Hello, and welcome to the Amneal first quarter 2021 conference call. All participants will be on a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to call over to Amneal's Head of Investor Relations, Tony DiMeo.
Good morning, and thank you for joining us for Amneal's first quarter 2021 earnings call. Earlier this morning, we issued a press release reporting our financial results. The press release, as well as the slides that will be presented on this call, are available on our website at amneal.com. We are conducting a live webcast of this call, a replay of which will also be available on our website after its conclusion. Please note that today's call is copyrighted material of Amneal and cannot be rebroadcast without the company's express written consent. I would like to remind you that statements made during this call stating management's outlook or predictions for future periods are forward-looking statements. These statements are based solely on information that is now available to us.
We encourage you to review the section entitled Cautionary Statements on Forward-Looking Statements in our press release and presentation, which applies to this call. Our future performance may differ due to numerous factors, many of which are listed on our most recent annual report on Form 10-K, and are revised and updated on our quarterly reports on Form 10-Q, and current reports on Form 8-K, which you can also find on our website and on the SEC's website at sec.gov. We also discuss certain non-GAAP measures. You will find important information on our use of these measures and our reconciliations to U.S. GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial metrics that correspond to some of our U.S. non-GAAP measures we reference throughout the presentation.
On the call this morning are Chirag and Chintu Patel, our Co-CEOs, Tasos Konidaris, our CFO, Andy Boyer and Joe Todisco, our Chief Commercial Officers for the Generics and Specialty segments, and Steve Manzano, our General Counsel and Corporate Secretary. I will now turn the call over to Chirag.
Thank you, Tony, and welcome to Amneal. Good morning, all. Thank you for joining us this morning. First, I want to acknowledge the public health crisis in India. COVID-19 has challenged the world in many ways, but even by the standards set over the last year, the situation in India is very challenging and access to medical care is limited. We are working diligently with Indian government officials, charitable foundations, and other pharmaceutical leaders to utilize our expertise, resources to secure critical care medications and equipment. Our hearts are with our colleagues in India, as well as all those who continue to fight COVID-19 around the world. As an essential business, we are proud of the investments we continue to make in protecting the health and well-being of our employees.
In addition, we are also ensuring the continuous supply of medicines for patients and customers in United States. our robust global supply chain is operating well, and the efforts of our procurement, quality, and manufacturing teams have been truly heroic. Finally, this latest COVID-19 outbreak is a reminder of the dependency of the U.S. Generics Pharmaceutical Industry on foreign manufacturing. We believe it remains critically important to make more products in America for America. Fortunately, Amneal's significant domestic manufacturing base, superb quality record, and the U.S. domicile enable us to work closely with federal and state legislators and public policy maker to provide meaningful solutions. We look forward to sharing updates as we make progress. Turning now to our financial and operating results. I'm extremely pleased with our first quarter results and how the full year is shaping up.
We remain confident that our momentum, the strength of our commercialized and pipeline assets, solid execution will deliver another year of strong top and bottom line performance, consistent with our guidance. Let me now provide you with an update on key initiatives across our business. First, we believe companies in our industry are only as strong as their R&D organizations. Innovation is growth. We continue to invest in product development in both Generics and Specialties. In Generics, we have established a well-oiled engine to replenish our development portfolio and drive increasingly complex product launches. Our strong innovation capabilities are a major reason we have delivered growth in an industry experiencing secular pressure. While our base business faces competition, our R&D team is constantly moving us up the value chain with higher barrier to entry products that have longer tails of revenues and profits.
In Specialty, we are acutely focused on executing the development plans for IPX203 and Kashiv Specialty Pharmaceuticals programs we acquired earlier this year. Chintu will touch on innovation in greater detail shortly. Second, we are excited to see our manufacturing and supply chain continue to improve every quarter. When we came back, it was one of our first public goals, optimize our global operations, reduce excess overhead and cost, improve our margins in Generics, and ultimately increase profitability. We are executing well towards these goals as Generics gross margin in first quarter grew to 45%. Going forward, we are pursuing additional efficiencies to improve margins over time. We know the execution of strategic, accretive, and creative transactions can help us accelerate our growth. Just after the end of first quarter, we completed our acquisition of Kashiv Specialty Pharmaceuticals.
