Amneal Pharmaceuticals, Inc. ($AMRX)

Great. Good morning, everyone, and thank you for joining us. My name is Matt Dellatorre. I'm a biopharma analyst here at Goldman Sachs, and we're very pleased to have Amneal Pharmaceuticals with us this morning. Where I'm joined by Chirag Patel, Co-Founder, President and Co-CEO. Chirag, thank you for being here.

Well, thank you, Matt. It's been a pleasure. A nice Goldman [ dinner ] yesterday. We go around with the CEOs and investment banks. It was fun.

Quite the [ Knicks ] one.

Yes. That was to tough.

Chirag, maybe to kick things off and to level set for anyone less familiar, maybe frame for us how Amneal is positioned. You guys just announced a major acquisition of Kashiv BioSciences, which [ Berkley ] integrates your biosimilars business. So maybe just kind of frame for us what you're most excited about broadly, your key priorities and what you view as the most meaningful growth drivers as we head into second half of the year and beyond?

Great. Now we could not be more excited. This is amazing. This year, after 7 years, we're seeing the growth in our in-line products. That usually declines 4%, 5%. And now it could be up 10%, 15%. So a very meaningful growth driven by the hormonal patches driven by the pain patches. And fortunately, we make them in [ Cardware ] New Jersey. [ The very ] quickly, we're able to meet the demand. So we're not all of it. We're building our capacity as fast as we can. We get also pretty much all news channels. When are you going to supply more -- they say the story behind it, [ black box ] warning, lift trade American Cancer Society. Estrogen does not cause cancer. So the menopause period women are -- that is a huge from 45 to 65 age of women there. Now used to -- maybe 5% of them used to take estrogen patches every week. That is forecasted to be 30%, 40%. So you can see the multiple falls. So we're tripling our capacity, maybe quadrupling it in 18 months, but we'll be supplying more from this August. In line is great. our launches to date are excellent and your main question and we'll go more in deep, but biosimilar, that entire new pillar of growth, along with our small molecule where we lead is amazing. All we have to do is execute. We got the pipeline of biosimilars, our own R&D, our own manufacturing, multiple plants, we are planned in Chicago focusing on [ Ecole ] plant in [ Skagway ], focusing on maps, India, maps, R&D center, U.S., India, just the same playbook we use for Amneal's growth. We are using it for [indiscernible] growth. And massive market. It's 100-plus products. You could launch over the next 7, 8 years. That only 20 or so are being worked on because not many players are in the industry now left to focus on biosimilars. So we are -- it's a race to win and we're completely poised to take the part and be U.S., probably top 3 globally. We have a partner model, so we don't know where we will end up, but significant revenues will come from global markets as well. And we have launches and filing lined up over next 4 years. And already, what comes after 4 years is also being worked on. Very exciting growth area.

Great. Yes, maybe let's dive a little bit further into the biosimilars market. Clearly, you guys did that deal and -- so you're positive on not only your portfolio but also the space more broadly. I guess, how do you kind of see the market evolving now over the next 5 to 10 years with some of the regulatory changes we've seen with FDA no Phase III and kind of more alignment on the payer side, which you guys have highlighted in the past, for instance, private labels. I guess kind of just kind of high-level frame for us maybe how you see the market evolving over the next 5 to 10 years?

