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

Thank you for coming this afternoon and a nice weather outside. So a beautiful day in New York City. Let's go through for the next 20 or so minutes on an exciting journey that Amneal is going through and as well as I'll touch upon exciting times in the industry as well. So let's start with the -- before we start with the micro health care trends, some whoever is new to the story, the quick history of Amneal. It was a humble beginning. My brother and I founded the company in 2002 and grew it as a private company until 2017, merged with Impax Laboratories, which was a public company and became public since 2018. 2019 August, my brother and I return as to run the company as the CEOs again. We still hold a majority of the position in the company, so a lot of vested interest. And we diversified our company with product portfolios, different areas of business, which I'll walk you through today. And very proud to say we're successfully able to do that until now and momentum is with us, and you will see why we are so excited for this year and coming years as well. So let's start with micro trends. We'll talk about our strategy and the key differentiators. Also, I will mention about one of the industries that you're very keen to knowing more about is biosimilars and how that is shaping up as well. And then we'll focus on our key growth accelerations as well. So I know generic industry had taken a lot of dislike from Investors community for the last 4, 5 years because of the price erosion. But one thing I'm sure you all of you know that this is an essential industry for the United States and for all the world. 92% of prescriptions are filled by generic drugs. So we're going nowhere. And it's actually more needed for us to be here as well as grow, invest in quality, invest in manufacturing infrastructure, invest in new technologies such as for the Biologics and the GLP-1s coming up and that could be oligonucleotides and who knows what's coming up. Our job is to provide affordable access. And you can see the populations keep aging, the requirements is going to go up. And when the products become generics or biosimilars, access is also increased because of now affordable access, more patients are taking drugs. And globally, it actually increases a lot more than United States. Lots of LOEs coming up, including both sides, the small molecules and biologics. So very excited to be where we are today with a 280-plus products and pipeline of 100. So we'll keep launching 30, 40 new molecules between small molecule, biosimilars and some of the 505(b)(2)s. On top of that, Amneal has the specialty franchise, which I'll walk you through, mainly focusing on Parkinson's and hypothyroidism. So with that, let's go to you. This is really a sad story for us to -- as our level of country with most advanced country in the world having 300 products in shortages where you would only come close to this if you are in our industry or if you have a loud one or by a soft, you're a patient. And we hear this from the doctors, especially the oncologist, the hospitals, the other clinics that how is it impacting and what they have to do to get these products? And most of these products are in shortages due to such a low price, gets concentrated to 1 or 2 suppliers where they're selling at a such a cheap price. They're not investing in quality, FDA shuts them down, all of a sudden create shortages. So Amneal is proud to have introduced 13 of these products. So we're doing our part, and we are planning to introduce 20-30 more to alleviate shortages. And proud to say Amneal drugs have so far never got into shortages and have a -- because we have #1 quality track records and as well as #1 customer service, 97%, 98% fill rate. So here's the summary of where we stand. As I mentioned, 280 products, 86 pending at FDA, 67 pipeline products. This year guidance is we mentioned in the first quarter call that it would be higher end and first quarter was awesome. Last year was awesome. And we see rest of the year momentum continue and not only for the rest of the year, also next year and the following year. So we have a 5 years plan. We go actually beyond that. But 5 years, we focus really in a very detailed way. Healthy EBITDA, we always is about 23% and will improve as we start utilizing our facilities as well as new product launches in injectables, which tends to have higher margins, biosimilars, higher margins and new specialty products coming up. And we're doing good on operating cash flow as well, and that will continue to drive higher. Here is a nutshell how the -- each segment of the business is growing. The first segment, we call it as a part is retail generics, injectable biosimilars and international. We call these business affordable medicines segment because if you look at all 3 areas, we're providing affordable medicines. The first one, Retail Gx, we rank #4 in value. We'll be moving up the value chain there. It is actually larger than low single digit right now. And we -- our pipeline there is mostly focused on ophthalmics, respiratory products. We have a huge infrastructure in Cashel, Ireland. Just for MDI and DPI product for respiratory. The other high-end products like a device-based product, transdermal, we just launched unit dose nasal spray, Narcan, naloxone, which is we're proud to do our part to supply that much-needed product to the states as well as CVS and Walgreens have taken our product as well to help in this opioid crisis or overdose crisis where naloxone is the choice to reverse the opioid impact. So with these kind of specialized product, our retail segments keep growing, injectable is about 35 products, 40 products now in the market. We're launching 10 or so products every year. Capacity utilization, we have about 60 million units capacity today. We're building more about 100 more million. And we only utilize about 25 million. So