Hello and welcome to today's Amneal 2Q 2022 Earnings Conference Call. My name is Elliot and I will be coordinating your call today. [Operator Instructions] I would now like to turn the call over to Amneal’s Head of Investor Relations, Tony DiMeo..

Good morning and thank you for joining Amneal's Second Quarter 2022 Earnings Call. Today, we issued a press release reporting our financial results. The press release and presentation are available at amneal.com and a replay of this call will be posted after the call.

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 review the section entitled Cautionary Statements on Forward-Looking Statements in the earnings presentation and our SEC filings for a discussion of factors that may impact our future performance. We also discuss non-GAAP measures. Important information on our use of these measures in reconciliation to U.S.

GAAP may be found in the earnings presentation. On the call today are Chirag and Chintu Patel, Co-CEOs; Tasos Konidaris, CFO; Andy Boyer, Generics; Harsher Singh, Biosciences; and Jason Daly, Chief Legal Officer. I will now turn the call over to Chirag..

Thank you, Tony. Good morning, everyone. Our solid second quarter performance reflects acceleration from Q1 as expected. Q2 revenues were $559 million, up $61 million sequentially and adjusted EBITDA was $135 million, up $35 million sequentially. Across all 3 segments, we saw acceleration in performance from Q1. The top line growth versus the prior year.

The core business is strong and performing well. Since the last start of the year, there are 2 isolated factors that are different from our initial expectations. First, there was an accounting policy change for R&D milestone payments.

Second, there was a product opportunity in Ritonavir which was expected to contribute in the second half, that did not materialize as anticipated. These items are not reflective of the underlying strength of the core business which is performing better than our expectations.

In addition, despite more than anticipated inflationary pressures, especially in freight, we managed to continue to deliver efficiencies to drive sequential growth. Tasos will provide more details shortly. As a result, we are revising our full year guidance for adjusted EBITDA.

That said, we are reaffirming our full year revenue guidance as we continue to expect mid-single-digit top line growth in 2022. We are enthusiastic about the acceleration in financial performance we saw in Q2 versus Q1 which we expect to continue in the second half.

As we launch new products in high-growth areas such as injectables, complex generics, biosimilars and specialty, we expect to drive higher levels of financial performance and acceleration as these key catalysts are additive to our current financial profile. This month marks the 3-year anniversary since Chintu and I returned to Amneal.

In 2019, net revenue was $1.6 billion and adjusted EBITDA was $339 million. Since then, the team has done an incredible job reinvigorating new product innovations, improving operational execution, driving commercial success.

In 2022, we expect about $2.2 billion in net revenue and $500 million to $520 million in adjusted EBITDA and have a durable, thriving portfolio that's diversified across specialty, injectable, complex generics, biosimilars and international with a number of key catalysts ahead.

Looking forward, as we execute our growth strategy, we expect further acceleration in financial performance. The growth engine is set. Let's go through each area of the business. Starting with generics, new launches and our diversified portfolio of increasingly complex medicines is driving durable top line performance.

With our focus on complex and higher barrier products, over half of generics revenue is now non-oral solids. We see that increasing over time as currently 90% of our pipeline is non-oral solids. In terms of the total company, oral solid generics represent 1/3 of total revenues and continues to shrink.

We expect continued growth in generics driven by our portfolio of complex products. Moving to injectables, this is the key near- and long-term growth driver. We now expect $170 million plus revenue in 2022, representing over 35% growth. We are scaling this business with extended expanded capacity, capabilities and portfolio.

We believe these initiatives will drive us well over $300 million by 2025. In biosimilars, after many years of hard work by us and our partners, we are only few months away from beginning commercialization of 3 important oncology biosimilars.

We estimate the market size for these 3 products based on net revenue is approximately $4 billion, of which, half is biosimilars. For us, we see peak sales over $200 million plus in the next 2 to 3 years. The biggest opportunity is ALYMSYS, our bevacizumab biosimilar.

