Q2 2023 Amneal Pharmaceuticals Inc Earnings Call
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Hello, everyone and thank you for standing by.
I'm, an Eagle Pharmaceuticals second quarter 2023 conference call will begin shortly.
Host for today will be Antony <unk> head of Investor Relations and you'll have the opportunity to register for a question by pressing star one on your telephone.
Thank you for your patience the conference call will begin shortly please standby.
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Okay.
Hello, everyone and welcome to the <unk> Pharmaceuticals second quarter 2023 earnings Conference call. My name is Bruno and it'll be operating your call today.
During the presentation you can register to ask a question by pressing star followed by one on your telephone keypad.
Please also limit to one question one follow up.
I will now hand over to your host Anthony the mill, how do we Investor Relations. Please go ahead.
Good morning, and thank you for joining annual Pharmaceuticals second quarter 2023 earnings call. Our Q2 earnings press release and presentation are available at <unk> Dot 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 about 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 information on our use of these measures and reconciliation U S or in the earnings presentation.
On the call today are suraj in situ Patel co founders and co Ceos Scott This is Tony Darren CFO .
Our commercial leaders, Andy Boyer for generics, Joe Brenda for specialty harsher St for our Biosciences adjacent Daly Chief Legal officer, I will now hand, the call over to Sharon. Thank you Tony and good morning, everyone.
Q2 was another strong quarter with $599 million of revenue growing 7%.
Adjusted EBITDA of $146 million growing 9% and net leverage at four nine times.
As a result of our solid momentum in the first half we are pleased to be raising our full year 2023 guidance.
On a personal note this earnings.
Earnings call marks 40 years since you didn't do it in a return to M&A less co Ceos.
At that time, we stated our goal was to return <unk> to growth and build a world class diversified pharmaceutical company.
Even by our purpose to provide access to high quality and affordable essential medicines.
Since then we have methodically execute our long term strategy to expand into high growth and high impact areas.
Today.
And Neil has a diversified portfolio of approximately 270 marketed products and industry, leading R&D engine extra.
Excellent commercial capabilities.
If footholds in key global markets and significant growth catalyst ahead.
Yes.
We have delivered strong financial performance each year since 2019.
We used to have grown 10% and adjusted EBITDA has grown 12% on a CAGR basis. Further we have reduced net leverage from seven four times in 2019 to four nine times currently well on our way to below four times by the EMA.
Year 2025.
Based on the strength of our diversified portfolio robust capabilities and opportunities ahead, and Neil is well positioned to drive sustainable long term growth accelerated profitability and continue deleveraging.
Let me now walk through how we are executing our strategy across the business.
In the genetics segment, where we have retail generics Injectables biosimilars.
International business, we expect generics revenue growth will accelerate over the next several years doing by complex products Approx.
Approximately 55% opioid generics revenue is expected to come from complex products in 2023 compared to 35% in 2019 and.
And we expect that mix shift will continue.
So clustered in retail generics, we are expanding our portfolio of approximately 230 products to move up the value chain of complexity as we have discussed complex generics tend to have less competitors and drive more durable growth.
Revenues and profit.
As shown on the catalyst light.
We expect to advance over a dozen high value complex generics to the finish line by 2024.
Second.
And Injectables our goal is to be a top five U S business and the global player with strategy centers on being a key supplier of an expanding portfolio and offering at a zillion supply chain in a market like by product shortages.
Currently we have about 30 injectables with over 30, new launches planned by 2025.
With our recently added sites, we now have four injectable facilities to produce at scale across multiple formulations.
As we ramp up production at our new facilities and launch new products. We expect the next inflection of Injectables revenue in 2024 building to over 300 million by 2025.
Third in Biosimilars.
But we're first three oncology products are seeing strong uptake.
Clearly <unk>, which is running ahead of expectations our lenses into local launched in Q4 2022 and getting that launched in may over to Biosimilars team has done an excellent job building the commercial infrastructure and establishing.
Our market presence in the past year.
Through June we have continued to add customers and we now have 400 infusion locations, particularly oncology clinics.
Most notably our Linzess market share based on dollar value is at 4% as of June only two quarters after having Q code.
We now expect about 60 million in Biosimilars sales this year.
We are well on our way to achieving over $200 million.
In peak sales by 2025.
Also we look to add two to four additional biosimilars to the pipeline.
In 2023, and 24, which have.
The potential to commercialize starting in 2025.
We are committed to being a leader in Biosimilars for long term.
Yeah.
Internationally, we are utilizing our U S FDA approved portfolio to expand globally.
India, we're leveraging our local infrastructure and expanding our portfolio.
In other geographies geographies, such as Europe , we are working with partners to commercialize our products based on our initial progress. We expect internationally expansion will add $50 million to $100 million in revenue by 2027 and scale.
There overtime.
Next in the specialty segment, we are continuing to drive.
Growth in our key branded products dietary and park it for Parkinson's and erythroid for hypothyroidism.
