Amneal Pharmaceuticals Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 9, 2024

There are 10 speakers on the call.

Operator

Good morning, and welcome to the Amneal Pharmaceuticals Second Quarter 2024 Earnings Call. I would now like to turn the call over to Amneal's Head of Relations, Tony DeMeo.

Speaker 1

Good morning, and thank you for joining Amneal Pharmaceuticals Q2 2024 Earnings Call. Today, we issued a press release reporting Q2 results. The earnings press release and presentation are available at amnealdot 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 this section entitled Cautionary Statements on forward looking statements for factors that may impact future performance.

Speaker 1

We also discuss non GAAP measures. Information on use of these measures and reconciliations to GAAP are in the earnings release and presentation. On the call today are Chirag and Shinto Patel, Co Founders and Co CEOs Tassos Conideras, CFO our commercial leaders Andy Boyer for generics Joe Renda for specialty and Jason Daley, Chief Legal Officer. I will now hand the call over to Shirod.

Speaker 2

Thank you, Tony. Good morning to everyone. We are delighted to report strong Q2 results, raise 20 24 guidance and share the recent approval of affordable and essential medicines for patients, providers and payers. We're a deeply purpose driven company on a remarkable journey of expanding in key areas of medicine and delivering sustainable long term growth. Amneal has grown consistently each of last 5 years.

Speaker 2

Revenues are up from $1,600,000,000 in 2019 to over $2,700,000,000 expected in 2024. Adjusted EBITDA is up from $339,000,000 in 2019 to about 6 $20,000,000 expected in 2024. We could not be more prouder of this progress and the strong foundation we have built. Let me now discuss how well we are positioned for sustainable growth, long term growth in each of our business. Starting with specialty business, we continue to grow our key branded products in neurology and endocrinology.

Speaker 2

This week's U. S. FDA approval of Crexant, formerly known as IPX203 is a watershed moment for Amneal. We are excited to launch Crexant in September. Our launch plan and market access strategy leverages 10 years of Rytry commercial experience and our deep market understanding of patients, providers and payers.

Speaker 2

We expect $300,000,000 to $500,000,000 in U. S. Peak cells. In total, with the addition of Crexon, we expect specialty revenues of over $500,000,000 in 2027. We continue to evaluate branded opportunities to add to our pipeline and we are excited about the future of this segment.

Speaker 2

Next, our affordable medicines business, which is our generic segment has grown consistently every year since 2019. This durable growth profile is driven by ever expanding portfolio of retail, injectable and biosimilar products. For the first half of twenty twenty four, revenue growth has accelerated to 14% due to our diverse portfolio of complex and high demand medicines. Robust supply chain and regular cadence to 30 new launches each year. We're number 1 in quality, complex new product portfolio and customer fulfillment in the United States.

Speaker 2

In injectable, we have expanded our portfolio to over 40 products for the hospital market with a deep pipeline. We have now tripled our manufacturing capacity to 60,000,000 units to drive growth at scale. Importantly, we are helping to address market shortages in hospitals and clinics as we provide 12 commercial injectables currently on the shortage list. We're also focused on providing unique ready to use 5 5(2) products that can improve hospital pharmacy efficiency by eliminating medication preparation steps. We have launched our 355(2) ready to use injectables with more to come.

Speaker 2

Turning to biosimilars, we have built a strong business with the successful launch of our first three products and we are on track for over $125,000,000 in revenue in 2024. The next phase of biosimilar growth will come from 5 additional pipeline products we have added in the past few quarters. They're all expected to launch between 2025 to 2027. With our most recent addition, omalizumab, we have now expanded beyond Onco to allergy. This product represents $2,600,000,000 of U.

Speaker 2

S. Market today and we see a significant biosimilar opportunity for this molecule with less competition. Overall, the U. S. Biosimilar market is estimated to grow from $4,000,000,000 to $5,000,000,000 today to $20,000,000,000 to $30,000,000,000 by 2,030 from a manufacturer's perspective.

