Hello everyone, and welcome to the Amneal third quarter 2022 conference call. My name is Emily, and I'll be your operator today. At the end of the presentation, we will have the opportunity for questions, and you can do so by pressing star followed by the number one on your telephone keypad. I'll now turn the call over to Maria Marquez , Amneal Investor Relations. Please go ahead.
Good morning, and thank you for joining Amneal's third quarter 2022 earnings call. Today, we issued a press release reporting our financial results. The press release and presentation are available at amneal.com, and a replay of this call will be posted after the call. 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 review the section entitled cautionary statements on forward-looking statements in the earnings presentation and on our SEC filings for a discussion of factors that may impact our future performance. We also discuss non-GAAP measures. Important information on our use of these measures and reconciliation to U.S. GAAP may be found in the earnings presentation.
On the call today are Chirag and Chintu Patel, Co-CEOs, Tasos Konidaris, CFO, Andrew Boyer, Generics, Harsher Singh, Biosciences, Gustavo Pesquin, Specialty, and Jason B. Daly, Chief Legal Officer. I'll now turn the call over to Chirag.
Thank you, Maria, and good morning, everyone. Our third quarter results reflect solid performance across our diverse business portfolio. Q3 revenues were $546 million and adjusted EBITDA was $126 million. We are on track to achieve our full year 2022 guidance. Let me now walk through our strategy and how we have been executing towards our key priorities since Chintu and I returned to Amneal a bit over three years ago. First, in generics, our goal was to stabilize and grow our complex generics business. We have done that. Over the last two years through Q3 2022, generics top line has grown at a 3% CAGR. New launches and our diversified portfolio of increasingly complex medicines are driving durable top-line performance and growth.
With our focus on complex and higher barrier products, we now expect 56% of 2022 generics revenue will be non-oral solids. That is a clear proof point of success. This has increased remarkably from 35% in 2019. We see that shifting further as 88% of our pipeline is non-oral solids. We expect continued top-line growth in generics driven by our portfolio of complex products. Second, in injectables, the strategic focus has been on scaling our business with an expanded portfolio, additional capacity, and new capabilities. We expect over $170 million revenue this year, and we are well on our way to achieving our goal of over $300 million in injectables revenue by 2025, which represents 24% CAGR from 2021.
Third, in specialty, we have been driving substantial growth of our key branded products with Rytary for Parkinson's and Unithroid for hypothyroidism. Over the last two years through Q3 2022, these two brands have grown at a 13% CAGR combined. At the same time, we are advancing our specialty pipeline of new CNS and endocrinology products. IPX203 is expected to launch in mid-2023 upon approval, followed by DHE auto-injector and K-127. Whether organically or inorganically, we look to further expand our portfolio and drive meaningful growth in our specialty business going forward. Fourth, we're building our biosimilar business. We were delighted to launch our first biosimilar, ALYMSYS, in October. Releuko is launching this month, followed by Fylnetra in January.
The commercial team is fully deployed and focused across payers, providers, and channels to ensure effective uptake of our products. In terms of reimbursement, we have a Q code already in place for Releuko, and our Q code for ALYMSYS is approved and will go live on January first, with Fylnetra expected to follow. For these first three products, we see peak sales of over $200 million in the next two to three years. Beyond these, we are working to expand our biosimilars portfolio with additional molecules where we can be early to market and are working to be vertically integrated over time. We look to be in top five in this fast-growing $28 billion U.S. biosimilar market over the next five to seven years and a global player. Fifth, we are driving growth in our healthcare distribution business.
We are expanding across multiple channels, including distribution, the federal government healthcare market, and unit dose. There is a good momentum in that business, and we expect it to continue. Sixth, internationally, we are looking to leverage our diverse product portfolio globally. We believe this strategy will add considerable revenue and profits in time as we work with distribution partners such as Fosun in China or utilize our own sales and marketing infrastructure to be direct in select markets such as in India. Around the rest of the world, including Europe, we are pursuing targeted distribution opportunities with strategic partners. Overall, we are very excited about the momentum that is building across Amneal. With the recent additions of new leaders, Rim, Meryl, and Gustavo, we have a deep and talented leadership team. As we progress in implementing our strategy, Amneal is becoming increasingly durable, diversified, and differentiated.
We are launching new products in high growth areas such as complex generics, injectables, specialty, and biosimilars that are additive to our current strong position. As these new catalysts come to market, we expect the growth drivers to build and generate higher levels of financial performance. With that overview of key strategic priorities and progress, I'll hand it over to Chintu.
