Good afternoon, everyone. I'm Ekaterina Kisqova from the JPMorgan team. Pleased to be introducing Emil. And from Emil, have Sharad Patel, the company's cofounder and co CEO. As a reminder, we're going to have Sharad make a presentation here, and then we'll open it up to a q and a session.
If anybody has any questions, you can ask those through the ask a question button on your screen. And with that, let me turn it over to Sharad.
Thank you, Ekaterina. Good afternoon, everyone. Hopefully, everybody is safe and healthy, and we hope to come out of this COVID crisis together very soon. We thank Amneal employees who have worked very hard and they're like frontline workers during the pandemic, showing up to the labs and plants every day here in The US, New York, New Jersey plants, well as India and Ireland. So we thank all of our employees for excellent work and keeping the supply chain going, through this very, very difficult times.
With that, let me start with page four. Some of you may not know Amneal and our history. We started Amneal, very humble beginning. My brother, myself, along with, our father, who's a pharmacist, scientist, and, humbly build up the company. The passion has been to deliver something new to the patient.
The affordability was at the key when we started the company and still today, we strive to bring more and more affordable medicines for American patients. Through our strategic initially inorganic, acquisitions and from 2009 and onwards, putting a lot of, focus on organic growth, creating one of the best engine r and d engines in the industry paid off, and we grew tremendously. We were the highest growing company in our industry for many years. We saw the the intense competition coming in in generics back in the days of 02/1617 with the FDA approving the more products and three buying groups consolidating. Therefore, we pursued the acquisition of Impacts and merged the company.
We went public. Lot of headwinds came in '18, so that's only degrowth year we had, is this from '18 to '19. We're back on track, and and I I would love to share in a few just slides, the further slides that how tremendously excited we are, to bring back the growth. It's been fifteen months, back at the helm. Me and my brother are back as co CEOs, and, we have built up excellent pipeline within generics as well as now in specialty and added distribution business, which allows one step closer to customers.
With that, let's go to page five, please. So this is three areas of growth that we've been focusing on, and we've been talking quite a bit. As you know, our foundation is genetics. And I'm pleased to say that when we finished our five years review, we got all the teams together, the mojo, the passion is back. Pipeline is revitalized.
We see growth in generics. Genetics includes injectables, all dosage forms, so injectables in elations, transdermals, oral solids, all kind of oral solids, liquid products, topical products, and biosimilars. So it's a pretty broad category, and this is why we we're seeing growth in our generics business. We did experience growth in even in COVID year nineteen to twenty. In twenty to twenty one, we expect high high margin launches as well as additional pipeline expansion.
So very excited about this and adding Kashyu Specialty Pharma, which is recently announced acquisition, even adds more complex generics to our portfolio. So we basically arguably have one of the best R and D engine in our industry, and our track record shows that as well. So very excited, for our genetics business. We're also key very keenly focused on margin expansion. This as you know, generic business requires reinvestment, requires r and d investment, requires a quality and CapEx investment.
Therefore, to operate the company, a 40% is necessary in a generics business. And we are almost getting there. And we with the new product launches as well as operation efficiency, we will further expand the margins. Additional thing what we are doing is expanding. We have a great 300 plus products portfolio.
Some of them are lucrative, and the market we look for first was China, and we have a partner for soon in China where we are expanding the partnership. We have already filed products with Chinese FDA and we would expect to ship those products from our US plant as well as Indian plants. And the pricing we're seeing in Chinese markets are better than The US market, which surprises us, but not entirely. The second leg of our growth is Amneal distribution. We acquired Avcare about a year ago.
Excellent acquisition for us, expanded our government business, which requires TA compliant manufacturers, which we having 50% capacity still in The United States, we're taking advantage of that and putting more products with VA and DOD. We have won number of national contracts and keep winning them. Also, are pursuing the products for strategic national stockpiling and other BARDA initiatives. Along with that, there is a tremendous bipartisan support to reassuring certain essential medicine to The United States, which Amneal also recommends that that is a must for the country for our supply security, as well as we need to bring back, have to have such capacity, bring back talent, and it is seems like the support from both parties is tremendous along with the, incoming administration. So we're very excited about, reassuring opportunities as well.
