Hello, everyone and welcome to the Amneal Pharmaceuticals First Quarter 2023 Earnings Conference Call. My name is Emily, and I'll be your moderator for today's call. [Operator Instructions] I will now turn the call over to Amneal's Head of Investor Relations, Tony DiMeo. Please go ahead.

Good morning, and thank you for joining Amneal's first quarter 2023 earnings call. Today, we issued a press release reporting our full Q1 results. We announced certain unaudited preliminary results for the first quarter on April 17, 2023. The press release and presentation are available at amneal.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 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 non-GAAP measures. Information on our use of these measures and reconciliations to US GAAP are in the earnings presentation. On the call today are Chirag and Chintu Patel, Co-Founders and Co-CEOs; Tasos Konidaris, CFO; our commercial leaders Andy Boyer for Generics; Joe Renda for Specialty; Harsher Singh for Biosciences; and Jason Daly, Chief Legal Officer. I will now turn the call over to Chirag.

Thank you, Tony. Good morning, everyone. We delivered a very strong first quarter results with $558 million of revenue growing 12% and adjusted EBITDA of $116 million growing 16%. We saw robust top-line growth in Q1 across all three business segments: Generics, Specialty and AvKARE reduced our net leverage to 4.9 times and affirmed our full year 2023 guidance. Taking a step back for those who are newer to the Amneal story, we are a global pharmaceutical company with an expanding portfolio of approximately 270 products. Our strategy focuses on launching new products in high-growth and high-impact areas of medicines such as complex generics, injectables, biosimilars and specialty. Since 2019, we have significantly diversified our business fueled by the productivity of our R&D pipeline and strategic investments to build our global platform. As a result of Amneal's diversification, we have seen continuous strong financial performance since 2019 as we have delivered substantial revenue and EBITDA growth. In 2022, approximately, $500 million of our top-line performance came from products launched since 2019. We see our momentum accelerating in 2023 and beyond underscored by our strong Q1 results and 2023 outlook. In short, we are very well-positioned for sustainable long-term growth accelerating profitability and continued deleveraging. I'll now briefly walk through, how are we executing on our key strategic priorities across our businesses. First in the Generics segment, our diverse portfolio of approximately 230 retail generic products is continually expanding moving up the value chain of complexity and generating durable top-line growth since 2019. Our strategy to diversify with more complex products has been deliberate over the years. To give you context, we expect about 55% of 2023 Generics revenue will be from complex products up from 35% in 2019. We feel great about the breadth and depth of our R&D pipeline,…

Good morning, everyone. Thank you, Chirag. Let me begin by thanking the Amneal family, who work hard every day to make healthy possible for so many. We are very excited about our strong start to the year and the great progress we are seeing across our organization. I will touch on how our strong foundation in operational excellence and highly productive R&D engine continues to propel our company strategy forward. Starting in operations. We are focused on operational excellence and efficiency, super quality and expanding our global capabilities, particularly in injectables. Let me provide more color on each. First, we remain focused on operational excellence and driving efficiencies. The team has done an excellent job as we move manufacturing for over 30 products to low-cost locations. And we are on track to achieve our in-year operational efficiency goals. We are taking various other measures to lower cost and expand our margins. In addition, our prudent capital spend, focuses on driving operational efficiency, automation and supporting long-term growth. Second, from a quality perspective, Amneal has maintained a super track record and commitment to the highest standards of quality over the years. Since 2005 the US FDA has conducted over 90 successful inspection with no OAIs or warning letters. We are very excited to share the successful US FDA inspection this week of our largest injectable site. We look to commercialize products from this site starting in third quarter. This is an important cornerstone of our injectables growth strategy by increasing our capacity and capabilities across all areas. We now have 19 production lines across various dosage forms, including vials, prefilled syringes, cartridges, LVP bags and immersion. Over the last two years, we have invested over $150 million in capital and tremendous energy to bring two new injectable sites online. As a…

