Hello and welcome to Amneal's First Quarter 2022 Conference Call. My name is Alex and I will be coordinating the call today. [Operator Instructions] I would now like to turn the call over to Amneal's Head of Investor Relations, Tony DiMeo. Over to you Tony?

Good morning and thank you for joining Amneal's first quarter 2022 earnings call. Today, we issued a press release reporting our financial results. The press release and a presentation are available on our website at amneal.com. And a replay of this call will be posted after the call. 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 review the section entitled cautionary statements on 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 certain non-GAAP measures. Important information on our use of these measures and reconciliation to U.S. GAAP may be found in our earnings presentation. Beginning is the first quarter of 2022 the company will no longer exclude R&A milestone expense from non-GAAP financial measures. In our press release we provide revised prior period results reflecting this change. On the call this morning are Chirag and Chintu Patel Co-CEOs; Tasos Konidaris, CFO; Andy Boyer, Generics; Joe Todisco, Specialty; and Jason Daly, our Chief Legal Officer and Corporate Secretary. I will now turn the call over to Chirag.

Thank you, Tony. And good morning, everyone. The first quarter was a good start to the year with the revenue of $498 million and adjusted EBITDA of $100 million as expected. We are on track to achieve our full year, 2022 guidance commitments of continued top and bottom line growth. Building on our consistent results and continued success in executing our strategy over the last several years, we are expanding in high growth areas, including Specialty, Injectables, and now Biosimilars. As a global essential medicines company, underlying our strategy is our focus on affordability, access and addressing unmet patient needs. Looking forward, as we continue to execute, we see our growth profile accelerating, our business mix increasingly diversifying and our impact on global healthcare expanding. Let me now provide a few updates across our businesses. Starting with Generics, our business continues to grow as our productive R&D engine continues to diversify the portfolio with new complex medicines. As a result, Amneal has a low product concentration with our largest Generics product represents only 5% of total company revenues. And our top five Generics products are only 17%. With our focus on more complex and higher barrier products over half of Generics revenue today is non-oral solids as compared to 35% a few years ago. The mix shift towards complex medicines is continuing as 86% of our pipeline is non-oral solids. Accordingly, we expect durable growth in this business, and we continue allocating returns into high growth areas. In regards to our injectable business, as we have shared with you in the past, this is a key growth area for Amneal. We are pleased that Injectables will grow approximately 30% this year to more than $160 million in revenue as we are well on our way of achieving $300 million plus…

Thank you, Chirag. And good morning, everyone. First, my sincere thanks to 7,000 plus members of the Amneal family who work hard every day to make healthy possible. We believe our relentless focus on excellence across operations, supply chain, quality and fast-driven innovation differentiates Amneal. Through our excellence programs we are constantly reducing cost and improving efficiencies. In R&D, we are directing more spend towards high growth areas, particularly Biosimilars, Specialty, Injectable, and complex generics. Let me now walk through the different aspect of our business. In Generics, we feel great about our pipeline and continued innovation in complex categories. So far in 2022, we have eight new launches. We expect 20 to 30 new launches this year and each year going forward. Just this past week, we received another CGT approval for bexarotene gel. Amneal is the industry leader in CGT approvals. Overall, we have 111 ANDAs spending across all dosage forms in generics and expect to file approximately 30 more ANDAs this year. In our pipeline of 101 products, 86% are non-oral solids and most are expected to be first-to-market, [indiscernible]. We continue to move towards an increasingly complex differentiated portfolio of over 250 molecules that is driving sustainable growth. One of the key product launches in 2022 is ritonavir, which is co-administered with Paxlovid. We are excited to be one of the main U.S. suppliers for this key COVID-19 treatment. Ritonavir is an already approved ANDA that our team has been working hard to fulfill substantial demand. In addition, we improved supply chain for Adrenaclick epinephrine auto-injector, and expect more revenue in 2022. As we look to the rest of 2022 and into 2023, we see significant launches on the horizon that will start to materialize late this year and drive growth in 2023 and beyond. We…

