Good morning and welcome to the Amneal Pharmaceuticals Second Quarter 2024 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 second quarter 2024 earnings call. Today, we issued a press release reporting Q2 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 Generics; Joe Renda for Specialty; and Jason Daly, Chief Legal Officer. I will now hand the call over to Chirag..

distribution, government and unit dose. We are especially proud to serve military veterans through AvKARE's government channel. Now we expect over $675 million in AvKARE revenue in 2025.

Overall, as we continue to grow and further diversify, we are providing more patient, providers and payers with access to high-quality, affordable and essential medicines as we are having a profoundly positive societal impact. We have demonstrated that our growth is durable and sustainable over the long term.

We believe the true potential and value of Amneal is yet to be realized. I will now hand it to my brother, Chintu..

Good morning, everyone. Thank you, Chirag and thank you to the global Amneal family, who help make healthy possible with their deep passion, great talents and hard work. I will begin with CREXONT and then discuss our core strength in innovation and operations which we have a long runway for sustainable growth.

We're very excited and delighted to receive the U.S. FDA approval of CREXONT that has the potential to change the treatment paradigm for Parkinson's disease. IPX203 has been our number 1 R&D program for years and its successful approval this week is a remarkable accomplishment by our team.

As a background, Parkinson's disease is a degenerative neurological disorder that severely impacts everyday life. Over 90% of Parkinson's patients today are on carbidopa-levodopa therapy. However, over 40% experience wearing-off symptoms within 2.5 years after diagnosis.

Some patients take up to 10 immediate-release doses per day and still experience motor fluctuations. CREXONT promises to ease this burden for patients and improve their daily living. CREXONT is an innovative formulation consisting of IR granules for rapid onset and ER pellets for long-lasting efficacy.

CREXONT delivers more "good on" time with less frequent dosing. For Phase III post hoc analysis, CREXONT showed 1.6 hours more "good on" time per dose than IR. As a leader in the Parkinson's space, we are proud to advance the standard of care for patients. In Specialty, we are continually evolving our R&D efforts to move up the value chain.

Next up is the DHE auto-injector for migraine and cluster headache. We are on target to complete our ANDA response in quarter 4 which would put us in a good position to launch in the second quarter of next year once approved. Let me touch on our industry-leading complex generics portfolio.

We have launched 15 new products year-to-date and are on track to launch over 30 again this year. Our pipeline remains deep with 80 new product ANDA pending, 63% of which are non-oral solids. In addition, we have 65 pipeline products, 94% of which are non-oral solids.

Our world-class global infrastructure is optimized and ready to support the commercialization of our pipeline. Within our R&D organization, we have enhanced our efficiency, execution and scientific capabilities to develop complex products on shorter time lines and a lot less cost.

As a result, we are allocating more investment toward external R&D, especially in biosimilar and Specialty. I will now touch on a few key programs. First, our recent launch of naloxone nasal spray is going well. With this product, we are expanding access to a critical rescue medicine for treating drug overdoses.

We started distribution to retail pharmacies and the state of California in the second quarter. Next, our first major inhalation product, albuterol sulfate has an FDA goal date in the fourth quarter. This is the first in a series of inhalation launches we have planned over the next several years.

We are also on target to file our first Respimat product by the end of 2025. Inhalation is a new vector of growth for our business. In injectables, we launched 9 new products so far this year, including our first 505(b)(2) products, PEMRYDI and FOCINVEZ and recently approved potassium phosphate bag.

We have developed our 505(b)(2) injectable strategy very uniquely based on feedback from many stakeholders. As a result, we have built a curated pipeline of unique injectable product presentations. We look to launch 2 to 3 505(b)(2) injectables each year, with about 15 [ph] currently in development.

Our other complex injectable R&D programs in microspheres, liposomes and the drug/device combinations are also advancing nicely in our pipeline. Next, in biosimilar, we are thoughtfully expanding our portfolio.

