Q1 2022 Amneal Pharmaceuticals Inc Earnings Call
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 and reconciliations to U S. GAAP may be found in the earnings presentation.
Beginning in the first quarter of 2022, the company will no longer exclude R&D milestone expense from non-GAAP financial measures in our press release, we provide revised prior period results, reflecting this change.
On the call. This morning are <unk> in Hsinchu Patel co Ceos.
Tassos <unk> CFO , Andy Boyer generics, Joseph <unk> specialty and Jason Daley, our Chief legal officer, and corporate Secretary I will now turn the call over to Sharon. Thank you Tony and good morning, everyone.
The first quarter was a good start to the year with revenue of $498 million and adjusted EBITDA of $100 million.
As expected.
We are on track to achieve over full year 2022 guidance commitments of continued top and bottom line growth.
Onto our consistent results and continued success in executing our strategy over the last several years.
We are expanding in high growth areas, including specialty Injectables and now biosimilars.
As a global essential medicines company.
Underlying illustrated GE is a focus on affordability.
And addressing unmet patient needs.
Looking forward as we continue to execute we see our growth profile accelerating our business mix increasingly diversifying.
And our impact on the global healthcare expanding.
Let me now provide a few updates across our businesses starting with generics.
Business continues to grow as a productive R&D engine continues to diversify the portfolio with new complex medicines as a result.
<unk> has a low broad product concentration with our largest genetics product represents only 5% of total company revenues and our top quality genetics products that only 17%.
With a focus on more complex and higher barrier products.
Over half of generics revenue to date is non oral solids as compared to 35% a few years ago.
The mix the mix shift towards complex medicines is continuing as 86% of our pipeline is known oral solids.
Accordingly, we expect durable growth in this business and we continue allocating returns into high growth areas.
In regards to an injectable business as.
As we have shared with you in the past this is a key growth area for revenue.
We are pleased that Injectables will grow approximately 30% this year to more than $160 million in revenue.
As we are well on our way of achieving 300 million plus.
Plus by 2025.
We look to scale of our business with expanded capabilities.
Increased capacity and new products in our portfolio.
We believe these initiatives will drive substantial and sustainable growth in Injectables for years.
In Biosimilars.
We're very excited to enter the U S biosimilar market.
Upcoming launch of our workforce to the oncology products. We are pleased with the approvals of the newco are pretty good.
Biosimilar and limitless ability to map biosimilar.
Which are wonderful achievements by team and Neil and our partners. In addition, we expect approvals for a third biosimilar pegfilgrastim in the next few weeks.
As we have shared with you in the past we are position positioning Avenue to player laws critical any long term role in the fast growing towards the $8 billion.
U S biosimilar market.
We estimate the market size for these three products based on net revenue is approximately $4 billion of which about half is biosimilars.
Together, we see peak sales for these three use biosimilars.
Of.
$200 million this.
This is the first time, we are sharing our biosimilars revenue estimates for us.
We are also looking for additional opportunities, where we can be early to market as we build our portfolio through in licensing to start and vertical integrate integration and time to become a meaningful player in biosimilars.
In Africa, our distribution business. We saw continued nice growth in Q1, we expect sustainable growth driven by strong commercial and operational execution as we expand across multiple distribution channels.
In international we are leveraging our portfolio of complex generics injectables specialty and Biosimilars medicines to meet local needs. We believe this strategy will add considerable revenues in time and be highly profitable as we utilize partners and <unk>.
Our existing infrastructure.
In China, we are making good progress with our <unk> partnership and we look to be a commercial later this year or early next year.
In the $25 billion branded generics, India market, we have launched our label there and on expanding our in market presence around the rest of the world. We are pursuing distribution agreements and look forward to share with you as we make progress.
In specialty we remain focused on driving strong commercial execution of our key branded products and advancing the pipeline.
We expect continued full year growth from writer in Parkinson's and unit toward and hypothyroidism.
<unk> pipeline delivers new branded products, including <unk> and <unk> this year and IPX two or three next year, we see especially as a business expanding very meaningfully over the next several years.
Before I pass it over to Chengdu I would like to acknowledge Joe Tedesco, who is moving on programming needs to be a CEO for a biopharmaceutical company here in New Jersey I want to thank Joe for his awesome contribution to Avenue over 11 years and his strong leadership.
He has built a great team and has contributed to revenue and a great race, we wish him all the best and with that I'll hand, it over to children.
Thank you Gerard and good morning, everyone.
My sincere thanks to segment.