Speaker 2

We see biosimilars as the next wave of affordable medicines. With adoption rates over 80%, biosimilars are increasing excess and driving affordability to important biologics therapy for patients. We look to build a significant biosimilar portfolio through in licensing and vertical integration over time to be one of the top global biosimilar players. Next, internationally, we are just beginning to gain traction. In India, we are building a customized portfolio of specialty products.

Speaker 2

In other geographies, we are working with partners to commercialize select Amneal products in key markets and we'll start supplying products in the Q4. We expect international revenues will add $20,000,000 to $30,000,000 in 2025, build to $50,000,000 to $100,000,000 by 2027 and rapidly scale after that. This represents the new growth factor for Amneal in the long term. Finally, our AvCare distribution business has more than doubled since we acquired it in 2020. This robust growth is driven by ongoing expansion across all three of our cash channel, distribution, government and unit dose.

Speaker 2

We're especially proud to serve military veterans through AvCare's government channel. Now we expect over 675,000,000 dollars in AvCare revenue in 2025. Overall, as we continue to grow and further diversify, we are providing more patient providers and payers with access to high quality affordable and essential medicines as we are having a profoundly positive societal impact. We have demonstrated that our growth is durable and sustainable over long term. We believe the true potential and value of Amneal is yet to be realized.

Speaker 2

I'll now hand it to my brother, Chintu.

Speaker 3

Good morning, everyone. Thank you, Shirag, and thank you to the global Amneal family who helped make Handi possible with their deep passion, great talents and hard work. I will begin with CrackSant and then discuss our core strength in innovation and operations, which favor long runway for sustainable growth. We are very excited and delighted to receive the U. S.

Speaker 3

FDA approval of treatment paradigm for Parkinson's disease. IPX203 has been our number one R and D program for years and its successful approval this week is a remarkable accomplishment by our team. As a background, Parkinson's disease is a degenerative neurological disorder that severely impacts everyday life. Over 90% of Parkinson's patients today are on carbidopa levodopa therapy. However, over 40% experience wearing of symptoms within 2 and half years after diagnosis.

Speaker 3

Some patients take up to 10 immediate release doses per day and still experience motor fluctuations. Kraxol promises to ease this burden for patients and improve their daily living. Krexant is an innovative formulation consisting of IR granules for rapid onset and ER palates for long lasting efficacy. Kratxon delivers more good on time with less frequent dosing. For Phase 3 post hoc analysis, Craxone showed 1.6 hours more good on time per dose than IR.

Speaker 3

As a leader in the Parkinson's space, we are proud to advance the standard of care for patients. In Specialty, we are continually evolving our R and D efforts to move up the value chain. Next up is the DHE auto injector for migraine and cluster headache. We are on target to complete our NDA response in quarter 4, which would put us in a good position to launch in the Q2 of next year once approved. Let me touch on our industry leading complex generics portfolio.

Speaker 3

We have launched 15 new products year to date and are on track to launch over 30 again this year. Our pipeline remains deep with 80 new product ANDA pending, 63% of which are non oral solids. In addition, we have 65 pipeline products, 94% of which are non oral solids. Our world class global infrastructure is optimized and ready to support the commercialization of our pipeline. Within our R and D organization, we have enhanced our efficiency, execution and scientific capabilities to develop complex products on shorter timelines and a lot less cost.

Speaker 3

As a result, we are allocating more investment towards external R and D, especially in biosimilar and specialty. I will now touch on a few key programs. First, our recent launch of naloxone nasal spray is going well. With this product, we are expanding access to a critical rescue medicine for treating drug overdoses. We started distribution to retail pharmacies and the state of California in the Q2.

Speaker 3

Next, our first major inhalation product albuterol sulfate has FDA goal date in the Q4. This is the first in a series of inhalation launches we have planned over the next several years. We are also on target to file our 1st RescuMed product by the end of 2025. Inhalation is a new vector of growth for our business. In injectable, we launched 9 new products so far this year, including our first 505B2 products, Pemredi and Forsynvents, and recently approved potassium phosphate bag.

