Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 31, 2022 | Jan. 31, 2023 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Dec. 31, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-31298 | |
Entity Registrant Name | LANNETT COMPANY, INC | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 23-0787699 | |
Entity Address, Address Line One | 1150 Northbrook Drive, Suite 155 | |
Entity Address, City or Town | Trevose | |
Entity Address, State or Province | PA | |
Entity Address, Postal Zip Code | 19053 | |
City Area Code | 215 | |
Local Phone Number | 333-9000 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | LCI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 43,066,265 | |
Entity Central Index Key | 0000057725 | |
Current Fiscal Year End Date | --06-30 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS (UN
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 55,850 | $ 87,854 |
Accounts receivable, net | 80,344 | 56,241 |
Inventories | 94,776 | 95,158 |
Current income taxes receivable | 36,793 | |
Assets held for sale | 1,300 | |
Other current assets | 18,257 | 14,070 |
Total current assets | 250,527 | 290,116 |
Property, plant and equipment, net | 116,473 | 133,178 |
Intangible assets, net | 29,639 | 32,179 |
Operating lease right-of-use assets | 9,274 | 9,646 |
Income taxes receivable | 17,984 | |
Other assets | 14,462 | 19,316 |
TOTAL ASSETS | 438,359 | 484,435 |
Current liabilities: | ||
Accounts payable | 33,165 | 29,737 |
Accrued expenses | 25,688 | 23,667 |
Accrued payroll and payroll-related expenses | 9,151 | 8,342 |
Rebates payable | 21,377 | 21,568 |
Royalties payable | 7,466 | 5,677 |
Restructuring liability | 410 | 490 |
Current operating lease liabilities | 2,074 | 2,064 |
Other current liabilities | 12,885 | 13,395 |
Total current liabilities | 112,216 | 104,940 |
Long-term debt, net | 623,855 | 614,948 |
Long-term operating lease liabilities | 9,441 | 9,994 |
Other liabilities | 5,121 | 5,616 |
TOTAL LIABILITIES | 750,633 | 735,498 |
Commitments and contingencies (Notes 11 and 12) | ||
STOCKHOLDERS' DEFICIT | ||
Common stock ($0.001 par value, 100,000,000 shares authorized; 42,996,851 and 42,269,137 shares issued; 41,247,806 and 40,704,572 shares outstanding at December 31, 2022 and June 30, 2022, respectively) | 43 | 42 |
Additional paid-in capital | 367,134 | 363,957 |
Accumulated deficit | (660,713) | (596,386) |
Accumulated other comprehensive loss | (367) | (411) |
Treasury stock (1,749,045 and 1,564,565 shares at December 31, 2022 and June 30, 2022, respectively) | (18,371) | (18,265) |
Total stockholders' deficit | (312,274) | (251,063) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 438,359 | $ 484,435 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Dec. 31, 2022 | Jun. 30, 2022 |
CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 42,996,851 | 42,269,137 |
Common stock, shares outstanding | 41,247,806 | 40,704,572 |
Treasury stock, shares | 1,749,045 | 1,564,565 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||
Net sales | $ 80,894 | $ 86,508 | $ 155,973 | $ 188,033 |
Cost of sales | 65,258 | 76,990 | 126,543 | 157,998 |
Amortization of intangibles | 1,358 | 3,808 | 2,553 | 7,804 |
Gross profit | 14,278 | 5,710 | 26,877 | 22,231 |
Operating expenses (income): | ||||
Research and development expenses | 4,928 | 4,747 | 12,107 | 10,511 |
Selling, general and administrative expenses | 18,317 | 18,791 | 35,014 | 37,696 |
Restructuring expenses | 335 | 891 | 481 | 891 |
Asset impairment charges | 5,969 | 49,361 | 10,637 | 49,361 |
Gain on sale of intangible assets | (500) | (3,563) | ||
Total operating expenses | 29,049 | 73,790 | 54,676 | 98,459 |
Operating loss | (14,771) | (68,080) | (27,799) | (76,228) |
Other income (expense), net: | ||||
Investment income | 399 | 46 | 491 | 80 |
Interest expense | (15,184) | (14,430) | (30,214) | (28,654) |
Loss on loan receivable | (6,826) | (6,826) | ||
Other income (expense) | 106 | 11 | 87 | (51) |
Total other expense, net | (21,505) | (14,373) | (36,462) | (28,625) |
Loss before income tax | (36,276) | (82,453) | (64,261) | (104,853) |
Income tax expense (benefit) | 32 | (1,368) | 66 | (1,426) |
Net loss | $ (36,308) | $ (81,085) | $ (64,327) | $ (103,427) |
Loss per common share (1): | ||||
Basic (in dollars per share) | $ (0.88) | $ (2.01) | $ (1.57) | $ (2.58) |
Diluted | $ (0.88) | $ (2.01) | $ (1.57) | $ (2.58) |
Weighted average common shares outstanding (1): | ||||
Basic (in shares) | 41,170,839 | 40,358,127 | 41,056,607 | 40,142,974 |
Diluted (in shares) | 41,170,839 | 40,358,127 | 41,056,607 | 40,142,974 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) | ||||
Net loss | $ (36,308) | $ (81,085) | $ (64,327) | $ (103,427) |
Other comprehensive income: | ||||
Foreign currency translation gain | 34 | 5 | 44 | 29 |
Total other comprehensive income | 34 | 5 | 44 | 29 |
Comprehensive loss | $ (36,274) | $ (81,080) | $ (64,283) | $ (103,398) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | Total |
Balance, beginning at Jun. 30, 2021 | $ 41 | $ 355,239 | $ (364,766) | $ (548) | $ (17,437) | $ (27,471) |
Balance, beginning (in shares) at Jun. 30, 2021 | 40,913 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | $ 1 | 199 | 200 | |||
Shares issued in connection with share-based compensation plans (in shares) | 1,140 | |||||
Share-based compensation | 5,327 | 5,327 | ||||
Purchase of treasury stock | (818) | (818) | ||||
Other comprehensive income | 29 | 29 | ||||
Net loss | (103,427) | (103,427) | ||||
Balance, ending at Dec. 31, 2021 | $ 42 | 360,765 | (468,193) | (519) | (18,255) | (126,160) |
Balance, ending (in shares) at Dec. 31, 2021 | 42,053 | |||||
Balance, beginning at Sep. 30, 2021 | $ 42 | 358,361 | (387,108) | (524) | (18,124) | (47,353) |
Balance, beginning (in shares) at Sep. 30, 2021 | 41,787 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | 95 | 95 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 266 | |||||
Share-based compensation | 2,309 | 2,309 | ||||
Purchase of treasury stock | (131) | (131) | ||||
Other comprehensive income | 5 | 5 | ||||
Net loss | (81,085) | (81,085) | ||||
Balance, ending at Dec. 31, 2021 | $ 42 | 360,765 | (468,193) | (519) | (18,255) | (126,160) |
Balance, ending (in shares) at Dec. 31, 2021 | 42,053 | |||||
Balance, beginning at Jun. 30, 2022 | $ 42 | 363,957 | (596,386) | (411) | (18,265) | (251,063) |
Balance, beginning (in shares) at Jun. 30, 2022 | 42,269 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | $ 1 | 66 | 67 | |||
Shares issued in connection with share-based compensation plans (in shares) | 728 | |||||
Share-based compensation | 3,111 | 3,111 | ||||
Purchase of treasury stock | (106) | (106) | ||||
Other comprehensive income | 44 | 44 | ||||
Net loss | (64,327) | (64,327) | ||||
Balance, ending at Dec. 31, 2022 | $ 43 | 367,134 | (660,713) | (367) | (18,371) | (312,274) |
Balance, ending (in shares) at Dec. 31, 2022 | 42,997 | |||||
Balance, beginning at Sep. 30, 2022 | $ 43 | 365,573 | (624,405) | (401) | (18,371) | (277,561) |
Balance, beginning (in shares) at Sep. 30, 2022 | 42,918 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | 29 | 29 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 79 | |||||
Share-based compensation | 1,532 | 1,532 | ||||
Other comprehensive income | 34 | 34 | ||||
Net loss | (36,308) | (36,308) | ||||
Balance, ending at Dec. 31, 2022 | $ 43 | $ 367,134 | $ (660,713) | $ (367) | $ (18,371) | $ (312,274) |
Balance, ending (in shares) at Dec. 31, 2022 | 42,997 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (64,327) | $ (103,427) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 12,501 | 18,871 |
Share-based compensation | 3,111 | 5,327 |
Asset impairment charges | 10,637 | 49,361 |
Loss on loan receivable | 6,826 | |
(Gain) loss on sale/disposal of assets | (3,563) | 51 |
Accrual of payment-in-kind interest on Second Lien Credit Facility | 5,453 | 10,024 |
Amortization of debt discount and other debt issuance costs | 3,635 | 2,959 |
Provision for inventory write-downs | 3,259 | 4,054 |
Other noncash expenses | 453 | 393 |
Changes in assets and liabilities which provided (used) cash: | ||
Accounts receivable, net | (24,103) | 32,559 |
Inventories | (2,877) | (288) |
Income taxes receivable/payable | 18,866 | (833) |
Other assets | (6,340) | (2,255) |
Rebates payable | (191) | 6,180 |
Royalties payable | 1,789 | (3,092) |
Restructuring liability | (80) | 612 |
Operating lease assets/liabilities | (624) | (561) |
Accounts payable | 3,428 | (3,597) |
Accrued expenses | 1,871 | (1,871) |
Accrued payroll and payroll-related expenses | 809 | (1,074) |
Other liabilities | (1,062) | 450 |
Net cash (used in) provided by operating activities | (30,529) | 13,843 |
INVESTING ACTIVITIES: | ||
Purchases of property, plant and equipment | (5,180) | (6,758) |
Proceeds from sale of assets | 4,700 | 353 |
Purchases of intangible assets | (1,000) | (1,500) |
Net cash used in investing activities | (1,480) | (7,905) |
FINANCING ACTIVITIES: | ||
Proceeds from issuance of stock | 67 | 200 |
Purchase of treasury stock | (106) | (818) |
Net cash used in financing activities | (39) | (618) |
Effect on cash and cash equivalents of changes in foreign exchange rates | 44 | 29 |
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (32,004) | 5,349 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 92,854 | 98,286 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | 60,850 | 103,635 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Interest paid | 21,185 | 15,131 |
Income taxes refunded | (18,798) | (592) |
Purchases of property, plant and equipment included in accounts payable | $ 440 | $ 999 |
Interim Financial Information
Interim Financial Information | 6 Months Ended |
Dec. 31, 2022 | |
Interim Financial Information | |
Interim Financial Information | Note 1. Interim Financial Information The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for the presentation of interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited financial statements do not include all the information and footnotes necessary for a comprehensive presentation of the financial position, results of operations and cash flows for the periods presented. In the opinion of management, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Operating results for the three and six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023. These unaudited financial statements should be read in combination with the other Notes in this section; “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Item 2; and the Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022. The Consolidated Balance Sheet as of June 30, 2022 was derived from audited financial statements. |
The Business and Nature of Oper
The Business and Nature of Operations | 6 Months Ended |
Dec. 31, 2022 | |
The Business and Nature of Operations | |
The Business and Nature of Operations | Note 2. The Business and Nature of Operations Lannett Company, Inc. (a Delaware corporation) and its subsidiaries (collectively, the “Company” or “Lannett”) primarily develop, manufacture, package, market and distribute solid oral and extended release (tablets and capsules), topical, nasal and oral solution finished dosage forms of drugs that address a wide range of therapeutic areas. Certain of these products are manufactured by others and distributed by the Company. The Company operates a pharmaceutical manufacturing plant in Seymour, Indiana. During Fiscal 2022, the Company completed the sale of its Silarx Pharmaceuticals, Inc. (“Silarx”) facility in Carmel, New York. In connection with the sale, the buyer will continue to produce certain products on behalf of the Company at the Carmel facility while the Company completes the transfer of such products to its Seymour, Indiana plant. The Company’s customers include generic pharmaceutical distributors, drug wholesalers, chain drug stores, private label distributors, mail-order pharmacies, other pharmaceutical manufacturers, managed care organizations, hospital buying groups, governmental entities and health maintenance organizations. NYSE Notices of Failure to Satisfy a Continued Listing Rule or Standard On March 2, 2022, we received notice from the New York Stock Exchange (the “NYSE”) that we were no longer in compliance with the NYSE continued listing standards, set forth in Section 802.01B of the NYSE’s Listed Company Manual, because the Company’s average global market capitalization over a consecutive 30 trading-day period was less than $50.0 million and, at the same time, our shareholders’ equity was less than $50.0 million. If the Company’s average global market capitalization over a consecutive 30 trading-day period drops below $15.0 million, the NYSE will initiate delisting proceedings. As of January 31, 2023, the 30 trading-day average global market capitalization of the Company was approximately $26.4 million, and the Company’s absolute market capitalization was approximately $23.7 million. In accordance with the NYSE listing requirements, we submitted a plan that demonstrates how we expect to return to compliance with Section 802.01B within 18 months. On May 26, 2022, the Company received notice from the NYSE that the plan was accepted. The NYSE has been performing quarterly reviews during the 18 months from the Company’s receipt of the notice for compliance with the goals and initiatives as outlined in the Company’s plan. Failure to satisfy the requisite goals or initiatives may result in the Company being subject to NYSE trading suspension at that time. The Company is required to achieve the minimum continued listing standards of either average global market capitalization over a consecutive 30 trading-day period of $50 million or total stockholders' equity of $50 million at the completion of the 18-month plan period, and failure to achieve any of the minimum requirements at the end of the 18-month period may result in the Company being suspended by the NYSE, which may make an application to the SEC to delist the Company’s common stock. There can be no assurances that the Company will maintain compliance with the plan. In addition, on March 14, 2022, the Company received a second notice from the NYSE that it was not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE’s Listed Company Manual because the average closing price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period. In order to regain compliance, on the last trading day of any calendar month during the cure period or on the last business day of the six-month cure period, the Company’s shares of common stock must demonstrate (i) a closing price of at least $1.00 per share and (ii) an average closing share price of at least $1.00 over the 30 trading-day period ending on such date. On January 25, 2023, the stockholders of the Company and the Board of Directors approved a 1 If we are unable to satisfy the NYSE criteria for continued listing, our common stock would be subject to delisting. A delisting of our common stock could negatively impact our reputation and, consequently, our business by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; decreasing the amount of news and analyst coverage of the Company; and limiting our ability to issue additional securities or obtain additional financing in the future. In addition, if the Company ceases to be listed or quoted on any of The NYSE, The Nasdaq Global Select Market or The Nasdaq Global Market (or any of their respective successors), holders of the outstanding 4.50% Convertible Senior Notes (the “Convertible Notes”) will have the option to require the Company to repurchase for cash all of such holder’s notes at 100% of the principal amount, plus accrued and unpaid interest. An acceleration of our debt maturities would put significant pressure on our liquidity and ability to continue to operate as a going concern; however, in the event of a delisting or likely delisting, the Company intends to work proactively and collaboratively with its debt holders to amend its credit documents and indentures or pursue other alternative plans that are probable of execution in order to avoid a default and acceleration of the Company’s indebtedness. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with U.S. GAAP. Principles of consolidation The Consolidated Financial Statements include the accounts of Lannett Company, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for estimated chargebacks, rebates, returns and other adjustments including a provision for the Company’s liability under the Medicare Part D program. Additionally, significant estimates and assumptions are required when determining the value of inventories and long-lived assets, including intangible assets, income taxes, and contingencies. Because of the inherent subjectivity and complexity involved in these estimates and assumptions, actual results could differ from those estimates. Foreign currency translation The Consolidated Financial Statements are presented in U.S. dollars, the reporting currency of the Company. The financial statements of the Company’s foreign subsidiary are maintained in local currency and translated into U.S. dollars at the end of each reporting period. Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at average exchange rates during the period. The adjustments resulting from the use of differing exchange rates are recorded as part of stockholders’ equity (deficit) in accumulated other comprehensive income (loss). Gains and losses resulting from transactions denominated in foreign currencies are recognized in the Consolidated Statements of Operations under other income (loss). Amounts recorded due to foreign currency fluctuations are immaterial to the Consolidated Financial Statements. Cash, cash equivalents and restricted cash The Company considers all highly liquid investments with original maturities less than or equal to three months at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value, and consist of bank deposits and money market funds. The Company maintains its cash deposits and cash equivalents at well-known, stable financial institutions. Such amounts frequently exceed insured limits. In connection with the Second Lien Secured Loan Facility (“Second Lien Facility”), the Company is required to maintain at least $5.0 million in a deposit account at all times, subject to control by the Second Lien Collateral Agent. At December 31, 2022, the Company classified this balance as restricted cash, which is included in other assets on the Consolidated Balance Sheets. Presented in the table below is a reconciliation of the cash, cash equivalents and restricted cash amounts presented on the Consolidated Balance Sheets to the sum of such amounts presented on the Consolidated Statements of Cash Flows for the periods ended December 31, 2022 and 2021. December 31, 2022 December 31, 2021 Cash and cash equivalents $ 55,850 $ 98,635 Restricted cash, included in other assets 5,000 5,000 Cash, cash equivalents and restricted cash as presented on the Consolidated Statements of Cash Flows $ 60,850 $ 103,635 Allowance for expected credit losses The Company complies with ASU 2016-13, Measurement of Credit Losses on Financial Instruments Inventories Inventories are stated at the lower of cost or net realizable value by the first-in, first-out method. Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels, expiration date and estimated sales forecasts. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the assets’ estimated useful lives. Repairs and maintenance costs that do not extend the useful life of the asset are expensed as incurred. Intangible Assets Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed on a straight-line basis over the assets’ estimated useful lives, which commence upon first shipment of the product associated with the intangible asset. The Company continually evaluates the reasonableness of the useful lives of these assets. Costs to renew or extend the term of a recognized intangible asset are expensed as incurred. Valuation of Long-Lived Assets, including Intangible Assets The Company’s long-lived assets primarily consist of property, plant and equipment and definite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flows of the asset, then impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. Revenue Disaggregation The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for the three and six months ended December 31, 2022 and 2021. Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2022 2021 2022 2021 Analgesic $ 2,592 $ 3,919 $ 6,016 $ 9,233 Anti-Psychosis 2,575 2,095 5,195 5,810 Cardiovascular 13,089 9,753 23,971 23,853 Central Nervous System 21,782 22,340 42,576 45,125 Endocrinology 5,831 8,297 13,143 16,142 Gastrointestinal 8,716 14,023 16,658 29,263 Infectious Disease 4,989 6,520 10,058 19,035 Migraine 3,574 4,446 6,898 9,131 Respiratory/Allergy/Cough/Cold 1,468 1,868 2,670 4,982 Other 10,955 10,275 19,714 20,627 Contract manufacturing revenue 5,323 2,972 9,074 4,832 Total net sales $ 80,894 $ 86,508 $ 155,973 $ 188,033 Customer, Supplier and Product Concentration For the three and six months ended December 31, 2022 and 2021, the Company did not have any products that accounted for at least 10% of total net sales. Products are defined as containing the same active ingredient or combination of ingredients. The following table presents the percentage of total net sales, for the three and six months ended December 31, 2022 and 2021, for certain of the Company’s customers which accounted for at least 10% of total net sales in any of those periods: Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 Customer A 22 % 26 % 22 % 28 % Customer B 21 % 15 % 21 % 17 % Customer C 16 % 14 % 16 % 14 % Revenue Recognition Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers Revenue from Contracts with When revenue is recognized, a simultaneous adjustment to gross sales is made for estimated chargebacks, rebates, returns, promotional adjustments and other potential adjustments. These provisions are primarily estimated based on historical experience, future expectations, contractual arrangements with wholesalers and indirect customers and other factors known to management at the time of accrual. Accruals for provisions are presented in the Consolidated Financial Statements as a reduction to gross sales with the corresponding reserve presented as a reduction of accounts receivable or included as rebates payable, depending on the nature of the reserve. Provisions for chargebacks, rebates, returns and other adjustments require varying degrees of subjectivity. While rebates generally are based on contractual terms and require minimal estimation, chargebacks and returns require management to make more subjective assumptions. Each major category is discussed in detail below: Chargebacks The provision for chargebacks is the most significant and complex estimate used in the recognition of revenue. The Company sells its products directly to wholesale distributors, generic distributors, retail pharmacy chains and mail-order pharmacies. The Company also sells its products indirectly to independent pharmacies, managed care organizations, hospitals, nursing homes and group purchasing organizations, collectively referred to as “indirect customers.” The Company enters into agreements with its indirect customers to establish pricing for certain products. The indirect customers then independently select a wholesaler from which to purchase the products. If the price paid by the indirect customers is lower than the price paid by the wholesaler, the Company will provide a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and the wholesaler purchase price. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels. As sales to the large wholesale customers, such as Cardinal Health, AmerisourceBergen and McKesson increase (decrease), the reserve for chargebacks will also generally increase (decrease). However, the size of the increase (decrease) depends on product mix and the amount of sales made to indirect customers with which the Company has specific chargeback agreements. The Company continually monitors the reserve for chargebacks and makes adjustments when management believes that expected chargebacks may differ from the actual chargeback reserve. Rebates Rebates are offered to the Company’s key chain drug store, distributor and wholesaler customers to promote customer loyalty and increase product sales. These rebate programs provide customers with credits upon attainment of pre-established volumes or attainment of net sales milestones for a specified period. Other promotional programs are incentive programs offered to the customers. Additionally, as a result of the Patient Protection and Affordable Care Act (“PPACA”) enacted in the U.S. in March 2010, the Company participates in a cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration (“FDA”) approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application ("ANDA”). Drugs purchased within the Medicare Part D coverage gap (commonly referred to as the “donut hole”) result in additional rebates. The Company estimates the reserve for rebates and other promotional credit programs based on the specific terms in each agreement when revenue is recognized. The reserve for rebates increases (decreases) as sales to certain wholesale and retail customers increase (decrease). However, since these rebate programs are not identical for all customers, the size of the reserve will depend on the mix of sales to customers that are eligible to receive rebates. Returns Consistent with industry practice, the Company has a product returns policy that allows customers to return product within a specified time period prior to and subsequent to the product’s expiration date in exchange for a credit to be applied to future purchases. The Company’s policy requires that the customer obtain pre-approval from the Company for any qualifying return. The Company estimates its provision for returns based on historical experience, changes to business practices, credit terms and any extenuating circumstances known to management. While historical experience has allowed for reasonable estimations in the past, future returns may or may not follow historical trends. The Company continually monitors the reserve for returns and makes adjustments when management believes that actual product returns may differ from the established reserve. Generally, the reserve for returns increases as net sales increase. Other Adjustments Other adjustments consist primarily of “price adjustments,” also known as “shelf-stock adjustments” and “price protections,” which are both credits issued to reflect increases or decreases in the invoice or contract prices of the Company’s products. In the case of a price decrease, a credit is given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Other adjustments also include prompt payment discounts and “failure-to-supply” adjustments. If the Company is unable to fulfill certain customer orders, the customer can purchase products from our competitors at their prices and charge the Company for any difference in our contractually agreed upon prices. Leases Under ASC Topic 842, Leases The lease term is determined to be the non-cancelable period including any lessee renewal options which are considered to be reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The present value of lease payments includes fixed and certain variable payments, less lease incentives, together with amounts probable of being owed by the Company under residual value guarantees and, if reasonably certain of being paid, the cost of certain renewal options and early termination penalties set forth in the lease arrangement. To calculate the present value of lease payments, we use our incremental borrowing rate based on the information available at commencement date, as the rate implicit in the lease is generally not readily available. In making the determination of whether a lease is an operating lease or a finance lease, the Company considers the lease term in relation to the economic life of the leased asset, the present value of lease payments in relation to the fair value of the leased asset and certain other factors. Upon the commencement of the lease, the Company will record a lease liability and right-of-use (“ROU”) asset based on the present value of the future minimum lease payments over the lease term at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. For operating leases, a single lease cost is generally recognized in the Consolidated Statements of Operations on a straight-line basis over the lease term unless an impairment has been recorded with respect to a leased asset. For finance leases, amortization expense and interest expense are recognized separately in the Consolidated Statements of Operations, with amortization expense generally recorded on a straight-line basis and interest expense recorded using the effective interest method. Variable lease costs not initially included in the lease liability and ROU asset impairment charges are expensed as incurred. The Company does not recognize short-term leases of 12 months or less on its Consolidated Balance Sheets. Cost of Sales, including Amortization of Intangibles Cost of sales includes all costs related to bringing products to their final selling destination, which includes direct and indirect costs, such as direct material, labor and overhead expenses. Additionally, cost of sales includes product royalties, depreciation, amortization and costs to renew or extend recognized intangible assets, freight charges and other shipping and handling expenses. Research and Development Research and development costs are expensed as incurred, including all production costs until a drug candidate is approved by the FDA. Research and development expenses include costs associated with internal projects as well as costs associated with third-party research and development contracts. Contingencies Loss contingencies, including litigation-related contingencies, are included in the Consolidated Statements of Operations when the Company concludes that a loss is both probable and reasonably estimable. Legal fees for litigation-related matters are expensed as incurred and included in the Consolidated Statements of Operations under the Selling, general and administrative expenses line item. Restructuring Costs The Company records charges associated with approved restructuring plans to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations and contract cancellation costs. The Company records restructuring charges based on estimated employee terminations, site closure and consolidation plans. The Company accrues severance and other employee separation costs under these actions when it is probable that a liability exists, and the amount is reasonably estimable. Share-Based Compensation Share-based compensation costs are recognized over the requisite service period, typically the vesting period, using a straight-line method, based on the fair value of the instrument on the date of grant less an estimate for expected forfeitures. The Company uses the stock price on the grant date to value restricted stock and performance-based shares with vesting based on the satisfaction of a performance condition. The Company uses the Black-Scholes valuation model to determine the fair value of stock options and the Monte-Carlo simulation model to determine the fair value of performance-based shares with a market condition. The Black-Scholes valuation and Monte-Carlo simulation models include various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate as well as performance assumptions of peer companies. These assumptions involve inherent uncertainties based on market conditions which are generally outside the Company’s control. Changes in these assumptions could have a material impact on share-based compensation costs recognized in the Consolidated Financial Statements. Self-Insurance The Company self-insures for certain employee medical and prescription benefits. The Company also maintains stop loss coverage with third party insurers to limit its total liability exposure. The liability for self-insured risks is primarily calculated using independent third-party actuarial valuations which take into account actual claims, claims growth and claims incurred but not yet reported. Actual experience, including claim frequency and severity as well as health-care inflation, could result in different liabilities than the amounts currently recorded. The liability for self-insured risks under this plan was $1.0 million and $0.5 million as of December 31, 2022 and June 30, 2022, respectively, and is recorded in the accrued payroll and payroll-related expenses caption in the Consolidated Balance Sheets. Income Taxes The Company uses the liability method to account for income taxes as prescribed by ASC 740, Income Taxes Income Taxes The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative accounting standards also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. Earnings (Loss) Per Common Share The presentation of basic and diluted earnings (loss) per common share is required on the face of the Company's Consolidated Statements of Operations as well as a reconciliation of the computation of basic earnings (loss) per common share to diluted earnings (loss) per common share. In accordance with ASC 260, Earnings per share For purposes of determining diluted earnings per share, the Company further adjusts the basic earnings per share to include the effect of potentially dilutive shares outstanding, including options and restricted stock awards, the 4.50% Convertible Senior Notes (the “Convertible Notes”), and the Warrants. In this calculation, the Company reallocates net income based on the rights of each potentially dilutive share and will report the most dilutive earnings (loss) per share. The weighted average number of diluted shares is adjusted for the potential dilutive effect of the exercise of stock options, treats unvested restricted stock as if it were vested, includes performance-based shares that would be issued if the performance criteria were met as of the end of the reporting period, and assumes the conversion of the Convertible Notes. The Company uses the “if-converted" method to compute earnings (loss) per share when assuming the conversion of the Convertible Notes, which is calculated by dividing the adjusted "if-converted" net income by the adjusted weighted average number of shares of common stock outstanding during the period. The adjusted "if-converted" net income is adjusted for interest expense and amortization of debt issuance costs, both net of tax, associated with the Convertible Notes. Because the Warrants do not participate in losses, the Company will allocate undistributed earnings when calculating basic and diluted earnings per share in periods of net income only. Anti-dilutive securities are excluded from the calculation. Dilutive shares are also excluded in the calculation in periods of net loss because the effect of including such securities would be anti-dilutive. Comprehensive Income (Loss) Comprehensive income (loss) reflects all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. This includes, but is not limited to, foreign currency translation gain (loss). Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss) but excluded from income (loss) for all amounts are recorded directly as an adjustment to stockholders’ equity. |
Restructuring Charges
Restructuring Charges | 6 Months Ended |
Dec. 31, 2022 | |
Restructuring Charges | |
Restructuring Charges | Note 4. Restructuring Charges On December 15, 2022, the Company authorized a restructuring and cost savings plan (the “2022 Restructuring Plan”) to streamline and realign our operations to ensure the continued progression of our existing pipeline and future growth. The 2022 Restructuring Plan includes operational improvements and cost efficiencies as well as engagement with more external partners and technology providers, globally, to execute on our R&D plans and operations. The total reduction in headcount, and the basis of the estimated severance costs, for the 2022 Restructuring Plan is expected to be approximately 60 positions. The Company expects the reduction in force to be completed by the end of Fiscal 2023. The Company estimates that it will incur approximately $3 million in severance-related costs in connection with the 2022 Restructuring Plan. A reconciliation of the changes in restructuring liabilities associated with the 2022 Restructuring Plan from June 30, 2022 through December 2022 is set forth in the following table: Employee (In thousands) Separation Costs Balance at June 30, 2022 $ — Restructuring charges 317 Payments — Balance at December 31, 2022 $ 317 In connection with the shift in our R&D operations, the Company also anticipates exiting our State Road and Torresdale facilities in Philadelphia, Pennsylvania by the end of our current fiscal year. In the first quarter of Fiscal 2023, the Company recorded an impairment charge of $4.7 million to adjust the State Road facility and certain equipment to fair value less costs to sell and the remaining assets of $1.3 million were recorded in the assets held for sale caption in the Consolidated Balance Sheet. In the second quarter of Fiscal 2023, the Company recorded an impairment charge of $6.0 million to adjust the Torresdale facility to its approximate fair value. |
Accounts Receivable, net
Accounts Receivable, net | 6 Months Ended |
Dec. 31, 2022 | |
Accounts Receivable, net | |