Thank you, Chintu. I'll first discuss first quarter results, then capital allocation, followed by a brief review of our full year 2023 guidance affirmation. We're very pleased with our first quarter results, with total net revenue of $558 million growing 12%; adjusted EBITDA of $116 million growing 16%; and adjusted diluted EPS of $0.12 in line with prior year. First quarter Generics net revenue was $344 million, an increase of $26 million or 8% versus the prior year. Strong performance was driven by new product launch in 2022 and 2023, which added $31 million of revenue and stable performance in the rest of our broad portfolio. In addition to the strong performance, we're very pleased by the continued evolution in the refreshing of our Generics portfolio. As an example, products launched and added since 2019, now account for 42% of our Generic revenue, which bodes well for continued growth and profitability. Q1 Specialty net revenue of $92 million, increased $7 million or 8% versus the prior year driven by Unithroid, up 39%; and Rytary, up 14% which reflects strong commercial execution as well as substantial patient needs. Our AvKARE business continues to perform exceedingly well, with Q1 net revenue of $122 million, up $27 million or 29% compared to the prior year due to continued expansion of our distribution channel. We're very proud of the work our AvKARE team is doing in increasing market share, and providing our customers with new products and innovative solutions. Q1 2023 adjusted gross margin of 39.4% compares to 43.5% in the prior year was in line with our expectations reflecting discontinuation of a handful of legacy products timing of fixed overhead absorption and our mix of business. Our first quarter adjusted gross margin represents the low point of the year as future quarters will…

Thank you, Tasos. In summary, we are pleased with our excellent start of the year. We expect our strong momentum will accelerate over 2023. Amneal remains well positioned for sustainable long-term growth with a diversified and expanding portfolio and key near-term catalysts happening all now including biosimilars, complex GX, injectables and IPX203. As we continue to execute our strategy well, further diversify our business and deliver profitable growth, we expect to drive higher levels of adjusted EBITDA and remarkably delever the company. Let me now open the call to questions.

Thank you. [Operator Instructions] Our first question today comes from the line of Balaji Prasad with Barclays. Please go ahead.

All the details on the slides, also congratulations on the injectable facilities, so I think that's probably where I'll start with. Chirag, can you help me understand the broader or the current commercial opportunity in the injectables market? Is it addressing shortages, or is the scope for a player with stronger pricing power or any kind of advantage there? And also just remind me about the current injectable size? And what are the key contributors to take you to the $300 million portfolio? And the second question is on the biosimilar side. Can you give an update on, how the environment for partnership in biosimilars is as you look to bring in more biosimilars into the U.S.? And lastly on the same front, are the combined biosimilars revenues greater than $15 million in 1Q? Thanks.

Thank you, Balaji. Let me start with the injectable strategy. As we have stated, that our strategy is to expand capacity, have redundancy in our supply chain and that's exactly what we've been doing. We -- our focus has been to introduce differentiated products such as Triamcinolone. We were first in the market and still has a major market share, cyclophosphamide, now LVP bags, the peptide-based products coming soon. So it's more driven towards complex products which has, demand less competition with supply chain security for our customers, for our hospitals a very deep relationship we are building. We're also going to supply certain commodity products that are in shortages, and that's how we have built very strategically so far our Injectable business. And going forward, it is built to be more even durable, more complex products, more relationship with hospitals and clinics and, bringing them what they need which is shortage products as well, addressing shortage products. So today we do about $180 million. And we expect to be well over $300 million by end of 2025. And continue to grow from there after that. And that obviously also will include international revenues as these products have good international markets as well. On biosimilars very excited with two launches about to launch the third one. The team has done a great job, all across, as we always do great job in commercial side, again excelling with building relationship using the old relationships that we had with the wholesalers, building new ones with the community oncologists and hospitals. We do have a sales force, market access. We take the -- from our specialty sales that help on marketing and market access as well. So with that, we are very -- we're well over on our way to reach this year target about $50 million to $60 million. But that accelerates, because we were accelerating in Q3 and Q4, so next year significant uptake for these three products. And then we are working on the pipeline which we haven't announced, as we have a stated goal to be the top five, player in the United States in the long run. So we're going to be -- here our strategy is not just one year, two year, three years it's to stay in the game for next 10 years. And we see a highly valuable franchise as biosimilars, for the United States and for the global market.

Just to add one point to Chirag on the injectable. Thank you. Good morning, Balaji. This is Chintu. We have 32 pending…

Good morning.

…ANDAs at FDA. And we continue to file about, 10 or 15, every year. And now we are at scale with 19, production line. So to get to from our current revenue of about $170 million to $180 million, if you can just do the math, 32 pending and 10, 15 and also all these are in a differentiated dosage from -- many are complex, drug device combination, cartridges, LVP bags, peptides. We have some of the maybe long-acting depot injections. So we are very well positioned. And we have now redundancy and a resiliency in our manufacturing footprint, which is the biggest challenge in injectable. So I think we are very excited with all the lines now going live and we'll be commercializing in third quarter from our newly FDA-inspected site. And this gives us the leverage in multiple areas. Plus these areas are also very lucrative for our international expansion.

