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

Good morning, and welcome to the Amneal Pharmaceuticals First Quarter 2025 Earnings Call. I'd now like to turn the call over to Amneal's Head of Investor Relations, Tony DiMeo.

Good morning, and thank you for joining Amneal Pharmaceuticals First Quarter 2025 Earnings Call. Today, we issued a press release reporting Q1 results. The earnings press release and presentation are available at amneal.com. Certain statements made on this call regarding matters that are not historical facts including, but not limited to, management's outlook or predictions are forward-looking statements that are based solely on information that is now available to us. Please see the section entitled Cautionary Statements on forward-looking statements for factors that may impact future performance. We also discuss non-GAAP measures. Information on use of these measures and reconciliations to GAAP are in the earnings release and presentation. On the call today are Chirag and Chintu Patel, Co-Founders and Co-CEOs; Tasos Konidaris, CFO; our commercial leaders Andy Boyer for Affordable Medicines; Joe Renda for Specialty; and Jason Daly, Chief Legal Officer. I will now hand the call over to Chirag.

Thank you, Tony. Good morning, everyone. In Q1, we delivered another quarter of strong performance and continued growth, driven by the successful execution of our strategy. Q1 revenues of $695 million grew 5% and adjusted EBITDA of $170 million grew 12%. Over the years, we have made deliberate decisions and investments across our business and delivered on our commitments. Over time and through market cycles, we have differentiated Amneal from our peers by delivering sustainable growth, driven by our leadership in quality, innovation and execution. Today, Amneal is in as strong a position as ever. We are embarking on our next phase of growth with momentum and confidence in our ability to deliver on our goals in 2025 and beyond. Big picture, Amneal is a trusted leader in an essential industry, providing millions of Americans with access to affordable and innovative treatments. Each year, we fill over 162 million scripts for American patients. Amneal has one of the largest U.S. pharmaceutical manufacturing footprints in the industry. With a broad portfolio of over 280 products, over 150 of our medicines are made in the United States from antibiotics, antivirals, to medicines that treat Alzheimer's, cancer, Parkinson's disease. For Amneal, Made in America isn't just a label. It's been a cornerstone of our strategy since our founding in 2002 in Paterson, New Jersey. Let me now walk you through the key areas of our business. First, in our Specialty segment, the launch of CREXONT for Parkinson's disease continues to exceed expectations in its first year of commercialization. Market uptake has been strong with market share already surpassing 1% and on track to reach over 3% by end of this year. We have received remarkable feedback from patients and providers as one key opinion leader who is also a patient shared the following. "CREXONT has made me feel and moved tremendously better compared to RYTARY. I have concrete examples of how CREXONT has changed my life. It has made a huge difference." In addition, we are pleased with the continued progress and momentum in expanding market access. This year, so far, CREXONT has been added to several major insurance plans, including the Veterans Administration, UnitedHealthcare, CVS Health and Cigna Commercial. This doubles the total U.S. coverage from approximately 30% at the end of 2024 to approximately 60% of U.S. covered lives today. To put that in perspective, CREXONT has achieved in 6 months what RYTARY took years to accomplish in market access coverage. We are highly confident in achieving U.S. peak sales of $300 million to $500 million for CREXONT. Overall, we are focused on expanding our Specialty branded portfolio over time, next, with the anticipated launch of our DHE autoinjector later this year. Second, in GLP-1s, we continue to advance our partnership with Metsera in the weight loss and obesity space, which represents a new integrated business model to drive innovation at scale in GLP-1s. Metsera is rapidly advancing its pipeline of ultra-long-acting injectable and oral candidates. As they have shared, Metsera's lead program, MET-097i, a monthly ultra-long-acting injectable, is expected to deliver Phase IIb trial results midyear. Amneal is Metsera's preferred global supplier across the United States, Europe, and other markets. Also Amneal will commercialize their products in 20 emerging markets, including India. To support this plan, we are leveraging our existing infrastructure while constructing a high-volume peptide manufacturing facility and an advanced sterile fill-and-finish production facility. Over time, we expect GLP-1s will be a long-term growth driver for Amneal with three avenues of value creation: first and foremost, our collaboration with Metsera; second, potential CMO offerings for other large companies; and lastly, manufacturing capacity we can provide for generic weight-loss therapies globally. Third, in our Affordable Medicines segment, which includes retail generics, injectables and biosimilars, growth continues to be driven by our diversified, complex portfolio and new launches. In particular, our injectables portfolio is expanding. Last month, we launched BORUZU, which is our fourth 505(b)(2) injectable launch over the last year. These ready-to-use solutions improve hospital efficiency by eliminating medication preparation steps and have unique reimbursement coding for hospitals. Fourth, turning to biosimilars. This represents a next major wave of affordable medicines in the United States. According to an IQVIA report, more than 100 biologics will lose exclusivity over the next decade, yet only 10% have biosimilars in development. Biosimilars for the remaining 90% could save approximately $189 billion over 10 years. For patients, biosimilars improve affordability and access to essential therapies. For Amneal, they represent a compelling long-term growth opportunity that we are well positioned to lead. Today, our strategic focus has been in licensing our biosimilar portfolio and establishing a commercial platform. In 2024, our first three biosimilars generated $125 million revenue. In addition, we have expanded our pipeline with regulatory applications for five additional biosimilars being filed this year. By 2027, we expect to have six biosimilars on the market across eight product presentations. Our strategic goal is to be vertically integrated in biosimilars and leverage our proven ability and expertise to develop, manufacture and commercialize complex biopharmaceuticals at scale. Finally, growth in our AvKARE segment continues to be driven by new launches across three channels: distribution, government and unit dose. We expect AvKARE revenue to reach over $900 million by 2027. This business adds stability and diversification to Amneal's portfolio. In summary, Amneal has a diverse array of growth drivers that enhance our competitive differentiation, drive sustainable value creation and improve access and care for patients. Our strategic focus and long-term investments have been intentional and thoughtful. We could not be more excited about what the future holds as we advance our vision to be America's #1 affordable medicines company. I will now turn it over to Chintu.

