Good morning, everyone. My name is Balaji Prasad. I'm the senior analyst for the specialty pharmaceuticals coverage for Barclays. Continuing the Spec Pharma track for the day, I have the pleasure of hosting Chirag Patel, the CEO of Amneal Pharmaceuticals, with us. Chirag, thank you for taking the time to join us out in Barclays. I also know that this is your first time here at our conference, so.
Yes, yes, first time. Nice location, especially when you come from the Northeast.
Indeed. Chirag, 2023 has been a great year for the stock. Of course, that's largely due to the operational performance that you delivered, the company delivered through the course of the year. Let's speak about how 2024 looks for you and some high-level thoughts around the outlook. What are your top priorities? I mean, there's still a work in progress for you as we've gone through multiple discussions. What are your top priorities now?
Great. Well, 2023 was a great year. We delivered 8%-9% top-line growth and EBITDA growth. So we're very proud of execution all across the businesses. In 2024, priorities, the execution will remain in focus and now expanding and delivering similar 8%-9% top-line growth while we keep building our pipeline. So the top priorities would be obviously the launch of naloxone nasal spray coming up. There are 39 products that we launched last year. We're annualizing that this year. About 30 new launches on generics and injectables side. Expanding our biosimilar sales to a much higher level from last year because now we have almost 12 months into the market. Specialty will grow at a decent pace as well. And then distribution business is doing really well.
Great. As we pick on each.
Obviously, the IPX203 is a big goal date we have on August 7th.
Indeed. I'll definitely dig into each of those. But just thinking about the guide itself, 8%-9% top-line growth, the adjusted EBITDA growth guidance was something which was very well received by the market. I think it reassures that you are on the path of improving profitability. So maybe talk to us through some of the pushes and pulls to this guidance, and then we can dig deeper into IPX203 and biosimilars.
Yeah. So we're very disciplined and conservative on our guidances, and that's the approach we have taken. And we'll continue to have that approach. Pushes and pulls, we have multiple launches. So obviously, the timing of those launches, either earlier or later, could impact the year. But we are not relying on one launch. So there are multiple launches to make up for any delays in any other launches. The R&D timing and the in-licensing is also push and pull. If we have a really good year, we can in-license more products. Organic R&D is already set around $120 million. So the rest of the money we spend in in-licensing biosimilar products, and now we're looking at in-licensing specialty products. So that would add into the future success of R&D.
Got it. As we went through your deck on earnings day, again, a pretty comprehensive pipeline across categories. Let me start first with the complex generics side of it. Again, you have spent the last couple of years rebuilding this pipeline around the not just complex generics side, but every aspect of it. Complex generics, I mean, you have spoken multiple times about generic naloxone and the opportunity in there. Maybe starting with that and then other key launches that you anticipate during the course of the year.
Yes. So look, just back to the industry, we're in an essential industry, basically. This is an essential industry for the country. There are so many and for the world, so many products coming up, patents. Amneal has invested largely on complex products, which are difficult to make, harder to provide access throughout the United States and some parts of the world. So the complex GX pipeline is even healthier now than before because of the work we've been doing over the last 10 years. So the platform like microsphere, the peptide platform, on injectables, we have a liposomal platform as well. So all these key technologies coming and respiratory, we have ProAir. We're expecting approval this year. So it's probably one of the best pipelines with complete control on our manufacturing, R&D, quality.
As we lead the entire industry in the world in quality, this makes it even more appealing for us to have these complex products and successfully launch them, which we have done that over the years. Some of these complex products, or most of them, have good markets in the international side as well.
Great. And any specific maybe, I think, among these naloxone is probably your most high-profile launch for the year. So excluding IPX203, we'll come to that. I don't forget that. But naloxone, what are your expectations around the product in terms of revenue contribution over the next few years?
I think we've been public about it. If we get the approval, which is a goal date, is end of this month, we should be able to sell somewhere between 2-3 million units. Our goal is to provide as much access as possible. Our automated lines would produce about 10 million units next year. We obviously have to work with states, counties, federal government to supply them. And we believe there is ample need out there, and we want to be there in such a good cause to help the patient reverse the opioid overdose.
