Hello and welcome to today's Amneal 2Q 2022 Earnings Conference Call. My name is Elliot and I will be coordinating your call today. I would now like to turn the call over to Amneal’s Head of Investor Relations, Tony DiMeo.

Good morning and thank you for joining Amneal's Second Quarter 2022 Earnings Call. Today, we issued a press release reporting our financial results. The press release and presentation are available at amneal.com and a replay of this call will be posted after the call. Certain statements made on this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions, are forward-looking statements that are based solely on information that is now available to us. Please review the section entitled Cautionary Statements on Forward-Looking Statements in the earnings presentation and our SEC filings for a discussion of factors that may impact our future performance. We also discuss non-GAAP measures. Important information on our use of these measures in reconciliation to U.S. GAAP may be found in the earnings presentation. On the call today are Chirag and Chintu Patel, Co-CEOs; Tasos Konidaris, CFO; Andy Boyer, Generics; Harsher Singh, Biosciences; and Jason Daly, Chief Legal Officer. I will now turn the call over to Chirag.

Thank you, Tony. Good morning, everyone. Our solid second quarter performance reflects acceleration from Q1 as expected. Q2 revenues were $559 million, up $61 million sequentially, and adjusted EBITDA was $135 million, up $35 million sequentially. Across all three segments, we saw acceleration in performance from Q1. The top-line growth versus the prior year. The core business is strong and performing well. Since the last start of the year, there are two isolated factors that differ from our initial expectations. First, there was an accounting policy change for R&D milestone payments. Second, there was a product opportunity in Ritonavir which was expected to contribute in the second half, that did not materialize as anticipated. These items are not reflective of the underlying strength of the core business which is performing better than our expectations. In addition, despite more than anticipated inflationary pressures, especially in freight, we managed to continue to deliver efficiencies to drive sequential growth. Tasos will provide more details shortly. As a result, we are revising our full-year guidance for adjusted EBITDA. That said, we are reaffirming our full-year revenue guidance as we continue to expect mid-single-digit top-line growth in 2022. We are enthusiastic about the acceleration in financial performance we saw in Q2 versus Q1 which we expect to continue in the second half. As we launch new products in high-growth areas such as injectables, complex generics, biosimilars, and specialty, we expect to drive higher levels of financial performance and acceleration as these key catalysts are additive to our current financial profile. This month marks the three-year anniversary since Chintu and I returned to Amneal. In 2019, net revenue was $1.6 billion and adjusted EBITDA was $339 million. Since then, the team has done an incredible job reinvigorating new product innovations, improving operational execution, and driving commercial success. In 2022, we expect about $2.2 billion in net revenue and $500 million to $520 million in adjusted EBITDA and have a durable, thriving portfolio that's diversified across specialty, injectable, complex generics, biosimilars, and international with a number of key catalysts ahead. Looking forward, as we execute our growth strategy, we expect further acceleration in financial performance. The growth engine is set. Let's go through each area of the business. Starting with generics, new launches and our diversified portfolio of increasingly complex medicines is driving durable top-line performance. With our focus on complex and higher barrier products, over half of generics revenue is now non-oral solids. We see that increasing over time as currently 90% of our pipeline is non-oral solids. In terms of the total company, oral solid generics represent one-third of total revenues and continue to shrink. We expect continued growth in generics driven by our portfolio of complex products. Moving to injectables, this is the key near- and long-term growth driver. We now expect $170 million plus revenue in 2022, representing over 35% growth. We are scaling this business with extended capacity, capabilities, and portfolio. We believe these initiatives will drive us well over $300 million by 2025. In biosimilars, after years of hard work, we are only a few months away from beginning commercialization of three important oncology biosimilars. We estimate the market size for these three products based on net revenue is approximately $4 billion, of which half is biosimilars. For us, we see peak sales over $200 million plus in the next two to three years. The biggest opportunity is ALYMSYS, our bevacizumab biosimilar. From a go-to-market perspective, we are focused on oncology clinics, integrated health systems, and specialty pharmacies. We believe the key value propositions to the market are a customer-centric service model, effective business, and offering a suite of oncology products for clinicians. We are working to expand our biosimilars portfolio with additional molecules where we can be early to market and we look to be vertically integrated over time. Amneal is well positioned for long-term success in the past, growing USD 28 billion biosimilar industry. In our health care distribution business, we expect continued solid growth driven by strong commercial and operational execution as we expand across multiple distribution channels, including the Federal government health care market, our direct distribution channel, and unit dose. In international, we are leveraging our portfolio of complex generics, injectables, specialty, and biosimilars products globally. We believe this strategy will add considerable revenue and profits over time as we work with partners for distribution or utilize the existing infrastructure. In China, we expect big infomercialization of multiple products early next year. In India, we are expanding our local presence with our own label. India is a $25 billion generics market and we are encouraged by our traction this year as we begin our commercial effort in the market. Around the rest of the world, we are pursuing targeted distribution opportunities with strategic partners and we look forward to sharing more information soon. In specialty, we are driving commercial execution of our key branded products and advancing our pipeline. We expect continued strong growth from Unithroid and Rytary, as well as the successful launch of LYVISPAH for spasticity. As our pipeline delivers new branded products, including IPX-203 and DHE auto-injector in 2023, and K127 in 2024, we see our specialty business expanding very meaningfully. With that, I'll hand it over to my younger brother, Chintu.