Thank you, Chirag. I'll start by thanking the Amneal family who make health possible for so many. Across our global operations, we are driving our company's growth strategy through several key initiatives. First, we are executing key operational excellence programs in each of our facilities to add efficiencies and drive savings, including transferring products across locations and insourcing certain CMO products. Second, we are focused on the strength of our global supply chain and continuously taking actions to improve our cost position and resiliency. Third, we are adding new infrastructure in key high growth areas such as injectables and biologics. We are empowering our best people to build new capabilities and add capacity. We are doing all this while continuing to advance our quality culture.
Next, across our R&D teams, we are increasingly focusing our efforts and investments toward high growth and high impact areas, particularly injectables, complex generics, biosimilars, and specialty branded products. Let me now walk through the different aspects of our innovation and growth agenda. In generics, we are innovating in complex categories with a rich pipeline extending out for years. We have 18 launches so far in 2022, including Vasopressin in Q3 and another five plus launches expected to come by the end of the year, including recently approved leuprolide acetate. In the near term, we see a significant cadence of key new product launches similar to the impact of new product launches we saw 18-24 months ago. From where we are today, we expect over 30 new product launches in 2023, and they are mainly complex, high barriers to entry products.
Please refer to the key catalyst slide in the earnings presentation for a summary of the notable upcoming launches. The list continues to grow. Overall, we have 102 ANDAs pending across all dosage forms with about 60% in non-oral solid products. To put this in context, two years ago in Q3 2020, we had 79 ANDAs with about 1/2 OSD. In just a few years, we now have meaningfully more ANDAs pending that represents meaningfully more complex and high-value products. The good work continues as we are on track to file 25-30 more ANDAs this year, mainly in injectables. In our pipeline of 106 products, 88% are non-oral solids, and over 50% are expected to be first to market, first to file or 505(b)(2).
In ophthalmic and otics, we have seven ANDAs pending and 11 products in the pipeline. In inhalation and nasal, there are three ANDAs pending and 11 more products in development. The diversity of our existing portfolio and vertical integration, combined with the breadth and the depth of pipeline, gives us high confidence in sustainable financial performance in generic. In injectables, we are seeing substantial growth as we expand our infrastructure and portfolio. Our two new manufacturing sites are coming online. The first new site was FDA-approved quickly in 18 months, which will allow us to launch five or more LVP bags in the H1 of 2023. The second new site is on track and expected to have FDA approval by Q2 2023.
Across 4 sites and 19 production lines, we have the capabilities to produce vials, pre-filled syringes, cartridges, and LVP bags across dosage forms for small and large molecules with both aseptic and terminal sterilization. At this level of capabilities and scale, we can both develop new differentiated products that serve to meet unmet hospital and pharmacy needs and provide consistent supply in markets plagued by shortages. Our innovation focus continues to shift towards injectables as we have five new launches this year so far, and we expect 30-40 new injectable launches from now through 2025. Overall, we have 31 injectables ANDAs pending and another 59 pipeline products. For context, we expect our annual ANDA filings in injectables to more than double from 5-7 per year previously to 15-20 per year with our new sites.
We are well on our way to scaling our injectables business to be a sustainable long-term global supplier. In biosimilars, we have launched ALYMSYS and are launching Releuko and Fylnetra near term. We are very excited about these three current products, the overall growth prospects of the biosimilars space, and the purposeful steps we are taking to be a long-term player in this market. Beyond these first three products, we look to further expand our portfolio and key capabilities. We believe the keys to success are having the right science, regulatory, manufacturing, and commercial skills with the goal to be vertically integrated over time. Overall, biosimilars are highly aligned with our strategy to provide high-quality, affordable medicine to patients, and it's key area of future growth for us. In specialty, we are expanding our branded portfolio with new growth drivers.
Our NDA for IPX203 was filed on August 31, and we expect to launch in mid-2023 upon approval. As a reminder, IPX203 is a novel oral extended-release formulation of carbidopa/levodopa that can offer Parkinson's disease patients better efficacy than immediate-release tablets, even with less frequent dosing. Importantly, in our post-hoc analysis, IPX203 provided 1.55 more hours of good on versus immediate-release CD/LD per dose. Beyond IPX203 and our currently disclosed pipeline, we are also working to add new 505(b)(2) programs which utilize our proprietary drug delivery technology platforms. As a reminder, GRANDE is an advanced gastric retention system, and ChronoTab is a modified-release technology. We believe these technologies will continue to provide high-value reformulation pipeline opportunities.
