Amneal Pharmaceuticals - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 delivered strong top-line growth: net revenue $731M (+18% YoY) with double-digit growth across Affordable Medicines (+21%), Specialty (+16%), and AvKARE (+14%); adjusted EBITDA was $155M and adjusted diluted EPS $0.12.
• Management introduced 2025 guidance: net revenue $3.0–$3.1B, adjusted EBITDA $650–$675M, adjusted EPS $0.65–$0.70; capital expenditures ~$100M and operating cash flow (ex-discrete items) $280–$310M.
• Strategic catalysts include CREXONT ramp ($3M Q4, 1,000+ Rx/week) with payer coverage at ~30% and targeted 50%+ in 2025, and accelerating biosimilars/505(b)(2) injectables momentum ($39M biosimilars Q4; $54M new launch contribution).
• Balance sheet progress continues: FY2024 operating cash flow $295M ($348M ex-discrete items) and net leverage reduced to 3.9x; 2025 target net leverage 3.6–3.7x with $80–$100M gross debt reduction plan.
• Street consensus from S&P Global was unavailable at the time of this report; beats/misses vs estimates cannot be assessed (we attempted to retrieve S&P Global consensus but hit an access limit).

What Went Well and What Went Wrong

What Went Well

• CREXONT launch traction exceeded expectations with ~1,000+ weekly scripts within four months; management cited “remarkable” patient outcomes and targeted payer coverage increases from ~30% to ~50% this year.
• Diversified growth engines: biosimilars revenue reached $39M in Q4, and new product launches added $54M; all segments posted double-digit growth YoY.
• Balance sheet and cash generation: net leverage improved to 3.9x, FY2024 operating cash flow was $295M ($348M ex-discrete items), positioning for further deleveraging and 2025 EPS growth despite mix headwinds.

What Went Wrong

• Q/Q margin/earnings pressure: adjusted EPS fell to $0.12 from $0.16 in Q3 as higher interest expense offset EBITDA and increased investment in growth areas; EBITDA declined to $155M vs $158M in Q3.
• Mix headwind and upcoming LOE: 2025 EBITDA margin guided ~21% vs ~22.5% in 2024 driven by AvKARE mix and RYTARY LOE, with incremental investments to maximize CREXONT trajectory.
• Naloxone state contract momentum slower than hoped; California remains the major contract with gradual progress on additional states; 2025 kit target ~2.5M rising to ~4.0M in 2026.

Transcript

Operator (participant)

Good morning and welcome to the Amneal Pharmaceuticals Fourth Quarter 2024 Earnings Conference Call. I'll now like to turn the call over to Amneal's Head of Investor Relations, Tony DiMeo. Please go ahead.

Tony DiMeo (Head of Investor Relations)

Good morning, and thank you for joining Amneal Pharmaceuticals Fourth Quarter 2024 Earnings Call. Today, we issued a press release reporting Q4 results. The 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 this section entitled "Cautionary Statements" on forward-looking statements for factors that may impact future performance. We also discussed non-GAAP measures. Information on use of these measures and reconciliations to GAAP are in the earnings release and presentation. On the call today are Chirag and Chintu Patel, co-founders and co-CEOs; Tasos Konidaris, CFO; our commercial leaders, Andy Boyer for Affordable Medicines, Joe Renda for Specialty, and Jason Daly, Chief Legal Officer.

I will now hand the call over to Chirag.

Chirag Patel (Co-CEO)

Thank you, Tony. Good morning, everyone. At Amneal, we are much more than another generics company. We are an American biopharmaceutical company with a track record of excellence in delivering high-quality, complex pharmaceuticals at speed and scale. We are a leader in an essential industry, providing millions of patients with access to affordable and innovative medicines. 2024 was an exceptional year where Amneal delivered stellar financial performance with double-digit revenue and adjusted EBITDA growth, and reducing net leverage below four times. All segments grew revenues double digits. This broad-based performance reflects the strength of our diversified business, strong execution, and continued investment in growth areas. Beyond financial results, we took major strategic steps in 2024 to enhance our long-term growth profile and expand our future potential, including launching Crexont, establishing our GLP-1 collaboration, and adding to our biosimilars pipeline.

