This other seat would be better.
Huh?
Either is fine.
This one?
I think the close one.
Okay.
Hello, my name is Adam Reinecke. I am a member of the Large Cap Biopharma team here at Wells Fargo, and it's my pleasure to host Amneal Pharmaceuticals. I have joined with me, Chirag Patel, CEO, I should say, co-CEO and co-founder, of Amneal Pharmaceuticals. I'll hand over to him for introductory remarks. The format will be a brief slide presentation, followed by a fireside chat.
Thank you, Adam. Thank you for inviting us today here. Glad to be here in Boston, and such a great venue, casino, and healthcare, v ery nice. So a bit about myself, co-founder, co-CEO, started the company, Amneal, with my brother and father back in 2002. Humble beginning, and can't wait to tell you the story. So let me walk through the few slides before we go on Q&A, if it's okay with you.
Yes, that sounds good.
All right. So here is, we are all aware of the macro trends, what's happening in the world. The global population is aging. Need for affordable medicines are the most, especially the complex medicines, which are not many manufacturers. People do get confused when they think about affordable medicines, generics. There's so many suppliers from India, but not for the complex medicines, and that's exactly what we're going to speak today, and need for consistent supply. You have seen shortages, more than 100 shortages in the most advanced country like America. So we are very well set to deliver f or these macro trends, trends for United States as well as globally. And being a U.S. company, it's much easier for us to go downward to the rest of the global markets, and that is what we are doing as well.
So let me walk you through how we are positioned to deliver on this. It's a great business to be in, affordable medicines, and I'll show you how big it becomes over the next 10 years. Here is what we have accomplished so far. This is, we're a well-diversified company. We have worked very hard over last six years to diversify the company from just being a simple generics company, to now, playing into biosimilars, injectables, inhalations, ophthalmics, taking the company globally, introducing, we just introduced three biosimilars, s pecialty products, which we are very proud of, have a direct distribution capabilities as well, to take out the middleman, so it's more margins for us.
You can see the snapshot we have achieved and what we are about to achieve in next one, two, three, four, five years is tremendous. It's sustainable growth and substantial growth. So let's walk through each key area before we go with Adam's on a Q&A. He has excellent Q&A. Here is the first major part of our business. We call it Affordable Medicines, which includes generics, biosimilars, and injectables. The generics products that we sell to Walmart, Walgreens, CVS, we're number four in the nation. That market is about $25 billion in the United States alone. It used to be much higher. Due to the competitive pressure, it has been reduced. We are 5% market share in that market, well-diversified and mix of products. All dosage forms allow us to keep growing in a highly competitive generics market.
The injectables, we're a smaller player. We do about $180 million, and our target is we go about $300 million in 2025. We are well on our way, and that market is total $12 billion, and so we have tremendous growth left in injectables. We are introducing 30+ products on top of 30 already launched products, and we have capabilities for producing bags. We just got approval for electrolytes, two of them. four more are coming, another 10 are coming. These are the products you read in the newspaper that are always in shortage, because not many companies making electrolytes. It looks simple, but they're not making those bags, so we purposely are driving about. W e're working on 28 shortage products out of 97.
So we're doing our part to alleviate shortages in the United States, and we're proud to do so. And biosimilars, it's today is about $4 billion to $5 billion market, and it's becoming $25 billion to $30 billion by 2030. We have invested in all these areas over last 10 years, and this is why we just launched three products, commercially, very well set, and we're now seeing the benefits. So about $200 million in peak sales. A lot of room to grow in biosimilars. Our stated goal has been that when you combine retail generics, injectables, and biosimilars, and we are terming that as Affordable Medicines Group, globally, we like to be number one in the United States, and I think we have a pathway to get there. Today, that business, I'll walk you through, about $1.5 billion and growing.
So it's not a declining business, it's a growing business, and you can see why it is growing business and the need. Remember the macro trends, why these are very important business for the American patients. Global citizens, they can't afford these medicines, and if they can't afford it, what's the use of innovation? And that leads me to our second business, which is specialty. We call it affordable innovations. The innovations have to be also affordable. This allows us to have a platform. The specialty business, we do about $400 million in sales. We have a leading Parkinson's drug, one in pipeline, which we expect the approval soon. We're aligning with FDA in early October, first week of October, and we should expect our IPX203 to be approved soon.
