's Series A Convertible Preferred Stock (the “PIPE Shares”), for a purchase price of $1,000 per share and an aggregate purchase price of $25.0 million on November 19, 2021 (Note 11).

The acquisition of Novitium was completed due to its proven track record of being a research and development growth engine capable of fueling sustainable growth, to expand the research and development pipeline via niche opportunities, to enhance the contract development and manufacturing organization (“CDMO”) business and U.S. based manufacturing capacity, and to diversify the Company's revenue base.

The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates. In connection with the acquisition, $46.9 million of indefinite-lived in-process research and development intangible assets, $67.4 million of acquired ANDA intangible assets, $24.9 million of customer relationship intangible assets, and goodwill of $24.6 million was recognized. Goodwill is considered an indefinite-lived asset and relates primarily to intangible assets that do not qualify for separate recognition, such as the assembled workforce and synergies between the entities. Goodwill established as a result of the acquisition is tax deductible in the U.S.

Novitium operations generated $149.9 million and $90.3 million of revenue during the years ended December 31, 2023 and 2022, respectively.

Transaction Costs

In conjunction with the acquisition, approximately $9.4 million in transaction costs were expensed during the year ended 2022 as selling, general, and administrative expense in the consolidated statement of operations.

Restricted Shares

The Novitium acquisition consideration included 2,466,654 restricted shares, which were valued at $91.2 million. These shares contained restrictions on their transfer for periods from three to twenty-four months following the completion of the acquisition. A Finnerty model was used to value the restricted shares. It includes inputs of not readily observable market data, which are Level 3 inputs. These unobservable inputs include ANI stock volatility with a range of 65% to 71%, and the discounted lack of marketability with a range of 7.5% to 21.5% depending on the length of restriction.

Pro Forma Consolidated Financial Information (unaudited)

The following unaudited pro forma consolidated financial information summarizes the results of operations for the periods indicated as if the Novitium acquisition had been completed as of January 1, 2020.


	Year Ended December 31,
(in thousands)	2021
Net revenues	$	272,888
Net loss	$	(31,740)