Yes. So what is shifting now is private label, which is the PBM, same customer we deal with in a small molecule. So we have a relationship over 20 years. And we're one of the trusted supplier for more than 300 medicines to those channels. So trust in Amneal is that they know will deliver a quality product and [ "on" ] time. So now it is -- if you look at number of competitors in the pipeline assets, they are less than 3, maybe 4, except for Keytruda, OPDIVO, all if you do a research and analysis on [ born ] shop products, which could be from $1 billion to $10 billion, whatever range is, but below 5, you see less competition and some of the complex molecule, fusion protein that we are able to correct through Kashiv has 2 competitors like Orencia is only 2 known competitors. That's our next products in filing. Xolair so far, it's only 3. And these are the very important molecule for us to go after. So 75% of our portfolio is going to be niche where we define niche as less than 4 competitors, less than 3 would be ideal because 3 major customers. So 70% or so 7-0, is moving into private label. So what happens is now when you launch -- and when you have a patent settlement, you already have a market. You're not waiting for 1, 2 years to create a kind of quasi branded market. We don't need to do that. and volume matters because that PBM's job to convert from branded to biosimilars. And that is really important for biosimilar industry to drive. So that is one -- the biggest factor that it wasn't there in all kinds of -- I don't want to use the word, but I'll use it. The games are being played between the rebates CMS, the PBMs, the brand companies, you saw that in Humira, it was biosimilars where pretty much nonexistent for a first year of launch. And then slowly now, they are more than 50%, 60% market share. So I see future biosimilar is getting pretty much 70%, 80% market share of total volume and [ volume is ] spending private label plus buy and build. So you can do multiple things as Amneal's commercial engine is set to do multiple things. And regulatory, yes, it cut down 2 years now, at least, maybe 3 if you are really good and almost 50% less cost. So on average, it would be global development. Our average is about $75 million, maybe $60 million, we can get to other companies may be higher, used to be $150 million. [indiscernible] number of [indiscernible] a lot of infrastructure. They could come in. It will take time. So it's a race right now. The sooner we get to the more complex biologics, we'll be always leading the pack as the more in tray may see 14 players. So it's amazing and a lot of access you're creating. So you feel good that patient benefits big time and global access as well.

And just to touch on the private label, you guys still view that as an attractive segment of the market because you give up a little bit of price, but will you gain in volumes kind of more than offsets?

Yes. What do we gain in the volume as well as we have now less sales and marketing expense. So overall, it's not a bad deal.

So similar margins potentially even on...

Similar, yes. And it depends, right? If you're 2 players, then you will have higher margins. 4, 5 less.

Yes. Interesting. Maybe with the deal you guys also gave long-term guidance, which included projected biosimilar revenues of about $1.2 billion by 2030, which I think everyone viewed as quite strong. But on the call, you guys mentioned that you were being conservative, which we like. Maybe walk us through how you reach that number in terms of which key products. We know Xolair and [ Orencia ] are definitely going to be key to that. But just kind of which products are going into that and how you're thinking about, I guess, potential share in pricing, which you touched on, I guess, a few minutes ago. And then maybe frame for us kind of the upside scenario, if that's the base case, one.

Yes, that's -- so we have existing products, which to about $100 million. Then we have [indiscernible] launching those of settlement agreement with so this year launched approved products. So that should add a good amount of revenue starting from next year. Xolair, absolutely a winner market is expanding. We already are in discussion with the private label as well as have the whole game plan for buy and build as well. Xolair will do well. and then follow that with Orencia, which would be sometimes late '28, mid-'28, and then [indiscernible] the only 2 player market. So that should add significant contribution. And then we have and plate, which is equalibased product coming from Chicago, that should be sometime in late '28 as well. So that should -- it's only single player. There's nobody [indiscernible] yes, hospital plays [ plenty count ] increases [indiscernible] product. And then we have one disclosed product, which is -- would be a major one. If we break through, we're waiting for the FDA's comment back, but that is a big winner. We have worked [ Asias ] worked 7 years on it, characterizing, more than 70 enzymes. It's a tough one, but..

You would potentially be only in...

Yes, we have, advanced. Yes, yes. For a long time, we could be single play if we correct through this. So we're not talking too much until we hear from FDA and ready to go. So those products, along with international revenue added on those products should get us.

Great. That's really helpful. Maybe shifting to the commercial business. You talked about the affordable medicine segment already a little bit. You all highlighted the ADHD momentum and...

But affordable medicines as soon add our respiratory product portfolio. So we have a cluster of growth within affordable medicines. So this -- we're not a tablet capture company. We're more of respiratory. We got a long-acting depots. We just launched respirator. We have octatidein the pipeline. So these are major drivers. We launched 505(b)(2) bags, which are taking the compounded version and turning into the FDA-approved products, which FDA loves because it comes from the sterile GMP manufacturing rather than compounded. The hospital love it to. We just launched or will be launching romidepsin, which was being compounded, and it was cytotoxic product. Teva was there with RTU since 2017. They had to pull out for some stability reasons. We cracked the stability. It took us a couple of years, and we have a great science team. And now we are in the market. FDA approved that product within like 6 months because of the need in the hospitals. So these kind of it is a completely unique portfolio and highly diversified. And the tailwind is behind us in small molecule as well, so many LOEs, so much diversity we have built on a hospital business, respiratory business, ophthalmic business. [ Batch ] business. So this we're very excited about that segment as well while we grow biosimilars.