From a go-to-market perspective, we are focused on oncology clinics, integrated health systems and specialty pharmacies. We believe the key value propositions to the market are a customer-centric service model, effective business and offering a suite of oncology products for clinicians.

We are working to expand our biosimilars portfolio with additional molecules where we can be early to market and we look to be vertically integrated over time. Amneal is well positioned for long-term success, in the past, growing USD 28 billion biosimilar industry.

In our health care distribution business, we expect continued solid growth to be driven by strong commercial and operational execution as we expand across multiple distribution channels, including Federal government health care market, our direct distribution channel and unit dose.

In international, we are leveraging our portfolio of complex generics, injectables, specialty and biosimilars products globally. We believe this strategy will add considerable revenue and profits in time as we work with partners for distribution or utilize the existing infrastructure.

In China, we expect big infomercialization of multiple products early next year. In India, we are expanding our local presence with our own label. India is a $25 billion [indiscernible] market and we are encouraged by our only traction this year as we begin our commercial effort in the market.

Around rest of the world, we are pursuing targeted distribution opportunities with strategic partners and we look forward to share more information soon. In specialty, we are driving commercial execution of our key branded products and advancing our pipeline.

We expect continued strong growth from reitering Parkinson's and Unithroid and hyperthyroidism. In addition, LYVISPAH for spasticity successfully launched in June as our pipeline delivers new branded products, including IPX-203 and DHE auto-injector in 2023 and K127 in 2024, we see our specialty business expanding very meaningfully.

With that, I'll hand it over to my younger brother, Chintu..

Good morning, everyone. Thank you, Chirag. First, let me express my gratitude to the Amneal family who make healthy possible for so many. Across our global operations, we are enabling our strategy by driving excellence programs that improve operational efficiencies, maintaining a robust supply chain and adding new infrastructure for future growth.

We also continue to advance our quality culture. Across the R&D organization, we are focusing our efforts and investments towards high-growth areas, particularly injectables, complex generics, biosimilars and specialty. Let me now walk through the different aspects of our business.

In generics, we are innovating in complex categories with a reach pipeline extending out for years. We expect 20 to 30 new launches every year. We have 12 launches so far in 2022, including another CGT approval with Bexarotene gel.

We see a significant cadence of key new product launches on the horizon that would begin to materialize later this year and into 2023. We have included an upcoming key catalyst slide in the presentation to summarize the notable upcoming launches across the company.

One of the planned launches in 2022 that we highlighted last quarter was Ritonavir year which due to sufficient supply in the market, we no longer expect to be a contributor for us in the second half of the year.

Regarding the Synchron CRO issue that caused a few products to be BX rated, we are very pleased to share that 2 key products, Zafemy and [indiscernible] had their AB rating return this week. What a tremendous job by the team to bring resolution to this issue and we look to have all products back in the coming months.

Overall, we have 111 ANDAs handling across all dosage forms and are on track to file 25 to 30 more ANDAs this year, mainly in injectables. In our pipeline of 110 products, 90% are non-oral solid and over 50% are expected to be first to market, first to file or 505(b)(2). In ophthalmics and optics, we have 9 ANDAs spending and 11 products in pipeline.

In inhalation and nasal, there are 5 ANDAs spending and 7 more products in development. We expect our increasingly complex differentiated portfolio of over 275 molecules and leading commercial presence to drive consistent financial performance in generics. In injectables, we expect substantial growth as we expand our infrastructure and portfolio.

Our 2 new manufacturing sites are coming online as planned. We expect FDA approval for our first new site in Q4 and the other is on track for early next year. In total, we look to have 16 production lines across 4 sites, all for injectables.

This will enable us to develop new products, including LVP bags and ensure consistent supply in a market plagued by shortages. The other key success factor is innovation. We expect 5 to 10 new launches this year and 30 to 40 new injectables from 2022 through 2025. We have 31 ANDAs spending and another 61 pipelined products.

They are in a variety of complex areas, including drug-device combinations, peptides, long-acting injectables, liposomes, LVP bags and Fire 505(b)(2) products. With our expanding infrastructure and continued innovation, we are well on our way to scaling our injectable business to be a sustainable long-term global supplier.

