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

Good morning, everyone. My name is Balaji Prasad, I'm the senior analyst for the specialty pharmaceutical sector. And continuing with the Spec pharma track of our Barclays Healthcare Conference. I'm delighted to have Chirag Patel, the Chairman and CEO of Amneal Pharmaceuticals with us. So Amneal, over the last couple of years have seen an exceptional turnaround, a name that we've been very bullish on, on multiple sides, be it on the complex generics or biosimilars or specialty pharmaceutical side. And the company continues to deliver, and we are glad to have Chirag with us and dig into some of these dynamics. Chirag, thank you so much for joining us.

Thank you, Balaji, for having me, the beautiful weather in Miami.

Indeed, I hope you got some time out there. So starting with the business, you recently reported Q4 earnings, maybe take us through some of the key highlights there. And also is that as a segue to discuss the outlook for 2025, as you say, Chirag.

Yes, Balaji. So Amneal, we delivered another great growth year in '24 continuing the momentum in 2025 as well. And all segments of our business are performing really well. So if I walk you through each segment how well it did in 2024 and why we are so bullish in '25, '26, '27, basically, we have mapped out next 7 years or so growth plan already. And the areas we're excited is that all of them. So let's start with, we call it affordable medicine segment, which we define it as traditional generics business, biosimilars and hospital injectable business, including bags. So those affordable medicine segment has a huge growth potential. The LOEs are coming. There's a void in biosimilars. If you get it right and execution, affordable medicines for us and our key competitors will grow in significant manner over the next 5 to 7 years. So that segment, you saw the growth in '24. We're so excited it will keep growing in '25 and beyond. And we have excellent pipeline. We launched 20 to 30 products every year in affordable segment categories. And we -- actually, our base business continues to do well as well. And we're not seeing as much of a price erosion in traditional generics as we saw a few years ago. So all -- everything is pointing towards growth for the entire segment, and it's a big segment where it's 92% of prescriptions in the United States. Biosimilars has a potential of delivering $100 billion a year savings for American patients and health care systems in 2032. And government is completely supporting the NFDA, obviously, to ease the development of biosimilars. So it's a $6 billion biosimilar category could get to $30 billion, $35 billion in the next 5 to 7 years. So huge growth potential there. The second segment, specialty, we're extremely excited and pleased to report that CREXONT is outperforming our own expectations. And the patient testimonials are just superb. It makes us feel so good. I mean our purpose as a company is to make healthy possible. And the patient testimonials, such as the patient was not walking for 5, 6 years properly, now able to walk. The MDS specialist by himself has Parkinson. He just texted us saying he's moving much better than RYTARY. So now we believe that the market is so wide. And later on, we can cover more on CREXONT, but specialty business is doing well as well. And our third segment, distribution outperformed our expectation as well. That's a government value-added distribution, which requires made in United States, TA compliant products. Amneal is one of the largest U.S. manufacturer, we have an advantage to do business with VA/DoD. So was a great year and starting out '25 great as well.

Fantastic. Chirag, lets discuss -- start with CREXONT, I mean, launched a couple of months ago, I clearly could see that there's a lot of excitement around it, sort on the call, too. So how is the clinical protocol evolving at the clinic side in terms of changing from existing drugs, Parkinson's drugs towards CREXONT and also maybe just remind us where are you with the payer coverage so far?

Yes. So we're, as I said, testimonials are awesome. The uptake is awesome. We are over 1,000 prescriptions per week, and it's growing every week. We are touching every avenue. So we're first time has opened up the market to general neurologists, the not only movement disorder specialists. We're going to long-term care. We just got coverage for VA/DoD. So that's almost 7%, 10% of the market. We are running Phase IV to basically put it in a context what we are already hearing from the patient. So that we'll have the results in the fourth quarter this year. Payer coverage, excellent. So far, we are in a very positive manner moving forward, and we'll be announcing as soon as we lined up the largest insurance companies. So it's -- and they're seeing the benefits for the product, for the patients. So we're very pleased to how it's moving. We should exit more than 50% coverage this year.

Exit more than 50 plus towards the end of the year.

Yes.

Great. Look forward to that. And in terms of the launch and the differences between, let's say, go by going back to a RYTARY when it launched versus this, what are the incremental things which are driving CREXONT?

