The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements (unaudited) and the accompanying notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, the audited consolidated financial statements and the accompanying notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Form 10-K”), as well as the information contained under Management’s Discussion and Analysis of Financial Condition and Results of Operations and “Risk Factors” contained in the 2025 Form 10-K, and Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, and other information provided from time to time in our other filings with the SEC. This discussion contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth under “Risk Factors” in our 2025 Form 10-K and this Quarterly Report on Form 10-Q.
EXECUTIVE OVERVIEW
ANI Pharmaceuticals is a diversified bio-pharmaceutical company. The Company’s mission is “Serving Patients, Improving Lives” by developing, manufacturing, and commercializing therapeutics through its Rare Disease, Generics, and Brands businesses.
On September 16, 2024, the Company acquired Alimera Sciences, Inc. (“Alimera”). In connection with the Merger, the Company added a growing and durable franchise, ILUVIEN (fluocinolone acetonide intravitreal implant) 0.19 mg, which has received marketing authorization and reimbursement in the United States (“U.S.”) and 24 countries for the treatment of diabetic macular edema (“DME”) and YUTIQ (fluocinolone acetonide intravitreal implant) 0.18 mg, available in the U.S. for the treatment of non-infectious uveitis affecting the posterior segment of the eye (“NIU-PS”). Subsequent to the acquisition of Alimera, we expanded the label for ILUVIEN to include an indication for chronic NIU-PS in addition to its then-current indication in DME in the U.S.
The Company owns and operates three pharmaceutical manufacturing facilities, which include two facilities in Baudette, Minnesota, and one in East Windsor, New Jersey, which collectively are capable of producing oral solid dose products, as well as semi-solids, liquids and topicals, controlled substances, and potent products that must be manufactured in a fully-contained environment.
Strategy
Our objective is to build a sustainable and growing biopharmaceutical company serving patients in need and creating long-term value for our investors. Our overall strategy is enabled by an empowered, collaborative, and purposeful team with high performance-orientation that seeks to deliver on our purpose of “Serving Patients, Improving Lives.”
Our strategy is driven by the following key growth drivers:
Building a Successful Rare Disease and Brands Segment
We spend significant time, effort and resources in expanding our Rare Disease and Brands segment which consists of our Rare Disease and Brands portfolio of products.
We acquired the NDAs for Purified Cortrophin® Gel (Repository Corticotropin Injection USP) (“Cortrophin Gel”) and Cortrophin-ZincTM in January 2016 and executed long-term supply agreements with a supplier of our primary raw material for corticotrophin API, a supplier of corticotrophin API with whom we have advanced the manufacture of commercial scale batches of API, and a Cortrophin Gel fill/finish contract manufacturer. On October 29, 2021, the U.S. Food and Drug Administration (“FDA”) approved the Company’s Supplemental New Drug Application (“sNDA”) for Cortrophin Gel for the treatment of certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis (“MS”) and rheumatoid arthritis (“RA”), in addition to excess urinary protein due to nephrotic syndrome. Cortrophin Gel is an adrenocorticotropic hormone (“ACTH”), also known as purified corticotropin. On January 24, 2022, we announced the commercial launch of Cortrophin Gel in the U.S. as our foundational Rare Disease asset.
On February 28, 2025, the FDA approved a prefilled syringe format for Cortrophin Gel. This new presentation became available in 40 USP units/0.5 mL and 80 USP units/mL single-dose options through Cortrophin Gel’s established specialty pharmacy network during the second quarter of 2025. The prefilled syringe reduces administration steps for patients using Cortrophin Gel, which remains available in 5 mL and 1 mL vials.
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During 2026, we are building a dedicated sales organization focused on acute gouty arthritis flares, an indication unique to Cortrophin Gel within the ACTH class. Our dedicated sales force will focus on the appropriate patient population through podiatry and primary care physicians, while our existing sales organization will continue to focus on appropriate acute gouty arthritis flare patients seen by rheumatologists and nephrologists.
In September 2024, we acquired ILUVIEN and YUTIQ (together, the “Retina Franchise”) in connection with the acquisition of Alimera. The acquisition of Alimera strengthened our Rare Disease business and expanded our footprint beyond the U.S. through Alimera’s direct marketing operations in Germany, the United Kingdom (“UK”), Portugal, and Ireland, as well as its partnerships in Europe, Asia, and the Middle East. We believe that the Retina Franchise is durable with high barriers to genericization and a clear role for patients in need of alternative therapeutic options. Importantly, the addition of Alimera expanded the reach of the ophthalmology sales team and we believe there will be significant overlap between high potential prescribers of Cortrophin Gel and the Retina Franchise.