Thank you, Chirag, and good morning, everyone. Let me begin by expressing my deep appreciation to our Amneal team. Your passion and commitment continue to drive Amneal forward as a purpose-driven company focused on innovation, execution and value creation. This morning, I will provide an update on our strategic priorities across operations, innovation and our portfolio. First, on operations, our global high-quality manufacturing infrastructure remains a key differentiator. Amneal continues to be recognized for its stellar quality track record and operational excellence. We are investing in digitization, automation and AI technologies across our network to drive operational efficiency and our trusted quality and customer service reputation. This foundation positions us well to launch new products, help address drug shortages in the market and serve more patients. Amneal has a robust and diverse manufacturing footprint across the U.S., India and Ireland. In the U.S., our extensive manufacturing infrastructure and capabilities are the foundation of our leadership position. We are one of the largest domestic pharmaceutical manufacturing footprints in the industry as we produce many of our generics and specialty products, including CREXONT, in the U.S. Over the years, we have built deep pharmaceutical manufacturing expertise across a wide range of dosage forms in the U.S. from oral solids to highly complex formulations. We have seven U.S. FDA-approved manufacturing facilities across four sites capable of making oral solids, liquids, topicals, transdermal patches and nasal spray dosage forms with excess capacity to meet market needs. Amneal is proud of its Made in America heritage, which is a competitive advantage and a core part of our strategy. Turning to innovation. We are pleased with the progress of CREXONT in the first 6 months of launch with strong KPIs across the board. The product is engineered for rapid onset and extended efficacy, delivering more "Good On" time with fewer doses for Parkinson's patients. At the American Academy of Neurology meeting last month, our team shared new data from our Phase III study showing significant improvements in sleep quality for patients on CREXONT. In particular, sleep disturbances affect up to 80% of PD patients. Further, our open-label Phase IV study is underway to generate additional real-world evidence. With robust early adoption and strong feedback from the neurology community and patients, CREXONT is poised to become the leading branded product for Parkinson's disease. Next in our Specialty pipeline is the DHE autoinjector for migraine and cluster headache. Our goal date is coming up this month. This innovative presentation of a well-known molecule was developed and will be manufactured in-house. This first and only DHE autoinjector is intended to help patients avoid emergency room visits during these painful headache episodes. We look to launch this product later this year and see the DHE autoinjector as a $50 million to $100 million peak sales opportunity. In addition, our strategic partnership with Metsera in the GLP-1 space is progressing as planned. As part of this collaboration, we are building two new manufacturing facilities, one for peptide drug substance production and another for advanced sterile fill-finish manufacturing. These facilities with enable high-volume production as Amneal serves as Metsera's preferred global supplier and will support large-scale GLP-1 commercialization. This collaboration exemplifies how we are leveraging our strong core competencies in R&D and complex manufacturing to lead in high-growth therapeutic areas like GLP-1s. On our complex generics portfolio, each year, we expect to launch 20 to 30 new products. We have launched eight new products so far in 2025. Later this year, we have several key complex product launches, including Pred Forte ophthalmic suspension and risperidone injection. Overall, we have 81 ANDAs pending approval, of which 65% are non-oral solids, and 47 products in development, of which 96% are non-oral solids. We continue to prioritize within our R&D portfolio and allocate investments towards higher growth areas like specialty brands, injectables and biosimilars over time. In injectables, we launched 12 new products in 2024 and expect to launch over 10 new injectables in 2025. In particular, we have launched four new 505(b)(2) injectables over the last year, which is a new growth vector for our business. In April, we launched BORUZU, our fourth 505(b)(2) injectable. In addition, we have 10 to 12 more 505(b)(2) injectables in development. Other complex injectable R&D programs including microspheres, liposomes and drug device combinations continue to progress well. Amneal is well positioned to be a leader in the injectable space in the coming years with our robust manufacturing footprint, deep scientific capabilities and expanding portfolio. In biosimilars, we see a significant market potential given the upcoming wave of LOEs for biologics and a clear opportunity for Amneal to establish a leadership position in the space. This year, we are filing our next five biosimilar pipeline candidates with launches targeted for 2026 and 2027. The BLA filings for two denosumab biosimilars were submitted with goal dates in quarter 4. Next, the supplemental BLA filings for pegfilgrastim, OBI and autoinjector is expected in the third quarter, followed by the BLA filing for biosimilar XOLAIR set for quarter 4. We look to expand our biosimilar portfolio and be vertically integrated over time. In summary, we have continued our strong operational momentum and execution in 2025. Our strategic focus on innovation, quality and manufacturing excellence sets us for sustainable growth and leadership across our business. Thank you. And with that, I will hand it over to Tasos.