With Kashiv, Amneal gained best-in-class small molecule formulation and development talent, which we expect will drive substantial organic long-term value across our portfolio. We also gained several near-term NDA programs across neurology and endocrinology that we expect to begin to launch as early as 2023. We're not stopping there. Given our existing commercial infrastructure in neurology and endocrinology, we are pursuing complementary commercial stage assets as well as late-stage clinical programs to provide near-term synergistic revenue streams. We believe we are uniquely positioned to drive substantial value to all stakeholders and further strengthen our balance sheet over time. Finally, we continue to grow our AvKARE distribution business, where we saw solid top line and profitability performance this quarter. As we have discussed in the past, AvKARE represents a strategic long-term opportunity for us as we focus on refi to government channel.
This business is buoyed by favorable tailwinds, including the continued stream of branded pharmaceuticals going Generics every year. As we look towards the rest of 2021 and beyond, Chintu and I could not be more excited about our business and confident in our strategic direction. Today, Amneal is truly firing on all cylinders, and we expect continued strong financial and operational performance as we move forward. With that, I'll now turn the call over to Chintu.
Good morning, everyone. Thank you, Chirag. As always, I would like to begin by recognizing our employees whose tremendous dedication inspires Chirag and I every day and drives our continued success in making healthy possible. The team's relentless commitment to delivering medicine for our customers and patients, even in these trying times, is truly remarkable. To our employees, we thank you for your service and are filled with gratitude for all you have contributed. Our employees in India have demonstrated amazing courage, and we are actively supporting them to ensure they get the care they need in light of the most recent COVID outbreak. Our India team has continued to ensure our supply chain remains strong and the flow of products is uninterrupted. From the beginning of the pandemic, we focused on building an even more resilient global supply chain, which has led to strong inventory levels across all locations.
These are unprecedented times, and we pray for those who have lost family members to this terrible virus in India and across the world. Let me provide a few key business updates. First, I'm happy to share that we are advancing key initiatives across the company to improve efficiencies, which will save cost and expand margins. For example, while we manufacture most of our Generics in-house, we are transferring several products from external manufacturing partners to our facilities, which will reduce cost and improve supply chain. Many of these types of initiatives will help improve our gross margins in a sustainable way. As always, we continue to uphold the highest standards of good manufacturing practices and integrity across every aspect of our business. From the very beginning, we have prioritized quality and compliance at all levels. It is truly in Amneal's DNA and part of our culture.
As Chirag said, R&D is the growth engine for our industry, and we continue to invest in our future pipeline. I will start with Generics. We believe that we are at an exciting time for Amneal 2.0 as we begin to see the benefits of the transition of our development activity towards complex dosage forms, drug device combinations, and other high-value programs. Over 80% of our pipeline is non-oral solid products, and an increasing share of that is drug device combinations. ZAFEMY, which we launched in March and is a complex hormonal patch, is a perfect example of our Generic strategy in action. ZAFEMY received CGT designation, which grants it 180 days of exclusivity. Given the complexity of its development and manufacturing, we believe it will have limited competition even post-exclusivity.
Of the 80 Generics approved with a CGT designated industry-wide, Amneal has launched 10, by far the highest number in our industry. Looking forward, we will continue refreshing our pipeline. We expect to deliver at least six to seven high-value products on an annual basis. In addition, we are actively looking to expand our high-value complex Generic portfolio into select international markets via external partners. Our existing partnership with Fosun is proceeding nicely. Together, we have already filed four products in China and expect to file another five by the end of the year. And this is just the first of multiple international collaborations. Overall, we see global expansion as another vector for long-term sustainable growth.
Next, Biosimilar will be an increasingly meaningful component of our pipeline going forward. As we have shared in the past, we think the Biosimilars market will behave more like complex Generics over time. We believe our core strength in high-quality manufacturing, innovation and strong commercial execution will position us extremely well in this space. Currently, we have filed three Biosimilar products, which we expect to launch over the next couple of years. Beyond that, we are actively evaluating additional opportunities via partnership models where we can be first or second to market. We believe Biosimilars will be a key strategic opportunity for us over the next 5-10 years.
Turning to our Specialty pipeline. IPX203 is the most advanced of our four Specialty pipeline programs, and is currently in phase III clinical trials with an estimated launch in 2023. as a reminder IPX203 is our next generation product for Parkinson's disease. We expect the product will offer a material improvement over RYTARY and existing therapies. In the United States, 60% of PD patients or roughly 600,000 people are on some form of levodopa therapy to help manage off time, which are periods of drastically reduced motor function due to low levels of dopamine. Immediate release carbidopa-levodopa is a first-line therapy for Parkinson's.
Our current leading product, RYTARY is an extended release carbidopa-levodopa product designed to provide better on-time for moderate and severe patients compared to Generic immediate release. In this patient population an hour or two of additional on time can be a large improvement in quality of life as off periods can be stressful and painful. We expect IPX203 will demonstrate a clinically superior efficacy profile versus immediate release and will bolster much more convenient dosing regimen. As a result, we believe that IPX203 has the potential to be a much larger product than RYTARY and help us grow further market leadership in the management of Parkinson's disease. We are excited to see top line data in the second half of this year.
The integration of Kashiv Specialty Pharmaceuticals is proceeding well. This deal has expanded our Specialty product pipelines significantly in both endocrinology and neurology. We have K127 for myasthenia gravis K128, a modify trihexyphenidyl for the treatment of sialorrhea and K114, a modified T3 product for the treatment of hypothyroidism. With the addition of these programs, we are well positioned to launch at least one Specialty product per year starting in 2023. And we believe the various drug delivery technology platforms we acquired will also provide a wellspring of new branded products for years to come.
To summarize, we build this company to deliver affordable, essential medicines for patients and create value for all our stakeholders. The company is executing well. Our pipeline, our technologies, our commitment to quality and most importantly, our people are elevating Amneal to new heights. Chirag and I share excitement and confidence in the journey ahead. I will turn the call over now to Tasos.
Thank you, Chintu. Our first quarter financial momentum reflects the relevancy and diversification of our product portfolio, successful new product launches, and our focus on execution and driving of efficiencies. As a result, in the first quarter of this year, we reported net revenue of $493 million, adjusted EBITDA of $126 million, and adjusted diluted EPS of $0.20. In addition, we generated $148 million of operating cash flow and further reduced our net leverage.
Let me now move to our segment results, starting with Generics, where net revenue of $313 million was down $40 million or 11% compared to Q1 2020. This decline was not surprising and was primarily driven by an almost nonexistent flu and cold season, which adversely impacted products like generic Tamiflu, as well as higher purchases last year at the onset of the COVID-19 pandemic. On a pro forma basis, as we adjust for the various discrete events, Generic net revenues grew low to mid-single digits. We continue to be very pleased with the performance of our new product launches, where products launched since January of last year delivered over $36 million in net revenue growth, offsetting price deflation, as well as the lingering negative impact of the pandemic.
From a product perspective, epinephrine, EluRyng, levothyroxine, and sucralfate were strong contributors in the current quarter. In addition, ZAFEMY is performing very well, and as you may remember, we launched it in March of this year, so there is only one month of it in the current quarter. Looking ahead, we expect a step change increase in Generic net revenue due to continued new product growth, strong commercial execution, and the fact that the seasonal nature of the flu and high purchases last year due to the pandemic are behind us. Adjusted gross margin for Generics was 44.6%, 250 basis points higher than Q1 2020 and 630 basis points ahead of full year 2020. This growth reflects our strategy and solid execution in transitioning to more complex Generics, as well as the efforts of our team to drive supply chain efficiencies and favorable pricing on certain manufacturing materials.
Let me now turn to our Specialty segment with net revenue in line with our expectations of $96 million, up $8 million or 9% from Q1 2020. As a reminder, our Specialty segment centers around neurology endocrinology with our promoted brands, Nuedexta and UNITHROID. Both brands continue to grow. In aggregate, they delivered $56 million, up 11% versus Q1 2020. This growth, as well as improvements in our gross to net, offset declines in ZOMIG due to its upcoming loss of exclusivity. Adjusted gross margin for specialty was 78.4%, 380 basis points higher than Q1 2020 and 420 basis points ahead of full year 2020, mostly due to a favorable product mix. Let me now move to AvKARE, which reported net revenue of $84.7 million, up $26.7 million or 46%. As a reminder, the acquisition was closed on January 31st, 2020.