Good morning, everyone. Thank you, Chirag. First, let me express my gratitude to the Amneal family who make healthy possible for so many. Across our global operations, we are enabling our strategy by driving excellence programs that improve operational efficiencies, maintaining a robust supply chain, and adding new infrastructure for future growth. We continue to advance our quality culture. Across the R&D organization, we are focusing our efforts and investments towards high-growth areas, particularly injectables, complex generics, biosimilars, and specialty. Let me now walk through the different aspects of our business. In generics, we are innovating in complex categories with a rich pipeline extending out for years. We expect 20 to 30 new launches every year. We have twelve launches so far in 2022, including another CGT approval with Bexarotene gel. We see a significant cadence of key new product launches on the horizon that would begin to materialize later this year and into 2023. We have included an upcoming key catalyst slide in the presentation to summarize the notable upcoming launches across the company. One of the planned launches in 2022 that we highlighted last quarter was Ritonavir, which due to sufficient supply in the market, we no longer expect to be a contributor for us in the second half of the year. Regarding the Synchron CRO issue that caused a few products to be BX rated, we are very pleased to share that two key products, Zafemy and other had their AB ratings returned this week. What a tremendous job by the team to bring resolution to this issue, and we look to have all products back in the coming months. Overall, we have 111 ANDAs handling across all dosage forms and are on track to file 25 to 30 more ANDAs this year, mainly in injectables. In our pipeline of 110 products, 90% are non-oral solid, and over 50% are expected to be first to market, first to file, or 505(b)(2). In ophthalmics and optics, we have 9 ANDAs pending and 11 products in the pipeline. In inhalation and nasal, there are 5 ANDAs pending and 7 more products in development. We expect our increasingly complex differentiated portfolio of over 275 molecules and leading commercial presence to drive consistent financial performance in generics. In injectables, we expect substantial growth as we expand our infrastructure and portfolio. Our two new manufacturing sites are coming online as planned. We expect FDA approval for our first new site in Q4, and the other is on track for early next year. In total, we look to have 16 production lines across four sites, all for injectables. This will enable us to develop new products, including LVP bags, and ensure consistent supply in a market plagued by shortages. The other key success factor is innovation. We expect 5 to 10 new launches this year and 30 to 40 new injectables from 2022 through 2025. We have 31 ANDAs pending and another 61 pipelined products. They are in a variety of complex areas, including drug-device combinations, peptides, long-acting injectables, liposomes, LVP bags, and 505(b)(2) products. With our expanding infrastructure and continued innovation, we are well on our way to scaling our injectable business to be a sustainable long-term global supplier. In biosimilars, we are launching our first three biosimilars starting in Q4, ALYMSYS, our bevacizumab biosimilar, Releuko, our filgrastim biosimilar, followed by FyInetra, our pegfilgrastim biosimilar. FyInetra and Releuko are proudly made in the United States, while ALYMSYS is already made in Europe. Beyond this, we look to further expand our portfolio and pipeline. We believe the keys to success are having the right science, regulatory, manufacturing, and commercial capabilities with the goal to be vertically integrated over time. Whether in the U.S. or globally, biosimilars represent the next wave of affordable medicines. Biosimilars align with our strategy to provide high-quality affordable medicines to patients and represent a key area of future growth for us. In international, we are advancing our strategies in China, India, Europe, and the rest of the world. Recently, we added a new international commercial business leader and now have a dedicated team and infrastructure to drive our global expansion efforts. In China, we continue to file products and look to begin commercialization early next year. In other geographies, such as Europe and South America, we are pursuing distribution strategies to drive access to our portfolio of medicines. In specialty, we are expanding our branded portfolio with several new growth drivers. As Chirag mentioned, LYVISPAH launched in June. This baclofen orally dissolving granules product addresses spasticity related to multiple sclerosis and spinal cord disorders, particularly for patients with swallowing difficulties. For IPX-203 and Parkinson's, we plan to file our NDAs shortly and expect a mid-2023 launch upon approval. We are driving our IPX-203 commercial strategy, including the coverage and reimbursement model and establishing a patient support system. For K127, for Myasthenia Gravis, we expect to file our NDA in Q1 2023 and are pursuing other indications. Our other pipeline programs are progressing very well. Beyond the currently disclosed pipeline, we plan to share more on other programs in development. We are adding new 505(b)(2) programs that repurpose existing molecules utilizing our proprietary drug delivery technology platforms acquired from Kashiv Specialty. We are very excited about the value of Grande and advanced gastric retention system and a modified release technology which we believe differentiates us in specialty and provides high-value product pipeline opportunities long term. In summary, we have a distinct and clear strategy in place across our business areas with robust growth drivers in each. As a company, we are laser-focused on execution and making progress every day. I will now hand it over to Tasos.