As noted above, during March 2025, the FDA approved an expanded label for ILUVIEN (fluocinolone acetonide intravitreal implant) to include an indication for the treatment of chronic NIU-PS in addition to the then-current indication of DME. During the second quarter of 2025, we transitioned promotional efforts in the U.S. from YUTIQ to ILUVIEN with its combined label of DME and NIU-PS.
We plan to continue to expand our Rare Disease business, through a combination of organic growth and acquisitions. While we execute against our strategic initiatives that we believe will result in long-term, sustainable growth and value to our stockholders, we continue to evaluate potential acquisitions and other strategic transactions of businesses that we believe complement our existing portfolio, infrastructure and capabilities or provide us with the opportunity to expand our existing capabilities.
The Brands portion of the Rare Disease and Brands segment is comprised of various branded products. We have grown our Brands portfolio of products through acquisitions. We have acquired the NDAs for and market Atacand, Atacand HCT, Arimidex, Casodex, Inderal LA, Inderal XL, InnoPran XL, Inzirqo, Lithobid, Oxistat, Vancocin, and Veregen. We are innovating in our go-to-market strategy through creative partnerships and a sales force for these products.
Strengthening Our Generics and Other Segment
We plan to strengthen our Generics and Other segment through continued investment in our research and development capabilities and increased focus on niche opportunities. We have grown our Generics business through a combination of market share gains on existing products and new product launches. We have also successfully acquired numerous ANDAs through business and asset acquisitions. Our most recent business acquisition in the Generics and Other segment was the acquisition of Novitium Pharma LLC (“Novitium”) in 2021, which included Novitium’s portfolio of commercial and pipeline generic products, manufacturing and development facilities and expert workforce. The Novitium acquisition significantly increased our generic pharmaceutical research and development and manufacturing capabilities. We have begun to increase our focus on niche lower competition opportunities such as injectables, paragraph IV (“PIV”), and competitive generic therapy (“CGT”) designation filings.
Additionally, we plan to continue to seek opportunities to enhance our capabilities through strategic partnerships and acquisitions of assets and businesses.
We consider a variety of criteria in determining which products to develop. These criteria include:
•Formulation Complexity. Our development and manufacturing capabilities enable us to manufacture pharmaceuticals that are differentiated and include high potency, modified release, combination, and hormonal products. This ability to manufacture a variety of differentiated products is a competitive strength that we intend to leverage in selecting products to develop and commercialize.
•Market Size and Patient Need. When determining whether to develop or acquire an individual product, we review the current and expected market size and competitive environment for that product. We endeavor to pursue products with sufficient market size to enable us to enter the market with a strong likelihood of serving patients in need and thus being able to price our products both competitively and at a profit.
•Profit Potential. In determining the potential profit of a product, we forecast our anticipated market share, pricing, competitive environment and the estimated cost to manufacture the products.
•Manufacturing. We generally seek to develop and manufacture products at our own manufacturing plants to ensure quality control of our products, supply chain reliability and to more closely control the economic inputs and outputs of our products.
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•Competition. When determining whether to develop or acquire a product, we research existing and expected competition. We seek to develop products for which we can obtain sufficient market share and may decline to develop a product if we anticipate significant competition. Our manufacturing facilities provide a means of entering niche markets, such as hormone therapies, in which fewer generic companies typically compete.
Products
A complete list of our generic and branded pharmaceutical products and descriptions is posted on our website, www.anipharmaceuticals.com. Information on, or accessible through, our website is not a part of, and is not incorporated into, this report or any other SEC filing.
GENERAL
Impacts to our second quarter 2026 and 2025 results of operations, including to net revenues, operating expenses, interest and other expense, net, and income taxes are described below.