As a result, the current quarter reflects three months of sales versus two months last year. Adjusted gross margin for the quarter for AvKARE was 19.6%, in line with Q1 2020, and 210 basis points higher than full year 2020. While the top line was slightly lower than our expectations due to lingering effects of the pandemic, the business was able to overcome it by leveraging a more profitable product mix, as well as operating expense efficiencies. Total company adjusted EBITDA of $126 million was slightly ahead of our expectations and $8 million below Q1 2020, reflecting three dynamics. First, higher gross profit, primarily due to a favorable product mix and operating efficiencies this year. Second, we're making substantial investments in our R&D and sales and marketing to drive long-term growth.
Third, the tough comparison to Q1 2020, where our adjusted EBITDA of $134 million was substantially higher than the $107 million average for the remaining three quarters of the last year. Adjusted diluted EPS of $0.20 was flat to Q1 2020 as our adjusted EBITDA performance and lower interest expense offset the very high prior year comps. Last year's first quarter of $0.20 in EPS was much higher than the $0.14 average of the remaining three quarters of 2020. From a cash perspective, operating cash flow of $148 million was ahead of our expectations and well ahead of the $49 million we generated in Q1 2020. We need to be mindful that this metric is inherently variable. Nevertheless, the strong performance was driven by top-line performance, lower DSO, and some favorable timing.
As a result of our strong financials in the quarter, we strengthened our balance sheet and our financial flexibility. Cash and cash equivalent in March 2021 was $456 million, compared to $347 million in December 2020, and our net debt to adjusted EBITDA ratio improved to 5.1x, compared to 6.2x in March 2020. In summary, we're pleased with our top-line performance, higher levels of profitability, cash generation, and improved balance sheet. Consequently, our full year 2021 guidance remains unchanged, and we remain confident in our financial and operating performance for the remainder of the year. With that, let me turn the call over to Chirag.
Thank you, Tasos. We are pleased with our continued positive momentum through the start of 2021 as we continue to execute against our Amneal 2.0 strategic vision of long-term sustainable growth. I would now like to turn the call over to the operator to take your questions.
Yes. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble the roster. The first question comes from Gregg Gilbert with Truist.
Thanks. I have a few. Chirag, I want to start with a high-level strategic question. I understand the desire for companies, including yours, to want to move up the value chain and have more durable products and brands. I certainly understand that. Also, I wonder why the Generic industry in the U.S. hasn't consolidated more, given what we've seen on the customer side, do you think that's in the cards independent of your standalone strategy? Let me ask the other questions right up front. Tasos, maybe you could comment a little bit on the AvKARE strength and how lumpy that is and what some of the drivers are there. Lastly, for Chintu, is generic Nexplanon a project that is interesting to you and perhaps underway? Curious how challenging something like that would be compared to other projects you've had your team work on. Thank you.
Wow, Gregg, you're so fresh this morning. Good morning. Consolidation in Generics. That's the holy grail, I guess. As you know, it is tough. The reason it is tough is the FTC requires to divest many products. We went through with the Impax merger. We had to go back and forth with the agency and ended up divesting a lot of value away. Also moving the products from their plants, Impax plants, to Amneal, we lost a lot of revenue in between. It becomes very hard. You look back and say, "Okay, why should we do that?" Of course, there are lots of synergies we can pick up, but the overlaps are so many. If we find a target without overlaps, be really good. I hope, and it is needed, the consolidation is must.
It's just what form it comes in, and if new players without overlaps, if they can merge, which category Generics divestment goes good. There are a couple of small companies. Do they consolidate together? Good. Good for the industry. We need that. As you know, Indian companies have a very hard time doing anything. They go on for a legacy of their families for many years to go, so they do not consolidate. It's a little bit of uphill slope. I hope I answered that question to you. Tasos on AvKARE and then Chintu.
