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

Good morning, everybody. I'm Chris Schott at JPMorgan, and it's my pleasure to be introducing Amneal today. From the company, we have the CEO, Chirag Patel, who's going to do a presentation, and then we'll jump into Q&A. So Chirag, I look forward to hear about all the progress the company has made over the last few years.

Thank you, Chris. Really appreciate it. Good morning, everybody. So excited to be here and presenting what we have for the next 5 years and quickly touching on -- touching base on what we have done for last 5 years. So it's an exciting time. We're calling it a growth in '25 and beyond. So let me take you through, and we have a good 40 minutes, so I'll try to finish the presentation in 20 minutes, and then we have 20 minutes for Q&A. So let's start with what we have done so far and where we are headed. And there are a few areas that I'll touch upon in more detail. So let's start with where we were, right? We have been the leader in complex innovations on affordable medicines. We feel very good to continue that path and move up the value chain. As you probably heard or may share the news with you is we just introduced that we took the compounded products and made it approved on the 505(b)(2) routes, and we have several of those. So we are doing a hospital a favor, a great market for us, potassium phosphate bag, IV bag. So we'll be doing more of those. So our complex innovations, we are well set. We have worked over 15 years to get there. Every year, it's a table stake for us now. So we'll launch 20, 30 but high-quality products every year, increasing revenue by $200 million, $300 million, $150 million, it's based on a year and time of the launch. So complex innovation is great. We have -- last 5 years, we have diversified the company. So I'll walk you through the diversification. And now the focus is on a high-growth area. A lot of work to be done, but we have done it before and we're ready to do it again. For biosimilars, especially -- specialty products and GLP-1. We have a global scale, as you know, last 20 years, we have built 12 sites. Three are in the United States, one in Ireland, eight in India, including two API sites. We're building two new sites for peptide manufacturing, one for peptide synthesis and one for fill and finish cartridges, PFS, about 100 million capacity per year should be up and running by 2028. Providing excess and affordability, we fill 162 million prescriptions per year, which is 5% of the entire United States volume. So we're one of the leader. Third rank, both in volume and value in affordable medicines, and continue to grow in that area were publicly stated goal is we will be #1 in 5 to 7 years in affordable medicines, defined as the injectable products, the hospital products, biosimilars and retail generics products, which are dispensed through the retail channels. And that's a goal and a lot of work being done to get there. Again, the emphasis is U.S. market always has been. We are expanding globally. India is the second market we launch our own sales and marketing, and rest of the world, we are partnering with distributors, local champions to distribute our key products. So you will see further diversification in international revenues as well. Last 5 years, we have grown double digit, 11% on revenue, 13% EBITDA, and last year was even higher. So we expect tremendous growth to continue, and I'll walk you through where the growth will come from. And what we are most proud of is we're leader in quality. We will never take our eyes off. We take this business with a lot of responsibility on our shoulder. The patients we treat, the access we create, the affordability we provide is a tremendous work we do. And we're very excited and focused there. So now let's go to the next. So here is a nice way to depict here. Let me walk you through the journey a little bit. In 2002, started with [ oral solid ]. Humble beginning. My brother and I started the company in Paterson, New Jersey. We added injectables in 2016. We bought impacts in 2018, gave us a nice Parkinson's franchise, which is where the RYTARY came from CREXONT launched recently, which I can't wait to talk about more. We entered into more next-generation complex products as competition catches up, Amneal sets the bar for the next level of complexities. So we'll continue to do so. AvKARE distribution was a great acquisition in January 2020, allowed us to directly distribute products to Veteran Affairs and Department of Defense, and also certain