In biosimilars, we are launching our first 3 biosimilars starting in Q4, ALYMSYS, our bevazimab biosimilar, Releuko, our filgrastim biosimilar, followed by FyInetra, our pegfilgrastim biosimilar. FyInetra and Releuko are proudly made in the United States, while ALYMSYS is already made in Europe.

Beyond this, we look to further expand our portfolio and pipeline. We believe the keys to success are having the right science, regulatory, manufacturing and commercial capabilities with the goal to be vertically integrated over time. Whether in the U.S. or globally, biosimilars represents the next wave of affordable medicines.

Biosimilars are aligned with our strategy to provide high-quality affordable medicines to patients and represents a key area of future growth for us. In international, we are advancing our strategies in China, India, Europe and the rest of the world.

Recently, we added a new international commercial business leader and now, have a dedicated team and infrastructure to drive our global expansion efforts. In China, we continue to file products and look to being commercializing early next year.

In other geographies, such as Europe and South America, we are pursuing distribution strategies to drive access to our portfolio of medicines. In specialty, we are expanding our branded portfolio with several new growth drivers. As Chirag mentioned, LYVISPAH launched in June.

This baclofen orally dissolving granules products feed spasticity related to multiple sclerosis and spinal cord disorders, particularly for patients with trouble swallowing. For IPX-203 and Parkinson's, we plan to file our NDAs shortly and expect a mid-2023 launch upon approval.

We are driving our IPX-203 commercial strategy, including the coverage and reimbursement model and establishing a patient support system. For K127, for Myasthenia Gravis, we expect to file our NDA in Q1 2023 and are pursuing other indications. Our other pipeline programs are progressing very well.

Beyond the currently disclosed pipeline, we plan to share more on other programs in development. We are adding new 505(b)(2) programs that repurpose existing molecules utilizing our proprietary drug delivery technology platforms acquired from Kashiv Specialty.

We are so excited in the value of Grande and advanced gastric retention system and [indiscernible], a modified release technology which we believe differentiates us in specialty and provides high-value product pipeline opportunities long term.

In summary, we have a distinct and clear strategy in place across our businesses area with robust growth drivers in each. As a company, we are laser-focused on execution and making progress every day. I will now hand it over to Tasos..

first, strong underlying demand for key growth brands such as Adrenaclick, Rytary, Unithroid, successful resolution of the AB Synchronite, Second, multiple new product launches such as LYVISPAH, biosimilars and numerous other ANDAs and finally, favorable manufacturing overhead and operating expense actions.

Looking beyond 2022, we believe that the actions we have taken in the last few years to turn around the financial performance of our business, along with substantial investments to reinvigorate our pipeline and competitive acquisition, bode well for sustainable growth and diversification.

Specifically, in the near term, we see the following key 4 catalysts for growth. First, we have our 3 biosimilars launching with expected peak sales over $200 million.

Second, injectable revenues is building each quarter from $39 million in Q4 2021 to $52 million in the second quarter of 2022, we now expect over $170 million in injectable revenue this year compared to $127 million only 2 years ago and we're well on our way to our goal of achieving over $400 million by 2025.

Third, there are several high-value generic launches over the next year plus. And fourth, specialty revenues ramping up with the expected IPX-203 launch by the middle of next year. For Amneal, it all comes to execution around our key success factors and continue to move the product portfolio towards more differentiated, high-growth areas.

Let me now hand it back to Chirag..

Thank you, Tasos. Even with our revised full year outlook, we see tremendous momentum across our core business. Q2 accelerated versus Q1 and we expect key products and new launches will drive acceleration in the second half.

After that, a robust line-up of key catalysts in high-growth areas are upcoming, we expect these growth drivers to build and accelerate financial performance. I’ll now open the call to questions..

[Operator Instructions] Our first question today comes from Balaji Prasad from Barclays..