Yes. So we it's 2016. RYTARY launch was slow in uptake. Amneal was not involved, Amneal acquired the company in '18 and we grew the business then. But if I look at the data, it took almost 2 years for RYTARY to get to 1% or 2% market share. This is happening in 3, 4 months. And it is very large market and Impax never penetrated or went after a bigger market and conversion was an issue from IR to because of the complexity of dosing. So they did not go after the bigger market, and they were not equipped to do it as well. They didn't have the team. So now with experience since 2018, we grew RYTARY from $80 million product to $210 million product, grew from 2% to 6%. We learned a lot, where our relationship is great. Our product is great. So we see now and we have the label for naive patients. So we are pushing with general Neuro will need some more data for naive patients to convince them, where there's a total 670,000 Parkinson patient, RYTARY was used by 40,000 approximately. We believe we can get up to now more than 20% of the market share, if not more. I mean if you ask our CMO, who would be biased, saying all 670,000 patients should be on CREXONT. There's no need for IR. That's a pretty old technology, lot of absorption issues on and off time. It's not doing any good for patients. Why should they be on IR -- it's a huge market.

That's a pretty interesting, pretty exciting number out there, 20% market share, which is substantially above RYTARY. So look forward to traction on that. But maybe taking a step about when thinking about the overall Parkinson's franchise, I mean, RYTARY will be seeing an LOE and then you have ONGENTYS that you picked up recently and of course, CREXONT. So overall, how should we think about the Parkinson's franchise and as you think about this commercial strategy, is there anything else which comes next to [ incrementally ] .

Yes, it'd be flat this year compared to last year and then grows from '26 and tremendous growth from '27.

Yes. Okay. And also, I think one of the things that we've been discussing with KOLs last year was if there is going to be cannibalization of RYTARY by CREXONT, but KOLs were not convinced that will be the case? Is that something that you're seeing, too?

Now we're getting more IR patient on CREXONT and RYTARY patients are also moving to CREXONT. So we're seeing both.

Got it. Shifting away from the Parkinson's side to the DHE auto injector, seem to be expecting an approval in 2Q and a potential launch in 2H '25. So help us understand a bit more on the product and the opportunity as you see it?

So there's another niche product, right? We -- our specialty segment is defined by niche product, which big pharma typically, obviously, do not pursue. They are somewhere between $100 million to $500 million, sometimes we may hit a really good product like CREXONT which could do even more. The DHE auto-injector is for -- it's again, the gold standard for the cluster headache patients as well as severe migraine patient. And right now, they would have to go to clinic. It takes 2, 3 hours to get there being administered. So tremendous pain until then. So we have come up with an auto-injector at home, they can inject and get immediate relief in the next 20, 30, 40 minutes rather than going for 3, 4 hours. So a tremendous need. The KOLs are very excited about this. We are looking for exciting launch in the second half of this year.

Great. And maybe last question around the subject. Help us understand the infrastructure that you have in place? I know that with CREXONT, you are now also reaching out to general neurologists and with DHE, would Amneal [indiscernible] sales force? Are you geared enough to...

We have a great team of 200 people, including market access sales team. We would probably add 10 to 20 specialists who would call into these big migraine management centers.

Understood. Shifting towards the biosimilar side, again, that's one place I've been really impressed with the pace that Amneal ramped up starting from just talking about in 2020 to having 3 products by the end of 2022 and now like a $200 million revenue size there. What's next on the biosimilar pipeline side of things? I know it's going to be dependent on partner discussions, but what...