The first important milestone we achieved in 2024 was the successful launch of Crexont. We are so excited by the strong response from prescribers and inspiring patient testimonials. Early traction has exceeded expectations, with market share reaching about 1% in just four months and on track to exit the year at 3% plus. As a point of reference, Rytary has 6% market share currently, 10 years since its launch. We are very confident in achieving U.S. peak sales of $300 million-$500 million for Crexont. Our specialty business grew 14% in 2024, and our goal is to grow specialty to over $500 million by 2027. This growth will be driven by Crexont, Unithroid, Ongentys, and upcoming launch of DHE and other branded products. We aim to add more branded opportunities to our portfolio over time.

Second, in 2024, we entered the high-growth weight loss and obesity space, a new category for Amneal, through a strategic collaboration with Metsera, a clinical-stage biotech company developing next-generation therapies. This unique collaboration represents a new integrated business model to drive innovation at scale between two organizations. It is a logical extension of Amneal's strategy that leverages our expertise in complex manufacturing and track record of delivering high-quality innovation at scale. Amneal is Metsera's preferred global supplier for the U.S., Europe, and other markets. In addition, we look to commercialize Metsera products in 20 emerging markets, including India. To support this effort, we will leverage our existing peptide capabilities and build two new high-volume peptide manufacturing facilities. With the global weight loss market projected to exceed 150 billion by 2030, this initiative is a powerful new long-term growth driver for Amneal.

Over time, we see this as a very large opportunity for Amneal, with three avenues for value creation: one, the Metsera collaboration, which is our top priority. Two, providing CMO offerings to other large companies. Three, providing scale to deliver on generics weight loss therapies. Third, our affordable medicine segment, historically referred to as generics, includes retail products and our rapidly growing injectable and biosimilar products. The affordable medicine segment generated revenues of $1.7 billion in 2024 as growth accelerated to 15%, fueled by new launches and a diversified complex portfolio over three components of the segment. This is a massive business that remains the foundation of Amneal, and we expect it will continue to grow tremendously going forward. Within this segment, our injectables business is expanding quickly. We have a growing portfolio of over 40 injectable products and launched our first 505(b)(2) injectables in 2024.

These differentiated ready-to-use solutions improve hospital efficiency by eliminating medication preparation steps and errors. In addition, we see biosimilars as the next major wave of affordable medicines. For patients, biosimilars improve the affordability of and access to key therapies. For Amneal, we see biosimilars as a long-term growth factor where we are well-positioned to lead. Our first three biosimilars generated $126 million revenue in 2024, just their second year on the market. We have built our pipeline with five additional biosimilars expected to be filed this year and commercial launches planned for 2026 and 2027. In 2024, we added our largest opportunity, omalizumab, a biosimilar for Xolair, targeting $2.8 billion U.S. market. By 2027, we expect to have six commercial biosimilars in the United States market. Looking forward, the global biosimilars market is projected to grow from about $33 billion today to $75 billion by 2030.

Given the cost, complexity, and development pipelines, we see a relatively limited number of market participants. A recent IQVIA report highlighted the significant white space opportunity in biosimilars. There are over 100 biologic products with patents expiring over the next 10 years, and only 10% currently have biosimilars in development. The report estimates that biosimilars for the other 90% would save American patients about $100 billion per year. We believe success in biosimilars will be driven by product selection, speed to market, R&D, manufacturing, and customer service. Similar to complex generics where Amneal is a leader, we are well-positioned to be a major biosimilar player. Our strategic focus has been in licensing an initial portfolio and building a commercial platform to start. Next, our goal is to be vertically integrated and leverage our proven ability to develop, manufacture, and commercialize complex pharmaceuticals at scale.