The following table summarizes our results of operations for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2026 2025 2026 2025
Net Revenues $ 266,044 $ 211,371 $ 503,506 $ 408,493
Operating Expenses
Cost of sales (excluding depreciation and amortization) 100,158 74,615 193,740 147,652
Research and development 14,747 16,535 25,347 27,099
Selling, general, and administrative 91,661 81,771 165,316 158,299
Depreciation and amortization 19,640 23,281 40,559 46,172
Contingent consideration fair value adjustment (622) 1,277 (804) (10,815)
Operating income 40,460 13,892 79,348 40,086
Unrealized gain (loss) on investment in equity securities 741 332 6,494 (589)
Interest expense, net (3,636) (5,438) (7,405) (10,922)
Other (expense) income, net (468) 1,739 (1,119) 1,937
Income Before Income Tax Expense 37,097 10,525 77,318 30,512
Income tax expense 12,386 1,976 23,115 6,282
Net Income $ 24,711 $ 8,549 $ 54,203 $ 24,230
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The following table sets forth, for the periods indicated, items in our unaudited condensed consolidated statements of operations as a percentage of net revenues:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Net Revenues 100 % 100 % 100 % 100 %
Operating Expenses
Cost of sales (excluding depreciation and amortization) 37.6 % 35.3 % 38.5 % 36.1 %
Research and development 5.5 % 7.8 % 5.0 % 6.6 %
Selling, general, and administrative 34.5 % 38.7 % 32.8 % 38.8 %
Depreciation and amortization 7.4 % 11.0 % 8.1 % 11.3 %
Contingent consideration fair value adjustment (0.2) % 0.6 % (0.2) % (2.6) %
Operating income 15.2 % 6.6 % 15.8 % 9.8 %
Unrealized gain (loss) on investment in equity securities 0.3 % 0.2 % 1.3 % (0.1) %
Interest expense, net (1.4) % (2.6) % (1.5) % (2.7) %
Other (expense) income, net (0.2) % 0.8 % (0.2) % 0.5 %
Income Before Income Tax Expense 13.9 % 5.0 % 15.4 % 7.5 %
Income tax expense 4.7 % 0.9 % 4.6 % 1.5 %
Net Income 9.2 % 4.1 % 10.8 % 6.0 %
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RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025
Net Revenue
Three Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Rare Disease and Brands
Cortrophin Gel $ 117,126 $ 81,647 $ 35,479 43.5 %
ILUVIEN and YUTIQ (1) 18,718 22,316 (3,598) (16.1) %
Rare Disease total net revenues $ 135,844 $ 103,963 $ 31,881 30.7 %
Brands 11,813 13,195 (1,382) (10.5) %
Brand royalties and other revenues 17,731 — 17,731 100.0 %
Rare Disease and Brands total net revenues $ 165,388 $ 117,158 $ 48,230 41.2 %
Generics and Other
Generic pharmaceutical products 99,051 90,297 8,754 9.7 %
Other generic revenues 1,605 3,916 (2,311) (59.0) %
Generics and Other total net revenues $ 100,656 $ 94,213 $ 6,443 6.8 %
Total net revenues $ 266,044 $ 211,371 $ 54,673 25.9 %
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(1)There were no sales of YUTIQ during the quarters ended March 31, 2026 and June 30, 2026, as the Company transitioned promotional efforts in the U.S. from YUTIQ to ILUVIEN, which has a combined label of DME and NIU-PS during the second quarter of 2025.
We derive substantially all of our revenues from sales of our Rare Disease, Brands and Generics portfolios of pharmaceutical products, as well as from other sources of revenue such as milestones, royalties on net sales of certain products, and other pharmaceutical services. Our Rare Disease products face competition from other brand products in many of the therapeutic categories in which they are sold. Essentially all of our Generics products face competition from other generic products, as do many of our Brands products, and we expect them to continue to face competition from generic products in the future. The primary means of competition among generic manufacturers are pricing, contract terms, service levels, and reliability. Increased competition generally results in decreased average selling prices of generic and brands products over time. In addition, due to strategic partnerships between wholesalers and pharmacy chains, we have experienced, and expect to continue to experience, increases in net sales to the wholesalers, with corresponding decreases in net sales to the pharmacy chains.
Net revenues for the three months ended June 30, 2026 were $266.0 million compared to $211.4 million for the same period in 2025, an increase of 25.9%, primarily as a result of the following:
•Net revenues from Rare Disease and Brands, which includes our Rare Disease and Brands portfolios of pharmaceutical products, royalties, and other revenues were $165.4 million during the three months ended June 30, 2026, an increase of $48.2 million, compared to $117.2 million for the same period in 2025.