A couple from me. Firstly, with regard to the biosimilar launches, it seems to have been staggered now with only 1 expected for 2022. So what are the gating factors for this? Second, on the EBITDA adjustments, I seem to pick up around $8 million for the R&D for the quarter.

So when I look at the guidance tweak, that’s around $40 million with the higher end of the range, so can I just extrapolate these to arrival around $25 million of R&D for the quarter of $30 million? And is the rest solely due to Ritonavir?.

Let me turn this over to our Head of Biosciences to answer the first question, Harsher Singh and then Tasos will take the second question. Go ahead, Harsher..

As Chirag stated earlier, our largest opportunity is in ALYMSYS which we plan to launch in October 1, 2022, supply is already on the ground. On the other products, we want to make sure that we have reimbursement in place as we get to launch, reimbursement for Releuko, our J code has been granted and so we expect to launch that in Q4.

For FyInetra, we are still expecting approval on our J-Code and that will be a gating factor for our launch. I hope that answers the first question. Tasos, over to you..

Yes. So the numbers, as you think about the $40 million drop, so the expected R&D milestones this year, we're anticipating them to be $15 million.

Then from there, you can assume Ritonavir was about 25% and then we probably combination of higher inflation and FX, that was combined, call it, about $15 million and that last part was offset by other operating expense reductions..

Maybe just to follow up there on the guidance part.

With revenue doing well in H1, just curious to understand you’re maintaining the revenue guidance for 2022 for the full year and not tweaking it further?.

Sure. So the revenue target, I think that kind of speaks to, within a $2.2 billion business, there's always ups and downs. But overall, our business performs extremely well. So generics are growing. The revenue growth of generics has accelerated. Last year, it was 2% organic, this year, we expect it to be 4%.

So we have a diversified portfolio of about 250 products there and a number of new ANDAs coming in every year. So I think that's good at that. Special display exactly as we expected.

So we expect we knew that specialty overall this year was a transitional year, in terms of being flat relatively year-over-year as we lost the ZOMIG button, while that's been completely offset by the continued strength of Unithroid and Rytary. And then finally, AvKARE is just performing ahead of our expectations.

Now, with AvKARE, there's been a substantial amount of growth in the distribution channel which is kind of more of a lower margin channel for us but nevertheless, it adds incremental EBITDA, so we feel great about it. But that is a little bit more insight as to why revenue kind of stayed where it was..

And injectable 35% growth..

Yes, injectables are going just incredibly strong..

Our next question comes from Nathan Rich from Goldman Sachs..

Maybe just building off of the last question, Tasos, can you maybe help us think about what the right jumping off point for EBITDA is as we think about how to build into 2023? I think at the midpoint of the guidance range this year, you’ll be at about a 23% EBITDA margin.

As we think about next year and the growth in injectables and biosimilars, how does that influence the margin profile that we should expect? And also, is $15 million of kind of R&D milestone expense a year kind of the rough range that you would expect to be on a go-forward basis?.

So, I think you're right. So it's kind of rewind a little bit so we can see how the profitability profile of the company has changed. So when we go back to 2020, the adjusted EBITDA to revenues was about 22%. In 2021, we were at 24% and as you know, that was an incredibly profitable year for us last year, a number of very strong new product launches.

And this year, you just said it's 23%. So I think this is the right jumping point for us. And also, when we think about, let's pick the midpoint of the guidance, $510 million, that's 23%, as you mentioned.

And that includes kind of solid top line growth and that includes about $40 million worth of incremental investments which is about 2 points of profitability that we're making in support of biosimilars, in support of new product launches and pre-commercialization work around IPX-203. So, I think 23% is the right point.

And I think as we think about next year, we'll see how things play out but our expectation is over the course of time, as the injectables which is a more profitable piece, as more of the more complex ANDAs coming to be which are more profitable and less exposure to price erosion and the specialty with IPX-203 in future years, K127 and so forth.

So we'll expect that 23% to grow over the course of time. Let me just kind of hit your second question. Your second question was, is $15 million the R&D right now? We think so. But at the same time, we're going to be opportunistic. So over the last few years, we've invested a tremendous amount in our R&D. So we spent about $180 million in R&D.

