Q2 2021 Amneal Pharmaceuticals Inc Earnings Call

Good morning, and welcome to and the old second quarter 2021 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

Net.

After todays presentation, there will be an opportunity to ask questions to ask the question. You May Press Star then 1 on your telephone keypad to withdraw your question. Please press Star then 2 please note. This event is being recorded.

I would now like to turn the conference over to Anne Neil's head of Investor Relations Day Mail. Please go ahead.

Good morning, and thank you for joining <unk> second quarter of 2021 earnings call today, we issued a press release reporting our financial results.

The press release and presentation are available on our website at the annual Dot com.

We are conducting the live webcast of this call a replay of which will also be available on our website. After its conclusion.

Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions for future periods are forward looking statements.

These statements are based solely on the information that is now available to us.

We encourage you to review the section entitled Cautionary statement on forward looking statements in our press release and the presentation, which apply for this call on.

Also please refer to our SEC filings, which can be found on our website and the SEC's website for.

For a discussion of numerous factors that may impact our future performance.

We also discuss certain non-GAAP measures.

The information on our use of these measures and reconciliations of the U S. GAAP, maybe found on our earnings release and the appendix of today's presentation.

On the call. This morning are Suraj and share supercell co Ceos.

The first Tony the CFO, Anders Boyer and Joe <unk>, Chief commercial officer for the generic and specialty segments, and Steve Mento General Counsel and corporate Secretary.

The <unk> separate locations today, so hopefully we maintained good connectivity.

I'll now turn the call over to Sharon. Thank you Tony Good morning, everyone I.

I am pleased to share with you I mean, the strong second quarter results with net revenue of $535 million adjusted EBITDA of $151 million and adjusted EPS of 25 cents.

As a matter of Greg the.

The results are the highest levels of our company has delivered since 2018, and a testament to the soundness of our strategy and excellence and execution by our global teams.

As you will hear from Todd those later on all 3 business segments generic specialty and distribution for some very well and at the halfway point of the year, we remain confident in our ability to meet or exceed our financial guidance for 2021, Let me.

Now discuss each of 3 of these 3 segments and provide updates on key initiatives.

Over the last 2 years, we have significantly strengthened over the generics portfolio to our core competencies in R&D manufacturing and commercial excellence as the result, we have seen an increase of cadence to new of new more complex product introductions, creating.

<unk> value for a meal as well as our customers and patients.

Since we joined them nearly 2 years ago, we have demonstrated consistent genetics performance.

While increasing the adjusted gross margins from 30% in third quarter of 2019% to 47% in this most recent quarter, that's a significant improvement.

In genetics, we are often asked.

What makes the generic business durable Fortunately the answer as many thanks, let me share a few highlights with you.

First of a third of our current generics net revenue come from products.

Launched since 2019, that's a meaningful portion of the business. This fact reflects the robustness of of what R&D engine.

Second for about half of these new products and Neil was either first or second to be approved for.

For that product with the speaks of the ingenuity of our team.

Third our business mix is increasingly from more complex products, which provides more durable revenues and higher profitability.

Over the course of time, we of C. We have been successful in migrating our business towards less commoditized products and we expect that to continue as a result of about half of all of our current revenue base is non oral solids.

The 80% of or are in the pipeline is non oral solids.

That's the significant and deliberate shift in mix towards the more complex product portfolio.

For our excellence in manufacturing and leading operational capabilities allow us to manufacture the majority of our products in house, that's driving the speed of execution and higher profitability I hope these towards demonstrate the soundness of who is.

Strategy, which along with solid execution makes us confident in the sustainability of generics performance.

For the long term.

In addition, we continue to bring certain generic products into select international markets, which with external partners overall, we see global expansion as another factor for long term sustainable growth.

Let me now move on 2 of our specialty business, where we are continuing to build on our specialty portfolio. We are focused on growing the business through organic growth advancing our R&D pipeline and pursuing soon.

Suitable inorganic opportunities focused primarily in neurology and endocrinology.

For us to drive organic growth, we strategically invested to expand over the endocrinology sales force. This year and accordingly, we are seeing continued strong commercial execution as the result.

In spite of continuing COVID-19 headwinds we are pleased with year to date performance of our 2 largest specialty products Rytary and unit droid.

