Hello, everyone and welcome to the Amneal Pharmaceuticals Second Quarter 2023 Earnings Conference Call. My name is Bruno, and I’ll be operating your call today. [Operator Instructions] I will now hand over to your host, Anthony DiMeo, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining Amneal Pharmaceuticals second quarter 2023 earnings call. Our Q2 earnings 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 in reconciliation to U.S. 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 hand the call over to Chirag.

Thank you, Tony, and good morning, everyone. Q2 was another strong quarter with $599 million of revenue, growing 7%, adjusted EBITDA of $146 million, growing 9% and net leverage at 4.9x. As a result of our solid momentum in the first half, we are pleased to be raising our full year 2023 guidance. On a personal note, this earnings call marks 4 years since Chintu and I returned to Amneal as Co-CEOs. At that time, we stated our goal was to return Amneal to growth and build a world-class diversified pharmaceutical company, driven by our purpose to provide access to high-quality and affordable essential medicines. Since then, we have methodically executed our long-term strategy to expand into high-growth and high-impact areas. Today, Amneal has a diversified portfolio of approximately 270 marketed products, an industry-leading R&D engine, excellent commercial capabilities, a foothold in key global markets and significant growth catalysts ahead. We have delivered strong financial performance each year since 2019 as revenues have grown 10% and adjusted EBITDA has grown 12% on a CAGR basis. Further, we have reduced net leverage from 7.4x in 2019 to 4.9x currently, well on our way to below 4x by the year 2025. Based on the strength of our diversified portfolio, robust capabilities and opportunities ahead, Amneal is well positioned to drive sustainable long-term growth, accelerate profitability and continue deleveraging. Let me now walk through how we are executing our strategy across the business. In the Generics segment, we have retail generics, injectables, biosimilars and international business. We expect Generics revenue growth will accelerate over the next several years, driven by complex products. Approximately 55% of a generics revenue is expected to come from complex products in 2023 compared to 35% in 2019. And we expect that mix shift will continue. So, first, in…

Good morning. Thank you, Chirag, and thank you to the global Amneal family who worked hard every day to advance our mission of making healthy possible for patients. As Chirag discussed, we have been focused these last 4 years on building an innovative, well diversified and differentiated global pharmaceuticals company capable of driving sustainable growth in key areas of medicine. We are very excited about our strong performance in the first half of 2023 and the outlook ahead. I will touch on how our operational excellence, highly productive R&D engine, resilient supply chain and expanded capabilities continue to propel our success. First, we remain focused on driving operational excellence and efficiency. As an example, we are in the process of moving production for about 30 products to lower-cost locations, and we are continuously evaluating opportunities to bring cost down. In addition, we have strengthened our global supply chain by expanding our infrastructures in key areas, adding redundancy and resiliency of our operations. Importantly, our global operations are at scale to support long-term growth. Most notably, we see the benefit in injectables, where today, we have 4 facilities with 19 production lines. Over the last few years, we have doubled our injectables capacity. At the same time, the overall injectables market continued to face chronic supply shortages. As we look at our commercial portfolio and pending ANDAs, 16 products are on the U.S. FDA shortage list with additional 12 our pipeline. Amneal is well positioned with our expanded supply chain and capacity to help address drug shortages in the United States. In addition, we expand our footprint and build our capabilities. We are committed to maintaining our quality track record. Since 2005, the U.S. FDA has conducted 95 successful inspections, including 4 this year with no observations or minor 483s. Moving…