In summary, we are focused on executing our strategy, advancing our pipeline, and driving success in the high-growth vectors for Amneal. I will now pass it over to Tasos.
Thank you, Chintu. Our third quarter financial results reflect solid and consistent performance driven by our increasingly diverse product portfolio. For the third quarter, we reported total net revenue of $546 million, adjusted gross margin of 44%, adjusted EBITDA of $126 million, and adjusted diluted EPS of $0.14. Versus the prior year period, revenue was up 3%, while adjusted EBITDA was down 5% due to ongoing investments in high-growth areas such as biosimilars, injectables, and specialty. We're on track to meet our full-year 2022 guidance metrics. Let me now review each business segment, starting with Generics, which delivered Q3 net revenue of $350 million, an increase of $3 million or 1% versus the prior year period.
Our results were driven by strong growth in our injectable portfolio, our Adrenaclick epinephrine auto-injector brand, and new product launches which offset declines in our legacy products. Our diversified portfolio continues to perform well as new innovations and increasingly complex products balance price pressures while delivering substantial benefits to our customers and patients. Looking to Q4, we expect a sequential increase in generics revenue due to two factors. First, a full quarter benefit of Zafemy and Vasopressin. As you may recall, the Zafemy AB rating was resolved in the middle of Q3, and Vasopressin was launched around the same time. Second, our first biosimilar, ALYMSYS, launched in October, and we expect our second biosimilar, Releuko, to launch in the next couple of weeks. Given the fact our sequential growth relies on already approved products and we're confident in this sequential acceleration.
Moving on to our specialty group, Q3 net revenue of $89 million decreased $3 million or 4% versus prior-year period. The small decline was driven by the loss of exclusivity of Zomig nasal spray, which was partially offset by strong growth of Unithroid, up 39% and Rytary up 12%. At $69 million in the quarter, Unithroid and Rytary account for approximately 80% of our specialty revenues, and we are very pleased with their consistent growth, with year-to-date total prescriptions being up 14% and 6% respectively.
Looking to Q4, we expect a sequential increase in specialty revenue as well as given the strength of Unithroid and Rytary and the normal seasonality of the business similar to prior year. In AvKARE, Q3 net revenue of $106 million grew $17 million or 19% compared to the prior year period, reflecting continued expansion of our distribution channel. The distribution channel has been the driving force of AvKARE growth this year, albeit at low levels of profitability due to the nature of the business, and we expect this growth to continue in the fourth quarter. Moving down the P&L, Q3 2022 adjusted gross margin of 44% is consistent with the prior two quarters reflecting stability. Compared to Q3 of 2021, gross margin was 130 basis points lower as product mix and inflation offset operating efficiencies.
Q3 adjusted EBITDA of $126 million was $7 million lower than Q3 of 2021. Our performance reflects substantial incremental sales and marketing investments in support of new products that will drive future growth, as well as absorbing higher inflation in areas like freight and labor costs. From a cash flow perspective, we continue to generate a lot of cash. For year-to-date Q3 2022 and excluding the $115 million legacy legal settlement regarding Opana ER, we generated $203 million of operating cash flow compared to $179 million in the comparable prior year period. From a balance sheet perspective, we're focused on deleveraging. Three years ago, we were at 7x net leverage, and we're now at 5x. EBITDA growth, margin will continue to drive a substantial portion of our deleveraging.
At the same time, we will work to reduce our total debt levels. For the full year 2022, our guidance remains unchanged, with revenue of $2.15-$2.25 billion, reflecting mid-single-digit top-line growth. Adjusted EBITDA, $500-$520 million, which is in line with the prior year's adjusted EBITDA of $512 million. As a reminder, our full-year adjusted EBITDA expectations include about $40 million of incremental investments to drive future growth and $25 million of inflation. Let me turn to Q4 and summarize the factors that we expect will drive sequential acceleration from Q3. First, as previously mentioned, we expect strong top-line performance across our three businesses, driven by key products such as Rytary, Unithroid, Zafemy, and Injectables.
