Good day, and welcome to the Amneal Pharmaceuticals’ Fourth Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Todd Branning, CFO. Please go ahead.

Thank you, and good morning. Welcome to Amneal's Fourth Quarter 2019 Earnings Call. Earlier this morning, we issued press release reporting our quarterly results. The press releases as well as the slides that will be presented on this call are available on our website at www.amneal.com. We are conducting a live webcast of this call, a replay of which will also be available on our website after its conclusion. Please note that today's call is copyrighted material of Amneal and cannot be rebroadcast without the Company's expressed written consent. I would also like to remind you that during the course of this call, management will make projections or other forward-looking remarks regarding future events or the future financial performance of the Company. It's important to note that such statements about estimated or anticipated in Amneal results, prospects or other non-historical facts are forward-looking statements and reflect our current perspective of existing trends and information as of today's date. Amneal disclaims any intent or obligation to update these forward-looking statements except as expressly required by the law. Actual results may differ materially from current expectations and projections depending on a number of factors affecting the Amneal business. These factors are detailed in our periodic public filings with the Securities and Exchange Commission, including, but not limited to, the Amneal Pharmaceuticals, Inc. Form 10-K for the period ended December 31, 2018. Our discussion today also includes certain non-GAAP measures as defined by the SEC. Management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the Company's operations and to better understand its business. Further, management believes the inclusion of non-GAAP financial measures provides meaningful supplementary information to and facilitates analysis by investors in evaluating the Company's financial performance, results of operations and trends. A reconciliation of GAAP to non-GAAP measures is available in this morning's press release and in the appendix of today's presentation. On the call this morning are Chirag Patel and Chintu Patel, our co-CEOs. Following the prepared remarks, we will hold the Q&A session. Also on the call and available for Q&A is Andy Boyer, our Executive Vice President of Commercial Operations; Joe Todisco, Senior Vice President of Specialty Commercial; and Steve Manzano , our General Counsel and Corporate Secretary. For our agenda today, Chirag and Chintu will begin with a discussion on our strategic direction. I will then review detailed financial results. Finally, we will have a question-and-answer session following the prepared remarks. And with that I would like to turn the call over to Chirag.

Thank you, Todd. Good morning, everyone and thank you for joining us today to review Amneal's fourth quarter and full year results. When Chintu and I rejoined Amneal as Co-CEOs in August, we laid out our plan to put the company back on track and lead it in its next phase of growth. We told you that we would revitalize our generics business, continue to grow the specialty franchise and improve our margins and cash flow; expand into international markets and evaluate strategic M&A. And in the last seven months, we have taken steps to do just that. We have launched 15 new generic products including high-value first-to-market ones like NuvaRing and Carafate have one new award for our base business. We have seen continued script growth for key specialty products Rytary and Unithroid. We have already increased our generics gross margin by 350 basis points from Q3 to Q4, 2019. And continue to make progress. We have entered into collaboration with Fosun Pharma to enter the Chinese market with certain products from our product portfolio. And we have executed on the acquisition of a majority stake in AvKARE, which diversifies is our channel mix and provides an attractive durable revenue stream. As you can see our efforts are already bearing fruit. Our fourth quarter results build on the momentum from the third quarter and demonstrate that our strategies are working and these result sets up nicely to enter 2020 with strong momentum. Now let me turn to the specifics. When we founded Amneal, our goal was to provide access and affordability for prescription drugs. For nearly two decades we have done just that and today is no different. The industry is changing quickly and significantly to continue to differentiate Amneal we recognize that our playbook and strategy need to…

Thank you, Chirag. I would like to start by reiterating my brother's enthusiasm about the direction of our business. We started to see improvements at the end of the year and we are excited about the opportunities to grow and build on Amneal's strong foundation. I will start by repeating the point we have made since August our generic business is fundamentally strong. We have over 225 marketed products and a deep pipeline of file products and once we are still developing. We have worked hard to earn our reputation of producing high quality products across a variety of complex dosage forms including injectables, transdermal, topicals and liquids. And we are extremely proud of our impeccable track record in quality and customer service, which has always been a priority for us. While the industry-wide headwinds of increased competition and concentration in buying power contributed to major gross margin declines across the industry over the last few years, the level of compression we saw at Amneal when we took over as CO-CEOS was unacceptable. We have been laser focused in our efforts to improve our margin structure and ultimately reach our target of 40 plus percent gross margin in the generic segment as soon as possible. We have already begun executing on these initiatives. First, we have improved plant utilization across our manufacturing infrastructure. We oversaw the transfer of many lower value oral solid products to our sites in India, which have more competitive cost structures. We have already increased volume for our complex products including transdermal, liquids, rings and injectables which has improved absorption at the plant level and as Chirag mentioned, we have proactively won additional incremental awards for base business products, 30 in the second half of last year alone, which will have a material impact on our…