So continued momentum there, high single-digit type high single digits -- it would be more than -- and then layer biosimilars that. You guys are also kind of -- I mean, this year and next, I think, on the kind of small molecule side are particularly -- it particularly rich period of launches for you all?

Yes. I didn't mention the lender type.

Yes, yes. Maybe -- yes, maybe starting with that one. I think you guys have flagged a Q3 approval.

Yes, yes. So far, everything is looking like Q3 or earlier and it should be a very good market until somebody else comes in for a couple of years, we already have so much demand have spoken to customers and ready to go. This is a dedicated facility, our own -- we built it [ fall lanreotide ]. So it doesn't require a huge footprint, but it requires a dedicated facility. The nature of the product, the viscosity, the device, it's redesigned the whole thing over the past 7 years.

Did that end up being want to like your biggest product with the...

No, no, luckily, we have -- we have other big products as well. But it could -- it would be. I hope it just become so I don't want to throw the numbers out, but very significant. And so that's lenti. We have [ iohexol ]. Other strengths are coming, which is, again, only GE and us. If there are any supply disruptions, right, it's a GE alone, and this is a much needed product. So we have now a couple of more strengths coming in supply chain is very, very tricky. So we have it somewhat figured out. We're still working more to have a bit of higher volume. And we'll go after certain market well has a lockdown customer.

So both land tied and you'll be the only generic on the market for the foreseeable future?

Yes. Yes. That is true.

And how are you thinking about the durability of that should we think like multiple years, I think you...

Yes, I don't know about lender tide, how quickly slug and come back. But recall, we don't hear anybody coming in. Again, this is we've been working on supply chain and figuring it out for 10 years. So -- we always work on toughest projects at Amneal, and that is paying off. Sometimes it may take some time. But this is where you need the value, you need more affordable access. And that is what we bring in.

Yes. Great. You did touch on this a little bit already, but your current biosimilars portfolio outside of kind of the Kashiv acquisition. I guess, how are you thinking about the [ Prolia XGEVA ] launches? Obviously, those -- there are there are other players on the market now. So you guys have kind of, I think, set expectations a little bit lower for those in the sense that they're not going to probably take huge share, but please correct me if I'm wrong.

Well, I'll wait until we disclose the creative strategy. You had to find an angle, right?

Okay. So then maybe tied to that...

It will have meaningful contribution for it.

It will have meaningfu...

Yes.

Okay. And then in terms of the Xolair launch, obviously, there's a lot of excitement about that. You guys will be 1 of the first 2 players could be 1 of your biggest products probably through 2030 in biosimilars. I guess, what do you view as kind of like the critical points of execution for capturing that market? Is there anything that kind of sticks out.

No, first, we hurdle is the Scardway plant, FDA is visiting from July 14, so they will be there. few days is guiding us through and inspecting. So that's the first hurdle in getting through a settlement, IP settlement would be the second hurdle. We don't the issue, but we'll see which month because we do not infringe. Our patent landscape is very strong. So that and after that, it just supply, and we already have advanced -- in advanced stock with some of the customers ready to go.

Yes. Maybe switching gears to the Specialty segment. You have 2 kind of key launches going on right now, CREXONT and [ Breccia ], which I think on the 1Q call, you guys highlighted continued momentum. I guess, as we think about those launches over maybe the coming quarters, kind of the trajectory as you kind of head towards those long-term targets of -- I think you've highlighted $300 million to $500 million for CREXONT and then $50 million to $100 million for [ Breccia ]. What's kind of the most critical aspects of the commercial strategy? And is it evolving now that we're a year couple of years, I guess, into the CREXONT?