Thank you, Chintu. Good morning. I’ll start first with our Q2 results, move on to our year-to-date strength and then raising our full year 2023 guidance. First, we’re very pleased with the performance of all our business segments in driving strong financial performance for another quarter. In the second quarter, total net revenue of $599 million grew 7%, adjusted EBITDA of $146 million grew 9%, and adjusted diluted EPS of $0.19 was in line with prior year. Our Q2 Generics net revenue of $374 million was up 9% sequentially and up 2% versus prior year. Growth was driven by Adrenaclick, Zafemy, multiple new product launches and strong commercial execution by our biosimilars team. New products launched in 2022 and 2023 added $24 million to Q2 revenue growth. As the year develops, we expect robust performance across our Generics segment as new product launches ramp up, biosimilars become a larger part of our business and our global supply and commercial teams work hard to ensure continuity of supply and market share growth. As we have said in the past, Amneal is now a much more diversified company than ever before, which allows us to deliver consistent financial outcomes despite the typical ups and downs. Furthermore, as our portfolio continues to shift towards more complex products, our ability to deliver increased levels of growth and profitability grow substantially. Moving on to our Specialty business, where in the second quarter, net revenue of $97 million was up 6% sequentially and flat with the prior year. Growth was driven by Unithroid, which grew 17% sequentially and 24% versus prior year. Rytary revenue was impacted by timing and was down 2% sequentially and down 4% versus prior year. Having said that, Rytary total prescriptions are up 4% versus prior year, which bodes well for revenue…

Thank you, Tasos. Our diversified portfolio of essential medicines is driving strong results. We expect our momentum and profitability acceleration will build in 2024 and beyond, driven by catalysts happening now, including biosimilars and new complex generics launches on the horizon. We said it would be a long-term journey to strategically reposition the company for sustainable long-term growth. That journey is at an inflection point as Amneal 2.0 is hitting its stride now. We will now open the call for Q&A.

[Operator Instructions] Our first question comes from Nathan Rich from Goldman Sachs. Nathan, your line is now. Please proceed.

Great. Good morning, and thanks for the questions. Maybe starting with biosimilars. You talked about ALYMSYS running ahead of expectations. Can you talk about maybe where you’ve been kind of successful in the market in terms of picking up that early share? And then, when it comes to future biosimilar opportunities, are you looking to stay in the oncology and kind of provider-administered space? Or do you see yourselves kind of looking at some of the self-administered products that go through the pharmacy channel? I’d just be curious to get your thoughts on relative attractiveness between the two.

Thanks, Nathan. So, biosimilars is a long-term journey and long-term play. As you know, more than 70 biologics products will become biosimilars over the next 10 years. And it’s not just a U.S. play, it’s also a global play, providing the more excess and affordability. The number one reason why we have been successful is, we have built a solid commercial team. And I have Mr. Harsher Singh here, who leads our team, which will provide more details without giving any confidential information to competitors how we did it. I’ll pass it on to you, Harsher, hold on. The onco – so your second question was where do we play? Right now, we are in oncology, and we will continue to add more products and add related products within oncology as well. But we are evaluating the pharmacy benefit products in immunology and other categories because to play biosimilars for the long-term, we would have, obviously, like to have leadership in oncology but also have additional products as we mature our biosimilar portfolio. So thank you, Nathan. I’ll pass it on to Harsher on Commercial success.

Nathan, thank you for your question. The short answer here is, we’ve done disproportionately well in the oncology segment, largely because they are more likely to change and more able to change their prescription behavior over a shorter time frame. We expect to continue that success both in oncology and in the hospital segment in the coming quarters. We like buy and build, and we hope to remain winners in that segment.

Thank you, Harsher.

Great. Thanks for the comment. If I could just ask a quick follow-up on the guidance. The EBITDA increase, I think, was a little bit lower than we would have expected just given the 2Q results and the updated revenue guide. So, Tasos, I just wanted to see if there was anything to call out there as we think about EBITDA cadence? Or is that kind of just embedded conservatism over the balance of the year?

Yes. We will try to be as conservative as we can. That’s number one, so that we were put in a position to meet all our commitments and hopefully exceed. So, I wouldn’t read anything more than that. There is still 6 months to play. We feel great about the growth so far, which, as I mentioned before, record revenues, record EBITDA, up 9% and 12%. We will see how the rest of the year plays, but we feel really good about exiting the year in a very strong position in a really great trajectory for 2024 and 2025.