Accounts Receivable, net | Note 5. Accounts Receivable, net Accounts receivable, net consisted of the following components at December 31, 2022 and June 30, 2022: December 31, June 30, (In thousands) 2022 2022 Gross accounts receivable $ 187,187 $ 199,242 Less: Chargebacks reserve (39,739) (54,501) Less: Rebates reserve (16,139) (26,921) Less: Returns reserve (37,190) (46,478) Less: Other deductions (12,826) (14,117) Less: Allowance for expected credit losses (949) (984) Accounts receivable, net $ 80,344 $ 56,241 For the three months ended December 31, 2022, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $94.7 million, $25.7 million, $8.2 million and $7.2 million, respectively. For the three months ended December 31, 2021, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $114.7 million, $26.5 million, $7.4 million and $7.8 million, respectively. For the six months ended December 31, 2022, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $180.9 million, $47.3 million, $13.5 million and $13.9 million, respectively. For the six months ended December 31, 2021, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $245.9 million, $55.3 million, $13.3 million and $26.8 million, respectively. The following table identifies the activity and ending balances of each major category of revenue-related reserve for the six months ended December 31, 2022 and 2021: Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2022 $ 54,501 $ 48,489 $ 46,478 $ 14,117 $ 163,585 Current period provision 180,856 47,322 13,546 13,931 255,655 Credits issued during the period (195,618) (58,295) (22,834) (15,222) (291,969) Balance at December 31, 2022 $ 39,739 $ 37,516 $ 37,190 $ 12,826 $ 127,271 Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2021 $ 69,564 $ 35,297 $ 38,395 $ 15,505 $ 158,761 Current period provision 245,900 55,262 13,305 26,761 341,228 Credits issued during the period (248,631) (46,857) (14,930) (26,968) (337,386) Balance at December 31, 2021 $ 66,833 $ 43,702 $ 36,770 $ 15,298 $ 162,603 For the three months ended December 31, 2022 and 2021, as a percentage of gross sales the provision for chargebacks was 44.8% and 47.8%, the provision for rebates was 12.2% and 11.1%, the provision for returns was 3.9% and 3.1% and the provision for other adjustments was 3.4% and 3.2%, respectively. For the six months ended December 31, 2022 and 2021, as a percentage of gross sales the provision for chargebacks was 44.9% and 46.9%, the provision for rebates was 11.8% and 10.5%, the provision for returns was 3.4% and 2.5% and the provision for other adjustments was 3.5% and 5.1%, respectively. The decrease in the reserve for chargebacks from June 30, 2022 to December 31, 2022 was primarily attributable to changes in product and customer sales mix. Additionally, the reserve for rebates and returns decreased during the first six months of Fiscal 2023 due to the timing of payments. Higher than average returns in prior periods also contributed to the decrease in the reserve for returns during the period. |
Inventories
Inventories | 6 Months Ended |
Dec. 31, 2022 | |
Inventories | |
Inventories | Note 6. Inventories Inventories at December 31, 2022 and June 30, 2022 consisted of the following: December 31, June 30, (In thousands) 2022 2022 Raw Materials $ 40,809 $ 39,297 Work-in-process 10,152 9,313 Finished Goods 43,815 46,548 Total $ 94,776 $ 95,158 During the three months ended December 31, 2022 and 2021, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $0.6 million and $1.2 million, respectively. During the six months ended December 31, 2022 and 2021, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $3.3 million and $4.1 million, respectively |
Property, Plant and Equipment,
Property, Plant and Equipment, net | 6 Months Ended |
Dec. 31, 2022 | |
Property, Plant and Equipment, net | |
Property, Plant and Equipment, net | Note 7. Property, Plant and Equipment, net Property, plant and equipment, net at December 31, 2022 and June 30, 2022 consisted of the following: December 31, June 30, (In thousands) Useful Lives 2022 2022 Land — $ 348 $ 533 Building and improvements 10 - 39 years 77,580 93,701 Machinery and equipment 5 - 10 years 155,598 158,854 Furniture and fixtures 5 - 7 years 3,088 3,367 Less accumulated depreciation (135,883) (136,433) 100,731 120,022 Construction in progress 15,742 13,156 Property, plant and equipment, net $ 116,473 $ 133,178 Depreciation expense for the three months ended December 31, 2022 and 2021 was $4.9 million and $5.5 million, respectively. Depreciation expense for the six months ended December 31, 2022 and 2021 was $9.9 million and $11.1 million, respectively. In the second quarter of Fiscal 2023, the Company recorded an impairment charge of $6.0 million to adjust the Torresdale facility to its approximate fair value in connection with the 2022 Restructuring Plan. See Note 4 “Restructuring Charges” for additional information on the plan. Property, plant and equipment, net included amounts held in foreign countries in the amount of $0.8 million and $0.7 million at December 31, 2022 and June 30, 2022, respectively. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Dec. 31, 2022 | |
Fair Value Measurements | |
Fair Value Measurements | Note 8. Fair Value Measurements The Company’s financial instruments recorded in the Consolidated Balance Sheets include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt obligations. The Company’s cash and cash equivalents include bank deposits and money market funds. The carrying value of certain financial instruments, primarily cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate their estimated fair values based upon the short-term nature of their maturity dates. The Company follows the authoritative guidance of ASC Topic 820, Fair Value Measurements and Disclosures. Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2 — Directly or indirectly observable inputs, other than quoted prices, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 — Unobservable inputs that are supported by little or no market activity and that are material to the fair value of the asset or liability. Financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation are examples of Level 3 assets and liabilities. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial Instruments Disclosed, But Not Reported, at Fair Value We estimate the fair value of 7.750% senior secured notes due 2026 (the “Notes”) and the Convertible Notes using market quotations for debt that have quoted prices in active markets (Level 1). Since our Second Lien Facility does not trade on a daily basis in an active market, the fair value estimate is based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities (Level 2). The estimated fair value of the Notes as of December 31, 2022 and June 30, 2022 was approximately $79 million and $140 million, respectively. The estimated fair value of the Second Lien Facility as of December 31, 2022 and June 30, 2022 was approximately $43 million and $76 million, respectively. The decline in the fair value of the Notes and Second Lien Facility is primarily a reflection of the increased competitive pressures on the Company’s recent financial performance, which, in part, resulted in a downgrade to the Company’s credit rating. The estimated fair value of the Convertible Notes was approximately $13 million and $25 million as of December 31, 2022 and June 30, 2022, respectively. The fair value of the Convertible Notes as of December 31, 2022 was lower than the carrying value primarily due to the Company’s stock price of $0.52 at December 31, 2022 as compared to the $15.29 conversion price as well as the Company’s downgraded credit rating. |
Intangible Assets
Intangible Assets | 6 Months Ended |
Dec. 31, 2022 | |
Intangible Assets | |
Intangible Assets | Note 9. Intangible Assets Intangible assets, net as of December 31, 2022 and June 30, 2022 consisted of the following: Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life December 31, June 30, December 31, June 30, December 31, June 30, (In thousands) (Yrs.) 2022 2022 2022 2022 2022 2022 Definite-lived: KUPI trade name 2 $ 2,920 $ 2,920 $ (2,920) $ (2,920) $ — $ — KUPI other intangible assets 15 19,000 19,000 (8,995) (8,362) 10,005 10,638 Silarx product rights 15 18,531 20,000 (6,383) (6,222) 12,148 13,778 Other product rights 7 17,242 16,242 (9,756) (8,479) 7,486 7,763 Total intangible assets, net $ 57,693 $ 58,162 $ (28,054) $ (25,983) $ 29,639 $ 32,179 For the three months ended December 31, 2022 and 2021, the Company recorded amortization expense of $1.4 million and $3.8 million, respectively. For the six months ended December 31, 2022 and 2021, the Company recorded amortization expense of $2.6 million and $7.8 million, respectively. Future annual amortization expense consists of the following as of December 31, 2022: (In thousands) Amortization Fiscal Year Ending June 30, Expense 2023 $ 2,095 2024 3,874 2025 3,840 2026 3,673 2027 3,535 Thereafter 12,622 $ 29,639 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Dec. 31, 2022 | |
Long-Term Debt | |
Long-Term Debt | Note 10. Long-Term Debt Long-term debt, net consisted of the following: December 31, June 30, (In thousands) 2022 2022 7.75% Senior Secured Notes due 2026 $ 350,000 $ 350,000 Unamortized discount and other debt issuance costs (4,070) (4,599) 7.75% Senior Secured Notes due 2026, net 345,930 345,401 Second Lien Secured Loan Facility due 2026 ($190.0M Principal, $5.7M Exit Fee, and $27.5M and $22.0M accrued PIK interest at December 31, 2022 and June 30, 2022 respectively) 223,174 217,721 Unamortized discount and other debt issuance costs (29,633) (32,308) Second Lien Secured Loan Facility due 2026, net 193,541 185,413 4.50% Convertible Senior Notes due 2026 86,250 86,250 Unamortized discount and other debt issuance costs (1,866) (2,116) 4.50% Convertible Senior Notes, net 84,384 84,134 $45.0 million Amended ABL Credit Facility — — Total long-term debt, net $ 623,855 $ 614,948 The weighted average interest rate for the three months ended December 31, 2022 and 2021 was 9.1% and 8.9%, respectively. The weighted average interest rate for the six months ended December 31, 2022 and 2021 was 9.1% and 8.9%, respectively. As of December 31, 2022, the Company recorded interest payable of $8.8 million, which is included in the accrued expenses caption of the Consolidated Balance Sheet. On April 22, 2021, the Company issued $350.0 million aggregate principal amount of the Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and outside the United States to persons other than U.S. persons in reliance upon Regulation S under the Securities Act. The Notes bear interest semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021, at a rate of 7.750% per annum in cash. The Notes will mature on April 15, 2026, unless earlier redeemed or repurchased in accordance with their terms. On April 5, 2021, the Company entered into an Exchange Agreement with certain participating lenders to exchange a portion of their existing Term B Loans for Second Lien Loans pursuant to a new $190.0 million Second Lien Facility. On April 22, 2021, in connection with the issuance of the Notes and the entrance into the Amended ABL Credit Facility, which is discussed further below, the exchange between the Company and the participating lenders was consummated. From the Closing Date until the one-year anniversary of the Closing Date, the Second Lien Loans bear 10.0% PIK interest. Thereafter, the Second Lien notes will bear 5.0% cash interest and 5.0% PIK interest until maturity, except to the extent the Company elects to pay all or portion of the PIK interest in cash. To date, the Company has not paid any PIK interest in cash. The Second Lien Loans will mature on July 21, 2026. In connection with the Second Lien Facility, the Company issued to the Participating Lenders Warrants to purchase up to 8,280,000 shares of common stock of the Company at an exercise price of $6.88 per share. Refer to Note 13 “Warrants” for further information on the Warrants issued. In connection with the Second Lien Facility, the Company is required to maintain at least $5.0 million in a deposit account at all times subject to control by the Second Lien Collateral Agent, and a minimum cash balance of $15.0 million as of the last day of each month. At December 31, 2022, the Company classified the $5.0 million required deposit account balance as restricted cash, which is included in other assets caption in the Consolidated Balance Sheet. The Second Lien Facility also contains an affirmative covenant requiring delivery of the Company’s year-end financial statements, accompanied by an audit opinion that is not qualified, subject to customary exceptions, as to the status of the Company as a going concern. In addition to the Notes Offering and the Second Lien Facility, on April 22, 2021, the Company entered into an amendment to that certain Credit and Guaranty Agreement, dated as of December 7, 2020 (such agreement as so amended, the “Amended ABL Credit Agreement”), among the Company, certain of its wholly-owned domestic subsidiaries party thereto, as borrowers or as guarantors, Wells Fargo Bank, National Association, as administrative agent and as collateral agent and the other lenders party thereto, for the purpose of, among other things, increasing the aggregate amount of the revolving credit facility from $30.0 million to $45.0 million and extending the maturity thereof to the fifth anniversary of the closing date of Notes Offering (subject to a springing maturity as set forth therein). The Amended ABL Credit Agreement provides for a revolving credit facility (the “Amended ABL Credit Facility”) that includes letter of credit and swing line sub-facilities. Borrowing availability under the Amended ABL Credit Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of eligible accounts receivable less certain reserves and subject to certain other adjustments as set forth in the Amended ABL Credit Agreement. Availability is reduced by issuance of letters of credit as well as any borrowings. Loans outstanding under the Amended ABL Credit Agreement bear interest at a floating rate measured by reference to, at the Company’s option, either an adjusted London Inter-Bank Offered Rate (“LIBOR”) (subject to a floor of 0.75%) plus an applicable margin of 2.50% per annum, or an alternate base rate plus an applicable margin of 1.50% per annum. Unused commitments under the Amended ABL Credit Facility are subject to a per annum fee of 0.50% per annum, which fee increases to 0.75% per annum for any quarter during which the Company's average usage under the Amended ABL Credit Facility is less than $5.0 million. On September 27, 2019, the Company issued $86.3 million aggregate principal amount of the Convertible Notes in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 4.50% payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2020. The Convertible Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms. The Convertible Notes are convertible into shares of the Company’s common stock at an initial conversion rate of 65.4022 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of approximately $15.29 per share), subject to adjustments upon the occurrence of certain events (but will not be adjusted for any accrued and unpaid interest). The Company may redeem all or a part of the Convertible Notes on or after October 6, 2023 at a redemption price equal to 100% of the principal amount of the Convertible Notes redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date, subject to certain conditions relating to the Company’s stock price having been met. Following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate event or notice of redemption. The indenture covering the Convertible Notes contains certain other customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee or holders of at least 25% in principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable. In addition, if the Company ceases to be listed or quoted on any of The NYSE, The Nasdaq Global Select Market or The Nasdaq Global Market (or any of their respective successors), holders of the outstanding Convertible Notes will have the option to require the Company to repurchase for cash all of such holder’s notes at 100% of the principal amount, plus accrued and unpaid interest. See Note 2 “The Business and Nature of Operations” for additional information regarding the out-of-compliance notices received from the NYSE. In connection with the offering of the Convertible Notes, the Company also entered into privately negotiated “capped call” transactions with several counterparties. The capped call transaction will initially cover, subject to customary anti-dilution adjustments, the number of shares of common stock that initially underlie the Convertible Notes. The capped call transactions are expected to generally reduce the potential dilutive effect on the Company’s common stock upon any conversion of the Convertible Notes with such reduction subject to a cap which is initially $19.46 per share. Long-term debt amounts due, for the twelve-month periods ending December 31 are as follows: Amounts Payable (In thousands) to Institutions 2023 $ — 2024 — 2025 — 2026 659,424 2027 — Total $ 659,424 The long-term debt amounts due above include accrued PIK interest on the Second Lien Facility as of December 31, 2022. As of April 22, 2022, which is the one-year anniversary of the closing date of the Second Lien Facility, the Company may now elect to pay in cash any interest previously required to be paid in the form of PIK interest. To date, the Company has not paid any PIK interest in cash. The outstanding Notes, Second Lien Facility, and Amended ABL Credit Facility amounts above are guaranteed by all of Lannett’s significant wholly-owned domestic subsidiaries and are collateralized by substantially all present and future assets of the Company. |
Legal, Regulatory Matters and C
Legal, Regulatory Matters and Contingencies | 6 Months Ended |
Dec. 31, 2022 | |
Legal, Regulatory Matters and Contingencies | |