Second, the addition of multiple already approved new products such as ALYMSYS, Vasopressin, and other 2022 new launches ramping up. Third, stable gross margins like we've seen all year long with favorable operating expense actions. Looking beyond 2022, we expect our consistent, durable financial profile to continue with four key catalysts. First, in Q4 of this year, we began commercializing our first biosimilars, and in 2023, we will have a full year benefit of these launches, which we expect them to peak at approximately $200 million-plus over the next few years. Second, Injectables revenues are building considerably at $114 million year-to-date, compared to $88 million at the same time last year. Third, as Chintu mentioned, we're entering a rich period of new product launches. Fourth, continued strong growth in Unithroid and Rytary, with IPX expected to launch later on in 2023.
In summary, we're pleased with the consistency of our financial performance and the product portfolio and investment choices we have made to drive long-term sustainable growth. With that, I'd like to pass it on to Chirag.
Thank you, Tasos. Q3 represented continued solid performance across our diversified portfolio. At the same time, we are launching new impactful products in high-growth areas, such as our first biosimilars, with a pipeline behind them that continues to advance. As key catalysts continue to come to market, we see these new growth drivers building and accelerating our financial performance. That's the value creation story for Amneal. It doesn't change, it only advances. I'll now open the call to questions.
Thank you. If you would like to ask a question, you may do so by pressing star followed by the number one on your telephone keypad now. If you change your mind and would like to remove yourself from the queue, please press star and then two. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. Our first question today comes from the line of David Amsellem with Piper Sandler. Please go ahead, David. Your line is open.
Hey, thanks. Just a few. First on Adrenaclick, these are product-specific questions, but on Adrenaclick, you cited some strength. I guess I'm just wondering what are the dynamics there, what's happening there, and, you know, how sustainable is that strength? And also what's Adrenaclick's sales, if you can, or just talk about its overall importance to the overall mix. That's number one. Then on Zafemy, can you just talk about what your thoughts are on potential competition down the road. Do you think there could be other AB-rated generics coming in that we should be thinking about? Then lastly, on the DHE auto-injector, you're now guiding to a 2024 launch. I may have missed this, but just wondering what's going on there. Thanks.
Thank you, David. Good morning. Adrenaclick has been our growth driver since we came back. The product was doing around $80-$90 million. Now it's in the range of $140-$150 million. We're growing steadily. As you know, epinephrine is just three suppliers with Mylan, Teva and us. We pretty much have. We grew our market share from 18%-28%, and we expect to hold on to the similar market share or grow in small percentages going forward. It's an excellent product for us, and as you know, it's much needed product out there and the choices are three in the marketplace. We expect that the product to be durable. The second question on Zafemy. We're very excited.
Our sales has grown tremendously as soon as we have received the AB rating because we already had the market share. Now utilization is more, and it's an excellent product even going forward in 2023. Competition, I think it's publicly stated that Teva has the approval but has not launched. I do not know their launch timing. DHE auto-injector, our partner, unfortunately, is continued to suffer through the FDA issues. Until they're resolved or we are able to do the product transfer, it will not be launched. This is why we have pushed it out to 2024.
Yeah, that's helpful. Thanks.
Thank you.
Our next question comes from Balaji Prasad with Barclays. Please go ahead.
Hi, good morning. This is actually Ekaterina Knyazkova on for Balaji Prasad, but thank you for taking my questions. Just two from me. I guess could you just provide color on the initial traction you're seeing with ALYMSYS? And I guess by when do you think you can realize your U.S. peak sales guidance of $200 million for your three biosimilars? Thank you.
Sorry, could you please clarify the first question and second. The line wasn't clear.
Yeah, sorry. I'll try and speak up a little bit. Just any additional color on the initial traction you're seeing with your ALYMSYS so far. Then just by when can you realize your US peak sales guidance of $200 million for your three biosimilars?
Excellent. I'd like to introduce Harsher Singh, who leads our Biosciences division, along with the institutional sales. Harsher, would you like to comment, please?
Good morning, Ekaterina Knyazkova. With regard to initial traction, we've seen good initial traction with ALYMSYS. It's early. We're about a month in, and our J code has just been approved and will go live in January. We have already started to see usage in the oncology channel. With regard to peak sales, we expect peak sales to be in the late 2024-2025 period, somewhere in that zone, in line with other biosimilars at this stage of their life cycle.
Thank you, Harsher.
Our next question comes from Gary Nachman with BMO Capital Markets. Please go ahead, Gary.