Thanks, Chintu. That’s helpful.

Our next question comes from Chris Schott with JPMorgan. Please go ahead. Chris, your line is open.

Great. Thanks very much. Just two questions on guidance for me. Maybe first on the generic gross margin trends. Can you just elaborate a little bit more in terms of what happened to gross margins this quarter and just how we should think about generic gross margins for the balance of the year? I know you mentioned there were some onetime issues, but I don't think you've had gross margins to slow for a few years and I was toing my hands around what exactly is happening there and probably more importantly just how to think about the next few quarters? And the second was on revenue growth. It seems like you have obviously a very good start to the year with this quarter. But I think the go-forward guidance implies more modest revenue growth for the remainder of the year. Again, just a similar question there, just help me a little bit about the cadence of revenue growth as we think about the next few quarters and kind of drivers there? Thank you.

Hey, Chris, this is Tasos. Good morning. Yes. I mean as you know gross margin at any given quarter can fluctuate a little bit. For us it was just certain products small product discontinuations as I mentioned and related kind of upsell license product that we had to write-off and just timing of our production line. So you are correct. It was slightly lower than it has been in previous quarters. But from our perspective, I expect -- I fully expect Q2 a step-up in the above 40%. And in terms of kind of full year expectations from a generic gross margin I think we're going to be around 42% in line with prior year. So that's around on the gross margin. In terms of -- from a revenue growth perspective, Chirag you want to take it?

Sure. So Chris, we've been speaking for the last few years and you've been following Amneal this is the rocket about to be fired now right because it's well-positioned to drive sustainable top-line growth and meaningful adjusted EBITDA acceleration in 2023, 2024 and beyond. And let me tell you how it is happening so -- and how diverse and how good that is that we're not relying on a two specialty products to make our life or our company right? We have Generics portfolio of 270 products driving durable profitable growth number three in the United States in value, number four in volume. We are the only company that grew where everybody degrew. And we will continue to grow in next several years. Highly productive innovative R&D pipeline launching 20 to 30 new products every year 30-plus, we -- look at the diversity we have. Continued shift to complex products with capabilities across dosage forms. It's essential business and we are providing essential services. $500-plus million revenue came from recent product launches; expanding in high-growth areas injectables and biosimilars; goal to be top five. You know that we did it before and we're going to do it again. Growing Specialty portfolio. I know you are not excited on IPX203, but we are. We're very excited and we will -- you will see the strategy being rolled out and why we think such a need. We talk to Parkinson's patient everyday, KOLs everyday and a huge need to penetrate. RYTARY penetrated only 4% and 96% are on IR CD-LD, which is 30 years old technology and they experienced such a bad off-time everyday. And we're determined to take this product out to as many general neuro as we can and even beyond that. AvKARE our distribution business growing double-digit. After big three there are not many players. So it gives us excellent chance to distribute our products directly in unit dose in government channels and niche distribution channels. This is a sizable business now $450 million-plus. On top of that we are entering very meaningfully on international markets to further diversify the company. And all that with our -- most of the products made by us we have a global network of manufacturing sites, top of the class, number one in quality. We are the US champions. What we need three OSD sites, four injectable sites, one nasal spray liquids in the United States, transdermal site in the United States, device base site in the United States, two API sites providing needed API for us and one inhalation respiratory site in Ireland. So with all this, we are extremely well positioned for growth not just this year, but 2024 to all the way to 2030. Thank you.

Our next question comes from David Amsellem with Piper Sandler. David, please go ahead.

On the Generics business, can you talk to products concentration? I'm specifically interested in contribution from Zafemy, this year and how you're thinking about the potential for competition that product down the road? I know it's a complex product. But can you talk to that? And in general, are there -- beyond Zafemy, are there any other products we should be thinking about that have an outsized impact on Generics? So that's number, one. And then number two, helpful commentary on the deleveraging. But I guess my question is on, business dev and M&A. What's your appetite or I guess capacity for deals? How large can you go? And how big of a priority are bolt-on transactions? Thanks.