unit dose distributions. So excellent business, growing double digit every year since we acquired. Biosimilars, I'm going to talk more about it. It's a golden era of biosimilars from now to next 10 years. There are almost 100 molecules that will require biosimilars globally. Only 30 are being worked on in the pipeline, known pipeline. So 70 are smaller, $500 million, $700 million, $1 billion that companies are not developing. And there are very few companies now left, 10 to 15 probably globally, which has the scale, knowledge, ability to develop biosimilars. So it's unlike the small molecule, you will not see as much competition at all in biosimilars. And I'll walk you through why biosimilars, and how we see it will play out. CREXONT, amazing launch. Three months ago, we launched it. We're already at 750 prescriptions per week. Testimonials from the patients, the movement disorder specialist is amazing. We're getting the feedback that the patients were in RYTARY for 4 to 5 tablets a day, they're taking two CREXONT. And they could not -- they weren't able to walk. They needed a walker. Now they're walking without a walker. And these are doctors, family members. So we're getting amazing feedback. We're running a Phase IV. So not only we did a great job in launching the product, but product is selling by itself. So we expect to -- we have high conviction that our projected number to reach 300 million to 500 million will be achieved. Globally -- first time this product is going out, there was -- RYTARY was not available globally. This is the only product available which has the better absorption. We have solved absorption issue. Our European partner is forecasting 50,000 patients to reach in Europe. We're forecasting we would reach 100,000 patients in the United States. And then rest of the world also needs this product. There are 10 million patients in Parkinson's. This is the best product available from the beginning of the disease, all the way. It's a chronic management over 20, 30, 40 years. So we're in great shape, and we'll continue to do more research for our Parkinson's patient. And then I can't wait to share the GLP-1. Extremely different. It's a strategically different partnership, which I'll walk you through, which we announced with Metsera. It is not a generics play to begin with. So -- and also, the numbers spoke by itself. We grew double digit. The number of products, if you see, the -- 93% in development are not oral solids. So we moved away from oral solids starting from 2016. In oral solids, you'll see the most competition. So when 8, 10 players shows up, the market erodes immediately. So we have moved away from all those products. 93% still -- 63% of pending products are not oral solid. It's not a number of products anymore. It's the value products for us in the complex generics. And lots of LOEs coming up over next 5 years, is it double than what we saw last 5 years. So all macro trends is favoring us. Great cash generation, paying down debt. This morning, we announced we will be at 3.9x leverage. We are hitting the high end of the guidance for EBITDA and revenue both, and continue to feel very strong for the 2025. I'm not going to spend too much time on the macro trends, but aging population, they're all on a 4-plus prescriptions over 65 years age. LOE, tremendous LOE, GLP-1 is a gold rush. Global demand is tremendous. I'll touch upon in a few minutes. The prescription -- I mean, Parkinson's patient every year, unfortunately, 90,000 to 100,000 patients are diagnosed with Parkinson's just in the United States. The supply challenges, you wonder why there's so much shortages, and Amneal is doing its best to alleviate these shortages. We have 13 products we introduced in injectables to relieve shortages. We have [indiscernible] credibility and trust with the hospital systems, partner like [ Visiant ] in the United States, and we'll continue to partner and solve these shortage issues. Most of the shortages happened because of the low price. The manufacturers cannot afford to continue making a $1 a while, $2 a while. Most of the shortages are in sterile products. And it has to change. This is essential business, affordable medicines, and it must survive. And government is fully supporting the manufacturers. Okay. Let's start with the specialty a little bit more. So our focus is Parkinson's, CREXONT's growing. ONGENTYS, we launched, it's a [ COMPinhibitor ], so which is also growing. We had a small product, but very needed product for the U.S. military. We developed it together Pyridostigmine