Restructuring Charges

9 Months Ended

Mar. 31, 2022

Restructuring Charges

Restructuring Charges

Note 4. Restructuring Charges

2021 Restructuring Plan

On November 1, 2021, the Board of Directors authorized a restructuring and cost savings plan (the “2021 Restructuring Plan”) to further optimize its operations, improve efficiencies and reduce costs. Under the 2021 Restructuring Plan, the Company will consolidate its manufacturing footprint by transferring certain liquid drug production from its Silarx Pharmaceuticals, Inc. (“Silarx”) facility in Carmel, New York to the Company’s main plant in Seymour, Indiana. On March 31, 2022, the Company closed on the sale of the Silarx facility, which included equipment within the facility, certain ANDAs and other assets, to Chartwell Pharmaceuticals, LLC (“Chartwell”) and its subsidiaries for total consideration of $10.5 million. In connection with the sale, Chartwell will produce on behalf of the Company certain products at the Carmel facility for a period of up to 18 months while the Company completes the transfer of such products to its Seymour, Indiana plant. During the transition, the Company will scale back or phase out some small low-margin over-the-counter medicines from Carmel and continue to assess its portfolio, which may include introducing or discontinuing additional products.

In addition, the Company has scaled back two low-margin prescription products manufactured by Kremers Urban Pharmaceuticals, Inc. (“KUPI”) at its Seymour, Indiana facility as part of the restructuring program. The Company also scaled back its research and development operations and eliminated certain administrative positions that primarily supported the Silarx and research and development operations.

The total reduction in headcount for the 2021 Restructuring Plan is expected to be approximately 165 positions. The Company expects that the actions contemplated under the 2021 Restructuring Plan will be substantially complete by June 30, 2022. The transfer of certain products from the Carmel facility to the Company’s main plant in Seymour, Indiana is in process and expected to continue into Fiscal 2023. The plan is expected to generate annual cost savings of approximately $20 million.

In connection with the sale of the Silarx facility, Chartwell will retain a majority of the employees at the facility. As such, the Company no longer expects to incur severance-related costs for those individuals. The Company now estimates that it will incur approximately $3.5 million to $4.5 million of total costs to implement the 2021 Restructuring Plan, comprised primarily of approximately $2.5 million of severance and employee-related costs and approximately $1.0 million to $2.0 million of tech transfer costs. The Company also expects to incur approximately $2.0 million to $3.0 million in capital expenditures to build out the liquid manufacturing business at the Seymour, Indiana facility.

As of March 31, 2022, the Company has reduced its headcount by approximately 140 positions under the 2021 Restructuring Plan, which includes the employees retained by Chartwell. The Company incurred $2.5 million in severance-related costs during the first nine months of Fiscal 2022 in connection with the 2021 Restructuring Plan. A reconciliation of the charges in restructuring liabilities associated with the 2021 Restructuring Plan from June 30, 2021 through March 31, 2022 is set forth in the following table:

	Employee		Tech Transfer
(In thousands)	Separation Costs		Costs		Total
Balance at June 30, 2021	$	—	$	—	$	—
Restructuring charges		2,529		144		2,673
Payments		(1,630)		(144)		(1,774)
Balance at March 31, 2022	$	899		—	$	899

The Company has incurred $48.9 million in non-cash impairment charges in connection with the 2021 Restructuring Plan related to certain long-lived intangible assets as well as certain facility, equipment and other plant-related assets currently utilized by the Company. Refer to Note 7 “Property, Plant and Equipment,” Note 9 “Intangible Assets” and Note 20 “Assets Held for Sale” for further details on the impairment charges incurred during Fiscal 2022 in connection with the 2021 Restructuring Plan.