These are, and we'll cover in Q&A, affordable innovations, which are going to be needed more and more. If you and I'm sure people wonder, how can you manage with only $160 million-$180 million R&D budget? But this is exactly our roots, and generics help us do the affordable medicines. These are reformulations, so they're not NC. So we do not need to do the full-scale tox studies and full-scale clinical studies. And reformulation, some of the products are great. All GLP-1s are reformulation. They started with Victoza, and today they are the world's largest category of drugs. Whether it's Lilly or Novo, they all reformulated from once a day to once a week, and it's extended release of GLP-1.
That's where they again play around with the strength, and they make it from Victoza to Ozempic, Ozempic to Wegovy, and same thing with Lilly, and they added one more hormone as well. Excellent pipeline. This is obviously high margin portfolio, as well as more sustainable. And these products also are needed in the global markets, because Parkinson's patients suffer through the off episode. You have to live in their lives and I've met hundreds of them. They go off every couple hours with the old technology products. It's 1985, the drug was introduced, so the IR product is the plasma concentration, lasts very short time, so absorption is not properly done within the GI tract. They get off time.
Off time means they cannot do activities, they can fall down, they cannot eat properly. Somebody has to feed them, even if somebody's feeding them, there are motor fluctuations. So our product, Rytary first, made that lasting longer, the good on time, about five to six hours. IPX203 takes it to six to eight hours. Somebody can say, "What? Couple hours make a huge difference?" You just ask the Parkinson's patient and the providers. They, they'll tell you, all the movement disorder specialists, that how important it is to have that. And they're asking us to do, "Can you extend it to once a day?" Which we're working on it, but we are not able to talk about it yet. So this platform allows us to do more of affordable innovations. And it’s incremental, one at a time.
Reformulation, then we go to the GLP. I mean, sorry, we go to the next generation of products, which could be pro drugs and others. Our distribution business is 20% growth. This is where we take the middleman out. We do not need to distribute our products and pay hefty fees to McKesson and ABC, even though they're our friends. We can distribute directly, and especially to the government, where we're a U.S.-based company, and the only one left with manufacturing in the United States at this scale, and the highest quality, obviously. We supplied, proudly supplied to VA and DOD, and we're supplying more and more products, and we're proud to say that VA and DOD supports Made in the United States products, and we do need to save certain manufacturing capabilities and capacities in the United States.
So excellent business. This acquisition has worked out really well. Here is what we have done. The growth is double- digits. I know we haven't been recognized for this, but I think it's about to change, and we expect the accelerated growth from here on, more than what we have achieved because of the transformation that took place, the deep pipeline that we have, multiple products in multiple areas. Global entry now, distribution business, specialty biosimilars, allows us to grow tremendously. And we invested last three years in our commercial infrastructure, our biosimilar in licensing. Therefore, EBITDA kind of was stagnant for a couple of years. Now it's growing 5% this year or more. We expect the double-digit growth going forward. So this is excellent. We're very excited.
The entire company is very excited, and there's a lot of room to grow. It's not, people do talk about that, what happens to your old products? But if you can see, old products are still staying there. It used to be $1.2 billion, now we do about $945 billion. So it doesn't go to like half of it. It declines, but not at the level that what we had seen previously. And just summary, these are the various businesses that I summarized, so you can see how much growth we have in retail generics, injectables, biosimilars, international and retail generics. We are number three in the United States and growing rapidly. Injectables, we are behind. Our position is top five. Biosimilar, we'll get there in seven to eight years as well.
International, we're getting and when you start with USFDA, the marquee agencies are much easier to register in Saudi Arabias or the Brazils of the world or anywhere in the world, even European agencies. And we are taking all our complex products to the international market. So you can imagine the growth. And these are all incremental growth. It's not new innovation. It's already done in the United States, taking it out in the other markets to further diversify away from just the U.S. market, which is, by the way, the best market and the top market. And specialty and eye care I touched upon. So it's pretty simple propositions, that macro trend are with us. We have, u ndisputedly, we are the number one quality company and number one in supply, which is, we're very proud to say that.
The 100+ inspections with FDA and never had any issues, so that no other company at this scale can say that. And we're proud to, to have that culture in the company. So that's my last slide, Adam, and now we can, I'm sure you have great questions.
Of course. Thank you for the business overview, and now we'll move to the fireside chat. Maybe you could just start off by giving an overview of the generics business and how it's different from the broader industry, and that you've been able to grow over the past three years.
That's what I touched upon. It's mix of our products. We have every dosage form, so we have invested over time in transdermal products. So we have eight transdermal products. So we have inhalation products, ophthalmics, injectables, nasal sprays, liquid products, so every t opicals. So every dosage form we have invested, which allows us, and very robust R&D engine, allows us to keep launching new products every year. About 30 new generics products we launch every year, and many of them high value. So that allows us to be differentiated. We're the only company that grew over the last five years in generics because of those reasons, and on top of that, do not forget, the best quality and consistent supply.