•Net revenues for Rare Disease pharmaceutical products were $135.8 million during the three months ended June 30, 2026, an increase of $31.9 million from $104.0 million for the same period in 2025. This increase was driven by increased volume of Cortrophin Gel from overall ACTH market growth and market share gains. ILUVIEN net revenues were $18.7 million in the second quarter, down 16% from the prior year period.
•Net revenues for Brands portfolio of pharmaceutical products were $11.8 million during the three months ended June 30, 2026, a decrease of $1.4 million compared to $13.2 million for the same period in 2025, driven by a net decrease in demand for certain products during the second quarter.
•Net revenues for Brand royalties and other revenues during the three months ended June 30, 2026, includes royalties of approximately $9.7 million, and $8.0 million of revenue associated with development milestones satisfied over time, related to the Harmony Agreement.
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•Net revenues from Generics and Other, which includes our generic pharmaceutical products, sales of contract manufactured products, royalties on contract manufactured products, and other pharmaceutical services, were $100.7 million during the three months ended June 30, 2026, an increase of 6.8% compared to $94.2 million for the same period in 2025, primarily as a result of the following:
•Generic pharmaceutical products net revenues were $99.1 million during the three months ended June 30, 2026, an increase of $8.8 million over the prior year. This increase was driven by a partnered product launched in the third quarter of 2025, and increased volumes from the benefit of new product launches during 2026. From a product perspective, in addition to the partnered product cited above, the increase was principally driven by revenues from year over year increases in products such as MAS ER, Vancomycin, among others.
•Other generic net revenues were down modestly for the three months ended June 30, 2026, compared to the same time in the prior year due to fewer contract manufacturing shipments and lower royalties during the period.
Cost of Sales (Excluding Depreciation and Amortization)
Three Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Cost of sales (excluding depreciation and amortization) $ 100,158 $ 74,615 $ 25,543 34.2 %
Cost of sales consists of direct labor, including manufacturing and packaging, active and inactive pharmaceutical ingredients, freight costs, packaging components, royalties payable, and profit-sharing arrangements. Cost of sales does not include depreciation and amortization expense, which is reported as a separate component of operating expenses on our unaudited condensed consolidated statements of operations.
For the three months ended June 30, 2026, cost of sales increased to $100.2 million from $74.6 million for the same period in 2025, an increase of $25.5 million, or 34.2%. The increase is primarily due to significant net growth in sales volumes of pharmaceutical products and significant growth of royalty bearing products, including Cortrophin Gel, and other products in our portfolio.
Cost of sales, as a percentage of net revenues, increased to 37.6% from 35.3% for the three months ended June 30, 2026, compared to the same period in 2025, primarily due to a shift in product mix year over year and an increase in sales of products that bear a royalty payable, and the non-recurrence of prior year sales from Prucalopride. These effects were somewhat tempered by the revenue recognized under the Harmony Agreement.
During the three months ended June 30, 2026 and 2025, no single vendor represented more than 10% of our raw inventory purchases.
Other Operating Expenses, net
Three Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Research and development $ 14,747 $ 16,535 $ (1,788) (10.8) %
Selling, general, and administrative 91,661 81,771 9,890 12.1 %
Depreciation and amortization 19,640 23,281 (3,641) (15.6) %
Contingent consideration fair value adjustment (622) 1,277 (1,899) (148.7) %
Total other operating expenses, net $ 125,426 $ 122,864 $ 2,562 2.1 %
For the three months ended June 30, 2026, total other operating expenses, net increased to $125.4 million from $122.9 million for the same period in 2025, an increase of $2.6 million, or 2.1%, primarily as a result of the following factors:
•Research and development expenses during the three months ended June 30, 2026 decreased from $16.5 million to $14.7 million, a decrease of approximately $1.8 million, primarily due to timing of activity associated with ongoing and new projects to support future growth of Rare Disease and Generics.
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•Selling, general, and administrative expenses increased from $81.8 million to $91.7 million, primarily resulting from increased investment in Rare Disease sales and marketing infrastructure, related to our expansion of the Rare Disease team which is targeting opportunities in acute gouty arthritis, and an overall increase in activities to support the growth of our business, tempered by lower legal costs, compared to the same period in 2025.
•Depreciation and amortization expense was $19.6 million for the three months ended June 30, 2026, compared to $23.3 million for the same period in 2025, a decrease of approximately $3.6 million, primarily related to certain definite-lived intangibles that have been fully amortized during 2025.