Building on the success of our first 3 commercial products, we have in-licensed 5 additional biosimilar pipeline candidates since December of 2023. First, we expect to file our 2 denosumab biosimilar for Prolia and XGEVA in Q4 this year. After that, we expect to file our pegfilgrastim on-body injector and prefilled auto-injector products.

In addition, we are excited to add omalizumab, our biosimilar for Xolair, to our pipeline. Our partner recently completed Phase III trial enrollment with expected BLA filing by quarter 4 of 2025. This marks our expansion in biosimilars beyond oncology to immunology and our commitment to be a leader in this space.

We will opportunistically add more molecules, particularly in less crowded categories to our pipeline and look to be vertically integrated over time. Internationally, we have distribution partners in place for key developed and emerging markets.

Our team has completed over 150 product registration filings since last year through the first half of this year. We are registering products globally, including in Europe, Canada, China and emerging markets. International expansion is a key area of focus for us at Amneal. Moving to operations; quality remains at the center of everything we do.

We make continuous investment in automation, digitization and AI technologies to support quality and advance our global infrastructure. This year, we had several successful FDA inspections at our sites.

Amneal's success is grounded in our deep commitment to operational excellence, exceptional customer service, driving efficiencies and maintaining a robust supply chain. Across our supply chain, we are focused on what we call the 3 Rs; redundancy, resiliency and reliability.

We are focused on long-term cost savings by validating secondary sourcing, operational excellence and moving production in-house. In addition, drug shortages remain a challenge for the U.S. supply chain and we are doing our part to address shortages, especially for injectable.

We have expanded our injectables manufacturing capacity in recent years to 19 production lines which will allow us to drive long-term growth in injectables. Overall, Amneal is expanding and growing in the key areas of medicine, specialty brands, biosimilars, injectables, complex generics, international and distribution.

We are so deeply passionate about our company's mission and purpose and the good work that remain ahead. Amneal is part of the solution in addressing several of the critical health care challenges in the U.S. today. I will now pass it over to Tasos..

Generics, up 14%; Specialty, up 11%; and AvKARE, up 33%. Our first half adjusted EBITDA of $315 million is up 20% year-over-year. With continued broad-based strength across our business and operating expense leverage, we are pleased to raise our full year 2024 guidance.

We now expect 2024 full year net revenue between $2.7 billion and $2.8 billion, up about $150 million from prior guidance which reflects 13% to 17% year-over-year growth. Due to higher revenues, we now expect 2024 adjusted EBITDA of $610 million to $630 million, up from $580 million to $620 million which reflects 9% to 13% year-over-year growth.

We expect 2024 adjusted EPS between $0.57 and $0.63, up from $0.53 to $0.63 in prior guidance. Our increased 2024 guidance reflects the ongoing strong performance and momentum across our businesses, continued investments in R&D as we grow our biosimilars pipeline and our commercialization efforts around the upcoming CREXONT launch.

The addition of CREXONT is an important new catalyst that bolsters our long-term top and bottom line growth profile. Combined with the array of growth drivers we have highlighted today and those not yet disclosed, we're confident in our ability to drive sustainable long-term top and bottom line growth.

Let me now turn to our cash and our balance sheet, where our strong financial performance is translating into higher cash generation and deleveraging with our key pillars of value creation. We now expect higher operating cash flow of $280 million to $320 million in 2024, up $20 million from prior guidance, excluding legal settlements.

Also, we continue to steadily reduce debt as net leverage has decreased from 7.4x in 2019 to 4.4x in the second quarter. We plan to pay down over $100 million in debt in the second half of 2024, including $40 million already paid down in July.

We expect to reduce net leverage to about 4x by the end of this year, on our way to below 3x over the next few years. I will now turn the call back to Chirag..

Thank you, Tasos. Q2 was an outstanding quarter on many fronts as we achieved strong performance and raised our full year outlook. With the approval of CREXONT, we expect the momentum to continue building, with additional catalysts on the horizon.