Great. Thank you.

Our next question comes from David Amsellem from Piper Sandler. David, your line is now open. Please go ahead. David, your line is now open. Please go ahead with your question. Okay. I think we lost connection with David. Our next question in line comes from Balaji from Barclays. Balaji, your line is now open. Please proceed.

Good morning, everyone. This is Mahila on for Balaji. Thanks for taking our questions. Just wondering what your latest thinking on generic pricing trends is? And can you specifically talk about price erosion for the injectables business? Thanks so much.

Hey, Mahila, good morning, this is Tasos. So, overall, we’re seeing an improved pricing environment. So, still prices continue to decline, just the rate of decline is lesser than prior year. And that obviously creates less of a headwind for us and a good thing for an industry that is trying to be helpful with the shortages and increase kind of compliance requirements from a regulatory perspective. So that’s kind of the high-level pricing comment. On injectables, and that’s an area that we like, we see less of a pricing pressure than the oral solids. And as a result, the profitability of that segment is higher than the typical orals. So this is why that’s an area of focus for us, and that’s why our pipeline disproportionately favors injectable products, which will help drive increased level of profitabilities for the next few years.

Great. And just one follow-up, if I can. I guess, do you just see the stabilization continuing for some time?

My – Nobody really knows, right? Our expectation is, as the industry just kind of consolidates, as the industry has to deal with increased investments in their plants and the quality control processes and people are dealing with improved access to high-quality medicines. I mean, this industry has to focus on improved profitability, which requires price stability at some point in time.

Yes. And I will add on to that, that the shortages you have been hearing about, it’s not the major reason, as we know, for the shortages is the generics industry sustainability. It’s the pricing. When pricing are driven down so low, the demand gets concentrated within one or two suppliers, any issues with that one or two suppliers causing the shortages. That’s the number one reason, I would rank it as 90% why shortages are happening. Our – the buying groups are well aware of this, both on the retail side as well as hospital side, and they are being very responsible because at the end of the day, we cannot have patients without products, and then doctors without using chemotherapy products. So, we as an American company always have led the efforts to what can we do to alleviate shortages, and also what can we do to make the generics industry sustainable. It just would be very prudent to do when time is now. We cannot wait because we will see more and more shortages if we do not address this. So, I do see stabilization or further improvements.

Our next question comes from Chris Schott from JPMorgan. Chris, your line is now open. Please proceed.

Hi. This is Ekaterina on for Chris from JPMorgan. Thanks you so much for taking our questions. So, first, on injectables, and you have kind of touched upon this, but thought specifically on the Pfizer Rocky Mount facility and what impact that could potentially have on the sterile injectables market. And as we think about potential shortages there, is that something that Amneal can help with and benefit kind of given some of the capacity that you have been building? And then, the second question is on the CRLs for IPX203. Can you just elaborate a little bit more as to what could be required to address some of the FDA concerns and basically, what the path forward could look like and timelines for that? And then building on that, you have the Rytary IPX [ph] going away sometime in 2025. Does having lost time, I guess between the IPX203 launch and the Rytary really change your approach to that launch at all? Thank you so much.

Thanks Ekaterina. So, regarding Pfizer, I think it’s unfortunate what has happened, not expected. It was a plant that manufactures a lot of sterile injectable products and supplied in the U.S. As I have mentioned that we, at Amneal, we have expanded our injectable capacity. We have four FDA-approved facilities with 19 injectable lines. There are certain products that Amneal would be able to help in the supply chain in near future to avoid the shortages, and we are ready. We have the available resources, and we are also working with FDA on some of the pending products that might be on Pfizer issues or other shortage list. So, as a company, we are very driven and passionate about bringing many, many of these shortage products and alleviate the shortage situation in U.S., which is absolutely not acceptable for the American patients. Regarding on IPX203, the CRL, we conducted a very robust clinical study as per our SPA agreement with FDA. And with totality – with all the data across our clinical study, we are very confident in the safety profile of IPX203 and able to provide the necessary data on a carbidopa safety bridge. So, that’s the only question we received on our CRL. There was no question about the efficacy, safety of levodopa on a CMC or the manufacturing. So, it’s a one question about the safety bridge of carbidopa. We expect to meet with the FDA as part of our Type A meeting in coming weeks. And after the meeting, we will have more clarity as onto the timeline. Regarding the launch, we don’t expect more than six months to nine months delay. And I will pass it over to Chirag on the market potential.