We are always ranked, if you ask CVS or Walgreens, "Who are your top suppliers?" It will rank right into number one in most of those buyers.
What drives the focus on complex generics and how does that kind of impact the business profile?
Since 2010, we started focusing on complex generics, so we build this platform. And why? It is because it's usually there are somewhere between three to five competitors in complex generics in each molecules that we enter. When we talk about regular generics, you could have eight to 10, and that changes everything. And the minute you go above five competitors, the margin profile, gross margins, could drop down to 30%, and it can go down to 25%, 20%, and you lose in revenue as well. The complex products we have seen over the years staying very steady. We make a lot of money in the beginning when the somebody. We have a lot of products first to market.
Somebody else enters, we go down, down, but still it's a high profitability, over 50% gross margins, and we sustain certain tail revenue going forward. This is why complex generics. And only 10 to 15 key players play on complex generics, versus 50 to 70 players are in commodity generics. So we're just going away from commodity generics. We've been going away, and our focus is less. There are enough suppliers for commodity.
Great. And then just thinking about how, you know, the diversification of the generics business is, how does that kind of compare to other players? And you already touched on the durability aspect, but just want to understand if, you know, you think about life cycle, or is it really more just driving the right new products within your generics mix?
It's a growth. So it's launching 30 products. We know we used to have last five years been ugly in generics industry. It was 12% to 16% price reduction. Now we are seeing half of it, which is huge pickup, just because everybody hit the bottom as they can, and there's no more room to go anywhere. As well as the Indian players and Chinese players figured out something else to do with the higher margin products, supplying to Europe, supplying to South America. They're making more money supplying to Middle East or India by itself. So U.S. market is, and also these consistent supply issues have started happening, so it's stabilizing. So it's a growth area for us, and then if you include injectables and biosimilar, it changes the entire game.
So the entire affordable medicines going from $1.5 billion to much higher level over the years. Of course, we see that.
Thinking about ophthalmology as an area that may be getting increased focus at Amneal, can you just talk about how your manufacturing competencies may support your decision to move into that area that has a lot of safety and a lot of, you know, challenges to making sure the product is just right?
So Amneal is known to do the most complex things, and that's the key differentiator. The most complex products, we do it. There are very few players. So it's investment over time, so it doesn't happen overnight. And we like to control our destiny, so we have our own manufacturing, our own quality system, so we do not rely on CMO on our key products. They're made in-house. So we margin benefits are there, as well as sustainability in the market. We control our quality, so we're proud to bring the entire ophthalmic portfolio. When we go in, we go in full force. This is why injectables, the market has seen about $150 million-$200 million so far, but that, the pipeline with 19 production lines now, four plants, the fifth peptide plant is about to come online.
It's tremendous capacity. If you just see the competitive, Hikma in the United States doing $1.1 billion-$1.2 billion with that kind of capabilities. So we got a lot of room from $150 million-$200 million to grow our injectable business. As I said, when we enter into something, we enter in full-fledged, and we have so far the track record of delivering the best in the entire industry.
On that note, you talked about having a presence in inhaled products already, but you recently had a new plant in Ireland. So you could just talk about that as another avenue of growth that you are going into as well.
We love our Irish plant. It's just a great people there. We have a team of about 100 people right now. We bought this plant from J&J, and it's excellent plant in Cashel, Ireland, and it's dedicated to just make MDI and DPI products. So this is another big differentiator with Amneal. And you can take any company, I don't care if you take Amphastar or this, we got the width and breadth that nobody has. So making, w e file ProAir, QVAR, we got the more MDI platform products coming up, DPI coming up, Respimat coming up. So we got the full line of, inhalation products, and it's just not just for the United States, we're launching it globally, these products.
That plant, we're very excited that it could generate tremendous revenue, part of the affordable medicines.
Very good. Maybe just moving to biosimilar.
And by the way, inhalation is, as an area, it's growing because the pollution is so much globally, so people are having asthmatic, more issues, so you have more need to supply globally these products. And they're now made much more affordable, right? It used to be $75, $100 the patient would have to pay. Now it's $10 copay, where the generics are being sold at $20, $25. So this is why more access is there.
Great. And then just thinking about biosimilars for a moment, what do you learn in the early launch of your oncology products into, you know, really being able to execute those products and see a successful launch?