Thank you, Chintu. Our second quarter financial results were in line with our expectations and reflect solid top and bottom line performance and substantial sequential acceleration. Our business fundamentals are strong and while we continue to expect a stronger second half versus the first half, we have adjusted our full-year 2022 guidance. Let me first start with the second quarter, where we reported total net revenue of $559 million, adjusted gross margin of 44%, adjusted EBITDA of $135 million and adjusted diluted EPS of $0.19. These metrics were substantially stronger than the first quarter of 2022, with revenue up 12% and adjusted EBITDA up 35%. Q2 generics revenue of $365 million increased $5 million or 1% versus prior year, driven mainly by injectables, Adrenaclick, and 2022 new product launches. It is worth noting that the second quarter of 2021 was our highest generics revenue quarter last year, benefiting from timing of numerous large new product launches. From a sequential perspective, Q2 generics net revenue of $365 million increased by $47 million or 15%, reflecting growth, like before in injectables and Adrenaclick, as our global supply and commercial teams ensured solid, growing and consistent supply of these highly complex and high medical need products. In specialty, Q2 net revenue of $97 million increased $8 million or 9% versus prior year, driven by Unithroid, up 46% and Rytary, up 14%, partially offset by Zomig's loss of exclusivity. The prescription trends for Rytary and Unithroid continued to be strong. From a sequential perspective, Q2 specialty net revenue increased by $12 million or 14%, driven again by Unithroid and Rytary. Moving on to Healthcare, where Q2 net revenue of $97 million grew $11 million or 13% compared to the prior year, reflecting strong customer acquisition success in the distribution channel which continues the trend from Q1 2022. Q2 2022 adjusted gross margin of 44% was slightly higher than the prior quarter and approximately 330 basis points below Q2 2021. The decline to prior year reflects a tough comparison due to timing of new product launches, as previously mentioned. Q2 adjusted EBITDA of $135 million is nearly below the second quarter of 2021, driven by product mix and investments in our commercial teams to support new product launches that will drive future growth and diversification. Having said that, our current quarter adjusted EBITDA of $135 million reflects a $35 million or 35% sequential increase due to revenue growth and stable operating expenses. From an operating cash flow perspective, we see significant stability and we continue to generate a substantial amount of cash. During the first six months of 2022, excluding the $100 million installment related to the legacy Impax patent settlement, we generated $95 million of operating cash flow compared to $96 million in the first six months of 2021. From a balance sheet perspective, we continue to be in a solid position and I will highlight the dynamics. First, our $2.6 billion Term Loan B does not mature until May of 2025. And since half of it is already fixed, we partially expected from interest rate increases. Second, in Q2, our net debt to adjusted EBITDA rate increased to 5.4x versus 4.8x at the end of 2021. This is a temporary increase driven by capital acquisitions and the first legacy Impax patent settlement payment. Looking ahead, we expect our net debt to adjusted EBITDA ratio to resume its steady decline. Let me now turn to our full-year expectations and revised financial guidance. First, regarding net revenues, we continue to expect $2.15 billion to $2.25 billion which reflects mid-single-digit growth versus prior year. This speaks to the relevancy and diversification of our product portfolio. From an adjusted EBITDA perspective, we now expect $500 million to $520 million compared to our previous guidance of $540 million to $560 million. This update reflects two unique factors which do not impact our long-term strength. First, last quarter, we shared with you that Ritonavir was expected to be a key growth driver for us later this year. However, for reasons of adequate supply in the marketplace, this launch has been delayed. And while it may be a growth driver in 2023, it represents a shortfall to our original expectations. Second, last quarter, we also shared with you an accounting policy change as we no longer exclude R&D milestone expenses from our non-GAAP results. This change is consistent with similar policy changes across our industry. Our updated guidance now includes $15 million of such payments and by nature, this change does not have any cash or economic impact. Finally, similar to many other companies, we are experiencing higher-than-expected inflation and foreign exchange headwinds, headwinds which we have been able to offset by various operating expense reductions. Our updated adjusted EBITDA guidance of $500 million to $520 million is about $40 million below our original expectation. It's important to keep in mind that this is in line with our 2021 actual adjusted EBITDA of $512 million and substantially ahead of 2020 adjusted EBITDA of $433 million. The substantial growth over time reflects the invigoration of our top line, solid performance of tuck-in acquisitions, and numerous expense reduction efforts. Let me now move to adjusted EPS, where we now expect $0.65 to $0.70 compared to previous guidance of $0.80 to $0.85. This update reflects this change in our adjusted EBITDA and higher interest expense. From an operating cash flow perspective, we now expect $200 million to $225 million, about $25 million below our original expectations. These amounts exclude the anticipated cash payment this year of $131 million related to the legacy Impax legal settlement. As you may recall, from the 8-K we issued mid-July, we were able to settle this legacy Impax matter for about $265 million. From a timing perspective, we paid $100 million in the second quarter. We expect to pay $31 million in the fourth quarter and the remaining $134 million split over 2023 and 2024. This settlement results in a substantial overhead in a fiscally responsible manner without material impact to our leverage ratios or long-term strategy. Our updated full-year guidance implies a financially stronger second half of 2022 compared to the first half, albeit lower than our original thinking. This growth will be driven by three factors: first, strong underlying demand for key growth brands such as Adrenaclick, Rytary, and Unithroid; successful resolution of the AB Synchronite; second, multiple new product launches such as LYVISPAH, biosimilars, and numerous other ANDAs; and finally, favorable manufacturing overhead and operating expense actions. Looking beyond 2022, we believe that the actions we have taken in the last few years to turn around the financial performance of our business, along with substantial investments to reinvigorate our pipeline and competitive acquisitions, bode well for sustainable growth and diversification. Specifically, in the near term, we see the following key four catalysts for growth: first, we have our three biosimilars launching with expected peak sales over $200 million; second, injectable revenues are building each quarter from $39 million in Q4 2021 to $52 million in the second quarter of 2022, and we now expect over $170 million in injectable revenue this year compared to $127 million only two years ago. We're well on our way to our goal of achieving over $400 million by 2025; third, there are several high-value generic launches over the next year; and fourth, specialty revenues ramping up with the expected IPX-203 launch by the middle of next year. For Amneal, it all comes to execution around our key success factors and continuing to move the product portfolio towards more differentiated, high-growth areas. Let me now hand it back to Chirag.