Touching on IPX, two or three we shared last month that we received a Seattle requesting additional data we plan to meet with the FDA soon to align on the pathway to approval, which Jim will discuss further.
With 1 million U S. Parkinson's patient 5 million annual scripts and an unmet need for this degenerative disease that is a much broader opportunity for IPX two or three.
Overall, we are focused on growing specialty to over $500 million revenue by 2027.
In our third segment and care we.
We see continued momentum across multiple channels distribution government and unit dose, we expect that <unk> will deliver at around $500 million in revenue in 2023.
<unk> to over $600 million by 2025.
Overall, we see strong momentum across our diversified global Pharmaceuticals company.
Our business does not rely on any one product.
Each quarter, we are adding new complex therapies to expand our reach and impact on patients.
As we execute and build on our sustainable growth profile, we expect to drive revenue growth and meaningfully higher levels of adjusted EBITDA.
I will now pass it to Chengdu.
Good morning.
And thank you to the global Amnio family, who work hard every day to advance our mission of making healthy policy both for patients as <unk> discussed we have been focused these last 40 years on building in a way too well diversified and differentiated global fall.
So legal company.
Capable of driving sustainable growth in key areas of medicine. We are very excited about our strong performance in the first half of 2023 and outlook.
I will touch on top of our operational excellence highly productive R&D engine.
In supply chain and expanded capabilities continue to propel our success.
First we remain focused on driving operational excellence and efficiency. As an example, we are in the process of moving production for about 30 products to lower cost locations and we are continuously evaluating opportunities to bring cost down.
In addition, we have strengthened our global supply chain by expanding our infrastructures in key areas, adding redundancy and resiliency of our operations.
Fortunately our global operations are at scale to support long term growth most notably we see the benefit in Injectables read today, we have four facilities with 19 production lines over the last few years, we have doubled our injected.
But its capacity at the same time.
Overall injectables market continued to face chronic supply shortages as we look at our commercial portfolio and pending Anda 16 products are on the U S. FDA shortage list with additional drilling or pipeline.
And Neil is well positioned retailer expanded supply chain and capacity to help address drug shortages in the United States. In addition, we have.
We expand our footprint and build our capabilities, we are committed to maintaining our quality track record since 2005. The U S. FDA has conducted 95 successful inspections, including for this year with no observations or minor 480 threes.
Moving to generics R&D, we have made tremendous progress diversifying our portfolio with new complex already since we have launched 18 new products. So far this year and we are on track to launch or 30, new products in 2023.
Overall, we have 92, andas pending FDA approval with 61% representing non oral solid products. This includes 2019, Injectables 11, ophthalmic nine top because and Ford inhalation products behind that.
We have 67 pipeline products with 90% being non oral solids REIT, our well established and diversified portfolio, we have incrementally shifted our focus to high value complex categories.
In fact, 40% of our pending Anda and 70% of our pipeline I'd expect it to be first to market first to file or Firefly it'd be two opportunities. Most recently, we announced the anda filing of three complex generics, including generic Proair.
Emulation bimatoprost in ophthalmic and Propofol immersion in Injectables.
These projects are indicative of the high value R&D programs, we are most focused on.
In Injectables, we have launched six new products year to date in July we launched our first L. B bag magnesium sulphate from one of our two new injectable facilities and flat except for an oncology injectables.
We are advancing a number of other complex injectables and expect to file our first two firefight to ready to use bag in Q3.
We expect the strong cadence of new Injectables in 'twenty, two 'twenty, three and 'twenty, one before including the launch of families are due in January 'twenty 'twenty. Four we are very excited about the opportunity.
And injected was for revenue.
For Injectables, we see inhalation and emptiness next key growth area in complex generics, we have two key metered dose inhaler andas pending with genetic QR and generic thread both are expected to launch in 2024 upon approval, but they're high.
Valued MDI programs are in development as well.
We are developing several that's been made emulation devices utilizing the soft mist technology platform.
Let me now highlight key launches currently underway first we launched an authorized generic version of Xyrem in July .
Second we are set to launch lease backs amphetamine, a key ADHD medicine in Q3 third our pending Anda for generic Narcan is under priority review, we are very passionate about this over the counter product, which will improve access to.
A critical lifesaving opioid overdose treatment.
Broadly stockholder notable planned launches is included on our catalyst slide.
Next in Biosimilars.
Very excited about the potential for <unk> in this space. Our first oncology Biosimilars are seeing excellent uptake and there is a compelling opportunity to expand our portfolio through partnerships for further molecules, we see biosimilars as a key long term growth driver.
Turning to specialty R&D, we continue to work to advance our <unk> pipeline as we disclosed the CRM. We received four IPX two or three requested additional data related to the scientific reach for the safety of Cod, we dopa react.
Expect to have a diverse meeting with FDA in the next few weeks.
To provide data necessary to address the comments and launch IPX two three following approval, we continue to see IPX, two or three as an innovation that advances the standard of care.