15 months in [ connection ] months. Yes. And 23,000 patients already on the therapy. It took 8 years to get to 42,000 patients for RYTARY. So this is moving very fast and 80% conversion is coming from IR. So there's a huge market, the 700,000 patients to go after. And from IR to CREXONT. This should not be on IR. So we're running multiple trials to prove that. We already had Phase I results read out recently. Even on RYTARY, it's 3 hours "good on" time on top of right and top of [ wire ] is even longer. And it's -- that's what the patient needs the consistency. They're not the peaks and valley peaks and valleys. So they all kind of bad things happen for Parkinson's patients. And we're very committed for Parkinson's. Team is to make rexine first-line therapy. That could be right, hundreds of thousand patients on starting on exon. There's no need to start on IR and then move to CREXONT. So we're working on it right now. Tremendous like patient providers, everybody is talking about CREXONT. So we should be able to achieve our target hopefully, higher side of the $300 million to $500 million. It looks like international will start as well. So we have approval now in India and Europe is coming soon. Europe, they're saying they would be able to do a whole lot as well. They ran another study here. So Europe never had a long-acting CDL. This is the first time.

Because Bitar is not...

[indiscernible] is not -- it was only in the United States. So the patient for 4 years has been taking here. We're launching it everywhere through partners. India, we're launching with us and another major Indian player. and demands every year. So they should do really well. CREXONT. A great molecule. It's an amazing technology we use. [ Break ], I think we going to double what we said. 50 to 100, it could be 100 to 200. And the reason is it's such a useful innovation. In cluster headaches, were migraine, you go to the clinics, the pain level is almost 10 out of 10, you're banging on the head. I mean you had is banking on the wall and everywhere, it just. We have a couple of our own employees suffer through it. Actually, our own head of marketing has severe migraine issue on a break here. So them to then go to the emergency room, that could be a couple of hours wait and then get the same DHE injection adviser at the hospital. Now we made it an auto injector. They keep the box of 4 brands when they have the episode whom self-administered like [ Manzaro ]. And in 15, 20 minutes, relief is provided. So they sleep better. There's -- they know the treatment is right there. We don't need to go to emergency rooms, so very well received by the migraine community and [ cost your ] headache community. -- continue to have more demand than we thought.

Maybe just kind of wrapping up the Specialty segment. What are your guys' latest expectations for rotary generic? Is that -- is that still just EBD? These are just 3 quarters that we're...

Yes, EBD. Specialty, we are very excited, right? Because we got Kracor, huge growth and potential break year, huge growth and potential -- we have over Unithroid like Synthroid, it's steady ID, it keeps growing. Then we have a couple of smaller products, which are there. And then we have one undisclosed program, which will disclose it by probably once we file it. And that's for men's health, which is also in the news lately Yes. So we got a good product there. And then we have...

We think of that as in the kind of neuroendocrine bucket? Or is it...

Yes. Often we don't talk about men's health much. So -- and then we have a couple of other products, which we haven't disclosed because we usually disclose ones probably after Phase II. We do invest now almost $30 million to $50 million every year. which sounds small, but with the world of AI and our teams being in U.S. and India, that $50 million goes a long way. and we would keep investing in R&D every year. We love that data. And there's a lot of these niches between let's call it, $300 million to $500 million revenue potential that big pharma will not be it leaves it out for us. And maybe sometimes, we hit a big one.

And just to touch on that men's health one, you said you'll announce that when you file the...

Yes, we filed NDA.

So it will be going into Phase...

No, no, it's going to be filed...

Will be filed a post...

We're going to file it probably end of this year -- so we'll then announce it. It could be launched by end of '27 not too far.

You mentioned Monaro in a go. So maybe shifting to your obesity program with Pfizer you all have been very enthusiastic about this. I think when we spoke post the quarter. You all kind of highlighted that the partnership could be potentially even expanded in terms of longer term I guess kind of maybe just level set us where the partnership stands today and how far along you are with the manufacturing facility build-out.