So biosimilar is a big area. This is equivalent to retail generics, which took 30 years to become $25 billion industry. Biosimilar is taking 10 years to get there, $25 billion to $30 billion by end of this, this decade, 2030, just in the United States. The global market would be another similar amount or more, so it's $70 billion-$80 billion global markets. And as you see, all these products are biologics-driven, whether it's Novo's GLP-1s are all recombinant products. A ll the oncology products, many of them, the immunology products. So tremendous market is being developed, and it obviously takes time, FDA, and we've been investing since 2013. We're early investor in all these technologies, which sometimes it's good, but you have to wait for it.
By the time we got returns, it was like eight, nine years. So we have, we have long-term strategy. It's huge market. It's oncology, immunology, the buy-and-bill, there's a separate model. Humira of the world is a separate model, which is controlled by PBMs. Both have benefits and advantages, disadvantages. We like the buy-and-bill model at this point, so we're in licensing more products on oncology. We have excellent commercial infrastructure set up. We got more market share and compared to Pfizer, which launched second Avastin, we launched third. The first six months, what they did, we did double than them. So we are more hungrier, we are more focused, sharper, and we have a culture to win, and we use all our relationship and our name, quality company, and they can trust us.
So we get tremendous response from whether it's our friends at ABC, McKesson, or oncology practices. We start meeting them. They like us because we are good partners with them. So One Oncology, Florida Cancer, so that so many customers, and then a hospital is by itself a big segment within that. And need for affordable medicines there is so huge. I mean, I don't know if you know the stats, but half of the cancer patient declared personal bankruptcy because of drug cost.
So you touched on that, you know, biosimilars may be an area of interest for bolt-ons. Is that really just kind of hitting on the same threads that, you know, it's the reliability of the manufacturing, having steady supply that can really differentiate some biosimilar manufacturers from others?
That's just completely different. The Biologics manufacturing, only 10 to 12 players are serious. Many have been weeded out, and I can walk you through. So this is, y ou can't compare with the Generics business, small molecule, you cannot, or even Injectables. The Biologics manufacturing, it takes, for one molecule, five, six years. It used to be seven years, now six years. We're working on to make it five years. Used to take $150 million-$200 million, now it takes, for us, $75 million or so in each molecule to bring to the market, which is probably the best cost structure right now we have. Exciting pipeline, so that the manufacturing, the investment in R&D, it is so complex that, and then now we have bi-specific.
So it is the next generation of maps, where you have two monoclonal antibodies targeting. So that, those are more complex manufacturing. So this is not a race to the bottom or race to, like, 30 players will come in. As you see, more and more players have dropped because who is going to fund six years of R&D? And by the time you commercialize, you get return, those small companies are unable to stay afloat. So the only companies serious in biosimilars are Sandoz. Obviously, it's been investing since 2007. We'll see how they play out when they go on their own, which is in few months, or one month, actually. Amgen has a separate division. Celltrion and Samsung in Korea.
Biocon in India, which took over the Viatris commercial rights because it was all their products. Alvotech is a question mark. And then you've got Amneal here. Teva is all licensed in at this point. I don't think Reddy's and they have a serious pipeline. You need to be, over time, have to have vertical integration, full control, because, again, two margins, relying on somebody is not going to work. And there are not many players left to in-license products as well. Kabi will be there with mAbxience. So there's, see, I just counted seven, eight key players, and there are 7-0, 70 biologics products you can launch over the next 10 years. So it's tremendous. People are not paying total focus on these biologics.
It's great opportunities, and when you develop it for U.S., you can obviously launch globally. So it's a global development, global need.
Very good. Well, I want to move to injectables for some time, and can you just start with talking about how big the U.S. market is and how the shortages, you know, really play to your ability to, you know, grow that vertical, in that, you know, it's already something where you're adding products and expanding the lineup as well?
Yes. So injectable is always complex because of the sterile manufacturing. You see, 90% shortages are all in injectables, and different products have different complexities. And then you saw the two chemo products, which cancer products, that we ran out. United States, mighty United States. Why? The economics were misaligned. So now the buyers are smart. They're giving longer term contract, higher prices. Even FDA commissioner says you cannot sell at this lower price. It's not sustainable, which everybody knows. Economics plays the major reason. So market is expanding. It's about $12 billion-$14 billion, and long-term contracts being awarded. The quality players like us are given preferential treatments because we can supply consistently, and we have 19 production lines in four different plants. So we have Onco plant, dedicated oncology plant, and we have peptide plants coming up now as well.
