Amneal Pharmaceuticals, Inc. ($AMRX)

All right. Good morning, everyone. Thank you for joining us for our next presentation. We're excited to be hosting Amneal Pharmaceuticals. Chirag Patel to my left is the Co-Chief Executive Officer and President of the company. In the front row, we got Joe Kates, who does all things finance. And to his left, my right, would be Tony DiMeo, who heads the Investor Relations function that I think many of you know. So we're excited to have you here. Thank you for joining us. Why don't we just jump right into it? I probably should have mentioned, I'm Glen Santangelo. I'm the analyst at Barclays that covers the stock. We launched in December with an outperform rating. Amneal is new coverage for us here at Barclays. So we're pretty excited about it. So thank you for joining us.

Maybe a good place to start is we're week, 1.5 weeks off your 4Q results. I mean you wrapped up a very successful 2025. Maybe that's a good place to start and just give people just a quick recap of 2025 and those 4Q results and set the table for 2026 with your guidance. And I don't know if there was anything that surprised you -- I mean there was a lot that maybe surprised you the upside, anything to the downside that might have surprised you coming out of fiscal '25.

Great. Thank you, Glen. Thank you for hosting Amneal here and inviting me here. So the journey for 2025 actually started in 2019. We call it Amneal 2.0. When my brother and I, we successfully ran a private company from founding of Amneal in 2002 to 2018, when it went public, we came back in August '19, and we started strategizing how do we -- what do we do for Amneal 2.0. And it obviously takes time for us, we had to make sure our base business keeps growing. We did that. We introduced new products and then invested in a different R&D, more complex R&D, which is -- which paid off and diversified the company as well. We bought a distribution company, especially for VA and DoD, which is doing fantastic AvKARE in 2020. So with all that diversification, what you saw and continue to invest in specialty. So got CREXONT approved, Brekiya launch, couple of biosimilars launched. So all these activities over the last 6 years, the platform is now even more set from where it goes from '26 to 2032. And we have a whole road map to '35, but '32, we're very excited. So '25 amazing year on all aspects. We obviously meet and raise our guidance, which we like conservative and go forward. The Affordable Medicines group, which we call it instead of calling generics, it's generics, injectable and biosimilars. We call that Affordable Medicines group, which is growing. It has grown 5% over the last 5 years. Now we expect to grow in high single digit or even more when we have successful biosimilar launches. So which we will talk more about it. Specialty segment is growing despite of LOE, authorized generics of RYTARY. CREXONT has been a superb launch. The product is outperforming everybody's expectation because what it delivered, the absorption it delivered, the crossing of a blood-brain barrier, the patients are taking it twice a day instead of 4, 5, 6, 8 capsules a day and it provides them a stable "Good On" time. So it's been an awesome year, and we also won the Best Company to Work For award last year from BioSpace, which was always given to big pharma. First time they chose a leading Affordable Medicines company. So we're very proud of that as well.

Okay. Maybe just before we dive into the different segments. On that conference call, you also announced some changes to AvKARE in that portion of your business. And you touched on Affordable Medicines. You touched on specialty. You didn't really touch on that segment. Maybe just to round out the conversation for people why you made that decision, and then we'll dive in.

Right. So when we acquired AvKARE, the 50% revenue came from VA/DOW (sic) [ VA/DoD ] channel, which is the most profitable channel we have. And that is where we are growing. It's value-added generics and injectables will soon be biosimilars and branded products. So 20 million lives at VA/DOW (sic) [ VA/DoD ] the veterans are aging. So we have 2 benefits there. And most of the profit comes from that channel. There was a second part of channel, which we did not really care, which competes with traditional wholesalers at 2%, 3% margin. That's a low-margin business, pure distribution. They take Gilead's product and distribute. That's not the business we are in. So that is the one we are deemphasizing. It's only nothing like $350 million in top line. Bottom line is not even $10 million, $15 million. So we're not going to invest behind that. So that's where you're seeing this, but remarkable growth on all the core areas of the business, including AvKARE, government distribution.

Okay. All right. Let's dive right into Affordable Medicines. You talked about there's 3 different businesses in there are generics, injectables and biosimilars. And when we look in 2025, a little bit of a mix of things going on, right? The trends in biosimilars and injectables were down, but in the traditional generics business, that was pretty strong. So maybe if you can unpack the different segments within that -- within the Affordable Medicines business to help us -- to help the investors think about all the underlying trends and what's impacting that business.

