Amneal Pharmaceuticals, Inc. (NYSE:AMRX) Q3 2023 Earnings Call Transcript

Behind that, we have 78 pipeline products, of which 90% are non-oral solids. We have shifted our focus to high-value complex categories with approximately 45% of pending ANDAs and over 60% of our pipeline expected to be first to market, first-to-file or 505(b)(2) products. In Injectables, we have launched 10 new products year-to-date including two high-value products in Q3 with potassium phosphate and calcium gluconate bags. Also we recently received approval for methylprednisolone acetate, which is in shortage. Further, we are advancing a number of complex injectables in our pipeline. In Q3, we filed our first to 505(b)(2) ready-to-use bags as planned. We expect to file several long-acting injectables in the near-term as well. As a result, we expect a strong cadence of impactful new injectables to continue in 2024, including the launch of already approved Pemry-DRTU.

After injectables, we see inhalation as Amneal’s next key growth area in complex generics. Our pending ANDA for a generic version of Narcan is under priority review and we look to launch in the coming months upon approval. This important over-the-counter product improves access to a critical overdose tripped. In addition, we have two key meter-dose inhaler ANDAs pending for generic version of QR and Pro. In biosimilars, our first three oncology products are seeing excellent uptake and we have added two additional molecules to the pipeline. We are also evaluating opportunities to be vertically integrated over time. Please see our catalyst slide for the list of recent and upcoming launches. Turning to specialty R&D, we continue to work to advance our 505(b)(2) pipeline.

On IPX203 as Chirag highlighted, we had a successful Type A meeting with FDA last month to align on the path to approval. As agreed with FDA, we are in the process of completing a small routine QT study in healthy patients. We will complete the study in the coming months and we will resubmit our NDA in early 2024. We are working diligently towards an IPX203 launch in the second half of 2024 pending FDA approval. We continue to see IPX203 as a critical innovation that meaningfully advances the standard of care for Parkinson’s patients. In summary, we are driving operational excellence and executing our innovation strategy, which together are fueling our ability to drive sustainable growth. I will now hand it over to Tasos.

Tasos Konidaris: Thank you, Chintu. Let me first start with the four pillars of value creation from Amneal. That is diversification, strong financial performance, cash generation; and fourth overall debt reduction. First starting with increased diversification. Chirag and Chintu touched on this throughout the overview of Amneal’s strategy and business highlights. Since 2019, the portfolio is remarkably more diversified with new lines of business. In 2019, oral solid generics represented 53% of total revenue. Now in 2023 with new complex generic launches growth in injectables and specialty and the addition of biosimilar in AvKARE, the portion of oral solid generic revenue is less than half of that at only 26%, of the total company revenues.

The higher level of diversification was intentional and driven by our desire to deliver consistent financial performance, despite the typical ups and downs of any business. As a result, our diversified portfolio is driving sustainable higher levels of growth and profitability, as well as increased future visibility. Let me now move to our second pillar, for strong financial performance. As an example, since 2019, our annual revenues have increased by over $800 million or 50% while adjusted EBITDA is up about $200 million or 60%. Consequently, our third quarter strong financial performance is not an isolated event and reflects strong execution, across our strategic choices for a number of quarters and years. Let me now go into a bit more detail of our third quarter results.

Total net revenue was $620 million, growing 14%. Adjusted EBITDA of $154 million growing 22%, adjusted EPS of $0.19 growing 36%. All three business segments grew revenue substantially this quarter. Q3 Generics net revenue was $391 million, growing 12% driven by our new biosimilars and new complex generics as new launches in 2023 and 2022 added $14 million in Q3 revenue growth. The acceleration in generics growth in 2023, reflects the continued shift towards a diverse complex portfolio and the addition of key new products that are added to growth. Next, in Specialty net revenue was $97 million, growing 9% driven by Unithroid and Rytary. Q3 after net revenue of $132 million, grew 25% which reflects strong execution in new product introductions by the team.

Q3 adjusted EBITDA of $154 million, reflects strong revenues, durable gross margins and tight expense management. Looking at our Q3 year-to-date results. Total company revenue growth is 11%, with generics up 7% and specialty growing at 5% and AvKare growing at 28%. Combined with stable gross margins and operating expense leverage, year-to-date adjusted EBITDA grew 16% and adjusted EPS grew 11%. Let me now move to our 2023 full year guidance, where given the continued strong performance across the business, we’re raising our full year 2023 expectations again this quarter. We now expect net revenue of $2.37 billion to $2.42 billion, which reflects high single-digit revenue growth. Due to higher revenues, we are raising our 2023 adjusted EBITDA guidance to $540 million to $550 million and adjusted EPS range between $0.51 [indiscernible].

Let me now move on how strong financial performance is translating, into the third pillar of value creation. That is higher cash generation. In 2023, in conjunction with higher profitability and our efforts to drive working capital improvements, our center year-to-date operating cash flow on an underlying basis has grown about 40% to $295 million compared to $213 million for the first nine months of 2022. Going forward, we’re focused on converting an increased amount of higher EBITDA to operating cash flow, as a fraction of targeting further working capital improvements and thoughtful CapEx investments. In addition, as you may have noticed on Form 8-K, we filed on October 17, we made important progress on a key legacy item, that is transitioning from an Up-C Corp structure to a more traditional C-Corp structure.