•We recognized a net gain of approximately $0.6 million for the three months ended June 30, 2026 related to changes in our contingent consideration liabilities, which are measured at fair value. The net gain resulted from the adjustment of future forecasted cash flows and includes primarily: (1) a $0.5 million reduction related to the Alimera contingent value rights; and (2) a $0.1 million decrease in contingent consideration related to the Novitium acquisition.
Other Expense, net
Three Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Unrealized gain on investment in equity securities $ 741 $ 332 $ 409 123.2 %
Interest expense, net (3,636) (5,438) 1,802 33.1 %
Other (expense) income, net (468) 1,739 (2,207) (126.9) %
Total other expense, net $ (3,363) $ (3,367) $ 4 0.1 %
For the three months ended June 30, 2026, we recognized total other expense, net of $3.4 million as compared to total other expense, net of $3.4 million for the same period in 2025.
•We recorded an unrealized gain on investment in equity securities of approximately $0.7 million for the three months ended June 30, 2026, compared to an unrealized gain of approximately $0.3 million in the same period in 2025, which is based on the mark to market fair value of equity securities held in CG Oncology as of the balance sheet date.
•Interest expense, net for the three months ended June 30, 2026 consists primarily of coupon interest expense on borrowings under our outstanding debt and amortization of deferred financing costs on these debt instruments, interest income earned on our bank balances, and interest earned on our interest rate swap. Interest income earned on our bank balances increased approximately $1.2 million and interest expense related to our outstanding debt decreased approximately $0.8 million resulting in an increase of interest income of approximately $2.0 million. This impact was partially offset by a decrease of interest earned on our interest rate swap of approximately $0.2 million, compared to the same period in the prior year.
•Other (expense) income, net, for the three months ended June 30, 2026 and 2025 consists primarily of unrealized foreign exchange gains and losses related to our Alimera UK subsidiary.
Income Tax Expense
Three Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Income tax expense $ 12,386 $ 1,976 $ 10,410 526.8 %
Income tax expense consists of current and deferred components, which include changes in our deferred tax assets, our deferred tax liabilities, and our valuation allowance. See Note 11 “Income Taxes” in the notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
For the three months ended June 30, 2026, our income tax expense was approximately $12.4 million. Our effective tax rate of 33.4% of pre-tax income for the current year was determined based on our pre-tax income, statutory tax rates and the tax impacts of certain discrete items for the three months ended June 30, 2026, which impact our income tax expense in the period in which they occur. The effective tax rate differed from the federal statutory rate of 21% primarily due to state taxes and disallowed officers' compensation partially offset by excess tax benefits recognized upon settlement of stock-based compensation.
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For the three months ended June 30, 2025, our income tax expense was approximately $2.0 million. Our effective tax rate was 18.8% of pre-tax income reported in the period, as well as the net effect of certain discrete items for the three months ended June 30, 2025 which impact our income tax expense in the period in which they occur. Discrete items during the second quarter of 2025 relate predominately to favorable return to provision adjustments attributable to certain foreign tax returns filed during the quarter.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025
Net Revenue
Six Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Rare Disease and Brands
Cortrophin Gel $ 192,245 $ 134,497 $ 57,748 42.9 %
ILUVIEN and YUTIQ (1) 37,973 38,425 (452) (1.2) %
Rare Disease total net revenues $ 230,218 $ 172,922 $ 57,296 33.1 %
Brands 24,141 38,318 (14,177) (37.0) %
Brand royalties and other revenues 39,271 — 39,271 100.0 %
Rare Disease and Brands total net revenues $ 293,630 $ 211,240 $ 82,390 39.0 %
Generics and Other
Generic pharmaceutical products 204,453 188,975 15,478 8.2 %
Other generic revenues 5,423 8,278 (2,855) (34.5) %
Generics and Other total net revenues $ 209,876 $ 197,253 $ 12,623 6.4 %
Total net revenues $ 503,506 $ 408,493 $ 95,013 23.3 %
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(1)There were no sales of YUTIQ during the quarters ended March 31, 2026 and June 30, 2026, as the Company transitioned promotional efforts in the U.S. from YUTIQ to ILUVIEN, which had a combined label of DME and NIU-PS during the second quarter of 2025.