Yes. So, thank you, Ekaterina. So, your question, we have been very clear from the beginning that this has nothing to do with Rytary switching over. As you may be aware that Rytary has 235,000 approximate prescriptions out of 5 million. So, majority, 95% is with old product immediate release, which has all kind of issues is very well known. So, that represents almost 4.5 million-plus prescriptions we can go after. IPX is an excellent product, clear differentiator. So, we believe we would tap into much more bigger market share with general neurologists than even Rytary. Yes, we would have loved to launch it in June, but didn’t happen, but we are very hopeful that we will get it through and launch the product as soon as possible.

Thank you so much.

Our next question comes from Les Sulewski from Truist. Les, your line is now open. Please proceed.

Good morning. Thank you for taking my questions and congrats on the progress, guys. So, first, just quickly, has a Type A meeting been scheduled on the CRL for IPX203 FDA – with the FDA? And secondarily, do you see any opportunities to trim any existing low-margin lines within generics? And as a follow-up, what opportunities are you seeing in the generics market given the disruptions that we are seeing? Are you looking to pursue any additional deals in which verticals? And perhaps just kind of walk us through how you think about BD plans in general.

Les, thank you very much. Type A meetings will be scheduled as soon as possible in the very near future. So, the interesting question on a trend on low-margin products. So, the low-margin products have reached very, very bottom. And it cannot go any further. It has to go up, even doesn’t matter where it is supplied from. The cost even in manufacturing in India is going up, so is in Europe, so is in Israel. So, we don’t expect – the companies cannot survive, right. Charlie Munger would say that no businesses can be successful when they lose money. So, that has to change the low margin trends. On the deals and the consolidation, as you know, the industry had faced tremendous unfair treatment from FTC compared with what they allow the buying groups and vertical integrations with PBM insurance company retails, and they do not allow the generics manufacturers to consolidate. That has to change. It’s so obvious we need the strong generics industry in order to alleviate shortages, in order to have invest in further automation, continuous manufacturing, next-generation technologies. It fills 92% of prescriptions. So, we hope FTC allows consolidation going forward, and we would love to play a major role in consolidating the generics industry if we are allowed to do so, but at the right time. Right now, we are completely focused on deleveraging. We would want to substantially reduce our debt, which we can do it from our operating cash flow. And it does not compromise any of our investments. We still have somewhere between $160 million to – in the future, it could be $180 million, $200 million every year, R&D investments, which is very efficient R&D engines we have. We have right capacity already built. So, we would – we spend $50 million, $60 million in CapEx. And then, we also do tuck-in deals. So, we don’t stop doing tuck-in deals, and we have reallocated our R&D with the simple generics getting very low dollars and then more complex, more biosimilars, more specialty is getting the allocation now. So, that’s – the larger deals would have to wait, and we see how the environment will work out, but we absolutely remain very optimistic that at some point, the generics consolidation, especially in the U.S., could happen.

Great. Thank you for that color. And just on the manufacturing footprint and capacity that you have added on, any concerns around FDA inspections? Maybe just walk us through what the latest status is specifically in regards to your overseas facilities. Thank you.

Yes. Hi. So, Amneal has a standard quality track record. We have been inspected globally. More than half of our 95 inspections been in India. And so far, we have no FDA concerns. Most of our inspections are without 483s or minor 483s. This year alone, we had three of our sites inspected in India, and we had no 483 observations. Over the many, many years, we have built a solid quality culture, and we continue to grow and cultivate that culture of quality. So, whether the plants are in India and U.S., our systems are so robust and so strong that we don’t anticipate issues coming out of those plants during the FDA inspections.

