AMNEAL PHARMACEUTICALS, INC., 10-Q filed on 11/7/2019
Quarterly Report
v3.19.3
Document And Entity Information - shares
9 Months Ended
Sep. 30, 2019
Oct. 31, 2019
Entity Information [Line Items]    
Entity Registrant Name Amneal Pharmaceuticals, Inc.  
Entity Central Index Key 0001723128  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Type 10-Q  
Document Period End Date Sep. 30, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Current Reporting Yes  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Entity Tax Identification Number 32-0546926  
Entity File Number 001-38485  
Entity Address, Address Line One Amneal Pharmaceuticals, Inc.  
Entity Address, Address Line Two 400 Crossing Boulevard  
Entity Address, City or Town Bridgewater  
Entity Address, State or Province NJ  
Entity Address, Postal Zip Code 08807  
City Area Code 908  
Local Phone Number 947-3120  
Document Quarterly Report true  
Document Transition Report false  
Entity Incorporation, State or Country Code DE  
Title of 12(b) Security Class A Common Stock, par value $0.01 per share  
Security Exchange Name NYSE  
Trading Symbol AMRX  
Class A Common Stock    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding (in shares)   134,095,850
Class B Common Stock    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding (in shares)   165,004,323
v3.19.3
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Income Statement [Abstract]        
Net revenue $ 378,283 $ 476,487 $ 1,229,045 $ 1,165,463
Cost of goods sold 267,717 268,567 873,841 634,653
Cost of goods sold impairment charges 56,132 7,815 112,441 7,815
Gross profit 54,434 200,105 242,763 522,995
Selling, general and administrative 63,797 75,486 215,514 156,610
Research and development 38,125 42,349 139,999 136,893
In-process research and development impairment charges 23,382 650 46,169 650
Charges (gains) related to legal matters, net 14,750 2,589 14,750 (411)
Intellectual property legal development expenses 2,586 4,401 9,263 13,024
Acquisition, transaction-related and integration expenses 3,131 2,231 12,682 216,873
Restructuring and other charges 20,937 (2,156) 29,933 42,309
Operating (loss) income (112,274) 74,555 (225,547) (42,953)
Other income (expense):        
Interest expense, net (42,209) (43,018) (129,376) (100,691)
Foreign exchange loss, net (12,531) (5,137) (9,684) (22,518)
Loss on extinguishment of debt 0 0 0 (19,667)
(Loss) gain on sale of international businesses, net 0 (2,812) 6,930 (2,812)
Gain from reduction of tax receivable agreement liability 192,844 0 192,844 0
Other income (expense), net 446 (1,014) 1,702 725
Total other income (expense), net 138,550 (51,981) 62,416 (144,963)
Income (loss) before income taxes 26,276 22,574 (163,131) (187,916)
Provision for (benefit from) income taxes 389,668 5,109 375,539 (6,943)
Net (loss) income (363,392) 17,465 (538,670) (180,973)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre- Combination 0 0 0 (148,806)
Less: Net loss (income) attributable to non-controlling interests (98,386) 10,577 (208,881) (21,191)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest (265,006) 6,888 (329,789) (10,976)
Accretion of redeemable non-controlling interest 0 64 0 (1,176)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. $ (265,006) $ 6,952 $ (329,789) $ (12,152)
Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:        
Class A and Class B-1 basic $ (2.03) $ 0.05 $ (2.56) $ (0.10)
Class A and Class B-1 diluted $ (2.03) $ 0.05 $ (2.56) $ (0.10)
Weighted-average common shares outstanding:        
Class A and Class B-1 basic 130,729 127,247 128,822 127,196
Class A and Class B-1 diluted 130,729 128,222 128,822 127,196
v3.19.3
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Sep. 30, 2019
Sep. 30, 2018
Statement Of Other Comprehensive Income [Abstract]        
Net (loss) income $ (363,392) $ 17,465 $ (538,670) $ (180,973)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre- Combination 0 0 0 148,806
Less: Net loss (income) attributable to non-controlling interests 98,386 (10,577) 208,881 21,191
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest (265,006) 6,888 (329,789) (10,976)
Accretion of redeemable non-controlling interest 0 64 0 (1,176)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. (265,006) 6,952 (329,789) (12,152)
Other comprehensive income (loss):        
Foreign currency translation adjustments arising during the period 4,997 (7,939) 4,014 (8,964)
Less: Reclassification of foreign currency translation adjustment included in net loss 0 0 3,413 0
Foreign currency translation adjustments, net 4,997 (7,939) 7,427 (8,964)
Less: Other comprehensive income attributable to Amneal Pharmaceuticals LLC pre-Combination 0 0 0 (1,721)
Less: Other comprehensive (income) loss attributable to non-controlling interests (2,813) 4,555 (4,207) 6,131
Other comprehensive income (loss) attributable to Amneal Pharmaceuticals, Inc. 2,184 (3,384) 3,220 (4,554)
Comprehensive (loss) income attributable to Amneal Pharmaceuticals, Inc. $ (262,822) $ 3,568 $ (326,569) $ (16,706)
v3.19.3
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 212,738 $ 213,394
Restricted cash 4,320 5,385
Trade accounts receivable, net 518,109 481,495
Inventories 401,827 457,219
Prepaid expenses and other current assets 66,699 128,321
Related party receivables 2,138 830
Total current assets 1,205,831 1,286,644
Property, plant and equipment, net 490,712 544,146
Goodwill 419,671 426,226
Intangible assets, net 1,435,801 1,654,969
Deferred tax asset, net   373,159
Operating lease right-of-use assets 71,385  
Other assets 18,607 67,592
Total assets 3,703,943 4,352,736
Current liabilities:    
Accounts payable and accrued expenses 495,857 514,440
Current portion of long-term debt, net 21,468 21,449
Related party payables 765 17,695
Total current liabilities 534,910 553,850
Long-term debt, net 2,614,412 2,630,598
Deferred income taxes 0 1,178
Liabilities under tax receivable agreement   192,884
Other liabilities 38,532 38,780
Total long-term liabilities 2,773,309 2,902,523
Commitments and contingencies (Notes 5, 11 and 13)
Stockholders' Equity    
Preferred stock, $0.01 par value, 2,000 shares authorized; none issued at both September 30, 2019 and December 31, 2018 0 0
Additional paid-in capital 565,641 530,438
Stockholders' accumulated deficit (345,752) (20,920)
Accumulated other comprehensive loss (4,879) (7,755)
Total Amneal Pharmaceuticals, Inc. stockholders' equity 218,001 504,750
Non-controlling interests 177,723 391,613
Total stockholders' equity 395,724 896,363
Total liabilities and stockholders' equity 3,703,943 4,352,736
Common Class A    
Stockholders' Equity    
Common stock 1,340 1,151
Common Class B    
Stockholders' Equity    
Common stock 1,651 1,713
Common Class B-1    
Stockholders' Equity    
Common stock   123
Excluding Related Party    
Current assets:    
Operating lease right-of-use assets 56,455  
Current liabilities:    
Current portion of operating lease liabilities 13,467  
Operating lease liabilities 44,375  
Related Party    
Current assets:    
Operating lease right-of-use assets 14,930  
Financing lease right-of-use assets - related party 61,936  
Current liabilities:    
Current portion of operating lease liabilities 2,299  
Current portion of operating and financing lease liabilities - related party 3,353  
Current portion of financing obligation - related party   266
Operating lease liabilities 14,271  
Financing lease liabilities - related party $ 61,719  
Financing obligation - related party   $ 39,083
v3.19.3
Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2019
Dec. 31, 2018
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 2,000,000 2,000,000
Preferred stock, shares issued (in shares) 0 0
Class A Common Stock    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 900,000,000 900,000,000
Common stock, shares issued (in shares) 134,090,000 115,047,000
Common stock, shares outstanding (in shares) 134,090,000 115,047,000
Class B Common Stock    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 300,000,000 300,000,000
Common stock, shares issued (in shares) 165,005,000 171,261,000
Common stock, shares outstanding (in shares) 165,005,000 171,261,000
Class B-1 Common Stock    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 18,000,000 18,000,000
Common stock, shares issued (in shares) 0 12,329,000