Second in terms of advancing of our pipeline, we expect to share.

Coming phase III clinical data for IPX towards free in the coming weeks for.

Furthermore, we continue to advance our broad array of these specialty pipeline projects, which are in various stages of preclinical and clinical development.

Simple will touch on innovation in more detail shortly.

As we have discussed in the past, we continue to pursue complementary commercial stage assets.

And late stage clinical programs to leverage our existing specialty commercial infrastructure.

That is exactly the rationale for our recently announced licensed EOG Prefilled syringe auto injector for the acute migraine and cluster headaches.

We expect to begin our commercialization efforts in the second half of 2022 once the Swire part of me too product is approved.

Let me now more on 2 hour average distribution business, where we saw a solid performance again this quarter as a reminder.

We're blazing the 3 main channels that is the federal government the institutional market by leveraging unit dose packaging and the niche distribution channel.

We are focused.

On the growth and profitability of <unk> as we continue to launched numerous new products expanded unit those offerings and ensure strong commercial and operational execution.

Finally, as a mission driven and purpose led company I would like to share more about of our own ongoing efforts in driving environment.

Social and governance governance initiative at MTO with truly integrate ESG into every aspect of the business underlying everything we do and standard for them Neal is the whole mission of pro widening of affordable essential medicines for patients since.

Of our founding in 2002, we have always been committed to the highest quality standards and good manufacturing practices.

And over the industry, leading quality track record speaks for itself. We also believe that our own people on.

Our greatest asset it's on people, who generated innovations operating of our plans and drive of the commercial success of order of business.

Hope you will read more about this inaugural sustainability report, which will come out later this year with that I'll now turn the call over to Jim.

Thank you for your dog, adding to those points around the U S. G. You're always trying for the improvements across the organization for instance, and then he is known for its best in class quality system, and we are constantly looking for ways to push that quality bog hired most importantly.

It is of our people that drive the success so far from Neal as always we would like to recognize the service of our nearly 6500 associates, who work really hard every day to make healthy possible retain them deeply.

On our call last quarter, we shared how the pandemic was impacting about organization and team in India Thankfully. The local situation has improved considerably Hollywood. We are saddened by the toll the pandemic has had on the amnio family and their loved ones the <unk>.

The team has demonstrated tremendous courage and resiliency and we are very proud of all of our team now let me provide some key updates on our operations and of what you know what.

The agenda.

2 years ago, when she would argue and I return as co Ceos restated our key priorities were to optimize global operations improved supply chain and enhance margins.

The goals continue to be key area of focus 2 years later, we are seeing considerable progress across all of those initiatives, most notably our product offerings are much more diversified across in the motors that are pretty good yards and multiple drug delivery mechanisms with the.

The much improved profitability. This is a remarkable improvements in 2 years next well you know what you shouldn't strategy has been well thought out and deliberate over the years looking back we have a rich history of innovating across numerous drug dosage from categories. We believe any of these differentiate there.

From a spears and its ability to deliver innovations across the complex dosage forms.

The internally developed R&D and manufacturing capabilities.

But part of Italy overtime are driving the velocity of innovation. We are seeing 2 day and we believe that these are compared to the right around the edges photos. Since these are the internally developed innovations. We also have better control or the vital supply chains for these products going forward.

We'll continue to prioritize complex products across the different dosage forms such as inhalation injectables implants drug device combinations and Biosimilars on.

Overall, we feel great about of our current generics pipeline today or the 80% of of pipeline is non oral solid products. We are very pleased with our new product launches in 2021 such as the Permian every restaurant and recently approved toward IDEXX, which is a complex ophthalmic.

Pension product later this year, we expect several additional meaningful of Peru was on Copaxone, we expect to launch in the first half of 'twenty 'twenty 2 on resin pricing, we are working with FDA on the Seattle and we expect to respond in the third quarter, we believe that puts the.

On the path to approval as soon as the first trial for 'twenty 'twenty, 2 having said that we never rely on 1 product as we have a very large and diversified pipeline net.

Let me now discuss of our injectable business, where do we have made significant progress over the last 2 years and expect substantial growth in the years I hate we view injectables as an attractive and strategic opportunity for EMIR 2.

