FAIR VALUE

12 Months Ended

Dec. 31, 2025

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.

The inputs used in measuring the fair value of cash and cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the Company's funds. The fair value of short-term financial instruments (primarily accounts receivable, prepaid expenses, accounts payable, accrued expenses, and other current liabilities) approximate their carrying values because of their short-term nature. The 2024 Credit Facility bears an interest rate that fluctuates with the changes in SOFR and because the variable interest rate approximates market borrowing rates available to the Company, the carrying value of the 2024 Credit Facility approximated its fair values at December 31, 2025 and 2024.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Alimera Contingent Value Rights Agreement

On September 16, 2024, prior to consummation of the Alimera acquisition, the Company entered into a CVR agreement, pursuant to which holders of Alimera Common Stock, as well as holders of Alimera Warrants, Alimera Options, Alimera PSUs, Alimera RSAs and Alimera RSUs, may become entitled to contingent cash payments per CVR (each, a “Milestone Payment”), such payments being contingent upon, and subject to, the achievement of: (i) $140.0 million in net revenue (the “2026 Milestone”) on third party sales of ILUVIEN and YUTIQ for the Company’s 2026 fiscal year (the “2026 Net Revenue”) and/or (ii) $160.0 million in net revenue (the “2027 Milestone” and together with the 2026 Milestone, the “Milestones”) on third party sales of ILUVIEN and YUTIQ for the Company’s 2027 fiscal year (the “2027 Net Revenue”). Each CVR entitles the holder to receive a Milestone Payment upon satisfaction of the applicable Milestones. The Milestone Payment for each CVR will equal the product (rounded to the nearest 1/100 of $0.01) of (i) $0.25 multiplied by a fraction (not exceeding one), the numerator of which is the amount, if any, by which the 2026 Net Revenue exceeds $140.0 million and the denominator of which is $10.0 million (subject to adjustment for the exercise price of applicable Alimera Options) and/or (ii) $0.25 multiplied by a fraction (not exceeding one), the numerator of which is the amount, if any, by which the 2027 Net Revenue exceeds $160.0 million and the denominator of which is $15.0 million (subject to adjustment for the exercise price of applicable Alimera Options).

If the Milestones are met, the distributions in respect of the CVRs will be made on or prior to the date that is fifteen (15) business days following the filing by the Company of its audited financial statements with the Securities and Exchange Commission in its annual report on Form 10-K in respect of the applicable year in which such Milestones have been achieved, and will be subject to a number of deductions, exceptions and limitations, including, but not limited to, certain taxes.

The fair value of the CVR liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The Company utilized a Monte Carlo simulation model to estimate the fair value of the CVR liability. For each simulated path of future revenue, the payments to the CVR holders were calculated based on the contractual terms of the rights. The average payments from all simulated paths were then discounted to present value at an estimated cost of debt. As a result of the decrease in forecast future revenue for 2026 and 2027, a corresponding decrease in the CVR liability was recorded. The fair value of the CVR liability was approximately $1.4 million as of December 31, 2025, a decrease of approximately $7.6 million from $9.0 million as of December 31, 2024, and is classified as non-current contingent consideration in the Company's consolidated balance sheet.

The following table presents the changes in the CVR liability classified as Level 3 for the years ended December 31, 2025 and 2024:


	Year Ended December 31,
(in thousands)	2025		2024
Beginning balance	$	9,000	$	—
CVR Agreement	—		8,700
Change in fair value	(7,572)		300
Ending balance	$	1,428	$	9,000

Money Market Funds

Money market funds are readily convertible into cash and the net asset value of each fund on the last day of the reporting period is used to determine its fair value. Money market funds are included in Cash and cash equivalents within the consolidated balance sheets, and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The Company does not adjust the quoted market price for such financial instruments. The fair value of the money market funds was approximately $209.9 million and $84.3 million as of December 31, 2025 and 2024, respectively.

Interest Rate Swap

The fair value of the interest rate swap is estimated based on the present value of projected future cash flows using the SOFR forward rate curve. The fair value of the interest rate swap is estimated based on the present value of projected future cash flows using the SOFR forward rate curve (see Note 6 "2024 Credit Agreement" in the notes to the consolidated financial statements). The model used to value the interest rate swap includes inputs of readily observable market data, a Level 2 input. As described in further detail in Note 8 “Derivative Financial Instrument and Hedging Activity” to the notes to the consolidated financial statements. As described in Note 8, the fair value of the interest rate swap was $1.6 million and $4.9 million at December 31, 2025 and 2024, respectively, and was classified as a non-current assets in the consolidated balance sheets.