Members of their family, who work hard every day to make kind of deposit growth. We believe our relentless focus on excellence across operations supply chain quality and science, driven innovation differentiation and new.
<unk> excellence programs, we are constantly reducing cost and improving efficiencies.
In R&D, we are directing more spend towards high growth areas, particularly biosimilars specialty Injectables and complex generics, let me now walk through the different aspect of our business in generics, we feel great about our pipeline and continued innovation in complex cattle.
So far in 2022, we have eight new launches.
We expect <unk> launches this year and each year going forward.
This past week, we received another CGT approval for back sort of detail and maybe as the industry leader in CGP approvals.
Overall, we have 111 and expanding across all dosage forms and genetics and expect to file approximately turnkey mode. Andy at this year.
Our pipeline of 101 products.
6% non oral solids and most are expected to be first to market plus two five or quantify reduce.
We continue to move toward an increasingly complex differentiated portfolio of over 250 molecules that is driving sustainable growth.
One of the key product launches in 2022 is the return of year, which is co administered with back slowly. We are excited to be one of the main U S supplier.
The key COVID-19 treatment with Mcdonald's is an already approved NDA that our team has been working hard to fulfill a substantial demand.
In addition, we improved supply chain.
Quarter, Gina click what epinephrine auto injector and expect more revenue in <unk> as.
As we look to the rest of <unk> and into 'twenty three.
This is significant launches on the horizon that will start to materialize later this year and drive growth in 'twenty, three and beyond we don't disclose many launches for competitive reasons, but let me share a few key upcoming ones among many others, including in our filings and OTT generic <unk> and generic products.
In order to solid Carvedilol yard in Moss Adams and injected when resin pricing deploy multi dose trial prednisolone acetate and extra Hittite in LBP bag vaccinated with.
We will be begin and magnesium sulfate.
And detailed genetics, we expect the desktop or pipeline and leading commercial presence to drive consistent financial performance and our public holdings. We have eight anda is pending and 11 products in the pipeline.
Inhalation nasal that are four andas pending and selling more products under development.
And in tactical we expect substantial growth as we are.
Expand our portfolio and add new capacity and capabilities as a reminder, in January we acquired the Salt Baclofen franchise, which added line result to our institutional bag and additional commercial capabilities and last November we acquired peninsula healthcare, which added state of the art.
Manufacturing capabilities and doubled our capacity to 16 production lines in total the integration is going very well and we are preparing for commercial production in 2023.
This acquisition and expansion of other sites has enhanced and needs the ability to do more R&D and supply of commercial product from multiple sites.
In terms of innovation in Injectables, we expect five to 10, new launches in 'twenty two with four already this year.
With <unk>, expanding and another 61 pipeline products.
We're in a variety of complex areas, including drug device combination peptides long acting Injectables LIFO Somos LBP bags and clarify these two products.
We are on track on all 14 injectable launches from 'twenty two through 'twenty five.
As we have shared in the past we believe the combination of a robust quality track record increasing supply capacity and continued innovation positions us really well to scale, our injectables business and be a sustainable long term supplier globally.
We are very excited about the large and growing biosimilars market and how <unk> is well positioned for near and long term growth. The recent approval of our first two U S. Biosimilars and one more accrual expected later this month in the watershed <unk> Neil.
We are planning for Q3 launch of our local analysis, we expect to be one off a few companies with three U S. Biosimilars on the market in the oncology space.
We're pleased that allows introducing a first cycle approval. This is a tremendous accomplishment by the team and demonstrates our core competency in this space.
Combined with our partners.
Have a substantial science regulatory manufacturing and commercial capabilities needed in Biosimilars, we believe the key to success, having the right development path manufacturing capability.
Being vertically integrated for time from development to commercialization.
We're actively working to enhance our key capabilities and expand our portfolio to drive growth organically and inorganically as we target to add new biosimilar launches in the years ahead, we are very enthusiastic about our future in virus pharmaceuticals, particularly biosimilars.
As the opportunity is coming to fruition now products.
In international we are advancing our strategies in China, and India and the rest of the World. We see global expansion is another vector for long term sustainable growth in China. We currently have five products fine with 10% to 15 expected by the end of 'twenty and.
And 20 to 30 overtime in March we were pleased to be one of the companies to receive a sub license to manufacture and commercialize <unk>.
Slowly in 95, low and middle income countries.
We're evaluating distribution strategies to drive access to this COVID-19 treatment.
In specialty we are expanding our branded portfolio and we see a number of growth drivers. Our current specialty pipeline represents $500 million to $1 billion U S peak sales.
We expect to launch <unk> for spasticity in June <unk>.
Next we look to launch our <unk> auto injector for migraine and cluster headaches later this year upon approval.
IPX two or three we completed our pre NDA meeting with FDA.
At the American Academy of Neurology meeting in April we presented two abstracts shedding topline clinical efficacy results and post hoc analyses showing one five hours.
Good on time.
We expect to submit our NDA in Q3 and pending FDA approval. We remain on track for launch in mid 2023, we see 300 to 500 million and USD four IPX two or three.
On <unk> seven for myasthenia gravis, we expect to file our NDA by end of 'twenty two.
And that of course doing other indications.
Also what other pipeline programs <unk>, <unk> and <unk> are progressing well.
To share more on our expanding specialty pipeline, we are adding new firefight to programs that look to repurpose existing molecule upa.
Utilizing our drug delivery technology platforms, driving and chronic tech. We believe these technologic differentiates us in specialty overall, we are very excited about our specialty growth prospects and expect at least one new launch per year going forward.
To summarize our strategy for accelerated growth builds upon our strong foundation of innovation support quality and operational excellence.
Across the business, we remain laser focused on execution. This year I will now hand, it over to tussles. Thank you to our first quarter financial performance was in line with our expectations and thanks to the good work by all our colleagues who are police to react to earmark full year 2022 guidance for continued.
Top and bottom line growth.
For the first quarter, we reported total net revenue of $498 million.
Adjusted EBITDA of a $100 million and adjusted diluted EPS of <unk> 12.
Our results include $5 million of R&D milestone expenses, which we no longer exclude from our non-GAAP results.
The annual run rate of these expenses was $15 million to $20 million and represents external collaborations to advance our R&D pipeline.
This policy change has no economic or cash impact to our business.
Q1 to Nellix net revenue of $318 million grew $5 million or 2%.
Products launched in 2021, and 2022 contributed $14 million of growth offsetting the typical declines in the remaining portfolio.
As we have said in the past our focus on innovation and strong commercial execution is a key differentiating factor that's in Naples are sustainable topline growth.
Consequently product class prior to 2019 now account for about 65% of generic net revenue and declining fast.
This reduced reliance on older more prone to competition products bodes well for continued growth and profitability.
And specially Q1 net revenue of $85 million declined $11 million or 11% and represents the low point of quarterly revenue for the year.
This performance reflects <unk> loss of exclusivity as well as higher than typical quarterly reimbursement costs related directly.
We continue to be excited by the total prescription growth of greater than unit growth up, 6% and 13%, respectively as well as the upcoming launches of licensees spa and DHT or the agenda.
I'll ask <unk> to $95 million grew $10 million up 12%, reflecting strong customer acquisition success in the non federal distribution channel.
Q1, 2022, adjusted gross margin of 43, 5% was in line with prior quarter and reflects the dynamics first generics gross margin of 42%, a 300 basis points improvement from prior quarter.
Second off care gross margin of 15%.
100 basis points decline from prior quarter due to mix of business.
And finally 15 million of costs related to the timing of our manufacturing production schedule.
Last item is a timing issue and will improve in future quarters, providing substantial additional gross margin and profitability.
Q1, adjusted EBITDA of $100 million was actually a few million higher than the expectations. We shared with you during our February earnings call as I mentioned earlier. It also includes $5 million related to our reporting policy changed and $15 million of manufacturing overhead allocation.
From an operating cash flow perspective, we generated $120 million of cash, which will continue to redeploy and driving sustainable long term growth.
Consequently in the first quarter, we invested $131 million to fully fund the previously announced acquisitions of cell C and finished the healthcare.
Looking ahead and consistent with our discussion in our February earnings call, we expect substantial acceleration of top and bottom line growth over the course of this year.
This growth will be driven by four factors first multiple new product introductions, such as I point out here that the strong <unk> and Avenue Biosimilars.
Strong underlying demand with key growth brands such as identically.
Family brighter in humans.
Third favor.
Favorable fixed overhead manufacturing absorption and finally stability in our operating expenses.
It's probably a bulk deals.
Understood and within our control gives us confidence in delivering our 2022 financial guidance let.
Let me hit the Costar suite right now thank you Doug.
Summary, we are on track for another good year in 2022, we see momentum across our business, including a robust U S. Biosimilar approvals, we see these growth drivers building and accelerating our company performance. This year next year and beyond.
Now open the call to questions.
<unk>.
Thank you if you'd like to ask a question a compressive one on the telephone keypad.