Today, we have about 25 of commercial injectable products with approximately $125 million in annual revenues, we see this business more than doubling over the next 40 years based on our rich pipeline as we look to meaningfully expand the overall footings for the Institute.

Net of market our talented R&D team is focused on developing a variety of injectable products in complex areas such as drug device combinations.

Tides long acting injectable large volume parenteral bags and the others. Each of these injectable categories requires R&D and manufacturing expertise that'd be possessed at M, Neal and which have been barriers to entry for others in the space, we like to share more about new injectable.

Products of Peru was in the near term.

For the data, we look to leverage our complex generics portfolio by out licensing certain products internationally through partnership.

Existing partnership with Fosun is progressing well, where do we expect to have about 10 products filed in China by the end of the year. Let me now more on 2 Biosimilars. We were pleased that our BLA for arresting was accepted by the FDA in June.

We now have 3 oncology Biosimilar currently filed and under GAAP.

We expect to start commercializing these products in 'twenty 'twenty 2 beyond these first products. We are actively evaluating additional opportunities via partnership models, where the weekend be first or second to market looking forward through 'twenty 'twenty, 2 and beyond we are highly confident.

In the long term growth prospects of our genetic business bolstered by new product launches of the diversity on durability of the business has never been stronger going forward. We expect the pace of new product launches and complex genetics will continue at any point in time, we have.

Approximately 100 products in our pipeline and another approximately 100 products with the N. D of spending currently we expect to file 25, 30, Andas and launched 20 to 30, new products on an annual basis. This thing no you shouldn't read constantly current set of M. Neil as we continue to the.

Refresh of our pipeline, we see a long runway for the innovations in genetics and as the result, we expect the trend of durable genetics dime of new growth and profitability the profitability to extend for some time.

Turning towards the specialty pipeline, we look forward to sharing our phase III clinical trial data for IP ex towards the in the coming weeks. The free 3 clinical trial has completed with the last patient out and we are performing the data analysis now and.

As a reminder, I'd be extraordinary ease of on next generation of levodopa treatment for Parkinson's disease immediate release Gotta be mobile levodopa is the first line therapy in the treatment for Parkinson's disease, we got whole for the data out of free theater will demonstrate increased on time, what's the.

While the meaningfully decreasing the dosing frequency per day we.

We believe that I'd be extra of 3 has the potential to be of larger product the vitality and would help us drive part of their market leadership in the mandate mental Parkinson's disease.

Beyond the IPX 2 or 3 we continue to read 1 of our development activities for cable on 27 for myasthenia gravis game on 1 for Marty for I D. C product for hypothyroidism and day 128 of mortified release dry ex the Fannie deal flow of Siloed.

And movement disorders on day 127, we are currently in the clinical study phase and we expect to complete the pivotal PK study in the second half of 'twenty 'twenty 2.

On cable on 1.4 and day 1 to 8 we expect to file the NDA application for the each in 'twenty 'twenty..2 these are all firefighter 2 programs for the reach the risk level.

He is relatively lower than the new molecular programs as the.

A reminder of our specialty programs utilize the proprietary drug delivery technology platform from the crushing acquisition.

Randy is the gastric retentive drug delivery technology.

Lies in the K 1.1 for NK 127, Corona of attack using advanced osmotic oral delivery technology that provides timed customized and pulsatile drug release.

On the timing of disease symptoms to build of a longer term specialty pipeline. We continue to evaluate for their programs that can leverage these unique technological remain well position to launch at least 1 specialty product what are you going forward now.

Starting next year with the D Itchy auto injectors.

In summary, our strategy is centered on delivering affordable of essential medicines for patients and creating value for all of our stakeholders. The company continues to execute well across the 3 businesses genetics specialty and distribution.

The distinct combination of people products and part of plays on M. Neil She dog and I share the vision ex.

Salesmen and confidence in the road ahead, I will turn the call over in the open paso's.

Thank you Chengdu.

In the second quarter of this year, we reported total company net revenues of $535 million up 15% versus Q2.2020.

Adjusted EBITDA of 851 million up 50% and adjusted EPS of <unk> 25 cents up 92 per cent.

Our growth was balanced and driven by strong commercial execution across our 3 business segments.

Operational efficiencies and targeted investments to drive long time long term value.