Right. So all 3 are large segments. All 3 are essential medicines, which 92% of prescriptions are filled using generics product, right? So let's take the small molecule retail channel. where we lead, we're #3 in the nation, soon to be #2, which is the business we do with CVS, Walmart, Walgreens, all the channels and Express Scripts and Optum. That segment has continued to grow because we're launching ophthalmics products. We have an entire line of transdermal. So right now, recently, Dotti, the estradiol patch is in shortage. We are one of the largest supplier because FDA removed the black box warning. So the demand went up by quadruple and transdermal is not easy to just increase the production. But we're doing -- we're working day and night to supply more Dotti. So the ophthalmics launches are coming up as well. We already launched 15 or so. The more are coming. We have 2 inhalation products are approved, ProAir and QVAR. So that entire inhalation portfolio now you will see over the next 5 years, which will provide growth to this retail channel. So we pretty much do everything in retail channel, about 260 products includes topicals, liquids, transdermal patches, inhalation, respiratory products. We have the ophthalmics, as I said, tablets, capsules. So we got the full line that the retailers need and one of the best pipeline in the industry, a lot of first-to-market products in that category. Second category is injectable, which it's a timing of launches. We are focused on very complex injectables like long-acting depot, iohexol, right? This is the first time anybody introduced competing with GE. Lanreotide is going to be approved hopefully very soon here. So these are the -- and we have the whole pipeline. We also took certain products in a bag manufacturing, the ready-to-use bags. So they were being compounded. We made them FDA approved. So entire pipeline in injectable is set for growth. And third, the biosimilar, which will provide the highest growth, but we would need to do certain M&A to have our own development manufacturing. And obviously, U.S. will market directly and the rest of the world would be marketed by partners. So very exciting in Affordable Medicines category. Huge growth.

Can we talk about biosimilars for a second? You have a couple of launches on the way with denosumab and the Xolair approval later this year. How do we think about the growth in 2026? I mean I think Prolia is maybe not expected to be as big as Xolair and Xolair will probably more benefit '27. How do we think about what we saw, some deceleration in '25 with maybe stabilization in '26 and reacceleration in '27. Is that the right way to think about it or not?

Yes, yes. Because we had these ASP-driven products, which always comes in pressure. So we did well with those, and they're a little bit under pressure, Avastin, Neupogen, Neulasta. And now denosumab is being launched second half of this year. that would accelerate the revenue growth. And then Xolair in '27 would accelerate further growth. And if we are successful announcing the M&A transaction, you'll see the more and more launches in '28, '29, '30 every year new launches and every year new filing. And the pipeline is so large, opportunities are total 110 products, but we at Amneal along with our partner -- potential partner is about 27 products in pipeline would be -- could be announced. And that builds the entire portfolio, and we now become vertically integrated top 5 companies in biosimilars for a long time to stay.

Yes. So when you think about the guidance, right, I mean, 7% to 8% growth this year, but high single digits sort of longer term, which is maybe reflective of that pipeline?

Yes. And it could be more. If we are successful in executing on biosimilar, this is the golden time. It's not just me, my friend, Richard Saynor says the same thing. It's who executes, how fast, will win. And you need to have R&D, manufacturing because it's a very complex manufacturing, multiple bioreactors huge science team, the analytical team. Now FDA has made it easier. You saw yesterday's announcement, that is a second announcement. So they took out pretty much need for Phase III, now took out unnecessarily the bridging studies between different RLDs.

And can you talk about the margin tailwind that this will potentially create in this segment? How should we think about that?

It's increasing the margin. We already saw our margins going up this '25; '26 we expect another 100 basis points to go up. And we will keep ahead in margin as long as we have our own manufacturing and distribution and R&D for biosimilars in the United States.

Okay. Can we talk about -- let's maybe transition over to specialty and let's talk about RYTARY, right? We're expecting some generic competition this year. Could you maybe talk about the timing of how you think that sort of plays out and how you sort of layered that into the guidance for this segment for 2026?

Yes. So we have layered in as April 1 potential launch. Anything delayed any -- we would obviously benefit. But most exciting thing is CREXONT, which is outperforming in year 1. It converted 80% of IR patients out of 25,000 patients are on CREXONT already in 1 year. It took RYTARY about 6, 7 years to get to 25,000 patients. So the demand is so much because what product is doing. And we made it very affordable access for the product. So we learned that from RYTARY that 38% scripts were being rejected. So this time, our goal was less than 10% rejection or nothing. So we made it -- we want to become America's leading Affordable Medicines company. We believe that innovations must reach the patients because there are potentially 700,000 patients and CREXONT has a potential becoming a first-line therapy because how it's performing and how it's formulated. And what we are seeing the real life examples, real life. It's -- so very excited. We have guidance is $300 million to $500 million for now.

Yes, that's maybe where I want to go next. Maybe we can talk about CREXONT maybe because it's clearly filling in a big hole left by RYTARY, right? Giving you some significant growth. And just to put some numbers around it for those that may be familiar, I think it was $63 million in revenues this year, but doubling next year. And you talked about peak sales number of $300 million to $500 million, right, which maybe could prove conservative over time, who knows. But could you talk about this product and maybe what you think differentiates it versus compared to some of the other immediate-release and extended-release products on the market and why you feel like it's -- you're seeing such huge demand, maybe even above your own expectations?

Yes. It's -- so we kind of own the Parkinson's field. We've been -- we probably spent the most time over the last 14, 15 years, which I'm counting the impacts years. And the scientists learned, obviously, they first came up with RYTARY and then what were the pitfalls of RYTARY. So they designed the new formulation with different polymers, the different bilayer they came up with it and also they increased the IR in initial dosing. So it's IR/ER combination. So patient gets the kick just like IR, but then it's stable for 8, 9 years. And the absorption at an exact proper place in the small intestine as well as the blood-brain barrier, it's crossing much effectively. So even we thought the patient would take 3 times a day, are taking 2 times a day. And starting early, which is -- we just launched another trial too because the product is approved for naive patients as well. So we are studying -- first of all, our Phase IV data came, which is 3.13 hours of "Good On" time. It's like every pump with capsule. So it's amazing what we are seeing on the field as well as the data is showing. The second trial would take the naive patient and then study them over 2 years, 3 years, 4 years and compare that with the IR. There's a data available for IR, how the disease progresses if they just use IR versus using CREXONT. And we also have out-licensed this product in Europe. They'll be launching it soon. In India, we are launching it by ourselves. And then Middle East, everywhere in the world, Canada, South America, we have licensed it out. So it will add additional revenue for CREXONT.

Okay. In your prepared remarks, you touched on Brekiya a little bit. I mean this is meaningful, not as big as CREXONT, but still meaningful. Obviously, you've also talked about peak sales of, I think, $50 million to $100 million. Could you maybe touch on this product at all and the outlook for 2026?

Yes. So this is another useful innovation Amneal came up with because there are about 200,000 cluster headache patients, and there are many more severe migraine patients. They would go to the emergencies and clinics, emergency rooms, clinics to get DHE through the injections. We made it auto-injector and brought it home for them. So they are saying this is a 10 out of 10 pain. And the horror story, they're banging on the wall and their heads and they just go crazy. And in that, you have to go to emergency, wait there, nobody wants to do that. Now there is a psychological safety, product sitting in the refrigerator. They can -- it's auto-injector like Mounjaro, you just boom, take it home, take it at home. And the uptake is amazing. It surprised us. It's 3x more than we thought because it's what the useful nature of the product. And there are so many patients suffer through these.

Does that make you rethink your peak sales number potentially?

Not yet, not yet. We're going to be modest in our -- but we're so happy that the patients are benefiting. Our own employees stood up in a town hall and said, she had the episode and she took Brekiya in 30 minutes, she never felt better like that.

Great. Awesome. All right. Well, maybe just in the interest of time, let's move on to AvKARE, and we don't need to spend much time here. You already sort of talked about it. I thought it was kind of interesting, right, in that you're getting out of some of the less profitable businesses that had an impact on your revenues, but a positive impact on your profitability, and we'll segue to guidance in a second, right? But when you look at your revenues are coming in 2026, maybe a little bit lower than what everybody thought, but the EBITDA is much better right, on the profitability and what's remaining. So you could just maybe talk through that transition and how people should be thinking about AvKARE in 2026, given the change?