[Operator Instructions] Our next question comes from David Amsellem from Piper Sandler. David, your line is now open. Please proceed.

Thanks and sorry for the tech issues earlier, and thanks for fitting me in. So, just a couple. So, with the lean into injectables and the shortage situation and given your commentary, does that in any way change how you are thinking about tuck-ins and specifically, the extent to which you are going to continue to add to the brand business through biz dev and M&A? How should we think about that as it’s becoming clear that the generics business is performing better and you see, in particular, starting to reap the fruits of your investment in injectables? So, that’s number one. Then number two, you talked about continued momentum into 2024. Just wondering if you can provide some more color on that in terms of how many launches? How much of those will be injectables? How much of those will be injectables that benefit from shortages? And how we should just think about any specific products that might have outsized importance for next year? Thanks.

Thank you, David. So, injectables is all organic homegrown story, does not require any tuck-in acquisitions. And again, my comments on generic industry is broader comment, not that Amneal is looking to do anything at this point. And as far as the investment in brand business, which is our number one priority because that is where we have invested since 2018, acquiring Impax, Rytary, Unithroid, KSP we acquired. So, we continue to focus there, and probably one of the few companies that can do both really good. And if you look at the overall, let’s say, in 4 years, we are going to spend $700 million, $800 million or $900 million in R&D, half of that money will go into, or more than half, would be on a branded side, which we constantly look for the either partnership deals and may go – some of them may go on a biosimilar side. So, totally focused on specialty, biosimilars and then injectables, and generics is more organic story for us. Second question, go ahead, Chintu.

Yes. Hi David. Regarding the 2024 outlook from new launches, we still expect to continue to launch about 30 or so new products next year. We have about 92 ANDAs pending with FDA. And as we have shifted and focused heavily on diversifying our portfolio into non-oral solid, obviously, we will have many more injectable products being launched next year, plus with our expanded capabilities in our [indiscernible] and Palli plant and our Onco plant and all other plants are FDA approved. We expect at least close to half of those products to be launched in injectables. But same time, we are also excited about some of the other complex product launches that is coming in 2024. Hopefully, in inhalation, we expect to launch two products. So, I think we are well positioned over ‘24 and even beyond, continue to launch 30 or so generic products and continue to be more in the complex area. So, 2024, including the biosimilar uptake, our new launches, we have growth across our portfolio, David.

That’s helpful. Thanks. And if I may just sneak in a follow-up, with all the new launches, is it fair to expect some degree of margin expansion, particularly given that there seems to be a lean into more complex product launches next year. I know it’s a little early to talk about guidance or anything, but just directionally, how should we think about margins?

Hey David, this is Tasos. Directionally, I think it will be kind of flat to up, right. So, we agree with you, that’s where our expectation would be to be flat or up. And whether or not it’s flat or up, I think it’s really kind of, number one, the cadence, number two is kind of the size of the opportunity and number three, the price deflation, right. So, in a world where the price deflation kind of continues to come down and the cadence of new products kind of ramps up, that’s what’s going to drive the kind of the margin expansion over the course of time.

Okay. That’s helpful. Thank you.

We currently have no further questions, so I would like to hand over back to the management team for closing remarks.

Thank you. As we shared on our second quarter call today, very good first half with momentum across our businesses and pleased to raise the 2023 guidance. Amneal in 2023 is a fundamentally different company than 2019 when Chintu and I returned. We have properly diversified our essential medicines portfolio and have expanded in a number of key areas such as biosimilars, more specialty pipeline and complex GX products and international operations. We are well positioned for sustainable growth and meaningful EBITDA acceleration in near-term with key catalysts adding to our growth profile, all of them now. Thank you very much and have a great day.

Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.