And I think we're going to be opportunistic. To the extent that we see right technologies, that we can in-license, we’ll execute on those. But I think the right level, the way we think about our history, last year, it was $26 million, this year, it’s $15 million.

So I think that’s probably the right level we are thinking about it but at the same time, it can go up and down just always depending on what’s available in terms of technologies and interesting new products..

Nathan, I'll just add one thing. This is Chirag. Our internal goal would be to get to 27% of EBITDA in a couple of years because of the mix that Tasos just walked you..

If I could just ask a quick follow-up on the launch of ALYMSYS in October? Have you started to have discussions with some of the key kind of purchasing entities in that channel? And can you maybe talk about just kind of how the contracting and purchasing process works as we think about that ramp to the $200 million of peak sales in the next few years?.

And this is the building block and then it goes on beyond $200 million as we bring more biosimilars and move up the value chain and become one of the leader in biosimilars in United States market as well as global market.

I'll hand it over to Harsher, who is working very hard building the entire team with almost 45, 50 people, a strong team now in all areas, up services, customer support, oncology cells, contracting, managing Ion and other distributors and strong foundation as we have done successfully.

I would proud to say that we're number one generic sales team and our customers can watch for it. And we're doing a great job on specialty being closed with Parkinson's patients and KOL. As you can see, rightly growing at 7% and unit growing at 14%. And we do one thing really good is to set up a great sales and marketing infrastructure.

So institutional and biosimilars, injectable biosimilars go together. And Harsher, please provide more detail..

As Chirag mentioned, our health system sales, market access and commercial leadership teams are in place and we’re scaling up our oncology clinic team and should be fully staffed by the middle of this month. We started discussions across all of the players across oncology institution, GPO channel and payers.

And I think what you start to realize in this market is there are a lot of hands out.

And what’s important to us is to make sure that as a lead entrant or a later entrant into these first 3 markets, particularly ALYMSYS is coming first, we focus on the highest control payers and providers where we can deliver asymmetric value while ensuring stable market and reimbursement dynamics.

We want to make sure that our partners continue to want biosimilars and that we can deliver them as much if not more value than the next player. I hope that answers some of your questions.

I won’t go into the details of our commercial strategy but suffice it to say that we’re going to enter by engaging and ensuring that the economics work across the channel and we focus disproportionately first in the categories where we haven’t seen high enough biosimilar uptake and that is hospitals.

And so we go hospitals and oncology with 2 different strategies and different field forces. I hope that answers your question..

Our next question comes from David Amsellem from Piper Sandler..

So just had a few.

First, I wanted to come back to the guidance and regarding the Ritonavir opportunity not coming to pass, I guess where I’m going with this is, are there any other regular way generic opportunities that are still in your guidance, both top line and EBITDA, of course, that have risk? And just in general, can you talk to how you’re risk adjusting for new launches on the generic side of the house? In other words, what I’m trying to get at is, is there another potential Ritonavir situation that could result in another step down to the guide? So that’s number one.

And then number 2 is, you have a recent settlement and that was pretty straightforward.

But I guess on opioids, I should say, can you talk to, at least in the next 6 to 12 months, how large of a transaction you could do in terms of M&A? How are you limited at least in the near term? And then when do you think you won’t be as limited in terms of deal size?.

David, just to clarify, Ritonavir is a unique opportunity. It is slowed. It is one of the drug within. So there are 2 tablets, impact [indiscernible] and Ritonavir. So we are part of that supply chain which has been just delayed because of the softer demand and moved to the later part of the year or less this year or next year.

So just clarifying it, it is not part of the typical generics launch which we do risk adjust really well and weighing the FDA timing. We so far have launches coming in. We have more expected even next week, some good ones as well. So continue to perform in line with that.

In your M&A question before I hand it over to Tasos to explain more how we guide and the M&A part is, yes, we have done a tuck-in acquisitions over 3 years, almost spending $400 million in cash and we will continue to do tuck-in acquisitions. We do have a very powerful organic pipeline. So we’re not in a dire need to do a transaction.