In addition, we continue to improve our balance sheet and further reduce net leverage to adjusted EBITDA of 2.5 times compared to 5.3 times from December 31st 2020, and 7 times in December 2019.

Starting with generics second quarter net revenues of $360 million were up 54 million or 18% year over year the <unk>.

<unk> of new product launches and the resiliency of our portfolio of offset lingering COVID-19 headwinds and price deflation.

On a quarterly growth rate of 18% also reflects favorable comparison to prior year, where COVID-19 disrupted our supply chain.

From a product for perspective the family.

That'd be right the run and tailoring were strong contributors to revenue growth.

On a year to date basis generics recorded 673 million of net revenues up 2% organically year over year.

How should we have discussed in the past the productive R&D pipeline is critical to ensuring of robust generics business we.

We continue to be pleased with the performance of of new product launches from products launched in 'twenty, 2020 'twenty, 1 accounted for 61 million of revenue growth this quarter.

What was the result of the performance of new products and the resiliency of our more complex product portfolio, we are driving profitable growth, while bringing more value to our patients from customers.

Adjusted gross margin for generics was 47, 1% in the second quarter substantially higher amount of 35 per cent of the prior here of course, there and I had the of our expectations the.

12 percentage point expansion reflects 2 key components first.

About half of the growth is due to operating efficiencies such as in sourcing of third party manufacturing and procurement savings from certain materials.

Second the other half of the growth is due to favorable product mix of new product launches.

For the second half, we expect some moderation of the generics gross margin due to mix of products and timing of manufacturing overhead absorption.

Let me now turn to the specialty segment with net revenues of $89 million down 6 million of 6% year over year, which was in line with our expectations.

As a reminder, our specialty segments centers around neurology endocrinology without promoted brands writer of enduring throw at both brands continued to grow nicely and in aggregate. They delivered 55 million of net revenues up 6% year over year.

This growth was offset by the clients zomig due to increased competition and lower promotion on lab forged ahead of expected generics.

Looking to the second half we see continued strength in the writer in the Union throw at our second quarter total scripts for both were up high single digits.

The new scripts were up double digits.

This growth reflects our auction at the beginning of the year to increase our specialty sales force.

Adjusted gross margin for specialty was 76, 1% in the second quarter, which is 240 basis points improvement of year over year due to favorable product mix.

Let me now move to of care of distribution business, where second quarter net revenue of $86 million were up 22 million or 35% year over year again in line with our expectations.

Growth was driven by new product launches and the federal government channel and favorable prior year comparison.

Okay.

Adjusted gross margin for all of care was 18, 9% of in the second quarter about 200 basis points lower than prior year due to product mix, but in line with our expectations.

Let me now moved the total company adjusted EBITDA of 151 million for the second quarter, which was 50 million higher than the prior year quarter. The.

The net revenue growth in our 3 segments added 62 million in gross profit and that was partially offset by 4 million of entire R&D as we incorporate the shape acquisition and $8 million and higher SG&A due to our sales force expansion and higher expenses as the econ.

On the opens.

Also want to be mindful that we had favorable comparisons to last year second quarter due to COVID-19 impact.

Adjusted diluted.

EPS for the second quarter of 25 cents almost doubled compared to the prior year quarter, driven by the very strong EBITDA performance, partially offset by higher taxes.

From a cash perspective operating cash flow of -52 million was in line with our expectations.

As we have discussed in the past operating cash flow is inherently variable quarter to quarter.

In the first half we generated $96 million of operating cash flow and we expect the stronger performance in the second half due to the timing of collections and cash expenses.

In summary, we're pleased with the strong top line performance and sustained higher levels of profitability driven by new products and the focus on efficiency and strong execution.

What was the result, our full year 2021 guidance remains unchanged and we remain confidence in our outlook for the second half of the year.

With that let me turn it over to Sheila.

Okay.

Yeah.

Yeah.

Thank you Todd zone to close and Neil is driving strong performance the crossover businesses, which reflects the diversity and durability of the word product portfolio. The.

The story of this year is the success of new complex product launches, which we believe will continue to differentiate AMU.

Is the direct result, we see sustainable growth and profitability going forward.

I would now like to open the call to questions.

We will now begin the question and answer session.

To ask the question you May Press Star then 1 on your telephone keypad. If you were using a speakerphone. Please pick up your handset before pressing the keys.