The broad appeal for Parkinson's patients.
In summary, we are driving operational excellence and executing on our integration strategy, which together are fueling our ability to drive sustainable growth I will now hand, it over to Tassos and continue.
I'll start first with our Q2 results move on to our year to date strength and then raising our full year 2023 guidance.
First we're very pleased with the performance of all our business segments and driving strong financial performance for another quarter.
In the second quarter total net revenue of $599 million grew 7%.
Adjusted EBITDA of $146 million grew 9%.
And adjusted diluted EPS of <unk> 19.
Was in line with prior year.
Our Q2 generics net revenue of $374 million was up 9% sequentially and up 2% versus prior year.
This was driven by <unk> as a family.
Multiple new product launches and strong commercial execution by our Biosimilars team.
New products launched in 2022 and 2023 20.
$24 million in Q2 revenue growth.
As the year develops we expect robust performance across our generic segment as new product launches ramp up biosimilars become a larger part of our business and a global supplying commercial teams work hard to ensure continuity of supply and market share growth.
As we have said in the past <unk> is now a much more diversified company than ever before which allows us to deliver consistent financial outcomes. Despite the typical ups and downs.
Furthermore, as our portfolio continues to shift towards more complex products, our ability to deliver increased levels of growth and profitability grows substantially.
Moving on to our specialty business, where in the second quarter net revenue of $97 million was up 6% sequentially and flat with the prior year.
Growth was driven by unit growth, which grew 17% sequentially and 24% versus prior year.
Rytary revenue was impacted by timing.
It was down 2% sequentially and down 4% versus prior year.
Having said that brighter total prescriptions are up 4% versus prior year.
Which bodes well for revenue growth in the back half of the year.
Our <unk> business continues to perform exceedingly well with Q2 net revenue of $128 million up 5% sequentially.
32% compared to the prior year.
Growth was driven across all lines of business, which includes distribution government and unit dose.
Improved product flow pricing and strong execution have led to a substantial increase in profitability.
See stabilization further improvements.
Expect that the strong momentum in that care will continue to reach about $500 million in revenue in 2023 up from $406 million in 2022.
Our next question comes from Chris Scott from J P. Morgan Chris Your line is now open. Please proceed.
As expected Q2, 2023, adjusted gross margin of 43% were substantially higher than the 39% of the first quarter of 2023.
Hi, This is a catarina on for Chris <unk> from JP Morgan. Thank you so much for taking our questions.
Albeit 1% below prior year.
So first on Injectables and you've kind of touched upon this but thoughts specifically on the Pfizer Rocky Mount facility and what impact that could potentially have on the sterile injectables market and as we think about you know potential shortages. There is that something that <unk> can help with and benefit kind of given some of the capacity that you've been building.
It is also worth noting that consistent with our earnings call in May generics adjusted gross margin grew substantially to 43% in the second quarter compared to 37% in the first quarter, a 600 basis point sequential improvement.
Q2, adjusted EBITDA $146 million increased sequentially by $30 million, or 26% and $12 million or 9% compared to prior year.
And then the second question is on the CRM for IPX tier three can you just elaborate a little bit more as to what could be required to address some of the FDA concerns and basically what the path forward could look like and timelines for that and then building on that you have the rytary are kicking going away sometime in 2025 does having lost.
Performance reflects strong revenue growth solid gross margins and operating expense leverage.
Jim I guess between the IPX, two or three launch and the Rytary at Louis change your approach to that launch at all thank.
As we have said in the past our overall business three months at scale, which provides strong operational leverage and bodes well for increased levels of profitability as revenue grows over time.
Thank you so much.
Thanks, Curt greener, so regarding Pfizer I think it's unfortunate orders happened.
Q2, adjusted diluted EPS of <unk> 19.
Not expected.
The plan bag manufacture Lord of sterile injectable products and supplied in the.
Was up 7% sequentially and flat to prior year, reflecting our adjusted EBITDA growth along with higher interest expense.
U S.
As I mentioned that we are that Neal we have expanded already injected route capacity, we have for <unk>.
Let me now spend a moment on our Q2 year to date performance, where our teams are delivering strong performance across all our business segments.
FDA approved facilities with 19 injectable lines, there are certain products that and it would be able to have in the supply chain in near future to avoid the shortages and he already.
Year to date top line is up 9%.
As generics grew 5%.
You have the available resources and we are also working with the.
Specialty grew 4% and now care grew 30%.
Ft on some of the pending projects that might be on on on Pfizer issues or other short deadly so as a company we are ready to U N and passionate about bringing many many of these shortage products and alleviate the.
Strong operating expense focus has allowed us to invest in new areas like biosimilars, while delivering year to date, adjusted EBITDA growth of 12% and adjusted EPS growth of 3%.
Furthermore, we feel really good about our cash generation as we generated operating cash flow of $128 million year to date compared to minus $5 million last year.
Shortage situation in the U S a which.