On Amneal specialty, this is where we're going to spend a bit more time today is that we part of the Impact's acquisition, we acquired the specialty business, which we have then grown to be almost $360,000,000 business. We see tremendous opportunity of growth there. We have existing marketed marketed products, which are growing. We had two pipeline products within the movement disorder. With the two therapeutics area we have is movement disorder as well as endocrinology.
With Kashyyy specialty acquisition, we added two pipeline products, one more in movement disorder and one in endocrinology. We're excited about those opportunities and I'll walk you through. It's important to understand them each individually and what cashew specialty brings to the table. Moving along, let me focus on generics a bit more. So if you go to Slide seven, please.
This is on the left side of the chart is our traditional mix of the products. So we had still 43% ER, IR tablets. So let's say 50% are the oral solids, 50% other dosage forms, which is a good mix. But what we did now is our current pipeline only has 12% of IRER where we the tablets where we see tremendous competition. All other dosage forms, we are becoming better and better.
Optalmics, inhalation, nasal sprays, topicals, transdermals. We have a series of products we have launched, and we're still launching them more, which are made in Escardew, New Jersey. Injection and injectable bags, we just increased our capacity. And that that's untapped area for us. We are still smaller player in injectable institutional marketplace.
And we, with the new addition of the capacity and we already have our R and D capabilities, we are we already launched certain key products in injectables. We look forward to launch more products in injectable as well. So this migration drives for the more durable and high margin, launches. And what our goal is to every one of you know that the generic industry, have the we we have the competition every year for our existing products. We have certain price erosion.
To offset that, we must come up with new product launches. This pipeline, just like in the past, Demneel's track record as you saw, allows us to not only offset those pressure, but allows us to grow substantially in genetics business from where we stand today moving forward. So very exciting mix, excellent scientific talent, and, the team is delivering. We filed 30 products in 02/2020, and we look forward to do this similar number, but most of them are high margin products and different dosage forms. So we have rationalized the portfolio to go for the more more and more complex products.
Moving on to slide eight. I will quickly walk you through injectables. We expect about 40 products to be launched. Ophthalmics, have a pretty much entire portfolio of branded products in generics, which is 10 plus expected to to launch as well between 2021 and '25. We already launched some products.
There are key products coming in 2021 as well. Inhalation, three to five launch is expected, '21 to '25. One is more likely to be in 2021, and we're very excited about it. On the right side, biosimilars, we have three pipeline products. Two are pending with FDA, Avastin and I'm sorry, Neupogen and Neulasta.
Avastin is being filed very soon. It's at the final stage of, compiling the application. So very excited. It's a different strategy on biosimilar. We are coming from behind.
We did not want to invest initial hundreds of millions of dollars in biosimilars, so we in licensed the products. The new FDA guidelines and analytical methodologies allows the new biosimilars to be developed for The US market within 30 to $50,000,000, unlike 100 and 150,000,000 before. So this allows us to be investing in more products going forward, in license those products. So we're sharing the risk and build the portfolio over five years, and we will become a material player in biosimilars. Marketing, we are well set.
We know the touch points where these products are sold. Many of those players, we interact with them for many years, last fifteen years. So it's we got multiple things to offer. We're not a single or double biosimilar product company. We are here to stay.
Quality, we are always pride ourselves. We are the number one quality company in our industry. Same way we are going to be number one quality company in biosimilars. So with that and using our specialty marketing team as well, we are well set to launch biosimilars product. We're very prudently.
We're not rushing because as markets are shifting, more people are experiencing biosimilars and the update is happening. It is more market share to biosimilars are going. We expect that to go even more. Competition, there will always be three to five players. The first movers will have advantage, but the third, fourth, fifth players will catch up to certain market share.
And pricing pressures would continue on in biosimilars. Not like generics, but it will it will come as four, five players are actively marketing their products. Moving on to nine, I already covered the Fosun partnership and other we are evaluating. I also covered the channel expansion in government business and unit dose, which we'll be launching this year as well as we have the entire portfolio of liquid Rx products. I want to now focus on specialty.