ER product for soman nerve gas, which is we're working with government to start supplying in the U.S, and we can supply to LIs as well. And DHE autoinjector, another needed product. It's the cluster headache. This tremendous pain, as you're probably aware of it. It's worse than migraine. Right now, the patients have to go to the clinic to get DHE administered. It takes 3, 4 hours to reach there in a tremendous pain. They bang that head on the wall. So this is -- we're excited to launch meaningful product, where they can auto-inject within seconds at home. And this will be the first auto injector in the market. We are more in the play. We will share more detail on specialty products as we get there. CREXONT, I just gave you the latest data, 750 prescriptions per week. This is a tremendous uptake, highest in Parkinson's. We have made the product. We have priced it properly because we wanted to create tremendous access. What good of any innovation if it doesn't reach the patient that needs these products. So we're also focused on affordable innovations. We -- this is -- we will continue to do more research where this product is globally will be available, very excited for what we are doing for the Parkinson's patient. Biosimilars. I know I get lots of questions about Humira. You just have to simply understand the history that 2014 FDA came up with guidance. It was a gold rush by the brand companies thought this would be a big category, certain other smaller companies came in, the [ Corian ] companies came in. Everybody developed Humira, 14 companies. So as fast forward, what happened is less and less players are now developing Humira -- I mean, any biologics products. We expect 3 to 5 competitors on most of the products. Some products like KEYTRUDA may have more competitors, maybe 6, 7. Humira, why commercially did not pick up? You know the answer, and I'm not going to go over the details. It's all about rebates. It's all about how the insurance company and [ PBM ] drives rebate. And you know the answer. I'm not going to say more about it. But now Humira is being picked up because eventually, the brand company would have to either keep selling the product at 80% off or allow the biosimilars to come in the market. And insurance companies have to do a job for the patient. They cannot be just focused on rebates. So biosimilars are covered from the beginning, you will create a lot more access at affordable prices. So this is what we are pushing to government to change to have biosimilars covered by the Medicare -- for the Medicare recipients from the beginning. Why we are excited? Because it is our cup of tea. We've been investing in biosimilars through our partners, our own commercial structure that, as I mentioned, there are 100 molecules, only 30 are being worked on actively. The 70 small ones, so just like what we did in complex generics, will do the same thing in biosimilars. We will come up with first to market. We'll focus on the small one. We'll make sure we have the integrated platform. So expect us to expand our portfolio, be vertically integrated over time. So very excited. This is a big market. It is made for companies like us, Teva, Sandoz, the, call it, the higher end of GX players. Celltrion is a focused player from Korea. Samsung is there. You got Indian company, Biocon, but that's only Indian company has a serious footprint in biosimilars. And there's Amneal with Kashiv Biosciences partnership, as a mAbxience partnership, and Kabi has it with partnership with mAbxience. So it's a limited number of players. It takes 6 years to develop the biosimilars now, it used to take 7 years. So the cost used to be 150 million, 200 million. Now it takes roughly 100 million for global development. Market is entire global. So volume is all over the world, the value, 50%, will be from the United States. It will be around $50 billion net sales market from the manufacturers. In 6 to 7 years, half value coming from the United States. A lot more access will be created. I may be underestimating the numbers, but this is a serious business and market being created for purposely -- purposeful access for the patient globally. And more and more biologics are coming up as a treatment. So this doesn't end in 10 years. It continues. Yes, you have to move your platform to ADC, be specific and anything else, the new innovations will come. So fantastic business coming up, and it is for us to win, and we aim to be top 3 here in the United States. Okay. This is the probably the most exciting slide. Every slide was very