When opportunity comes, we figure things out. So we have multiple strategic options in all segments of our business. And I hope that answers your question.

Tasos?.

Yes. I think I'll tell you how we think about risk adjustment. So number one is, we track, over the last 3, 4 years, every single ANDA and we know exactly what our internal expectations are. And we have extremely detailed models around risk adjusting those.

And when we enter our run roll budget process, we're just kind of collaboration between our R&D teams, our regulatory teams and commercial teams. We go through ANDA, AMBA with expected time line and then we take the overall number and then we haircut based on our historic models. That has seemed to work every single time.

Sometimes, the one thing is for certain, you're going to be wrong. So sometimes, we tend to do better than that. Sometimes we tend to do a little worse. But over the current, as you know, you're not in control of the FDA necessarily. So over the course of time, I think we've been pretty spot on and dynamic model.

As Chirag said, Ritonavir was just unique. It was a one-off opportunity. We're trying to be helpful to all the people in need, trying to supply the marketplace and ultimately, it did not work out. So I think it's a one-off.

Finally, in terms of, are there any other, there is no other kind of substantial opportunity that we expect that's going to have a material impact next to this year. So it was a pricing that's a great opportunity, we feel great about that.

The biggest issue for us, just in terms of risk, was the time line of resolving the synchronist, so the AB rating because I think we did an outstanding job but at the end of the day, the FDA had 7, 8 months to conclude. So that issue now is substantially resolved.

I think that's going to give a substantial amount of growth in the second half of the year. So I'll stop here..

We now move on to Gary Nachman from BMO Capital Markets..

So first, the gross margin was a bit weaker than we expected in 2Q.

So how should that trend the rest of the year and into next year, given the business mix? Just talk about the pushes and pulls there? And then on the lower EBITDA guide, if Ritonavir was $25 million this year, how much could it contribute next year if it’s a delay with that? Would it be a similar amount in ‘23? And then just on the biosimilars, how soon could you add to the portfolio to get more critical mass there? How much of that would be internal versus external? And then just how important is that from a competitive standpoint in that space just to bring more into the overall portfolio?.

Thank you. I'll pass it over to Tasos for gross margins and the Ritonavir next year opportunity and I'll take the rest of this question. Go ahead, Tasos..

So, I think as we think about the overall gross margin for the company, I think we’re looking at around 44% this year compared to about 46% last year in 2021 and compared to 42% in 2020. So it’s essentially coming in between 2020 and 2021. So from a historic perspective, I think there is a huge turnaround on the performance of the business.

And I think between kind of first half, second half, in terms of gross margin performance, I think we’re looking for overall stability. So I hope that helps..

And the Ritonavir is we would know more about the forecast and purchasing but as the demand has been slow, we expect lower than the 2022 expectations. But it's good to have a relationship with the supplier there and continue to build on beyond in 2023. On the biosimilars, the strategy has been in license the products which we have done.

We continue to in-license but as we have said and we have said that in generics market and it's a no-brainer, eventually, the vertically integrated companies will win.

This market will become more competitive, not as competitive as retail generics, so having control over quality, having control over science, understanding CMC, expertise in regulatory, working with FDA on designs of the trials and manufacturing with the continuous manufacturing and other technologies, all this will play a role.

So therefore and we would like to be vertically integrated to have U.S. manufacturing as that has done really well for us over the years and also use India's infrastructure to better sell to the world because as biosimilars will become global and it's a very large market coming up for us on the biosimilar.

So we'll do fewer licenses and our goal will be to have 75%, 80% of portfolio in-house overtime..

If I could just get one follow-up.

Just on the net leverage coming up on the legal settlement, at what point could you potentially trip your debt covenants and how long will it take to get back to a more normalized level?.

Yes. We're way away from tripping any debt covenants. And just as a point of reference, it was only a couple of years ago but our net debt to EBITDA was over 7x. So right now, we are at 5.4% and our expectation is to be at about 5x at the end of the year.