In page 11, our current products are doing really well. We're tracking right to read to be 150, 160,000,000 annual revenue products, net revenue, and unit growth is growing growing to be 60 plus million as well. We have a two advanced existing pipeline, IPX two zero three, where we expect the readout in September or say, let's call it the third quarter next year. And K127 follows after that. Very exciting data for IPX203 we have seen in phase two, which I'll share with you.
With Kashyyyu Specialty Pharma, we have expanded our pipeline and added two more advanced programs, k one one four and k one two eight, which I'll share more information about. So let's talk about on page 12, advancing over IPX two zero three. So phase three readout, as I mentioned, is third quarter this year. And we we plan to file in '22, launch in '23. This is speaking with KOLs, they're very excited about this product and what we bring to patient and our commitment to Parkinson patient to bring more innovation continues on.
This is two more hours almost providing a good on time and up to eight hours relief. It is remarkable for them. It's two to three times current IR. They fluctuate, go up and down. This product is even better than Rytary as well.
So providing a good on time and on without troublesome dyskinesia for almost two hours, that's remarkable for a PD patient. And it's pretty large. Unfortunately, there's a million patient already in the country living with PD and sixty thousand being diagnosed every year. In our, right to read, we already have the touch points with the commercial side from our payers as well as the KOLs, and we listen to them. We we take everybody's input and develop the product that really meets unmet need.
On page 13, this is a myasthenia gravis product, orphan disease, sixty thousand patient or so causes excessive drooling eyes and other muscles in the face. There is the current treatment is, again, it's outdated. We use our Kashi technology, GRS technology, to provide twenty four hours symptomatic release. And so the absorption is better and the the variability has reduced as well. Let me talk more about Kashiv transaction on '14.
So Kashiv specially formed MyAmneal has a relationship with them since 02/2011. They developed for Amneal key generics products. Those products like Ylurine, Uofem, Agronox, and there are bunch of more key products that came from Kashmir platform. This team came from Roche, New Jersey site when the formulation team, and it sits in a Bridgewater excellent r and d site, which they acquired from Sanofi. And it also has a specialized manufacturing capabilities, all GMP.
They it it it only brings the complex generics, but it brings the two key advanced technologies and two pipeline assets, and there are several several assets at the early stage as well. So on a strategic rationale, history of successful GX r and d collaboration, right, the it derisk the deal because we are getting benefit of $15,000,000 royalties that we used to pay to Kashyy for their generics product. We no longer will be paying, and all future generics products are royalty free as well. It advances our strategic goal of growing our specialty pharma, and we are very keenly focused and committed in that business. A nice thing about where we are focusing are those products are five zero five b twos.
The development cost are 30 to $60,000,000. The time frame is a little bit longer than complex generics, and the revenue potential is 100 to $300,000,000. So this sweet spot, only certain spec pharma companies play. The big pharmas don't most of the time and biotechs don't. So it leaves a there are a lot of molecules which were designed so poorly twenty years ago, thirty years ago using the latest and greatest technologies that we have.
We can meet a lot of patients' need and what KOL's been asking for for a long time. So very excited about the Kashi transaction and the entire organic engine it has created in specialty products is just outstanding. Timing on page 15, we would it's closing is expected in 02/2021, and I'm sure you have read the the terms of the deal, 70,000,000 upfront and 30,000,000 at January 2022. I'm mindful of the time. So on page 16, talks about the expansion of the pipeline.
Two more products added, one in endocrinology. We're very excited about the t three products in hypothyroidism. It's again, Cytomel is an old product, a lot of uneven peaks. This removes that, provides twenty four hour proper absorption, and and the levels which would substantially reduce the side effects as well. At page 17, we talk about more about these products.
We myasthenia gravis sixty thousand patient. The the k one two eight, which is for sialorrhea and movement disorder is about one point two million patient because dystonia could be another indication as well, as well as PD patient also uses that. And as you know, the hypothyroidism is a big issue. It's almost, twelve million patient, but twenty percent of them are on t three therapy, which currently is older technology and older formulation. So excellent opportunity for us.