good, but this one is the most exciting. This is a unique partnership. This is based on trust that we had with the Metsera team over 10 years. So first of all, it's a partnership. It's a collaboration. It's not a partnership, it's a collaboration, where we -- Amneal provided the entire scale, which Metsera would have had to go. Metsera is, by the way, biotech startup, has 550 million they have raised the entire library of peptides. About 20,000, they're quickly moving forward on their GLP-1 buyers. They saw 15 days half-life, that means twice month administration if it gets through the phase -- remaining Phase II and III. So what Amneal is doing? Amneal is providing CMC support. Amneal is providing the formulation enhancement, drug device combination. We're building 2 sites. We want to make peptides. So both teams are working as one team. They don't need to any more go to 5 CDMO, CMOs, 5 labs. And our speed is 5x, according to them, and our cost is 5x lower. So we instantly provide at scale because Amneal has been producing billions of units for 20 years, 300-plus approvals. We have a lot of experience. As I said, we fill -- our products fill 162 million prescriptions in the United States. So sometimes, we have more expertise than brand. We have 1,000 scientists in various areas, the engineers. We built so much of a manufacturing, so building 2 sites takes us faster time. And we're doing it very cost effectively. Metsera is contributing $100 million. We're putting our net $120 million or so over the next 3 to 4 years, and government of India is contributing another [ 80 million ]. We'll have certain manufacturing in the United States as well as we always have done both U.S. and India. Very excited. And if Metsera will [indiscernible] the preferred partner, 70% of volume they would have to buy from us. And we got licensing rights for 20 countries. So we'll be marketing in India and other 19 emerging countries. I got the statistics just in India, there are 40 million or so patients can use GLP-1, can afford $50 a month. So it's a different price point. But again, in our wheelhouse, more access needs to be created in GLP-1 globally if it needs to reach globally. And price points will not be obviously like United States. It's based on how rich the country is. Europe is already lower than United States. As competition will come, the prices will go down, but it is a great product, is showing great results. Let's work collectively to provide more access, and that's what we are doing with Metsera, and also allows us to launch -- have the platform ready for 3 to 5 turns of peptide manufacturing for almost 100 million cartridge capacity or PFS. We already have some capacity already. And oral solids, we don't need to. We already have in-house, 12 million capacity, we can make it as many as Metsera would require. We will work on generics, and we will also attract companies like Lilly, Novo, other big pharma to use our excellent infrastructure that we're building. So they can also affordably provide products to the rest of the world because the demand and the volume is going to keep going up very, very enormously. Excellent. So that is Metsera. You know the numbers. We've been growing. We just said today on 8-K, we'll be higher end of these guidance on EBITDA and revenue and next year, for '25, we are feeling very strong, which we will be announcing at the earnings -- fourth quarter earnings call. And beyond '25 is looking great as well, as you can see what we are working on. And just summing it up, the affordable medicines category will continue to grow. It has grown. We conservatively put down high single digit, but it has room to grow a lot more with injectables, 505(b)(2)s, biosimilars, more complex products within generics, in ophthalmics, respiratory products, nasal sprays that we launched in [indiscernible]. There are a few more to launch like that. So there's a lot of growth area and complexities. We do not face as much competition in complex products as the regular product. Specialty will keep growing, very excited with CREXONT launch. And [indiscernible], I did not touch upon, its excellent business for us. It's growing double digit, and we expect that to continue to grow as VA and DoD requires made in the United States, which we have the largest U.S. GX affordable medicines infrastructure in the United States. No other company, they have all moved out. There are a few others. Teva has some, but we have the largest infrastructure for the manufacturing. That is it. Chris sorry, it took 4 more minutes.