It's a very exciting area for us, and it's in our wheelhouse. This is what we do really well, produce complex products at a large scale. And in the beginning, we had commercial model. We did not want to invest a whole lot of money until the market stabilizes. The FDA guidance are more amicable, more easier than what used to be, which is all happening at the same time. Trifecta. I'm probably the only one calling this a golden era of biosimilars from now to next 5, 7 years. And you will see people are always hung up on HUMIRA, but there are 120 products. That was just a couple of years that brand company protected its franchise. But now you can see the HUMIRA market share with the biosimilar players. So competition is lower compared to before the brand companies are pretty much out except Amgen. So the competition's main competition is Sandoz, Celltrion, Teva tech, mAbxience, Kabi, Amneal will have to integrate with R&D and manufacturing unit somewhere along the time, which we've been very public about it, that we would look to do that this year. And that will give us additional pipeline. We're launching 3 products by '27. So Xolair is a big opportunity for us. We could be the second in the market after Celltrion. We have XGEVA, Prolia and OBI for our current Neulasta franchise. And after that, we would have many biosimilars if we are successful integrating the business, and we'll have full control from R&D, manufacturing, the sales and marketing, commercial functions in the United States and our strategy is to partner in Europe with European champion, a partner in South America with whoever specializes there, Middle East, the demand for these products are amazing. The access it creates, the volume, it grows because now it's affordable and available and how many patients it helps. And think about it. It's just -- these are great products, never reached so many patients globally. So it's a very exciting business, and we're fully committed to making it really big. And just like our -- on a small molecule, we are in top 5, we will do the same for biosimilars.

Fantastic, Chirag, maybe do you want to comment very quickly around your expectations around Xolair and Prolia.

There's going to be great products. Xolair is going to be very big. Prolia and XGEVA are more competitive. But Xolair, if we are second and Teva is like say publicly saying they will be there in '28. Three players you tend to do really well in biosimilars.

All right. Last one on the biosimilar side is more around the partnerships on the deals. You commented that you'll be looking to add a couple of deals every year. So -- and you rightly said that there are many, many biologics, which are expiring and not -- we have not seen that in the U.S. So tell us about the environment for these deals and what kind of assets you're looking at?

Well, we -- usually 2 kind of deals we look for. We are -- we have, first of all, organically really great pipeline. So we're not in a position where we have to do this, except for integrating biosimilar business. We look at specialty assets. We are quietly building our branded oncology business, again, specialty assets, we're launching 505(b)(2)s. You'll see us doing more in [ Onco ]. And some of the biosimilars deal will continue to happen. So those are the -- from the deals standpoint.

Got it. Shifting towards the generic side of things, or the complex generic side of things, I think you'll be very happy to notice that analysts don't ask you about generic pricing erosion anymore. That used to be the only question being asked for the last couple of years. And your portfolio, clearly, as your focus on complex generics has expanded significantly. Could you call up on the pipeline and highlight the key ones that we ought to be looking for on the portfolio side of things for '25 and '26?

Yes, it's in our presentation, there are many products, 20 to 30 products. So there -- we already launched 3 good ones beginning of the year. Everolimus, Mesalamine and -- picked up the market share on Levothyroxine. So we're picking up more market share as some of our competitors may run into FDA issues, while Amneal works very hard to maintain its top rating and quality. So we benefit from those areas as well. So it's very healthy market, lots of LOEs on affordable medicine segment, essential business for the country and the world. So we're very excited about the growth.

Great. And on the injectables side of things, you again called it out within your affordable medicines segment. Help us understand the current capacity that you have and the need for incremental capacity or how well equipped the company is towards this?

Yes. So we build out capacity for about 60 million to 70 million units and we are very -- our approach is very targeted, 505(b)(2)s, more complex injectables, microspheres and long-acting depot, which we're able to peptide, right? We just got our first GLP-1 approved, the old one. So with that, we are pretty rightsizing capacity for next 4, 5 years. We're good. Where we are building capacity is on our newly announced partnership with Metsera on a peptide front.

So I want to dig into Metsera, so I'm glad that you mentioned it. So help us understand, announced it a few months ago and where are you currently in your discussions for various things, setting up capacity? And then how do you identify assets? And when could we expect to see the outcomes of this partnership through -- is it a 3-year thing or a 5-year thing?

