Amneal Pharmaceuticals, Inc. (AMRX) Earnings Call Transcript & Summary

Good morning, David Amsellem again from the Pharma Team here at Piper Sandler. Welcome again to the Piper Sandler Healthcare Conference. We're going to go right into our next company, Amneal, and delighted to have Chirag Patel, CEO, Co-CEO, I should say, I don't know, I don't want to get any [indiscernible] to your brother. So we're going to jump right in. There is very much -- a lot to talk about this morning. But maybe, Chirag, you can give some brief remarks and we can go right into questions. So I'll turn it over to you, and thanks for joining us today.

Thank you, David. Excellent. This location always excites me because in 1987, February of '87, we came to America and had to work as a student from day 1. Literally day 3, I was working at the gift store downstairs and worked here for 1 year. So this is always a reminder where we started and how the American dream and American entrepreneurial system and our own great work, hard work, smart work, the teams got us here today. So what is exciting is in 4 years, we were able to diversify the company and put all the business segments on a growth mode, including Generics, which is retail generics, right, which is on a growth path, Injectables are in excellent growing category for us. Biosimilar, we just started, launched three, many more to come, and now it annualizes this year handsomely. Specialty, we are excited for IPX-203 launch, and it grows a $400 million business. It would be probably 10% growth this year and continue to grow as the further pipeline develops. And our Distribution business, which is very targeted distribution value add is also growing double digit. And then international on top of that is adding more diversity. So with all that, we feel really good. We proved it this year, and it carries on to next year.

Great. That's a great intro. And I have lots of questions. So I'm going to dive right in. You mentioned Injectables. And I'm particularly interested in that business. It's a big priority for the company. So I wanted to get your thoughts at a high level on your longer-term vision for the footprint of your Injectable business? And also get your latest thinking on what kind of capabilities you have in that segment?

Yes. So, Injectables is an extremely important area for the company, we have invested over 7 years. So we built capacity. And at the same time, we were building our capabilities. So R&D capabilities and, it's not the volume injectables we are competing. It's more of a value base. So we have invested in the technology. So we have MAGs. We have Emulsion Technology. We have Microsphere Technologies. Pretty soon, you'll see us filing a couple of products on Microsphere. Peptides, you will see us filing and announcing a couple of products. We have products like propofol, which is always in shortage. We're also addressing shortage products. We have an oncology portfolio and creatively working with oncology groups to have longer-term contracts, so we can supply them 20, 25 products. So they don't run out of Onco product for long term. So with this broader capabilities, almost 70 million units we can produce of different forms. And these are complicated. I was just in India last week, I saw one of our products, which is a Peptide, I mean it's a Hormone Microsphere-based Infrastructure, it's a specific infrastructure just for that product and it's extremely complicated. So it's one to come with all the same rigor we brought in retail Gx with the technologies, we're doing it in Injectables. And whenever we enter the segment, we're here to stay. So we easily see ourselves going over $300 million in '25 publicly stated.

Just from injectables?

Just from injectables. So and it will keep growing. So that segment is -- and the international is additional opportunities within Injectable.

Are you planning additional expansion of your capacity -- of your manufacturing capacity for Injectables. Can you talk to that?

We have enough right now. We got great fore plans, and we're doing good. We may add one additional couple of lines in the United States. So that's about it. But we have enough to manage through the pipeline. We have 30 products. So we commercialize today. We have 30 in pipeline. So we can manage up to 27.

What's your current annualized top line contribution from injectables now? You talked about the $300 million longer-term target. What's the revenue footprint right now, and I don't want to pin you down on 2024, but how many approvals of injectables do you think you could be getting next year?

We, about 10 approvals and it's moving in the right...

Next year?

Yes. And this year, we had 10 approvals.

Okay.

So it's moving up. In '22, we did $180 million in net sales. So that whole segment is really a growth driver for us.

Shortages. Big topic for Injectables. And you have called out a few approvals you mentioned Propofol as an example of a shortage product. I know there are others. How big of a priority is the development and distribution of products that are on shortage? I mean you talked about complex products, but there's a role here for shortage, and I wanted to hear your latest thinking there.

Yes. So we're always mission driven. So we like to help in shortages. And so what we have done is taken an approach and identified, we just got approval for Calcium Gluconate. So all the electrolytes, all those bags are always in shortages. So we've worked on the entire portfolio. Just for the patients and hospitals and entering into longer-term contracts.

As we have a siren in the background.

Yes. Yes, exactly. So, and then the Onco portfolio, we're diligently working to come up with the 2025 products out of 30 or so products used pretty much majority. And offer that for a 5-year contract for 7 years. So we cannot be held hostages by the middle man with changing the pricing and formularies. So we -- and the customers are very eager to sign up. So we have complex plus shortages plus some volume because you need to run the plants and get the overhead absorbed.

And just one more question about shortage products. This has been pretty persistent going back a number of years. Is it your view that these shortage issues are likely to continue where you'll be in a good position to step into the void?

Yes. Unfortunately, they will continue because the older plants are many, unfortunately, have to be either decommissioned or completely redone.

Right.