So excellent R&D capabilities, excellent manufacturing, supply, quality, track record with FDA. So with that, we are very excited to make a major dent in injectable business. And also we're taking some of those injectables internationally.
Great. So you touched on that. You know, this is a really good opportunity for growth, but can you just talk about some of the intermediate term, you know, launches, the things that you're, you're adding?
Oh, yeah. We just announced this morning Calcium Gluconate, which is, we're the first to market. We got the always been on and off in shortage. We are launching epinephrine injectable ampoule multidose. So we have about 10-15 lined up over the next 12 months to launch Pemetrexed at RTU. So we also have an advisory board from marquee hospitals, and they tell us that if you can please make this product ready to use, so less error, all the mixing and everything. There's a space issue in the hospital. So we're working on multiple products. It's 505(b)(2) route, and it's more sustainability, the more market share you get. So it's creativity is there as well, not just simple generics and injectables.
It's excellent growth area with the capacity that we have built.
I want to just quickly touch on Adrenaclick. So ultimately, within the epinephrine space, you know, there's some, you know, inhaled options that are coming to market. Is that something that you see as opposed to a little bit of a headwind for that particular product o r, you know, how are you thinking about how, you know, clinicians and patients may kind of, you know, view that product?
Well, you just have to talk to 10 mothers and see if they can just keep the nasal spray or proven epinephrine injectables, which we have one-third of the market share, a little less than the one-third. But we don't see it as a headwind. We maybe expand the market because people with not life-threatening allergies may keep nasal spray. Nasal spray may act. I mean, one thing that happens when you have the shock is you have a trouble breathing, so I don't know if a nasal spray, the parents will trust to just have nasal spray. They may keep both for a while, and obviously there are a few percentages of children or patients who do not like the needle. Most of them are fine. They may go on a nasal spray out. So we don't see, major, any distraction.
Plus, the pricing of epinephrine pens have been become very reasonable. We have the most cost-effective pen in the market, so I don't know if they're going to sell nasal spray at $30 where they can make money. So that's going to play a role as well for parents. They take the, keep the EpiPen or nasal spray. So, and we'll also have our own epinephrine nasal spray as well.
Great. Last, I just want to touch on the specialty business, and so ultimately, you're thinking about how reformulation is something that, you know, you're able to, you know, really, you know, reformulate existing products and manage the R&D spend associated with those launches. I'd just be interested to hear more about the business model there.
Yeah, I had one more thing I'll cover before that on nasal spray. So we are very excited to launch this purpose-driven product, Naloxone, which is Narcan, and we have, i n one or two months, we should get the approval, and we have built the capacity to produce 10 million units per year. It could go to 15. We've been urged by the government to invest, which we did. A lot of demand from state, federal to have these Naloxone kits everywhere. It saves lives, so we have done that right from Branchburg, New Jersey.
Affordable medicine
Aaffordable innovations. It's a reformulation, so we, we've been allocating somewhere between $30 million-$50 million per year. Generic spends is less, and we can do it because the way we are building infrastructure and we have developed the technology in-house for reformulation. So it's a gastric retention system.
It's a slow release of the product over time, and we're able to manage through that, three to four products per year we are working on, and it takes several years to get to the market. If we expand into pro-drug and other areas, we will expand the budget, but we'll see how we, we partner in the specialty. But I think another area that people should focus on is affordable innovations. So you can expand the population healthcare. Everybody talks about rare diseases and oncology, but that's fortunately only happens, unfortunately, 3% to 4% of the patient. What about 95%, which is the diabetes, obesity, cardiovascular, and all of them requires affordable innovation, so you can provide to more people all over the world.
Great. Maybe just end on a high note. So IPX203, ultimately a little bit different approach to formulating carbidopa/levodopa. Just quickly talk about why you're excited about that and how, you know, it could perhaps, you know, have more value in early Parkinson's.
Yeah, so it extends the good on time by very significant number versus IR and significant over Rytary, and the dosing conversion is much easier. This is why Rytary, there are 4.5 million scripts total, and Rytary only has 260,000. So we're going to go after the larger market, and only the adapt, it's more or less episode. We do not know. We'll be conducting and seeing more data, that if we have some data on Rytary, that if they take it earlier, their quality of life is, it remains well over time. So we'll be seeing more data on that, but we're very excited to we're, we're meeting with FDA on October 4th, and we'll see how we align with them for that approval.
Great. With that, I want to wrap things up and just say thank you for attending the Wells Fargo Conference.
Thank you, Adam. Thank you.