So looking ahead, I think what we have said publicly, we want to get below 4x, so it's another turn, that we need to deliver on. My gut feel, depending on any M&A, different usage of costs, it will take us a couple of years to get there. And it's kind of a steady decline from here..

Our next question comes from Greg Fraser from Truist Securities..

You bumped up your target for injectable sales this year. How much of that change was driven by better performance of the current portfolio versus higher expectations for new launches? And if the base portfolio is doing better than anticipated.

Can you speak to the drivers behind that? And then just a question on opioid exposure and the litigation that you’re involved in.

Can you just give us an update there? Are you working towards a settlement? We’ve recently seen progress on that front from other companies, so just curious how you’re thinking about the path forward for annual?.

So Greg, on injectable sales, the current portfolio went up as well. We had sold virus cell cells counted this year as well and new product launches. So all 3 contributed this year to grow over $170 million.

And as we look ahead, we have multiple new launches coming even this year in injectables, multidose, restores, potentially the first back products and next year, continue on to more launches from our new sites. So very excited about injectable, new launches as well as current portfolio. One thing is, for sure, to have a great quality.

Great supply track record matters a whole lot in sterile business compared to the oral solid business and we have done that very successfully as a hallmark of Amneal being number one quality company in affordable medicines, we continue to perform such a way on injectable as well. And we'll do so in biosimilars.

Your second question, we have, Jason, our Chief Legal Officer, who'd address that..

With respect to the outcome of [indiscernible] that's for uncertain but we are encouraged by certain recent outcomes [indiscernible] is to be filed is primarily on the active market and directly promoting our distributors and [indiscernible] our sales comes to all wholesale distributors, we've got engagement marketing and brand manufacturers or.

We will continue to defend those cases [indiscernible] market share and look for opportunities to resolve [indiscernible]..

Our next question comes from Elliot Wilbur from Raymond James..

Just if I might, one financial question for Tasos and then I had a question for Chintu on the pipeline as well. So first for Tasos, just trying to get my arms around trends in the SG&A line, specifically within the generics segment. I think last quarter run rate was $21 million, this quarter, $25 million.

Those are adjusted figures but basically, looking at the annualized rate there, I mean it’s roughly twice the level that company was spending 2 years ago.

So just trying to understand sort of what may be behind the step-up in spend?.

So I just want to make sure, Elliot, so you're talking about the step-up in the operating expense of the company, essentially, right? I just want to....

Specifically within the generics segment, the step-up in the SG&A trend..

I got it. Yes. So overall, one of the things we said this year, we're looking to spend an incremental $40 million, in terms of investments. So that's driven by the investments in biosimilars. That's the direct answer to your question, kind of getting ready to properly launch. So biosimilars right now, as a segment, is rolling under generics. Okay.

That's I think the direct answer to your question. Overall, our level of investment in generics has remained the same, relatively limited investment change there. And then what we had is this year, we acquired Sol, so we have the [indiscernible] portfolio.

That's all on the generics, so that added to the operating expenses and getting ready for the biosimilars. So I think that's the answer to your question. Next year, now that we have these expenses primarily in the base, next year, we should see the expected growth in generic spend to be flat to slightly up as opposed to the rate of growth this year..

And then just one final question for Chintu on the pipeline, specifically thinking about the injectable portfolio, obviously expected to be sort of a key element of top line growth over the next several years.

But how should we think about your strategy sort of within the world of injectables? And if I look at the pipeline today, roughly 30 or 31 ANDAs pending, what percentage of those would you consider to be complex, I guess, within the world of injectables? And sort of how has your modeling on the injectable portfolio maybe changed in the last 6 months to a year versus what you were thinking about 3 to 4 years ago? And I guess the reason I asked the question is, if you look at some recent approvals like Velcade, I mean there were 8 approvals [indiscernible] and Vasopressin certainly has turned out to be much more price competitive despite what still is relatively limited competition? So it still seems like you sort of kind of need to move up the technology value chain even with injectables in order to sort of read the types of returns that are available from some of the higher quality assets in the space? And just wondering how you guys are thinking about the evolution of your injectable strategy?.