Net revenues for the six months ended June 30, 2026 were $503.5 million compared to $408.5 million for the same period in 2025, an increase of 23.3%, primarily as a result of the following:
•Net revenues from Rare Disease and Brands, which includes our Rare Disease and Brands portfolios of pharmaceutical products, royalties, and other revenues were $293.6 million during the six months ended June 30, 2026, an increase of $82.4 million, compared to $211.2 million for the same period in 2025.
•Net revenues for Rare Disease pharmaceutical products were $230.2 million during the six months ended June 30, 2026, an increase of $57.3 million from $172.9 million for the same period in 2025. This increase was driven by increased volume of Cortrophin Gel from overall ACTH market growth and market share gains. Net revenues for ILUVIEN were down modestly for the six months ended June 30, 2026, compared to the same time in the prior year.
•Net revenues for Brands portfolio of pharmaceutical products were $24.1 million during the six months ended June 30, 2026, a decrease of $14.2 million compared to $38.3 million for the same period in 2025, driven by a net decrease in demand for certain products during the first half of 2026, compared to the same time in the prior year.
•Net revenues for Brand royalties and other revenues during the six months ended June 30, 2026, includes a $15.0 million upfront payment, associated royalties of approximately $16.3 million, and $8.0 million of revenue associated with development milestones satisfied over time, related to the Harmony Agreement.
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•Net revenues from Generics and Other, which includes our generic pharmaceutical products, sales of contract manufactured products, royalties on contract manufactured products, and other pharmaceutical services, were $209.9 million during the six months ended June 30, 2026, an increase of $12.6 million compared to $197.3 million for the same period in 2025, primarily as a result of the following:
•Generic pharmaceutical products net revenues were $204.5 million during the six months ended June 30, 2026, an increase of $15.5 million over the prior year. This increase was driven by a partnered product launched in the third quarter of 2025, and increased volumes from the benefit of new product launches during 2026. From a product perspective, in addition to the partnered product cited above, the increase was principally driven by revenues from year over year increases in products such as Vancomycin and MAS ER, among others, tempered by decreased sales of Prucalopride.
•Other generic net revenues was down modestly for the six months ended June 30, 2026, compared to the same time in the prior year due to fewer contract manufacturing shipments during the period.
Cost of Sales (Excluding Depreciation and Amortization)
Six Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Cost of sales (excluding depreciation and amortization) $ 193,740 $ 147,652 $ 46,088 31.2 %
For the six months ended June 30, 2026, cost of sales increased to $193.7 million from $147.7 million for the same period in 2025, an increase of $46.1 million, or 31.2%. The increase is primarily due to significant net growth in sales volumes of pharmaceutical products and significant growth of royalty bearing products, including Cortrophin Gel, and other products in our portfolio.
Cost of sales, as a percentage of net revenues, increased to 38.5% from 36.1% for the six months ended June 30, 2026, compared to the same period in 2025, primarily due to a shift in product mix year over year, an increase in sales of products that bear a royalty payable, and the non-recurrence of prior year sales from Prucalopride. These effects were somewhat tempered by the revenue recognized under the Harmony Agreement.
During the six months ended June 30, 2026, approximately 23% of our raw material inventory purchases were from one domestic supplier. During the six months ended June 30, 2025, approximately 23% of our raw material inventory purchases were from one domestic supplier.
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Other Operating Expenses, net
Six Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Research and development $ 25,347 $ 27,099 $ (1,752) (6.5) %
Selling, general, and administrative 165,316 158,299 7,017 4.4 %
Depreciation and amortization 40,559 46,172 (5,613) (12.2) %
Contingent consideration fair value adjustment (804) (10,815) 10,011 92.6 %
Total other operating expenses, net $ 230,418 $ 220,755 $ 9,663 4.4 %
For the six months ended June 30, 2026, total other operating expenses, net increased to $230.4 million from $220.8 million for the same period in 2025, an increase of $9.7 million, or 4.4%, primarily as a result of the following factors:
•Research and development expenses during the six months ended June 30, 2026 decreased from $27.1 million to $25.3 million, a decrease of approximately $1.8 million, primarily due to timing of activity associated with ongoing and new projects to support future growth of Rare Disease and Generics.