Great. So very excited. I think we will take -- Clive and us will take the credit to put up such a unique deal where Amneal has huge capacity capabilities, the CMC expertise, 800 scientists, and we have unleashed all that capabilities for Metsera to get their projects to help them move forward in CMCs and formulation enhancement for the oral solids because we have worked on 300 of them. So we know what to do and how to improve and lots of science, the gratitude from Metsera team is amazing. So it's unique. It's not a CMO, CDMO, it's more of a unique partnership at scale that immediately gave Metsera scale. You saw the announcement Corden followed with what we did with Vikings a few days ago. So we love to be pioneer in these areas, and we're expanding that partnership, 2 plants will be ready, some of the existing plants we are using for their Phase III as well as their initial launches, where we expect the sites to be up and running by end of '27. And we also have marketing rights for their products in 20 emerging countries, including India. And India market is about 50 million patients that could be on this GLP-1. If price is right, you cannot have obviously the U.S. prices there. So tremendous growth, and we start -- we'll start seeing it from '28, the revenue contribution going more on '29, '30. So that's our first preference on GLP-1 is to work with Metsera, and we are the preferred suppliers for U.S. and Europe, 70% products they would have to buy from us. They're putting $100 million in CapEx. We are putting about $100 million, and we expect the government incentives about another $80 million to $100 million. So that's good for 100 million cartridge capacity. Oral solid, we already have the capacity, do not need to build new and 4 to 7 tons of peptide manufacturing, which using -- we're using novel method of liquid-phase chemistry as well as solid phase. So we have more yield, like Lilly got it for Mounjaro, because solid phase alone would be -- especially when you have the oral solids. Which would expand the market really well. So it's like absolutely, and we're just quickly finishing that is second priority in that new infrastructure is where also will approach Novo, Lilly, Roche to do some contract manufacturing for them, either for the emerging markets or even for U.S., Europe, the sites are for global use. And the third is, we'll be ahead in generics launches as well because we'll have sure infrastructure to launch GX products.

And when you say that you mean generic GLPs.

Yes, yes.

Chirag, look forward to that, I think that could be truly transformative for the company.

It is, if you look at Amneal, the specialty where it's headed, biosimilar where it's headed, the complex GX our distribution business and top of that, your peptide, and I haven't even talked about international growth. So it's all huge growth potential for Amneal from now to next 5, 10 years.

Fantastic. So let's speak about that. We still have a couple of minutes left. Let's speak about the international part of the business. And it's a very unique model where U.S. best pharma starts looking at that, especially on the specialty generic side, looks at the international market, which is not frequent.

Yes. So we're -- we have -- obviously, we're a U.S. company. All our products are approved by U.S. FDA, #1 in quality, so it has a unique demand in Middle East, anywhere we go in the world. So we -- instead of setting up our own distribution centers, which will be too much and will not be that much value added. So we're partnering with key partners. We already have almost 40 partnership with Middle East, Southeast Asia, Canada, Europe, so our products will go through our partners who are set to distribute in these countries. We picked about 50 small molecule assets, which are already approved in the United States. We signed up our CREXONT also is going international. First time the International Parkinson's patient, which is more than 10 million would get access to most advanced drug formulation than the IR. And you see the need is same. We will launch in Europe, Canada. And in India, we decided 2 years ago to set our own sales and marketing. Since we operate many facilities in India, familiar with India, and India is a growing market. India is going to almost triple in their entire economy, but also in pharmaceuticals. It's pretty small compared to U.S., it's $27 billion total market. It will go to $75 billion to $100 billion over the next 10 years. So we would like to establish our footprint there that we have started just doing that. And it's a small $15 million, $20 million business, but it will grow tremendously over the next several years. And it's branded. So you -- with not generics, the branded unmet need we're bringing in India and certain specialty assets.

Got it. We're out of time, but I want to ask 1 final question. I think it's pretty important, especially around operating margins last couple of years, market focus, investor focus has been on the net debt-to-EBITDA metric, clearly, that is less of a focus now, but still want to understand the EBITDA guidance you gave for the year and the potential for operating leverage in the business over the next couple of years.

Yes. So expect the -- so we have distribution business, which grows EBITDA in absolute terms, but brings down the combined overall percentages. So expect overall to grow as well because as we launch more in CREXONT, more in other specialty assets, they are higher in margins and complex GX as well as biosimilars, they're all higher in margins. So it will go up and it will expand the margin. The investment we have made, we don't need to keep making it. CREXONT marketing, we're spending $30 million more than RYTARY in the first year, right? But then the revenue is outgrowing. Biosimilar, we set up a sales marketing, commercial capabilities with $40 million, $45 million investment. It's incrementally now when we add products, it doesn't go up. So a lot of operating expenses would be in line while revenue is growing expect margin expansion significantly from now to next 5 years.

Fantastic. I think that will be a good spot to leave there, Chirag. Thank you again for joining us. Thanks a lot and I wish you a good day.

Thank you.