Finally, our healthcare segment is a highly durable business with long-term contracts and recurring revenue streams across three channels: distribution, government, and unit dose. In 2024, healthcare revenue grew 25%, and we expect continued double-digit growth, reaching over $900 million in revenue by 2027. This business adds stability and diversification to Amneal's portfolio. Overall, Amneal is an essential player in an essential industry. Over 90% of prescriptions in the United States are for affordable medicines, yet account for only 10% of commercial value. Amneal fulfills over 162 million scripts for American patients each year. We are the largest U.S. manufacturer of affordable medicines. Currently, Amneal is number four in the U.S. retail market based on value, and our goal is to become top five in the U.S. injectables and U.S. biosimilars market in coming years.

Over our company's history, we have built a successful track record of innovation, execution, and growth. Amneal is uniquely positioned in the pharmaceutical industry with a broad and differentiated portfolio across affordable medicines, specialty, and distribution to drive sustainable growth. I'll now pass it to Chintu.

Chintu Patel (Co-Founder and Co-CEO)

Thank you, Chirag, and good morning, everyone, and special thanks to our dedicated employees for making Amneal a purpose-driven company focused on execution and delivering value to our stakeholders. Today, I will provide an update on our strategic priorities across operations, innovation, and our portfolio. First, our world-class global operations remain a key competitive advantage. Amneal has a stellar quality track record and a world-class operational infrastructure with an extensive manufacturing footprint in the United States, Ireland, and India. Over our history, the FDA has conducted over 105 successful inspections with either no or only minor observations. Further, we continue to invest in digitization, automation, and operational efficiencies to drive innovation and growth across different dosage forms. We are committed to enhancing our operational excellence and cost efficiencies across our global infrastructure.

Amid chronic drug shortages and supply chain challenges in the U.S., Amneal stands out with its industry-leading quality, resilient supply chain, and high customer fulfillment rates. A key highlight is our collaboration with Metsera in the GLP-1 space, where our partner's portfolio is moving swiftly through the drug development phase. Amneal already has the infrastructure and capabilities for peptide development and injectable manufacturing. As part of this collaboration, we will build two state-of-the-art manufacturing facilities, one for peptide drug substance production and another for advanced sterile field finish manufacturing. These investments will enable large-scale production, positioning Amneal as Metsera's preferred global supplier while leveraging our R&D expertise and quality leadership in this fast-growing category. Next, in innovation, we launched Crexont, which is a remarkable new treatment for Parkinson's disease, designed for rapid onset and extended efficacy. Crexont delivers more good on time with fewer doses.

Our open-label phase four study is underway to generate additional real-world evidence. We are pleased with early adoption and wonderful testimonials from patients, positioning Crexont to become the leading branded Parkinson's therapy. Next, in our specialty pipeline is the DHE autoinjector for migraine and cluster headache. This innovative presentation of a well-known molecule is intended to help patients avoid emergency room visits during these painful episodes. We project peak sales of $50-$100 million and look forward to launch later this year pending FDA approval. Next, I will touch on our complex generics portfolio. We expect to launch 20 to 30 new products each year. This year, so far, we have launched key complex products such as mesalamine, everolimus, and memantine/donepezil, which has 180-day exclusivity. Last week, we received approval for lenalidomide, which we launch in early 2026.

This cadence of approvals and new launches reflects the breadth and depth of our R&D pipeline. Currently, we have 76 products pending approval, of which 61% are non-oral solids and 56% in development, of which 93% are non-oral solids. We continue to optimize our R&D portfolio, allocating more resources towards biosimilars and specialty over time. In 2024, we launched 12 new injectable products, including our first three 505(b)(2) products, Pemrydi, Focinvez for oncology, and potassium phosphate ready-to-use IV bag. Our fourth 505(b)(2) injectable, Boruzu, for multiple myeloma, is approved and set to launch in Q2 with 10-12 additional 505(b)(2) injectables in development. We will meaningfully expand our injectable portfolio. Other complex injectable programs, microsphere, liposomals, and drug device combinations are progressing as well.

With our R&D capabilities and infrastructure of 21 manufacturing lines in injectables, Amneal is well-positioned to be a leader in the injectable space in the coming year. In biosimilar, we are strategically focused on expanding our portfolio. We are very excited about the biosimilar market, given the upcoming wave of biologics LOEs, clarity on the regulatory pathway, and continued adoption by clinicians. Building on the success of our first three commercial products, we have in-licensed five additional biosimilar pipeline candidates. The BLA filings for two denosumab biosimilars were submitted. Next, the supplemental BLA filing for pegfilgrastim OBI and autoinjector is expected in Q2. After that, the BLA filing for omalizumab, a biosimilar for Xolair, is expected by the end of the year. We look to further expand our portfolio and be vertically integrated over time to be a leader in the biosimilar industry.

In summary, we are focused on driving execution across development, manufacturing, and commercialization throughout our diversified and growing business. With that, I will hand it over to Tasos.

Tasos Konidaris (CFO)

Thank you, Chintu, and good morning, everyone. 2024 was a very strong year of execution across all our business units, with excellent financial performance well ahead of our original guidance metrics. In addition, net leverage declined to 3.9 times compared to 4.8 times at the end of 2023 as we grew EBITDA and we paid down debt. Strategically, as Chirag and Chintu highlighted, we're driving the ongoing diversification of the business through new launches and pipeline expansion in biosimilars and GLP-1s, which provides a strong foundation for long-term growth. In 2025, we expect continued top and bottom line growth, reflecting our ability to offset the Rytary loss of exclusivity due to the breadth and depth of our commercial portfolio and strong pipeline. I'll review our strong performance in Q4, touch on our full-year results, and discuss guidance for 2025.

In the fourth quarter, revenues of $731 million grew 18%, with double-digit growth across all three segments. Our affordable medicine segment grew 21% to $439 million. New product launches added $54 million to Q4 revenue, driven by recent complex launches. Biosimilars generated $39 million in Q4 revenues and grew 49% versus the prior year. As Chintu mentioned, Amneal's continued success in R&D, superb quality track record, and supply consistency are competitive advantages driving sustainable growth, portfolio diversification, and value to customers, providers, and patients. Q4 specialty revenues grew 16% to $121 million, driven by our branded products. Our Parkinson's franchise, which includes Crexont, Rytary and Ongentys, generated $64 million in Q4 revenues, including $3 million from Crexont. As we said, we're very pleased with the initial launch success of Crexont and its early trajectory, well ahead of Rytary's launch.

In Q4, our healthcare segment grew 14% to $170 million, reflecting continued growth across the distribution and government channels. New product launches and continued strong execution are key drivers of healthcare's strong performance. Moving down the P&L, Q4 adjusted EBITDA of $155 million reflects robust revenue growth, consistent gross margins, and some targeted R&D and sales and marketing investments in high-growth areas. Q4 adjusted EPS of $0.12 declined $0.02 as higher adjusted EBITDA was offset by interest expense. In summary, Q4 reflected strong year-over-year revenue growth of 18% and adjusted EBITDA growth of 9%. Moving on to the full year of 2024, total revenues were $2.8 billion, up $400 million or 17% year-over-year, and it was ahead of our original and revised guidance of about $2.6 billion. Its segment grew double digits with affordable medicines of 15%, specialty up 14%, and healthcare up 25%.

In 2024, adjusted gross margins were strong at 42.4%, with affordable medicines gross margins expanding by 110 basis points, reflecting new product launches and operating efficiencies. Full year 2024 adjusted EBITDA of $627 million was ahead of original guidance of $580-$620 million and grew 12%, which includes a substantial increase in R&D and sales and marketing to enhance our already strong pipeline and support new launches. From a cash flow perspective, 2024 operating cash flow was $348 million, excluding one-time legal costs, well ahead of original guidance of $260-$300 million. The strong performance was driven by higher adjusted EBITDA and good work by our teams to drive substantial working capital improvements and some timing benefits.

We're also glad to report that as part of our efforts to reduce leverage, we paid down $182 million of gross debt in 2024 and reduced net leverage to 3.9 times as compared to 4.8 times at the end of 2023, and going further back, 7.4 times net leverage at the end of 2019. We achieved net leverage below four times one year ahead of our publicly stated target. In summary, very strong full year 2024 results with revenue growth of 18%, adjusted EBITDA of 12%, and substantial debt reduction while continuing to invest for long-term growth. Let me now move on and discuss our full-year guidance for 2025. On the top line, we expect 2025 total company net revenue of $3.0 billion-$3.1 billion, reflecting strong growth of 7%-11%.

First, in the affordable medicine segment, we expect continued double-digit growth in 2025 due to the uptake of products launched throughout 2024, some new launches expected in 2025, continued biosimilar growth, and injectables expansion with a number of new 505(b)(2) products. Second, in the specialty segment, we expect 2025 revenue of approximately $400 million, which includes expected Crexont sales of approximately $50 million and expected Rytary sales between $120 million to $140 million, given the loss of exclusivity in the third quarter of 2025. Third, in the healthcare segment, we expect continued double-digit growth in 2025, driven by ongoing new launches from Amneal and other suppliers across channels. Moving down the P&L, we expect 2025 adjusted gross margins between 41%-42%, similar to 2024.

We expect adjusted EBITDA between $650 million and $675 million, reflecting growth between 4%-8% due to top-line growth, the Rytary loss of exclusivity, as well as incremental sales and marketing investments to maximize the substantial commercial opportunity ahead of us. That is Crexont, biosimilars, 505(b)(2)s, and injectables. From an EPS perspective, we expect 2025 adjusted EPS between $0.65 and $0.70, which reflects adjusted EBITDA growth and lower interest expense as debt levels have been reduced and interest rates are beginning to come down. Moving to cash flow, we expect another strong year of cash generation in 2025, which allows us to continue reducing gross debt and net leverage. For 2025, we expect operating cash flow, excluding potential legal settlement costs, between $280 million and $310 million. Depending on timing of settlements, we may incur approximately $25 million of costs, which are substantially lower than prior years.

From a capital allocation perspective, we continue to prioritize investments to further diversify our business and drive sustainable growth, particularly high-growth areas such as specialty, biosimilars, and GLP-1s. In 2025, we expect capital expenditures of approximately $100 million net of reimbursement related to the new facilities we're building as part of our Metsera collaboration. In addition, we continue to be laser-focused and continue to reduce our debt levels. Looking to the balance sheet, our strong financial performance and disciplined capital allocation is driving higher cash generation and continued delivery. Recognizing our delivery progress and improved financial profile, we're pleased to receive one-notch credit upgrades from S&P and Moody's a few months ago. Now that net leverage is below four times, our focus is on driving net leverage to below three times in the next few years. Let me now turn the call back to Chirag.

Chirag Patel (Co-CEO)

Thank you, Tasos.

In summary, 2024 was a remarkable year for Amneal. We delivered broad-based double-digit growth and took key strategic actions to further position our company for sustainable long-term growth. Amneal enters a new chapter of growth in 2025 with tremendous momentum across our business, and we are so excited for what's ahead. Let's now open the call for Q&A from.

Operator (participant)

Thank you. To ask a question, please press Star followed by 1 on your telephone keypad now. If you change your mind, please press Star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. The first question is from Chris Schott from J.P. Morgan. Your line is now open.

Chris Schott (Managing Director)

Hi, great. Thanks so much for the questions. Maybe just to start off with, I just had a couple on Crexont. Maybe just kicking off a little bit, can you just elaborate on these first few months of the launch? It seems like the ramp's going really nicely, but I was just wondering, is there any surprises from your perspective in terms of either where the patients are coming from or just any dynamics of how physicians are integrating this into their practices? And maybe just a second one on Crexont while we're at it. Can you just give us the latest in terms of where formulary access stands and how you're seeing that trending?

Chirag Patel (Co-CEO)

Thank you, Chris. We're so excited beyond our expectations, and the testimonials, patient testimonials are amazing. This is where you feel so good that the patient that wasn't able to walk now walks. They're taking fewer capsules a day, lasting longer. It's arguably right now, it's only four months, it's performing as the best CD/LD formulation and absorption ever seen in this category. This is straight from the most well-known KOL saying it's the best absorption he has seen, and he called it a medical drug. We keep hearing that from all across the MDS, even started from general neuro. We're going up to the long-term care. We're covering all corners of the market now, all 100%. With Rytary, we covered only 20%, which is a fluctuating market with MDS. This is, we have broadened our market reach. The teams are doing great.

We're so excited. There's already 1,000-plus prescriptions per week just in four months. Rytary would have taken two years to get there. It's amazing feedback. Formulary access is awesome as well. And to discuss that further, I'll pass it on to Joe Renda, our head of specialty business.

Joe Renda (Head of Specialty Business)

Yeah, thanks, Chirag. Thanks, Chris, for the question. And yeah, to Chirag's point, we're very pleased with the performance we've seen thus far. The team has really executed well the plan. The response from the market has been remarkable. We continue to hear from physicians literally every day the patient responses that they're getting. You asked about formulary access, and so far, we've been very pleased with the response from the payers. Right now, we're somewhere in the neighborhood of about 30% coverage rate. We anticipate that to go up this year in the neighborhood of 50%. Our goal has always been to catch or surpass Rytary coverage, which is around 70%. We anticipate bringing on at least one, two, maybe even three major commercial payers this year. So the coverage conversations have been very good. The payers are also seeing the demand generation that's happening in the market.

That's further exciting them about bringing Crexont on formulary. And we're also getting great response from the advocacy organizations. We're partnering very closely with the advocacy organizations across the country. They're also helping spread the word of how favorable Crexont has been. Just to give you a point of illustration, when you look at the way Crexont has performed in launch versus Rytary, we're three to five times where Rytary was at this point in launch. Very good uptake in the market, very pleased, and we look for more to come.

Chirag Patel (Co-CEO)

Yeah. And, Chris, last thing I would add is this is we're making Crexont the global product, so creating global access, so we have a partner in Canada, South America, Mexico. We have a partner in Europe. Amneal will market in India. And we're looking for a partner in China and Japan, so this would be a truly global product. As you know, Rytary was never available outside of the United States. Millions of Parkinson's patients across the globe, and this will be the best therapy that they will get for their day-to-day living with Parkinson's.

Chris Schott (Managing Director)

Excellent. And maybe just one last question for me was just kind of bigger picture with the strong top line. I'm just interested, are you thinking about either organic investment into the business or external BD any differently than the past? I'm just trying to get a sense of how you're thinking about balancing kind of longer-term investment and top-line growth versus kind of maybe the drop-through of that growth in terms of the near-term margins. Thank you.

Chirag Patel (Co-CEO)

Thanks, Chris. So we're so fortunate to have a solid organic pipeline in affordable medicines. So within affordable medicines and the retail GX, we have a leading portfolio in inhalations, ophthalmics, a microsphere, which is drug-device combination products. So one of the best portfolios we have. Then comes to the injectable, which we have 12 or so more 505(b)(2) injectables to come, ready-to-use, peptide, microsphere, so very excited. Biosimilars, we have in-licensed the product as we've been very upfront about it that this is a very long-term focus, that this is an over 10-year business. It is, and we've been investing for a long time. We need to become vertically integrated, so have manufacturing with us, R&D with us, full pipeline, global market. And we are just like in complex GX. We were here to stay. Our mission is to become America's number one affordable medicines company.

So biosimilar expansion is a must. So we will allocate capital towards biosimilar. And then always looking for specialty portfolio addition. Beyond DHE, we're looking at either a couple of programs internally, which we are not ready to discuss yet, and working with a few outside potential that we can either bring it in license or buy those products.

Chris Schott (Managing Director)

Great. Thanks so much.

Operator (participant)

The next question is from David Amsellem from Piper Sandler. Your line is now open.

David Amsellem (Managing Director and Senior Research Analyst)

Thanks. So got a couple. So you cited GLP-1s peptides in 2028. Are those launches in XUS/emerging markets? Is it Trulicity? Is it in the United States? Is it a combination of those things? I'm just trying to get a sense of what you're thinking regarding that 2028 number that's on slide six. And then secondly, with the Metsera collaboration, you're constructing the new facilities, but you've also talked about beyond peptides vertically integrating your biosimilars business. And so I guess my question here is, how should we think about growth in CapEx over the next several years and how that plays into your overall debt paydown strategy? Because it sounds like there's significant expansion of your infrastructure that's going to be happening. So just wanted to get your thoughts there. I'll leave it there. Thanks.

Chirag Patel (Co-CEO)

Thank you, David. First question on GLP-1: by 2028, all of the above what you mentioned in the U.S. could have a product like Trulicity, could have other contract manufacturing business. That is how we see the GLP-1 through our partnership with Metsera. The growth in CapEx, as we had laid out, Metsera is contributing $100 million. We expect government incentives to be around $100 million. We are investing $100 million-$150 million of our CapEx over three years. It's manageable CapEx. As you would have noticed, we increased our CapEx projection for this year about $100 million. We're not on the biosimilars. We're not going to start building from scratch. We're going to do certain M&A to bring the capacity already there and pipeline that is already there. It will require incremental CapEx for those, but we do not know exactly how much.

But you can see in the ballpark, we'll continue to be $70 million-$100 million ongoing on CapEx. But our EBITDA is keep growing up. Our cash flow is improving. Our interest expense is coming down. So no problem. It's rather invest here and keep making. We have the awesome infrastructure already for many things, and this will be additional great infrastructure to have.

David Amsellem (Managing Director and Senior Research Analyst)

If I may just ask a quick follow-up regarding M&A, do you think that in terms of capacity, help us understand how large you can go or what you're thinking about aspirationally in terms of sizing?

Chirag Patel (Co-CEO)

Well, David, we are focused, as Tasos said, right? We're not going to be. We'll be four times leverage, under four times. And over time, we want to go to three times. So we would have to find a creative deal that may include the cash on hand or limited cash equity. So there's multiple ways to do it. Yeah.

Tasos Konidaris (CFO)

Hey, David, this is Tasos. Let's kind of be clear, right? Continued leverage continues to be an organic revenue growth continues to be our top two priorities, number one. Number two, we're not a big M&A shop. We're not a big M&A shop. The last deal we did, which was whatever, $300-some million dollar deal, that was the after-deal five years ago. And I think universally that has paid for itself five times over.

It's the strength of our organic pipeline that puts us in a position, I think, to kind of do the right deal that makes sense financially, number one. Number two, it has to be strategic in nature, such as biosimilars. And number three, we have a high degree of confidence of executing well. And I think the way the teams have executed in terms of growing our biosimilars, essentially from nothing three years ago to something that probably in 2025, this year is probably going to be a $150-some million business. I think that's remarkable. So that's how we think about it. And so hopefully that's helpful.

David Amsellem (Managing Director and Senior Research Analyst)

It is. Thanks.

Operator (participant)

The next question is from Les Sulewski from Truist Securities. Your line is now open.

Les Sulewski (VP of Spec Pharma Equity Research)

Good morning. Thank you for taking my questions. Can you provide any latest commentary around naloxone? Any additional contracts that you sign with other states? And then second, I haven't really heard much commentary on Unithroid. Maybe provide some puts and takes around long-term opportunity there. And then lastly, you did comment on delivering, and you delivered faster than you anticipated. Is there a new target for 2025? Thank you.

Chirag Patel (Co-CEO)

Good morning. Naloxone, the states are slowly moving. We haven't up to California. We're close to with a few states, but haven't signed anything new beyond California, which was the largest state by far. You have to add another 20 states to get to California. We're working through the distributors as well who already have the state contracts. 240652 batch Amneal Pharmaceuticals Q4 2024.mp3

So that's what we're working towards. Unithroid is like Synthroid. They're a patient which favors consistent therapy, and that is what we provide. It has a consistent growth profile over time. We see it going the same way. Tasos?