Thank you, Chintu. Our first quarter financial performance was in line with our expectations, and thanks to the good work by all our colleagues who are pleased to re-affirm our full year 2022 guidance for continued top and bottom line growth. For the first quarter, we reported total net revenue of $498 million, adjusted EBITDA over $100 million, and adjusted diluted EPS of $0.12. Our results include $5 million of R&D milestone expenses, which we no longer exclude from our non-GAAP results. The annual run rate of these expenses is $50 million to $20 million and represents external collaborations to advance our R&D pipeline. As policy change there is no economic [indiscernible] impact to our business. Q1 generics network of $318 million grew $5 million or 2%. Products launched in 2021 and 2022 contributed $14 million of growth offsetting the typical declines in the remaining portfolio. As we have said in the past, our focus and innovation in strong commercial execution is a key differentiating factor that enables our sustainable top line growth. Consequently products launched prior to 2019 now accounts for about 65% of generics net revenue and declining fast. This reduced reliance on older, more prone to competition products bodes well for continued growth and profitability. In Specialty, Q1 net revenue of $85 million declined $11 million or 11%, and represent the low point of quarterly revenue for the year. This performance reflects Zomig's loss of exclusivity as well as higher than typical quarterly reimbursement cost related to Lannett. We continue to be excited by the total prescription growth of Rytary and Unithroid up 6% and 13% respectively, as well as the upcoming launches of like LYVISPAH and DHT Autoinjector. Our AvKARE net revenue of $95 million grew $10 million or 12% reflecting strong customer acquisition success in…

Thank you, Tasos. In summary, we are on track for another great year in 2022. We see momentum across our business, including our first U.S. biosimilar approval. We see these growth drivers building and accelerating our company performance this year, next year and beyond. I'll now open the call to questions.

Thank you. [Operator Instructions] Our first question for today comes from Gary Nachman of BMO Capital Markets. Gary, your light is now open. Oh sorry, Gary, you might be muted. Sorry, Gary I'm still not receiving any audio. Could you make sure? [Operator Instructions]

Operator, next question.

[Operator Instructions] Our next question comes from Mikaela Franceschina from Barclays. Mikaela, your line is now open.

Hi, I'm Mikaela on from Barclays on for Balaji Prasad. Just wondering by when can you realize your U.S. peak sales guided of $200 million plus for your three biosimilars? And when thinking about your Biosimilars how do you plan to get vertically integrated and over what timeframe?

Mikaela, thank you and good morning. So the peak sales as you know we are working with getting a reimbursement in place, which would be in – should be in place by January 1, 2023. Commercial infrastructure is in place. So we expect contributions this year adding up to more contribution in 2023 and peak else I would say somewhere between 2023, 2024 we should be able to achieve that. And you had a second question on political integration. So as we are committed in a biosimilar for long-term, as we have previously stated that our strategy is dual, one is to license from key partners – trusted partners and build our own capabilities. So we are exploring different options and should be able to be vertically integrated by end of this year or the beginning of next year.

Thank you.

Thank you. Our next question comes from David Amsellem from Piper Sandler. David, your line is now open.

Hey, thanks. I joined late, so I apologize if I missed this. But on the margins, I know you talked about the AvKARE being a bigger part of the mix. I just had a bigger picture question about the role of AvKARE in the organization and to the extent that you have periods where it's a bigger part of the mix, and there's some margin compression. Do you see that as problematic, I'm just trying to get a better sense of where AvKARE fits and where is the margin profile given where you're taking the business, I guess acceptable? So that's number one. Number two is on Biosimilars. I think you laid out some assumptions about peak sales. So I wanted to get your thoughts on just your view on share – volume share and ultimately how you're seeing overall penetration in the Filgrastim and PEG-Filgrastim and bevacizumab markets playing out of Biosimilars, and what your underlying assumptions are regarding pricing erosion, share and your penetration, that would be really helpful? Thank you,

David, good morning. So I'll start with the big picture on AvKARE. AvKARE is a excellent cash flow business for us and also allows us to put more products in federal healthcare market, which is VA and DoD as you know we are one of the top two there. So margin could fluctuate it in that business. They have three businesses within AvKARE. One is the federal government, which is steady and margins, and then they have unit dose business which is growing, and the third business is pure distribution business for City of Philadelphia, and they have added few more cities. So it's a great business. It will fluctuate between 15% to 20% of gross margin and we keep adding the top line. So we should be focused on top line as well. Anything else on AvKARE Tasos.

No, you are spot on. It's a sustainable business. It is growing both top line and bottom line. David is correct. The overall margin of that business is less so than the rest of our business, but we're really focused on total absolute dollars return there.

Yes.

And whether or not one quarter AvKARE in this situation 15% gross margin versus 18%, that's where it's going to fluctuate and doesn't really move the needle that much from a total company perspective. So the key driver there is Specialty, which continues to be almost 80% in our generics, which as you know over the last three years, we've grown it from mid-30s to substantially more than 40%,so that will be then.