I would like to withdraw your question you May press balance.
Okay.
Please and show you on metered likely when asking your question.
Our first question for today comes from Gary Nachman of BMO capital markets.
Your line is now open.
I'm, sorry, Gary you might be muted.
Alright, gaiam somewhat reserved ODI credential.
My apologies if you'd like to ask the question you compressor star one on your telephone keypad, if you'd like to withdraw your question you May Press Star two.
Operator next question.
Okay.
As a reminder, if you would like to ask a question a compressive start one on the telephone keypad.
Our next question comes from Mikael Francesca Ciena from Barclays.
Your line is now open.
Hi, Kayla from Barclays on fertilizer Prasad.
Just wondering why you realize your U S peak sales guidance of 200 million cost for your three biosimilars.
About your Biosimilars, how do you plan to get vertically integrated and over what timeframe.
Sure.
Thank you and good morning.
So the peak sales.
As you know we are.
Working with getting a reimbursement in place.
Which would be and should be in place by January one 2023.
Our commercial infrastructure is in place so we expect.
Contributions this year, adding up to more contribution in 'twenty, three and peak sales I would say somewhere between 'twenty three 'twenty four it should be able to achieve that.
And you had a second question on vertical integration.
So as we committed in the Biosimilar to long term as we have previously stated that our <unk>.
Strategy is.
Duo one is to in license from key partners.
<unk> partners.
And build their own capabilities. So we are exploring.
Different options and should be able to.
Vertically integrated by end of this year or beginning of next year.
Thanks.
Thank you.
Thank you.
Next question comes from David <unk> from Piper Sandler David Your line is now open.
Hey, Thanks, I joined late so I apologize if I missed this but.
On the margins.
You talked about.
As care being a bigger part of the mix I just had a bigger picture question about the role of <unk>.
<unk> care.
In the organization and.
To the extent that you have.
Periods, where it's a bigger part of the mix and there is some margin compression.
Do you see that as probably.
Problematic I'm, just trying to get a better sense of.
We're <unk>.
The margin profile, given where youre, taking the business I guess acceptable. So that's number one number two is on Biosimilars I think you laid out some assumptions.
That peak sales so.
I wanted to get your thoughts on that.
Your view on share volume share.
And ultimately.
How youre seeing.
Overall penetration.
Filgrastim, Petrograd and Bevacizumab markets playing out of Biosimilars.
What your underlying assumptions are regarding pricing erosion share and your penetration that would be really helpful. Thank you.
David Good morning, So I'll start with the Big picture on <unk> excellent cash flow business for US and also allows us to.
Put more products.
In federal healthcare market, which as we have as you know.
We had one of the top to the so margin could fluctuate and fluctuate in that business.
Three businesses within <unk>, one is that the federal government, which is steady and our margins and then they have.
Unit dose business, which is growing.
And the third business is pure distribution business with city of Philadelphia and have added few more cities.
So it's.
Great business.
Will fluctuate between 15% to 20% of gross margin and we will keep adding the topline. So we should be focused on top line as well.
Anything else on.
No.
Spot on.
It's a sustainable business it is growing both topline and bottom line.
David It is correct that the overall margin of that business is less so.
The rest of our business, but we're really focused on total absolute dollars.
And whether or not one one.
Third quarter <unk> carries this situation with a 15% gross margin versus AP, that's where it's going to fluctuate.
It doesn't really move the needle that much from a total company perspective. So the key driver there is specialty which continues to be.
80%.
In our generics, which as you know over the last three years, we've grown it from mid thirties to substantially more than 40%. So.
It will be.
Yeah.
Second question. Thank you Tassos on Biosimilars.
Bob.
Excellent part as the commercial team is in place led by.
Sure thing and.
Excellent.
Team.
A couple other people added from ABC and finds it and the small team, which added 21 people in institutional sales plus contracting sales force as we have always done a great job in <unk>.
<unk>, we will do great.
Great job and commercialization tier as well and we are we are we have understood the market. So.
As you know, it's a quasi branded products, we've got to get the.
Reimbursement code in place.
We'll do so the language of map.
Dealing with Amgen and Pfizer.
Obviously the innovator.
<unk>.
Try and maximize our market share to about 15% to 20% we were more focusing on oncology clinics integrated regional systems.
So many avenues to get there as well we will have the 340 <unk> pass through status, which is always helpful. And then for the the <unk>.
G CSF we have.
Pass through status as well, Phil Gaston and.
It's little bit more competitive.
With three active players.
We'll try to.
With over 340, <unk> unique position, we may be able to get.