I'm not gonna go with more of technology. I can take it on q and a since I'm running out of time. But the GRS platform is very exciting platform. And on a q and a, my brother, who's also cofounder and co CEO, will explain more. He's very excited about these technologies and very knowledgeable knowledgeable about it as well.
On moving on to already mentioned the complex GX in collaboration with Amneal. Deal rationale rationale, I've gone through it on page 20, and I want to focus on page 21. It's been a remarkable year. We grew our revenue almost 20 plus percent, and these are mid level of guidance. We haven't put out the final results out there, but it's it's closely aligns and 25% plus EBITDA growth.
Then the key thing is leverage. Leverage is going down to almost below 5.5, 5.4. We will end up around this this year, which we are very focused to to to reduce the leverage going forward. So very excited about the 20 where what we produce, but the 21 also, we have a good growth story coming up, and we'll be sharing that on our earnings call. Thank you for listening.
Have a great day.
So I guess to start the Q and A, so elaborate a bit more on why Kashyyyv and kind of why now? What was the trigger for kind of acquiring versus continuing to partner as you've done in the past? How much of this was confidence in some of the branded ops that the asset brought versus some of improving margins on some of the existing partnered assets and perhaps maybe generics pipeline? So how much of each of those pieces was it?
Very good question. So Kashy was a very niche team, 75 people. We've been working together as we have this whole related party transaction. Their complex genetics platform was already mature, so it was no brainer to combine with Amneal. We were waiting for specialty platform to be mature.
They have 500 plus patient data on both technologies and and the advanced pipeline products we mentioned. That allowed us to strike a deal at right point to bring everything under our leadership as a one team. We can produce a whole lot, and and it fits the strategic rationale of Amneal to advance the specialty pipeline and specialty growth area. We see the specialty products provide us almost ten years of durability. They're patent protected, and we have the commercial infrastructure for movement disorder and endocrinology to grow.
So pretty big two therapeutic areas, two technology platforms, which we can apply to several other products. This is a very exciting area. People obviously big pharma is on to more NC and BLA and gene therapy. This is a huge unmet need, which we're addressing in several of the debilitating diseases.
And then, I guess, just in the context of the transaction and just in general, the leverage profile, how comfortable are you with kind of the leverage that you'll be having kind of exiting the year? How big of a priority is reducing outstanding debt? And then as well as what does this mean for kind of future business and kind of using balance sheet capacity? And how should we think about future transactions?
Excellent. So I have our CFO online as well. So Tassos, would you like to take this question, please?
Sure. Thank you, Katerina. So we've delivered substantially. So we think we're going to finish 2020 at about 5.4, 5.3 x net debt to EBITDA. A year before that, we were over 7%.
And that has happened because we have been thoughtful in terms of increasing the operating performance of the business, number one. And number two, in terms of the business being being at, substantial amount of strength. So it doesn't require a substantial amount of cash to be reinvented into the business. So we're at scale. So our priorities right now, so this in 2020, we probably will generate a couple $100,000,000 of operating cash flow.
So that's substantially ahead of the $2,000,000 we generated a year before. So I think that gives us enough financial flexibility to a, invest to drive organic revenue growth because we don't believe there is anything that drives shareholder value creation as much as organic revenue growth and then to allow us to do thoughtful acquisitions in the area of specialty to drive long term EBITDA. So right now we're not looking to delever or start paying down debt for a couple of reasons. Number one, our debt is at pretty good rates. Number two, it doesn't come to fruition for another a little over four years, so it gives us enough flexibility.
So driving organic revenue growth and thoughtful acquisitions would just allow us to delever and reduce that net debt to EBITDA, below 4x. That's what we're trying to get.
That makes sense. And then looking back in 2020, you've made a lot of progress in recapturing kind of share for the base business. You've had some issues with that in 2019, and you've done a lot of progress in 2020. So as we think about going forward 2021 and beyond, is there any more of that to be done? Or do you think that you've kind of optimized the base generic business and operations to the most kind of extent that you think you can?
Good question. As we have a broad portfolio, we're still looking at the products as we are bringing them in house from contract manufacturers. There are opportunities to grow business. We enjoy tremendous relationship with with our partners, our customers. So with and with our quality track records and supply track record, we keep getting more and more business.