Great question. So we have a very robust pipeline. We have multiple areas of focus. First of all, we expanded our infrastructure that gave us a lot more capabilities in immersions to liposomes. We've been investing heavily also on infrastructure creation organically to cater to microspheres, drug device combination and the back portfolio.

So our pending 31 ANDAs, at least half of them or close to half are either the shortage products or the first 2 markets. Our approach to pipeline is very robust. Even our current portfolio, not too many people has a suspension product.

So we're both the commercial product and times are very, very complex product which always has a multiple challenges from the R&D to approval to sustainability. So with our expanded infrastructure and our focus and our own pipeline, this year, we will file another 15 products. Most of them are very niche products.

I totally get your point on a Velcade or Pamitrex, again, other products, that's not our strategy. Our strategy is to go after tough to formulate, where in niche APIs, go for peptides, liposomal and also, we have some products which is even though having approval is always in a shortage.

So we are going after those products where our quality track record, our manufacturing abilities, that's what the Amneal is known for. So we have 61 products in the pipeline.

Out of 61, more than half of our portfolio is in this complex injectable space which we are very excited and the results are speaking or also in the future, most of them come out every year, 7, 8 key launches will come from our injectable space..

In the sterile bags, so that’s terminally sterile bags, the septic sterile bag, that’s a huge portfolio coming of our bag’s products..

Our next question comes from Ekaterina Knyazkova from JPMorgan..

So first, on biosimilars, I guess. So there’s been some debate about the importance of having interchangeability on your label.

So where do you stand on that debate? Do you think that having interchangeability is important to drive a similar uptake or more of a nice taffeature with things like having supply and maybe payer relationships as being actually more important? And then my second question is on generic pricing.

Are you seeing anything different this year than last year? So obviously, inflation is pretty high in the U.S., just wondering if that’s changed in generic pricing dynamics at all and it’s having any impact on like how you’re negotiating prices or if you can potentially like, I guess, push back when people are asking you to go, yes, let’s like reduce price by like X amount?.

I'll take the first question on -- first on interchangeability. So we think interchangeability is definitely a tool that would give much more comfort to doctors especially, it depends on the therapeutic category and the product. What we are looking at, it's not that each product interchangeability will give you a upper hand.

So I think it is very essential. FDA has opened up and is a clear. As Amneal, we will definitely look for our programs to have as much interchangeability as possible as we go forward. It will give us better marketing and better comfort levels with our customers and patients..

Let me take the generic pricing that always comes. And then we have been loud and clear that the oral solid markets and certain other generics have become unsustainable for many companies and product rationalizations have happened and this could create shortages in the future.

So we’ve been in constant dialogues with our customers that penny uphill is not a wise thing to do for American patients and it’s being heard. It’s being evaluated because there is no company in this world can produce penny able.

And FDA by itself is worried about the investment in quality control, investment in future R&D for generic drugs which saves hundreds of billions of dollars for American patients and provides 92% of the prescriptions in the United States. And also, there is a worry about the supply chain.

We saw that in Ukraine more now and the pandemic and we can’t wait for another emergency to not have essential medicines made in America.

So we’ll keep pushing that issue as well through our industry association as well as government that, please wake up, we need to have this done, it takes 4 to 5 years and make key starting materials, API and finished products in the United States. So overall, pricing pressure is still there.

We urge and we hope that it reduces because there’s no way to go on these oral solids and the bottom less products. Amneal fortunately sits in a bit of a proper position because of the complex portfolio and having all other dosage forms as part of our platform in the company.

So we don’t face as much of a problem as other companies may face who have more oral solid portfolio than us. Sorry, I gave you much bigger answer and a bit of an issue in the industry but I hope that is helpful for you, Ekaterina..

This concludes our Q&A. I will now hand it back to Chirag Patel, Co-CEO for final remarks..

Thank you very much for everyone joining and have a wonderful weekend. Take care..

Today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines..