Amneal Pharmaceuticals - Earnings Call - Q4 2021

Transcript

Speaker 0

Hello, and welcome to Amneal's Fourth Quarter and Full Year twenty twenty one Earnings Call. My name is Alex, and I will be coordinating the call today. I would like to turn the call over to Head of Investor Relations, Tony DeMeyer. Over to you, Tony.

Speaker 1

Good morning, and thank you for joining fourth quarter and full year twenty twenty one earnings call. Today, we issued a press release reporting our financial results. The press release and presentation are available at amneal.com. We are conducting a live webcast of this call, a replay of which will be available on our website after the call. Please note that certain statements made during this call regarding matters that are not historical facts, including, but not limited to, management's outlook or predictions for future periods are forward looking statements.

These statements are based solely on information that is now available to us. We encourage you to review the section entitled Cautionary Statements on Forward Looking Statements in our press release and the presentation that applies to this call. Also, please refer to our SEC filings on our website and the SEC's website for a discussion of numerous factors that may impact our future performance. We also discuss certain non GAAP measures. Important information on our use of these measures and reconciliations to U.

S. GAAP may be found in our earnings release in the appendix of the presentation. On the call this morning are Sharag and Shintu Patel, Co CEOs Tatas Konenderas, CFO Andy Boyer and Joe Todisco, Chief Commercial Officers for the Generics and Specialty segments and Jason Daley, our Chief Legal Officer and Corporate Secretary. I will now turn the call over to Sharag.

Speaker 2

Thank you, Tony, and good morning, everyone. Yesterday, we were so thrilled to announce the approval of ReLUKYO, our biosimilar version of filgrastim. This is truly a watershed moment for Amneal and reflects the team's tireless effort to bring this important oncology biosimilar to the market. On the call, we'll discuss our broader growth strategy in biosimilars. Turning to results.

Amneal delivered solid results in the fourth quarter, capping off a year of exceptional performance and execution. For the full year 2021, revenue grew 5% and adjusted EBITDA grew 18%. Before we go forward, let us look back for a moment. Since Chintu and I returned two point five years ago, Amneal is now a much stronger company with a more diversified portfolio. We are driven by our R and D engine with a rich innovation pipeline and talented global team in place that is executing well.

Since 2019, revenue is up $468,000,000 or 29 percent, and adjusted EBITDA is up $182,000,000 51%. As we have grown, our innovation pipeline is as deep as ever. Also, we have added key capabilities through the acquisition of Kashyoo Specialty, Punishka Healthcare and Sol's baclofenac franchise that we believe will power our next chapter of growth. Now looking forward, our 2022 guidance reflects continued top and bottom line growth that includes investments ahead of launches in higher growth areas of business such as injectables, specialty and biosimilar. Our ability to continue growing while making long term investments reflects the diversity and sustainability of our growth profile.

We believe we have the right strategy to be successful and the right team to continue executing and innovating, and we are well positioned in several key growth areas. As the core of this strategy is our focus on affordability, unmet patient needs and providing access as a global essential medicine company. Overall, we see Amneal's growth profile accelerating over the next several years as we increasingly shift our business mix towards higher growth and higher growth end markets. Let me now walk through our key business areas at a high level, both where we are today and our strategy for growth in each. Starting with our retail generics business, which has grown consistently over the last few years as our robust R and D engine has significantly diversified the portfolio with new complex products.

In 2021, we delivered $370,000,000 in net revenue and launched 28 new products. We see the $20,000,000,000 U. S. Retail generics market continue to expand and grow. The pipeline for the industry remains robust with approximately $284,000,000,000 in total brand product revenues facing loss of exclusivity in the next decade.

We are confident that our core competencies in R and D, manufacturing, quality and commercial excellence will drive our continued momentum in retail generics for years. About half of our 2021 generics revenue came from non oral solids and 87% of our pipeline is non oral solids, which underscores our shift to more durable and complex portfolio. With a clear line of sight to continued innovation and the increasing complexity of our portfolio, we expect continued growth in our retail generics business going forward. Regarding our injectable generics, we announced the acquisitions of Punishka Healthcare in Q4. As a reminder, the acquisition adds key manufacturing infrastructure, capabilities and capacity to support The U.

S. And international markets. Building on that, we were pleased to announce another tuck in transaction in January with the acquisitions of Sol Therapeutics' baclofenac franchise, which advances our strategy in a few key ways. First, it expands our neurology presence into spasticity with an established durable institution product in lyocell and expands our annual institutional injectables business to about $150,000,000 Second, it also adds the recently approved Livespa to a specialty bag with commercial launch planned in June. And third, it adds a specialized institutional commercial team in advance of our biosimilar launches this year.

We expect strong growth in the $5,000,000,000 institutional injectable market as we scale the injectable business with a remarkably larger portfolio over time, over the end of our expanded global capabilities, we expect injectable revenues will ramp up substantially in the later part of 2023 on our way to annual revenues in excess of $300,000,000 by 2025 as we aspire to be the top five in The United States and also become a global player. Now in biosimilars, we expect to enter the market in 2022 with our initial oncology portfolio of three products. The total addressable market for these products is $6,300,000,000 with $2,900,000,000 representing the biosimilar portion. Beyond those, we're also actively looking at additional partnership opportunities where we can be early to market, preferably first or second. The pipeline for the industry remains robust with approximately $148,000,000,000 in total Biologics products revenue facing loss of exclusivity in the next decade.

After our initial launches, gaining share and adding to the portfolio, we expect biosimilar revenues will build over time. Our goal is to build a global business through in licensing and being vertically integrated as we look to become a meaningful player in biosimilars. In our AvKARE business, we saw solid performance in 2021 with $349,000,000 in net revenue. We are focused on a strong commercial and operational execution as we expand across multiple channels, including the federal government health care market, distribution channel and unit dose. We expect substantial growth in this durable business going forward.

In specialty, we see multiple growth opportunities over the next several years. In 2021, our commercial organization executed very well, delivering $378,000,000 in net revenue. A year ago, we invested to expand our endocrinology sales force, which led to significant growth this year in Unithroid, our branded product for treating hypothyroidism. Rytary, our branded carvedilolivodopa product for Parkinson's also had a strong year, while at the same time, the team did an excellent job advancing our IPX-two zero three pipeline product. Positive Phase III data showed that this innovation has the potential to achieve more good on time and less frequent dosing for Parkinson's patients.

We expect high single digit growth in the $7,000,000,000 brand market for our products and pipeline. As we execute on our existing portfolio and rich pipeline, we see the specialty business expanding meaningfully over the next several years. In international, we are advancing our global expansion plans in key several markets. As you know, in China, we have our Fosun partnership and look to be commercial starting next year in the second largest pharmaceutical market. In India, we have a small hospital business today that came through the Punishka Healthcare acquisition, and we look to build our in market presence in the estimated $25,000,000,000 Indian pharmaceutical market today, projected to go to $36,000,000,000 by 2025.

Also, in other geographies, we are pursuing distribution agreements to leverage our portfolio to enter certain emerging markets. I hope you shared our excitement as we see several businesses that are healthy, expanding and growing through innovation and new capabilities and execution. As we progress and implement our strategy, we expect Amneal will be increasingly durable, diversified and differentiated. With that overview, I'll pass it over to Chintra.

Speaker 3

Thank you, Shiraj, and good morning, everyone. As always, I will start by acknowledging and thanking our 7,000 plus Amneal team members who worked incredibly hard to make healthy possible. As you know, at Amneal, we leave our culture and core competencies every day. We remain relentlessly focused on operational excellence, ensuring a resilient supply chain and driving cost efficiencies across the business. In 2021, our team executed on these areas brilliantly, driving supply chain savings and better inventory management with reduced obsolescence and the lowest level of backorders in our history.

At the same time, we are committed to the highest standards of quality and current good manufacturing practices. We are proud that we have maintained our excellent manufacturing quality track record with an impeccable compliance history at all our sites. Let me now walk you through the tenets of our growth strategy and our focus on innovation across our business lines. In generics, we continue to find new development opportunities across complex product categories such as inhalation, implants, drug device combination and ophthalmics. Our internal R and D and manufacturing capabilities make these fast to market and hard to make complex launches possible, which we believe differentiates Amneal in the industry.

In 2021, our 28 new product launches were excellent, including generic version of Zafamy, Zytiga, Choradex, Decadron and Durezone, and we expect another 20 to 30 launches in 2022 as well as every year going forward. In 2022, we expect to file approximately 30 ANDAs, of which 15 to 20 are injectable. Importantly, Amneal continues to maintain the highest number of CGT designated products in the industry. In retail generics, we have 85 ANDAs pending for approval and expect to launch 15 to 20 of them in 2022. We also have clear visibility to a long runway of future launches with another 55 pipeline products.

Of these roughly 40% are expected to be first to market or first to file. In injectables, we remain acutely focused on expanding our portfolio and growing our commercial business. We expect to launch five to 10 injectables in 2022. So far in Q1, we have already received approval for four new products. We have 29 injectables ANDA spending and another 73 pipeline products, over half of which are expected to be first to market, first to file or five zero five(two).

As previously stated, we expect over 40 new injectable launches from 2021 through 2025 in a variety of complex areas, including drug device combinations, peptide, long acting injectables, liposomal and large volume parenteral bags. In addition to complex injectables, we are focused on five zero five(two) opportunities that target unmet patient needs in hospitals. We will leverage our in house capabilities, including our expanded commercial infrastructure to bring more products to market, including our first 55B2 injectable launches expected in 2024. The next key piece to the injectable strategy is adding global capacity and capabilities. Earlier in 2021, we expanded our existing manufacturing capabilities in LVP bags and vials.

Then with Punishka Healthcare acquisition, we added even more infrastructure. The integration of Punishka Healthcare is going well and we expect FDA inspection and approval of the site in early twenty twenty three. Altogether, we now have 16 production lines, twice as many as we had one year ago, with a broad range of production capabilities across LVP bags, emulsion, prefilled syringes, wires and cartridges to serve The U. S. And international markets.

We believe there is a clear opportunity and need to better serve the global injectable market with consistent supply of high demand products to avoid drug shortages and provide a broad portfolio of high value products to meet patient needs. In biosimilar, we expect to enter The U. S. Market this year with our first three biosimilars filgrastim, pagfilgrastim and bevacizumab. Our first approved biosimilar for filgrastim, ReLUCO, will launch in quarter three and this product will be made in Chicago.

We are so proud of the team for this significant accomplishment as it signals Amneal has a bright future ahead in biopharmaceuticals, particularly biosimilars. Pacfilgrastim and bivasimod have FDA action dates upcoming and we look forward to launching both this year upon approval. By the end of twenty twenty two, our target is to add more biosimilar products in our portfolio where we can be first or second to market. As the dynamics and economics of the biosimilar market shift over time, Similar to our success in complex generics, we believe the key to success is being vertically integrated from development to commercialization to manage margins well. In biosimilars, we look to build our business in a smart way as we leverage partnerships and acquisitions to start and then develop products organically over time.

We are very excited about the future potential pipeline in biosimilars. In Specialty, we continue to advance our pipeline and expect to launch two new branded products this year, The recently acquired and approved LIVISPA product for spasticity is expected to launch in June. In addition, we are hopeful that the DHE auto injector for migraine and cluster headaches will launch in Q4, pending inspection of the CMO site and FDA approval. Next, IPX-two zero three remains on track for NDA submission in Q2 with expected launch in the middle of twenty twenty three. Our market development work continues to validate the view that one point five five hours of increased Guron time per dose with IPX-two zero three as compared to IR CDLV is very meaningful and the commercial opportunity is broader as we see the potential for $300,000,000 to $500,000,000 in peak sales for IPX-two zero three.

For K-one hundred twenty seven for myasthenia gravis, we expect to file our NDA by 2022 and we are pursuing multiple other indications. For K114, a modified release T3 product for hypothyroidism, we plan to file our IND application in the middle of this year. This five zero five(two) program utilize our proprietary drug delivery technology platforms, Grande and Chronotek. Going forward, we expect to launch at least one new specialty product per year. For our full specialty pipeline, we see between $500,000,000 to $1,000,000,000 in potential peak sales.

In international, we are pursuing expansion in several key markets. In China, we currently have five products filed with 10 to 15 expected by the 2022 and twenty to thirty over time. In the last year, we have strengthened our team and infrastructure to enable us to register our products in select markets around the world. Overall, our strategy for growth is built on the strong foundation established over the last few years with a clear plan in place for each area of our business. As a company, we are leveraging our core competencies in innovation, superb quality and manufacturing to position us for sustainable long term growth.

Our team is squarely focused on execution. With that, I will hand it over to Tasos.

Speaker 4

Thank you, Chengdu. Good morning, everybody.

Speaker 5

I'll discuss our fourth quarter and full year results and then I'll move on to our 2022 guidance. For the fourth quarter of twenty twenty one, we reported total net revenue of $537,000,000 up five percent adjusted gross margin of 43.3%, a two seventy basis points extension adjusted EBITDA of $126,000,000 up 18% and adjusted EPS of $0.18 which grew at 29%. As has been the case throughout the year, Q4 performance was driven by our revenue growth and higher gross margins across all of our three business segments. Q4 generics net revenue of $346,000,000 grew 1%. Our growth was driven by the strength of new product launches, particularly ZAPHEMI, Abireteron and Etranapiri, which contributed $35,000,000 in incremental revenue in the quarter.

Also, as an update on Synchron from last quarter, the team has been working very closely with the FDA and we're happy to report that we expect resolution during the 2022 for our key products. Q4 Specialty net revenue of $101,000,000 grew 18%, driven by Unithroid, up 38% and Rytary, up 6%. Our Q4 after net revenue of $90,000,000 was up 9%. Our Q4 adjusted gross margin of 43.3 was driven by all three segments, with generics expanding 130 basis points specialty up 400 basis points and abcare expanding two eighty basis points. As you may recall in our second quarter call, we said that our first after our strong first half, we expected some moderation in the second half gross margins due to the mix of products and timing of overhead absorption, and that's exactly how it played out.

Our Q4 adjusted EBITDA of $126,000,000 was up $19,000,000 growing at 18%. Gross profit growth added $25,000,000 and was partially offset by higher operating expenses, which included the expansion of our endocrinology sales force earlier in the year. Q4 adjusted diluted EPS of $0.18 was driven by the strong EBITDA performance. Let me now summarize our full year 2021 performance. For the full year, we reported total net revenue of $2,100,000,000 growing 5%.

Generics net revenue of about $1,370,000,000 grew 2% driven by the strength of new product launches. Specialty net revenue of $378,000,000 was up 6% driven by Unithroid up 24% and Rytary up 7%, partially offset by declines in our non promoted brands. Outcare net revenue of $349,000,000 was up 19% and up 9% organically. Moving down the P and L, full year 2021 adjusted gross margins was 45.7%, slightly ahead of our expectations. This reflects five thirty basis points of expansion in generics, driven by successful new product launches, the renegotiation of a key third party agreement and a number of other operational efficiencies.

Three seventy basis points of expansion in our Specialty business was driven by favorable mix and 150 basis points of expansion in Healthcare reflects a number of operational improvements. 2021 adjusted EBITDA of $538,000,000 was up $82,000,000 and growing at 18%. 2021 adjusted diluted EPS of $0.85 grew 35%. And our 2021 operating cash flow was $242,000,000 in line with prior years. And we finished the year with $257,000,000 in cash and cash equivalents, which reflects the Tunisia Healthcare acquisition closing in Q4.

Finally, we're pleased to finish 2021 with net debt to adjusted EBITDA of 4.6 times compared to 5.3 times a year ago and seven times two years ago. Let me turn to our 2022 expectations now.

Speaker 2

From a

Speaker 5

top line perspective, we expect 2022 total company net revenue between 2,150,000,000.00 and 2,250,000,000.00 which reflects mid single digit growth. In regards to generics, we expect mid single digit growth, which is an acceleration from the 2% growth in 2021. Our growth will be led by our retail generics as we introduce new products and the strength of the recent launches enabled to offset low double digit price erosion similar to what we saw in 2021. This consistent growth profile reflects the depth of our R and D pipeline, cumulative impact of years of innovation and the transition to a more complex resilient portfolio. In addition, we expect strong growth in injectables driven by new product launches, the addition of Laresal and some initial revenue from biosimilars in the latter part of the year.

In Specialty, we expect 2022 revenue to be in line with 2021 with continued strong write off rate unit ROIC growth offset by the exclusivity loss of Zomi. The launch timing of Ladispa will have limited impact due to the time of launch. And in regards to Up Care, we expect mid single digit growth for 2022. Moving down the P and L. We expect 2022 adjusted gross margins to be broadly in line with 2021.

This includes the benefit of higher margin new product launches, continued operating efficiencies, partially offset by inflation pressures. Keep in mind, a big piece of the gross margin improvement last year came from supplier efficiencies that do not repeat this year to the same extent. Next, we expect 2022 adjusted EBITDA of five forty million to $560,000,000 Our outlook includes approximately $40,000,000 in incremental investments as we look to scale the higher growth areas of our business with new launches. In 2022, we're making those key investments, particularly in sales and marketing and R and D to support upcoming launches across injectables, specialty and biosimilars. Our outlook also includes approximately $20,000,000 from inflation on materials and other costs beyond normal merit.

On the bottom line, we expect 2022 adjusted EPS of $0.08 0 to $85 which reflects solid EBITDA growth as well as slightly higher interest expense and growth in minority interest related to Aptar. On the cash side, we expect 2022 operating cash flow between $225,000,000 to $250,000,000 and a slight an increase in CapEx between $75,000,000

Speaker 2

to $85,000,000

Speaker 5

In terms of quarterly phasing in 2022, we expect our financial performance to accelerate over the course of the year for four reasons. First, we expect to successfully resolve the majority of the Synchron issue over the next coming months. Second, the timing of new product launches as they build throughout the year, particularly in the second half. Third, timing of manufacturing fixed overhead absorption. And finally, our investments to support our multiple upcoming product launches as they are more front end loaded.

From a dollars perspective, we're targeting Q1 revenues of about $500,000,000 and adjusted EBITDA of about $100,000,000 With that overview of Q4, full year 2021 and 2022 expectations, let me hand it back

Speaker 2

to Shiraz. Thank you, Tasos. In summary, 2021 was a very successful year for Amneal as the team executed well on all elements of our strategy across the business. We entered 2022 with strong momentum. As a result of our focus in higher growth areas and strong pipeline in large attractive markets, we expect our top and bottom line growth to accelerate over the next several years.

With that, let's open the call to questions. Tony?

Speaker 0

Thank you. We will now begin the Q and A. Our first question for today comes from David Amsellem of Piper Sandler. David, your line is now open.

Speaker 6

Okay. Thank you. Good morning. So a couple of questions. First, high level question about business development.

I mean, you recently acquired the baclofen assets. And with that in mind and with the expansion of the specialty brand portfolio, can you talk about your appetite, really your capacity for additional acquisition of assets, brand assets? And ultimately, what do you see as being the mix between brands and generics over the next few years for the business? I guess that's number one. Number two, regarding the biosimilars that you have in the portfolio, filgrastim, petfilgrastim, bevacizumab.

These are fairly crowded markets, not very crowded markets, but I guess how are you thinking about contribution? How are you thinking about pricing erosion in these specific markets and ultimately, your penetration for those three? And then lastly, wanted to pick your brain on the DHE injector product. The question here is how do you see it coexisting with the intranasal product that Impel has launched recently?

Speaker 2

David, good morning. We'll start with one at a time. First, high level BD is on a specialty, as you know, we did the tuck in acquisitions. We did KSP to bolster our pipeline, which we have excellent organic pipeline. So we're not in a dire need to do some deal.

If there's a good deal, we always are looking. And if we can afford it, because at the same time, we are very mindful of deleveraging or we are at 4.6 of a stated goal to be between three to four. So whatever we can afford and when we find the right deal, we'll do more of a tuck in deal for the specialty brand side. And we expect to have a good opportunity this year and next year as the corrections happening in the biotech field. We may acquire pipeline assets as well on the specialty side.

So very excited about the growth on specialty. Your question, how do we see the breakdown? So the way we see it, as we said, we are very excited about all growth areas. So let's talk about our retail generics. We said we would be maintaining, stabilizing, right?

We have stabilized the business, growing few percent, which would be the probably only company that can save on growing my retail generics business because of a very powerful pipeline. And we're not we don't expect that to be a higher growth, but we do expect it to maintain where it is and grow slowly. The distribution falls under the same umbrella. Now we take the on a specialty side, we have various launches, LiveSpa, DHE auto injector, got IPX-two zero three next year, potentially K-one 127 in 2024. And every year, we have lined up these, as you know, it takes time to ramp up, but it adds a meaningful contribution, and we expect that to become almost 25% of our business from a revenue perspective and contribution perspective would be higher on a specialty.

And then just finishing it off, where other powerful growth area is biosimilars, where we see three launches for this year. We're very excited that the first approval came. This reminded us of folic acid approval in 2005 at Amneal when we launched our label. And then right now, today, we sit on three fifty approvals. Biosimilars do not have that many products out, but we expect the one to two to three to keep going every year.

And we are actively looking at various options on do we vertically integrate, how do we add to the biosimilar pipeline. And commercially, we are investing to set the already have done it and doing it more to set the infrastructure to completely support the providers and patient support. I will pass the and the market the markets would be, as you know, we there's a couple of levers to pull the pass through for our G CSF, is Releukio because we would be the new biosimilar. And we would use our collective relationship between from the retail injectables specialty to launch these and the newly built biosimilar team to penetrate as much as we can. It's going to be competitive.

And then same thing with pegfilgrastim and then Avastin. So all three very excited for this year. BHE, I'll pass it on to Joe.

Speaker 7

Okay. Thanks, Shirov. Hi, David. For competitive reasons, I don't want to disclose too much about our planned marketing strategy, but I'd want to point to a couple of things. First, I do think we're going to have a little bit different of a labeled indication from the INPEL product.

We see it as a differentiated product, different mechanism of action and a different target patient profile. So from that standpoint, I don't see us really competing for the same patients. I think we're going to be competing in a little bit different of a segment of the migraine market, a different niche segment. And as we get closer to launch, we'll talk more about our launch strategy. All right.

Speaker 5

Next Thank

Speaker 2

you.

Speaker 0

You. Our next question comes from Balaji Prasad of Barclays. Balaji, your line is now open.

Speaker 8

Hi, good morning and congratulations. Couple of questions from me. Firstly, on the biosimilars side. Gerard, we just want to understand your comments both on the need for being vertically integrated and also your focus on future biosimilars coming from partnered and licensed products. How do these two comp against each other?

And if you could also give an update on the FDA inspection of the manufacturing side for biosimilar Avastin and would be great. And on the guidance part of things, Chirag, two point one five billion at the lower end of the range implies around an incremental $60,000,000 of revenue. At the lower end, EBITDA is flat versus twenty twenty one. Indeed, you called out that you are investing into the business. But considering all the positive fractions across each of those segments, I'm just trying to think about how conservative is this guidance?

Thanks.

Speaker 2

Thank you, Balaji, and good morning. So on a biosimilars, on the strategy front, as we discussed several times on the call that, look, this market is becoming better and better from all fronts. Right? Regulatory, it's much easier compared to when we started in 02/1516. So FDA understanding, our understanding, the requirements for the clinicals, all that is reasonable.

It still has a room to improve and there are various actors are working on it to make it much better and because this is one of the key area to bring more access and affordability in biologics, as you know. So we remain on the strategy side, we have disclosed three pipeline assets from the partners. We may have more pipeline from the in licensing. And why vertically integrate vertical integration is important is as we in a small molecule, thing. It can't have two players.

The margins are not enough to be shared between two players. So that's the first thing. We want to maximize. We're doing all this hard work. We just do not want to have a commercial expertise.

We want to have the development expertise and entire integrated chain That allows us the quality controls, which we are best known for, which is going to be even more important in Biologics than any other form, allows us our cost controls, allows us to develop global products for global markets. And we see higher growth opportunities and higher margins. And it's a serious investment in biosimilars as we have made since last few years. And going forward, we're very excited. And this is why I believe why a particularly integrated company would lead and become be in the top five in The United States or globally.

You you want to say something, Bharat? So yeah. Hi, Bharat.

Speaker 3

This is Chintu. So regarding the Avastin inspection, the inspection was conducted. We don't have a feedback from FDA. Overall inspections went well, but at this point, we are not able to make any outcome comments. So we'll wait and see.

Our goal date is sometime in April. So it's in very near term. About being vertically integrated, it is very important as Amneal is known for its innovation science and cost effective execution that we have some development to commercialization capabilities in house, plus it's a global market reach for us as biosimilars have a very good market outside of U. S. So giving all these reasons, we are working with partners right now, but we firmly believe is to have vertical integration.

Speaker 2

Yes. And Balaji, on your question on the guidance, as you know, last two years, we meet our guidance and raise our guidance. We like to be like that. The across the segment investments are the $40,000,000 in sales and marketing expenses, which builds up our teams in specialty and biologics biosimilars. That revenue, as you know, the uptake is slow unlike the small molecule to convert the patient and the providers to using biosimilars.

So it slowly ramps up. And then also we got ahead by $20,000,000 inflation related costs, which unfortunately we cannot pass and that's on the retail side at all because of as you know, I don't have to say it again, it's unfairly set with the three big buying groups completely controlling the buying powers, the suppliers. Many times, it becomes a sustainability issue. It's very concerning that hope it doesn't cause future shortages and other issues. And that is why the guidance are given the way they are given.

And hey, look, we still have a growth and very excited about how 2023, 2024, 2025 even lines up.

Speaker 8

Thank you. That's helpful.

Speaker 0

Thank you. Our next question comes from Gary Nachman of BMO Capital Markets. Gary, your line is now open.

Speaker 9

Thanks. Good morning. First on the injectable business, you're looking to more than double that over the next few years. I think you said greater than $300,000,000 is the target. How much of that will be organic with your own pipeline versus going out and doing more tuck in deals in that space?

And the four new approvals in the first quarter, just talk about those and how much you expect they'll contribute this year? And then in generics, are there certain dosage forms where you currently don't have strong capabilities that you want to get into or perhaps an area that you want to get into in a more meaningful way? Or are you happy on that front? And the low double digit price erosion in generics, is that a normalized rate at this point that we should be thinking about? You.

Speaker 2

Hey, good morning, Gary. How are you? So on your injectable growth is mostly organic. It's pretty much organic because we

Speaker 4

do have the capabilities, as we

Speaker 2

said, and capacity to and R and D. And as my brother mentioned, all the the technology capabilities we have. The four approvals, we expect even more approvals. We do not give us the product specific guidance, but they're good products, you know, in the injectable. And there's always some products that are in shortage.

So we expect good contributions from those launches. On the generic side, what we haven't launched is inhalation product. And we're excited that inhalation can be coming this year and definitely for the next year. Shimpy, do want to expand?

Speaker 3

Sure. Hi, Gary. So I think I need just to expand on injectables. Our forecast is based on our current capabilities and pipeline. Historically, we used to file five to six product with expanded capacity and Punishka acquisition.

It gives us the manufacturing and plus r and d increased capacity. So starting with this year, we'll be filing 15 to 20 new products in a, you know, variety of differentiated products. So we have a very good diversified manufacturing and R and D capabilities as far as injectables are concerned. One of the area we are expanding is inhalation as my brother said, but also other is the implant products and more drug device combination products. Those are complex products, which requires device and formulation different capabilities.

We have some, but that's the area we are investing little more going forward to give us that edge as they are very high barriers to entry

Speaker 2

areas. Yep. And your question on that double low double digit, Gary, yeah, it is for now. It's a norm for the base business. We don't expect any change.

Speaker 9

Okay, great. Thank you.

Speaker 2

Thank you.

Speaker 0

Thank you. Our next question comes from Chris Schott of JPMorgan. Chris, your line is now open.

Speaker 10

Great. Thanks so much for the questions. Just a couple for me. I guess, first on the 1Q results, I think you said you're targeting $100,000,000 of EBITDA. Can you just help me understand the dynamics there a bit as it seems like that is a step down from recent performance?

So is that just kind of a expense timing issue? Or is there something else we should be keeping in mind with the 1Q number? And then the second one to me was maybe a broader biosimilar kind of pipeline question. Can you just talk a bit about the approach you're taking as you're thinking about adding further assets? So are you looking to stay kind of hospital focused with the portfolio?

Would you look more broadly? Are there any therapeutic areas that are particularly attractive to you? Just a bit more color of when you envision kind of expanding this out, what kind of criteria are you looking at, I guess, as you think about the products you're targeting? Thanks so much.

Speaker 4

Hey, Chris, this is Tassos. Good morning. I'll take the first question. Yes. So a couple of things.

So we don't I mean, you've seen if you look at our quarterly performance the last three years, the company is not on autopilot, right? So there is there happens to be volatility at any given quarter. So we look at it more in terms of kind of full year numbers. That's number one. Number two is, as we look at Q1, it's playing out exactly how we're planning it for in regards to our 2022 internal budget.

And what this accounts for is, number one, is the kind of substantial amount of investments that we're making to the business, which we're not going to sacrifice, right? So we're delivering growth in 2022, but also we want to position the company for sustainable growth. So we're not going to sacrifice required investments. So we have a front loaded of the investments and then you have the product launches and the incremental revenue in the back end of the year. So that's a key driver, number one.

Number two is Q1, you always have some seasonality, right? It tends to be one of our lower quarters just between Q4 and Q1, some seasonality. And the number three issue is any given quarter, primarily Q1, we just gave a little bit more fixed overhead less overhead absorption just between the timing, the way we run our manufacturing plants and some of the lesser impact of COVID that's hitting on our workforce. So you put all these things together, that's why we're targeting about $100,000,000 and then we see a substantial amount of ramp up from there for the rest of the year. With that, let

Speaker 5

me just turn it over to Chidu.

Speaker 3

Yes. Hi, Chris. Regarding your second question on biosimilar pipeline and product selection, our approach is that we want to be first or second to That's our key criteria. We are not looking from the therapeutic perspective. We are looking broadly as a global play for biosimilars, and we are also looking from acute to chronic.

So So we are taking approach from the interchangeability, non interchangeability product. As you know, you're aware there is a lot more adoption acceptance of biosimilar from the provider and payers perspective. So I think as the markets are opening up and more, we are looking at opportunistic approach on biosimilar, time to development, cost of development and again the stated goal is to be first and second. And our targeted pipeline puts us in that positions to have highest number of first to market biosimilar. So I think it's a very holistic view keeping IP and other norms in mind, but not focused on therapeutic area.

Speaker 10

Great. Thanks so much.

Speaker 0

Thank you. Our next question comes from Greg Fraser of Truist Securities. Greg, your line is now open.

Speaker 11

Great. Good morning and thanks for taking the questions. A couple of follow ups on the guidance. How much of the anticipated revenue growth for generics will depend on approvals that are pending? And is vasopressin one of the launches that you expect this year?

And on your comment about gross margin being grossly in line, does that apply for both generics and specialty? And then on biosimilars, clearly expanding the pipeline as a priority. For the next wave of biosimilar launches over the next few years, are there assets available that could be among the first one or two to get to the market? Or deals for biosimilars that will get to market later in a decade more likely?

Speaker 4

Greg, I'll take the first two. So when we look at the growth of the of our generic business is, I would say, fifty-fifty. So 50% of the growth is coming for brands that we launched late last year, right? So those are growing. And 50% of the growth should come from new product launches.

Speaker 5

Angus, we talked about it

Speaker 4

is we're never relying on any one product, whether or not that was oppressing, Zafemi or anything else. So we think of it as a bundle of twenty, thirty new product launches and some of them are larger than others. So we're not overly relying on any one, which kind of helps with the durability and the predictability, right, of our business. That's number one. In terms of gross margin, I'm listening at a high level, I think we feel great about the progress the company has had over the last few years, right?

So in 2020, right, our overall gross margin was about 42%. We finished last year at about 46% and we expect to kind of stabilize this year at this level over the course of time. That's what further improve as we push more and more on the specialty business, biosimilars and complex generics. So we feel good about it. The more specific question about this year, I think generics, I think they're going to be relatively flat, give or take a point.

I think AvKARE is just going to be down a little bit just because of the mix of business where that's coming from. And we should see some specialty gross margin growth, just again, of products and heavy regulatory unit flowing, fueling the growth that are higher margin products. With that, let me

Speaker 2

just kind of turn it over to Yes. Thank you, Tasos. Good morning, Greg. Biosimilars Next Wave, as you probably know, we have a partnership with two partners who we work very deeply, and there are a few others we are evaluating. So as we said, it's going to be a mix, and the mix will be more of a we're we're looking at a various development house to bring them in house.

So and Neil becoming vertically integrated along with continue the opportunistic pipe the partnership, the licensing. So if I see the next next three, four, five years, it would be pretty pretty much 75% in house products, 25% in licensed products. That's how the next wave will come. It will come from 02/2024, 25 launches, and then it continues to to build up. That's our internal plan that that we have.

And when we have more information, we will be very excited to disclose. But Amneal, it's a very growth area for us and it's a part of our growth strategy, as I mentioned, our key growth area, specialty, biosimilars, injectables and international markets. This four will drive us out of the melting ice cube business of retail generics, which,

Speaker 5

by

Speaker 2

the way, we do really well there as well.

Speaker 11

Thank you.

Speaker 0

Thank you. Our final question for today comes from Elliot Wilbur of Raymond James. Elliot, your line is now open.

Speaker 12

Thanks. Maybe just two high level questions. Sherrod, going back to your commentary earlier with respect to the biopharma environment presenting or potentially presenting some unique opportunities in terms of funding assets or acquiring companies that aren't going be raised capital. One source of potential new assets or revenue, the other, of course, being the more traditional generic market. I mean, that asset market looks to be gaining a little bit more momentum, a lot more properties coming to market than we've seen, I think, in some time and probably going to see more of those.

Not traditionally been your focus, but just wondering how you're sort of viewing the ongoing dynamics there in terms of larger companies continuing to scale back, put up larger properties for sale. How are you thinking about potentially advancing some of your ambition in some of these areas, injectables and some of the more complex dosage forms via an immediate acquisition that might give you assets that could be in

Speaker 7

the

Speaker 12

company's pipeline already or sort of on the radar screen just given their availability and pricing? And then I have a follow-up for Shintu, but maybe I'll ask you to respond to that.

Speaker 2

Okay. Thank you, Elliot. So So what I mentioned is the the biotech companies, there's just so many. Right?

And some of them could be injectable companies as well with the platform technology. So we're looking at all of them. And if the right fit, we would like to do a deal there. The retail genetics is gonna be very tough for us because we do have 350 approved products, 140 in pipeline, a 110 pending at FDA. The FTC divestiture process would not allow us to go through a successful transaction.

I know with Sandoz out there, private equity being active, there are few other assets, you know, Perrigo asset has has gone. So we're excited. We do need consolidation in generics. It's just unsustainable. How do we blame that?

That's entirely a different game, which we do not know exactly when that gets played out. But let's put it this way. At this point, it's interesting that it is moving in that that that side because there's a sustainability for many players on the on the GX retail side. And if they don't consolidate, they won't be able to to compete well. But we stay very excited about the biotech and injectable side to look at all the tuck in opportunities and and bolster over, obviously, the vertical integration for our biosimilars capabilities.

Speaker 12

Okay. And just one last question for Shin too. Just thinking about the competitive environment in the overall injectable space, certainly that market still remains much more concentrated obviously than most areas of the traditional generic market. And I guess we've seen sort of the larger entrenched players just seem to sort of concede shares to some of the upstarts and still seems to have sort of protected new product launch dynamics and margins. But if you look at the competitive environment, at least in terms of the companies who want to get into the space, there's certainly a lot of companies out there with a lot of ANDA filing.

So obviously, any new approvals or incremental revenue for you, but just how do you think about this from sort of the big picture perspective in terms of all these new entrants looking to get in the space? How does that impact sort of new launch contribution, return on investment and margins? What do you think we're going see just kind of continuation of what we have for the past couple of years where just certain large incumbents just kind of continue to back away from the market? So you don't really sort of see change in any of those key dynamics. Thanks.

Speaker 3

Yes. Hi, Alid. Great question. So first of all, yes, there is capacity and there's maybe new capacity coming in the market for injectable. But always, if you see historically, still there's on an average 100 plus product in shortages.

So I think the key to success in injectable space is not just the approval, but consistent quality supply. Supply and that's what Amneal gets differentiated because we have one of the best quality track record. And that's what we are focused also. We are doing redundancy in our supply chain and and try to be a consistent long term supplier. So that's our one key differentiator.

Second, we have so much further diversification in our pipeline as we have long acting injector injectables. We have these large parenteral bags, large volume bags. We have the PFS. We have drug device combinations. We have the liposomal products.

So plus we have a separate site for our Onco product. So we are well positioned and plus our infrastructure is also pretty new, brand new. So we are so well positioned to kind of cater multiple areas of growth and we saw acquisition. Now we have the front end commercial team also where we are looking at very unique which we already had some, but we are bolstering our five five b two pipeline in injectable where we are bringing unmet to the hospital unmet needs to the hospital. So I think looking at our broader pipeline, what we have invested in our people in r and d infrastructure and now manufacturing infrastructure, we are very uniquely positioned to be a consistent supplier and also bring high end value products.

So combination of that would definitely lead to a margin expansion than the regular typical products.

Speaker 0

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

Speaker 5

Well, thank you everyone for joining today. Have a great day.

Speaker 3

Thank you everyone.

Speaker 1

Thanks everyone.

Speaker 0

Thank you for joining. You may now disconnect.