Got it.
The other key launches we also have is ProAir, potentially. We have mesalamine. We've been public. Ciprodex, so some of the ophthalmics products are rolling as well. PEMRYDI , which is our ready-to-use, pemetrexed is coming up as well. Very exciting year. There could be a couple of surprises towards the end of the year, which could contribute big in 2025.
We'll look forward to the surprises, but that kind of leads into my next question. I mean, you commented around $130 million of revenues from new product launches. You are looking at around 35-40 launches for the year. How conservative is this guidance or thoughts around $130 million only of new revenues with 40 launches?
I think we have done a great job in forecasting. So it's a pretty good number what we have laid out. We feel very comfortable with pushes and pulls. We are very confident. Obviously, the 39 products that we launched in the second half, most of them last year, is also annualized this year on top of that 30 new launches. So we believe we will. Our goal always is to beat that number.
Great. Chirag, I want to move over to the specialty side of things. And with IPX203, you guys clearly are confident of getting approval. As you said, stated that you have met all of FDA's requirements. So assuming approval and a launch, help us understand the incremental contribution from the product. When I speak to neurologists and the market, there are two schools of thought. One is, of course, neurologists and expert calls that I've done stated that clearly think that IPX203 is a great asset and it will be incremental to RYTARY. And other school of thought, the bears in the stock, think that with the generics for RYTARY around, the market potential for IPX203 is likely to be diminished. So what are your thoughts on that?
So let's start with this. Rytary is a great product, but it has a dose conversion issue. It has less Good On time than IPX203. These are two facts. If it was easier to do the dose conversion, the movement disorder specialists around the polypharmacy, basically, they would have done it in a greater number than just 5% of the patient. IPX203 solves the dose conversion issues. The longer Good On time, and with our recently launched Ongentys, it increases, it prolongs the life of levodopa. So it's a complementary product as well. We are going out for a broader market in IPX203. We have evaluated our phase three data very carefully and will continue to do further studies to prove that this product can be very beneficial if taken earlier in the onset of Parkinson's.
So multiple ways and having it now, 10 years experience in Parkinson's and being committed with the community and research, we believe we will get a better coverage than even Rytary. Rytary enjoys one of the finest coverage. We will expand the market from just 5% of prescriptions to go after 30%, 40%, 50% of potential patients. And as you know, the 1.1 million patients, then unfortunately, every year, about 90,000 new patients are added. So huge market. And you saw we licensed out in Europe, Canada, South America, working on with China. So this product is going to be global. India will be launching on our own. The global patient needs this. This is a much better technology. It extends the life of good on time, and it's daily management of their lives. This Parkinson's doesn't go away. It stays there for 20, 30, 40 years.
We're very excited about IPX203 launch. We're very bullish. We have publicly said we can do $300 million-$500 million. I don't think ramp-up is going to take that long because of all the pre-activities we have been doing.
Got it. And just a couple of follow-ups there. With IPX203 launching, do you kind of see any cannibalization impact on RYTARY or patients on RYTARY going to stay on RYTARY, and you'll see newer patients only starting on IPX203?
We don't know. It's up to the provider, right? We don't have any switching strategy or anything. We don't need to do that. As we said, we're going after a much bigger market, tapping the general neuro, other movement disorder specialists. Some of the KOLs we have heard, all the doctors who are part of the trials, obviously may choose to prescribe IPX203 over Rytary. But our strategy is to go broad. So combination can happen. Some may move, and we have new patients.
Got it. Maybe last question on the Parkinson's side of things. Ongentys said it prolongs levodopa. And really, how is the positioning and the strategy going to be? And how big of an opportunity should we think about Ongentys itself on its own being over the longer term?
Yeah. It's a complementary product. So we did a good job getting the rights to it and worked with our partner in Portugal, BIAL, a great partner. And now we are expanding the market. When Neurocrine marketed, it was doing somewhere between $20 million-$25 million. We look to expand the market and make it more complementary with IPX203. That means I believe it will go +$50 million.