So we've been hearing about new capacity "coming, coming, coming" and Injectable was not easy. Oral solids or even the products like transdermal and all those, you can change it quickly. Injectables, it's a whole line. It takes longer time. The trial products, right the FDA requirements are at the top, and you have to constantly maintain and upgrade your equipment. So this is why, unfortunately, the shortage and economics that the GPOs and the distributors and hospitals have set it up. $2 a while, $3 a while. These are not sustainable. Even FDA commissioner has said that. So those, what happens, it gets concentrated in 1 or 2 companies market share. And now they have quality issues because they did not have money to invest. And that's causes the shortage.

Okay. No, that's very helpful and definitely something to watch over the next few years as it relates to your business. So on the Generics business more broadly, you've talked a lot about your pipeline and your movement away from Oral Solid. So can you talk more specifically about how much of your pipeline, not your filed products, but your actual pipeline consists of products that are not Oral Solid formulations? And then I have a couple of follow-ups.

Sure. So today, our Retail Generics, which is the Injectable separate and is part of the whole affordable medicines group. The retail Gx is about $1.3 billion business. We're fourth largest and moving up in values and the growth driven in that $1.3 billion segment that is all United States revenues. International will add. But within the United States is the inhalation products, ophthalmics products, so 90% of our 9-0 pipeline is non-oral solids. And within $1.3 billion only $600 million of sales is Oral Solids. But those are well established Oral Solids. We still make money. And we have the right infrastructure just to produce what we need we are not wasting our time shutting down plants like our competitors had to do.

Sure. So as you look at that base of Oral Solids business that $600 million, and even non-Oral Solids, Non Injectables, I'm interested in how you're thinking about price erosion going forward. I mean we know that the environment is not nearly as bad as what it was a few years ago. Maybe less bad as I like to use that term. But as you look at '24 and '25, what's your view on pricing erosion of the at least in Oral Solids?

So there are two components. One is price erosion, the second is volume gain. Surprisingly, this year, we did have price erosion, but the volume gain offset the price erosion, and we had increase in base business, which we classify as pre-2019 products. So that dynamic because of shortages, right, onetime buy, all that matter. But it's still price erosion is 8%, 9% and used to be 12%, 13%. Now we expect that it should normalize back to 2010 to '17, which was 5%,.6%.

Okay.

Now it depends for the company specific, because if you're launching many first to markets, you're going to have more competitive.

Okay. So the erosion is moderating but you're seeing more volume growth?

Because of the credibility in like a company like us with hundred inspections, no warning letters ever, the #1 quality track record in the industry. Supply chain is almost at 99.7% I mean it's so high. So customer trust is so much, and the other companies are fumbling, we're stepping up and providing those onetime buys.

So you talked about, I think it was about 10 injectable approvals this year, maybe another 10 next year. Just looking more broadly at the generics pipeline. You had a lot of approvals this year. What's your outlook for 2024 in terms of number of approvals for the...?

30 to 40. 10 Injectables and 20, 30 non-injectables.

Any big first-to-market opportunity?

They are good ones. They are good ones. And most of the biggest, the exciting one nearby is and then, again, mission driven is Naloxone. So we have built up a capacity for 10 million. It all goes online, 12 million actually units. By next year, it's right now at 3 million, 4 million, but the machine has been in store. So we expect that approval anytime.

Okay. So let's switch gears a little bit to Biosimilars. So you have 3. Just remind us what your revenue footprint is for those 3. And as you look at this space, more broadly, how are you envisioning the growth of your Biosimilar footprint over time?

Great. So the first one is we are doing good. Our goal was as Amneal to set the commercial front. And we have done that, successfully got a 6% market share in 3 quarters for our leading product Alymsys, Avastin biosimilar; and Neupogen and Neulasta is following the similar paths now. And we expect those portfolio to do more than $140 million, $150 million next year. So it's -- and then $200 million by '25. So as we publicly said, we'll reach those goals over those 3. We in-licensed two more Prolia and Xgeva, which we'll be launching sometime '26. There's a couple more we haven't announced, which is in works for in-licensing. So that will keep building the oncology portfolio. We may deviate from there if we get the products which we are only 1 of 3 or 1 of 4 Biosimilars and not going to these 8, 10 category which are only a few like.

You're not going to be in the HUMIRA market?

No. But the other products which could be in autoimmune, but if we are first, second, third, it's a big, big market. The United States, the prices start high. So even 80% erosion, it's a great business. It could still do $200 million in revenue. which are very large for $2.4 billion base company, a large amount. So biosimilars will grow. 5 years later, the companies would have to be vertically integrated, none of the just front end would survive and they have to be global.

So that brings me to my next question is you're not quite there at shared economics. Now a days that might work, and you said 5 years from now, it might not work. So what does that mean for Amneal?

For Amneal would have to be over 5 years become vertically integrated. And have a global pipeline. So we are out licensing in South America and Middle East and most likely selling on our own in Europe. So we would have to, because it's a global demand for these products. But it's an amazing business.

Does that include R&D capabilities as well?

Yes, yes. Everything. You have to have A to Z.