Legal, Regulatory Matters and Contingencies | Note 11. Legal, Regulatory Matters and Contingencies Federal Investigation into the Generic Pharmaceutical Industry In November and December 2014, the Company and certain affiliated individuals and customers were served with grand jury subpoenas relating to a federal investigation of the generic pharmaceutical industry into possible violations of the Sherman Act. The subpoenas requested corporate documents of the Company relating to corporate, financial and employee information, communications or correspondence with competitors regarding the sale of generic prescription medications and the marketing, sale, or pricing of certain products, generally for the period of 2005 through the dates of the subpoenas. The Company received a Civil Investigative Demand (“CID”) from the Department of Justice on May 14, 2018. The CID requested information from 2009-present regarding allegations that the generic pharmaceutical industry engaged in market allocation, price fixing, payment of illegal remuneration and submission of false claims. The Company has responded to the CID. Based on internal investigations performed to date, the Company believes that it has acted in compliance with all applicable laws and regulations. Government Pricing On May 22, 2019, following an audit conducted by the Company, the Department of Veterans Affairs issued a Contracting Officer’s Final Decision and Demand for Payment, assessing the sum of $9.4 million for overpayments by the Veteran’s Administration (“VA”) as a result of certain commercial customer prices that were not properly disclosed to the VA for the period of January 1, 2012 through June 30, 2016. In August 2019, the Company remitted payment to the VA and was indemnified from UCB S.A. for the portion of that related to the period prior to the acquisition of KUPI (January 1, 2012 to November 24, 2015) totaling $8.1 million. The VA requested additional information for the period of July 1, 2016 through March 2018. The Company is in the process of responding to the information request. State Attorneys General and Private Plaintiffs Antitrust and Consumer Protection Litigation In December 2016, the Connecticut Attorney General and various other State Attorneys General filed a civil complaint alleging that six pharmaceutical companies engaged in anti-competitive behavior. The Company was not named in the action and does not compete on the products that formed the basis of the complaint. The complaint was later transferred for pretrial purposes to the United States District Court for the Eastern District of Pennsylvania as part of a multidistrict litigation captioned In re: Generic Pharmaceuticals Pricing Antitrust Litigation (the “MDL”). On October 31, 2017, the State Attorneys General filed a motion for leave to amend their complaint to add numerous additional defendants, including the Company, and claims relating to 13 additional drugs. The District Court granted that motion on June 5, 2018. The State Attorneys General filed their amended complaint on June 18, 2018. The claim relating to Lannett involves alleged price-fixing for one drug, doxycycline monohydrate, but does not involve the pricing for digoxin. The State Attorneys General also allege that all defendants were part of an overarching, industry-wide conspiracy to allocate markets and fix prices generally. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims but has yet to decide an individual motion filed by the Company to dismiss the overarching conspiracy claims as to it. On June 7, 2022, the Court granted a joint motion of all defendants to dismiss the federal claim of the State Attorneys General for disgorgement of defendants’ allegedly ill-gotten gains, but denied defendants’ motion to dismiss their parens patriae federal claims for injunctive relief due to lack of standing. On May 10, 2019, the State Attorneys General filed a new lawsuit naming the Company and one of its employees as defendants, along with 33 other companies and individuals. The complaint again alleges an overarching conspiracy and contains claims for price-fixing and market allocation under the Sherman Act and related state laws. The complaint focuses on the conduct of another generic pharmaceutical company, and the relationships that company had with other generic companies and their employees. The specific allegations in this complaint against Lannett relate to the Company’s sales of baclofen and levothyroxine. The complaint also names another current employee as a defendant, but the allegations pertain to conduct that occurred prior to their employment by Lannett. In June 2020, the State Attorneys General filed a third overarching conspiracy complaint involving scores of different drugs used primarily to treat dermatological conditions, including alleged price-fixing by the Company for acetazolamide. Both complaints have been added to the MDL. In 2016 and 2017, the Company and certain competitors were named as defendants in a number of lawsuits filed by private plaintiffs alleging that the Company and certain generic pharmaceutical manufacturers have conspired to fix prices of generic digoxin, levothyroxine, ursodiol and baclofen. These cases are part of a larger group of more than 100 lawsuits generally alleging that over 30 generic pharmaceutical manufacturers and distributors conspired to fix prices for multiple different generic drugs in violation of the federal Sherman Act, various state antitrust laws, and various state consumer protection statutes. The United States also has been granted leave to intervene in the cases. On April 6, 2017, these cases were added to the MDL. The various plaintiffs are grouped into three categories - Direct Purchaser Plaintiffs, End Payer Plaintiffs, and Indirect Reseller Purchasers - and filed Consolidated Amended Complaints (“CACs”) against the Company and the other defendants in August 2017. The CACs naming the Company as a defendant involve generic digoxin, levothyroxine, ursodiol and baclofen. Pursuant to a court-ordered schedule grouping the 18 different drug cases into three separate tranches, the Company and other generic pharmaceutical manufacturer defendants in October 2017 filed joint and individual motions to dismiss the CACs involving the six drugs in the first tranche, including digoxin. In October 2018, the Court (with one exception) denied defendants’ motions to dismiss plaintiffs’ Sherman Act claims with respect to the drugs in the first tranche. In March 2019, the Company and other defendants filed answers to the Sherman Act claims. In addition, in February 2019, the Court dismissed certain of the plaintiffs’ state law claims but denied the remainder of defendants’ motions to dismiss and set a deadline of April 1, 2019 for certain plaintiffs to amend their existing complaints. Those plaintiffs amended their complaints, but further motions to dismiss the state-law claims remain pending. Following the lead of the state Attorneys General, the Direct Purchaser Plaintiffs, End Payer Plaintiffs and Indirect Reseller Plaintiffs filed their own complaints in June 2018 alleging an overarching conspiracy relating to 14 generic drugs in the End Payer complaint and 15 generic drugs in the Indirect Reseller complaint. Although the complaints allege an overarching conspiracy with respect to all of the drugs identified, the specific allegations related to drugs the Company manufactures involve acetazolamide and doxycycline monohydrate. In addition, between December 2019 and February 2020, the End Payer Plaintiffs, Indirect Reseller Purchasers, and Direct Purchaser Plaintiffs filed separate complaints alleging overarching, industry-wide price-fixing conspiracies modeled on the second one filed by the state Attorneys General. The new complaint involves 135 new drugs in addition to those named in previous complaints. As to the Company, the new drugs involved are pilocarpine HCL, triamterene HCTZ capsules, amantadine HCL, and oxycodone HCL. None of the defendants, including the Company, has responded yet to these new complaints. Between January 2018 and December 2020, a number of opt-out parties filed individual complaints or otherwise commenced actions against the Company and dozens of other companies and individuals alleging an overarching conspiracy and individual conspiracies to fix the prices and allocate markets on scores of different drug products, including digoxin, doxycycline, levothyroxine, ursodiol and baclofen. The opt-out parties include various retailers, insurers and county governments, which have filed federal suits in Pennsylvania, New York, California, Minnesota and Texas. All of those complaints have been added to the MDL but none of the defendants, including the Company, has responded to any of the complaints. Other groups of insurers have commenced actions in Pennsylvania state court against the Company and other drug companies by filing writs of summons, which are not complaints but can serve to toll the running of statutes of limitations. Those state-court cases have not been added to the MDL, although the parties have agreed to stay those cases pending further developments in the MDL. One of the insurance state-court plaintiffs filed a motion to have its case removed from deferred status so it could be litigated simultaneously in the Philadelphia Court of Common Pleas, but the Court denied that motion on October 3, 2022, so the case currently remains in deferred status. In June 2020, the Company and a number of other generic pharmaceutical manufacturers were named as defendants in a Statement of Claim in a proposed class proceeding in federal court in Toronto, Ontario, Canada. The case alleges a violation of Canada’s Competition Act. The allegations are similar to those in the MDL alleging an overarching, industry-wide conspiracy to allocate markets and fix the price of generic drugs. That alleged conspiracy reached Canada because these same manufacturers also allegedly sell the majority of generic drugs in Canada. The Statement of Claim alleges that the conspiracy extends to the entire generic pharmaceutical market. The specific drugs identified with respect to the Company are: acetazolamide, baclofen, digoxin, doxycycline monohydrate, levothyroxine, and ursodiol. The Company has not yet responded to the Statement of Claim. On July 13, 2020, the District Court overseeing the MDL selected as “bellwether” cases the second overarching conspiracy case filed by the state Attorneys General in May 2019 as well as individual-conspiracy cases filed by the Direct Purchaser Plaintiffs, End Payer Plaintiffs, and Indirect Reseller Purchasers involving the drugs clobetasol, clomipramine and pravastatin. The Company is a defendant only in the overarching conspiracy case. On February 9, 2021, the District Court vacated the order selecting the bellwether cases. Thereafter, the District Court re-designated the clobetasol and clomipramine cases as individual-conspiracy bellwethers, and on May 7, 2021, selected the third complaint filed by the state Attorneys General in June 2020 as the new overarching conspiracy bellwether case. On September 9, 2021, the state Attorneys General amended their bellwether complaint. To date, none of the bellwether cases have been scheduled for trial. The Company believes that it acted in compliance with all applicable laws and regulations. Accordingly, the Company disputes the allegations set forth in these class actions and plans to vigorously defend itself against these claims. Shareholder Litigation In November 2016, a putative class action lawsuit was filed against the Company and two of its former officers in the federal district court for the Eastern District of Pennsylvania, alleging that the Company and two of its former officers damaged the purported class by making false and misleading statements regarding the Company’s drug pricing methodologies and internal controls. In December 2017, counsel for the putative class filed a second amended complaint. The Company filed a motion to dismiss the second amended complaint in February 2018. In July 2018, the court granted the Company’s motion to dismiss the second amended complaint. In September 2018, counsel for the putative class filed a third amended complaint alleging that the Company and two of its former officers made false and misleading statements regarding the impact of competition on prices and sales of certain of the Company’s products, regarding the potential effects on the Company of regulatory investigations and antitrust litigation, and regarding the defendants’ investigation of purported anticompetitive conduct. The Company filed a motion to dismiss the third amended complaint in November 2018. In May 2019, the court denied the Company’s motion to dismiss the third amended complaint. In July 2019, the Company filed an answer to the third amended complaint. In October 2020, counsel for the putative class filed a motion for class certification. In March 2021, the Company filed a brief in opposition to the motion to certify the putative class. In August 2021, the court granted the motion to certify the proposed class, to appoint class representatives, and to appoint class counsel. In August 2021, the Company filed a petition for permission to appeal the court’s class certification order. In September 2021, counsel for the class filed a response in opposition to the Company’s petition. In November 2021, the United States Court of Appeals for the Third Circuit granted the Company’s petition for permission to appeal the class certification order. In January 2022, the Third Circuit granted the Company’s motion to stay the case pending a decision on the interlocutory appeal. The Company believes it acted in compliance with all applicable laws and continues to vigorously defend itself from these claims. The Company cannot reasonably predict the outcome of the suit at this time. Sandoz, Inc. On July 20, 2020, Sandoz, Inc. (“Sandoz”) filed a complaint in federal court in Philadelphia, alleging claims for tortious interference with contract, unfair competition and conversion of confidential information, arising out of Cediprof, Inc.’s (“Cediprof”) termination of Sandoz’s contract to distribute levothyroxine tablets in the United States and certain territories. Along with the complaint, Sandoz filed a motion for a temporary restraining order and preliminary injunction, seeking to enjoin the Company from commencing the distribution of levothyroxine tablets on August 3, 2020. On the same day, Sandoz filed a separate complaint and application for a temporary restraining order and preliminary injunction against Cediprof in federal court in New York, seeking to prevent Cediprof from selling its levothyroxine tablets in the United States and certain of its territories to anyone other than Sandoz. On July 27, 2020, the New York court held a hearing and denied Sandoz’s application for a temporary restraining order, ruling Sandoz had failed to establish irreparable harm. Sandoz subsequently dismissed the complaint and is proceeding against Cediprof in an Arbitration in New York, where the Company has agreed to indemnify Cediprof. On July 28, 2020, the Philadelphia court held a hearing and denied Sandoz’s application for a temporary restraining order, ruling that Sandoz had failed to establish irreparable harm and failed to establish that it is likely to succeed on the merits of its claim against Lannett. On October 5, 2020, the Company filed a motion to dismiss the complaint. On December 28, 2020, the Court granted in part and denied in part the motion, dismissing certain of the claims. The Company has filed a motion to stay the case pending the Arbitration of the Sandoz/Cediprof dispute. On January 11, 2021, the Company filed an answer and counterclaim to the complaint. Upon the conclusion of fact discovery, the Court entered an order on July 16, 2021 staying the remaining deadlines in the case pending the outcome of the Arbitration between Sandoz and Cediprof, which began on January 31, 2022. On August 5, 2022, the Arbitrator issued a final award, finding that Cediprof had breached the Sandoz contract and determining that Sandoz is entitled to lost profits, among other damages. The portion of the award subject to indemnification from the Company amounted to $10.9 million, which the Company has accrued as of June 30, 2022. The Company’s indemnification obligation will only be triggered if and when Cediprof pays the award. On November 4, 2022, Cediprof filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. By virtue of the automatic stay arising upon the filing of the bankruptcy petition, collection efforts against Cediprof are stayed pending the resolution of the bankruptcy proceeding. Ranitidine Oral Solution, USP On June 1, 2020, a class action complaint was served upon the Company and approximately forty-five (45) other companies asserting claims for personal injury arising from the presence of NDMA in Ranitidine product, which was consolidated in a multidistrict litigation (“MDL”) pending in the United States District Court for the Southern District of Florida. Following the filing of a first amended complaint, the Company filed a motion to dismiss, which was granted and resulted in a dismissal of all claims with prejudice based on federal preemption. The Plaintiffs filed an appeal to the Eleventh Circuit Court of Appeals, which has not yet been ruled upon. Separately, several lawsuits were filed in various state courts by state government, city government, and several private parties asserting various consumer protection and/or personal injury claims (in the case of individual plaintiffs) regarding the presence of NDMA in Ranitidine products. The Company has filed motions to dismiss in all state cases, some of which were granted and other of which were denied. The Company denies all liability in pending cases. Other Litigation Matters The Company is also subject to various legal proceedings arising out of the normal course of its business including, but not limited to, product liability, intellectual property, patent infringement claims and antitrust matters. It is not possible to predict the outcome of these various proceedings. An adverse determination in any of these proceedings or in any of the proceedings described above in the future could have a significant impact on the financial position, results of operations and cash flows of the Company. |
Commitments
Commitments | 6 Months Ended |
Dec. 31, 2022 | |
Commitments | |
Commitments | Note 12. Commitments Leases At December 31, 2022 and June 30, 2022, the Company had a ROU lease asset of $9.3 million and $9.6 million, respectively, and an operating lease liability of $11.5 million and $12.1 million, respectively. The current balance of the operating lease liability at December 31, 2022 was $2.1 million. Components of lease costs are as follows: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2022 2021 2022 2021 Operating lease cost $ 466 $ 444 $ 932 $ 905 Variable lease cost 41 16 79 57 Short-term lease cost (a) 144 83 228 152 Total $ 651 $ 543 $ 1,239 $ 1,114 ______________________ (a) Not recorded on the Consolidated Balance Sheet Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Six Months Ended December 31, (In thousands) 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,104 $ 1,084 Weighted-average remaining lease term and discount rate for our operating leases are as follows: Six Months Ended December 31, 2022 2021 Weighted-average remaining lease term 8 years 9 years Weighted-average discount rate 8.5 % 8.5 % Maturities of lease liabilities by fiscal year for our operating leases are as follows: (In thousands) Amounts Due 2023 $ 1,041 2024 2,083 2025 2,103 2026 2,124 2027 2,145 Thereafter 6,368 Total lease payments 15,864 Less: Imputed interest 4,349 Present value of lease liabilities $ 11,515 Other Commitments In Fiscal 2020, the Company executed a License and Collaboration Agreement with North South Brother Pharmacy Investment Co., Ltd. and HEC Group PTY, Ltd. (collectively, “HEC”) to develop an insulin glargine product that would be biosimilar to Lantus Solostar. Under the terms of the deal, among other things, the Company shall fund up to the initial $32.0 million of the development costs and split 50/50 50/50 60/40 On February 8, 2021, the Company executed a License and Collaboration Agreement and a Supply Agreement with Sunshine Lake Pharma Co., Ltd. an HEC Group company (“Sunshine”) with respect to the development of a biosimilar insulin aspart product. Under the terms of the deal, among other things, the Company shall fund up to the initial $32.0 million of the development costs, provided that if total development and other costs paid by Lannett are less than $32.0 million then the difference will be paid to Sunshine over the first year of commercialization. As of December 31, 2022, the Company has incurred approximately $2.2 million towards the $32.0 million commitment made by the Company. The parties shall negotiate the sharing of any development costs in excess of $32.0 million. Lannett shall receive an exclusive license to distribute and market the product in the United States upon FDA approval under the 50/50 60/40 In conjunction with the HEC collaboration efforts to develop biosimilar insulin glargine and aspart, the Company also separately entered into two Customization and Supply Agreements with Ypsomed AG (“Ypsomed”) in October 2020 and July 2021 to develop, manufacture and supply an injection device to be used with both insulin products. In April 2022, the Company executed an amendment to the Customization and Supply Agreements to allow Ypsomed to expand their production capacity to meet the anticipated demand. Under the terms of the deal, the Company is required to pay 14 million Swiss Francs (“CHF”) to Ypsomed over various future milestone dates to fund the capacity expansion in exchange for a predetermined discount on future purchases of the injection device. In April 2022, The Company paid Ypsomed 4.0 million CHF, the equivalent of approximately $4.3 million, which is recorded in the other assets caption of the Consolidated Balance Sheet as of December 31, 2022. The remaining 4.0 million and 6.0 million CHF payments are to be paid in installments in calendar years 2023 and 2024, respectively. In Fiscal 2017, the Company signed an agreement with a third-party company operating in the online pharmaceutical business, under which the Company agreed to provide up to $15.0 million in revolving loans for the purpose of expansion and other business needs. Any outstanding balance under the loan would bear interest at 2.0% and be due seven years from the date of the agreement. As of 12/31/2022, after a review of the third-party’s current financial condition as well as their projected liquidity levels, the Company determined that it is more likely than not that the third party will be unable to repay the outstanding loan. Therefore, the Company recorded a full write-off of the loan receivable of $6.8 million during the second quarter of Fiscal 2023. |