Got it. Thank you. So let's shift towards the biosimilar side. Clearly, you've gone from being almost nowhere in the biosimilar landscape in 2020 and speaking about it for the first time around that time frame, launched three products by the end of 2021. And today, you have a fairly substantial revenue position in it and guiding towards $200 million. So what's resonating commercially on the biosimilar side with the products that you launch currently?
See, we're an American company, and we have stated that for the U.S. market, we will be the leading affordable medicines company. And the way we define affordable medicines are generics products, institutional generics products, injectables, the bags, and biosimilars. So when you group these three, which company would be leading over 5-10 years? We believe we will be leading it. And we've been focused on biosimilars quietly before 2020, understanding the science and regulatory requirement, manufacturing, partnering. And we have established such a great name on the commercial side with Amneal's record over 20 years, genuine relationship with big wholesalers, Amerisource, McKesson, Cardinal, relationship with CVS, Walgreens. And similar way, we have now established a relationship with oncology groups, hospitals. Same approach. We care and we deliver as well as we have number one quality. The three things keep happening.
It's not a new formula, and that is why we're winning. We're not afraid to go against Pfizer and Amgen and compete. We do compete, and we will keep competing. It is a competitive market, it will be, but we're very excited about biosimilar's future.
Got it. So Chirag, on that note, how are you thinking about licensing more biosimilars into your product category, into this category, and then your key focus areas for licensing within the space?
Yeah. So we are right now front-end only as Amneal. We've been clear about it. Over time, integration could happen because you have to be integrated players, control your development, manufacturing, which is very crucial, tap into global markets, and be a champion in the United States market. So we are right now focusing on a buy-and-build strategy, so more on an oncology product, the products which are dispensed through clinics or administered through clinics, or a combination with PBMs and buy-and-build, but not 100% PBM like Humira or other products that could just be controlled by the PBMs because we believe that area would be very competitive compared to the buy-and-build. And we have multiple opportunities to license. two-three, we expect to be licensing this year. And it doesn't stop this year. Every year, we'll be licensing with our key partners.
Got it. And over the longer term, how big do you think the biosimilar category should be or could be for Amneal? What would be a target that you'd be happy with?
So as a global market, it's going to be somewhere around $85 billion from the manufacturer's perspective by 2030. U.S. would be almost half. We would like to get a good piece of that in a very strategic manner over the time. It's a large market being created. All this noise you hear will quiet down because the PBMs, the payers, and the brand companies can only play games for one year, two years. But then what? They should be focused on innovations. At the right time, the biosimilars have to come, and the markets have to be receptive to that. Then it happens. It just takes a few years. Like you're seeing in Humira, the biosimilar is not getting market share, but they will.
Got it, Chirag. That's a good lens to look at this. I want to shift gear maybe kind of boiling down to a couple of questions on the generic side. Clearly, this is a sector which has gone through a significant ups and downs, seen its highs, seen its lows. And what we are seeing from the last couple of quarters seems to be a clear stabilization across the industry, looking at commentary from the likes of few European generic companies, Indian generic companies. Have we reached an equilibrium in terms of pricing dynamics? So where are we in this trend?
Yes. On the most part, on the mature products, we have. So the products that already have seven, eight competitors have been out there since the last five plus years. We don't see any room to go down. It has to go up, actually, because of the inflation and the quality system requirements from FDA. And companies should proactively invest in quality and new machinery, new plants. Therefore, it needs to have proper pricing. And again, as I said, this is an essential industry. 90% of prescriptions are filled by generic products. So it's going nowhere. And I think buyers are now more in alignment with us as long-term contracts and be more strategic rather than transactional all the time. Now, all of them haven't switched to the long-term and care about supply and quality, but the majority are.
We think the rest of the market will move that as well. The government is very clear about this. They are worried about the sustainability of the generics industry, and they are backing the industry because it's just an unfair game. They allowed the buyers to consolidate. Three buyers controlling 92%. It's just unfair with 5,000 companies selling the products, and they cannot consolidate. We see the wind behind ourselves. It is the right thing to do. It's a lot of products coming off patent as well. There's plenty to do. It'll be always two segments in the industry. One is more commoditized, and one is more on the complex side. We're more on the complex side.