So we still have opportunities, not as much as we had it last year, but there is still some opportunities to keep growing the base business and and launch new products.
And as we think about you getting to kind of like the 40% target for the generics, gross margin target for the generic segment, how much of that is going to be what you just outlined versus how much of that is you launching some of these you know, higher margin complex opportunities?
It's a mix, very hard to describe, but new product launches typically have the highest impact on margins. And our operational efficiencies that we are gaining by additional volume also helps us expand the margins. So it's a mix of and bringing in house the products in house also helps. So we're now shooting for higher than 40. 40, we are almost there.
Gotcha. Gotcha. And and then I guess just, you know, COVID nineteen obviously has had an impact on, you know, all sorts of businesses, yours as well. Just talk about, you know, what impact that has had kind of, like, on the company in 2020 and then the year over year comparison as we think about both, like, the 2021 and then maybe the second half as, you know, as economies reopen and things like that, just kind of the ups and downs of that?
I think two impacts. One is people impact. So we operate in New York, New Jersey, and India, which were hit hardest by the by the COVID in May, June time frame. So we had to work around that. We took a lot of safety precautions, so we're good as far as our employees are concerned.
It then opened up in July, August, so we we weathered through that storm of of capacity and building more inventory or meeting demands. So we had certain back orders in May, June. Now we have reduced that drastically as of December. The second impact was all the acute procedures. Those those were reduced, the the physician visits and other the the procedures, which were voluntary procedures that were delayed.
So the demand we saw about 8% softening in May, June, July, August started coming back, and now it's even higher than the previous year. So it's normalizing in in in that aspect as well.
And then just to kind of pivot to some of the growth opportunities. You often talk about biosimilars as an opportunity for Emil. So I guess just elaborate a bit more on the role you see Emil playing and as well as your outlook on the broader biosimilar market. There's, you know, there's this debate going on in terms of, like, this as more and more people enter, does this become genericized over time or and kind of profits get competed away, or is it like a quasi branded market where, you know, you need to have, like, the sales reps in place and things like that? Just your view on kind of that both the market the market overall and as well as the meals roll in it.
Excellent. We're learning as everybody else as the market is maturing. So definitely, it has matured, and it will mature even a lot more in coming years. First, let's start with regulatory. FDA is is providing a lot of guidance and interactive meetings where you can double up the product without going bankrupt, without using $200,000,000 for development.
So now the players will come. The intent for biosimilar was to bring affordability. So we see it is the manufacturing is a huge challenge. Obviously, you the quality, consistency, all of those things are higher, barriers, than the even complex generics. So we don't see this getting exactly like complex generics market because nobody can afford it even though it's still going to cost $30.40, $5,060,000,000 depending on which biosimilar you're developing.
Even if you start now with the new guidance, new understanding, less burden on clinical trials. It is quasi specialty today where there are sales touch point. As doctors get more comfortable with, it it is more of a comes to the negotiating play with PBM insurance companies, wholesalers, this the typical stakeholders that we dealt with in generics, we will be doing it the same way now. Certain biosimilars fall under retail retail market, so we have to deal with PBMs more and retail side of the business. Certain biosimilars fall under buy and bill.
This is oncology driven biosimilars that where you have to deal with oncology practices less with PBMs and more with insurance companies. So that the whole dynamic is playing out, but that the end of the day, logically thinking when four, five competitors come for the same products, it doesn't it it's not protected. You will have downward pressure. Yes. First one, first second one will have advantage, but eventually, market is going to remain competitive, but good market.
It is because so many biosimilars to be launched over next twenty years. So we're very excited. We want to play smart. We will come from behind, which we are doing it. In five years, we become a very meaningful player.
This is what we said about genetics back in 02/2010, and we did it in 02/2015. So same strategy we're applying on biosimilars. We're very confident in launching biosimilars. And our partners are making it in America and Spain, so we're we're in good shape.
Good. Good. And then on VASOSTRICT, I just wanted to touch upon that because I know that there's an I think a court case coming up in February around the IP. Just how should we think about that opportunity for Emil? Yeah.
Anything you can comment on kind of the VASOSTRICT opportunity?