Warrants
Warrants | 6 Months Ended |
Dec. 31, 2022 | |
Warrants | |
Warrants | Note 13. Warrants In connection with the Second Lien Facility, the Company issued to the Participating Lenders warrants to purchase up to 8,280,000 shares of common stock of the Company (the “Warrants”) at an exercise price of $6.88 per share. The Warrants were issued on April 22, 2021 with an eight-year term. The Participating Lenders received registration rights with respect to the shares of common stock of the Company to be received upon exercise of the Warrants. The Company concluded that the Warrants were indexed to its own stock and, therefore, are classified as an equity instrument. In accordance with ASC 470, Debt The holders of the Warrants are entitled to receive dividends or distributions of any kind made to the common stockholders to the same extent as if the holder had exercised the Warrant into common stock. Although the Company did not issue or declare dividends during the period, the Warrants are considered participating securities under ASC 260, Earnings per share |
Loss Per Common Share
Loss Per Common Share | 6 Months Ended |
Dec. 31, 2022 | |
Loss Per Common Share | |
Loss Per Common Share | Note 14. Loss Per Common Share A reconciliation of the Company’s basic and diluted loss per common share was as follows: Three Months Ended December 31, (In thousands, except share and per share data) 2022 2021 Numerator: Net loss $ (36,308) $ (81,085) Net income allocated to participating securities for the Warrants — — Interest expenses applicable to the Convertible Notes, net of tax — — Amortization of debt issuance costs applicable to the Convertible Notes, net of tax — — Adjusted "if-converted" net loss $ (36,308) $ (81,085) Denominator: Basic weighted average common shares outstanding 41,170,839 40,358,127 Effect of potentially dilutive options, restricted stock awards and performance-based shares — — Effect of conversion of the Convertible Notes — — Effect of participating securities for the Warrants — — Diluted weighted average common shares outstanding 41,170,839 40,358,127 Loss per common share: Basic $ (0.88) $ (2.01) Diluted $ (0.88) $ (2.01) Six Months Ended December 31, (In thousands, except share and per share data) 2022 2021 Numerator: Net loss $ (64,327) $ (103,427) Net income allocated to participating securities for the Warrants — — Interest expenses applicable to the Convertible Notes, net of tax — — Amortization of debt issuance costs applicable to the Convertible Notes, net of tax — — Adjusted "if-converted" net loss $ (64,327) $ (103,427) Denominator: Basic weighted average common shares outstanding 41,056,607 40,142,974 Effect of potentially dilutive options, restricted stock awards and performance-based shares — — Effect of conversion of the Convertible Notes — — Effect of participating securities for the Warrants — — Diluted weighted average common shares outstanding 41,056,607 40,142,974 Loss per common share: Basic $ (1.57) $ (2.58) Diluted $ (1.57) $ (2.58) In accordance with ASC 260, Earnings per share The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the three and six months ended December 31, 2022 and 2021 were 7.3 million and 8.1 million, respectively. The effect of potentially dilutive shares was excluded from the calculation of diluted loss per share in the three and six months ended December 31, 2022 and 2021 because the effect of including such securities would be anti-dilutive. |
Share-based Compensation
Share-based Compensation | 6 Months Ended |
Dec. 31, 2022 | |
Share-based Compensation | |
Share-based Compensation | Note 15. Share-based Compensation At December 31, 2022, the Company had two share-based employee compensation plans (the 2014 Long-Term Incentive Plan (“LTIP”) and the 2021 LTIP). Together these plans authorized an aggregate total of 8.0 million shares to be issued. As of December 31, 2022, the plans have a total of 1.5 million shares available for future issuances. Historically, the Company has issued share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. The Company issues new shares of stock when stock options are exercised. As of December 31, 2022, there was $5.3 million of total unrecognized compensation cost related to non-vested share-based compensation awards. That cost is expected to be recognized over a weighted average period of 1.2 years. The target award value mix in Fiscal 2022 for Named Executive Officers (“NEOs”) was 50% performance shares, 30% restricted stock, and 20% provided in the form of a cash-based incentive where the value varies based on changes in our stock price over the three-year period ending June 30, 2024. In the first quarter of Fiscal 2023, the Compensation Committee approved the granting of 50% of the target long-term incentive for Fiscal 2023 (calculated based on the NEO’s Fiscal 2022 salary) in the form of a cash-based retention award, which was paid in September 2022. In the second quarter of Fiscal 2023, certain other employees were granted a cash-based incentive award, which totaled $1.3 million and was paid in October 2022. The cash-based retention award was paid as a result of the potential dilution associated with granting equity incentives; however, the awards are subject to a 36-month one-third Stock Options The Company measures share-based compensation costs for options using the Black-Scholes option pricing model, which includes the use of various weighted average assumptions to estimate the fair values of stock options granted. Expected volatility is based on the historical volatility of the price of our common shares during the historical period equal to the expected term of the option. The Company uses historical information to estimate the expected term, which represents the period of time that options granted are expected to be outstanding. The risk-free rate for the period equal to the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The forfeiture rate assumption is the estimated annual rate at which unvested awards are expected to be forfeited during the vesting period. This assumption is based on our actual forfeiture rate on historical awards. Periodically, management will assess whether it is necessary to adjust the estimated rate to reflect changes in actual forfeitures or changes in expectations. Additionally, the expected dividend yield is typically equal to zero, as the Company has not historically issued a dividend. There were no stock options granted during the six months ended December 31, 2022 and 2021. A stock option summary as of December 31, 2022 and changes during the six months then ended is presented below: Weighted Weighted- Average Average Aggregate Remaining Exercise Intrinsic Contractual (In thousands, except for weighted average price and life data) Awards Price Value Life (yrs.) Outstanding at June 30, 2022 935 $ 8.94 $ — 6.5 Forfeited, expired or repurchased (23) $ 8.13 Outstanding at December 31, 2022 912 $ 8.96 $ — 6.1 Vested and expected to vest at December 31, 2022 912 $ 8.96 $ — 6.1 Exercisable at December 31, 2022 710 $ 9.73 $ — 5.9 Restricted Stock The Company measures restricted stock compensation costs based on the stock price at the grant date less an estimate for expected forfeitures. The annual forfeiture rate used to calculate compensation expense was 6.5% for the six months ended December 31, 2022 and 2021. A summary of restricted stock awards as of December 31, 2022 and changes during the six months then ended, is presented below: Weighted Average Grant-date Aggregate (In thousands, except for weighted average price data) Awards Fair Value Intrinsic Value Non-vested at June 30, 2022 1,355 $ 5.28 Vested (551) 5.46 $ 318 Forfeited (23) 4.97 Non-vested at December 31, 2022 781 $ 5.17 Performance-Based Shares The Company grants performance-based awards to certain key executives. The stock-settled awards will cliff vest based on a three-year performance measurement period. Awards issued prior to July 2021 are based on relative Total Shareholder Return (“TSR”) over a three-year period, which, in accordance with ASC 718, Compensation – Stock Compensation Compensation – Stock Compensation Compensation – Stock Compensation There were no changes to the outstanding performance-based share awards during the six months ended December 31, 2022. Employee Stock Purchase Plan In February 2003, the Company’s stockholders approved an Employee Stock Purchase Plan (“2003 ESPP”), under which the Company is authorized to issue 1.1 million shares of the Company’s common stock. The 2003 ESPP was implemented on April 1, 2003 and is qualified under Section 423 of the Internal Revenue Code. In January 2022, the stockholders of the Company approved a new ESPP (“2022 ESPP” and, together with the 2003 ESPP, “ESPPs”). The Company is authorized to issue an additional 1.5 million shares of the Company’s common stock under the 2022 ESPP, which is qualified under Section 423 of the Internal Revenue Code. During the six months ended December 31, 2022 and 2021, 177 thousand shares and 107 thousand shares were issued under the ESPPs, respectively. As of December 31, 2022, 1.5 million total cumulative shares have been issued under the ESPPs. Employees eligible to participate in the ESPP may purchase shares of the Company’s stock at 85% of the lower of the fair market value of the common stock on the first day of the calendar quarter, or the last day of the calendar quarter. Under the ESPP, employees can authorize the Company to withhold up to 10% of their compensation during any quarterly offering period, subject to certain limitations. The following table presents the allocation of share-based compensation costs recognized in the Consolidated Statements of Operations by financial statement line item: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2022 2021 2022 2021 Selling, general and administrative expenses $ 1,392 $ 2,115 $ 2,836 $ 4,812 Research and development expenses 28 27 56 122 Cost of sales 112 167 219 393 Total $ 1,532 $ 2,309 $ 3,111 $ 5,327 Tax benefit at statutory rate $ 345 $ 519 $ 700 $ 1,199 |
Employee Benefit Plan
Employee Benefit Plan | 6 Months Ended |
Dec. 31, 2022 | |
Employee Benefit Plan | |
Employee Benefit Plan | Note 16. Employee Benefit Plan The Company has a 401(k) defined contribution plan (the “Plan”) covering substantially all employees. Pursuant to the Plan provisions, the Company is required to make matching contributions equal to 50% of each employee’s contribution, not to exceed 4% of the employee’s compensation for the Plan year. Contributions to the Plan were $0.2 million during each of the three months ended December 31, 2022 and 2021. Contributions to the Plan were $0.6 million and $0.5 million during the six months ended December 31, 2022 and 2021, respectively. In Fiscal 2020, the Company implemented a non-qualified deferred compensation plan for certain senior-level management and executives. The non-qualified deferred compensation plan allows certain eligible employees to defer additional pre-tax earnings for retirement, beyond the IRS limits in place under the Plan. Contributions to the non-qualified deferred compensation plan during the three and six months ended December 31, 2022 were not material. |
Income Taxes
Income Taxes | 6 Months Ended |
Dec. 31, 2022 | |
Income Taxes | |
Income Taxes | Note 17. Income Taxes The federal, state and local income tax expense for the three months ended December 31, 2022 was $32 thousand compared to income tax benefit of $1.4 million for the three months ended December 31, 2021. The effective tax rates for the three months ended December 31, 2022 and 2021 were (0.1)% and 1.7%, respectively. The federal, state and local income tax expense for the six months ended December 31, 2022 was $66 thousand compared to income tax benefit of $1.4 million for the six months ended December 31, 2021. The effective tax rates for the six months ended December 31, 2022 and 2021 were (0.1)% and 1.4%, respectively. The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2022 and June 30, 2022, the Company has total unrecognized tax benefits of $4.6 million, of which $4.5 million would impact the Company’s effective tax rate for each period, if recognized. As a result of the positions taken during the period, the Company has not recorded any material interest and penalties for the period ended December 31, 2022 in the statement of operations and no cumulative interest and penalties have been recorded either in the Company’s statement of financial position as of December 31, 2022 and June 30, 2022. The Company will recognize interest accrued on unrecognized tax benefits in interest expense and any related penalties in operating expenses. The Company files income tax returns in the United States federal jurisdiction and various states. The Company’s federal tax returns for Fiscal 2014 and prior generally are no longer subject to review as such years are closed. The Company’s Fiscal 2015 through 2017, 2019, 2020 and 2021 federal returns are currently under examination by the Internal Revenue Service (“IRS”). As part of a lengthy process, the Company has received various Information Document Requests and Notices of Proposed Adjustment with respect to positions taken in certain income tax issues, including an accounting method change related to chargebacks and rebates that the IRS is proposing to disallow. We are in the process of assessing the impact of these notices and preparing a response to the IRS. We believe that it is more likely than not that our positions will ultimately be sustained upon further examination, and, if necessary, will contest any addition tax determined to be owed; however, an adverse outcome could have a material impact to the Company’s Consolidated Statements of Operations and financial position. In September 2022, the IRS notified the Company that a portion of its income tax receivables balance will be held until the completion of the examination of its federal tax returns. As such, the balance expected to be held by the IRS is classified as income taxes receivable on the Company’s Consolidated Balance Sheet as of December 31, 2022. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions | |
Related Party Transactions | Note 18. Related Party Transactions The Company had sales of $0.3 million and $0.4 million during the three months ended December 31, 2022 and 2021, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn”), which is a member of the Premier Buying Group. Sales to Auburn for the six months ended December 31, 2022 and 2021 were $0.6 million for each period. Jeffrey Farber, a board member until January 25, 2023 and stockholder owning more than five percent of the Company’s stock, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $0.3 million at December 31, 2022 and June 30, 2022. |
Assets Held for Sale
Assets Held for Sale | 6 Months Ended |
Dec. 31, 2022 | |
Assets Held for Sale | |
Assets Held for Sale | Note 19. Assets Held for Sale State Road Facility In September 2022, the Company signed a listing and sale agreement to engage a broker to sell its State Road facility and certain equipment at the facility. The Company adjusted the assets to fair value less costs to sell, which resulted in a $4.7 million impairment charge. As of December 31, 2022, the assets identified for sale at the State Road facility, totaling $1.3 million, were recorded in the assets held for sale caption in the Consolidated Balance Sheets. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Dec. 31, 2022 | |
Subsequent Events. | |
Subsequent Events | Note 20. Subsequent Events On January 25, 2023, the stockholders of the Company approved a proposed amendment to the Company’s Certificate of Incorporation to effect a reverse stock split (the “Reverse Stock Split”) of the issued and outstanding shares of common stock, par value $0.001 per share, of the Company at a ratio of between 1 1 On January 25, 2023, the Board of Directors approved a 1 The following table presents pro forma loss per share on a post-reverse split basis for the three and six months ended December 31, 2022 and 2021: (UNAUDITED) Three Months Ended Six Months Ended December 31, December 31, (In thousands, except share and per share data) 2022 2021 2022 2021 Net loss $ (36,308) $ (81,085) $ (64,327) $ (103,427) Basic weighted average common shares outstanding 10,292,710 10,089,532 10,264,152 10,035,744 Diluted weighted average common shares outstanding 10,292,710 10,089,532 10,264,152 10,035,744 Loss per common share Basic $ (3.53) $ (8.04) $ (6.27) $ (10.31) Diluted $ (3.53) $ (8.04) $ (6.27) $ (10.31) |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with U.S. GAAP. |
Principles of consolidation | Principles of consolidation The Consolidated Financial Statements include the accounts of Lannett Company, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. |
Reclassifications | Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for estimated chargebacks, rebates, returns and other adjustments including a provision for the Company’s liability under the Medicare Part D program. Additionally, significant estimates and assumptions are required when determining the value of inventories and long-lived assets, including intangible assets, income taxes, and contingencies. Because of the inherent subjectivity and complexity involved in these estimates and assumptions, actual results could differ from those estimates. |
Foreign currency translation | Foreign currency translation The Consolidated Financial Statements are presented in U.S. dollars, the reporting currency of the Company. The financial statements of the Company’s foreign subsidiary are maintained in local currency and translated into U.S. dollars at the end of each reporting period. Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at average exchange rates during the period. The adjustments resulting from the use of differing exchange rates are recorded as part of stockholders’ equity (deficit) in accumulated other comprehensive income (loss). Gains and losses resulting from transactions denominated in foreign currencies are recognized in the Consolidated Statements of Operations under other income (loss). Amounts recorded due to foreign currency fluctuations are immaterial to the Consolidated Financial Statements. |
Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash The Company considers all highly liquid investments with original maturities less than or equal to three months at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value, and consist of bank deposits and money market funds. The Company maintains its cash deposits and cash equivalents at well-known, stable financial institutions. Such amounts frequently exceed insured limits. In connection with the Second Lien Secured Loan Facility (“Second Lien Facility”), the Company is required to maintain at least $5.0 million in a deposit account at all times, subject to control by the Second Lien Collateral Agent. At December 31, 2022, the Company classified this balance as restricted cash, which is included in other assets on the Consolidated Balance Sheets. Presented in the table below is a reconciliation of the cash, cash equivalents and restricted cash amounts presented on the Consolidated Balance Sheets to the sum of such amounts presented on the Consolidated Statements of Cash Flows for the periods ended December 31, 2022 and 2021. December 31, 2022 December 31, 2021 Cash and cash equivalents $ 55,850 $ 98,635 Restricted cash, included in other assets 5,000 5,000 Cash, cash equivalents and restricted cash as presented on the Consolidated Statements of Cash Flows $ 60,850 $ 103,635 |
Allowance for expected credit losses | Allowance for expected credit losses The Company complies with ASU 2016-13, Measurement of Credit Losses on Financial Instruments |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value by the first-in, first-out method. Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels, expiration date and estimated sales forecasts. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the assets’ estimated useful lives. Repairs and maintenance costs that do not extend the useful life of the asset are expensed as incurred. |
Intangible Assets | Intangible Assets Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed on a straight-line basis over the assets’ estimated useful lives, which commence upon first shipment of the product associated with the intangible asset. The Company continually evaluates the reasonableness of the useful lives of these assets. Costs to renew or extend the term of a recognized intangible asset are expensed as incurred. |
Valuation of Long-Lived Assets, including Intangible Assets | Valuation of Long-Lived Assets, including Intangible Assets The Company’s long-lived assets primarily consist of property, plant and equipment and definite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flows of the asset, then impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. |
Revenue Disaggregation | Revenue Disaggregation The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for the three and six months ended December 31, 2022 and 2021. Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2022 2021 2022 2021 Analgesic $ 2,592 $ 3,919 $ 6,016 $ 9,233 Anti-Psychosis 2,575 2,095 5,195 5,810 Cardiovascular 13,089 9,753 23,971 23,853 Central Nervous System 21,782 22,340 42,576 45,125 Endocrinology 5,831 8,297 13,143 16,142 Gastrointestinal 8,716 14,023 16,658 29,263 Infectious Disease 4,989 6,520 10,058 19,035 Migraine 3,574 4,446 6,898 9,131 Respiratory/Allergy/Cough/Cold 1,468 1,868 2,670 4,982 Other 10,955 10,275 19,714 20,627 Contract manufacturing revenue 5,323 2,972 9,074 4,832 Total net sales $ 80,894 $ 86,508 $ 155,973 $ 188,033 |
Customer, Supplier and Product Concentration | Customer, Supplier and Product Concentration For the three and six months ended December 31, 2022 and 2021, the Company did not have any products that accounted for at least 10% of total net sales. Products are defined as containing the same active ingredient or combination of ingredients. The following table presents the percentage of total net sales, for the three and six months ended December 31, 2022 and 2021, for certain of the Company’s customers which accounted for at least 10% of total net sales in any of those periods: Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 Customer A 22 % 26 % 22 % 28 % Customer B 21 % 15 % 21 % 17 % Customer C 16 % 14 % 16 % 14 % |
Revenue Recognition | Revenue Recognition Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers Revenue from Contracts with When revenue is recognized, a simultaneous adjustment to gross sales is made for estimated chargebacks, rebates, returns, promotional adjustments and other potential adjustments. These provisions are primarily estimated based on historical experience, future expectations, contractual arrangements with wholesalers and indirect customers and other factors known to management at the time of accrual. Accruals for provisions are presented in the Consolidated Financial Statements as a reduction to gross sales with the corresponding reserve presented as a reduction of accounts receivable or included as rebates payable, depending on the nature of the reserve. Provisions for chargebacks, rebates, returns and other adjustments require varying degrees of subjectivity. While rebates generally are based on contractual terms and require minimal estimation, chargebacks and returns require management to make more subjective assumptions. Each major category is discussed in detail below: Chargebacks The provision for chargebacks is the most significant and complex estimate used in the recognition of revenue. The Company sells its products directly to wholesale distributors, generic distributors, retail pharmacy chains and mail-order pharmacies. The Company also sells its products indirectly to independent pharmacies, managed care organizations, hospitals, nursing homes and group purchasing organizations, collectively referred to as “indirect customers.” The Company enters into agreements with its indirect customers to establish pricing for certain products. The indirect customers then independently select a wholesaler from which to purchase the products. If the price paid by the indirect customers is lower than the price paid by the wholesaler, the Company will provide a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and the wholesaler purchase price. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels. As sales to the large wholesale customers, such as Cardinal Health, AmerisourceBergen and McKesson increase (decrease), the reserve for chargebacks will also generally increase (decrease). However, the size of the increase (decrease) depends on product mix and the amount of sales made to indirect customers with which the Company has specific chargeback agreements. The Company continually monitors the reserve for chargebacks and makes adjustments when management believes that expected chargebacks may differ from the actual chargeback reserve. Rebates Rebates are offered to the Company’s key chain drug store, distributor and wholesaler customers to promote customer loyalty and increase product sales. These rebate programs provide customers with credits upon attainment of pre-established volumes or attainment of net sales milestones for a specified period. Other promotional programs are incentive programs offered to the customers. Additionally, as a result of the Patient Protection and Affordable Care Act (“PPACA”) enacted in the U.S. in March 2010, the Company participates in a cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration (“FDA”) approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application ("ANDA”). Drugs purchased within the Medicare Part D coverage gap (commonly referred to as the “donut hole”) result in additional rebates. The Company estimates the reserve for rebates and other promotional credit programs based on the specific terms in each agreement when revenue is recognized. The reserve for rebates increases (decreases) as sales to certain wholesale and retail customers increase (decrease). However, since these rebate programs are not identical for all customers, the size of the reserve will depend on the mix of sales to customers that are eligible to receive rebates. Returns Consistent with industry practice, the Company has a product returns policy that allows customers to return product within a specified time period prior to and subsequent to the product’s expiration date in exchange for a credit to be applied to future purchases. The Company’s policy requires that the customer obtain pre-approval from the Company for any qualifying return. The Company estimates its provision for returns based on historical experience, changes to business practices, credit terms and any extenuating circumstances known to management. While historical experience has allowed for reasonable estimations in the past, future returns may or may not follow historical trends. The Company continually monitors the reserve for returns and makes adjustments when management believes that actual product returns may differ from the established reserve. Generally, the reserve for returns increases as net sales increase. Other Adjustments Other adjustments consist primarily of “price adjustments,” also known as “shelf-stock adjustments” and “price protections,” which are both credits issued to reflect increases or decreases in the invoice or contract prices of the Company’s products. In the case of a price decrease, a credit is given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Other adjustments also include prompt payment discounts and “failure-to-supply” adjustments. If the Company is unable to fulfill certain customer orders, the customer can purchase products from our competitors at their prices and charge the Company for any difference in our contractually agreed upon prices. |
Leases | Leases Under ASC Topic 842, Leases The lease term is determined to be the non-cancelable period including any lessee renewal options which are considered to be reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The present value of lease payments includes fixed and certain variable payments, less lease incentives, together with amounts probable of being owed by the Company under residual value guarantees and, if reasonably certain of being paid, the cost of certain renewal options and early termination penalties set forth in the lease arrangement. To calculate the present value of lease payments, we use our incremental borrowing rate based on the information available at commencement date, as the rate implicit in the lease is generally not readily available. In making the determination of whether a lease is an operating lease or a finance lease, the Company considers the lease term in relation to the economic life of the leased asset, the present value of lease payments in relation to the fair value of the leased asset and certain other factors. Upon the commencement of the lease, the Company will record a lease liability and right-of-use (“ROU”) asset based on the present value of the future minimum lease payments over the lease term at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. For operating leases, a single lease cost is generally recognized in the Consolidated Statements of Operations on a straight-line basis over the lease term unless an impairment has been recorded with respect to a leased asset. For finance leases, amortization expense and interest expense are recognized separately in the Consolidated Statements of Operations, with amortization expense generally recorded on a straight-line basis and interest expense recorded using the effective interest method. Variable lease costs not initially included in the lease liability and ROU asset impairment charges are expensed as incurred. The Company does not recognize short-term leases of 12 months or less on its Consolidated Balance Sheets. |
Cost of Sales, including Amortization of Intangibles | Cost of Sales, including Amortization of Intangibles Cost of sales includes all costs related to bringing products to their final selling destination, which includes direct and indirect costs, such as direct material, labor and overhead expenses. Additionally, cost of sales includes product royalties, depreciation, amortization and costs to renew or extend recognized intangible assets, freight charges and other shipping and handling expenses. |
Research and Development | Research and Development Research and development costs are expensed as incurred, including all production costs until a drug candidate is approved by the FDA. Research and development expenses include costs associated with internal projects as well as costs associated with third-party research and development contracts. |
Contingencies | Contingencies Loss contingencies, including litigation-related contingencies, are included in the Consolidated Statements of Operations when the Company concludes that a loss is both probable and reasonably estimable. Legal fees for litigation-related matters are expensed as incurred and included in the Consolidated Statements of Operations under the Selling, general and administrative expenses line item. |
Restructuring Costs | Restructuring Costs The Company records charges associated with approved restructuring plans to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations and contract cancellation costs. The Company records restructuring charges based on estimated employee terminations, site closure and consolidation plans. The Company accrues severance and other employee separation costs under these actions when it is probable that a liability exists, and the amount is reasonably estimable. |
Share-Based Compensation | Share-Based Compensation Share-based compensation costs are recognized over the requisite service period, typically the vesting period, using a straight-line method, based on the fair value of the instrument on the date of grant less an estimate for expected forfeitures. The Company uses the stock price on the grant date to value restricted stock and performance-based shares with vesting based on the satisfaction of a performance condition. The Company uses the Black-Scholes valuation model to determine the fair value of stock options and the Monte-Carlo simulation model to determine the fair value of performance-based shares with a market condition. The Black-Scholes valuation and Monte-Carlo simulation models include various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate as well as performance assumptions of peer companies. These assumptions involve inherent uncertainties based on market conditions which are generally outside the Company’s control. Changes in these assumptions could have a material impact on share-based compensation costs recognized in the Consolidated Financial Statements. |
Self-Insurance | Self-Insurance The Company self-insures for certain employee medical and prescription benefits. The Company also maintains stop loss coverage with third party insurers to limit its total liability exposure. The liability for self-insured risks is primarily calculated using independent third-party actuarial valuations which take into account actual claims, claims growth and claims incurred but not yet reported. Actual experience, including claim frequency and severity as well as health-care inflation, could result in different liabilities than the amounts currently recorded. The liability for self-insured risks under this plan was $1.0 million and $0.5 million as of December 31, 2022 and June 30, 2022, respectively, and is recorded in the accrued payroll and payroll-related expenses caption in the Consolidated Balance Sheets. |
Income Taxes | Income Taxes The Company uses the liability method to account for income taxes as prescribed by ASC 740, Income Taxes Income Taxes The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative accounting standards also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. |
Earnings (Loss) Per Common Share | Earnings (Loss) Per Common Share The presentation of basic and diluted earnings (loss) per common share is required on the face of the Company's Consolidated Statements of Operations as well as a reconciliation of the computation of basic earnings (loss) per common share to diluted earnings (loss) per common share. In accordance with ASC 260, Earnings per share For purposes of determining diluted earnings per share, the Company further adjusts the basic earnings per share to include the effect of potentially dilutive shares outstanding, including options and restricted stock awards, the 4.50% Convertible Senior Notes (the “Convertible Notes”), and the Warrants. In this calculation, the Company reallocates net income based on the rights of each potentially dilutive share and will report the most dilutive earnings (loss) per share. The weighted average number of diluted shares is adjusted for the potential dilutive effect of the exercise of stock options, treats unvested restricted stock as if it were vested, includes performance-based shares that would be issued if the performance criteria were met as of the end of the reporting period, and assumes the conversion of the Convertible Notes. The Company uses the “if-converted" method to compute earnings (loss) per share when assuming the conversion of the Convertible Notes, which is calculated by dividing the adjusted "if-converted" net income by the adjusted weighted average number of shares of common stock outstanding during the period. The adjusted "if-converted" net income is adjusted for interest expense and amortization of debt issuance costs, both net of tax, associated with the Convertible Notes. Because the Warrants do not participate in losses, the Company will allocate undistributed earnings when calculating basic and diluted earnings per share in periods of net income only. Anti-dilutive securities are excluded from the calculation. Dilutive shares are also excluded in the calculation in periods of net loss because the effect of including such securities would be anti-dilutive. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) reflects all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. This includes, but is not limited to, foreign currency translation gain (loss). Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss) but excluded from income (loss) for all amounts are recorded directly as an adjustment to stockholders’ equity. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Reconciliation of the cash, cash equivalents and restricted cash | December 31, 2022 December 31, 2021 Cash and cash equivalents $ 55,850 $ 98,635 Restricted cash, included in other assets 5,000 5,000 Cash, cash equivalents and restricted cash as presented on the Consolidated Statements of Cash Flows $ 60,850 $ 103,635 |
Schedule of the Company's net sales by medical indication | Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2022 2021 2022 2021 Analgesic $ 2,592 $ 3,919 $ 6,016 $ 9,233 Anti-Psychosis 2,575 2,095 5,195 5,810 Cardiovascular 13,089 9,753 23,971 23,853 Central Nervous System 21,782 22,340 42,576 45,125 Endocrinology 5,831 8,297 13,143 16,142 Gastrointestinal 8,716 14,023 16,658 29,263 Infectious Disease 4,989 6,520 10,058 19,035 Migraine 3,574 4,446 6,898 9,131 Respiratory/Allergy/Cough/Cold 1,468 1,868 2,670 4,982 Other 10,955 10,275 19,714 20,627 Contract manufacturing revenue 5,323 2,972 9,074 4,832 Total net sales $ 80,894 $ 86,508 $ 155,973 $ 188,033 |
Summary of customers which accounted for at least 10% of total net sales | Three Months Ended Six Months Ended December 31, December 31, 2022 2021 2022 2021 Customer A 22 % 26 % 22 % 28 % Customer B 21 % 15 % 21 % 17 % Customer C 16 % 14 % 16 % 14 % |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Restructuring Charges | |
Schedule of reconciliation of changes in restructuring liabilities | Employee (In thousands) Separation Costs Balance at June 30, 2022 $ — Restructuring charges 317 Payments — Balance at December 31, 2022 $ 317 |
Accounts Receivable, net (Table
Accounts Receivable, net (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Accounts Receivable, net | |