Yeah. Good morning. Let me try this, see if that works. AvKARE overall is growing nicely. Last year, we did about almost $300 million. This year, it will grow mid-double digits. Feel good about the top-line growth. Profitability, we knew that when we did the deal, profitability for the business is around high double digits. Last year was 18%. Q1, we're sitting at 20%, so we're pleased with that improved level of profitability. One of the things we like about the business, about more than 50% of that $300 million growing double digit this year, is the government business. What we like about this, many of the contracts are long-term contracts, so it gives us a nice, stable platform that we can grow over time. For that reason, we cannot turn the growth rate overnight.
It embeds us with our government customers, and the team has a lot of expertise. Over time, we're looking to grow that segment, not only by leveraging third-party products, but also Amneal products, which as you can imagine, provide a nice, much more profitable growth there. The rest of the business is a number of other more distribution-like businesses with low single-margin business. That's been growing nicely, and that's where we're looking for more operating efficiencies over time. I think overall, I think the business again this year is going to grow mid-double digits. I think for the next few quarters, it'll be low $80 million to low $90 million in terms of quarterly revenues. Profitability should be in that 18%-20% gross margin. Hopefully, Gregg, that helped.
Just to add a bit, we're also growing the unit dose business by launching 8-10 of our own liquid products out of our Branchburg, New Jersey site. That should be a nice uptick for AvKARE next year. Chintu?
Hi, Gregg. Good morning. It's a good question on Nexplanon. Amneal, as you know, has been investing into a complex Generic space, and we continue to move up the value chain. The products like Nexplanon, which is a drug device combination implant product, sits on the top of the most complexity from the development and from the device perspective, and also how to conduct and work with FDA. With Kashiv's acquisitions, we acquired some of the talents that is required. I will not get into the particular product, but Amneal, we have the good knowledge on how to develop these three to five years long implant products. We have the very good drug device group within the organization. We understand the formulation and the other challenges, the PK studies and other regulatory requirements.
Absolutely, Amneal is moving up, and it's part of our portfolio, not the particular product, but entire drug device combination implant category is something we are very excited, and we have the knowledge, and we are working aggressively to bring that to the market.
Thanks, gentlemen.
Thank you. The next question comes from Daniel Busby with RBC Capital Markets.
Hey, good morning. Thanks for the questions. Maybe sticking with the big picture theme. As we think about the business longer term, in your view, what is the ideal revenue mix between Generics and Specialty, and also, I guess, U.S. versus OUS? Clearly, right now, you're still more heavily weighted towards U.S. Generics, what would you ideally like to see when we look at the business five years from now, and how does business development play into that? Second, how should we think about the cadence of additional Generic new launches over the remainder of this year, and how important are those to the anticipated step change increase in Generic revenue that you mentioned?
Well, thank you, Daniel. The big picture, how do you see Amneal growing, say, Amneal 2.0? We said the complex Generics is a driver of the business within Generics, right? We got within complex Generics, all kind of dosage form. Chintu mentioned the device products, the inhalation products, the injectable products. As we have said it a year ago, that Biosimilars, we put them in a complex Generics. That segment going from somewhere at $1.4 billion-$1.5 billion to a higher level in five years. We're not going to give you exact number now, there is enough growth for us because of all these scientific capabilities and investment we have made over the years to produce this. It will be excellent growth in that one segment of the business. The Specialty, we have our own pipeline. We haven't given forecast for that pipeline.
IPX203 is moving nicely. Is K127. We got the platform, we got the technology. One thing Amneal does really well is once we get in, we do it. We finish the job. It's a long-term view for us. Five, 10 years, we'll build a Specialty business to be at a great level on a more contribution on EBITDA than revenue. I don't want to say the mix exactly, but it is on a tremendous growth trajectory, and also it will be complemented by accretive strategic M&A, because we have the strength. We got the cash flow, we got the complex Generics complementing the Specialty. For Parkinson's disease side, we like to consolidate as many products as we can. Same thing on endocrinology, is how our T3 comes, and then there's more to come.
Very excited and very targeted on those two areas. Do you want to take this?
Yeah, good morning.
Okay.
Yeah, just in terms of overall new product launches are critical to us, right? We are really not relying on any additional new product launches to lead to that step change I spoke to. Based on the product portfolio that we currently have, we're very confident on the step change, number one. Number two, as new products kind of come in, those new products will be fueling growth mostly towards Q4 and into next year.