Hi, guys. Good morning. First, generally speaking, how has FDA been getting to new generic approvals? One of your competitors told us recently that there have been some delays with inspections and getting some ANDAs through. When you talk about greater than 30 new approvals, next year, just what's your confidence level in getting those? On specialty, is the sales force right-sized as you look to bring in IPX203 next year? Talk about how 203 will be positioned relative to Rytary. Will it mostly cannibalize or will it be incremental to the overall franchise?
Thanks, Gary.
Chintu.
Yeah. Hi, Gary. Good morning. On the first question, we had an injectable plant in India within 18 months, brand new site. We are able to get the product filed and get FDA approval. Which was within a short 18 months of time. We are not experiencing any delays because of the pre-approval inspections, because Amneal has the best quality track record. This is a huge advantage. None of our ANDA has been delayed, and we are confident of launching 30+. Year-over-year, we have the highest number of approvals. We have not experienced any delays from FDA's pre-approval inspection perspective or travel restrictions, anything like that, on our ANDAs. The second question, I'll let Gustavo.
We have Gustavo.
Yes. Good morning everyone in the call. In regards to the size of the team, we are very confident that with the existing team, we can cover not only the whole existing writers of Rytary, but more than 60% of the existing writers of IR and CR/IR.
Which takes me a little bit to the second part of the question, which is, are we going after the Rytary market or are we thinking about market expansion? When you look at the profile of two or three , this is not designed to be an intensification strategy for patients in IR. It's designed to be a first line of treatments and really try to work with the medical community to do the right thing for patients first. That's why we're not limiting the opportunity to the existing Rytary segment today. We are looking at this as a potential best-in-class, first-line treatment in CD/LD.
Yeah. Just additional comment. There's a large market to capitalize on this with all our learnings on Rytary over years, and almost 3.2 million prescriptions for 780,000 patients in America. We see a large opportunity. Currently, Rytary has 210,000 prescriptions out of 3.1 million. There's a lot of room with the ease of use, the better product, it's a different technology. Gustavo now leading, who joined us from Sanofi, Pfizer and Abbott, we are very excited about our specialty growth coming up.
Just to add maybe one more point. Just one more point that IPX203 in post hoc analysis has shown 1.55 hours of good on time against the IR. It is a different technology and we are confident that the patient would benefit a lot more from IPX203.
Okay, great. Actually, Chirag, if I could squeeze in one more, I think for you. Just, the expansion internationally, so leveraging your portfolio better, just how long before you can really execute on that and get distribution partners in the various regions? I'm just curious when we should see a real impact from that strategy. Thanks.
Oh, yeah. Good. Okay, Gary. We've been talking about China. We have filed more than 10 products now and keep filing products with our partner. They should start commercializing H1 of next year. We are not in a position to forecast that revenue yet. We're still understanding the forecasting, how the net sales works in China. Once we have a complete grip of China, we'll be providing that. Incremental revenue starts next year. India is small, but it started with $5 million a year, and we expect that to keep growing over time. We're very excited. The hospital business has been launched in India, and we're looking at two more therapeutic categories. Excellent growing market. The market is highest growth in the world is in India pharma business.
It's the entire market is about $25 billion, growing to $50 billion. India adds a little bit next year. China adds a little bit next year. In Europe, we are very close to partnering for our key products, almost 15 products with one partner who has a reach across Europe. Europe will obviously be the second largest market for us after the United States. Very exciting on European side. This strategy this time is to work with key partners in Europe with our complex GX as well as specialty, as well as biologics. South America, with Gustavo Pesquin's experience in South America, we'll be speaking to certain companies and we will choose the right partner or partners because Brazil and Mexico will have different dynamics.
We expect to have that partnership in place by mid next year. European partnership, we are hoping for end of this year.
Okay, great. Thanks for that.
Thank you.
Our next question comes from Nathan Rich with Goldman Sachs. Please go ahead, Nathan.
Hi. Good morning. My first question is on the revenue outlook for the generic segment in 2023. I guess, Tasos, can we annualize the implied 4Q revenue? And would that be kind of a good proxy for what you'd expect from the generic segment next year? And are there any other kind of headwinds or tailwinds that you would call out? My second question is a follow-up on biosimilars. I'd just be curious to go into a little bit more detail about the line of sight you have on the uptake in revenue contribution from ALYMSYS and Releuko for the fourth quarter. Can you maybe talk about pricing strategy and the receptivity you've seen by the GPOs that manage kind of the hospital and community oncology channels? Thank you.