there's a whole pipeline, product spending at FDA, which will need the sites to produce those products. And it's excellent business. We have publicly said it will be $300 million next year. This year is about $180 million, $200 million. So it's growing rapidly, and that segment will continue to grow. And it has a new ranch in it because of the GLP-1s taking a lot of capacity away on a sterile manufacturing. It may cause further shortages or further more demand on traditional generics products, injectable products. Biosimilars is a big industry. It is -- we expect that to be $30 billion by 2030; today is about somewhere between $5 billion to $7 billion, 70 molecules, different biologics molecule will face LOE. IRA plays in a positive way for biosimilar players. The industry is keep getting smaller for us, which is great. So we have 2 companies out of Korea, Celltrion, Samsung playing -- Celltrion is integrated, Samsung's more development side. Sandoz, Amgen biosimilars. Biocon from India, then Teva, Alvotech, Amneal with [ Map Science ] and Kashiv BioSciences. But that's about it. And Kabi to some extent. So it's 8 -- 7 to 8 players because it's 6 to 7 years to develop the product, $100 million, $150 million, $200 million per molecule is a spend and you need specialized manufacturing and know-how. So this is not the small molecule where 30 people can show up all of a sudden. And a lot of co-development deals are happening. So the Sandoz-Biocon combining, codevelopment; Amneal's doing it with [ Map Science ] and Kashiv BioSciences, looking at the other partners as well. That will reduce the number of competitors in coming years. You will not see like 10 competitors you saw in Humira going forward. You can see for KEYTRUDA, in such a big product, only 2 products are in Phase III. The requirements are huge. It's a 600-patient trial. It takes a number of years to complete the trial. So it's a very good market being formed, but it is for the companies like us, not the brand companies. And for us, it adds tremendous value. And you have $100 million -- $140 million biosimilar revenue, next year, $200 million, and we're launching another one. So we have a pipeline of already 3 products, we'll be adding another one soon. And then every year, we'll be adding 2 to 3 biosimilars to the pipeline. So expect to launch 1 or 2 biosimilars every year. And we have the staying power. We are committed to biosimilars and our goal that when you combine Retail Gx injectable biosimilars for the United States market, we should become #1 affordable medicine company. We could get there in less than 5 years. Specialty is the business where we have the -- when we acquired Impax came with the Parkinson's franchise. We expanded the franchise. We have a PDUFA date for IPX203, which is a next-generation, long-acting levodopa carbidopa, the gold standard for Parkinson's patient gives them a longer, good on time per dose, which is very much needed because they live with this condition for years. And how can they live better every day. And that is what we are providing with our new products. So very excited. So far, it's moving in the right direction. We'll know on August 7 and then 10 years of our experience launching and working with Parkinson's patient, providers, payers, we're very confident of a successful launch for IPX203. And we also launched a COMT inhibitor within Parkinson's just recently, which makes the levodopa to stay longer time in the brain. So it's a complementary product, already launched, doing $25 million this year and will grow in coming years. So with that, we feel very comfortable launching products within movement disorder. And AvKARE, this is when a lot of production moved away from, unfortunately, from United States, the opportunity opened up to supply products for Department of Defense and Veteran Affairs. They have a mandate to buy American and TAA-compliant products and Amneal has 3 large manufacturing facilities still in the United States and our Irish facility also counts as a TAA compliant. We're able to put more product, grow that business. When we acquired the business, it was doing $55 million EBITDA; now it does this year as expected, $140 million, $150 million. So we have done tremendously well with that segment. And basically, we do not need to go through any middleman. We're directly selling from AvKARE directly to VA and DoD. Where we -- for years, we have invested in our R&D platform. So we're one of the vertically integrated, most vertically integrated company. We have the manufacturing capabilities capacity for -- from all sorts of injectables where microspheres, peptides, the liposomes, transdermal, we make them in Piscataway, New Jersey, and we have launched 7 transfer among products, including women's health. The nasal spray came out of Branchburg, New Jersey facility and all liquid production is in Branchburg, New Jersey. In all of these, we've been investing since 2008. So it's not overnight success. Ophthalmics, we have excellent capacity and pipeline. Inhalation products, we're very excited to launch this year and then the entire pipeline of 8 respirator products we have, including MDI, DPI and soft mist. Devices, we already launched alluring and we're working on another products, the auto injectors. We have a platform as we have 34% of EpiPen market today. So we are working on other auto injectors. And our manufacturing infrastructure is very strategically located. So it gives us a cost-efficient network and the products that we need to make in America, we make it here. And we also can compete with Indian and Chinese competitors because we have 8 plants in India as well. And the Irish plant, as I mentioned, is a respiratory production. That's going a bit faster. The pipeline is always innovating. So we're not -- every year, we have new launches. And the new launches, contributions been -- if you look at just on the generic side, last 5 years, launches