Speaker 3

We have developed our 505B2 injectable strategy very uniquely based on feedback from many stakeholders. As a result, we have built a curated pipeline of unique injectable product presentations. We look to launch 22355E2 injectables each year with about 15 currently in development. Our other complex injectable IND programs in microspheres, liposomes and drug device combinations are also advancing nicely in our pipeline. Next in biosimilar, we are thoughtfully expanding our portfolio.

Speaker 3

Building on the success of our first three commercial products, we have in licensed 5 additional biosimilar pipeline candidates since December of 2023. First, we expect to file our 2 denosimumab biosimilar for Prolia and XGEVA in Q4 this year. After that, we expect to file our backfillgrass team, onboard injector and prefilled auto injector products. In addition, we are excited to add omalizumab, a biosimilar for Zolad, to our pipeline. Our partner recently completed Phase III trial enrollment with expected BLA filing by Q4 of 2025.

Speaker 3

This marks our expansion in biosimilars beyond oncology to immunology and our commitment to be a leader in this space. We will opportunistically add more molecules, particularly in less crowded categories to our pipeline and look to be vertically integrated over time. Internationally, we have distribution partners in place for key developed and emerging markets. Our team has completed over 150 product registration filings since last year through the first half of this year. We are registering products globally, including in Europe, Canada, China and emerging markets.

Speaker 3

International expansion is a key area of focus for us at Amneal. Moving to operations. Quality remains at the center of everything we do. We make continuous investment in automation, digitization and AI technologies to support quality and advance our global infrastructure. This year, we had several successful FDA inspections at our sites.

Speaker 3

Amneal's success is grounded in our deep commitment to operational excellence, exceptional customer service, driving efficiencies and maintaining a robust supply chain. Across our supply chain, we are focused on what we call the 3 R's redundancy, resiliency and reliability. We are focused on long term cost savings by validating secondary sourcing, operational excellence and moving production in house. In addition, truck shortages remain a challenge for the U. S.

Speaker 3

Supply chain, and we are doing our part to address shortages, especially for injectable. We have expanded our injectables manufacturing capacity in recent years to 19 production lines, which will allow us to drive long term growth in injectables. Overall, Amlan is expanding and growing in the key areas of medicine: specialty brands, biosimilars, injectables, complex generics, international and distribution. We are solely passionate about our company's mission and purpose and the good work that remain ahead. Emile is part of the solution in addressing several of the critical health care challenges in the U.

Speaker 3

S. Today. I will now pass it over to Tasos.

Speaker 4

Thank you, Chindhu. I'll start with our strong second quarter results, then move to our first half and then discuss our higher 2024 guidance expectations. 5 months ago, during our March 1 earnings call, we outlined how our growth will meaningfully accelerate in 2024. We laid out an array of growth drivers, including biosimilars, new products, our specialty portfolio, continued after expansion and strong execution across our business. What we said we would do, we are doing.

Speaker 4

With strong momentum across our diversified business, we're driving accelerated top and bottom line growth and continuing reducing our debt levels. Let me now turn to our 2nd quarter results. Q2 revenues of 702,000,000 dollars grew 17% with growth across our three business segments. Q2 generics net revenue of $427,000,000 grew 14%, driven by our diverse portfolio of complex products. Biosimilars generated $30,000,000 in revenue driven by Alenesis.

Speaker 4

New products launched in 2023 2024 added $36,000,000 to Q2 revenue growth. Additionally, our base portfolio continued to perform very well, driven by robust demand for our complex portfolio and our strong execution by our supply chain and commercial teams. We're working incredibly hard to ensure the needs of our partners and patients have been met on a daily basis. Our 2nd quarter specialty net revenue of $104,000,000 grew 7%, driven by our key branded products, including the recent addition of AgenTis. Q2 AvCare net revenue of $170,000,000 grew 33%, reflecting continued strong growth across all three sales channels.