Common stock, shares outstanding (in shares) 0 12,329,000
v3.19.3
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2019
Sep. 30, 2018
Cash flows from operating activities:    
Net loss $ (538,670) $ (180,973)
Adjustments to reconcile net loss to net cash used in operating activities:    
Gain from reduction of tax receivable agreement liability (192,884) 0
Depreciation and amortization 152,932 89,910
Amortization of Levothyroxine Transition Agreement asset 36,393 0
Unrealized foreign currency loss 10,552 21,560
Amortization of debt issuance costs 4,849 4,220
Loss on extinguishment of debt 0 19,667
(Gain) loss on sale of international businesses, net (6,930) 2,812
Intangible asset impairment charges 158,610 8,474
Non-cash restructuring and asset-related charges 11,923 0
Deferred tax provision (benefit) 371,683 (9,111)
Stock-based compensation and PPU expense 16,666 163,991
Inventory provision 67,844 20,755
Other operating charges and credits, net 5,945 (1,955)
Changes in assets and liabilities:    
Trade accounts receivable, net (46,457) (74,711)
Inventories (25,906) (53,708)
Prepaid expenses, other current assets and other assets 41,256 9,803
Related party receivables (1,305) 10,828
Accounts payable, accrued expenses and other liabilities (13,932) (26,858)
Related party payables 25 (14,125)
Net cash provided by (used in) operating activities 52,594 (9,421)
Cash flows from investing activities:    
Purchases of property, plant and equipment (42,664) (63,065)
Acquisition of product rights and licenses (50,000) (14,000)
Acquisitions, net of cash acquired 0 (324,634)
Proceeds from surrender of corporate owned life insurance 43,017 0
Proceeds from sale of international businesses, net of cash sold 34,834 0
Net cash used in investing activities (14,813) (401,699)
Cash flows from financing activities:    
Payments of deferred financing costs and debt extinguishment costs 0 (54,955)
Proceeds from issuance of debt 0 1,325,383
Payments of principal on debt and capital leases (20,250) (610,482)
Net borrowings on revolving credit line 0 25,000
Proceeds from exercise of stock options 1,385 3,162
Employee payroll tax withholding on restricted stock unit vesting (926) 0
Equity contributions 0 27,742
Capital contribution from non-controlling interest 0 360
Acquisition of non-controlling interest (3,543) (11,775)
Tax distribution to non-controlling interest (13,494) 0
Distributions to members 0 (182,998)
Payments of principal on financing lease - related party (1,118)  
Repayment of related party note 0 (14,842)
Net cash (used in) provided by financing activities (38,535) 506,595
Effect of foreign exchange rate on cash (967) (1,204)
Net (decrease) increase in cash, cash equivalents, and restricted cash (1,721) 94,271
Cash, cash equivalents, and restricted cash - beginning of period 218,779 77,922
Cash, cash equivalents, and restricted cash - end of period 217,058 172,193
Cash and cash equivalents - end of period 212,738 165,192
Restricted cash - end of period 4,320 7,001
Supplemental disclosure of cash flow information:    
Cash paid for interest 121,872 89,075
Cash received (paid) for income taxes, net 11,857 (5,379)
Supplemental disclosure of non-cash investing and financing activity:    
Tax distribution to non-controlling interest 0 35,543
Distribution to members 0 8,562
Related Party    
Cash flows from financing activities:    
Payments of principal on financing lease - related party $ (1,707) $ 0
v3.19.3
Consolidated Statement of Stockholders' Equity / Members' Deficit - USD ($)
shares in Thousands, $ in Thousands
Total
Period Subsequent to the Combination
Period Subsequent to the Combination
Private Placement
Period Subsequent to the Combination
PPU Holders Distribution
Period Prior to the Combination
Common Stock
Class A Common Stock
Common Stock
Class A Common Stock
Period Subsequent to the Combination
Common Stock
Class A Common Stock
Period Subsequent to the Combination
Private Placement
Common Stock
Class A Common Stock
Period Subsequent to the Combination
PPU Holders Distribution
Common Stock
Class B Common Stock
Common Stock
Class B Common Stock
Period Subsequent to the Combination
Common Stock
Class B Common Stock
Period Subsequent to the Combination
Private Placement
Common Stock
Class B Common Stock
Period Subsequent to the Combination
PPU Holders Distribution
Common Stock
Class B-1 Common Stock
Common Stock
Class B-1 Common Stock
Period Subsequent to the Combination
Private Placement
Additional Paid-in Capital
Additional Paid-in Capital
Period Subsequent to the Combination
Additional Paid-in Capital
Period Subsequent to the Combination
Private Placement
Additional Paid-in Capital
Period Subsequent to the Combination
PPU Holders Distribution
Additional Paid-in Capital
Period Prior to the Combination
Members' and Stockholders' Accumulated Deficit
Members' and Stockholders' Accumulated Deficit
Period Subsequent to the Combination
Members' and Stockholders' Accumulated Deficit
Period Prior to the Combination
Accumulated Other Comprehensive (Loss) Income
Accumulated Other Comprehensive (Loss) Income
Period Subsequent to the Combination
Accumulated Other Comprehensive (Loss) Income
Period Subsequent to the Combination
Private Placement
Accumulated Other Comprehensive (Loss) Income
Period Subsequent to the Combination
PPU Holders Distribution
Accumulated Other Comprehensive (Loss) Income
Period Prior to the Combination
Non-Controlling Interests
Non-Controlling Interests
Period Subsequent to the Combination
Non-Controlling Interests
Period Subsequent to the Combination
Private Placement
Non-Controlling Interests
Period Subsequent to the Combination
PPU Holders Distribution
Non-Controlling Interests
Period Prior to the Combination
Members' Equity
Members' Equity
Period Subsequent to the Combination
Members' Equity
Period Prior to the Combination
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                                                        
Cumulative-effective adjustment from adoption of Topic 842 | Adoption of ASU 2014-09 (Topic 606)         $ 4,977                                   $ 4,977                          
Members' equity beginning balance at Dec. 31, 2017 $ (375,582)                             $ 8,562         $ (382,785)     $ (14,232)         $ 10,157         $ 2,716    
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                                                        
Net (loss) income (180,973) $ (32,331)                                       $ (10,976)               $ (21,355)            
Net (loss) income, Period Prior to the Combination (148,806)       (148,709)                                   (148,806)                   $ 97      
Capital contribution from non-controlling interest         360                                                       $ 360      
Distributions to members         (191,560)                             $ (8,562)     $ (182,998)                          
PPU expense         158,757                                                             $ 158,757
Foreign currency translation adjustment (8,964) (10,685)     1,721                                       $ (4,554)     $ 1,721   (6,131)            
Capital contribution by Amneal Holdings for employee bonuses         $ 27,742                                                             $ 27,742
Effect of the Combination   1,483,143         $ 733       $ 2,250           $ 323,589         709,612     9,437         626,737         $ (189,215)  
Effect of the Combination (in shares)             73,289       224,996                                                  
Stock-based compensation   5,234                             5,234                                      
Exercise of stock options   3,162         $ 3                   3,610               (7)         (444)            
Exercise of stock options (in shares)             279                                                          
Redemption of Class B Common Stock     $ 32,714 $ 4,823       $ 345 $ 69     $ (468) $ (69)   $ 123     $ 165,180 $ 24,293             $ (1,965) $ (289)       $ (130,501) $ (19,181)        
Redemption of Class B Common Stock (in shares)               34,520 6,886     (46,849) (6,886)   12,329                                          
Reclassification of redeemable non-controlling interest   (11,708)                                       (1,176)               (10,532)            
Non-controlling interests from acquisition of Gemini   2,518                                                       2,518            
Tax distribution   (35,543)                                                       (35,543)            
Other   (3,714)                             (1,746)                         (1,968)            
Stockholders' equity ending balance at Sep. 30, 2018 915,319         $ 1,150       $ 1,713       $ 123   520,160         (12,152)     (9,889)         414,214              
Shares ending balance (in shares) at Sep. 30, 2018           114,974       171,261       12,329                                            
Increase (Decrease) in Temporary Equity [Roll Forward]                                                                        
Net income   67                                                                    
Reclassification of redeemable non- controlling interest   11,708                                                                    
Acquisition of redeemable non-controlling interest   (11,775)                                                                    
Stockholders' equity beginning balance at Jun. 30, 2018 939,486         $ 1,149       $ 1,713       $ 123   517,122         (19,104)     (6,502)         444,985              
Shares beginning balance (in shares) at Jun. 30, 2018           114,859       171,261       12,329                                            
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                                                        
Net (loss) income 17,465 17,398                                       6,888               10,510            
Net (loss) income, Period Prior to the Combination 0                                                                      
Foreign currency translation adjustment (7,939) (7,939)                                             (3,384)         (4,555)            
Effect of the Combination   (2,329)                             (2,329)                                      
Stock-based compensation   3,590                             3,590                                      
Exercise of stock options   1,185         $ 1                   1,369               $ (3)         (182)            
Exercise of stock options (in shares)             115                                                          
Reclassification of redeemable non-controlling interest   150                                       $ 64               86            
Non-controlling interests from acquisition of Gemini   (531)                                                       (531)            
Tax distribution   (35,543)                                                       (35,543)            
Other   (148)                             $ 408                         $ (556)            
Stockholders' equity ending balance at Sep. 30, 2018 915,319         $ 1,150       $ 1,713       $ 123   520,160         (12,152)     (9,889)         414,214              
Shares ending balance (in shares) at Sep. 30, 2018           114,974       171,261       12,329                                            
Redeemable Noncontrolling Interest, balance at Jun. 30, 2018 11,858                                                                      
Increase (Decrease) in Temporary Equity [Roll Forward]                                                                        
Net income   67                                                                    
Reclassification of redeemable non- controlling interest   (150)                                                                    
Acquisition of redeemable non-controlling interest   $ (11,775)                                                                    
Cumulative-effective adjustment from adoption of Topic 842 | Adoption of Topic 842 13,561                                       4,957               8,604              
Stockholders' equity beginning balance at Dec. 31, 2018 896,363         $ 1,151       $ 1,713       $ 123   530,438         (20,920)     (7,755)         391,613              
Shares beginning balance (in shares) at Dec. 31, 2018           115,047       171,261       12,329                                            
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                                                        
Net (loss) income (538,670)                                       (329,789)               (208,881)              
Net (loss) income, Period Prior to the Combination 0                                                                      
Foreign currency translation adjustment 4,014                                             1,759         2,255              
Stock-based compensation 16,666                             16,666                                        
Exercise of stock options 1,385         $ 2                   922               (7)         468              
Exercise of stock options (in shares)           205                                                            
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (926)         $ 2                   10               (5)         (933)              
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (in shares)           253                                                            
Redemption of Class B Common Stock           $ 62       $ (62)           17,605               (332)         (17,273)              
Redemption of Class B Common Stock (in shares)           6,256       (6,256)                                                    
Conversion of Class B-1 Common Stock           $ 123               $ (123)                                            
Conversion of Class B-1 Common Stock (in shares)           12,329               (12,329)                                            
Tax distribution (82)                                                       (82)              
Reclassification of foreign currency translation adjustment included in net loss 3,413                                             1,461         1,952              
Stockholders' equity ending balance at Sep. 30, 2019 395,724         $ 1,340       $ 1,651           565,641         (345,752)     (4,879)         177,723              
Shares ending balance (in shares) at Sep. 30, 2019           134,090       165,005                                                    
Stockholders' equity beginning balance at Jun. 30, 2019 749,352         $ 1,281       $ 1,710           544,161         (80,746)     (6,750)         289,696              
Shares beginning balance (in shares) at Jun. 30, 2019           128,151       170,941                                                    
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                                                        
Net (loss) income (363,392)                                       (265,006)               (98,386)              
Net (loss) income, Period Prior to the Combination 0                                                                      
Foreign currency translation adjustment 4,997                                             2,184         2,813              
Stock-based compensation 6,095                             6,095                                        
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (5)                             4                         (9)              
Restricted stock unit vesting, net of shares withheld to cover payroll taxes (in shares)           3                                                            
Redemption of Class B Common Stock (223)         $ 59       $ (59)           16,481               (313)         (16,391)              
Redemption of Class B Common Stock (in shares)           5,936       (5,936)                                                    
Other (1,100)                             (1,100)                                        
Stockholders' equity ending balance at Sep. 30, 2019 $ 395,724         $ 1,340       $ 1,651           $ 565,641         $ (345,752)     $ (4,879)         $ 177,723              
Shares ending balance (in shares) at Sep. 30, 2019           134,090       165,005                                                    
v3.19.3
Nature of Operations
9 Months Ended
Sep. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Nature of Operations

1. Nature of Operations

Amneal Pharmaceuticals, Inc., formerly known as Atlas Holdings, Inc. (the "Company"), was formed along with its wholly owned subsidiary, K2 Merger Sub Corporation, a Delaware corporation ("Merger Sub"), on October 4, 2017, for the purpose of facilitating the combination of Impax Laboratories, Inc. (now Impax Laboratories, LLC), a Delaware corporation then listed on the Nasdaq Stock Market ("Impax") and Amneal Pharmaceuticals LLC, a Delaware limited liability company ("Amneal"). The Company is a holding company, whose principal assets are Amneal Common Units.

Amneal was formed in 2002 and operates through various subsidiaries. Amneal is a vertically integrated developer, manufacturer, and seller of generic pharmaceutical products. Amneal’s pharmaceutical research includes analytical and formulation development and stability. Amneal operates principally in the United States, Switzerland, India, and Ireland. Amneal divested its operations in the United Kingdom on March 30, 2019 and Germany on May 3, 2019. For additional information, refer to Note 3. Acquisitions and Divestitures. Amneal sells to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly.

On October 17, 2017, Amneal, Impax, the Company and Merger Sub entered into the Business Combination Agreement, as amended on November 21, 2017 and December 16, 2017 (the "BCA").

On May 4, 2018, pursuant to the BCA, Impax and Amneal combined the generics and specialty pharmaceutical business of Impax with the generic drug development and manufacturing business of Amneal to create the Company as a new generics and specialty pharmaceutical company, through the following transactions (together, the "Combination", and the closing of the Combination, the "Closing"): (i) Merger Sub merged with and into Impax, with Impax surviving as a wholly owned subsidiary of the Company, (ii) each share of Impax’s common stock, par value $0.01 per share ("Impax Common Stock"), issued and outstanding immediately prior to the Closing, other than Impax Common Stock held by Impax in treasury, by the Company or by any of their respective subsidiaries, was converted into the right to receive one fully paid and non-assessable share of Class A common stock of the Company, par value $0.01 per share ("Class A Common Stock"), (iii) Impax converted to a Delaware limited liability company, (iv) the Company contributed to Amneal all of the Company’s equity interests in Impax, in exchange for Amneal common units ("Amneal Common Units"), (v) the Company issued an aggregate number of shares of Class B common stock of the Company, par value $0.01 per share ("Class B Common Stock", and collectively, with the Class A Common Stock and Class B-1 common stock of the Company, par value $0.01 , ("Class B-1 Common Stock"), the "Company Common Stock") to APHC Holdings, LLC, (formerly Amneal Holdings, LLC), the parent entity of Amneal as of the Closing ("Holdings"), and (vi) the Company became the managing member of Amneal.

Immediately upon the Closing, holders of Impax Common Stock prior to the Closing collectively held approximately 25% of the Company and Holdings held a majority interest in the Company with an effective voting interest of approximately 75% on a fully diluted and as converted basis through its ownership of Class B Common Stock. Holdings also held a corresponding number of Amneal Common Units, which entitled it to approximately 75% of the economic interests in the combined businesses of Impax and Amneal. The Company held an interest in Amneal of approximately 25%.

In connection with the Combination, on May 4, 2018, Holdings entered into definitive purchase agreements which provided for a private placement of certain shares of Class A Common Stock and Class B-1 Common Stock (the "PIPE Investment") with select institutional investors (the "PIPE Investors"). Pursuant to the terms of the purchase agreements, upon the Closing, Holdings exercised its right to cause the Company to redeem approximately 15% of its ownership interests in the Company in exchange for 34.5 million shares of Class A Common Stock and 12.3 million unregistered shares of Class B-1 Common Stock (the "Redemption"). The shares of Class A Common Stock and Class B-1 Common Stock received in the Redemption were sold immediately following the Closing by Holdings to the PIPE Investors at a per share purchase price of $18.25 for gross proceeds of $855 million. Following the PIPE Investment, the PIPE Investors owned collectively approximately 15% of the Company Common Stock on a fully diluted and as converted basis.

On May 4, 2018, Holdings also caused Amneal to redeem (the "Closing Date Redemption") 6.9 million of Amneal Common Units held by Holdings for a like number of shares of Class A Common Stock, for future distribution to certain direct and indirect members of Holdings who were or are employees of the Company and to whom were previously issued (prior to the Closing) profit participation units ("PPUs") in Amneal. As a result of the PIPE Investment and Closing Date Redemption, the voting and economic interest of approximately 75% held by Holdings immediately upon Closing was reduced by approximately 18%. The overall interest percentage held by non-controlling interest holders (the "Amneal Group") upon the consummation of the Combination, PIPE Investment and Closing Date Redemption was approximately 57%. As of September 30, 2019 and December 31, 2018, the overall interest percentage held by non-controlling interest holders was approximately 55% and 57%, respectively.

On July 5, 2018, Holdings distributed to its members all Amneal Common Units and shares of Class B Common Stock held by Holdings. As a result, as of September 30, 2019, Holdings did not hold any equity interest in Amneal or the Company.

During the three months ended June 30, 2019, pursuant to the Company's certificate of incorporation, the Company converted all (12.3 million) of its issued and outstanding shares of Class B-1 Common Stock to Class A Common Stock and such shares of Class B-1 Common Stock have been retired and may not be reissued by the Company. The rights of Class A Common Stock and Class B-1 Common Stock are identical, except that the Class B-1 Common Stock had certain director appointment rights and the Class B-1 Common Stock had no voting rights (other than with respect to its director appointment right and as otherwise required by law).

v3.19.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States of America, should be read in conjunction with Amneal’s annual audited financial statements for the year ended December 31, 2018 included in the Company’s 2018 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in annual financial statements have been omitted from the accompanying unaudited consolidated financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of September 30, 2019, cash flows for the nine months ended September 30, 2019 and 2018 and the results of its operations, its comprehensive loss and changes in stockholders' equity for the three and nine months ended September 30, 2019 and 2018. The consolidated balance sheet data at December 31, 2018 was derived from the Company's audited annual financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The accounting policies of the Company are set forth in Note 2. Summary of Significant Accounting Policies contained in the Company’s 2018 Annual Report on Form 10-K, except for the impact of the adoption of new accounting standards discussed under Recently Adopted Accounting Pronouncements.

Use of Estimates

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

Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation.

Recently Adopted Accounting Pronouncements

Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases, which was subsequently supplemented by clarifying guidance (collectively, "Topic 842") to improve financial reporting of leasing transactions. Topic 842 requires a lessee to recognize most leases, including those classified as operating, on its balance sheets as right of use ("ROU") assets and lease liabilities and requires disclose of additional key information about leases.

The Company elected to apply the modified retrospective transition provisions of Topic 842 on January 1, 2019, the date of adoption. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed the Company to carry forward historical lease classifications. Adoption of this standard resulted in the recording of operating lease ROU assets and operating lease liabilities of $85 million and $86 million, respectively.

The transition guidance of Topic 842 also required the Company to de-recognize the build to suit accounting associated with a related party lease for integrated manufacturing and office space and recognize that transaction as a financing lease as of January 1, 2019. The resulting de-recognition reduced leasehold improvements and a financing obligation by $24 million and $39 million, respectively, and increased non-controlling interests and stockholders' accumulated deficit, net of income taxes, by $9 million and $5 million, respectively. The arrangement was then recognized as a financing lease with an ROU asset and lease liability of $64 million on January 1, 2019. Leases with related parties, the details of which are described in Note 15. Related Party Transactions, are presented separately in the Company's balance sheets.

The adoption of Topic 842 did not have a material impact on the Company's consolidated statements of operations. ROU assets and lease liabilities for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts were not adjusted and continue to be reported in accordance with previous guidance.

All significant lease arrangements after January 1, 2019 are recognized as ROU assets and lease liabilities at lease commencement. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of the future lease payments using the Company's incremental borrowing rate, which is assessed quarterly.

Operating lease expense is recognized on a straight-line basis over the lease term. At each balance sheet date, operating and financing lease liabilities continue to represent the present value of the future payments. Financing lease ROU assets are expensed using the straight-line method, unless another basis is more representative of the pattern of economic benefit, to lease expense. Interest on financing lease liabilities is recognized in interest expense.

Leases with an initial term of 12 months or less (short-term leases) are not recognized in the balance sheet and the related lease payments are recognized as incurred over the lease term. The Company separates lease and non-lease components. A portion of the Company's real estate leases are subject to periodic changes in the Consumer Price Index ("CPI"). The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

For further details regarding the Company's leases, refer to Note 11. Leases.

Financial Instruments

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Company adopted ASU 2016-01 as of January 1, 2019 and it did not have a material impact on the Company's consolidated financial statements.

Goodwill

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment that eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. The Company adopted ASU 2017-04 as of April 1, 2019 on a prospective basis and it did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 82): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurement. The guidance is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods, and early adoption is permitted. The Company is evaluating the impact of this new guidance on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, guidance that changes the impairment model for most financial assets including trade receivables and certain other instruments that are not measured at fair value through net income. The standard will replace today’s "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. Entities will apply the standard’s provisions as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The guidance is effective for the Company for the annual period beginning after December 15, 2019. The Company is evaluating the impact of this new guidance on its consolidated financial statements.

v3.19.3
Acquisitions and Divestitures
9 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Acquisitions and Divestitures

3. Acquisitions and Divestitures

Impax Acquisition Unaudited Pro Forma Information

On May 4, 2018, the Company completed the Combination, as described in Note 1. Nature of Operations.  The unaudited pro forma combined results of operations for the nine months ended September 30, 2018 (assuming the closing of the Combination occurred on January 1, 2017) are as follows (in thousands):

 

 

 

Nine Months Ended

September 30, 2018

 

Net revenue

 

$

1,341,555

 

Net loss

 

$

(143,585

)

Net loss attributable to Amneal Pharmaceuticals, Inc.

 

$

(21,502

)

 

The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the closing of the Combination taken place on January 1, 2017. Furthermore, the pro forma results do not purport to project the future results of operations of the Company.

The unaudited pro forma information reflects primarily the following non-recurring adjustments (all of which were adjusted for the applicable tax impact):

 

 

Adjustments to costs of goods sold related to the inventory acquired; and

 

Adjustments to selling, general and administrative expense related to transaction costs directly attributable to the transactions. 

UK Divestiture

On March 30, 2019, the Company sold 100% of the stock of its Creo Pharma Holding Limited subsidiary, which comprised substantially all of the Company's operations in the United Kingdom, to AI Sirona (Luxembourg) Acquisition S.a.r.l ("AI Sirona") for net cash consideration of approximately $32 million which was received in April 2019. The carrying value of the net assets sold was $22 million, including intangible assets of $7 million and goodwill of $5 million. As a result of the sale, the Company recognized a pre-tax gain of $9 million, inclusive of transaction costs and the recognition of accumulated foreign currency translation adjustment losses of $3 million, within (loss) gain on sale of international business for the nine months ended September 30, 2019. As part of the disposition, the Company entered into a supply and license agreement with AI Sirona to supply certain products for a period of up to two years.

Germany Divestiture

On May 3, 2019, the Company sold 100% of the stock of its Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany, to EVER Pharma Holding Ges.m.b.H. (“EVER”) for net cash consideration of approximately $3 million which was received in May 2019. The carrying value of the net assets sold was $7 million, including goodwill of $0.5 million. As a result of the sale, the Company recognized a pre-tax loss of $2 million, inclusive of transaction costs and the recognition of accumulated foreign currency translation adjustment losses, within (loss) gain on sale of international business for the nine months ended September 30, 2019. As part of the disposition, the Company also entered into a license and supply agreement with EVER to supply certain products for an 18 month period.

v3.19.3
Revenue Recognition
9 Months Ended
Sep. 30, 2019
Revenue From Contract With Customer [Abstract]  
Revenue Recognition

4. Revenue Recognition

Performance Obligations

The Company’s performance obligation is the supply of finished pharmaceutical products to its customers. The Company’s customers consist primarily of major wholesalers, retail pharmacies, managed care organizations, purchasing co-ops, hospitals, government agencies and pharmaceutical companies. The Company’s customer contracts generally consist of both a master agreement, which is signed by the Company and its customer, and a customer submitted purchase order, which is governed by the terms and conditions of the master agreement. Customers purchase product by direct channel sales from the Company or by indirect channel sales through various distribution channels.

Revenue is recognized when the Company transfers control of its products to the customer, which typically occurs at a point-in-time, upon delivery. Substantially all of the Company’s net revenues relate to products which are transferred to the customer at a point-in-time.

The Company offers standard payment terms to its customers and has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing, since the period between when the Company transfers the product to the customer and when the customer pays for that product is one year or less. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The consideration amounts due from customers as a result of product sales are subject to variable consideration, as described further below.

The Company offers standard product warranties which provide assurance that the product will function as expected and in accordance with specifications. Customers cannot purchase warranties separately and these warranties do not give rise to a separate performance obligation.

The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping errors or where product is damaged in transit. The Company accrues for the customer’s right to return as part of its variable consideration. See below for further details.

Variable Consideration

The Company includes an estimate of variable consideration in its transaction price at the time of sale, when control of the product transfers to the customer. Variable consideration includes but is not limited to: chargebacks, rebates, group purchasing organization ("GPO") fees, prompt payment (cash) discounts, consideration payable to the customer, billbacks, Medicaid and other government pricing programs, price protection and shelf stock adjustments, sales returns, and profit shares.

The Company assesses whether or not an estimate of its variable consideration is constrained and has determined that the constraint does not apply, since it is probable that a significant reversal in the amount of cumulative revenue will not occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. The Company’s estimates for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a change in the amount of total consideration it expects to receive.

Chargebacks

In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and the contract price charged to the indirect customer is lower than the wholesaler pricing, the Company pays the direct customer (wholesaler) a chargeback for the price differential. The Company estimates its chargeback accrual based on its estimates of the level of inventory of its products in the distribution channel that remain subject to chargebacks and historical chargeback rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Rebates

The Company pays fixed or volume-based rebates to its customers based on a fixed amount, fixed percentage of product sales or based on the achievement of a specified level of purchases. The Company’s rebate accruals are based on actual net sales, contractual rebate rates negotiated with customers, and expected purchase volumes / corresponding tiers based on actual sales to date and forecasted amounts.

Group Purchasing Organization Fees

The Company pays fees to GPOs for administrative services that the GPOs perform in connection with the purchases of product by the GPO participants who are the Company’s customers. The Company’s GPO fee accruals are based on actual net sales, contractual fee rates negotiated with GPOs and the mix of the products in the distribution channel that remain subject to GPO fees.

Prompt Payment (Cash) Discounts

The Company provides customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. The Company’s prompt payment discount accruals are based on actual net sales and contractual discount rates.

Consideration Payable to the Customer

The Company pays administrative and service fees to its customers based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. The Company accrues for these fees based on actual net sales, contractual fee rates negotiated with the customer and the mix of the products in the distribution channel that remain subject to fees.

Billbacks

In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and the contract price charged to the indirect customer is higher than contractual pricing, the Company pays the indirect customer a billback for the price differential. The Company estimates its billback accrual based on its estimates of the level of inventory of its products in the distribution channel that remain subject to billbacks and historical billback rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Medicaid and Other Government Pricing Programs

The Company complies with required rebates mandated by law under Medicaid and other government pricing programs. The Company estimates its government pricing accruals based on monthly sales, historical experience of claims submitted by the various states and jurisdictions, historical rates and estimated lag time of the rebate invoices.

Price Protection and Shelf Stock Adjustments

The Company provides customers with price protection and shelf stock adjustments which may result in an adjustment to the price charged for the product transferred, based on differences between old and new prices which may be applied to the customer’s on-hand inventory at the time of the price change. The Company accrues for these adjustments when its 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. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Sales Returns

The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping errors or where product is damaged in transit, and occurrences of product recalls. The Company’s product returns accrual is primarily based on estimates of future product returns based generally on actual net sales, estimates of the level of inventory of its products in the distribution channel that remain subject to returns, estimated lag time of returns and historical return rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Profit Shares

For certain product sale arrangements, the Company earns a profit share upon the customer’s sell-through of the product purchased from the Company. The Company estimates its profit shares based on actual net sales, estimates of the level of inventory of its products in the distribution channel that remain subject to profit shares, and historical rates of profit shares earned. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Concentration of Revenue

The Company's three largest customers accounted for approximately 81% and 80% of total gross sales of products for the three and nine months ended September 30, 2019, respectively. The Company's three largest customers accounted for approximately 83% and 82% of total gross sales of products for the three and nine months ended September 30, 2018, respectively.

Significant Products

The Company generally consolidates net revenue by "product family," meaning that it consolidates net revenue from products containing the same active ingredient(s) irrespective of dosage strength, delivery method or packaging size. The Company's significant product families, as determined based on net revenue, and their percentage of the Company's consolidated net revenue for each of the three and nine months ended September 30, 2019 and 2018 are set forth below (in thousands, except for percentages):

 

Segment

 

Product Family

 

Three Months Ended September 30, 2019

 

 

 

 

 

$

 

 

%

 

Generics

 

Levothyroxine Sodium

 

$

39,767

 

 

11%

 

Specialty

 

Rytary®

 

 

33,710

 

 

9%

 

Generics

 

Epinephrine Auto-Injector (generic Adrenaclick®)

 

 

22,687

 

 

6%

 

Generics

 

Diclofenac Sodium Gel

 

 

19,264

 

 

5%

 

Specialty (1)

 

Oxymorphone

 

$

17,142

 

 

5%

 

 

Segment

 

Product Family

 

Three Months Ended September 30, 2018

 

 

 

 

 

$

 

 

%

 

Generics

 

Yuvafem-Estradiol

 

$

48,466

 

 

10%

 

Specialty

 

Rytary®

 

 

33,073

 

 

7%

 

Generics

 

Epinephrine Auto-Injector (generic Adrenaclick®)

 

 

30,259

 

 

6%

 

Generics

 

Diclofenac Sodium Gel

 

 

26,455

 

 

6%

 

Generics

 

Aspirin; Dipyridamole ER Capsule

 

$

22,777

 

 

5%

 

 

Segment

 

Product Family

 

Nine Months Ended September 30, 2019

 

 

 

 

 

$

 

 

%

 

Generics

 

Levothyroxine Sodium

 

$

135,220

 

 

11%

 

Specialty

 

Rytary®

 

 

95,538

 

 

8%

 

Generics

 

Diclofenac Sodium Gel

 

 

67,741

 

 

6%

 

Generics

 

Epinephrine Auto-Injector (generic Adrenaclick®)

 

 

53,841

 

 

4%

 

Specialty (1)

 

Oxymorphone

 

$

45,191

 

 

4%

 

 

(1)

For the six months ended June 30, 2019 Oxymorphone net revenue was recorded in the Generics segment.

 

Segment

 

Product Family

 

Nine Months Ended September 30, 2018

 

 

 

 

 

$

 

 

%

 

Generics

 

Yuvafem-Estradiol

 

$

106,477

 

 

9%

 

Generics

 

Diclofenac Sodium Gel

 

 

78,551

 

 

7%

 

Generics

 

Aspirin; Dipyridamole ER Capsule

 

 

67,718

 

 

6%

 

Specialty

 

Rytary®

 

 

53,593

 

 

5%

 

Generics

 

Epinephrine Auto-Injector (generic Adrenaclick®)

 

$

49,425

 

 

4%

 

 

A rollforward of the major categories of sales-related deductions for the nine months ended September 30, 2019 is as follows (in thousands):

 

 

 

Contract

Charge- backs

and Sales

Volume

Allowances

 

 

Cash Discount

Allowances

 

 

Accrued

Returns

Allowance

 

 

Accrued

Medicaid and

Commercial

Rebates

 

Balance at December 31, 2018

 

$

829,596

 

 

$

36,157

 

 

$

154,503

 

 

$

74,202

 

Provision related to sales recorded in the period

 

 

3,413,718

 

 

 

101,285

 

 

 

71,126

 

 

 

143,145

 

Credits/payments issued during the period

 

 

(3,444,048

)

 

 

(109,309

)

 

 

(85,666

)

 

 

(110,319

)

Balance at September 30, 2019

 

$

799,266

 

 

$

28,133

 

 

$

139,963

 

 

$

107,028

 

 

v3.19.3
Alliance and Collaboration
9 Months Ended
Sep. 30, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Alliance and Collaboration

5. Alliance and Collaboration

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

Levothyroxine License and Supply Agreement; Transition Agreement

On August 16, 2018, the Company entered into a license and supply agreement with Jerome Stevens Pharmaceuticals, Inc. ("JSP") for levothyroxine sodium tablets ("Levothyroxine"). This agreement designated the Company as JSP's exclusive commercial partner for Levothyroxine in the U.S. market for a 10 -year term commencing on March 22, 2019. Under this license and supply agreement with JSP, the Company accrued the up-front license payment of $50 million on March 22, 2019, which was paid in April 2019. The agreement also provides for the Company to pay a profit share to JSP based on net profits of the Company's sales of Levothyroxine, after considering product costs.

On November 9, 2018, the Company entered into a transition agreement ("Transition Agreement") with Lannett Company (“Lannett”) and JSP. Under the terms of the Transition Agreement, the Company assumed the distribution and marketing of Levothyroxine from Lannett beginning December 1, 2018 through March 22, 2019, ahead of the commencement date of the license and supply agreement with JSP described above.

In accordance with the terms of the Transition Agreement, the Company made $47 million of non-refundable payments to Lannett. For the nine months ended September 30, 2019 and the year ended December 31, 2018, $37 million and $10 million, respectively, were expensed to cost of goods sold, as the Company sold Levothyroxine (none in the three months ended September 30, 2019). As of December 31, 2018 , the Company had a $4 million transition contract liability, which was fully settled in February 2019.

Biosimilar Licensing and Supply Agreement

On May 7, 2018, the Company entered into a licensing and supply agreement, with Mabxience S.L., for its biosimilar candidate for Avastin® (bevacizumab). The Company will be the exclusive partner in the U.S. market. The Company will pay development and regulatory milestone payments as well as commercial milestone payments on reaching pre-agreed sales targets in the market to Mabxience, up to $72 million. For the nine months ended September 30, 2019 the Company expensed a milestone payment of $1 million (none for the three months ended September 30, 2019), to research and development. For the nine months ended September 30, 2018, the Company expensed a milestone payment of $0.5 million to research and development (none for the three months ended September 30, 2018).

Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited

In January 2012, Impax entered into an agreement with AstraZeneca UK Limited ("AstraZeneca") to distribute branded products under the terms of a distribution, license, development and supply Agreement (the "AZ Agreement"). The parties subsequently entered into a First Amendment to the AZ Agreement dated May 31, 2016 (as amended, the "AZ Amendment"). Under the terms of the AZ Agreement, AstraZeneca granted to Impax an exclusive license to commercialize the tablet, orally disintegrating tablet and nasal spray formulations of Zomig® (zolmitriptan) products for the treatment of migraine headaches in the United States and in certain U.S. territories, except during an initial transition period when AstraZeneca fulfilled all orders of Zomig® products on Impax’s behalf and AstraZeneca paid to Impax the gross profit on such Zomig® products. Pursuant to the AZ Amendment, under certain conditions, and depending on the nature and terms of the study agreed to with the FDA, Impax agreed to conduct, at its own expense, the juvenile toxicity study and pediatric study required by the FDA under the Pediatric Research Equity Act ("PREA") for approval of the nasal formulation of Zomig ® for the acute treatment of migraine in pediatric patients ages six through eleven years old, as further described in the study protocol mutually agreed to by the parties (the "PREA Study"). In consideration for Impax conducting the PREA Study at its own expense, the AZ Amendment provides for the total royalty payments payable by Impax to AstraZeneca on net sales of Zomig ® products under the AZ Agreement to be reduced by an aggregate amount of $30 million to be received in quarterly amounts specified in the AZ Amendment beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020 . In the event the royalty reduction amounts exceed the royalty payments payable by Impax to AstraZeneca pursuant to the AZ Agreement in any given quarter, AstraZeneca will be required to pay Impax an amount equal to the difference between the royalty reduction amount and the royalty payment payable by Impax to AstraZeneca. Impax’s commitment to perform the PREA Study may be terminated, without penalty, under certain circumstances as set forth in the AZ Amendment. The Company recognizes the amounts received from AstraZeneca for the PREA Study as a reduction to research and development expense.