Thank you, Tasos. Even with our revised full-year outlook, we see tremendous momentum across our core business. Q2 accelerated versus Q1, and we expect key products and new launches will drive acceleration in the second half. After that, a robust lineup of key catalysts in high-growth areas is upcoming, and we expect these growth drivers to build and accelerate financial performance. I’ll now open the call to questions.

Our first question today comes from Balaji Prasad from Barclays.

A couple from me. Firstly, with regard to the biosimilar launches, it seems to have been staggered now with only one expected for 2022. So what are the gating factors for this? Second, on the EBITDA adjustments, I seem to pick up around $8 million for the R&D for the quarter. So when I look at the guidance tweak, that’s around $40 million with the higher end of the range, so can I just extrapolate these to arrive around $25 million of R&D for the quarter, or $30 million? And is the rest solely due to Ritonavir?

Let me turn this over to our Head of Biosciences to answer the first question, Harsher Singh, and then Tasos will take the second question. Go ahead, Harsher.

As Chirag stated earlier, our largest opportunity is in ALYMSYS, which we plan to launch on October 1, 2022; supply is already on the ground. On the other products, we want to make sure that we have reimbursement in place as we get to launch. Reimbursement for Releuko, our J code, has been granted, and we expect to launch that in Q4. For FyInetra, we are still expecting approval on our J-Code, and that will be a gating factor for our launch. I hope that answers the first question. Tasos, over to you.

