Company: NOTV
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001628280-25-039017
Chunk: 55

Company: Inotiv, Inc.
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 1
Chunk 55
---
 may be materially different than the amounts recorded, and are subject to final resolution of these lawsuits, including negotiations between the Company, the other defendants and the plaintiffs, and required approvals by all parties involved and the courts.

External Factors

Additionally, we remain attentive to external factors, including tariffs, client research and development funding levels, and the recently announced efforts to accelerate implementation of the FDA Modernization Act 2.0, passed in December 2022, any of which may increase our costs and could continue to drive uncertainty and instability in global markets. Any or all of these external factors could impact both of our segments during the remainder of fiscal 2025 and beyond.

Our imported NHPs were subject to 10% tariffs during the third quarter of fiscal 2025. These tariffs were required to be paid within 30 days of import, which is a shorter timeframe than the average NHP research model inventory turnover period. As a result, payment of tariffs negatively impacted the Company's cash flows during the third fiscal quarter of 2025 and is expected to continue to impact the Company's cash flows in the future. Future NHP imports are expected to be subject to 15%-20% tariffs. However, we have and expect to continue to work with suppliers and customers to attempt to mitigate the financial impact of these additional costs. The current and future applicable tariff percentages are based on the country of origin of the imported NHPs. If tariff rates continue to increase, we expect to continue working with suppliers and customers to attempt to mitigate these potential additional costs as the NHP’s are mission-critical to the safety testing of new medicines.  

Client research and development funding levels, particularly those impacted by government sources like the U.S. National Institutes of Health ("NIH"), can be challenging to forecast. Funding of research and development is impacted by the political process, which is ever-changing. For example, on February 7, 2025, the NIH announced a policy that would reduce research grants by limiting payments for indirect overhead. Subsequently, on April 4, 2025, a federal judge issued a permanent injunction blocking the implementation of this policy.

With respect to the FDA Modernization Act 2.0, which encourages the industry to explore alternatives to animal testing, many of our acquisitions and investments have been implemented, at least in part, if not sometimes wholly, with the intent to help position us for the future. We believe our future objectives are in line with the goals outlined in the FDA Modernization Act 2.0