Hi, David this is Tasos. I can take the first one and Chirag, can take the more strategic question. It's whether or not Zafemy or any other product in our portfolio has more competition or less competition, it does not make a big difference one way or the other. Because we have done -- if you kind of go back for example, a number of years ago for example, levothyroxine was $180 million product for us. We don't have any such product anymore in the Generic segment, right? The biggest product may be a $50 million $60 million product. So that's part of why, we kind of keep focused on how the business has been diversified over the course of time. And this is a differentiating factor for Amneal, compared to any other generic company out there. So, no one product kind of keeps us up at night. And the other thing is, as Chirag said earlier on, who already launched 10 new products. There's another 20 new products that are going to be launched. Whether or not we launched 30 products this year or 25 products this year, it's not going to make a difference in our performance. Yes, so the -- on the capital allocation piece, I mean I'll give you my view is, as I mentioned before, we spent a ton of money and thoughtfully, right? We never did an acquisition that can affect the company. Many of them were tacking acquisitions, to fill out specific areas that are going to drive future growth. So as a result, I think at this point in time with the investments we have made, the interest rates being where they are right, this is why you're hearing us kind of the prioritizing M&A and focusing more on debt pay down. Chirag, any additional thoughts?

Tasos, you covered really well. And David, we do not have that 2018 problem, the big leaky buckets on a big GX products. It's highly diversified across the business segments. Within Generics, we have multiple products with 10 20 30 40 50. And we'll continue to drive and obviously, or a drag like leads the way. It's kind of a branded GX, if you would call it. And in M&A, look we invested almost $600 million over the last four years and that is paying off really well. We continue to invest almost $240 million $250 million every year combining R&D, internal R&D, external R&D as well as CapEx, putting a new peptide site or putting biosimilar investments. So we have enough for next two three years. So right now, we're zoomed in. We love the consolidated business that we have different segments diversification. Goal is to delever, lower the debt amount, increase the EBITDA. And then from 2026, we would be in a much better position to think about anything big strategic. But right now we're loving all the businesses and they're all firing on all cylinders so -- which is a beautiful thing. There's not a weak link within any of the segments of our businesses.

Okay. Thank you.

[Operator Instructions] Our next question comes from Greg Fraser with Truist Securities. Greg, please go ahead.

Thanks and good morning, folks. On IPX203 you mentioned in the slide the data generation plan that support potential for early use. Can you expand on that? Are you planning additional clinical work? And then, can you just give us an update on your efforts to refinance the term loan B? When do you expect to finalize a refinancing? And what are your expectations for terms for the new debt? Thank you.

Hi. Good morning.So IPX203 we are very excited about how novel this formulation is compared to what is currently available in the market and how it can benefit the patient. It is a very unique formulation combined with immediate release with ER. Carbidopa/levodopa especially levodopa has a huge problem of absorption throughout the GI track and half short life. So the way the formulation is done and our data shows as part of the clinical that 1.5 hours of per dose improvement compared to IR CD/LD. And again, that's what goes in the label but label and everything remains on a final negotiation. So it can help many, many new patients who are starting on an immediate release carbidopa/levodopa therapy which can take the fluctuations out and can stabilize the patient and can give a long durable good on time. So that's why we are excited. Currently, our Rytary product only offers over 4% of the patient and 96% of patients still are going to step-up. So once we get the final label and what is on the label IPX203 can be very, very helpful for the naive and the new patient and provide them awesome good on time compared to the current therapies on the market.

Greg on the refinancing as you know our term loan B doesn't come up for -- that doesn't become due in two years, right? So it's May 2025. So there is plenty of runway, right? It's kind of having said that I was the CFO in 2007, 2008 and 2009. So having lived through that you never know what happens to the capital markets. So this is why as a company we want to be constructive and that's why we said we would like to extend to kind of refinance our term loan B sometime this year. So we're in active conversations with the market. We have a number of kind of great investors in our current term loan B. Love to see many of them have expressed an interest to kind of continue in our refinancing efforts. So we'll continue to try to be constructive with the market, but not at any cost and not at any terms. So our expectation is continue to focus in kind of getting it done before the end of the year. And if it goes beyond that so be it.

Thank you.

We have no further questions registered. I'll turn the call back to Chirag for closing remarks.

Thank you very much. So just closing out just summarizing Amneal is a diversified differentiated and growing across all businesses. It's a show-me study. We know that and we've been showing it. We'll be showing more. That's what we are doing. And we are laser-focused on execution driving higher EBITDA and deleveraging. And our future is very bright. And so we're very excited. All 7,000 employees are extremely excited to make Amneal the American Champion and be the leading affordable medicine company for the United States. Thank you very much.

Thank you.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.