As we look forward, we are excited for the opportunities ahead to increase access to high-quality, affordable medicines, improve lives and create value for our shareholders. Let's now open the call for Q&A..

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

Just a couple for me. First on CREXONT. Can you talk about how you see the payer landscape evolving, particularly Part D, just given the eventual loss of exclusivity for Rytary? So just help us understand what you think access will look like, how restrictive do you think the landscape could be with Rytary being available as a generic.

So that's number one. Then number two, just wanted to pick your brain on complex generics, particularly interested in what you're thinking regarding GLP-1 generics. I think you called out an exenatide pen in your slides. Are there others, the obvious suspects here, that you're looking to file on down the road? I wanted to get your thoughts there..

Thanks, David. So as you know, Rytary has the highest coverage among the Parkinson's products and we expect similar coverage for CREXONT or even better. And initial discussions with all the payers have been good. We have a very smart strategy on the pricing to make -- as you know, we're going after almost 30% of the market share.

Therefore, we have devised a great pricing plan where it's more affordable for seniors, especially the Part D. And with the new Part D out-of-pocket, we expect the adoption for this product and the coverage would be even better. And the fulfillment of prescriptions will be better than previously.

We used to lose 20% to 30% prescriptions due to coverage or due to donut hole [ph]; we expect that to be much better going forward.

Joe, do you want to add anything?.

Sure. Dave, thanks for the question. The only thing I would add from what Chirag said is that remember, too, we've been in this market now for over a decade. So we've developed very, very good expertise in contracting with the payers. So we're intending to leverage that.

And to Chirag's point, we're also going to be building a pretty comprehensive patient support program to ensure reimbursement and patients actually get on paid therapy, to Chirag's point. So the experience that we've leveraged with Rytary really enables us to ensure access for CREXONT..

And the second one, let me hand it over to my brother, Chintu..

So as you know, Amneal is very focused on a complex product development. And we have spent many years of understanding the entire peptide space and drug/device combination. So we are in a pretty good shape.

As you mentioned, exenatide is the -- was the first GLP that was developed into a pen [ph] and most likely, we'll be launching that product in the next quarter. That does give us the platform to develop more. We do have other GLPs in pipeline.

We have not disclosed which ones but we do have a deep understanding of API peptides and manufacturing with drug/device combination. So we have a good pipeline in this category of drug..

Stay tuned, David..

The next question is from Les Sulewski from Truist Securities..

Congrats on the approval of CREXONT. Just 3 questions for me. So maybe first, the focus on CREXONT now that it's approved. I would imagine you have an improved profile across your lenders.

Any consideration for a chunky BD plan, further advance your Specialty portfolio? Or does the focus remain on internal pipeline with some tuck-ins along the way? Second question is on residual investments in CapEx, I believe you maintained $60 million to $70 million of guidance.

I'm just kind of wondering how that second half of the year plans out and then also 2025. And then third, on the DHE auto-injector launch, I believe that was initially expected in kind of the earlier first half of next year.

What's triggering the delay into the second quarter?.

So we are steadfastly focused on getting to 3x, as Tasos mentioned, on a leverage profile. Until then, expect us to keep doing the R&D deals and those are really good for us. We do have a large budget of R&D. And as my brother mentioned that we -- internally for Gx now, the spend has gone down.

It's still a good amount of spend but not as what it used to be in 2016, '17, '18, '19, right? So we have more dollars available for R&D deals and we may acquire some of the commercial assets in the areas we operate, all on the branded side. So that will remain as a BD plan.

And then obviously, we'll be -- after we get to 3x, we will be very engaged in very smart business developments and acquisitions as we have -- our intention is to keep growing Amneal to the next level and next level. We have one of the best team to do that and one of the best foundations in the industry.

So we'll expect us to keep doing good business development over time. Your second question on CapEx. CapEx will go up from next year and we'll share that detail. This year is in line. As we plan to expand, there's certain specific areas which we'll share information when we have it.