Hey, Nathan. This is Tasos. Good morning. You know, trying to extrapolate and I'll answer your question more directly. Trying to extrapolate any given quarter is just problematic, right? For any company. When you look at our generics business, you know, this year I think we're gonna be up. Year to date, we've been up single digits. I think we're gonna finish the year low single digits, you know, give or take 3%. We believe this is sustainable.
If you do your math 350 times and you annualize Q3, you probably come up with about 1% growth rate year-over-year for 2023 versus 2022. I think we can do better than that, and we will do better than that. I think the growth will be driven by... I think we're gonna have Zafemy, I think it will be a growth driver number one. As Chirag said, Adrenaclick has been a wonderful growth driver for us. It has benefited obviously our patients, and I think that will continue to grow into next year. There were a number of product launches this year that launched in the H2 of the year.
I think we will have a strong annualization of those NPLs, new product launches, and I think we will have, you know, as Chintu said, we're entering a product cycle with growth in new product launches. I think all of those drivers will continue to offset the, you know, price erosion we continue to see in our industry, and I think we will end up in the mid-single-digit growth in generics next year. As you know, typically in February, we'll provide you our annual guidance, but hopefully, that gives you good color on the, you know, rough growth expectations in generics and some of the inflows.
Biosimilars, do you want-
I'll pick up biosimilars, Nathan. With regard to ALYMSYS, as I said, we're pleased with the initial uptake despite the fact that our Q-Code only goes live on January 1. We have, as expected, better uplift in the oncology channel in the early days of our launch. We expect hospitals to take just a little longer as they turn their EHR systems and make their formulary decisions, which tend to be a little bit slower. I don't expect this to be a substantial Q4 revenue driver. This is much more a ramp through 2024. With regard to Releuko, we expect to launch the drug midway through this month in November, so we have a short runway here.
However, we do expect really good uplift through that period based on our initial customer discussions, given that our J code is live, the dynamics in that market, that are positive for our drug. Thank you.
Nathan, we see obviously the products as launched. 2023 is where we start seeing good revenue ramping up to 2024.
Thanks for the comments.
Thanks for that.
Our next question comes from Elliot Wilbur with Raymond James. Please go ahead, Elliot. Your line is open.
Thank you. Good morning. A couple of follow-up questions for Tasos. First, with respect to generic performance in the quarter, could you provide us what the contribution was from new launches? You provided that metric. I didn't catch it in your prepared commentary. I'm wondering how the performance of that driver compared to trends in overall erosion in the base from price and/or volume, you know, where there may have been over or underperformance versus your internal expectations. I want to ask a quick question on balance sheet and interest expense, specifically. What's the effective rate on the debt currently and how much of that is actually hedged? Just trying to get a sense of your exposure to rising rates. Then maybe just last question around inflation dynamics, you know, how those impacted the quarter versus what you called out specifically last quarter.
Just trying to think about, you know, how we should be thinking about higher cost parameters flowing through the P&L and impacting both gross and operating margins over the course of 2023. Thanks.
Thanks, Elliot. I'm running out of rows to capture your questions, but that's okay. We'll try one at a time. If I miss one, let me know. You asked about new product launches. You know, new product launches. Here is the dynamic, right? Usually, there is new products that we launch in the year, and those are always a growth driver compared to prior year just because they're new products. In addition, what we see is products that we launched last year, we get the full year annualization benefit this year. Then everything else kinda offsets, and then other product launches from prior years typically offset price erosion and so forth. The key drivers are, in general, in terms of new product launches, new this year and prior year.
This year's product launches, I'll just speak about annual numbers. They're probably gonna deliver about $40-$50 million of incremental annual growth, right? That's probably about 3% of organic revenue growth. In the quarter, it's probably $10-$15 million. In addition to that, the annual impact of incremental revenue products that we launched last year, the year before, it's probably another, call it 2% of organic growth. Combination of those two products gives you. Those two-year launches gives you probably about 5%-6% of organic revenue growth, and then the remaining of the portfolio kind of offsets price erosion and volume erosion. I think that's point number one.
Your second point, I think it's around interest expense. Interest expense for everybody is going up, right? If you think about our overall debt, our biggest debt is about $2.6 billion, which is our Term Loan B. Okay. Half of it is fixed at 5%, actually. The remaining of it is variable, right, at LIBOR plus 350. So far this year, you will expect the weighted average to be at about 6 percentage points of interest expense. Okay? You can probably do the math.