Thanks Chintu. Good morning, everyone. Before I dive into our results from the fourth quarter, I would like to express my enthusiasm at the positive trends we are seeing as we move into 2020. We continue to face a challenging generics marketplace, but the work we have done to address internal inefficiencies and better position Amneal to capitalize on growth opportunities has already had a positive impact on our financial results. We believe we are well-positioned to build on this momentum through 2020 and beyond. Now turning to the results. Total net revenue in the fourth quarter was $397 million compared to $378 million in this year's third quarter, a 5% sequential increase driven by sales from new products launched in the fourth quarter including in December the first generic versions of NuvaRing and Carafate. Gross margin in the fourth quarter improved to 43%, an increase of 350 basis points from the third quarter 2019 due to favorable volume and mix, new product launches and lower inventory obsolescence charges which more than offset price erosion. We are continuing to actively manage operating expenses across the organization. In the fourth quarter 2019, adjusted R&D and SG&A expenses were $43 million and $64 million respectively probably in line with our current run rates levels for these expenditures. Adjusted EBITDA and adjusted diluted earnings per share for the fourth quarter 2019 were $81 million and $0.08 respectively, both sequential improvements as a result of higher revenues and better gross margins compared to the third quarter of 2019. Moving to a review of our generic segment results compared to the third quarter of 2019. Net revenues grew 3% driven primarily by the launches of generic NuvaRing and generic Carafate. We were pleased to see the expansion of our generics gross margin from 30% we…

Thank you, Todd. While we are proud to be having seen improvement this quarter, we are aware that we still have a long way to go reach our goals. We expect the trends we are seeing to continue as we work aggressively to improve operations and gain greater efficiencies, drive gross margin expansion and generate growth in 2020 and beyond. As we look through challenging market conditions and internal changes, we continue to operate in a solid financial position with no near-term debt maturities or covenant compliance concerns. We are excited to reinvest in the business in the coming quarters years and rebuild Amneal into the leader we know it can be. Thank you. With that I'll turn the call back to Todd.

Thank you, Chirag. Before we open up the line for questions, I'd ask that you please limit yourself to one question and one follow-up. So we can get through a number of callers in the queue. So with that I'll turn the call back to the operator to open it up for questions, please.

[Operator Instructions] The first question today comes from Elliot Wilbur of Raymond James. Please go ahead.

Thanks, good morning. Just a quick couple of questions around the AvKARE business. At the time of acquisition I think you reported that EBITDA was right over --just over 2020 and then also wondered if we get may be top-line contribution just really trying to understand sort of how that business impacts overall margins I assume that that is going to be or actually I don't know the answer. Is that going to be reported as a separate segment or is that going to be consolidated into generic results? But just try to get a sense of how that business impacts the overall margin profile. And then just as a follow-up just a macro question hearing a lot of noise out of China with respect to the impact of Coronavirus and how that could impact the generic supply chain. Seems like companies that are closest to the API world are suggesting there could be issues relatively near-term, others are indicating they've got plenty of safety stock on hand and there shouldn't be issues for a couple of quarters. Just wondering what your perspective is on the issue whether there's any Amneal specific risks and what you may be hearing from the overall competitive environment in terms of whether or not there will be a potential negative impact or shortages. Thanks.

Okay. So this is Todd. Thank you for your questions. I'll take the first couple you asked in respect to AvKARE. And then ask Chirag and Chintu to answer the last question as it relates to supply change. So the adjusted EBITDA amount that we disclosed when we announced AvKARE transaction a little over $60 million is a reasonable run rate for a full year. Of course, that'll be a little less contribution to us in 2020 simply because we closed the transaction at the end of January. And so we'll only get 11 months contribution this year but you can work still with that figure as an approximate run rate of EBITDA for the business for this year. In terms of the top-line contribution, we're not going to disclose that the revenue estimate for AvKARE today. It will be reported as a separate segment in our results apart from the generic segment and the specialty segment. So when we report the first quarter, it will be included for a couple months and will be some additional visibility into the financial profile of that business at that time.