Great. Thanks for the color.
Thank you. The next question comes from David Amsellem with Piper Sandler.
Is that a hot mic?
Thanks. Just a couple. On the Biosimilars, you talk about, I know that this is a partnership model, but how should we think about your net economics and how these three opportunities you've identified, what kind of margins they'll have relative to your overall Generic margins, given the shared economics? That's number one. Number two is you've talked about other Biosimilar programs. When are you going to be in a position to identify those other opportunities? Do you expect those other opportunities to have better economics or similar economics to Avastin and the G-CSFs? Lastly, is there anything that you can add on the COPAXONE Generic? Is this still part of your expectation that you expect that opportunity to bear fruit later this year? Thank you.
Thank you, David. With Biosimilar strategy, as you pointed out, it's a partnership model to begin with, which is very cost effective for us. We waited, and we wanted to see how it develops because we did not want to spend or invest $150 million- $200 million for biologic. The patent dance, the thicket of patents. We want to see how, plus the adoption of Biosimilars, which is all playing now nicely over now and over next 10 years, we see Biosimilar as a great business. Not only Biosimilars, it will then just like in small molecule and 505(b)(2)s, Biosimilars may end up into biobetters or follow on branded biologics, because which could be brought earlier in the market. We've been very diligently working over last couple of years to identify great partners. We understand that manufacturing is a key.
I would put 80% value to very high-end manufacturing and consistent manufacturing.
We are working on strategies on how do we become champion, just like on a complex Generics for the manufacturing of Biosimilars. R&D, we will establish our capabilities sooner than later. The split is almost like 60% in our favor, 40% to partner. We probably will continue with that model, which gives us around 25%-30% EBITDA per product. If we do it in-house, whenever we start doing it, obviously it will go up to 35% plus. That's the plan for now.
David, when will we announce the next partnership? This year.
David, your last question on COPAXONE. Yes, we are working and the product can have launch later this year or early first quarter 2022.
Great. That's helpful. Thank you.
Thank you. The next question comes from Elliot Wilbur with Raymond James.
Hi, good morning. This is Lucas Lee on for Elliot, thanks for the questions. The question I have is, what drove the gross margin upside during the quarter? Is this sustainable, and how does that impact your prior expectations around Generic gross margin trends? As a follow-up, how are you thinking about the potential Generic competition on ZOMIG? Thank you.
I can take Lucas. Good morning. This is Tasos. Listen, we were incredibly pleased on the gross margin performance. It was, as you saw, every business expanded margins, which is something we're very focused on, improving profitability. Generics had a great quarter with margins about 45%. We believe those are sustainable. My gut feel is I think we're going to see some moderation, right, to the low 40s%, some moderation, but I think we're going to finish the year on the Generic side, most likely in the low 40s, which, as you know, is a substantial increase versus the 38% we delivered last year and the 35% we finished 2019. As you can see, we are executing in terms of what we had said over the last couple of years. We see Generic margins going over 40%.
I think we'll be pleased to cross that bridge this year. That's in terms of our expectations. Pretty much sustainable. It's the same thing across the remaining other two parts of the business. On generic ZOMIG, this was not overall one of the things we're proud about we have created. We have created very diversified business, much more so than three years ago. We have AvKARE . That's a big part of the business. Specialty has grown. We have a portfolio of Generic products, over 250 products. We're not dependent on any single products. On ZOMIG, let me turn it over to Joe to kind of give us a little bit more insight.
Sure. Thanks, Tasos. With respect to specific Generic competition on ZOMIG Nasal Spray, we're aware of two filers that are already publicly known, but we always do assume that someone else could be coming to market. We had preemptively launched an authorized Generic earlier this year. We've got sufficient inventory of both labels, and we've taken steps to maximize the value of the product, regardless of the number of Generic competitors that come to market at the end of May.
Thank you. That's very helpful.
Thank you. The next question comes from Dana Flanders with Guggenheim.