Speaker 4

Our overall 2nd quarter adjusted gross margins of 41% continued to be very robust and in line with expectations. Our 2nd quarter adjusted EBITDA of $162,000,000 grew 11%, reflecting robust revenue growth and operating expense leverage. Our 2nd quarter adjusted EPS of $0.16 declined $0.03 as higher EBITDA was offset by interest expense and higher shares outstanding. Looking at our first half financial performance, total company revenues grew 18% with double digit revenue growth across all three segments: generics, up 14%, specialty up 11% and healthcare up 33%. Our first half adjusted EBITDA of $315,000,000 is up 20% year over year.

Speaker 4

With continued broad based strength across our business and operating expense leverage, we're pleased to raise our full year 2024 guidance. We now expect 2024 full year net revenue between $2,700,000,000 $2,800,000,000 dollars up about $150,000,000 from prior guidance, which reflects 13% to 17% year over year growth. Due to higher revenues, we now expect 2024 adjusted EBITDA of $610,000,000 to 630,000,000 dollars up from $580,000,000 to $620,000,000 which reflects 9% to 13% year over year growth. We expect 2024 adjusted EPS between $0.57 $0.63 up from $0.53 to $0.63 in prior guidance. Our increased 20 24 guidance reflects the ongoing strong performance and momentum across our businesses, continued investments in R and D as we grow our biosimilars pipeline and our commercialization efforts around the upcoming cracksand launch.

Speaker 4

The addition of cracksand is an important new catalyst that bolsters our long term top and bottom line growth profile. Combined with the array of growth drivers we have highlighted today and those not yet disclosed, we're confident in our ability to drive sustainable long term top and bottom line growth. Let me now turn to our cash and our balance sheet, where our strong financial performance is translating into higher cash generation and deleveraging, which are key pillars of value creation. We now expect higher operating cash flow of $280,000,000 to $320,000,000 in 20.24, up $20,000,000 from prior guidance, excluding legal settlements. Also, we continue to steadily reduce debt as net leverage has decreased from 7.4x in 2019 to 4.4x in the 2nd quarter.

Speaker 4

We plan to pay down over $100,000,000 in debt in the second half of twenty twenty four, including $14,000,000 already paid down in July. We expect to reduce net leverage to about 4x by the end of this year on our way to below 3x over the next few years.

Speaker 2

I will now turn the call back to Chirag. Thank you, Tassos. Q2 was an outstanding quarter on many fronts as we achieved strong performance and raised our full year outlook. With the approval of Craxant, we expect the momentum to continue building with additional catalyst on the horizon. As we look forward, we're excited for the opportunities ahead access to high quality affordable medicines, improve lives and create value for our shareholders.

Speaker 2

Let's now open the call for Q and A.

Operator

Thank you, The first question comes from David Amsellem from Piper Sandler. Please go ahead.

Speaker 5

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

Speaker 5

So that's number 1. Then number 2, just wanted to pick your brain on complex generics, particularly interested in what you're thinking regarding GLP-one generics. I think you called out an exenitide pen in your slides. Are there others, the obvious suspects here that you're looking to file on down the road? Wanted to get your thoughts there.

Speaker 4

Thank you.

Speaker 2

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

Speaker 2

Therefore, we have devised a great pricing plan where it's more affordable for seniors, especially the Part D. And with the new Part D out of pocket, we expect the adoption for this product and the coverage would be even better. And the fulfillment of prescriptions will be better than previously. We used to lose 20% to 30% prescriptions due to coverage or due to donut hole, we expect that to be much better going forward. Joe, do you want to add anything?

Speaker 6

Sure. Dave, thanks for the question. The only thing I would add from what Shruk said is that remember too, we've been in this market now for over a decade. So we've developed very, very good expertise in contracting with the payers. So we're intending to leverage that and to Shrogg's point, we're also going to be building a pretty comprehensive patient support program to ensure reimbursement and patients actually get on paid therapy to Shirock's point.