adds up to more than $750 million of new revenue. Biosimilar, we're expanding, as I said, added more in the pipeline, we'll be keep adding it. At some point, we will become vertically integrated, meaning having capabilities of development and manufacturing. Today, we work with partners to do that from the Phase 1 assets and specialty pipeline, very excited about it as well and may add 1 or 2 going forward. This is a record that we are most proud of as a company. We're one of the robust operating team in the industry. This culture has been set from the beginning. This is what we believe in. These products are taken by our own mothers and sisters, fathers, everybody is taking prescription medicines. These are a responsible business. We take quality always on a top and proud to be ranked as #1 in quality, no OAI, no warning letters over 16 years of history, 105 inspections. So it's a very proud record for us, and we continue to focus and double down on quality, quality systems, culture and all segments of the business. This is what we are terming it as affordable medicines portfolio; great growth opportunity, it's growing almost double digit now. And we expect that to continue to grow as we go into year 2025 to all the way to 2030, tremendous growth opportunity for us. Specialty. It is exciting time for IPX203. Current products are growing really well as well, Rytary and Unithroid. The pipeline, there's another pipeline asset, which is for the cluster headache. There is -- today, a patient has to go to the clinic to get treated with DHE and that takes 2, 3 hours and they're in massive pain. They're banging their head on the wall. This is 9 out of 10 kind of pain. So this auto-injector, they would be able to take it at home right away. So we see this product playing a very niche role and it's further unmet need. And we'll continue to enhance our pipeline, as I mentioned. This is the AvKARE business has done phenomenally great for us. We -- more than double-digit growth in some areas, and it continued to grow, and we have a pipeline that goes all the way to 2030, because a lot of products coming off the patent. So VA & DoD has demand, the VA/DoD number of patients or number of people within VA/DoD veterans are keep increasing. So we see this business keep growing, and we are probably ranked #1 today within the VA/DoD category. And this is the interesting chart, right? Everybody is always worried about price erosion in generics industry. If you look at it, our base business of $1.2 billion in 2018, we're still doing $900 million plus. So not that we have lost all of it or half of it. And we continue to make proper margins on those products. Then if you look at the light blue bar, that's a new product introduction. It's more than $700 million contribution this year and it continued to go up. And as we have refreshed our pipeline, it's much higher contributions coming up. And then AvKARE businesses keep adding more revenue and profitability and specialty business on top of it. Margins are improving. We -- even though we keep investing in R&D, almost $170 million, $180 million, sometimes $200 million and have built all the commercial infrastructure for biosimilars, for specialty business and obviously, Gx business we already had. So exciting years coming up. And these are the near-term growth drivers. It's our -- the first one is -- happens every year, about 30, 40 launches in Gx. We add revenue every year. Those revenue gets annualized in the following year, keep going up. As you saw that chart about $750 million contribution in the last 4 years, we expe0ct that to even more than double in the next 5 years because of the quality of pipeline in retail and injectable new launches. Naloxone has continued to get the market share. We have Walgreens, CVS, California is taking our product. They did a big press release. So we -- we already have started to supply to California and working with other 10 states to supply directly naloxone. Alymsys is keep growing the entire biosimilar portfolio, Fylnetra, Releuko, all 3 products are growing. IPX is a key growth driver, coming PDUFA date is August 7, and the DHE Auto-injector. And here are the 4 things we're very focused. The already diversified business, the commodity oral solids is about 20% now, which is where you get a lot more competition. The rest is all complex, all on biosimilar specialty. The financial performance is great and becoming even better and cash generation is improving every year. Net leverage 4.6, targeting to go below 4 in the short term in -- by year-end and then keep going down from there. So this is a lot of momentum within Amneal, and we are using that momentum to do tuck-in deals, expand internationally, bringing more biosimilar assets, some specialty assets as we brought Ongentys to the board to Parkinson's franchise. And very excited to keep growing the company and doing a great work for American patients and providers to keep bringing these shortage products to the market and more affordable medicines. So I'll stop here and have 2 minutes probably for Q&A unless they let us go one more minute. I am sure there are questions.

[ DoD ] was a segment [Technical Difficulty] revenue. Was there an acquisition?

Yes. We acquired that company in 2020 and since then have tripled the business.

And was it disclosed what the multiple was as revenue or...

Yes, it was. Which did really well. Yes, we bought it at 6x multiple, and we really grew it. It was only doing $55 million EBITDA. Now it's doing more than $140 million this year.

And then outside of that, it looks like the revenue has been flat?

It's growing. Let's see -- so the -- you see the blue bar, right? The all new launches is almost this year, $700 million. And then specialty is flattish because we lost a couple of LOEs. So that's staying around $400 million, $420 million.

Okay. Thank you.

Yes. Okay. Well, thank you very much. Have a great conference.