Great. Thank you very much for the questions. I just had two. My first is I was wondering if you could comment on just base business Generic pricing trends. We are hearing some comments from the supply chain and other manufacturers that they're seeing a little bit more pressure this year, kind of independent of competition. Just wondering if you're seeing that as well. My second question, I was wondering if you could comment on just the unfortunate and sad situation going on in India with COVID, and wondering if you are seeing or expecting to see kind of shortages start to pop up impacting the U.S. market, and just how Amneal's overall supply chain is just relatively positioned. Thank you.
Hey, Dana, this is Tasos. I'll take the first question on pricing. We're seeing just the high level. We're seeing consistent behavior as you're hearing from some of the other manufacturers. Also want to point out this is exactly what we planned this year. As a reminder, in our guidance, we assumed mid to high single-digit deflation. As you mentioned, it's coming certain areas. Certain areas, it's coming a little worse than that. Our ability, right, to get new product launches actually ahead of our own expectations and our ability of our supply chain to drive operating efficiencies and the new markets of growth that we are seeing by the commercial team is offsetting that and ultimately is increasing our profitability in a sustainable way.
We're pretty much very happy how the company is dealing with this and so forth. As in terms to India, let me turn it over to Chirag, I think has a good perspective on that.
Thank you, Tasos. The situation is very grim. There are local lockdowns, pharmaceutical is being an essential industry, it is allowed to operate. The inventory levels for Amneal is very good, three-plus months, we have secured the APIs, if you count overall inventory, it's almost four to six months. We don't expect, as far as Amneal is concerned, any shortage from our product. Others may face, based on where they're located and how much pre-planning have they done. For now, next month or two should be fine. We expect the situation to improve hopefully after one month. At Amneal India, we're doing everything we can to help the situation with oxygen concentrators or with working on supplying or donating remdesivir and steroid products. We got Indian government license to sell. We never sold anything to local market from our U.S. FDA-approved plant in India.
Everybody is assisting. Many countries have, as you know, offered lots of help. There seem to be enough remdesivir. I was in a call with Gilead, they have 15 million vials they will produce this month. They're all trying to help. Same thing with Pfizer, hopefully the more vaccines will be available besides just AstraZeneca. It's very grim there, and we hope it improves soon. Thank you.
Just to add just one point, we were very proactive in vaccinating many of our Amneal India employees. A large population of our employee base has been vaccinated, and that has led to very good attendance and a strong supply chain. We are working diligently with everyone to make sure we do everything to provide help and support. Our supply chain, still in this current situation, is very strong.
Thank you. The next question comes from Nathan Rich with Goldman Sachs.
Good morning. Thanks for the questions. Maybe Tasos, starting with you, I just wanted to make sure that I understood the revenue cadence for the Generic segment. You called out the $23 million headwind related to the mild flu and cold season. I am assuming that revenue doesn't come back over the balance of the year. Is that a fair assumption? If so, it looks like your underlying view of the business got better. It sounds like pricing trends have been consistent, you did mention the traction with the new product introduction. Is that what is driving the implied increase in outlook over the remainder of the year? Just as a follow-up, as we think about the margin opportunity for complex Generics, how should we be thinking about those margins relative to maybe the Generic segment average?
I think you had maybe mentioned Biosimilar margins, EBITDA margins being north of 30%, if I caught that number right. Where would you feel like the complex Generic average be relative to margins for that segment? Thank you.
Good morning. I think that $23 million in Q1 related to low flu season, et cetera, that's not going to come back. I think you're spot on. Nevertheless, the rest of the year remains unchanged or slightly ahead of our own initial projections. That really reflects new product introductions and primarily the ZAFEMY launch just doing extremely well. I think that's number one. The margins, I think we see sustainability in the low 40s for the rest of the year on the Generic side. That bodes well for increased profitability overall of the Generics versus our initial expectations. In terms of the new product, the complex Generics, overall the Generic margins is in the low 40s, right? You can assume that substantially more so than that.
Primarily during the first, call it, six, seven months where we have an exclusivity. That kind of bodes well as we think about next year and the year after that about improving gross margins of the Generics. Biosimilars, I think it's early stages. I think the first three Biosimilars we have in place, just because there is just more competition at this point in time, and because it's much more partnered, I think the EBITDA that Chirag talked about earlier on, call it, the 30%, I think that's a good number. Over time, as we enhance our manufacturing capabilities and our internal expertise, I think we see those going up from there.