The good thing is, 50% of our interest expense is fixed, 50% is variable, so there is some natural hedge against this interest rate growth that everyone is being seen. The other thing we just wanna note is that, you know, our debt is not due until May of 2025, so we're about two and a half years out, so I think we have plenty of runway to effectively refinance that or have other vehicles available to us, that we can amend and extend our debt. This is something we feel very good our ability to refinance the debt. And, you know, we're kinda staying close to the markets. Your other question was around inflation dynamics.
When we started the year back in February, what we said in terms of our annual guidance was we anticipated about $20 million of inflation headwinds. As inflation got worse, right now we're seeing probably about $25 million of incremental inflation, so it's a little worse than we thought. That's probably happening across every industry. Again, I think our actions to drive operating efficiencies, new product launches that are helping with margins, you know, we're able to offset that to deliver consistency from a bottom-line EBITDA perspective. Let me pause here and see if I covered your questions.
Yes. Thank you.
Sure.
I would just add, because the inflation this year is here, next year it will be here. Freight, we expect to slow down on inflation. What is our little bit success has been is to convince the customers that we cannot take all the inflation by ourselves, and we were able to pass certain inflation-related costs to our customers. That hasn't happened in any previous years, so we are really thankful that it is a two-way street. We cannot be absorbing all the costs. We hope that to continue next year as well.
Our next question comes from Greg Fraser with Truist Securities. Please go ahead, Greg.
Good morning, folks. Thanks for taking the questions. Growth for AvKARE has continued to strengthen and is tracking well ahead of your mid-single digit target. How much of that growth year to date is durable, and how do we think about, I guess, should we think about mid-single digit growth for 2023 off of the higher base this year?
Well, I can take that. I really love the AvKARE business. The business has done incredibly well since the acquisition over a few years ago, about three years ago. One of the reasons we acquired the business, we acquired majority stake of the business is because of this durable nature. A substantial amount of that business from a revenue perspective is really long-term government contracts, so they tend to be sticky, stickier than the usual kinda, you know, business. The rest of it is the distribution channel, which has grown tremendously this year, primarily around you know, three or four big businesses, and the team there has done very well.
Overall this year, my gut feel is that business is gonna grow top line at about 15%. My gut feel is, you know, we're in, you know, into our early stages of our planning for next year. I mean, I'm not quite sure it's gonna continue to grow at 15%, as you said, given the higher base, but we expect durable growth, most likely low double digit, to continue next year.
Got it. That's helpful. I'm not sure if I missed this, but in 2023, how do we think about gross margin, I guess if inflationary pressures continue, or do you still expect to offset the pressure with new launches and efficiencies, or could we see erosion?
Sure. Yeah. I think our gross margins are sustainable. This year, our overall gross margins are probably gonna be around 44%. I think we're gonna be hovering around the same level, a little less, a little bit more. You know, AvKARE tends to grow top line and bottom line, but its level of profitability is not on the same level as the rest of the business. You have that headwind in terms of kinda diluting the margins a little bit. You know, continue to focus on our generics, new product launches. Those have to have substantial higher margin than the rest of the business. The injectable products that we have higher gross margin. I think all of those things should offset most or all the headwinds around inflation.
I think the overall gross margins are sustainable, you know, give or take a point or up or down. Does that help?
Very helpful. Thank you for that. My last question is just on the opioid litigation front. Is there anything new to report there, and how high of a priority is it to resolve that overhang? Thank you.
Jason, our general counsel is here, he will take this question. Thank you.
Hi, Gary. Thanks for the question. You know, to date, the focus of those trials and resolutions has been on those who have engaged in direct promotion or large scale distribution, pharmacy distribution of those products. As a generic manufacturer with low market shares at peak, whose sales are to major wholesalers that didn't promote those products aggressively, we perceive ourselves to be differently situated than the others. We're gonna continue to look for resolutions that are appropriate for the shareholders and for the organization. Certainly given our different profile as we see it, you know, we'll be looking to do those things in a way that's amenable to everybody's best interests, particularly ours. Thank you for that question.
Thank you.
At this time, we have no further questions, so I'll now turn the call back to Chirag to conclude.
Well, thank you everyone. Have a great weekend. Take care.
Thank you.
Thank you everyone for joining us today. This concludes our call. You may now disconnect your line.