DHE auto-injector has always been a first half launch and which allows us to -- Specialty team to focus on CREXONT. And we're completing stability in the fourth quarter. It's our own site. So we don't expect any delays anymore. And after that, PAS [ph], so 4 to 6 months after that..

We expect approval sometime in April, May..

Yes. So April, May, we'll be launching it..

The next question is from Chris Schott from JPMorgan..

This is Ekaterina [ph] on for Chris. So just two, if I may.

So first, just on biosimilar Prolia and XGEVA, can you talk about your expectations for those markets? And are you expecting similar dynamics to what we saw with HUMIRA and kind of any learnings from how that market is evolving over time in terms of the contracting in the PBM stuff? And then, the second question is just on generic pricing.

Can you just talk a little bit more about the broader environment? I think you've touched upon this in the prepared remarks but just what you're seeing in terms of shortages and just the general pricing environment and anything that's kind of changing or something that you're kind of calling out or paying attention to..

Thank you, Ekaterina. So Prolia and XGEVA, it touches both markets, the PBM as well as buy and bill and we have expertise in both commercial segment as we have been working with buying groups over the last 20 years, great relationship with them.

And so these are similar buying groups have been formed for biosimilar products and we expect to have a fantastic relationship with them. Just like we are ranked top of the line today with our retail buying groups, we'll have the similar relationship. So we expect -- we like that what happened with HUMIRA as aggressively and we knew this would happen.

Eventually, the biosimilars will gain 80% or so market share because it's designed to do that. So we are not worried about market penetration for both products. And if HUMIRA lessens, where -- multiple lessens, right? You -- and which is kind of stabilize the industry as well as you have less competition developing biosimilars than what it used to be.

And it's more of a play for companies like us, Teva, Sandoz which are focused on biosimilars, where we already have experience providing affordable medicines. And your second question on Gx pricing, it's better than before. It was unsustainable in 2016, '17, '18, '19, '20, painful years. And manufacturers cannot just keep lowering prices.

We have obligations to patients. We have obligations to quality systems. We have obligations to the government of United States as well. So we just -- this is an essential industry. It fills 92% of prescriptions. It is much needed. It has to be sustainable and it's a robust industry. I don't know why you would -- somewhere we would sell our Gx business.

When you think about it, what we are doing -- and part of Gx now is injectables, biosimilars, so this -- it's a critical industry and I hope we start getting respect that we deserve and pricing that we deserve..

The next question is from Balaji Prasad from Barclays..

This is Vishal [ph] for Balaji.

So can you talk about how you see your Parkinson's franchise evolve now with CREXONT approved? What will be the pace of ramp-up look like in the next few years? And how do you expect to achieve synergy within the 3 assets of your Parkinson's franchise? And also, could you comment a little bit on how will CREXONT impact your margin profile next year and over the next 3 years?.

Thank you. So we're now the leader in Parkinson's. We have ONGENTYS, Rytary and now CREXONT. We look to add more pipeline assets as well as continue to do research in Parkinson's. This is the area we know really well for 10 years and we've been working closely with patients and providers and it's really touching our heart.

So it's the -- I think we can do more for this disease state and we will continue to do so. And it's fantastic synergy, right? The COMT inhibitor with -- CD/LD, COMT inhibitor for certain patient increases the levodopa, or it keeps it longer in the brain, so -- which is completely synergistic to market both product, CREXONT and ONGENTYS.

And as we launch more products which are specialty, biosimilars, even the inhalations, our margin profile should improve on the Specialty side. It should improve on Gx and you see the margins -- the AvKARE margins, obviously, is the distribution business, so which are going to be lower. So that's -- when you combine it, total margin will improve..

We have no further questions. So I'd like to hand back to Chirag Patel for closing remarks..

Well, thank you very much. We're so excited and we'll continue to deliver great results and really make an impact for patients and providers in the United States and now slowly but surely expanding internationally as well. Thank you, everybody and have a great day..

Thanks, everyone..

This concludes today's call. Thank you for joining. You may now disconnect your lines..