Great. So Pfizer, we have been in active discussion. Both teams are working together already. First priority was the execution. They are probably impressed with the Amneal's team is we're not a typical CDMO or CMO. We are same as them, the manufacturer, which takes everything with passion. how they did it on the vaccine. We're doing it over here, which they never had the infrastructure for GLP except for the bill and finish side. So they're working very -- and [ Metsa ] some of the either as well, whom we have worked over the last 3 years. So manufacturing is yet the peptide is a key. That facility, there are 2 facilities. One is at a small scale, which is coming online very soon, and only dedicated for Pfizer's product, Pfizer meseta. And then another bigger facility, which should be done by end of next year as well for API. So these 2 will -- and that API is considered biologics because of 41 ammino acids over 40 is biologic designation. Their 40 is more molecule. They get 5 more years of exclusivity, right? It's years exclusivity for -- I think Lilly is fighting on one of the filing. Yes, 7 years versus 12. So the Pfizer recent data is awesome. And it's -- we always believe that this is going to become more of a consumer product. So the more lesser side effect, longer-lasting with how much of other complications like cardiovascular or others would be the winner because it -- I don't have to sell GLP, right? Everybody knows and what it does. It's tremendous. In India, they just launched its -- you can't even get it. And people are paying for it for the branded products. Generics becomes a dime dozen because it's so many players will make it. validate such a cheap price. So our play was always to partner with branded company, which we did with Metsera, likely Pfizer bought them. So now we are with a big guy, and we have a great relationship with them and we'll announce probably in a couple of months updates on the agreement. We make a market in some of the big market because Pfizer has a team right now, we have the exclusive right in India and other 17 countries. But some of them will co-market -- we're always up for what product can do. Probably we can maximize product. Yes, we'll do it together. Yes. it's a very good relationship and moving really well. And the 2 giant facility, we could use it for other futuristic peptide products as well.

Extra capacity, okay.

Yes. First is dedicated to Pfizer, whatever is Pfizer as a use. We can use it for us. The peptide is moving as in. But you guys are not interested in kind of focusing on generic. It would be it would be kind of -- and then it's some very generics will be 2036 something and by the day, go who's going to use it all with a lot of side effects.

Maybe kind of tying the Pfizer is one of your maybe key people don't really give you credit for it yet. It's early, but it is 1 of the key kind of growth levers as we...

From 2030 onwards. So we do not have it in the guidance.

You don't have it on.

No. No. This is all -- if we do it earlier, it would be added we just we would we are always conservative. We like to beat and raise. That's been a public company lesson for us. We like that.

In the past, you all have highlighted kind of this nice way to think about it, which is every roughly $1 billion in...

Well, that is -- let's wait until how the contract gets updated because we could expand the time line, right? The price environment has become challenging. That was back then, I think, calculation when monthly price would be [ 800 ] and now, I think it's [ 400 ] going down. for the treatment in U.S. and Europe. So we'll update, but we have supply, we make money from supplying, and we share gross profit royalties as well. And then we make money from our own 18 markets. So those are who we share only small royalty back to Pfizer. The rest remains with us. So it's pretty good economics on both sides. And right now, we're negotiating. So we'll update as we finish the negotiation.

I see and then as you think about India and some of those other emerging markets, obviously, there seems to be a lot of demand now, but they're still relatively small, I guess, how do you -- how big do you see those getting? Like are you just imagining kind of...

I think, look, for our size, all these 18 countries become our portion. I don't know what Pfizer is going to bring in. But if we do somewhere between $300 million to $500 million annually, the great profitability not bad Yes. and it depends on what next product, Pfizer Metsera portfolio will produce. We have rights for all that maybe Amneal combination, I'm esure,maybe a broad drug on oral that is still R&D. Yes. it's pretty good -- it's very...

Yes. Maybe just to wrap up kind of post the deal, obviously, you guys are investing heavily in biosimilars. You have the Pfizer partnership we just talked about. Capital allocation strategy post this deal. You guys...

Yes. So capital was straightforward. We would want to operate under 3x leverage. We're at 3.5%, maybe temporarily go to 3.6%, but very soon, we get down to [ 20 ]. Once we are [indiscernible] the rest of the free cash flow, which could be significant, million, $400 million, $500 million a year as EBITDA is rising, all investment, most of it is going to go on specialty. This after investing into the we invest in R&D and biosimilars every year, CapEx. So that will continue. But we don't need to buy anything in...

As you highlighted, you have a specialty pipeline.

Yes, yes. And we'll do some M&A as well starting in licensing. So very excited about that. We are a multi-decade strategy. So this will continue.

Great. Thank you. Thank you very much for being with us today, and congrats on all the progress, and we look forward to monitoring all the updates.

Yes, please. Thank you very much.