Which is absolutely not accepted one for the American patient.
Regarding on the IPX towards the the Fiat as.
We conducted a very robust clinical study.
The increase of $134 million.
As we shared with you in the past with a company's increased profitability at many of the investments to expand our portfolio and infrastructure already in place.
As part of our Spa agreement with FDA.
And with totality all with all the data crossover clinical study we are very confident.
Puts us in a good position to further reduce debt.
In the safety profile of IPX, two or three.
At the end of Q2, our net leverage was four nine times, which is substantially below the five five times at the end of Q2 of last year and five three times at the end of 2022.
And.
<unk> able to provide the necessary data are on a cargo by safety breach. So that's the only question. We received on our C. N N. There was no question about the efficacy safety of levodopa on our CMC or manufacturing. So it's a one question about the safety with Egypt, God, we dopa react.
In addition in July we paid down an additional $30 million in gross debt.
Were targeting net leverage below four times by the end of 2025.
Back to.
Meet with the FDA as part of our Diaby meeting in coming weeks and after the meeting we will have more clarity as to the timeline.
Let me now turn to our full year guidance and as you may have seen in our press release. This morning, we are raising our full year 2023 expectations to reflect the strength of our year to date performance across all segments of our business.
Timeline.
Regarding the launch.
We don't expect more than you know six to nine months delay.
From a revenue perspective, we now expect net revenue of two three to $2 4 billion in 2023.
And I'll pass it over to soon Chicago on the market potential yeah. So.
$50 million from the prior range.
Our accelerated revenue growth outlook reflects mid to high single digit revenue growth for 2023.
Thank you.
So your question, we have been very clear from the beginning that this is nothing to do with the right to the switching over to us.
Due to the strength of revenue growth.
Raising our 2023 adjusted EBITDA guidance.
You may be aware that <unk> has 235 positive proximate prescriptions out of $5 million to majority, 95% is with the old product immediate release, which has all kind of issues as well.
<unk> from $5 25 to $5 40 up about $20 million from the prior range of $500 million to $530 million.
We're also raising 2023 adjusted EPS guidance to 45 to 55.
Well known.
So that represents almost four 5 million plus descriptions. We can go after IPX is an excellent product clear differentiator.
Up five from the prior range of 40 to 50 cents.
We're also raising our 2023 operating cash flow guidance to $220 million to $250 million, which is an improvement of $20 million compared to the prior range of $200 million to $230 million.
So we believe we would tap into much more of a bigger market share with general utilizes than England light duty.
Yes, we would have loved to launch it in June but didn't happen, but we're very hopeful that we will get it through and launch the product as soon as possible.
This range includes interest expense and excludes the legal settlement costs of about 90 million, mostly related to the Opana ER case.
Yeah.
It is also important to note that we expect continued momentum in 2024 and beyond and with that let me turn it over back to Gerard.
Thank you so much.
Yeah.
Our next question comes from Les Sulewski from true leases less your line is now open. Please proceed.
Thank you Tassos.
Our diversified portfolio of essential medicines is driving strong results, we expect a little momentum and profitability acceleration will build in 2024 and beyond.
Good morning, Thank you for taking my questions and congrats on the progress guys.
So first just quickly has a type a meeting scheduled on the CRM or IPX, two or three FDA and with the FDA and secondarily.
Driven by catalyst happening now, including Biosimilars and new complex generics launches on the horizon.
Do you see any opportunity to trend any existing low margin lines of engine Ericsson as a follow up on what opportunities are you seeing in engineering market given the disruption that we're seeing.
We said it would be a long term journey to strategically reposition the company for sustainable long term growth.
That journey is at an inflection point as our mill two point, though is hitting its stride now.
Are you looking to pursue any additional deals and which verticals and perhaps just kind of walk us through how you think about BD plans in general.
We will now open the call for Q&A.
Ladies and gentlemen, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Less.
Thank you very much.
Type a meetings will be schedule as soon as possible.
Star followed by one on your telephone keypad.
But in the very near future so the.
To withdraw your question Press Star followed by two I'm pleased to also remember to Anita microphone, we need your turn to speak.
Interesting question on trained on low margin products.
So the low margin products have reached.
Very very volatile.
<unk>.
Our first question comes from Nathan Rich from Goldman Sachs. Nathan Your line is now open. Please proceed.
It cannot go any further it has to go up even doesn't matter where it is supplied from the in the cost even in manufacturing in India is going up so is in Europe . So is in Israel. So we don't expect.
Great Good morning, and thanks for the questions.
Maybe starting with Biosimilars you talked about <unk> is running ahead of expectations.
Can you talk about maybe where you've been kind of successful in the market in terms of picking up that early share and then when it comes to future Biosimilar opportunities are you looking to stay in the oncology and kind of provider administered space or do you see yourself kind of looking at some of the self administered products that go through the pharmacy.
The.
Companies cannot survive.
Right.
Charlie move I would say that no businesses can be successful and they lose money.