Yes. So the numbers, as you think about the $40 million drop, so the expected R&D milestones this year, we're anticipating them to be $15 million. Then from there, you can assume Ritonavir was about 25%, and then we probably had a combination of higher inflation and FX, that was combined, call it, about $15 million, and that last part was offset by other operating expense reductions.

Maybe just to follow up there on the guidance part. With revenue doing well in H1, just curious to understand you’re maintaining the revenue guidance for 2022 for the full year and not tweaking it further?

Sure. So the revenue target, I think that kind of speaks to, within a $2.2 billion business, there's always ups and downs. But overall, our business performs extremely well. So generics are growing. The revenue growth of generics has accelerated. Last year, it was 2% organic, this year, we expect it to be 4%. So we have a diversified portfolio of about 250 products there and a number of new ANDAs coming in every year. So I think that's good at that. Specialty performed exactly as we expected. We knew that specialty overall this year was a transitional year in terms of being flat relatively year-over-year as we lost the ZOMIG patent, while that's been completely offset by the continued strength of Unithroid and Rytary. And then finally, AvKARE is just performing ahead of our expectations. Now, with AvKARE, there's been a substantial amount of growth in the distribution channel which is kind of a lower margin channel for us, but nevertheless, it adds incremental EBITDA, so we feel great about it. But that is a little bit more insight as to why revenue stayed where it was.

And injectable 35% growth.

Our next question comes from Nathan Rich from Goldman Sachs.

Maybe just building off of the last question, Tasos, can you maybe help us think about what the right jumping off point for EBITDA is as we think about how to build into 2023? I think at the midpoint of the guidance range this year, you’ll be at about a 23% EBITDA margin. As we think about next year and the growth in injectables and biosimilars, how does that influence the margin profile that we should expect? And also, is $15 million of R&D milestone expense a year kind of the rough range that you would expect to be on a go-forward basis?

So, I think you're right. So it's kind of rewind a little bit so we can see how the profitability profile of the company has changed. So when we go back to 2020, the adjusted EBITDA to revenues was about 22%. In 2021, we were at 24%, and as you know, that was an incredibly profitable year for us last year, with a number of very strong new product launches. And this year, you just said it's 23%. So I think this is the right jumping point for us. And also, when we think about, let's pick the midpoint of the guidance, $510 million, that's 23%, as you mentioned. And that includes kind of solid top-line growth and that includes about $40 million worth of incremental investments which is about 2 points of profitability that we're making in support of biosimilars, in support of new product launches, and pre-commercialization work around IPX-203. So, I think 23% is the right point. And I think as we think about next year, we'll see how things play out but our expectation is over the course of time, as the injectables, which is a more profitable piece, as more of the more complex ANDAs coming to be, which are more profitable and less exposure to price erosion, and specialty with IPX-203, in future years, K127 and so forth. So we'll expect that 23% to grow over the course of time. Let me just kind of hit your second question. Your second question was, is $15 million the R&D right now? We think so. But at the same time, we're going to be opportunistic. So over the last few years, we've invested a tremendous amount in our R&D. So we spent about $180 million in R&D. And I think we're going to be opportunistic. To the extent that we see right technologies that we can in-license, we’ll execute on those. But I think the right level, the way we think about our history, last year, it was $26 million, this year, it’s $15 million. So I think that’s probably the right level we're thinking about it but at the same time, it can go up and down just always depending on what’s available in terms of technologies and interesting new products.

Nathan, I'll just add one thing. This is Chirag. Our internal goal would be to get to 27% of EBITDA in a couple of years because of the mix that Tasos just walked you.

If I could just ask a quick follow-up on the launch of ALYMSYS in October? Have you started to have discussions with some of the key purchasing entities in that channel? And can you maybe talk about just how the contracting and purchasing process works as we think about that ramp to the $200 million of peak sales in the next few years?

And this is the building block and then it goes on beyond $200 million as we bring more biosimilars and move up the value chain and become one of the leaders in biosimilars in the United States market as well as the global market. I'll hand it over to Harsher, who is working very hard building the entire team with almost 45 to 50 people, a strong team now in all areas, customer services, customer support, oncology sales, contracting, managing Ion and other distributors. I would proudly state that we're number one in generic sales and our customers can count on us. We're doing a great job on specialty being close to Parkinson's patients and KOL. As you can see, we're rightly growing at 7% and unit growing at 14%. And we do one thing very well: set up an excellent sales and marketing infrastructure. So institutional and biosimilars and injectable biosimilars go together. Harsher, please provide more detail.