In May 2013, Impax’s exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and Impax launched authorized generic versions of those products in the United States. As discussed above, pursuant to the AZ Amendment, the total royalty payments payable by Impax to AstraZeneca on net sales of Zomig ® products under the AZ Agreement is reduced by certain specified amounts beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020, with such reduced royalty amounts totaling an aggregate amount of $30 million. The Company recorded cost of sales for royalties under this agreement of $5 million and $14 million for the three and nine months ended September 30, 2019 , respectively, and $5 million and $8 million for the three and nine months ended September 30, 2018, respectively.

Adello License and Commercialization Agreement

On October 1, 2017, Amneal and Adello Biologics, LLC ("Adello"), a related party, entered into a license and commercialization agreement. Adello granted Amneal an exclusive license, under its New Drug Application, to distribute and sell two bio-similar products in the U.S. Adello is responsible for development, regulatory filings, obtaining FDA approval, and manufacturing, and Amneal is responsible for marketing, selling and pricing activities. The term of the agreement is 10 -years from the respective product’s launch date. In connection with the agreement, Amneal paid an upfront amount of $2 million in October 2017 for execution of the agreement which was expensed in research and development. The agreement also provides for potential future milestone payments to Adello of (i) up to $21 million relating to regulatory approval, (ii) up to $43 million for successful delivery of commercial launch inventory, (iii) between $20 million and $50 million relating to number of competitors at launch for one product, and (iv) between $15 million and $68 million for the achievement of cumulative net sales for both products. The milestones are subject to certain performance conditions which may or may not be achieved, including FDA filing, FDA approval, launch activities and commercial sales volume objectives. In addition, the agreement provides for Amneal to pay a profit share equal to 50% of net profits, after considering manufacturing and marketing costs.  The research and development expenses for payments made to Adello for the three and nine months ended September 30, 2019 and 2018 were immaterial.

v3.19.3
Restructuring and Other Charges
9 Months Ended
Sep. 30, 2019
Restructuring And Related Activities [Abstract]  
Restructuring and Other Charges

6. Restructuring and Other Charges

During the three months ended June 30, 2018, in connection with the Combination, the Company committed to a restructuring plan to achieve cost savings. The Company expected to integrate its operations and reduce its combined cost structure through workforce reductions that eliminate duplicative positions and the consolidation of certain administrative, manufacturing and research and development facilities. In connection with this plan, the Company announced on May 10, 2018 that it intended to close its Hayward, California based operations.

In addition to the actions noted above, on July 10, 2019, the Company announced a plan to restructure its operations that is intended to reduce costs and optimize its organizational and manufacturing infrastructure. Pursuant to the restructuring plan as revised, the Company expects to reduce its headcount by approximately 300 to 350 employees, primarily by closing its manufacturing facility located in Hauppauge, NY.  As a result of the restructuring plan, the Company estimates that it will incur a pre-tax restructuring charge of approximately $6 to $8 million of cash expenditures related to severance benefits.

Other cash expenditures associated with this restructuring plan, including decommissioning and dismantling the sites and other third party costs cannot be estimated at this time (collectively these actions comprise the "Plans").

The following table sets forth the components of the Company's restructuring and other charges (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Employee restructuring separation charges (1)

 

$

6,187

 

 

$

(2,156

)

 

$

8,607

 

 

$

42,309

 

Asset-related charges (2)

 

 

10,609

 

 

 

 

 

 

11,923

 

 

 

 

Total employee and asset-related restructuring charges

 

 

16,796

 

 

 

(2,156

)

 

 

20,530

 

 

 

42,309

 

Other employee severance charges (3)

 

 

4,141

 

 

 

 

 

 

9,403

 

 

 

 

Total restructuring and other charges

 

$

20,937

 

 

$

(2,156

)

 

$

29,933

 

 

$

42,309

 

 

(1)

Employee restructuring separation charges include the cost of benefits provided pursuant to the Company's severance programs for employees impacted by the Plans at the Company's Hauppauge, NY, Hayward, CA and other facilities.

(2)

Asset-related charges are primarily associated with the impairment of property, plant and equipment and right of use asset associated with the Company's Hauppauge, NY facility.

(3)

For the three months ended September 30, 2019, other employee severance charges are primarily associated with the resignation of the Company’s former Chief Executive Officer.  For the nine months ended September 30, 2019, other employee severance charges are primarily associated with the resignation of the Company’s former Chief Executive Officer and other former senior executives.

The charges related to restructuring impacted segment earnings as follows (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Generics

 

$

14,888

 

 

$

(2,885

)

 

$

17,201

 

 

$

21,912

 

Specialty

 

 

213

 

 

 

(27

)

 

 

391

 

 

 

2,394

 

Corporate

 

 

1,695

 

 

 

756

 

 

 

2,938

 

 

 

18,003

 

Total employee and asset-related restructuring charges

 

$

16,796

 

 

$

(2,156

)

 

$

20,530

 

 

$

42,309

 

 

The following table shows the change in the employee separation-related liability associated with the Plans, which is included in accounts payable and accrued expenses (in thousands):

 

 

 

Employee

Restructuring

 

Balance at December 31, 2018

 

$

22,112

 

Charges to income

 

 

8,607

 

Payments

 

 

(28,422

)

Balance at September 30, 2019

 

$

2,297

 

 

v3.19.3
(Loss) Earnings per Share
9 Months Ended
Sep. 30, 2019
Earnings Per Share [Abstract]  
(Loss) Earnings per Share

7. (Loss) Earnings per Share

Basic (loss) earnings per share of Class A Common Stock and Class B-1 Common Stock is computed by dividing net loss attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of Class A Common Stock and Class B-1 Common Stock outstanding during the period. Diluted (loss) earnings per share of Class A Common Stock and Class B-1 Common Stock is computed by dividing net (loss) earnings attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of Class A Common Stock and Class B-1 Common Stock outstanding, adjusted to give effect to potentially dilutive securities.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted (loss) earnings per share of Class A Common Stock and Class B-1 Common Stock (in thousands, except per share amounts):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018