So that has to change the low margin trends on the deals and the consolidation as you know the industry had faced tremendous unfair treatment from FTC.
Just be curious to get your thoughts on relative attractiveness between the two.
Thanks Nathan.
Compared with what they allow the buying groups and vertical integrations with P. B M insurers come new details and they do not allow the generics manufacturers to consolidate that has to change. It. So obviously, we need the strong genetics industry in order to alleviate shortages in order.
<unk>.
So biosimilars as a long term journey and long term play as you know.
More than 70 biologics products will be.
We'll become biosimilars over the next 10 years.
And it's not just a U S play, it's also global play providing more access and affordability.
We have invest in further automation continuous manufacturing next generation technologies.
The number one reason why we have been successful as we have built.
Is it.
With 92% of prescriptions. So we hope FTC allows consolidation going forward and we would love to play a major role in consolidating the genetics industry. If we are allowed to do so but at the right time right now we are completely focused on deleveraging.
Our solid commercial team.
I have Mr for sure seeing here, who leads our team, which will provide more details without giving any confidential information to competitors, how we did it.
Second I will pass it onto a ship hold.
The encore. So your second question was where do we play right now we are in.
We would wanted to substantially reduce our debt, which we can do it from other operating cash flow and it does not compromise any of our investments we still have somewhere between 162 in the future could be 180 $200 million every year RMB investments, which is very efficient.
In oncology and we will continue to.
Add more products.
And.
AD related products within oncology as well.
But we are evaluating the pharmacy benefit products.
R&D engines, we have we see.
In immunology and other categories.
We have right capacity already built so he would.
Because to play Biosimilars for the long term, we would have obviously the like to our leadership in oncology, but also have additional products as we mature or biosimilar portfolio. So thank you Nathan I'll pass it onto his share.
Around 50 60 million in Capex and then we also do tuck in deals.
So we don't stop doing tuck in deals and we have reallocated or R&D with.
With a simple generics getting very low dollars and then more complex more biosimilars more specialty is getting their location now. So that's the larger deals would have to wait and we see how the environment will work out but we.
When a commercial success.
And thank you for your question.
The short answer here is.
We've done disproportionately well in the oncology segment, largely because they are more likely to change and more able to change their prescription behavior over the shorter timeframe.
We absolutely remain very optimistic that at some point the genetics consolidation, especially in the U S could happen.
We expect it to continue that success, both in oncology and in the hospital segment in the coming quarters, we'd like to buy and bill.
Great. Thank you for that color.
And just on the manufacturing footprint and capacity that you've added.
And we hope to remain in that segment.
Thank you Richard.
Any concerns around FDA inspections, maybe just walk us through what the latest status is specifically in regards to your overseas facilities. Thank you.
Great. Thanks, Thanks for the comment if I could just ask a quick follow up on the guidance.
The EBITDA increase I think it was a little bit lower than we would've expected just given the <unk> results and the updated revenue guide so tougher. So I just wanted to see if there was anything to call out there as we think about EBITDA cadence or is that kind of just embedded conservatism over the balance of the year.
Yes, hi, So M&A has a standard quality track records, we have been inspected globally.
More than half of over 90 fire inspections being.
In India, and so far we have no FDA concerns in most of our inspections are readout for ADP go to minus 40 bps this year alone.
Yes.
Try to be as conservative as we can that's number one.
We will put in a position to.
Had.
Meet all our commitments and hopefully exceed.
Three of our sites inspected in India, and we had no 482 observations.
I wouldn't read anything more than that.
Still six months to play we feel.
Over the many many years, we have built a solid quality culture. Then we continues to grow and cultivate that culture of quality. So rather the plans are in India and the U S. Our systems are so robust and so strong that we don't anticipate issues coming out of those plants.
Right about the growth, so far which as I mentioned before record revenues record EBITDA up 9% and 12% we'll.
We'll see how the rest of the year place, but we feel really good about exiting the year in a very strong position in there really.
Great trajectory for 2024 and 2025.
During the FDA inspections.
Great. Thank you.
Our next question comes from David and sleep from Piper Sandler.
Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Your line is now open. Please go ahead.
Darren followed by one on the telephone keypad.
Our next question comes from David <unk> from Piper Sandler.
David Your line is now open. Please go ahead with your question.
David Your line is now open. Please proceed.
Thanks, and sorry for the tech issues earlier and thanks for fitting me in.
Okay.
So just a couple so with.
Connection, but David our next question in line comes from <unk> <unk> from Barclays. Your.
The lean into Injectables.
Your line is now open. Please proceed.
And.
The shortage situation and given your commentary.
Good morning, everyone. This is material and fertilizing it thanks for taking our question.
Does that in any way change how are you thinking about tuck ins and specifically.
Just wondering what your latest thinking on generic pricing trends.
Can you specifically talk about price erosion, so to injectables business. Thanks, so much.
The extent to which you're going to.