Elliot, good morning. So far our exposure to Coronavirus is limited. We expect one product to be impacted over next three months and other products could be in a single-digit away six months plus since we have this --we have stock and proactively we're working with our API suppliers in India and other parts of the world Europe to have alternate key starting materials. So we don't at this point see any impact at all. And just to add one point most of our APIs are coming out of India, Europe and US. We only have a single digit API coming from China and as Chirag said, we have taken proactive measures to protect our supply chain and we don't at this point anticipate issues over the near term.

The next question today comes from David Amsellem of Piper Sandler, please go ahead.

Thanks, so wanted to focus on your two newest generics NuvaRing and Carafate. So on NuvaRing, can you just talk about how much of the market you can supply? And I believe that you have or will file a CV-30 for a more automated manufacturing process. Can you talk about what that means in terms of your ability to supply more of the market? And then in terms of competition on NuvaRing, what are your expectations regarding competitors specifically Teva and Reddy's or even anyone else down the road? And then I guess the same question for Carafate, how should we think about competitive expectations for that product? Thanks.

Thank you, David. Good morning. NuvaRing, we have approximately 16% market share, our CE-30 for the automated machine, fully automated machine has been approved. And we are ramping up our production as we stated earlier. Our goal is to get 25% to 30% market share. Competition, we expect in the first half mainly from Teva and even with the competition and authorized generics, we should be able to keep our market share of 25%-30%. We do not expect other competitors maybe in the late in the year but not throughout early part of the year. Moving to Carafate, we have almost 60% market share as AG has launched in January. And we do not expect any competition this year.

Our next question comes from Greg Gilbert of SunTrust, please go ahead.

Thank you. Just to follow up first on AvKARE. I was curious if you're seeing any customer concerns or questions for AvKARE now that Amneal is the majority owner, it sounds like you're not expecting any financial disruption but just wanted to see if you have any qualitative comments on how that hand off in the ownership stake has changed anything, if at all? And then my follow-up is for, Chirag and Chintu, curious what your appetite is as well as your flexibility to pursue additional transactions in the relative near-term that can materially diversify the business such as AvKARE something of that size or larger, thank you.

Thank you, Greg. Good morning. AvKARE actually it runs as an independent company and we have a tremendous support as you know the founders have 35% stake, they run the company and they treat every manufacturing partners equally. We have 100 manufacturing partners, tremendous support from the big manufacturers as this is a highly profitable channel for them to sell their products. And AvKARE does a great job of customer service, relationship with manufacturers, so we're actually very excited to grow that business. On the appetite and flexibility on the new transaction, as we have stated we are in the game to hit singles and doubles and now we have turned our focus onto specialty. And we're looking at number of potential transaction that can fit real nicely with our neurology basically in CNS field or endocrinology. So we're very excited to work on those and we could hit singles and doubles. We do have a flexibility to do so.

If I could interject just a single or double as AvKARE in that realm or is AvKARE triple or?

Yes. No, no, that's single and double, yes.

The next question comes from Chris Schott of JPMorgan. Please go ahead.

Great. Thanks very much for the questions. Just the first one here was on the biosimilars. Can you just elaborate a little bit more about the oncology infrastructure you expect you'll need to build out to compete in these markets? And maybe more just strategically, it seems like at least on some of these initial products you're going to be entering the market after a number of competitors have already launched? How does the company differentiate itself given that dynamic? And it's a very quick one just coming back to the guidance a bit more in gross margins that's 44% to 46%, can you give us a little more color how that breaks down by division just given the AvKARE inclusion to the P&L. I am just trying to get sense of how we think about kind of generics versus specialty versus AvKARE as we construct to get that 44% to 46%. Thanks very much.

Thank you, Chris. Good morning. Biosimilar as you are well aware how it's shaping up, it's more of a - I call it a quasi-branded business. So we have put that business in our specialty division under the leadership of Joe Todisco who has done a marvelous job leading our oncology and neurology franchise. We are already using our market access team, marketing team, customer support team to get ready for our oncology launches. The force would be added as we get closer to the launches and we plan to add more oncology assets as well. Your question on a late entry is absolutely valid one as we had a late start on a biosimilars; we don't expect to jump right into a big market share. So if you are fourth or fifth we expect 8% - 10% market share unlike the generics business, but the next version of biosimilars we intend to be first or second or third to move up the value chain that as we see this business as over 10 years or 15 years. And we are always here to stay as I said earlier; we build the business over time so we patiently will come from behind just like generics. And we'll be one of the key players in biosimilar business. On a question of a gross margin, I will turn it over to Todd the 44% to 46% includes all three segments specialty, generics and AvKARE distribution business, please Todd.

Hi, Chris. It's Todd. Thanks for the question. So as we look at 2020 for each of the segments starting with generics, we ended the year roughly mid-30s gross margin, adjusted gross margin that's how well we were starting out in 20202. We think that will improve to probably the upper 30s over the course of 2020 for reasons we talked about on the call, reduction of manufacturing inefficiencies, launch of new products, and improvement in product mix. So that's where we see that segments coming in our guidance range of 44% to 46%. Specialty is right around 75% right now that's stable and we expect that stability will continue in 2020. AvKARE, I'm not going to mention that the gross margin we have built into our numbers this morning. It's obviously a bit lower than the generics business given its predominance and distribution but the blended average of everything I just outlined is what puts us in the range of 44% to 46% for the guidance.

The next question comes from Balaji Prasad of Barclays. Please go ahead.

Hi, good morning. And congratulations on the results. So I wanted to explore a bit more a bit further on your comments on biosimilars, Chirag. So is it fair to assume that your next couple of years, next two or three years will be focused on the three products that you've disclosed. And what would you, how can I anticipate the evolution of your biosimilar strategy pipeline in the timeline and what kind of capital would you deploy behind this? And do you have any partners on any of these products? Thanks.

Thank you, Balaji. And good morning to you as well. So biosimilars is one of our specialty segment pieces of business along with generics and injectable. The evolution, we’ll have is obviously the first three products we expect to get approval and launch in the next one, two, three years. We will add on to our biosimilar pipeline by key partnership. Today, we have partnership with Kashiv BioSciences and mAbxience from Spain. We will add more partnership as we go along. Our focus as I mentioned last time is been on a regulatory and commercial. There’s plenty of manufacturing capacity people have built and R&D capacity which we’ll utilize with partners and continue on to evolve our biosimilars which would be -- we’ll build up the pipeline and as you know, oncology could have 10 products, 15 products. And that's only when we are focusing today. The capital deployment, we believe the way FDA is moving now and this is what is going to make biosimilars more affordable, more accessible and more of a game for players like us and Teva and Mylan and not a game for Pfizer and other Merck and big pharma because the approval requirements where it used to require lengthy trials, we believe would go away. And FDA would work with us on a more on analytical methods, more on PK studies and we may not have to repeat unnecessary big trials of already proven effective products. So that will bring the capital deployment to a more manageable numbers, we don't have exact number but let's say I could -- our appetite is between $25 million to $50 million per biosimilar to spend. And we see this deployment over next five years to build our pipeline.

That's very helpful, Chirag. I have follow-up on the injectables; firstly, so you had 15 new launches since August, were this just a question of timing of approvals or did the revamp management do anything differently? And on the injectables pipeline what kind of a timeline would most of this materialize? How should I factor growth around this part of your pipeline? Thanks.

So we already market almost 20 injectables products. We have started --but we do have two manufacturing plants of our own. We have a very strong pipeline to add on injectables and become a key player in coming years. Today, we are approximately $120 million to $150 million in injectable revenue. We see that as a key growth driver in next five years. As you know, that we have the great R&D capabilities and our focus has turned more into injectables as well as biosimilars and specialty products so we will expand that. The 15 complex products we expect to launch over 18 to 24 months which we have launched four already which includes both, so these are complex products only. We do have other product launches as well this year. So I just want to make sure we're not confusing the street by 15 only, it's 15 plus I call it regular products.

The next question today comes from Randall Stanicky of RBC Capital Markets. Please go ahead.

Great. Thanks, guys. How much new launch revenue have you built into the outlook for 2020? And how does that compare to how you're thinking about 2021? Is it more? Is it less on a relative basis? And then the follow-up question just on opioids, how are you guys currently thinking about the opioid exposure? And what are the next data points from an Amneal perspective that we should be focused on. Thanks.

Good morning, Randall. On -- we have significant new revenues obviously with Carafate and NuvaRing launched in December. We have not broken it down so but let's call it a significant in 2021 will continue because of the pipeline that we've been investing over years, that all comes to approval cycle over next several years. And we'll keep filing new products as well and we have revamped the R&D to file the products we used to file very high-value products. So very excited about the new product revenues in 2020 and coming years. On opioid exposure since we have our GC here, this is Steve Manzano. I'm going to turn it over to him.

Thank you, Chirag. Randall on the opioid exposure in terms of data points I really can't give you any data points that are coming soon. The reason is that we’re trying to defend it at the end of the day; it seems that the multi district litigation judge is focusing on promotion activities, as well as distributor activities in terms of the case which Amneal is neither one of those. So we have been purely a generic provider of opioids and have not engaged in promotional activities about the safety and efficacy of the generic opioids that we are -- that to prescribing physicians, patients and for anybody else.

Yes. So there are no activities at this point, Randall.

The next question today comes from Ami Fadia of SVB Leerink, please go ahead

Hi this is Sharon on for Ami. Congratulations on the good quarter and our main question is you expect about 15 new filing this year, how many of those new launches do you expect this year? And how many of those are that kind of high-value complex generics? And the follow-up question is on IPX-203, the timeline seems to have been delayed a few times in the past, what's the main challenge there? Thanks.

Yes. Hi, good morning. Just for clarity we expect to file 20 to 25 new products in year 2020. And we are expected to launch close to 30-plus new launches in year 2020. As far as IPX-203, as you know, the always challenge is recruitment and that's why certain timelines have shifted slightly. But we feel very comfortable to have a top-line data by first half 2021 and commercialize the product no later than 2023.

Could you clarify, among those remaining maybe 11 high-valued new launches you identified before, how many you can potentially launch?

A good question but we don't -- because certain things are with agency, but we think we'll have few in coming year in 2020. But we are not at this time prepared to give exact number, but we do expect that we will have few in 2020.

The next question today comes from Gary Nachman of BMO Capital Markets, please go ahead.

Hi, good morning. And maybe you can provide a general comment on how challenging the environment has been for new complex launches, like NuvaRing and Carafate versus the way it was over the last couple of years, it seems like you're grabbing some good share. Are you giving up a fair amount of price in order to be able to do that? And then just a quick follow-up on the generic gross margin, how long will it take to get to the greater than 40% goal? Just lay out the path for that, maybe you could get there in 2021 if you do high 30s like you said in 2020? Thank you very much.

Yes. Good morning Gary. Nice questions. So, your first question is on the new key product launches on Carafate and NuvaRing. The market share dynamic stays the same except for the complex products, nobody builds out a 100% capacity because it requires all the capital investments, and we expect the competitors to be there. The pricing side, as you know, the three major buying groups have come down hard on generic manufacturers over the last three years, and the profitability what used to be has reduced for even the first two market products. Your second question on gross margin, the four drivers we have been working on it, since we came back the plant utilization, the efficiency in supply chain, the new product launches and operations excellence, all of them are showing results. As we continue on, as we said high 30s, our run rate would be in 40s by fourth quarter, so we expect to get that as soon as possible, complete focus is on that.

And our last question today comes from Dana Flanders of Guggenhime Securities. Please go ahead.

Hi, thanks for squeezing me in. Just two quick ones. First, has the supply situation for your generic Epinephrine improved at all, and kind of what's the outlook for that product in 2020? And then my second one actually is on just IPX-203, I know you have some data, phase 2 data expected soon, how do you think about the incremental benefit you need to see over Rytary to get both kind of physicians and payers on board to switch with Rytary generics expected five, six years from now? Thanks

Thank you, Dana, good morning. On an EpiPen supply, it's been stable to our expectations from Pfizer, so we're in an okay situation. We could use more but this is what we have forecasted, and we are getting it, so a good job by the hospital plant in the Pfizer on a supply at this point. IPX-203 phase 3, we expect the top-line results in first half. And it's a meaningful improvement over IR and over Rytary as well. We have a pretty good coverage on Rytary, and we expect the coverage to improve as our KOL and initial feedback our CMO. Everybody's excited on IPX-203 because its duration is good on time, it’s 6 to 8 hours compared to 3 to 4 hours on Rytary, and the fluctuations are much - almost half than the IR products. So very excited about 203, it can expand the market, we will have more proactive commercial strategies than the Rytary, when that was launched back a few years ago. Since we have learned a lot, we're with the community all the time, so very excited about 2 or 3. Joe, would you like to add any?

No, I’d say we're putting the framework in place now, with the agreements we have on Rytary to lay the ground for the launch by the IPX-203. So, we're confident at the point of launch, we’ll have meaningful managed care coverage. End of Q&A

This concludes our question-and-answer session. I would like to turn the conference back over to Todd Branning for any closing remarks.

Thank you, operator. I would just close by saying we appreciate you joining our call this morning. And we look forward to our ongoing dialogue with you. And with that we wish you all a good day, thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.