CG Oncology Equity Securities

The Company currently holds 219,925 shares of common stock in CG Oncology, Inc. (Nasdaq: CGON) ("CG Oncology"). The Company accounts for its investment in CG Oncology equity securities as an equity investment with a readily determinable fair value, as the securities are publicly traded on the Nasdaq Global Select Market. The fair value of the equity securities is based on its closing price on the Nasdaq and is classified within Level 1 of the fair value hierarchy because the equity securities are valued using quoted market prices. The Company does not adjust the quoted market price for such financial instruments. The fair value of the CG Oncology equity securities was approximately $9.1 million and $6.3 million as of December 31, 2025 and 2024, based on a closing market price of $41.52 and $28.68 on December 31, 2025 and 2024, respectively. The change in fair value of the equity securities is classified on the consolidated statements of operations as unrealized gain on investment in equity securities, in the amounts of approximately $2.8 million and $6.3 million for the years ended December 31, 2025 and 2024, respectively. Between 2013 and 2023, CG Oncology securities held by the Company were valued at zero under U.S. GAAP.

Novitium Contingent Consideration

In connection with the acquisition of Novitium, the Company may pay up to $46.5 million in additional consideration related to the achievement of certain milestones, including milestones on gross profit of Novitium portfolio products over a 24-month period (which period ran from December 1, 2021 through November 30, 2023), , regulatory filings completed during this 24-month period, and a percentage of net profits on certain products that are launched in the future.

The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs, as the inputs are not based on readily available market data. As of the November 19, 2021 acquisition date, the contingent consideration had a fair value of $30.8 million.

Pursuant to the terms of the Agreement and Plan of Merger related to the Novitium acquisition, dated as of March 8, 2021 (the "Novitium Merger Agreement"), on December 12, 2023, the Company paid $12.5 million of cash consideration to the holders of Novitium ownership interests ("Company Members"), for the achievement of the ANDA Filing Earn-Out, (as defined in the Novitium Merger Agreement). On February 22, 2024, the Company paid $12.5 million to Company Members of Novitium upon the achievement of the milestone. See Note 18 "Related Party Transactions" in the notes to the consolidated financial statements).

Pursuant to the terms of the Novitium Merger Agreement, the Company owes 20% of net profit generated by the sales of certain 505(b)(2) products (as defined in the Novitium Merger Agreement) to the Company Members through the earlier to occur of (i) the sum of all such payments being equal to $21.5 million in the aggregate and (ii) the tenth anniversary of the FDA approval of the applicable 505(b)(2) product (the "505(b)(2) Earn-Out"). The payments are due on a quarterly basis, within 45 calendar days of each quarter end. During the years ended December 31, 2025 and 2024, the Company has paid less than $0.1 million and zero, respectively, for payments of the 505(b)(2) Earn-Out to the Company Members, respectively.

The total fair value of the contingent consideration was approximately $8.3 million and $10.9 million as of December 31, 2025 and 2024, respectively, and is reflected as a current and non-current accrued contingent consideration liability in the consolidated balance sheets.

The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs as of December 31, 2025:

Payment Type

Valuation Technique

Unobservable Input

Assumptions

Profit-based milestone payments

Probability-weighted discounted cash flow

Discount rate

11.5%

Projected fiscal year of payment

2026-2034

The following table presents the changes in contingent consideration balances classified as Level 3 balances for the years ended December 31, 2025 and 2024:


	Year Ended December 31,
(in thousands)	2025		2024
Beginning balance	$	10,854	$	23,984
Payment of Gross-Profit earn-out	(26)		(12,500)
Accrual of Gross-Profit earn-out	108		—
Change in fair value	(2,588)		(630)
Ending balance	$	8,348	$	10,854

Accrued Licensor Payments

On May 17, 2023, Alimera entered into the Product Rights Agreement with EyePoint, which granted Alimera an exclusive and sublicensable right and license under EyePoint’s and its affiliates’ interest in certain of EyePoint’s and its affiliates’ intellectual property to develop, manufacture, sell, commercialize and otherwise exploit certain products, including YUTIQ, for the treatment and prevention of uveitis in the entire world, except Europe, the Middle East and Africa, where the Company already had such rights pursuant to the A&R Collaboration Agreement, and except for China, Hong Kong, Macau, Taiwan, Brunei, Burma (Myanmar), Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam, for which Ocumension holds a license from EyePoint. Pursuant to the agreement, Alimera paid EyePoint an upfront payment of $75.0 million and also made four quarterly guaranteed payments to EyePoint totaling $7.5 million during the year ended December 31, 2024. Upon making the quarterly payments in the aggregate amount of $7.5 million in 2024, the licenses and rights granted to the Company became automatically perpetual and irrevocable. There are no quarterly guaranteed payments in 2025 and beyond.