If at any time of your question has been addressed and you would like to withdraw your question. Please press Star then 2.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Gary Nachman with BMO capital markets. Please go ahead.

Hi, Good morning, guys first on the plan to double the generic injectable business in several years is that all organic or are you assuming some inorganic growth as well the talk about how much of in the pipeline there and some of the bigger drivers over the next few years.

And then just on the specialty business.

Talking about the additional endo reps on units right how much of a benefit are you seeing from that you hope to leverage that with more assets through business development and then just the expectations for IPX 2 of 3 phase III data in the coming soon just what youre, hoping to see from the data.

It would be meaningful in terms of that product. Thank you.

Thank you Gary Good morning, let me start with the Euro.

First question.

Which is on an injectable. So currently our expectation is all from the organic growth. We do have a solid pipeline of 75 injectable products.

As Jim dimension of cross the.

Various complexities such as by the times long acting depot.

The drug device combination so it's a very rich pipeline.

We have in Injectables and we have 3 plans to deliver on that so capital investments have been already made over the years and we are ready to.

<unk> become of Cvs bled in injectable market in coming years, and really highly valuable player.

So that is your answer to the first question for the second 1 I would like to turn the call over to Joe and you may want to address the third 1 and 2 of them you may want to add on to the IP extraordinary as well sure. Thanks, Chuck So we started building out the endocrinology field for us.

Or increasing the size of March of this year and begin hiring and training.

Around 25 of the sales reps, which doubled the size of that team.

They essentially went live on the field in June and we saw the immediate uptick in scripts would you expect that trend to continue.

For the back half of the year. So we're very pleased with what we've seen with the promotional sensitivity of units right.

On IPX 2 of 3 we expect to announce the topline results from the next couple of weeks.

We're hoping to show a statistically significant improvement good on time.

Also meaningfully.

Meaningfully reducing the dosing frequency versus IR.

Beyond that I don't think we're gonna comment on non at this point of this 1 time from a couple of weeks left yes. Thank you Joe Jim The would you like to add anything for.

Organic question no.

You guys covered it thank you excellent.

Fantastic, let's move to the next question. Please the.

The next question comes from David some of them with Piper Sandler. Please go ahead.

Yeah.

Hey, Thanks, just a few of them. So first on you know as the business evolves. What is your thoughts on potentially divesting some of parts of the legacy oral solids business and just getting.

Out of oral solids or the more commoditized.

Peace of the business, how do you think of that that or how should we think about that that's number 1 number..2 is can you just give us a roadmap for regarding the competitive landscape for for that for me and how we should think about other entrants coming in particularly in 2022, and then lastly on the D H E opportunity.

Is it your view that this could be bigger than what the than the footprint for the the zomig.

Nasal spray and and what I guess I'm trying to get at here is you know not just how you're framing the opportunity, but how do you see the the acute migraine landscape evolving given the.

The the new entrance of help us understand your thinking there. Thanks.

Good morning, David.

Good to hear from you.

So let me start with the first question, which is really.

Strategic question, you day to ask and as you as you know endo adopted the strategy to divest out of the OSD Luo of Mod on.

The diversity and the more of a complex generics portfolio, we do not like that strategy. We are a meaningful player in generics business. We are of a base of about $1.4 billion. So we have a long runway we can grow our customer appreciates when we are bringing on.

The solids, the commoditized product as well as complex products.

And as well as all of the operational efficiencies are also increase by doing so.

Of course, we have lowered over the commoditized products the look.

To almost 20% and 80% still focus on the complex products. So we like to remain as an essential mean.

The meaningful company for the United States, which is driving the patients need reducing the costs, creating more access. So we believe we would play in the in oral solids as well.

Your second question on Zest for me I'd like to turn it over to Andy Boyer over commercial head of genetics business, Yes. Good morning. Thank you.

So if any has performed extremely well this year, we're up to almost 35% market share and we continue to grow our opportunity. We do expect additional competition at some point later this year and as far as 2022.

We haven't commented on that yet, but it has performed extremely well.

Thank you Randy on Joe would you like to assure the issue for sure. Thanks, David So.

We know that the migraine space is getting increasingly more competitive with all of the new <unk> that are launching.