Tasos Konidaris (CFO)

Hey, Les. Good morning. From the leverage perspective, we can expect us to continue to pay down debt and reduce net debt to EBITDA in 2025, just depending on a number of scenarios around interest rates, refinancing, etc. We're targeting about give or take between $80 million-$100 million overall reduction in gross debt, number one. This year, in 2024, we finished net debt to EBITDA 3.9. My gut feel is we're targeting 3.6-3.7 net debt to EBITDA. So another 0.3 or 0.2, 0.3 reductions in net debt to EBITDA.

So we're kind of continuing going down in a reasonable manner, reduction of leverage, gross, and net debt to EBITDA.

Les Sulewski (VP of Spec Pharma Equity Research)

Great. Thank you for that color.

Operator (participant)

The next question is from Balaji Prasad from Barclays, please. Your line is now open.

Balaji Prasad (Director)

Good morning, everyone. So it's great to see the consistent progress and the healthy outlook. I'll try to read a couple of questions on topics not asked, but Tasos, starting with you, firstly on the guidance and EBITDA margins, 2025 EBITDA range seems to be at around 20.9%-22.5%. I'm surprised to see that even at the higher end, there is limited OPM expansion. So how much of a drag has Rytary LOE been on this? And are there any other factors at play? One. Two, I'm sure everyone will be happy to hear you say that you're not a big M&A shop and the focus will be on continuing to deliver. So is this going to be more of a consistent delivery year over year, or are you comfortable with a bump up in net leverage on the back of any deals?

Lastly, Chirag, I was just curious, combining your recent approval of lenalidomide and Viatris's issues with Inderal and that they can't supply, they evidently need a supplier. Do you see any scope for you to monetize your approval early, either in the form of a supply deal or an accelerated launch ahead of January 2026? Thank you.

Tasos Konidaris (CFO)

Let me take the first couple of questions and good morning. So number one is you're correct. If you look at EBITDA as a percentage of revenue, and in 2024, we were at about 22.5%. You look at the guidance, we're more like 21%. So it looks a little bit of a deterioration. I wouldn't read anything into this. This is driven by a couple of things. Number one is just it's a mix of business. Healthcare continued to grow faster than the rest of the business. And the simple fact is that that business is slightly less profitable than the rest of the business. But frankly, we don't care. We're just looking at incremental dollars, right, and incremental costs that can help us fund our business and grow. So it's number one. And then obviously, the combination of the Rytary LOE, right? Rytary is a 90% margin product, right?

They need to kind of invest in Crexont and kind of maximize kind of the slope of growth for that product. That's what I would say. My gut feel is it's kind of we're barely into 2025. I think as we look at 2026, as we are anniversary, most of the Rytary LOE, the incremental investments, full year investments of Crexont begin to kind of level off. I will expect to see EBITDA margin to begin increasing. That's kind of on that. Number two, on the leverage, the company is not on autopilot. In five years, we reduced leverage from 7.4 to 3.9. Probably in 2025, we'll be at 3.6. We'd like to see in a perfect world a glide path of reduction.

If at any given point in time there is a slight increase for a few months or for a year, I don't think our equity holders or our debt holders will be concerned because it will be the right decision that's going to begin kind of leading to further delivering over the course of time. So that's how we think about that. Chirag, on the other question?

Chirag Patel (Co-CEO)

I believe it's IP subject.

Jason Daly (Chief Legal Officer)

Subject to a settlement, Chirag. Thanks for the question, Balaji. This is Jason Daly, the Chief Legal Officer. Given the settlement dynamics, I think we shouldn't be talking too much about, let alone mind, but obviously, we're excited for all the products that are in our portfolio and looking forward to launching them all.

Balaji Prasad (Director)

You got it, Jason. Thank you.

Operator (participant)

We have no further questions. So I'd like to hand back to Chirag for any closing remarks.

Chirag Patel (Co-CEO)

Thank you very much. Have a nice weekend.

Tasos Konidaris (CFO)

Thanks.

Chirag Patel (Co-CEO)

Thank you, everyone.

Operator (participant)

This concludes today's call. You may now disconnect from the call and enjoy the rest of your day.