Schedule of accounts receivable | December 31, June 30, (In thousands) 2022 2022 Gross accounts receivable $ 187,187 $ 199,242 Less: Chargebacks reserve (39,739) (54,501) Less: Rebates reserve (16,139) (26,921) Less: Returns reserve (37,190) (46,478) Less: Other deductions (12,826) (14,117) Less: Allowance for expected credit losses (949) (984) Accounts receivable, net $ 80,344 $ 56,241 |
Schedule of major category of revenue-related reserves | Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2022 $ 54,501 $ 48,489 $ 46,478 $ 14,117 $ 163,585 Current period provision 180,856 47,322 13,546 13,931 255,655 Credits issued during the period (195,618) (58,295) (22,834) (15,222) (291,969) Balance at December 31, 2022 $ 39,739 $ 37,516 $ 37,190 $ 12,826 $ 127,271 Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2021 $ 69,564 $ 35,297 $ 38,395 $ 15,505 $ 158,761 Current period provision 245,900 55,262 13,305 26,761 341,228 Credits issued during the period (248,631) (46,857) (14,930) (26,968) (337,386) Balance at December 31, 2021 $ 66,833 $ 43,702 $ 36,770 $ 15,298 $ 162,603 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Inventories | |
Schedule of Inventories | December 31, June 30, (In thousands) 2022 2022 Raw Materials $ 40,809 $ 39,297 Work-in-process 10,152 9,313 Finished Goods 43,815 46,548 Total $ 94,776 $ 95,158 |
Property, Plant and Equipment_2
Property, Plant and Equipment, net (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Property, Plant and Equipment, net | |
Property, Plant and Equipment, net | December 31, June 30, (In thousands) Useful Lives 2022 2022 Land — $ 348 $ 533 Building and improvements 10 - 39 years 77,580 93,701 Machinery and equipment 5 - 10 years 155,598 158,854 Furniture and fixtures 5 - 7 years 3,088 3,367 Less accumulated depreciation (135,883) (136,433) 100,731 120,022 Construction in progress 15,742 13,156 Property, plant and equipment, net $ 116,473 $ 133,178 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Intangible Assets | |
Summary of intangible assets, net | Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life December 31, June 30, December 31, June 30, December 31, June 30, (In thousands) (Yrs.) 2022 2022 2022 2022 2022 2022 Definite-lived: KUPI trade name 2 $ 2,920 $ 2,920 $ (2,920) $ (2,920) $ — $ — KUPI other intangible assets 15 19,000 19,000 (8,995) (8,362) 10,005 10,638 Silarx product rights 15 18,531 20,000 (6,383) (6,222) 12,148 13,778 Other product rights 7 17,242 16,242 (9,756) (8,479) 7,486 7,763 Total intangible assets, net $ 57,693 $ 58,162 $ (28,054) $ (25,983) $ 29,639 $ 32,179 |
Summary of future annual amortization expense | (In thousands) Amortization Fiscal Year Ending June 30, Expense 2023 $ 2,095 2024 3,874 2025 3,840 2026 3,673 2027 3,535 Thereafter 12,622 $ 29,639 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Long-Term Debt | |
Summary of long-term debt, net | December 31, June 30, (In thousands) 2022 2022 7.75% Senior Secured Notes due 2026 $ 350,000 $ 350,000 Unamortized discount and other debt issuance costs (4,070) (4,599) 7.75% Senior Secured Notes due 2026, net 345,930 345,401 Second Lien Secured Loan Facility due 2026 ($190.0M Principal, $5.7M Exit Fee, and $27.5M and $22.0M accrued PIK interest at December 31, 2022 and June 30, 2022 respectively) 223,174 217,721 Unamortized discount and other debt issuance costs (29,633) (32,308) Second Lien Secured Loan Facility due 2026, net 193,541 185,413 4.50% Convertible Senior Notes due 2026 86,250 86,250 Unamortized discount and other debt issuance costs (1,866) (2,116) 4.50% Convertible Senior Notes, net 84,384 84,134 $45.0 million Amended ABL Credit Facility — — Total long-term debt, net $ 623,855 $ 614,948 |
Summary of long-term debt amounts due | Amounts Payable (In thousands) to Institutions 2023 $ — 2024 — 2025 — 2026 659,424 2027 — Total $ 659,424 |
Commitments (Tables)
Commitments (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Commitments | |
Schedule of components of lease costs | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2022 2021 2022 2021 Operating lease cost $ 466 $ 444 $ 932 $ 905 Variable lease cost 41 16 79 57 Short-term lease cost (a) 144 83 228 152 Total $ 651 $ 543 $ 1,239 $ 1,114 ______________________ (a) Not recorded on the Consolidated Balance Sheet |
Schedule of supplemental cash flow information | Six Months Ended December 31, (In thousands) 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,104 $ 1,084 |
Schedule of weighted-average remaining lease term and discount rate | Six Months Ended December 31, 2022 2021 Weighted-average remaining lease term 8 years 9 years Weighted-average discount rate 8.5 % 8.5 % |
Schedule of maturities of lease liabilities | (In thousands) Amounts Due 2023 $ 1,041 2024 2,083 2025 2,103 2026 2,124 2027 2,145 Thereafter 6,368 Total lease payments 15,864 Less: Imputed interest 4,349 Present value of lease liabilities $ 11,515 |
Loss Per Common Share (Tables)
Loss Per Common Share (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Loss Per Common Share | |
Reconciliation of basic and diluted loss per common share | Three Months Ended December 31, (In thousands, except share and per share data) 2022 2021 Numerator: Net loss $ (36,308) $ (81,085) Net income allocated to participating securities for the Warrants — — Interest expenses applicable to the Convertible Notes, net of tax — — Amortization of debt issuance costs applicable to the Convertible Notes, net of tax — — Adjusted "if-converted" net loss $ (36,308) $ (81,085) Denominator: Basic weighted average common shares outstanding 41,170,839 40,358,127 Effect of potentially dilutive options, restricted stock awards and performance-based shares — — Effect of conversion of the Convertible Notes — — Effect of participating securities for the Warrants — — Diluted weighted average common shares outstanding 41,170,839 40,358,127 Loss per common share: Basic $ (0.88) $ (2.01) Diluted $ (0.88) $ (2.01) Six Months Ended December 31, (In thousands, except share and per share data) 2022 2021 Numerator: Net loss $ (64,327) $ (103,427) Net income allocated to participating securities for the Warrants — — Interest expenses applicable to the Convertible Notes, net of tax — — Amortization of debt issuance costs applicable to the Convertible Notes, net of tax — — Adjusted "if-converted" net loss $ (64,327) $ (103,427) Denominator: Basic weighted average common shares outstanding 41,056,607 40,142,974 Effect of potentially dilutive options, restricted stock awards and performance-based shares — — Effect of conversion of the Convertible Notes — — Effect of participating securities for the Warrants — — Diluted weighted average common shares outstanding 41,056,607 40,142,974 Loss per common share: Basic $ (1.57) $ (2.58) Diluted $ (1.57) $ (2.58) |
Share-based Compensation (Table
Share-based Compensation (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Share-based Compensation | |
Summary of stock option award activity | Weighted Weighted- Average Average Aggregate Remaining Exercise Intrinsic Contractual (In thousands, except for weighted average price and life data) Awards Price Value Life (yrs.) Outstanding at June 30, 2022 935 $ 8.94 $ — 6.5 Forfeited, expired or repurchased (23) $ 8.13 Outstanding at December 31, 2022 912 $ 8.96 $ — 6.1 Vested and expected to vest at December 31, 2022 912 $ 8.96 $ — 6.1 Exercisable at December 31, 2022 710 $ 9.73 $ — 5.9 |
Summary of non-vested restricted stock awards | Weighted Average Grant-date Aggregate (In thousands, except for weighted average price data) Awards Fair Value Intrinsic Value Non-vested at June 30, 2022 1,355 $ 5.28 Vested (551) 5.46 $ 318 Forfeited (23) 4.97 Non-vested at December 31, 2022 781 $ 5.17 |
Schedule of allocation of share-based compensation | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2022 2021 2022 2021 Selling, general and administrative expenses $ 1,392 $ 2,115 $ 2,836 $ 4,812 Research and development expenses 28 27 56 122 Cost of sales 112 167 219 393 Total $ 1,532 $ 2,309 $ 3,111 $ 5,327 Tax benefit at statutory rate $ 345 $ 519 $ 700 $ 1,199 |
Subsequent Events (Tables)
Subsequent Events (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Subsequent Events. | |
Reconciliation of pro forma loss per common share | (UNAUDITED) Three Months Ended Six Months Ended December 31, December 31, (In thousands, except share and per share data) 2022 2021 2022 2021 Net loss $ (36,308) $ (81,085) $ (64,327) $ (103,427) Basic weighted average common shares outstanding 10,292,710 10,089,532 10,264,152 10,035,744 Diluted weighted average common shares outstanding 10,292,710 10,089,532 10,264,152 10,035,744 Loss per common share Basic $ (3.53) $ (8.04) $ (6.27) $ (10.31) Diluted $ (3.53) $ (8.04) $ (6.27) $ (10.31) |
The Business and Nature of Op_2
The Business and Nature of Operations (Details) $ in Millions | 6 Months Ended | |||
Jan. 25, 2023 | Dec. 31, 2022 | Oct. 31, 2022 USD ($) | Jun. 30, 2022 | |
Legal, Regulatory Matters and Contingencies | ||||
Reverse stock split | 0.25 | |||
4.50% Convertible Senior Notes due 2026 | ||||
Legal, Regulatory Matters and Contingencies | ||||
Interest rate (as a percent) | 4.50% | 4.50% | ||
Convertible notes redemption (as a percent) | 100% | |||
NYSE Notices of Failure to Satisfy a Continued Listing Rule or Standard | ||||
Legal, Regulatory Matters and Contingencies | ||||
Global market capitalization | $ 26.4 | |||
Absolute market capitalization | $ 23.7 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Cash (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 |
Summary of Significant Accounting Policies | ||||
Cash and cash equivalents | $ 55,850 | $ 87,854 | $ 98,635 | |
Restricted cash, included in other assets | $ 5,000 | $ 5,000 | ||
Restricted Cash, Statement of Financial Position [Extensible Enumeration] | Other Assets, Noncurrent | Other Assets, Noncurrent | ||
Cash, cash equivalents and restricted cash as presented on the Consolidated Statements of Cash Flows | $ 60,850 | $ 92,854 | $ 103,635 | $ 98,286 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Segments (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2022 USD ($) segment | Dec. 31, 2021 USD ($) | |
Medical Indication Information | ||||
Number of reportable segments | segment | 1 | |||
Total net sales | $ 80,894 | $ 86,508 | $ 155,973 | $ 188,033 |
Analgesic | ||||
Medical Indication Information | ||||
Total net sales | 2,592 | 3,919 | 6,016 | 9,233 |
Anti-Psychosis | ||||
Medical Indication Information | ||||
Total net sales | 2,575 | 2,095 | 5,195 | 5,810 |
Cardiovascular | ||||
Medical Indication Information | ||||
Total net sales | 13,089 | 9,753 | 23,971 | 23,853 |
Central Nervous System | ||||
Medical Indication Information | ||||
Total net sales | 21,782 | 22,340 | 42,576 | 45,125 |
Endocrinology | ||||
Medical Indication Information | ||||
Total net sales | 5,831 | 8,297 | 13,143 | 16,142 |
Gastrointestinal | ||||
Medical Indication Information | ||||
Total net sales | 8,716 | 14,023 | 16,658 | 29,263 |
Infectious Disease | ||||
Medical Indication Information | ||||
Total net sales | 4,989 | 6,520 | 10,058 | 19,035 |
Migraine | ||||
Medical Indication Information | ||||
Total net sales | 3,574 | 4,446 | 6,898 | 9,131 |
Respiratory/Allergy/Cough/Cold | ||||
Medical Indication Information | ||||
Total net sales | 1,468 | 1,868 | 2,670 | 4,982 |
Other | ||||
Medical Indication Information | ||||
Total net sales | 10,955 | 10,275 | 19,714 | 20,627 |
Contract manufacturing revenue | ||||
Medical Indication Information | ||||
Total net sales | $ 5,323 | $ 2,972 | $ 9,074 | $ 4,832 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Concentrations (Details) - Net sales - Customers | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Customer A | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 22% | 26% | 22% | 28% |
Customer B | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 21% | 15% | 21% | 17% |
Customer C | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 16% | 14% | 16% | 14% |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Self Insurance (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Summary of Significant Accounting Policies | ||
Self-insured risks | $ 1 | $ 0.5 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - EPS (Details) | Dec. 31, 2022 | Jun. 30, 2022 |
4.50% Convertible Senior Notes due 2026 | ||
Interest rate (as a percent) | 4.50% | 4.50% |
Restructuring Charges (Details)
Restructuring Charges (Details) - 2022 Restructuring Plan $ in Millions | Dec. 15, 2022 USD ($) employee |
Restructuring Charges | |
Positions eliminated estimate | employee | 60 |
Aggregate expected restructuring charges | $ | $ 3 |
Restructuring Charges - Change
Restructuring Charges - Change (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Reconciliation of the changes in restructuring liabilities | |||||
Restructuring charges | $ 335 | $ 891 | $ 481 | $ 891 | |
Impairment charges | 5,969 | $ 49,361 | 10,637 | $ 49,361 | |
Assets held for sale | 1,300 | 1,300 | |||
State Road facility | |||||
Reconciliation of the changes in restructuring liabilities | |||||
Impairment of assets held for sale | $ 4,700 | ||||
Assets held for sale | $ 1,300 | ||||
Torresdale facility | |||||
Reconciliation of the changes in restructuring liabilities | |||||
Impairment charges | 6,000 | ||||
2022 Restructuring Plan | |||||
Reconciliation of the changes in restructuring liabilities | |||||
Restructuring charges | 317 | ||||
Ending balance for the period | $ 317 | $ 317 |
Accounts Receivable, net (Detai
Accounts Receivable, net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Accounts receivable, net | ||
Gross accounts receivable | $ 187,187 | $ 199,242 |
Less: Allowance for expected credit losses | (949) | (984) |
Accounts receivable, net | 80,344 | 56,241 |
Chargebacks | ||
Accounts receivable, net | ||
Less: reserve | (39,739) | (54,501) |
Rebates. | ||
Accounts receivable, net | ||
Less: reserve | (16,139) | (26,921) |
Returns | ||
Accounts receivable, net | ||
Less: reserve | (37,190) | (46,478) |
Other. | ||
Accounts receivable, net | ||
Less: reserve | $ (12,826) | $ (14,117) |
Accounts Receivable, net - Reve
Accounts Receivable, net - Revenue reserve (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Accounts receivable, net | ||||
Balance at the beginning of the period | $ 163,585 | $ 158,761 | ||
Current period provision | 255,655 | 341,228 | ||
Credits issued during the period | (291,969) | (337,386) | ||
Balance at the end of the period | $ 127,271 | $ 162,603 | 127,271 | 162,603 |
Chargebacks | ||||
Accounts receivable, net | ||||
Balance at the beginning of the period | 54,501 | 69,564 | ||
Current period provision | 94,700 | 114,700 | 180,856 | 245,900 |
Credits issued during the period | (195,618) | (248,631) | ||
Balance at the end of the period | 39,739 | 66,833 | 39,739 | 66,833 |
Rebates | ||||
Accounts receivable, net | ||||
Balance at the beginning of the period | 48,489 | 35,297 | ||
Current period provision | 25,700 | 26,500 | 47,322 | 55,262 |
Credits issued during the period | (58,295) | (46,857) | ||
Balance at the end of the period | 37,516 | 43,702 | 37,516 | 43,702 |
Returns | ||||
Accounts receivable, net | ||||
Balance at the beginning of the period | 46,478 | 38,395 | ||
Current period provision | 8,200 | 7,400 | 13,546 | 13,305 |
Credits issued during the period | (22,834) | (14,930) | ||
Balance at the end of the period | 37,190 | 36,770 | 37,190 | 36,770 |
Other. | ||||
Accounts receivable, net | ||||
Balance at the beginning of the period | 14,117 | 15,505 | ||
Current period provision | 7,200 | 7,800 | 13,931 | 26,761 |
Credits issued during the period | (15,222) | (26,968) | ||
Balance at the end of the period | $ 12,826 | $ 15,298 | $ 12,826 | $ 15,298 |
Accounts Receivable, net - Re_2
Accounts Receivable, net - Revenue reserve information (Details) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Chargebacks | ||||
Accounts receivable, net | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 44.80% | 47.80% | 44.90% | 46.90% |
Rebates | ||||
Accounts receivable, net | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 12.20% | 11.10% | 11.80% | 10.50% |
Returns | ||||
Accounts receivable, net | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 3.90% | 3.10% | 3.40% | 2.50% |
Other. | ||||
Accounts receivable, net | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 3.40% | 3.20% | 3.50% | 5.10% |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Inventories: | ||
Raw Materials | $ 40,809 | $ 39,297 |
Work-in-process | 10,152 | 9,313 |
Finished Goods | 43,815 | 46,548 |
Total | $ 94,776 | $ 95,158 |
Inventories - Additional inform
Inventories - Additional information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Inventories: | ||||
Provision for inventory write-downs | $ 600 | $ 1,200 | $ 3,259 | $ 4,054 |
Property, Plant and Equipment_3
Property, Plant and Equipment, net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Property, Plant and Equipment, net | |||||
Less: accumulated depreciation | $ (135,883) | $ (135,883) | $ (136,433) | ||
Property, plant and equipment, net before construction in progress | 100,731 | 100,731 | 120,022 | ||
Property, plant and equipment, net | 116,473 | 116,473 | 133,178 | ||
Depreciation expense | 4,900 | $ 5,500 | 9,900 | $ 11,100 | |
Impairment charges | 5,969 | $ 49,361 | 10,637 | $ 49,361 | |
Torresdale facility | |||||
Property, Plant and Equipment, net | |||||
Impairment charges | 6,000 | ||||
Held in foreign countries | |||||
Property, Plant and Equipment, net | |||||
Property, plant and equipment, net | 800 | 800 | 700 | ||
Land | |||||
Property, Plant and Equipment, net | |||||
Property, plant and equipment, gross | 348 | 348 | 533 | ||
Building and improvements | |||||
Property, Plant and Equipment, net | |||||
Property, plant and equipment, gross | 77,580 | 77,580 | 93,701 | ||
Machinery and equipment | |||||
Property, Plant and Equipment, net | |||||
Property, plant and equipment, gross | 155,598 | 155,598 | 158,854 | ||
Furniture and fixtures | |||||
Property, Plant and Equipment, net | |||||
Property, plant and equipment, gross | 3,088 | 3,088 | 3,367 | ||
Construction in progress | |||||
Property, Plant and Equipment, net | |||||
Property, plant and equipment, net | $ 15,742 | $ 15,742 | $ 13,156 |
Property, Plant and Equipment_4
Property, Plant and Equipment, net - Useful Lives (Details) | 6 Months Ended |
Dec. 31, 2022 | |
Building and improvements | Minimum | |
Property, Plant and Equipment, net | |
Useful Lives | 10 years |
Building and improvements | Maximum | |
Property, Plant and Equipment, net | |
Useful Lives | 39 years |
Machinery and equipment | Minimum | |
Property, Plant and Equipment, net | |
Useful Lives | 5 years |
Machinery and equipment | Maximum | |
Property, Plant and Equipment, net | |
Useful Lives | 10 years |
Furniture and fixtures | Minimum | |
Property, Plant and Equipment, net | |
Useful Lives | 5 years |
Furniture and fixtures | Maximum | |
Property, Plant and Equipment, net | |
Useful Lives | 7 years |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ / shares in Units, $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 | Apr. 22, 2021 |
7.750% Senior Secured Notes due 2026 | |||
Debt Instrument [Line Items] | |||
Interest rate (as a percent) | 7.75% | 7.75% | 7.75% |
Estimated fair value of loan | $ 79 | $ 140 | |
Stock price (in dollars per share) | $ 0.52 | ||
4.50% Convertible Senior Notes due 2026 | |||
Debt Instrument [Line Items] | |||
Interest rate (as a percent) | 4.50% | 4.50% | |
Estimated fair value of loan | $ 13 | $ 25 | |