We've developed over the last few years with Zomig nasal spray on a large amount of of intelligence in the migraine space and we're not looking to position <unk> as the first line therapy that goes out and compete head to head against the largest seat <unk>. We know that it's kind of being more of a niche second third line therapy, we are in a position it accordingly, and that's how will the marketing.

They're not kind of comment beyond that.

Any other pricing on commercial strategy at this time, but we're mindful of the competitive nature of that space.

Okay.

Okay. Thanks, guys.

Thank you David The next question comes from Biology Prasad with Barclays. Please go ahead.

Okay.

Hi.

Good morning, just biology of.

Couple of questions from me on Doug Congrats again on the resolve of firstly on the generate industry.

The Hawaii generally expense.

The C a lot of churn annually the <unk>.

The call out around 1 third of our revenues from new generics launch of or the last on last years, how does the comparator the industry style day and kind of an extrapolation of the same question new launches going by what you called out seems to be running on a $200.200 million run rate from 32 products on average.

The dollar.

$6 million per product.

Despite most of these being first or second market is that how we should think about the contribution from complex generate or should we be expecting higher revenue per products, especially from the complex things. Thanks.

Good morning Biology excellent question so.

In the comparing the generic industry other players.

May not be of good comparison, because some are already year to $3.4 billion range like Taiwan, we address so the willow harder time 2 to match the 1 third of our new product launches within 2 years as we keep saying that we are at the right.

Right the revenue base as a total of $1.4 billion and we see tremendous growth in the order generics business from now to next 5 years as you know we build the company over time.

And we're very excited about that so that we have these.

We love innovation, where we have hundreds of broad expanding EBITDA 100 pipeline every year, we're launching 20 to 30 products out of that 6 to 7 on high value products the rest.

Highly competitive new products and then every year. We are filing 2530 products, we are increasing our complexities of filing its more higher potential higher revenue drivers. We are filing drug device combination inhalation products, along acting depo injectable.

Was the bags of some of the Firefly, we do in the injectable space as well. So we expect the contribution which is you did the math it could be $200 million could be 200 strip day could be 1 a day could be 300.

All depends on which products get approved within that year, but the key message is that we have enough to rotate every year into <unk>.

New product launches as we constantly face competition in our base business and the reduction in prices due to the highly competitive.

The competitive nature of the generics business the.

The complex products are also driving more durability. So even if we lose in the revenue and the competition came like as the rig we're still we increased market share and still maintaining the same revenue as last year. So we will.

We're building this durable portfolio as well.

Did I Miss anything Tony.

So the thank you biologic hopefully that answers. Your question. Thank you for that that's very helpful. If I could just amazing the fallout based on the guidance can you also just describe the pushes and pulls towards the implied second half run rate. Thank you very much.

Thank you. Thank you biology, so we're very pleased with our progress and continued momentum and remain very confident that we will deliver at the high end of the guidance or even above.

For more details and as you know the there are variables.

Net going.

In the guidance I'll turn it over to Tassos.

Yeah.

Hey, good morning Bill.

Sue ex had the first half of it on I think we feel great about the pro for months and as you think about the second half I don't think you should expect any sort of anything substantially different right. So you're going to have the normal play out of the typical of competitive pressures being offset by.

It continues from new product introduction of the 1.

Number 2.

Poke a little bit about the generics gross margin kind of tapering off a little bit because in the first half.

46, 47 per cent for the first half so that's going to taper a little bit and continue to be thoughtful about the investments, we're making to our business because it's all about driving topline and bottom line growth next year on the year. After that so I think the first half is a good indicator of how the second half of it.

It's going to play out on a slight acceleration.

Acceleration on revenues little tapering down on gross margin and the thing when you look at the.

Adjusted EBITDA I think of a good opportunity to be on the high end or the or exceed the the high end of our guidance.

That helps out.

Okay was there a follow up.

Yes.

No I think he said thank you. Thank you again, if you have a question. Please press Star then 1 on a touchtone phone the net.

Next question comes from Craig Frazier with true of Securities. Please go ahead.

Good morning, guys. Thanks for taking the questions.

Can you speak to the level of competitive intensity that you're seeing the key generics and how the price erosion has been trending relative to expectations and then my second question is on at the are you anticipating that Q3 will be strong as it has been historically driven by the back to school demand and how you're thinking about that the SBA market beyond this year do you think the mark.