•Selling, general, and administrative expenses increased from $158.3 million to $165.3 million, an increase of approximately $7.0 million, and includes increased investment in Rare Disease sales and marketing infrastructure, related to our expansion of the Rare Disease team which is targeting opportunities in acute gouty arthritis, and an overall increase in activities to support the growth of our business, compared to the same period in 2025, offset by a litigation settlement received of $9.0 million, and a decrease of approximately $2.3 million in transaction and integration costs related to the Alimera acquisition.
•Depreciation and amortization expense was $40.6 million for the six months ended June 30, 2026, compared to $46.2 million for the same period in 2025, a decrease of approximately $5.6 million, primarily related to certain definite-lived intangibles that have been fully amortized during 2025.
•We recognized a net gain of approximately $0.8 million for the six months ended June 30, 2026 related to changes in our contingent consideration liabilities, which are measured at fair value. The net gain resulted from the adjustment of future forecasted cash flows and includes primarily: (1) a $0.9 million reduction related to the Alimera contingent value rights; and (2) a $0.2 million increase in contingent consideration related to the Novitium acquisition.
Other (Expense), net
Six Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Unrealized gain (loss) on investment in equity securities $ 6,494 $ (589) $ 7,083 1,202.5 %
Interest expense, net (7,405) (10,922) 3,517 32.2 %
Other (expense) income, net (1,119) 1,937 (3,056) (157.8) %
Total other expense, net $ (2,030) $ (9,574) $ 7,544 78.8 %
For the six months ended June 30, 2026, we recognized total other expense, net of $2.0 million as compared to total other expense, net of $9.6 million for the same period in 2025.
•We recorded an unrealized gain on investment in equity securities of approximately $6.5 million for the six months ended June 30, 2026, compared to an unrealized loss of approximately $0.6 million in the same period in 2025, which is based on the mark to market fair value of equity securities held in CG Oncology as of the balance sheet date.
•Interest expense, net for the six months ended June 30, 2026 consists primarily of coupon interest expense on borrowings under our outstanding debt and amortization of deferred financing costs on these debt instruments, interest income earned on our bank balances, and interest earned on our interest rate swap. Interest income earned on our bank balances increased approximately $2.5 million and interest expense related to our outstanding debt decreased approximately $1.4 million, resulting in an increase of interest income of approximately $3.9 million. This impact was partially offset by a decrease of interest earned on our interest rate swap of approximately $0.5 million, compared to same period in the prior year.
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•Other (expense) income, net, for the six months ended June 30, 2026 and 2025 consists primarily of unrealized foreign exchange gains and losses related to our Alimera UK subsidiary.
Income Tax Expense
Six Months Ended June 30,
(in thousands) 2026 2025 Change % Change
Income tax expense $ 23,115 $ 6,282 $ 16,833 268.0 %
For the six months ended June 30, 2026, our income tax expense was approximately $23.1 million. Our effective tax rate of 29.9% of pre-tax income for the current year was determined based on our pre-tax income, statutory tax rates and the tax impacts of certain discrete items for the six months ended June 30, 2026, which impact our income tax expense in the period in which they occur. The effective tax rate differed from the federal statutory rate of 21% primarily due to state taxes and disallowed officers’ compensation partially offset by excess tax benefits recognized upon settlement of stock-based compensation.
For the six months ended June 30, 2025, our income tax expense was approximately $6.3 million. Our effective tax rate was 20.6% of pre-tax income reported in the period, as well as the net effect of certain discrete items for the six months ended June 30, 2025 which impact our income tax expense in the period in which they occur. Discrete items are primarily related to excess tax benefits recognized upon settlement of stock'based compensation awards.
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is cash generated from operations, available cash on hand, and borrowings under our Term Loan and Convertible Notes as discussed and defined in Note 4 “2024 Credit Agreement” and Note 5 “2.25% Convertible Senior Notes” in the notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
On August 13, 2024, we entered into a credit agreement (the “2024 Credit Agreement”) with JPMorgan Chase Bank, N.A., and other financial institutions, which provides for aggregate principal commitments consisting of (i) a senior secured delayed-draw term loan facility in an aggregate principal amount of $325.0 million (the “TLA”), and (ii) a senior secured revolving credit facility in an aggregate commitment amount of $75.0 million, which may be used for revolving credit loans, swingline loans and letters of credit (the “TLA Revolver” and together with the TLA, the “2024 Credit Facility”). As of June 30, 2026, the outstanding principal under our 2024 Credit Agreement was approximately $304.7 million, with $74.9 million remaining available for borrowing under the TLA Revolver. We also maintain an interest rate swap with a notional value of $139.4 million at an effective fixed rate of 2.313% to manage SOFR-based variable interest rate exposure on a portion of the borrowings under the 2024 Credit Agreement.