Initial conversion price (in dollars per share) | $ 15.29 | ||
Second Lien Facility | |||
Debt Instrument [Line Items] | |||
Estimated fair value of loan | $ 43 | $ 76 |
Intangible Assets - Definite-li
Intangible Assets - Definite-lived (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Finite-Lived Intangible Assets | |||||
Gross Carrying Amount | $ 57,693 | $ 57,693 | $ 58,162 | ||
Accumulated Amortization | (28,054) | (28,054) | (25,983) | ||
Intangible Assets, Net | 29,639 | 29,639 | 32,179 | ||
Amortization expense | 1,400 | $ 3,800 | $ 2,600 | $ 7,800 | |
Trade name | KUPI | |||||
Finite-Lived Intangible Assets | |||||
Weighted Avg. Life | 2 years | ||||
Gross Carrying Amount | 2,920 | $ 2,920 | 2,920 | ||
Accumulated Amortization | (2,920) | $ (2,920) | (2,920) | ||
Other Intangible Assets | KUPI | |||||
Finite-Lived Intangible Assets | |||||
Weighted Avg. Life | 15 years | ||||
Gross Carrying Amount | 19,000 | $ 19,000 | 19,000 | ||
Accumulated Amortization | (8,995) | (8,995) | (8,362) | ||
Intangible Assets, Net | 10,005 | $ 10,005 | 10,638 | ||
Product rights | Silarx | |||||
Finite-Lived Intangible Assets | |||||
Weighted Avg. Life | 15 years | ||||
Gross Carrying Amount | 18,531 | $ 18,531 | 20,000 | ||
Accumulated Amortization | (6,383) | (6,383) | (6,222) | ||
Intangible Assets, Net | 12,148 | $ 12,148 | 13,778 | ||
Other product rights | |||||
Finite-Lived Intangible Assets | |||||
Weighted Avg. Life | 7 years | ||||
Gross Carrying Amount | 17,242 | $ 17,242 | 16,242 | ||
Accumulated Amortization | (9,756) | (9,756) | (8,479) | ||
Intangible Assets, Net | $ 7,486 | $ 7,486 | $ 7,763 |
Intangible Assets - Future Amor
Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Future annual amortization expense: | ||
2023 | $ 2,095 | |
2024 | 3,874 | |
2025 | 3,840 | |
2026 | 3,673 | |
2027 | 3,535 | |
Thereafter | 12,622 | |
Intangible Assets, Net | $ 29,639 | $ 32,179 |
Long-Term Debt - Summary (Detai
Long-Term Debt - Summary (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | Apr. 22, 2021 | Apr. 05, 2021 | Dec. 07, 2019 | Dec. 06, 2019 | Sep. 27, 2019 | |
Long-term debt | ||||||||||
Debt, gross | $ 659,424 | $ 659,424 | ||||||||
Long-term debt, net | $ 623,855 | 623,855 | $ 614,948 | |||||||
Accrual of payment-in-kind interest on Second Lien Credit Facility | $ 5,453 | $ 10,024 | ||||||||
Weighted average interest rate (as a percent) | 9.10% | 8.90% | 9.10% | 8.90% | ||||||
Interest payable | $ 8,800 | $ 8,800 | ||||||||
7.750% Senior Secured Notes due 2026 | ||||||||||
Long-term debt | ||||||||||
Debt, gross | 350,000 | 350,000 | 350,000 | |||||||
Unamortized discount and other debt issuance costs | (4,070) | (4,070) | (4,599) | |||||||
Total debt, net | $ 345,930 | $ 345,930 | $ 345,401 | |||||||
Interest rate (as a percent) | 7.75% | 7.75% | 7.75% | 7.75% | ||||||
Principal Amount | $ 350,000 | |||||||||
Second Lien Facility | ||||||||||
Long-term debt | ||||||||||
Debt, gross | $ 223,174 | $ 223,174 | $ 217,721 | |||||||
Unamortized discount and other debt issuance costs | (29,633) | (29,633) | (32,308) | |||||||
Total debt, net | 193,541 | 193,541 | 185,413 | |||||||
Principal Amount | 190,000 | 190,000 | $ 190,000 | |||||||
Exit fee | 5,700 | 5,700 | ||||||||
Accrual of payment-in-kind interest on Second Lien Credit Facility | 27,500 | 22,000 | ||||||||
4.50% Convertible Senior Notes due 2026 | ||||||||||
Long-term debt | ||||||||||
Debt, gross | 86,250 | 86,250 | 86,250 | |||||||
Unamortized discount and other debt issuance costs | (1,866) | (1,866) | (2,116) | |||||||
Total debt, net | $ 84,384 | $ 84,384 | $ 84,134 | |||||||
Interest rate (as a percent) | 4.50% | 4.50% | 4.50% | |||||||
Principal Amount | $ 86,300 | |||||||||
ABL Credit Facility | ||||||||||
Long-term debt | ||||||||||
Maximum borrowing capacity | $ 45,000 | $ 45,000 | $ 45,000 | $ 30,000 |
Long-Term Debt - Details (Detai
Long-Term Debt - Details (Details) - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | |||||||
Apr. 22, 2021 | Dec. 31, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Apr. 05, 2021 | Dec. 07, 2019 | Dec. 06, 2019 | Sep. 27, 2019 | |
Debt Instrument [Line Items] | ||||||||
Deposit account as restricted cash in other assets | $ 5,000 | $ 5,000 | ||||||
7.750% Senior Secured Notes due 2026 | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal Amount | $ 350,000 | |||||||
Interest rate (as a percent) | 7.75% | 7.75% | 7.75% | |||||
Second Lien Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal Amount | $ 190,000 | $ 190,000 | ||||||
Common stock under the warrant (in shares) | 8,280,000 | |||||||
Warrants exercise price (in dollars per share) | $ 6.88 | |||||||
Minimum amount to be maintained in deposit account | $ 5,000 | |||||||
Minimum liquidity to be maintained | $ 15,000 | |||||||
Deposit account as restricted cash in other assets | 5,000 | |||||||
Second Lien Facility | Interest rate, first year | ||||||||
Debt Instrument [Line Items] | ||||||||
Paid-in-kind interest rate (as a percent) | 10% | |||||||
Second Lien Facility | Interest rate, after first year | ||||||||
Debt Instrument [Line Items] | ||||||||
Paid-in-kind interest rate (as a percent) | 5% | |||||||
Cash interest rate (as a percent) | 5% | |||||||
ABL Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | $ 45,000 | $ 45,000 | $ 30,000 | |||||
Unused capacity commitment fee (as a percent) | 0.50% | |||||||
Unused capacity, threshold balance, commitment fee (as a percent) | 0.75% | |||||||
Threshold outstanding principal amount | $ 5,000 | |||||||
ABL Credit Facility | LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Minimum applicable margin rate (as a percent) | 0.75% | |||||||
Variable interest rate (as a percent) | 2.50% | |||||||
ABL Credit Facility | Alternate base | ||||||||
Debt Instrument [Line Items] | ||||||||
Variable interest rate (as a percent) | 1.50% | |||||||
4.50% Convertible Senior Notes due 2026 | ||||||||
Debt Instrument [Line Items] | ||||||||
Principal Amount | $ 86,300 | |||||||
Interest rate (as a percent) | 4.50% | 4.50% | ||||||
Initial conversion rate | 0.0654022 | |||||||
Initial conversion price (in dollars per share) | $ 15.29 | |||||||
Convertible notes redemption (as a percent) | 100% | |||||||
Percentage of principal amount of notes outstanding | 25% | |||||||
Percentage of principal accrued and unpaid interest due | 100% | |||||||
Convertible notes cap price | $ 19.46 |
Long-Term Debt - Maturity (Deta
Long-Term Debt - Maturity (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Long-term Debt, Rolling Maturity | |
2026 | $ 659,424 |
Total | $ 659,424 |
Legal, Regulatory Matters and_2
Legal, Regulatory Matters and Contingencies (Details) $ in Millions | 3 Months Ended | |||
Aug. 31, 2019 USD ($) | May 22, 2019 USD ($) | Nov. 30, 2016 item | Jun. 30, 2022 USD ($) | |
Government Pricing | ||||
Legal, Regulatory Matters and Contingencies | ||||
Damages sought, value | $ 9.4 | |||
Settlement payment | $ 8.1 | |||
Shareholder Litigation | ||||
Legal, Regulatory Matters and Contingencies | ||||
Number of officers | item | 2 | |||
Sandoz, Inc | ||||
Legal, Regulatory Matters and Contingencies | ||||
Litigation settlement payable to other party | $ 10.9 |
Commitments - Leases (Details)
Commitments - Leases (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Commitments | ||
Right-of-use asset | $ 9,274 | $ 9,646 |
Operating lease liability | 11,515 | 12,100 |
Operating lease liability, current | $ 2,074 | $ 2,064 |
Commitments - Lease costs (Deta
Commitments - Lease costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Commitments | ||||
Operating lease cost | $ 466 | $ 444 | $ 932 | $ 905 |
Variable lease cost | 41 | 16 | 79 | 57 |
Short-term lease cost | 144 | 83 | 228 | 152 |
Total lease cost | $ 651 | $ 543 | $ 1,239 | $ 1,114 |
Commitments - Cash flow informa
Commitments - Cash flow information (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Lease cash flow | ||
Operating cash flows from operating leases | $ 1,104 | $ 1,084 |
Weighted-average | ||
Weighted-average remaining lease term | 8 years | 9 years |
Weighted-average discount rate | 8.50% | 8.50% |
Commitments - Maturity (Details
Commitments - Maturity (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Jun. 30, 2022 |
Maturities of lease liabilities | ||
2023 | $ 1,041 | |
2024 | 2,083 | |
2025 | 2,103 | |
2026 | 2,124 | |
2027 | 2,145 | |
Thereafter | 6,368 | |
Total lease payments | 15,864 | |
Less: Imputed interest | 4,349 | |
Present value of lease liabilities | $ 11,515 | $ 12,100 |
Commitments - Other (Details)
Commitments - Other (Details) $ in Thousands, SFr in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Feb. 08, 2021 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2022 USD ($) | Jun. 30, 2020 USD ($) | Jun. 30, 2017 USD ($) | Dec. 31, 2022 CHF (SFr) | Apr. 30, 2022 USD ($) | Apr. 30, 2022 CHF (SFr) | |
Commitments | ||||||||
Maximum loan commitment | $ 15,000 | |||||||
Loans receivable fixed rate (as a percent) | 2% | |||||||
Loans receivable term | 7 years | |||||||
Loss on loan receivable | $ 6,826 | $ 6,826 | ||||||
HEC Agreement | ||||||||
Commitments | ||||||||
Commitment amount | 32,000 | 32,000 | $ 32,000 | |||||
Development costs | 9,300 | |||||||
Excess development cost split ratio | 1 | |||||||
HEC Agreement | First ten years | ||||||||
Commitments | ||||||||
Profit split ratio | 1 | |||||||
Profit split period | 10 years | |||||||
HEC Agreement | Next five years | ||||||||
Commitments | ||||||||
Profit split ratio | 1.5 | |||||||
Profit split period | 5 years | |||||||
HEC Agreement | Maximum | ||||||||
Commitments | ||||||||
Commitment amount | $ 32,000 | |||||||
Sunshine Agreement | ||||||||
Commitments | ||||||||
Commitment amount | $ 32,000 | $ 32,000 | 32,000 | |||||
Development costs | $ 2,200 | |||||||
Sunshine Agreement | First ten years | ||||||||
Commitments | ||||||||
Profit split ratio | 1 | |||||||
Profit split period | 10 years | |||||||
Sunshine Agreement | Next five years | ||||||||
Commitments | ||||||||
Profit split ratio | 1.5 | |||||||
Profit split period | 5 years | |||||||
Ypsomed Agreement | ||||||||
Commitments | ||||||||
Commitment amount | SFr | SFr 14 | |||||||
Unowned capitalized preproduction costs | $ 4,300 | SFr 4 | ||||||
2023 | SFr | SFr 4 | |||||||
2024 | SFr | SFr 6 |
Warrants (Details)
Warrants (Details) - Second Lien Facility $ / shares in Units, $ in Millions | Apr. 22, 2021 USD ($) $ / shares shares |
Class of Warrant or Right | |
Common stock under the warrant (in shares) | shares | 8,280,000 |
Warrants exercise price (in dollars per share) | $ / shares | $ 6.88 |
Warrants term | 8 years |
Issuance of warrant | $ | $ 24.4 |
Loss Per Common Share (Details)
Loss Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Numerator: | ||||
Net loss | $ (36,308) | $ (81,085) | $ (64,327) | $ (103,427) |
Adjusted "if-converted" net loss | $ (36,308) | $ (81,085) | $ (64,327) | $ (103,427) |
Denominator: | ||||
Basic weighted average common shares outstanding | 41,170,839 | 40,358,127 | 41,056,607 | 40,142,974 |
Diluted weighted average common shares outstanding | 41,170,839 | 40,358,127 | 41,056,607 | 40,142,974 |
Loss per common share (1): | ||||
Basic (in dollars per share) | $ (0.88) | $ (2.01) | $ (1.57) | $ (2.58) |
Diluted | $ (0.88) | $ (2.01) | $ (1.57) | $ (2.58) |
Anti-dilutive shares excluded in the computation of diluted earnings per share | 7,300,000 | 8,100,000 | 7,300,000 | 8,100,000 |
Share-based Compensation - Comp
Share-based Compensation - Compensation Plans (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | |
Dec. 31, 2022 | Sep. 30, 2022 | Dec. 31, 2022 | |
Share-based Compensation | |||
Aggregate number of shares authorized for issuance | 8 | 8 | |
Shares for future issuances | 1.5 | 1.5 | |
Share-based awards vesting period | 3 years | ||
Share-based awards maximum contractual term | 10 years | ||
Total unrecognized compensation cost | $ 5.3 | $ 5.3 | |
Weighted average period cost is expected to be recognized | 1 year 2 months 12 days | ||
Cash based incentive award | 1.3 | ||
Service-based clawback period | 36 months | ||
Clawback annual expiration (in percent) | 33% | ||
Other current assets | |||
Share-based Compensation | |||
Prepaid share-based expense | 1.4 | $ 1.4 | |
Other assets | |||
Share-based Compensation | |||
Prepaid share-based expense | $ 2.5 | $ 2.5 | |
NEOs | |||
Share-based Compensation | |||
Period of changes in stock price | 3 years | ||
Restricted stock | NEOs | |||
Share-based Compensation | |||
Target award value mix (in percentage) | 30% | ||
Performance-Based Shares | |||
Share-based Compensation | |||
Share-based awards vesting period | 3 years | ||
Performance-Based Shares | NEOs | |||
Share-based Compensation | |||
Target award value mix (in percentage) | 50% | ||
Cash-based incentive | NEOs | |||
Share-based Compensation | |||
Target award value mix (in percentage) | 20% | ||
Share-based awards vesting (as a percent) | 50% |
Share-based Compensation - Valu
Share-based Compensation - Valuation (Details) - shares | 6 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Stock options | ||
Assumptions used to estimate fair values | ||
Expected dividend yield (as a percent) | 0% | |
Granted (in shares) | 0 | 0 |
Restricted stock | ||
Assumptions used to estimate fair values | ||
Forfeiture rate (as a percent) | 6.50% | 6.50% |
Share-based Compensation - Opti
Share-based Compensation - Options Rollforward (Details) - Stock options - $ / shares shares in Thousands | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Awards | ||
Outstanding, beginning (in shares) | 935 | |
Forfeited, expired or repurchased (in shares) | (23) | |
Outstanding, ending (in shares) | 912 | 935 |
Vested and expected to vest (in shares) | 912 | |
Exercisable (in shares) | 710 | |
Weighted-Average Exercise Price | ||
Outstanding, beginning (in dollars per share) | $ 8.94 | |
Forfeited, expired or repurchased (in dollars per share) | 8.13 | |
Outstanding, ending (in dollars per share) | 8.96 | $ 8.94 |
Vested and expected to vest (in dollars per share) | 8.96 | |
Exercisable (in dollars per share) | $ 9.73 | |
Additional option disclosures | ||
Weighted average remaining life outstanding | 6 years 1 month 6 days | 6 years 6 months |
Weighted average remaining life vested and expected to vest | 6 years 1 month 6 days | |
Weighted average remaining life exercisable | 5 years 10 months 24 days |
Share-based Compensation - Rest
Share-based Compensation - Restricted Stock (Details) - Restricted stock $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended |
Dec. 31, 2022 USD ($) $ / shares shares | |
Awards | |
Non-vested at the beginning of the period (in shares) | shares | 1,355 |
Vested (in shares) | shares | (551) |
Forfeited (in shares) | shares | (23) |
Non-vested at the end of the period (in shares) | shares | 781 |
Weighted Average Grant-date Fair Value | |
Non-vested at the beginning of the period (in dollars per share) | $ / shares | $ 5.28 |
Vested (in dollars per share) | $ / shares | 5.46 |
Forfeited (in dollars per share) | $ / shares | 4.97 |
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 5.17 |
Aggregate Intrinsic Value | |
Vested | $ | $ 318 |
Share-based Compensation - Perf
Share-based Compensation - Performance-Based (Details) | 6 Months Ended |
Dec. 31, 2022 shares | |
Share-based Compensation | |
Share-based awards vesting period | 3 years |
Performance-Based Shares | |
Share-based Compensation | |
Share-based awards vesting period | 3 years |
Changes to outstanding shares | 0 |
Share-based Compensation - Stoc
Share-based Compensation - Stock Purchase Plan (Details) - shares shares in Thousands | 1 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Feb. 28, 2003 | |
Share-based Compensation | ||||
Shares authorized for issuance (in shares) | 8,000 | |||
Employee stock purchase plan | ||||
Share-based Compensation | ||||
Shares authorized for issuance (in shares) | 1,100 | |||
Additional shares for future issuances | 1,500 | |||
Shares issued (in shares) | 177 | 107 | ||
Cumulative shares issued (in shares) | 1,500 | |||
Purchase price of stock based on market (as a percent) | 85% | |||
Maximum compensation withheld for stock purchase (as a percent) | 10% |
Share-based Compensation - Cost
Share-based Compensation - Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-based compensation costs | ||||
Total | $ 1,532 | $ 2,309 | $ 3,111 | $ 5,327 |
Tax benefit at statutory rate | 345 | 519 | 700 | 1,199 |
Selling, general and administrative | ||||
Share-based compensation costs | ||||
Total | 1,392 | 2,115 | 2,836 | 4,812 |
Research and development | ||||
Share-based compensation costs | ||||
Total | 28 | 27 | 56 | 122 |
Cost of sales | ||||
Share-based compensation costs | ||||
Total | $ 112 | $ 167 | $ 219 | $ 393 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Employee Benefit Plan | |||||
Company matching contributions (as a percent) | 50% | ||||
Maximum company contribution (as a percent) | 4% | ||||
Contributions to the plan | $ 0.2 | $ 0.2 | $ 0.6 | $ 0.5 |
Income Taxes - Quarter (Details
Income Taxes - Quarter (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Reconciliation of federal statutory rate to effective rate | |||||
Income tax expense (benefit) | $ 32 | $ (1,368) | $ 66 | $ (1,426) | |
Effective income tax rate (as a percent) | (0.10%) | 1.70% | (0.10%) | 1.40% | |
Unrecognized tax benefits | $ 4,600 | $ 4,600 | $ 4,600 | ||
Unrecognized tax benefits that would impact rate | 4,500 | 4,500 | 4,500 | ||
Unrecognized tax benefits interest and penalties | $ 0 | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - Auburn - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Related Party Transactions | |||||
Sales to related party | $ 0.3 | $ 0.4 | $ 0.6 | $ 0.6 | |
Accounts receivable related party | $ 0.3 | $ 0.3 | $ 0.3 |
Assets Held for Sale (Details)
Assets Held for Sale (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2022 | |
Assets Held for Sale | |||
Assets held for sale | $ 1,300 | ||
State Road facility | |||
Assets Held for Sale | |||
Impairment of assets held for sale | $ 4,700 | ||
Assets held for sale | $ 1,300 | $ 1,300 | |
Disposal group held for sale | State Road facility | |||
Assets Held for Sale | |||
Impairment of assets held for sale | $ 4,700 | ||
Assets held for sale | $ 1,300 |
Subsequent Events (Details)
Subsequent Events (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jan. 25, 2023 $ / shares | Dec. 31, 2022 USD ($) $ / shares shares | Dec. 31, 2021 USD ($) $ / shares shares | Dec. 31, 2022 USD ($) $ / shares shares | Dec. 31, 2021 USD ($) $ / shares shares | Jun. 30, 2022 $ / shares | |
Subsequent Events | ||||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | |||
Reverse stock split | 0.25 | |||||
Earnings per share, pro forma | ||||||
Net loss | $ | $ (36,308) | $ (81,085) | $ (64,327) | $ (103,427) | ||
Basic weighted average common shares outstanding | shares | 10,292,710 | 10,089,532 | 10,264,152 | 10,035,744 | ||
Diluted weighted average common shares outstanding | shares | 10,292,710 | 10,089,532 | 10,264,152 | 10,035,744 | ||
Basic | $ (3.53) | $ (8.04) | $ (6.27) | $ (10.31) | ||
Diluted | $ (3.53) | $ (8.04) | $ (6.27) | $ (10.31) | ||
Subsequent event | ||||||
Subsequent Events | ||||||
Common stock, par value (in dollars per share) | $ 0.001 | |||||
Reverse stock split | 0.25 | |||||
Subsequent event | Minimum | ||||||
Subsequent Events | ||||||
Reverse stock split | 0.33 | |||||
Subsequent event | Maximum | ||||||
Subsequent Events | ||||||
Reverse stock split | 0.2 |