Thank you, Chintu, and good morning, everyone. In the first quarter, we saw continued broad-based growth across our three segments, excellent uptake of CREXONT and new product launches that further enhanced our growth profile and diversification. As a result, we're incredibly proud of our global teams for delivering growth of 5% in revenue, 12% in adjusted EBITDA and 50% growth in adjusted EPS. I'll first cover our Q1 results in more detail, then touch on tariffs and finally affirm our 2025 full year guidance. In the first quarter of 2025, total net revenues of $695 million grew 5%, in line with our expectations. Q1 Affordable Medicines revenue of $415 million grew by $23 million or 6% as new products launched in 2024 and 2025 added $41 million. Our Affordable Medicines portfolio includes approximately 270 products across retail, injectables and biosimilars. As Chirag and Chintu mentioned, Amneal's R&D success, excellent supply chain and commercial execution are key strengths driving consistent revenue growth, broadening of our product portfolio and delivering value to our customers, providers and patients. In our Specialty segment, Q1 revenue of $108 million grew 3% driven by CREXONT, which added $9 million, and UNITHROID, which added $4 million in the quarter. We're delighted by the market acceptance of CREXONT and upcoming payer coverage expansion. Consequently, we're confident that CREXONT will meet or exceed its 2025 revenue goal of $50 million. Q1 AvKARE revenues of $172 million grew 6% as strong growth in the government channel was partially offset by softness in the lower-margin distribution channel. From a gross margin perspective, we're extremely pleased to report Q1 adjusted gross margins of 43.1%, up 120 basis points year-over-year. The strong margin expansion was driven by favorable product and channel mix, new product launches and higher efficiencies at the plant level. Q1 adjusted EBITDA of $170 million grew 12%, reflecting revenue growth, higher gross margin and operating expense leverage. From an EPS perspective, we're pleased to report Q1 adjusted EPS of $0.21, which represents 50% growth driven by higher adjusted EBITDA and lower interest expense. In summary, we are off to a strong start for the year, driven by strong execution across a multitude of growth drivers. In addition, we continue to strengthen our overall financial position with strong cash flow generation, no near-term debt maturities and continue to reduce leverage. In Q1, gross leverage was further reduced to 4.0 versus 4.1x at year-end 2024, and net leverage remained at 3.9x. Let me now turn to tariffs. And even though it's difficult to quantify precise implications, our team is developing numerous mitigating actions across multiple scenarios. First, our financial forecast already include a modest impact of our current tariff provisions. Second, we already have a large and growing manufacturing presence in the U.S., which produces 2/3 of our Affordable Medicines and Specialty revenues. The remaining 1/3 mostly comes from our India operations, and imports from rest of the world are not very meaningful. Third, our teams are taking several mitigating actions to ensure we deliver on our commitments to patients and shareholders. This includes increasing our U.S.-based inventory, secure alternative sources of API, renegotiating supply agreements, driving portfolio optimization and other productivity initiatives. Finally, from a long-term perspective, we believe our multiple growth vectors, extensive U.S. manufacturing capabilities and leading commercial presence position Amneal well in being a top-tier growth company. Finally, we're pleased to affirm our full year 2025 expectations. And as a reminder, we expect total net revenue between $3 billion and $3.1 billion, which reflects 7% to 11% top line growth; adjusted EBITDA between $650 million to $675 million, reflecting 4% to 8% growth; and adjusted EPS of $0.65 to $0.70, reflecting 12% to 21% growth. I will now turn the call back to Chirag.