Yes, and our second question, thank you, Tasos, on Biosimilars. The excellent part is the commercial team is in place, led by Harsher Singh and excellent team with a couple other people added from ADC and Pfizer. And a small team, which added 21 people in institutional sales plus contracting salesforce. As we have always done a great job in commercialization, we will do a great job in commercialization here as well. And we have understood the market. So as you know, you say quasi branded products, we’re going to get the reimbursement code in place. We’ll do so. Bevacizumab we are competing with Amgen and Pfizer and obviously the innovator and we would try and maximize our market share to about 15% to 20%. We're more focusing on oncologic clinics, integrated regional systems, so many avenues to get there as well. We will have the 340B pass-through status, which is always helpful. And then for the GCSF, we have the pass-through status as well, Filgrastim. And it’s a little bit more competitive with the three active players. But we'll try to with our 340B unique position, we may be able to get again 15% to 20% market share or more. And for PEG-Filgrastim would be a little bit more competitive since there are five active players. So we will try to penetrate different channels. And it should be very helpful to have [indiscernible] with PEG-Filgrastim. So that would be a nice launch as well. So all three very excited and the future of biosimilar we are very excited as well.

Okay. That's helpful. And just if I may follow-up, just to be clear on the shared economics, you just remind me the margin profile of the biosims. I mean, that's not going to be net margins that are going to be higher than corporate operating margins, right. Is that a fair way to think about it?

Yes, so may be [indiscernible] would be higher because the bigger market. And PEGNG [ph] would be in line with corporate margins.

Got it. Okay. Thank you.

Thank you. Our final question for today comes from Gary Nachman from BMO Capital Markets. Gary, your line is now open.

Okay, great. Sorry, I missed you guys before just jumping around a couple of calls. I don't know if you touched on this. I obviously jumped on late. But did you talk about how you expect gross margins to trend for the remainder of this year and sort of what additional initiatives you are taking to improve the gross margin further beyond this year? Just what sort of levers you think you have at this point? How much more there is to do on that front? And then with respect to the Specialty – yes, just one more, with respect to the Specialty business just how comfortable you are with the commercial infrastructure? And how much more you want to leverage that in terms of bringing new products in? Is that going to become a much bigger part of your business do you think over the next few years, or will it be relatively modest when you think of the overall company? Thanks.

Hey, Gary, I'll take the first one. Good morning. So as you know our Q1 gross margin was 43%. We are looking to in increase for the rest of the year. My gut feel is, we’ll finish the full year, probably about 45%, which is in line with where we were last year. That's number one. Now, if you think about the growth drivers, how do we go from Q1 of 43% to let's say rest of the year of about 45%, there are a couple things. Number one is the first piece is just our internal manufacturing production plan. So better fixed overhead absorption and we're in control of that. It just reflects the demand and manufacturing operations. So high confidence on getting that benefit. Second, is NPLs new product launches. So, as we had shared with you a few months ago, this year we expect new product launches to be more on the back end of the year and the pro end. And as you know, by nature of the complexity of those products, they have substantial, greater gross margin than the rest of the portfolio. And then, the third is when you look at our Specialty business, as I said in Q1, that's the low point of terms of revenue, right. Unit growth are expected to accelerate the growth and those products have higher gross margins. So those are the three levers.

Yes.

Thank you, Tasos. And Gary on Specialty, as you know, we had committed, we acquired impacts back in 2018 that form our Specialty platform. So excellent commercial capabilities already in place for Parkinson’s, for movement disorders, as well as endocrinology. So very excited to have a great team in place, relationship for market access in place marketing teams are in place. And penetration, as you can see, will continue to grow right by 6% to 8% every year, units will by 10% to 12%. And we have excellent organic pipeline. We got [indiscernible] being launched on June 1, we have DHE autoinjector based on the outcome at our partner’s site from the FDA, should be launched this year. IPX-203 next year with a much higher fixed sales because of the product profile and results what we have seen. K127 Myasthenia Gravis core product, which we're filing this year. We also have government programs for that as well. And that is also expected to launch in 2024. And then we have two additional, and these, we acquired from Kashiv Specialty, K-114, K-128, along with K-127, and we are adding couple more pipeline assets in Specialty. And we have a separate team focusing on Specialty R&D. We have two technology platforms which have been well tested over last 10 years. So with that today, our business is about $400 million in Specialty. These organic pipeline will add substantial revenue to it, and we are open for certain tuck-in deals for adding within these two specialty. And we are constantly evaluating those opportunities. And I think more are being available with this biotech pool in the market and other conditions which are driving companies like us in a better of a driver's seat because of the constant cash flow from our Generics business, Injectables business, Specialty business allows us to sustain our growth and keep adding these assets. So very excited. If you ask me a go on numbers, yes, we like to get to a $1 billion in Specialty sales. How long it will take? May be few more years, but excellent growth drivers. You are absolutely right. That part of the business is becoming very significant and much higher contribution than the Generics.

That's very helpful. Thank you.

Thank you. We have no further questions for today. So I'll hand back to Chirag Patel for any closing remarks.

Well, thank you everyone. I know it was a busy morning, so many people could not join. But everybody would join thank you very much. And have a great day.

Thank you for joining today's call. You may now disconnect.