It's very hard to comment on actively litigated cases, so I would pass on. It's, it's February 1 since the the court date starts due to COVID. It was there by a couple weeks, so we'll wait and see.
And then heading into 02/2021, any any kind of, you know, bigger launches that you would highlight, you know, kinda similar size to, you know, NuvaRing and some of the other kind of big ones we've had in 02/2020. Anything I know from a competitive reason, you probably don't wanna say too much, but anything you can say in terms of the 02/2021,
want My my I'll pass it to Chintu.
Yeah. Hi. Good afternoon, everyone. Yes. I mean, we are excited about our upcoming launches in 02/2021.
Not saying the timing because of the competitive nature, but we have good high value seven to eight product launches in 2021. We just launched generic Zydia, so it was a two player market only. A very good opportunity for us. And overall, I think we are comfortable around 30 new launches, 25 to 30 new launches in 2021. And then we'll continue, and we are we are refreshing our pipeline.
So, yeah, this is not an end of twenty one. Every year, we'll be able to bring seven, eight high value products in a different in a depreciated dosage form. So we are very excited about the pipeline short term and long term view and the launches, and Amneal has the best track record from approval to launch. That's something we have done. You know, Nuari is a perfect example.
Manufacturing, everything is ramped up, all the automation, and we are consistently supplying in the marketplace.
And then just to kind of on the back of that, like, on r and d priorities, it does seem that the company is increasingly, you know, focusing in on the, you know, complex generics or some of these, you know, branded opportunities. Is the is this kind of like a matter of just, like, reallocating kind of, you know, spend, or should we think about kind of like an increase, you know, plans to kinda, like, increase r and d kind of over time as you're kinda developing some of these, you know, kind of higher value opportunities that probably also kind of require additional investment as well? So how should we think about that?
So good question. So r and d spend, we are really highly disciplined. We are, you know, staying in the ballpark that which we have discussed before around hundred hundred sixty to hundred sixty five. We are just reallocating our r and d spend from generic to branded. We are focused more now on a, you know, not the volume number of products in generics, but the real value.
Plus our understanding and learning and our teams are aligned so nicely on generic where, you know, we have the speed in development, which brings the cost down. So we are staying within our guidelines of the total spend. We are just reallocating and reshuffling the the spending, the bucket of more towards branded and over period of time, you want to get to 5050% allocation in our r and d spend.
So it's a branded it's five five b twos, and the generics platform is very matured and very targeted now. So we would we're reallocating certain dollars to specialty pharma.
Gotcha. Gotcha. And then so I think my last question. So generics, you know, outlook, I think over the past, you know, several years, you've seen some companies, you know, kind of either scale down their US footprint or just kind of, you know, pivot away from the market. So how do you see, you know, the market kind of evolving over time just, you know, five, ten, fifteen years from now?
Just just where do you see the market going and kind of your views on kind of The US generics market overall?
So US generics market is here to stay. Without us, there is no affordability. We provided more than $2,000,000,000,000 as a industry savings to the American people, and there are plenty of products coming in. And we do consider the injectables are obviously generics. So as biosimilars are similar nature, they're generic.
So it it it would grow depending on US government, certain interest and initiatives after the pandemic of reshoring manufacturing for essential drugs back to America. It would make a huge impact on how the industry evolves going forward. We believe that is must for the nation to have certain capacity in The United States in case of pandemics or other emergencies or wars. You never know. So certain manufacturing, certain APIs of antibiotics or certain other key antivirals or even more biosimilars manufacturing should be in The United States.
So in case of emergencies, it can be searched capacities built already. So we have supply security, and we bring back the talent, organic chemistry, all the other talent that we've been losing left and right. We need to bring it back and create many jobs as well. And I'll sound like a politician, but in both sides of aisles is supporting this, bringing back manufacturing to The United States. So we see a very bright future for generics regardless, in coming years.
This is a highly highly, complex business made simpler by just the force in the market. When you have 50 suppliers and three buyers, it's not gonna be equal footing. So
Great. Awesome. I think we're just right out of time. So thank you so much for the time, and this was this was very informative. Thank you.
Thank you very much, and have a good day.