Thank you, Tasos. Our performance in Q1 reflects the strength of our diversified business, continued execution of our strategy and the dedication of our team. We remain confident in our ability to drive sustainable value as we advance in this exciting next chapter of growth. Let's now open the call for question and answers.

[Operator Instructions] Our first question today comes from David Amsellem from Piper Sandler.

So I have a couple of questions on biosimilars and generic injectables. First, on biosimilars, can you just give us a refresher on what you expect the '25 top line contribution to be? And particularly interested in how big you think ALYMSYS could be. I think you, in the past, have cited it as being about $100 million of contribution, but I just wanted to just level set those expectations for biosimilars for this year. And then secondly, you talked about vertical integration regarding your biosimilar business. I guess my question here is when do you think that's going to actually come to pass? And how should we be thinking about not just the next couple of years, but sort of the next 5 years as we think about the cadence of new launches and just your overall thoughts on contribution for biosimilars to the top line? So that's on biosimilars. And then on injectables, I know you've cited shortages but you've also cited more complex products. I guess, as you think about the business, is there a lean into one versus the other? And just help us better understand what you think injectable top line contribution is going to be this year.

Thank you, David. Biosimilars, we're in line with what we have said, around $150 million, $160 million in total contribution on a top line with ALYMSYS being a leading product. You're in the ballpark somewhere between $90 million to $100 million. That's what we are driving towards. So that's the current existing products. And then your question on vertical integration, we are looking at options and we expect to execute on options by probably end of this year, maybe beginning of next year because we see time is at essence now, would like to be very, very a big player in biosimilars, having the development capabilities, having manufacturing capacity in the United States and in India or other locations in the world. And I have this -- as we said, this is -- there's a void in biosimilar. There's so many products we can work on. And when we do look to vertically integrate, we will hope that the partner has a big pipeline. And the contribution from a biosimilar business over 5 years and 10 years is going to be very significant. It's a whole -- as you know, the value of the biosimilars are huge. The total branded value is $250 million, $300 million and about 100 losing exclusivity over the next 10 years. So there is -- it's all about execution. The market dynamics on the commercial side, we believe we'll work it out over time, just like how it worked out in Gx, but not exactly like Gx because competition here is very less from the supplier standpoint. Right now, we see about somewhere 7 to 10 active companies in the United States that work on the pipeline, serious pipeline. So I know it's a long answer, but it's a very, very important vertical for us, biosimilars, to grow. And it's in our wheelhouse. This is what we do, complex development, device combination. Biosimilar is a very complex manufacturing, and great commercialization in the United States and work with partners in the international market. So it's a great international opportunity. On injectable, I'll pass it over to my younger brother.

David, on injectables, over the last few years, we have expanded our manufacturing footprints and R&D capabilities to work on complex and, at same time, we have the capacity, which we can work on certain volume product. We are very passionate about solving the drug shortage because we believe that drug shortage should not exist. And we have many products where -- does not affect or impact our ability on the complex development. So we are focusing on both areas. Our complex portfolio is moving very, very well. This year, we'll be launching CONSTA. We have launched many of the 505(b)(2) programs. We have other 10, 12 pipeline of 505(b)(2) injectable programs, along with microspheres are making good progress. Our liposome is making good progress. We have a deep expertise on drug device combination. We have now infrastructure of about 22 injectable lines with three to four locations, and we are also looking to some manufacturing in U.S. in coming time also. So we are well positioned on injectables. It's a focused area. And it's -- we're not leaning one over another. We are prioritizing both space equally.

The next question is from Les Sulewski from Truist Securities.

So first, I wanted to focus on AvKARE. How exposed is AvKARE to the federal government cuts, if any? How are you positioning this business in the current environment, I guess? And then second on -- are you seeing any sort of FDA delays, whether it's on approvals or feedbacks, on the generics front? And any sort of, I guess, initial potential from facility site visits delays as well? And then second, just kind of talk to us about the ongoing partnership selection on CREXONT ex U.S. I know you've identified EU and South America and Canada, but perhaps maybe just give us a little bit of time line on other parts and then specifically with your time line to launch in India and the opportunity there.

Well, thank you, Les. So we -- these federal cuts do not apply to the pharmaceuticals. VA is actually expanding 18 million lives so -- and more. Our veterans are becoming older, so more prescription drugs. So we see volume growth actually in VA DoD. So we do not see any issue there. Your question on FDA, we haven't seen any delays from FDA at this point. So no issue there. And then CREXONT ex U.S., we have the partnership in place for Canada, Latin America, Europe, and now we just signed Southeast Asia. India, we're going to market by ourselves. Europe is the largest market size will be for us. And partner is doing a Phase IV, additional small Phase IV for European requirements to get a proper reimbursement. And then India, we haven't gauged the exact market size, but it's much needed drug all over the world. Only IR is available for the last 30, 40 years, and these patients really will benefit from CREXONT. And looking at China and Japan, those talks are going on right now.

Les, just to add one thing on FDA. None of our goal dates have been impacted. All our products are progressing well, and it's part of the GDUFA user fee also, so site inspection. Plus Amneal's all plants are FDA-approved and in a very, very good standing. That also benefits us from any potential delays. But as of today, we have not seen any delays on our application or the goal dates.

And the next question is from Chris Schott from JPMorgan.

That said, maybe to start with the two-parter on tariffs. I know you have a different manufacturing footprint versus peers. So if we were to see tariffs applied to pharmaceuticals, do you see an opportunity to further leverage your U.S. manufacturing footprint? And maybe just talk a little bit about what type of capacity you'd have to utilize if, in fact, we did see tariffs applied. My second question on the tariff front was for some of the products that are potentially exposed to tariffs, and thinking about the Affordable Medicines portfolio, what is the ability to increase price on some of these products to offset some of those pressures? Or is the goal of Amneal more to pivot the manufacturing to either your own capacity or third parties to more avoid tariffs on those? And then maybe one follow-up after that.

Thank you, Chris. So if tariffs were to come on generics pharmaceuticals, leveraging our U.S. manufacturing footprint, we have additional capacity. We have one idle plant for a long time now, which we would restart if economically viable. We still have to do that. [ We'll see if ] it's long-term economically viable. About 8 billion to 10 billion more units of oral solids, of liquid manufacturing, topical manufacturing, transdermal manufacturing, we can produce in the United States. So we would -- we are ready, set to go, but it has to be economically viable. And your question on increase in prices, obviously, look, if there are tariff-related increases, we would work with our big, big customers, they have to participate in that, which is the CVS and UnitedHealth and Cigna. These are large companies. And there is some positive indication from the customers that they would partner if something has to happen because we -- last thing we want is any kind of a discontinuation or shortages. So that's the news so far. Thank you, Chris.

Great. And maybe just as a follow-up on CREXONT. I've been looking at scripts. I mean, obviously, great trends so far. It seems like we're seeing very little cannibalization for RYTARY as we've seen the ramp. I know that hasn't been focus, but as we get maybe closer to that RYTARY LOE, is there an opportunity to maybe accelerate some of the conversion of those patients ahead of generic entry? Or is the focus more on just the broader market here?

Yes. Chris, so our focus, as we have said from the beginning, it's a broader market. It's a huge market. Almost 650,000 patients we could potentially be on CREXONT. RYTARY reached up to 40,000. We are already at a run rate of 20,000 patients now. And by year-end, we'll have 25,000. And then next year, we could reach -- would easily double that or more. So 80% of that is coming from the new patient, IR, which was our goal. And RYTARY, as I pointed out, the KOL by himself took RYTARY over the years, now taking CREXONT, seeing a huge impact. So as the patients are -- many of these MDS already have started shifting their patient to CREXONT because it's just a much better drug than RYTARY. So we would see both. But we have -- we're not doing anything in particular, or we don't need to move or convert aggressively from RYTARY to CREXONT at all.

Thank you. We have no further questions, so I'd like to hand back to Chirag for concluding.

Well, thank you very much. We're so excited at Amneal, and we wish everybody a great weekend. Thank you.

Thank you, everyone.

Thank you. This does conclude today's call. You may now disconnect your lines, and enjoy the rest of the day. Thank you.