To add to the brand business to a biz Dev and <unk>.
Oh, Hey, good morning, Rich discusses so.
M&A, how should we think about that as well.
Overall, we're seeing an improved pricing environment. So steel prices continue to decline just the rate of decline is less so than prior year and that obviously creates less of a headwind for us and a good thing for an industry.
It's becoming clear that the generics business.
Better than you've seen in particular, starting to reap the fruits of your investment in.
Injectables so that's number one.
That is trying to be helpful with the shortages and increased compliance requirements from a regulatory person.
Number two you talked about continued momentum into 2024.
Wondering if you can provide some more.
Color on that in terms of how many launches how much of those will be injectables.
<unk> so.
So that Scott.
High level pricing comment.
How much of those will be injectables that benefit from shortages.
On Injectables and Thats, an area that we like we see less of a pricing pressure than the oral solids.
And then how we should just think about.
Any specific products.
And as a result, the profitability of that segment is higher than the typical orange. So this is why that scenario of focus for us and Thats why our pipeline disproportionately favours injectable products.
That might have outsize importance.
For next year. Thanks.
Thank you David So Injectables is all organic homegrown story does not required any tuck in acquisitions and again my comments on generic industry is a broader comment not that Emil is looking to do anything at this point and as far as the investment in <unk>.
Will help drive increased level of profitability for the next few years.
Great and one follow up if I can I guess do you see.
<unk> business, which is our number one priority because that is where we have invested since 2018 acquiring impacts.
See the stabilization continuing for some time.
My.
Nobody really knows right our expectation our expectation needs as the industry kind of just kind of consolidates as the industry has to deal with increased investments.
Right Terry units.
Okay SPV acquired so we continue to focus there and.
Probably one of the few companies that can do both.
In their plans and the quality control processes.
Very good and if you look at the overall, let's say in four years, we are going to spend seven 8 million or $900 million in R&D half of that money will go into or more than half would move on the branded side, which we constantly look for that either partnership deals.
And.
Yes.
People are dealing with improved access.
Two high quality medicines.
This industry has to focus on improved profitability, which requires price stability at some point in time.
And May go some of them may go on the Biosimilar side. So.
And I'll add on to that.
The shortages you have been hearing about.
Totally focus on the specialty Biosimilars, and then Injectables and generics is more organic story for us.
It's not the major reason is we know where the shortages is the generics industry sustainability.
Second question <unk>, yes.
Pricing.
Pricing to wound down so low.
Hi, David regarding the trend differently for the outlook for new launches.
The demand gets concentrated within one or two suppliers and any issues with that one or two suppliers, causing the shortages. That's the number one reason I would rank it as 90% why shortages that are happening.
Still expect to continue to launch about 30, or so new products next year.
About 92, andas pending with FDA.
And as we have shifted and focused heavily on diversifying our portfolio into non oral solid obviously, you're going to have many more injectable products.
Or.
The buying groups are well aware of this both on the.
The retail side as well as hospital sites and they are being very responsible because at the end of the day, we cannot have patients without products and doctors without using chemotherapy products.
Being launched next year, plus retailer expanded our capabilities, there and our people and poly plant than our encore client than all other plans are.
FDA approval, we expect at least.
No.
We as American company always.
Those two half of those products to be launched in Injectables, but same day. We are also excited about some.
Have led the efforts to what can we do to alleviate shortages and also what can we do to make the generics industry sustainable.
Some of the other complex product launches that is coming in 'twenty 'twenty four.
Hopefully in the installation we expect to launch two products. So I think we are well position or trying before and you're going to be on continuing to launch 30, or so generic products and continue to be more in the complex area.
Just would be.
Very prudent to do and time is now we cannot wait because we will see more and more shortages. If we if we do not address this.
So I do see stabilization further improvements.
So 2024, including the Biosimilar uptake of our new launches, we have growth across our portfolio David.
Okay.
Our next question comes from Chris Scott from J P. Morgan Chris Your line is now open. Please proceed.
That's helpful. Thanks, and if I may just sneak in a follow up with all the new launches is it fair to expect some degree of.
Hi, This is a catarina on for Chris from Jpmorgan. Thank you so much for taking our questions.
Margin expansion, particularly given that there seems to be.
Lean into more complex.
First on the Injectables and you've kind of touched upon this but thoughts specifically on the Pfizer Rocky Mount facility and what impact that could potentially have on the sterile injectables market and as we think about potential shortages. There is that something that can help with this benefit kind of given some of the capacity that you've been building.
Product launches and next year I know I know, it's a little early to talk about.
Guidance or anything, but just congratulate you how should we think about margins.
Hey, David this is.
Excellent piece will be flat to up right. So we agree with you that.
And then the second question is on the CLO four IPX tier three can you just elaborate a little bit more as to what could be required to address some of the FDA concerns.
Where our expectation would be to be flat or up.
And whether or not is flat or up materially.
It's really kind of number one the cadence.