We can continue to grow or do you think of erosion that is more likely at the at least in 2020 due the vaccine related demand decline.

Good morning, Greg. This is <unk> I'll take the IP question, and then pass it to Tassos for the genetics.

Price pressure that we see every year.

So.

We're doing good we had a growth and its growing compared to last year, and we expect that to grow slightly as we improve over the supply chain. We are working with both of the world Barton is diligently it's wiser and Philips.

We're seeing good results. So we're upbeat and yes, Q3, Q4 would be would be hired as well due to the back to school and the higher demand. So it's more of our.

Getting ahead on the supply chain.

On the market is there for us.

For your key genetics.

Competitive landscape, let me turn it over to Texas.

Thank you Sue.

The second price the second question was more around pricing.

Greg So.

The price outlook has not changed since last time, we spoke in the in May. So there you know the older. The oral solids for the older part of the portfolio, we continue to see low double digit.

The price erosion so.

In terms of the overall portfolio I think were of high single digits. So kind of in line with our conversation in May. So that's how this kind of plays out but more importantly, right you know in our business the sees the.

This is part of the business, which is why we have invested substantially in complex and R&D pipeline. So as the result, the cadence of new products allows us to offset the price deflation on the competitive pressures on that but 1 but at the same time more importantly increase the profitability of the business.

Which is exactly how things have played out over the last.

2 years because over the last 2 years, we increased our generic margin from 35 per cent.

In 2019% to 38% last year and this year will be substantially over 40%. So we think that creates a lot of value for our patients for our customers, but also for out of shareholders.

On our own competitive pressures all day.

See anything.

Can substantially change our view of the business at some point in time is the famous gonna have competition. The same way of live with hydroxide head competition of the same way <unk> had competition, but our ability.

To provide.

Excellent quality products, a very strong supply chain.

Will allow us I think the continued to grow the business so hopefully that helps.

Very helpful. Thank you.

The next question comes from Daniel Busby with RBC capital markets. Please go ahead.

Hi, good morning instead.

A few questions on Biosimilars first could you provide us with an update on your Biosimilar Neupogen candidate I think last quarter, you had guided to a potential 2021 launch and it looks like that's been pushed to 2022 and then more broadly can you talk about the timelines and level of investment needed at the place amnio in the position to develop and <unk>.

On your tax your Biosimilar products in house.

Is this something that you're actively pursuing now or is this more of a longer term aspiration.

Finally to what extent are there the potential business development targets that could help accelerate the development of of in house capabilities. Thank you.

Excellent.

Daniel Good morning, and excellent question, we always get the Biosimilar questions. We lowered so neupogen. The only reason it has moved to 2022 is the facility inspection in Chicago FDA has resumed inspections and the prioritizing it so hopefully they get to the facility as soon as possible.

No.

So thats for the Neupogen. So we do expect which is of much smaller product as you know the neulasta, which we expect next year and Avastin.

On the site inspection goes on time since it is approved in the EU already by our partner <unk>. We are very hopeful that we can launch of asking as well next year, even though it may get pushed to 2023, so very exciting all 3.

As we have mentioned we build everything in the long term. So of course, we are thinking to build the in house capabilities. We have started certain activities, but we are at the nascent stage at this point.

We see this next 10.15 years the roadway we wanted to do it smartly, we wanted to be efficient, we do not and cannot spend of 100 million for the product. Though we are the spend $30.35 million. We know that this is a highly competitive market and it will remain so and that was the purpose to her.

For Biosimilars Act.

But we will definitely do what we do best is to manufacture high quality products.

They do great science on Biosimilars coming in next 12345 years as far as the business.

Is.

It's going on that we expect to in license maybe 2 to 3 new products. This year.

And next year, we will do the probably similar to 2.3.

The external partnership while we start developing in house as well.

And yes, we could afford the the capex and R&D as we smartly allocate the <unk>.

Money towards.

Next generations of manufacturing, which is biologics and next generations of R&D, which is biologics as well.

Hope that answers your question Daniel.

Yeah, Ted Thanks for the color.

Thank you Chris.

This concludes our question and answer session and and Neil's second quarter 2021earnings call. Thank.

Thank you for attending today's presentation you may now disconnect.

Yeah.

Okay.

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