Again, 15 to 20 bps in market share or more than four.
So Luke had asked it would be a little bit more competitive since the prior active players. So we will do it.
We'll try to penetrate different channels and.
It should be very helpful to have.
<unk> map risk bag progressing.
So that would be a nice launch as well so all three really excited in the future of Biosimilars.
Really excited as well.
Okay. That's helpful and just if I may follow up.
Just to be clear on the shared economics, you just remind me.
Margin profile of.
<unk>.
That's not going to be net margins that are going to be higher than your corporate.
Corporate operating margins right is that a fair way to think about it.
Yes, it will be.
<unk> would be higher because the bigger market.
<unk> would be in line with corporate margins.
Got it okay. Thank you.
Thank you.
Anil question for today comes from Gary Nachman from BMO capital markets.
Your line is now open.
Okay.
Okay, Great sorry, I missed you guys before just jumping around a couple of calls.
I don't know if you touched on that.
Obviously jumped on late but.
Could you talk about how you expect gross margins to trend.
For the remainder of this year and sort of what additional initiatives.
Taking to improve the gross margin further.
Our next year Jeff.
What sort of levers do you think you have at this point how much more there is to do on that front.
And then.
With respect to the specialty just talked about with respect to the specialty business.
How comfortable you are with the commercial infrastructure.
How much more you want to leverage that in terms of bringing new products and then.
Is that going to become.
And a much bigger part of your business do you think over the next few years or will it be relatively modest when you think of the overall okay. Thanks.
Hey, Gary I'll take the first one good morning.
So as you know Q1 gross margin was 43%.
Looking to <unk>.
Increase for.
For the rest of the year my gut feel these will finish the full year, probably at about 45%, which is in line with <unk>.
Last year, that's number one if you think about the growth drivers how do we go from Q1 of 43% to let's say the rest of the year of about 45. There are a couple of things number one is the first piece.
Is just out.
Our internal manufacturing production plans, so better fixed overhead absorption and we are in control of that adjusted flex fee.
Demand in our manufacturing operations, so high confidence shown from getting that benefit.
Second is mpls new product launches, so, which we had shared with you a few months ago. This year, we expect new product launches to be more on the backend of the year on the front end and as you know by nature of the complexity of those product stage have substantial greater gross margin than the rest.
The of the portfolio.
And then.
Third is when you look at our specialty business as I said in Q1, that's the low point in terms of revenue right and we had unit Troy I expect it to accelerate the growth in those products have higher gross margins. So those are the.
The three levers.
Thank you Tassos.
Gary on especially as you know we had committed.
Wired impact back in 2018 debt.
Our specialty platform, so excellent commercial capabilities already in place for.
For instance, a movement disorders as well as endocrinology. So very excited to have a great team in place relationship for market access in place marketing teams are in place.
And penetration as you can see we continue to grow <unk> by 6% to 8% every year units rose by 10%, 12% and we have excellent organic pipeline, we got <unk> launch.
On June 1st we have BHG auto injector based on the outcome of that.
Partners site from the FDA should be launched this year.
<unk> two or three next year.
The much higher sales because of the product profile and results what we have seen.
<unk> my opinion going at risk for our product, which we're filing this year. We also government programs for that as well.
And that is also expected to launch in 2004.
And then we have two additional lease we acquired from cashew specialty K, one <unk> eight along with <unk> to seven <unk>.
And we are adding a couple of more pipeline assets and specialty we have a separate team focusing on specialty R&D with two technology platforms, and which have been.
Well tested over last 10 years, so with that today, our business is about $400 million in specialty these organic pipeline will add substantial revenue to it and we are open for.
Sorry.
Akane deals or adding within these two specialty and we are constantly evaluating those opportunities and I think more or being available.
With this.
Biotech.
Pool in the market than.
Weather conditions, which is driving.
He is like us.
A bit of a driver's seat because of the constant cash flow from our generics business injectable business, especially the business allows us to to sustain our growth and keep adding these assets so really excited.
You asked me a golar numbers, yes, we like to get to $1 billion in specialty sales.
How long it will take a few.
Two more years, but excellent growth drivers, you're absolutely right that part of the business is becoming very significant and much.
Much higher contribution than the genetics.
That's very helpful. Thank you.
Thank you we have no further questions, so I'll hand back to share.
Any closing remarks.
Well. Thank you everyone I know it was a busy morning.
So.
Many people could not join but everybody who are joining thank you very much and have a great day.
Yes.
Thank you for joining today's call you may now disconnect.
Okay.