Likely what the path forward could look like and timelines for that and then building on that.
<unk> two is kind of the size of the opportunity and number three the price deflation right. So in a world where the price deflation and a continues to come down.
Have the Rytary accounting going away sometime in 2025 years, having less time I guess between the IPX till three launch on the Rytary really changed your approach to that launch at all.
And the cadence of new products kind of ramps up that's what's going to drive the.
Thank you so much.
Kind of the margin expansion over the course of time.
Thanks Catherine.
Regarding Pfizer I think it's unfortunate orders happened.
Okay. That's helpful. Thank you.
Not expected it.
The client that can manufacture a lot of sterile injectable products and supplied in the.
We currently have no further questions. So I would like to hand over back to the management team for closing remarks.
U S.
As I mentioned that.
Neal we have expanded our injectables capacity, we have for <unk>.
Thank you.
As we shared on our second quarter call today.
FDA approved facilities with 19 injectable lines. There are certain products that you would be able to have in the supply chain in near future to avoid the shortages and we are ready.
Very good first half with momentum across our businesses and pleased to raise the 2023 guidance.
And Neil in 2023 is a fundamentally different company than 2019 launch into and I returned.
We have the available resources and we are also working with <unk>.
<unk> on some of the pending projects that might be on on Pfizer issues or other short at least so as a company we are ready to run and passionate about bringing many many of these shortage products and alleviate.
We are properly diversified our essential medicines portfolio and have expanded in a number of key areas such as biosimilars more specialty pipeline and complex gx products and international operations.
Charter's deterioration in U S retail.
<unk>, absolutely not acceptable for the American patient.
We are well positioned for sustainable growth and meaningful EBITDA acceleration in near term with key catalyst, adding to our growth profile all of them now.
Regarding on the IPX two or three.
The Crs.
We conducted a very robust clinical study.
Thank you very much and have a great day.
As part of our Spa agreement with FDA.
With totality all with all the data crossover clinical study we are very confident.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
In the safety profile of IPX, two or three.
Thank you very much and have a great day.
And.
Able to provide the necessary data.
Ladies and gentlemen.
Category robust safety bridge. So thats. The only question we received on our CRM. There was no question about that.
Efficacy safety of levodopa on the CMC or manufacturing. So it's a one question about the safety of <unk>, we expect to.
Meet with the FDA.
As part of our Taipei meeting in coming weeks.
The meeting we will have more clarity as to the.
The timeline.
Regarding the launch.
We don't expect more than.
Six to nine months delay.
And I will pass it over to Susan.
On the market potential.
Yes, so thanks.
Thank you.
So your question, we have been very clear from the beginning that this has nothing to do with Rytary switching over to us.
You may be aware that <unk> has 235 positive proximate prescriptions out of $5 million. So majority 95% is with.
Old product immediate release, which has all kinds of issues is very well known.
So that represents almost $4 5 million plus descriptions. We can go after IPX is an excellent product clear differentiator.
So we believe we would tap into much more of a bigger market share with general neurologists than even <unk>.
Yes, we would have loved to launch it in June but didn't happen, but we are very hopeful that we will get it through and launch the product as soon as possible.
Thank you so much.
Yeah.
Our next question comes from Les Sulewski from Trulia.
Your line is now open. Please proceed.
Good morning, Thank you for taking my question.
The graph on the progress guys.
First just quickly.
Type a meeting scheduled on the CRM for IPX, two or three FDA with the FDA and secondary.
Do you see any opportunities to trim any existing low margin lines within generics and as a follow up what opportunities are you seeing in engineering market given the disruption that we're seeing.
Are you looking to pursue any additional deals and <unk>.
Verticals, and perhaps just kind of walk us through how you think about BD plans in general.
Less.
Thank you very much.
Type a meetings will be schedule as soon as possible.
But in the very near future. So.
The interesting question on the trend on low margin products. So the low margin products have reached.
Very very volatile and.
It cannot.
Any further it has to go up even doesn't matter where it is supplied from.
The cost even in manufacturing in India is going up so is in Europe . So is in Israel. So we don't expect.
The.
Companies cannot survive.
Right.
Ali move I would say that no businesses can be successful and they lose money.
So that has to change the low margin trends on the deals and the consolidation as you know the industry had faced tremendous unfair treatment from FTC.
Compared with what they allow the buying groups and vertical integrations with Pbms insurers can the details and they do not allow the generics manufacturers to consolidate that has to change. It. So obviously, we need the strong generics industry in order to alleviate shortages in order.
To invest in.
Further automation continuous manufacturing next generation technologies.
It is.
It is 92% of prescriptions. So we hope FTC allows consolidation going forward and we would love to play a major role in consolidating the generics industry. If we are allowed to do so but at the right time right now we are completely focused on deleveraging.
We would wanted to substantially reduce our debt, which we can do it for lower operating cash flow and it does not compromise any of our investments we still.