Speaker 6

So the experience that we've leveraged with Rytary really enables us to ensure access for KRYXANAV.

Speaker 2

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

Speaker 3

Yes. Hi, Dave. Good morning. So as you know, Amneal is very focused on a complex product development. And we have spent many years of understanding the anti peptide space and the drug device combination.

Speaker 3

So we are in a pretty good shape. As you mentioned, externatide is the was the first GLP that was developed by Intuit and most likely we'll be launching that product in the next quarter. That does give us the platform to develop more. We do have other GLPs in pipeline. We have not disclosed issuance, but we do have a deep understanding of API peptide and manufacturing with drug device combination.

Speaker 3

So we have a good pipeline in this category of drug. Stay tuned, David.

Speaker 4

That's helpful. Thank you.

Operator

Thank you. The next question is from Lesley Wilksky from Truett Securities. Please go ahead.

Speaker 7

Good morning. Thank you for taking my questions and congrats on the approval of Kratxon. Just three questions for me. So maybe first to focus on Crackson now that it's approved. I would imagine you have an improved profile across your lenders.

Speaker 7

Any consideration for a chunky BD plan, further advance your specialty portfolio or does the focus remain on internal pipeline with some tuck ins along the way? Second question is on residual investments in CapEx. I believe you maintained $60,000,000 to $70,000,000 guidance. So just kind of wondering how that second half of the year plans out and then also 2025. And then 3rd, on the DHE auto injector launch, I believe that was initially expected in kind of the earlier first half of next year.

Speaker 7

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

Speaker 2

Hey, Les. Good morning. So we are steadfastly focused on getting to 3 times, as Tassos mentioned on a leverage profile. Until then, expect us to keep doing the R and D deals and those are really good for us. We do have a large budget of R and D and as my brother mentioned that we internally for GX now the spend has gone down, right.

Speaker 2

I mean, it's still a good amount of spend, but not as what it used to be in 20 16, 2017, 2018, 2019, right? So we have more dollars available for R and D deals and we may acquire some of the commercial assets in the areas we operate, all on the branded side. So that will remain as a BD plan. And then obviously, we'll be after we get to 3 times, we will be very engaged in a very smart business developments and acquisitions as we have our intention is to keep growing Amneal to the next level and next level. We have one of the best team to do that and one of the best foundations in the industry.

Speaker 2

So we'll expect us to keep doing good business development over time. Your second question on CapEx. CapEx will go up from next year and we'll share that detail. This year is in line, as we plan to expand certain specific areas, which we'll share information when we have it. DHE auto injector has always been a first half launch and which allows us to specialty team to focus on Trexond and we're completing stability in Q4.

Speaker 2

It's our own site, so we don't expect any delays anymore. And after that PAS,

Speaker 3

so 4 to 6 months after that. We expect approval sometimes April, May.

Speaker 2

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

Speaker 7

Excellent. Thank you for the color.

Speaker 2

Thanks, Les.

Operator

Thank you. The next question is from Chris Schott from JPMorgan. Please go ahead.

Speaker 8

Thank you so much. This is Ekaterina on for Chris. Thank you for taking our questions. So just 2, if I may. So first, just on biosimilar Prolia and XGEVA.

Speaker 8

Can you talk about your expectations for those markets? And are you expecting similar dynamics to what we saw with HUMIRA and kind of any learnings from how that market is evolving over time in terms of the contracting and the PBM stuff? And then the second question is just on generic pricing. Can you just talk a little bit more about the broader environment? I think you've touched upon this in the prepared remarks, but just what you're seeing in terms of shortages and just the general pricing environment and anything that's kind of changing or something that you're kind of calling out or paying attention to?

Speaker 8

Thank you so much.