Yeah, Nathan, this is Chirag. What we see is durability for the complex Generics and Biosimilars. The complex Generics may be shorter, Biosimilars will be longer. The margins, and let's stay with the EBITDA margins, would be north of 30%. It may start out between 25% to 30% because these products are highly competitive, the three we have filed. As we come out as a first or second Biosimilars, just like first or second complex Generics, it'll be much higher than 30%.
Thanks for the comments.
Thank you. Once again, please press star then one if you would like to ask a question. The next question comes from Gary Nachman with BMO Capital Markets.
Thanks. Good morning. Chirag and Chintu, when you're having discussions with different parties about expanding your portfolio, what segments or technologies are you most focused on, or where are you seeing the most opportunities at this point? I'm curious, how competitive is the BD environment for assets, especially Biosimilars? Do you feel like sellers or partners are being reasonable? What sort of advantages do you have in getting some of these deals done?
Thank you. The portfolio on Biosimilars, we have the oncology assets, so we'll go for a few more oncology assets. We will also go on to autoimmune and on the eye side as well, because we are establishing a long-term Biosimilar or follow-on biologics platform, 10, 15 years, just like we did with complex Generics. We'll be pretty much looking at more of where we can navigate the patent, where we can be first or second to market, even the small ones. Those are how we build a complex Generics portfolio. Those same thinking, same playbook we are using to come up with a Biosimilar platform. BD side on the biosimilars, actually, assets are available because the companies invested in the last 10 years. Mostly they focused on R&D, and then they got stuck because of the patent situation in the United States and the brands and all those.
You know how it goes with the branded companies. It takes time to really launch the Biosimilars unlike Europe. There is excess capacity in manufacturing sitting out there, especially in Europe and South Korea and China. We're tapping onto those, and we do have existing two great partnership, and we would probably expand to one more and manage with three partners. We're very keen in bringing manufacturing to United States as well for many reasons, including the pandemics and climate changes or emergencies. We have to have biologics manufacturing in the United States as well. In a war footing, we put up a vaccine manufacturing expanded, and it is helping. We got our people vaccinated faster than other countries, and we are now in a position to export that. I believe making it here would be very advantageous.
Other deals we're looking at is on our Parkinson category, where we have a leading asset already, commercial asset. We have IPX203, which is coming up, the top line results second half of this year. We like to consolidate the space. Those are the main focus right now from expanding the portfolio on the BD side.
Okay. actually, if I could just squeeze in one other, just back to the gross margin, how many products are you shifting from external to internal manufacturing, and how will that be phased to help the gross margin efficiencies over time? just talk about where you're getting most of the efficiencies in manufacturing. Thanks.
Yeah, sorry. Pretty much our work is done since we came back. We have brought in most of the products in-house. The partner products such as EpiPen comes from Pfizer and Phillips are trusted partner, very reliable, great partners. We continue to expand that relationship. Our levothyroxine, our Long Island partner, Jerome Stevens, is excellent over the years and one of the best quality levothyroxine in the market. Besides those, we pretty much have brought everything, like 14 or so products in-house from various CMOs, which allowed us to now produce more and more margins. Very highly efficient already.
Yeah, I think that's spot on. The other areas, right? We spent more than $500 million purchasing raw materials. That gives us a nice opportunity for our Strategic Sourcing Organization. The same way our customers are pushing for price, that kind of goes down the supply chain, right? I think that's an area of opportunity as well as our efficiencies within our own global manufacturing footprint, right?
Yeah.
The efficiencies on the plant. Chintu and his team are very focused on that, and we see this continue to produce income for us from the foreseeable future.
Yeah.
It's not done yet.
Yeah. Just give you an example. A year ago, our backorder was $30+ million. Last week, it's $1 million. We have gained tremendous efficiencies all across New Jersey operations, New York, India, and now Ireland is coming up soon. It's fantastic. Thank you.
Okay. Very helpful. Thank you.
Thank you. That concludes both the question and answer session as well as the call itself. Thank you so much for attending today's presentation. You may now disconnect your lines.