Got it, Chirag. Great. So when you think about this dynamic, clearly looking positive for the generics sector after a fairly long time, do you see this resolving partially the shortages issue? I think that's a big one.
Yeah, we are.
Could it help resolve the shortage issue?
Definitely. 100%. 90% of shortages are caused by unsustainable pricing in the market. Only 10% has other causes. So if it becomes healthier, even the GPOs allowing a longer contract, hospitals entering into the longer contract, proper pricing, then companies like us would be there or Teva would be there. Then you have genuine competition, genuine suppliers, four or five. It's not concentrated with one supplier with a 90% market because that supplier is selling at a $1 a vial, which nobody can do that and should not do that. It's a lot that goes in making sterile products, and nobody should be selling or buying at $1. Then that has to change. It is changing. FDA is very vocal about it, that penny a pill and dollar a vial are unsustainable.
They just do not know how companies can invest in a quality system when you sell that cheaply.
Got it. I want to move to the balance sheet side of things in the last three, four minutes that we have left. Clearly, this was a concern last year, especially as the rate environment moved counter to what you would have liked, with leverage being a concern. I know that you have been tackling it head-on in terms of the multiple moves that the company did. I want to get your latest thoughts around leverage, your thoughts around where you would like to what you're comfortable with in terms of leverage ratio that you want to get Amneal to.
Yeah. So we are very determined to bring the leverage below three over time. So we have said by 2025, it should be below four. We're paying off about $150 million-$200 million debt every year, which we'll continue to do that from our cash flow. And whenever the interest rate goes down, the cash flow will even improve better. But besides that, we are paying down the debt. EBITDA is keeping going up. So we would generate more cash year-over-year. And we don't have any legal liabilities left. We only had one, which is for the IP patent settlement done by Impax, which is all paid off. So we're going to be laser-focused in reducing the leverage.
Sure. And so I think EBITDA is going to play a key role in it. Last year, I remember when you started guidance, it was, I think, around Q1 or Q2, you were at $520 million for the year, but eventually ended up at +$550 million.
558.
So this year, you have instituted guidance of $580 million-$605 million EBITDA. So what are the upside risks to this year's guidance?
Well, it's $580 million-$620 million is our range. The upside would be if we do more naloxone sales, a couple of our GX products come earlier, these injectable products. If we are able to solve the shortages, it creates more revenue. And biosimilar, if we penetrate more than what we expect. So there are upsides there.
That's great. And maybe last question from me is, as you think about this, with all these products coming through, both on the maybe staying step above the EBITDA itself, the gross margin progression, how should we factor it through the course of the year?
The gross margin will continue to improve as we utilize our injectable plants more and more. We have four injectable plants, a capacity of 50-60 million vials, bags. And they've just come on. Two of them were approved last year by FDA. So it's online now. So it would improve new complex products we launch. It improves biosimilar products, improves the gross margin. Obviously, distribution is a lower margin, but great cash flow business. So with that balance, we expect the improvements to continue over time. And it has to have a healthy gross margin to keep investing in the business. And we're keen to have top-line growth as well as bottom-line growth.
Okay. Fantastic.
And one thing I think you mentioned earlier that where do you see the company over 5 to 10 years is in the affordable medicine segment, we should be leading in the United States, and international business should be meaningful as well. Today is just $15 million. We expect the international to go well above $500 million, including India being a direct in the market. The specialty segment, we're around $400 million-$450 million, should grow with our niche play in CNS and endocrinology, continue to grow. Our goal is to be over $1 billion, which we think we can do that. And on the distribution business, as we have said, it's a great business, doing great, and will continue to do great. But if we have strategic options, we would, at the right time, divest that business as well to pay off a good amount of debt.
Got it. I think that's probably something which could potentially be very well received when you announce that. I think we're out of time, but I'd love to follow more updates on these as we go along, Chirag. Thank you again for your time, and we.
Thank you, Balaji. Have a great day.