Right. So the core business, which is obviously the Affordable Medicines growing 7%, 8%. And depending on the timing of launches, we could do better. The second one is the specialty, which already grew from '24 to '25 from $440 million to $529 million. We're saying it would be steady this year because we will lose LOE for -- we're assuming on April 1, but still is staying steady. These are the high-margin businesses. And then AvKARE, the government business is doing well. They have a little bit flattish year because they had a big launch Entresto last year, which now the competition is there, but they're launching new products, but we expect that to continue to grow over many years. And that's very core to us. We love that direct distribution. Many of Amneal's product because VA and DOW (sic) [ DoD ] requires TAA compliant. So made in U.S.A. is a big advantage for us. So we can provide many products from our U.S. clients to directly without the wholesaler margins to VA and DOW sic [ DoD ].

Okay. Can we maybe segue to the Metsera deal? I don't know to what extent you may be...

It is Pfizer now.

Well, I was going to get to that. I was going to say there was already some interest in it and the spotlight has intensified now with the Pfizer transaction. And so I don't know if you've started to think about quantifying the opportunity and maybe what attracted you to the deal to begin with? And are you more excited now because of the Pfizer transaction? Or is it still the same? Like how should we be thinking about how impactful this can be?

Yes, it's very impactful. So how -- it's an interesting question you asked. So we wanted to go in GLP-1, and we did not want to just be a generics GLP-1 player. We have a lot of talent in the company, lots of scientists, peptide experts. So we approached our friends at Metsera back then, and I know Clive really well for years and so I have all these capabilities and talent, CMC, clinical support, oral solid formulations, device selection and drug device combination, peptide manufacturing, and we can make it cost effective because we could bring this from India rather than making it in the United States, which will be very expensive in a long time. So we partnered with Metsera and it is such a comprehensive partnership. And as you know, Pfizer now acquired. Pfizer is continuing to work with our team, and we're very excited to be a very helpful partner for Pfizer. I know they're big guys. They have a lot of capabilities, but there are things we can provide. And right now, the partnership is going in a great spirit on both sides.

This is obviously future down the road as we think about contributing to that growth algorithm.

It's huge, right? Because -- just Zepbound was launched in India. So the total deal is in the 2 phases we have. We have a right to market in 18 countries, including India. So we have exclusive rights for Pfizer products now. It used to be Metsera, which is very lucrative for us, which India and other emerging markets. In India, Zepbound is running out of products. So it's that much in demand. So globally, it will be in demand. The prices, as you know, the price points are going to come down. And at that point, having a technology which produces the cost-effective peptides and have these highly automated fill and finish total from start to end packaging lines, which we have 3 of them being installed right now, 2 cartridge line, 1 auto-injector line. It is really needed for the global supply. So we -- with Pfizer and us, we're very excited. Well, we are more excited than, I guess, they're, but they're very excited as well.

Just 2 more quick ones as we're starting to run out of time. Let's talk about the balance sheet, over $300 million in cash. I mean, manageable leverage. How should we think about sort of capital allocation in 2026 and beyond? I mean, anything that sticks out to you opportunistically or what you'd like to do?

Well, we continue to invest in the company, right? We have our own R&D, which is about $180 million to $200 million we invest, Capital expenditures we continue to invest. Outside, as we have said, this year, priority is vertical integration for biosimilars and which hopefully we'll be announcing that shortly.

Okay. Well, we're out of time. So what I want to do is I just want to give you the last word to sort of close this out. It felt like we've come off a very successful 2025. We got a lot of momentum in Affordable Medicines. Within specialty, we're overcoming the LOE of RYTARY. We got CREXONT and Brekiya that is sort of picking up the slack. You've made some changes on the profitability side of AvKARE. I mean, what else have we not talked about that you want to mention to investors? And what's the final word you want to leave with the investors here today?

Well, thank you, Glen. Well, we're very zoomed in focusing on the execution of massive portfolio that we have and looking forward to successfully integrate biosimilars and become a top 5 players for the United States. So that's a huge opportunity for us. And we do have a couple of candidates on our specialty side of R&D, which how it moves forward, we'll be announcing towards the end of the year or beginning of next year. So all segments are doing really well. And there is some growth in international markets, India being direct market and then through partnership in Europe and rest of the world. So that would become meaningful maybe after 3, 4, 5 years.

Okay. All right. Perfect. Chirag Patel, Co-CEO of Amneal Pharmaceuticals. We'll leave it there. Thank you very much.