Okay. That's helpful. How are you looking at how pricing will behave in the Biosim space? I mean are you looking at Biosims behaving more or less like complex small molecule Generics over time? or better?

No, no. Of course, better. Because it's just whole manufacturing and R&D is so complicated. You keep seeing that like product like Zolid had like 9 people working on it. Only 3 are in Phase III right now. So it cuts down the cost is $100 million, $150 million versus $10 million to $15 million for complex Generics. So cost is 10x higher, may take $200 million to develop a product. It's a 6- to 7-year journey if you do it right, this is for the United States, Europe, maybe MHRA maybe a little faster. And then you got a complicated manufacturing. Manufacturing is Biologics. It's not a slam dunk. And then you have complicated commercialization in the United States. So it will not behave like complex Gx. It's going to be more -- you will see different categories behaving differently, the medical benefits versus the PBMs and a number of players coming in the supply continuity, all this will matter.

What are your margins like for your Biosimilars business now relative to corporate margins?

It's better even with the shared economics. So if you are integrated, you're going to maintain the better margins and improve.

Okay. So let's switch gears. About 6 minutes left. I want to make sure we talk about the brand business. And IPX203. I know you met with the FDA recently. Can you just talk to that meeting? And what you need to do? Or how already have done to get to the NDA resubmission?

So we had a great pre-NDA meeting, and they had laid out that you're using more Carbidopa. So we need 100 patient safety, we did it. We had provided them. They needed further clarification. We clarified. Here you go, 170-patient safety data, not even 100. They check marked. They're okay with it. But they said, we like you to do the routine QT study, the 36 patients. We're about to complete and then the analysis takes for a couple of months, and we'll be filing early next year. And that's it. That's the last open remaining question.

It was just a thorough QT study?

That's it for Carbidopa only.

Just for carbidopa.

Which hasn't shown any QT impact ever in 50 years at least.

That's just because there's more carbidopa?

Initially it is designed that way. So the patient is not struggling in the morning right? So it does they don't fall down. They're doing the -- they can drink their cup of coffee, take their medication, read their newspaper, walk around. So that's why it's designed. It's very smartly designed. It's completely novel formulation than Rytary.

So let's talk about the value proposition versus Rytary. I'm particularly interested in, well, two things. One is the pill burden, the daily pill burden for -- and so talk about that with some specifics. And then secondly, do you expect that with the different genetics you could see better motor control?

Well, we'll do those further studies like Phase IV. We plan to do those, continue to do the studies. But right now, what we have seen and the investigator is amazing. And it's 2 to 3 times a day, pretty much most of the patient. But it's not just the pill burden. It's, quality of their life is improved all day long because they're not going on, on and off episodes, so they can do their consistent activities, the less accidents and they have a life because live fortunately, a very long time with motor fluctuations. Well, we'll see. I think we're going to, we plan various studies to see how if you start early on, and we're going after the entire market this time. We're not going after just the movement disorder, 5% market share. So we're opening up.

Does that mean you're going to add more head count to the neuro sales force?

No, I don't think we need to add more headcount. We have designed a beautiful marketing strategies on social media, different demographies. So reaching, payer access. That's the biggest issue. Half of our prescriptions in Rytary don't get filled because of the price issue.

So does that mean you price 203 more cheaply to access a wider [indiscernible] market?

We're not talking publicly yet, but we're negotiating. It will be price where we have more access for patients. That's ultimate goal. Give more access and 55%, 60% are on Medicare.

Yes. Okay. I wanted to move on to just your vision for the brand business more broadly, you've done some in-licensing, acquisitions. You've got a neurology vertical. You've also got Unithroid with your Endocrinology business. So how are you thinking about ways to bolster your brand business and ways to better leverage your commercial infrastructure?

Yes. So we're looking at any commercial assets that can fit in PD. So that would be just add-on because our sales team can handle two products, 2 to 3. So that would be just natural additions. So hopefully, we announce something soon. And then we would have the pipeline in PD, we are looking at -- always been looking at everything that is happening, including the gene side, we're not touching, but we're learning what's going on, what the 10% to 15% patient has 1 gene that you can modify. But then there's other one that can -- Levodopa-induced dyskinesia -- can you -- is it a better product than [indiscernible]. So those kind of things we are always looking for. We are there. Anything we look at it, I mean we get into that business, we are completely in it.

What about endocrinology?

Endo is great. We got -- Unithroid is great and looking at other assets. We have a pipeline, we have K114 which is, if it works out, it will be the newest form after 25 years, combining T3 and T4.

How large of a transaction can you do or have, what's your wherewithal?

We have CFO sitting right here. He watches me every time. We pay down the debt. We have a great pipeline and can't wait to get to the below 4 and then keep going to below 3. So we would do what we can do with our operating cash flow, which is awesome every year and managed with our disciplined approach.

Okay. Last question because we're just about out of time. You talked about getting below 4. Do you have a time line on when you can get there?

Yes, by end of '25.

Okay. And then getting to below 3?

No, that's out goal there, but maybe whatever, '26, '27.

Okay. That's helpful. All right. Chirag, thanks so much for joining us. Thank you in the audience.

Thank you.