Speaker 2

Thank you, Catalina. So, Prolia and XGEVA, it touches both markets, the PBM as well as buying bill. And we have expertise in both commercial segment as we have been working with buying groups over last 20 years, great relationship with them. So these are similar buying groups have been formed for biosimilar products and we expect to have a fantastic relationship with them just like we are ranked top of the line today with our retail buying groups, we'll have the similar relationships. So we expect we like that what happened with Humira as aggressively and we knew this would happen.

Speaker 2

Eventually, the biosimilars will gain 80% or so market share because it's designed to do that. So we're not worried about market penetration for both products and HUMIRA lessons were multiple lessons, right, and which is kind of stabilized the industry as well as you have less competition developing biosimilars than what it used to be. And it's more of a play for companies like us, Teva, Sandoz, which are focused on biosimilars, who already have experience providing affordable medicines. And your second question on GX pricing, it's better than before. It was unsustainable in 2016, 2017, 2018, 2019, 2020 painful years.

Speaker 2

And manufacturers cannot just keep lowering prices. We have obligations to patients. We have obligations to quality systems. We have obligations to the government of United States as well. So we just this is an essential industry, fills 92% of prescriptions.

Speaker 2

It is much needed. It has to be sustainable. And it's a robust industry. I don't know why you would somebody would sell GX business. We think about it what we are doing and part of GX now is injectables, biosimilars.

Speaker 2

So this it's a critical industry and I hope we start getting respect that we deserve and pricing that we deserve.

Speaker 8

Thank you so much.

Operator

Thank you. The next question is from Balaji Prasad from Barclays. Please go

Speaker 9

ahead. Hey, good morning. This is Shao on for Balaji. Thanks for taking our questions. So can you talk about how you see your Parkinson's franchise evolve now with Caraximol approved?

Speaker 9

What will be the pace of ramp up look like in the next few years? And how do you expect to achieve synergy within the three assets of your Parkinson's franchise? And also, could you comment a little bit on how will CRAXMAN impact your margin profile next year and over the next 3 years? Thanks so much.

Speaker 2

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

Speaker 2

It's the I think we can do more for this disease state and we will continue to do so. And it's fantastic synergy, right? The COMT inhibitor with CDLD COMT inhibitor for certain patients increases the levodopa or it keeps it longer in the brain. So which is completely synergistic to market both product, Trexant and Ongentus. And as we launch more products, which are specialty biosimilars, even the inhalations, our margin profile should improve on the specialty side, it should improve on GX and you see the margins, the AvCare margins obviously is a distribution business, so which are all going to be lower.

Speaker 2

So that's when you combine it, total margin will improve.

Speaker 9

Thanks, Shoaib, and congrats on that approval again.

Speaker 2

Thank you very much.

Operator

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

Speaker 2

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

Speaker 3

Thank you.

Speaker 1

Thanks everyone.

Operator

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

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Key Takeaways

  • Amneal received FDA approval for Crexant (IPX203) for Parkinson’s disease, plans a September launch with expected U.S. peak sales of $300–500 million and specialty revenues over $500 million by 2027.
  • In Q2 2024, Amneal reported revenue of $702 million, up 17% year-over-year, and raised full-year guidance to $2.7–$2.8 billion in revenues and $610–$630 million in adjusted EBITDA.
  • The generic segment grew 14% in the first half, driven by 30 annual complex launches, tripled injectable capacity to 60 million units, and a biosimilars business on track for over $125 million in 2024 with five more products launching through 2027.
  • Amneal strengthened its balance sheet, reducing net leverage from 7.4x in 2019 to 4.4x in Q2 and targeting around 4x by year-end with $280–$320 million in operating cash flow expected in 2024.
  • The company is expanding internationally—with $20–$30 million in revenues forecast for 2025 scaling to $50–$100 million by 2027—and expects AvCare distribution revenues to exceed $675 million in 2025.
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Earnings Conference Call
Amneal Pharmaceuticals Q2 2024
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