Somewhere between 162 in the future it could be 180 $200 million every year R&D investments, which is very efficient R&D engines, we have.
We have right capacity already built so he would.
We spend $50 million to $60 million in Capex and then we also do tuck in deals.
So we don't stop doing tuck in deals and we have reallocated or R&D.
With a simple generics getting very low dollars and then more complex more biosimilars more specialty is getting the allocation now.
So that's the larger deals would have to wait and we see how the environment will work out but.
We absolutely will.
Very optimistic that at some point, the genetics consolidation, especially in the U S could happen.
Great. Thank you for that color.
And just on the manufacturing footprint and capacity that you've added.
Any concerns around FDA inspections, maybe just walk us through what the latest status is specifically in regards to your overseas facilities. Thank you.
Yeah, Hi, So Anil has a standard quality track records, we have been inspected globally.
More than half of over 90 fire inspections being.
In India, and so far we have no FDA concerns most are already inspections are readout for ADP or minus 40 bps. This year alone.
Had.
Three of our sites inspected in India, and we had no 482 observations.
Over the many many years, we have built a solid quality culture, and we continues to grow and cultivate that culture of quality. So rather declines are in India and use our systems are so robust and so strong that we don't anticipate issues coming out of those plants.
During the FDA inspections.
Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Darren followed by one on the telephone keypad.
Our next question comes from David <unk> from Piper Sandler.
David Your line is now open. Please proceed.
Thanks, and sorry for the tech issues earlier and thanks for fitting me in.
So just a couple so with.
The lean into Injectables.
And.
The shortage situation and given your commentary.
Is that in any way change, how youre thinking about tuck ins and specifically.
The extent to which youre going to.
To add to the brand business too.
And M&A, how should we think about that as the.
It's becoming clear that the generics business.
Farming better than you've seen.
Starting to.
Reap the fruits of your investment in <unk>.
So that's number one.
Number two you talked about continued momentum into 2024, just wondering if you can provide some more color on that in terms of how many launches how much of those will be injectables.
How much of those will be injectables that benefit from shortages.
And then how we should just think about.
Any specific products.
That might have outsize importance.
For next year. Thanks.
Thank you David So Injectables is all organic homegrown story, there has not required any tuck in acquisitions and again my comments on generic industry is a broader comment not that aneel is looking to do anything at this point.
And as far as the investment in brand business, which is our number one priority because that is where we have invested since 2018 acquiring impacts.
<unk> Erythroid K SPV acquired so we continue to focus there.
Probably one of the few companies that can do both.
Really good and if you look at the overall, let's say four years, we're going to spend $700 million $900 million in R&D.
Half of that money will go into more than half would be on the branded side, which we constantly look for either partnership deals.
And May go some of them may go on the Biosimilar side. So.
Totally focus on specialty <unk>.
Similar.
And then Injectables and generics is more organic story for us.
Second question direction, yes.
Hi, David regarding the 'twenty 'twenty four outlook for new launches.
We still expect to continue to launch about 30, or so new products next year, we are about 92 andas pending with FDA.
And as we have shifted and focused heavily on diversifying our portfolio into non oral solid obviously.
Many more injectable products.
Being launched next year plus with our expanded.
Capability, there and our people in polyp lagged in our encore client than all other plans are.
FDA approved we expect at least.
Close to half of those products to be launched in Injectables, but things that we are also excited about.
Some of the other complex product launches that is coming in 2024.
Following the integration, we expect to launch two products. So I think we are well position or trying before and you will be on continuing to launch 30, or so generic products and continued to be more in the complex area.
So 2024, including the Biosimilar uptake of our new launches, we have growth across our portfolio David.
That's helpful. Thanks, and if I may just sneak in a follow up with all the new launches is it fair to expect.
Some degree.
Margin expansion, particularly given that there seems to be a lean into more complex product launches next year.
I know, it's a little early to talk about.
Guidance or anything, but just directionally, how should we think about margins.
Hey, David this is.
Excellent piece will be flat to up right. So we agree with you that that's what.
Our expectation would be to be flat or up.
And whether or not is flat or up materially.
It's really kind of number one the cadence.
<unk> two is kind of the size of the opportunity and number three the price deflation right. So in a world where the price deflation kind of continues to come down.
And the cadence of new products kind of ramps up that's what's going to drive the.
Kind of the margin expansion over the course of time.
Okay. That's helpful. Thank you.
We currently have no further questions. So I'd like to hand over back to the management team for closing remarks.
Thank you.
As we shared on our second quarter call today.
Very good first half with momentum across our businesses and pleased to raise the 2023 guidance.
And Neil in 2023 is a fundamentally different company than 2019, reaching into and I returned.
We are properly diversified our essential medicines portfolio and have expanded in a number of key areas such as biosimilars more specialty pipeline and complex gx products and international operation.
We are well positioned for sustainable growth and meaningful EBITDA acceleration in near term with key catalyst, adding to our growth profile all of them now.
Thank you very much and have a great day.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.