On August 13, 2024, the Company completed an offering of $316.3 million aggregate principal amount of the Company’s Convertible Senior Notes due 2029 (the “Notes”). The Notes are due September 1, 2029, unless earlier repurchased, redeemed, or converted. The Notes accrue interest at a rate of 2.25% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2025.
Our primary contractual obligations over the next twelve months consist of quarterly principal payments and monthly interest on the 2024 Credit Facility and semi-annual interest payments on the Notes, as discussed in Note 4 “2024 Credit Agreement” and Note 5 “2.25% Convertible Senior Notes” in the notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
As of June 30, 2026 and December 31, 2025, we had $360.2 million and $285.6 million, respectively, in unrestricted cash and cash equivalents. The majority of our cash balances are held in interest bearing and non-interest bearing accounts in U.S.-based financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 thousand. The majority of our cash balances are in excess of FDIC coverage, which we consider to be a normal business risk. In addition, we have cash and cash equivalents held in international bank accounts that are denominated in various foreign currencies, specifically in Canada, the United Kingdom, Germany, Ireland, Portugal, and India.
We are focused on expanding our business and product pipeline through acquisitions of products and companies as well as internal research and development. We are continually evaluating potential asset acquisitions and business combinations. To finance such acquisitions, we might raise additional equity capital, incur additional debt, or both.
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We believe that our financial resources, consisting of current working capital, anticipated future operating revenue and corresponding collections from customers, and available borrowings under the 2024 Credit Facility, and our Notes, will be sufficient to enable us to meet our working capital requirements and debt obligations for at least the next 12 months from the date of filing of this report, and for the foreseeable future thereafter. If our assumptions underlying estimated revenue and expenses are wrong, or if our cash requirements change materially as a result of shifts in our business or strategy, we could require additional financing. If we are not able to maintain profitability in future years or are not able to continue to generate cash from operations as anticipated and additional capital is needed to support operations, we may be unable to obtain such financing, or obtain it on favorable terms, in which case we may be required to curtail development of new products, limit expansion of operations, or accept financing terms that are not as attractive as desired.
Discussion of Cash Flows
The following table summarizes the net cash and cash equivalents provided by operating activities, used in investing activities, and used in financing activities for the periods indicated:
Six Months Ended June 30,
(in thousands) 2026 2025
Operating Activities $ 115,044 $ 110,803
Investing Activities $ (14,378) $ (26,755)
Financing Activities $ (26,263) $ (11,653)
Net Cash Provided by Operations
Net cash provided by operating activities was $115.0 million for the six months ended June 30, 2026, compared to net cash provided by operating activities of $110.8 million during the same period in 2025, an increase of $4.2 million. The increase in cash provided by operating activities primarily resulted from our net income of $54.2 million adjusted for non-cash items, and an increase in our working capital accounts driven by the growth of our business.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 was $14.4 million, which includes the acquisition of intangible assets of approximately $5.3 million and capital expenditures of approximately $9.1 million. Net cash used in investing activities for the six months ended June 30, 2025 was $26.8 million, principally due to the payment for the exercise of an option by the Company to buy-out royalties owed to SWK Funding LLC in connection with the Company’s acquisition of Alimera, and purchases of other intangible assets of approximately $20.3 million and capital expenditures of approximately $6.5 million.
Net Cash Used in Financing Activities
Net cash used in financing activities for the six months ended June 30, 2026 was $26.3 million, resulting from $20.6 million of treasury stock purchases for restricted stock vests and principal payments on our 2024 Credit Facility of $8.1 million, offset by proceeds received from stock option exercises and 2016 Employee Stock Purchase Plan (“ESPP”) purchases of approximately $2.5 million. Net cash used in financing activities for the six months ended June 30, 2025 was $11.7 million, principally resulting from $10.6 million of treasury stock purchases for restricted stock vests, principal payment on our 2024 Credit Facility of $4.1 million, offset by proceeds received from stock option exercises and ESPP purchases.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes to our critical accounting policies and estimates as disclosed in Part II, Item 8. Consolidated Financial Statements, Note 1, “Description of Business and Summary of Significant Accounting Policies” in our 2025 Form 10-K.