Royalties are payable to EyePoint from 2025 to 2028 at 30% of annual U.S. net sales of certain products (including YUTIQ and ILUVIEN) in excess of certain thresholds, beginning at $70.0 million in 2025, and increasing annually thereafter. The Company did not make any royalty payments during 2025, as the minimum threshold of net sales that would trigger the requirement to make royalty payments was not met.

During the quarter ended December 31, 2024, the Company paid the final quarterly payment of $1.9 million. The present value of the remaining payments to EyePoint for years 2025 to 2028 will continue to be revalued at an appropriate discount rate for the Company at each reporting date until they are settled. Significant inputs used in the measurement of the fair value include discount rates and probabilities of achievement of net revenue. Changes in fair value, which incorporate changes in assumptions and the passage of time, are recognized as an operating expense in the consolidated statements of operations. These changes resulted in a decrease of the fair value of the liability of approximately $21.0 million as no further payments are anticipated to be made in fiscal 2026 to 2028.

The following table presents the changes in accrued licensor payments classified as Level 3 balances for the years ended December 31, 2025 and 2024:


	Year Ended December 31,
(in thousands)	2025		2024
Beginning balance	$	20,961	$	—
Accrued licensor payments	—		25,000
Payments	—		(3,750)
Change in fair value	(20,961)		(289)
Ending balance	$	—	$	20,961

The following table presents financial assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2025 and December 31, 2024, by level within the fair value hierarchy:


(in thousands) Description	Fair Value at December 31, 2025		Level 1		Level 2		Level 3
Assets
Money Market Fund	$	209,891	$	209,891	$	—	$	—
Interest rate swap	$	1,646	$	—	$	1,646	$	—
CG Oncology - Investment in equity securities	$	9,131	$	9,131	$	—	$	—
Liabilities
Contingent consideration, Novitium	$	8,348	$	—	$	—	$	8,348
Contingent Value Rights, Alimera	$	1,428	$	—	$	—	$	1,428
Accrued licensor payment	$	—	$	—	$	—	$	—


(in thousands) Description	Fair Value at December 31, 2024		Level 1		Level 2		Level 3
Assets
Money Market Fund	$	84,277	$	84,277	$	—	$	—
Interest rate swaps	$	4,897	$	—	$	4,897	$	—
CG Oncology - Investment in equity securities	$	6,307	$	6,307	$	—	$	—
Liabilities
Contingent consideration, Novitium	$	10,854	$	—	$	—	$	10,854
Contingent Value Rights, Alimera	$	9,000	$	—	$	—	$	9,000
Accrued licensor payment	$	20,961	$	—	$	—	$	20,961

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

There are no financial assets and liabilities that are measured at fair value on a non-recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

There are no non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Long-lived assets, including property and equipment, ROU assets, intangible assets, and goodwill, are measured at fair value on a non-recurring basis. During the years ended December 31, 2025 and 2024 there were $0.8 million and $7.6 million of impairment charges recognized related to non-financial assets and liabilities measured at fair value on a non-recurring basis, respectively. During the year ended December 31, 2023, there were no impairment losses recognized in relation to any non-financial assets or liabilities measured at fair value.

Acquired Non-Financial Assets Measured at Fair Value

Acquired non-financial assets measured at fair value consists of certain assets, such as ANDAs or NDAs, acquired by the Company during the year ended December 31, 2025 and 2024, as discussed above, and assets and liabilities acquired from Alimera during the year ended December 31, 2024 (see Note 3 "Business Combination" in the notes to the consolidated financial statements).

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (bbb)(1)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 107
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482078/820-10-55-107

Reference 3: http://www.xbrl.org/2003/role/exampleRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 100
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482078/820-10-55-100

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (c)(3)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2E
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6A
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 940
-SubTopic 820
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147478119/940-820-50-1

+ Details

ANI PHARMACEUTICALS INC 10-K