Exciting stuff.

Can you get out of this.

I'd love to start the conversation on the CREXONT launch. Maybe just share a little bit just any surprises or learnings from this first rollout? Obviously, the script trend looks great. But just anything -- as you look at the dynamics, what are kind of your biggest takeaways?

So far, everything is favorable. Excess because product is doing good. We priced it properly. So it's 20% lower than RYTARY because we wanted to make sure we had 38% [ or so ] rejection on Rx. We wanted to reduce those tremendously. And then Medicare patient with 2,000 out of pocket per year. So it's $166 per month for all that prescriptions, and 65% are Medicare patients who are RYTARY users and CREXONT users. So more access will be created. So, so far, everything is positive. We were surprised by how good the product is. So we're doing a Phase IV to find out more about it. And we got the label for [ naive ] patients, which is amazing. So we'll keep doing the more and more study to see what happens to [indiscernible] patients when they're on CREXONT. There are about 500,000 patients in the United States should be on CREXONT, and they're on IR, most of them. So we'll try to convince and improve chain, move it to CREXONT as many as we can.

The initial uptake, what are the characteristics of the patients who are kind of this first wave of...

It's more of a RYTARY patient moderate. We're now seeing some naive. We had 700 new prescribers. So it's all across the patients that are taking from [indiscernible] all the way to pretty much advance. And then more advanced, you go to the [indiscernible].

And can you talk about the payer piece of it? It seems like the coverage is building nicely. What are the targets for this year? And then as you think about longer term, where do you think you can get coverage for the product as we look beyond '25?

So we already got 30% or so coverage. We expect 50-plus percent. RYTARY got 70% coverage, highest in the category. So we'll aim to be more than that. So so far, the discussions are very positive.

Great. Great to hear. I guess the potential generic for RYTARY, I'm assuming all these payer discussions are anticipating that's coming out so that you wouldn't expect any changes as that comes to market. Is that correct?

No, not at all. It's -- we -- even payers not bringing up. It's 2 different product completely, right? So RYTARY would, in August, those generics, whatever it does, but doctors and patients are more excited about CREXONT.

Yes, absolutely. And you've targeted 300 million to 500 million of peak here. How quickly do you think you can get to that target level?

I believe 2028, we can get there.

Okay. So fairly rapid launch if you think about it.

We'll try to be even before.

Excellent. Maybe the last one is...

It's not a novel launch, right? It's a -- CD LD has been the gold standard. And we solved the absorption issue, which is the biggest so how it crosses the -- goes through the intestines, crosses the blood brain barriers and how long we have leveraged into dopamine and last longer. We have solved that. So we're very excited too.

Good. Good. Maybe last one, just as we think about the dynamics of the LOE plus what seems like a very attractive launch so far, expectations for the franchise for 2025 is a business that can grow as we kind of balance the LOE on one hand and then the new product revenue coming in?

There may be a slight headwind of a few million dollars. If you think about RYTARY in 2014, probably did about $210 million, okay? That may be a small headwind, which then we will just kind of -- but that headwind in the context of a $2.8 billion business will not impede our ability to grow both top line or bottom line 2025.

Maybe pivoting over to the GLP-1 piece of the story. I guess the first part, it seems to a lot different options you can go where the list goes over time. Where do you -- what's the most exciting piece of this to you in terms of, is it working with some of the branded companies to build capacity? Is it international markets you have? Is it longer term, the generic opportunity as some of these big drugs go off? Help me understand kind of what excites you the most of the -- what you're getting here?

Yes, Chris. So most exciting thing is Metsera and that partnership with affordable innovations and we can provide scale. So that's our number one. Number two, we can also provide more access, do more work for big companies, the gold medalist, Lilly, and now or other upcoming big companies. So that's the second priority. GX, we will have it, but I'm not too excited about GX because there will be new GLP-1s, more half-life, much lesser side effects. So why would -- if the price points are similar, a little bit here and there, why would you go for all generics of Ozempic? I just -- but we'll have, it in case...

Is that kind of a value brand [indiscernible] emerging...

That's number three, yes. And we'll have the scale to supply that because it's -- everybody talks about we have generics GLP, who is going to have scale? Who is going to produce. And this for tablets, you're going to do for the oral solid, will need tonnage. No, not leave as it probably no will forget it out, but who has -- who can produce peptides and tonnage? It's all kilos.

Certainly, when I talk to Lilly and some of the branded manufacturers, this kind of ability to scale up is it's a [ rate limiter ]. How -- have you been able to engage with some of those companies or kind of conceptually, how would you envision that working?

Yes, we have. We have, and they love our site. It's state-of-the-art. We built just same as they would build the infrastructure. Same machinery we use from Germany, most of it. So we will, and over time, I'm sure we will just with the Metsera, with our reputation. We're a trust-worthy partner, quality track record. I'm very confident we'll win the business over the next 2, 3 years from these big companies.

Maybe just last question is how do we think about kind of the updates from the company on this front? What are the things we should be watching to see how this progresses over the next few years?

On GLPs?