As Chirag mentioned, our health system sales, market access, and commercial leadership teams are in place, and we’re scaling up our oncology clinic team and should be fully staffed by the middle of this month. We started discussions across all of the players across oncology institutions, GPO channel, and payers. I think what you start to realize in this market is there are a lot of hands out. What’s important to us is to make sure that, as a lead entrant, or a later entrant into these first three markets, particularly ALYMSYS coming first, we focus on the highest control payers and providers where we can deliver asymmetric value while ensuring stable market and reimbursement dynamics. We want to make sure that our partners continue to want biosimilars and that we can deliver them as much, if not more, value than the next player. I hope that answers some of your questions. I won’t go into the details of our commercial strategy but suffice it to say that we’re going to enter by engaging and ensuring that the economics work across the channel and we focus disproportionately first in the categories where we haven’t seen high enough biosimilar uptake, and that is hospitals. So we go to hospitals and oncology with two different strategies and different field forces. I hope that answers your question.

Our next question comes from David Amsellem from Piper Sandler.

So just had a few. First, I wanted to come back to the guidance and regarding the Ritonavir opportunity not coming to pass. I guess where I’m going with this is, are there any other regular generic opportunities that are still in your guidance, both top line and EBITDA, of course, that have risk? And just in general, can you talk to how you’re risk-adjusting for new launches on the generic side of the house? In other words, what I’m trying to get at is, is there another potential Ritonavir situation that could result in another step down to the guide? So that’s number one. And then number two is, you have a recent settlement, and that was pretty straightforward. But I guess on opioids, can you talk to, at least in the next 6 to 12 months, how large of a transaction you could do in terms of M&A? How are you limited at least in the near term? And then when do you think you won’t be as limited in terms of deal size?

David, just to clarify, Ritonavir is a unique opportunity. It is slowed. It is one of the drugs within our supply chain which has been just delayed due to softer demand and shifted to the later part of the year or less this year or next year. So just clarifying, it is not part of the typical generics launch which we do risk adjust really well and weigh the FDA timing. We so far have launches coming in, and we expect continued positive performance. In your M&A question, before I hand it over to Tasos to explain more how we guide and what the M&A part is, yes, we have done tuck-in acquisitions over the past three years, almost spending $400 million in cash, and we will continue to do tuck-in acquisitions. We do have a very powerful organic pipeline. So we’re not in dire need to do a transaction. When opportunities arise, we figure things out. So we have multiple strategic options in all segments of our business. I hope that answers your question. Tasos?

Yes. I think I'll tell you how we think about risk adjustment. So number one is, we track, over the last 3, 4 years, every single ANDA and we know exactly what our internal expectations are. We have extremely detailed models around risk-adjusting those. When we enter our annual budget process, we're just collaborating with our R&D teams, regulatory teams, and commercial teams. We go through ANDA, AMBA with expected timelines and then we take the overall number and then we consider historical adjustments. That has seemed to work every single time. Sometimes, the one thing is for certain, you're going to be wrong. So sometimes, we tend to do better than that, sometimes we tend to do a little worse. But over the current, as you know, you’re not in control of the FDA necessarily. So over the course of time, I think we've been pretty spot on and dynamic around this model. As Chirag said, Ritonavir was just unique. It was a one-off opportunity. We're trying to be helpful to all the people in need, trying to supply the marketplace, and ultimately, it did not work out. So I think it's a one-off. Finally, in terms of any other substantial opportunity that we expect, there's no other kind of substantial opportunity that we expect that's going to have a material impact compared to this year. So the most significant opportunity is the Ritonavir forecast, which we feel great about. The biggest issue for us, just in terms of risk, was the timeline of resolving the Synchronite issue, so the AB rating because I think we did an outstanding job, but at the end of the day, the FDA had 7 to 8 months to conclude. So that issue now is substantially resolved, and I think that's going to give significant growth in the second half of the year. So I'll stop here.

We now move on to Gary Nachman from BMO Capital Markets.

So first, the gross margin was a bit weaker than we expected in 2Q. So how should that trend the rest of the year and into next year, given the business mix? Just talk about the pushes and pulls there? And then on the lower EBITDA guide, if Ritonavir was $25 million this year, how much could it contribute next year if it’s a delay with that? Would it be a similar amount in '23? And then just on the biosimilars, how soon could you add to the portfolio to get more critical mass there? How much of that would be internal versus external? And just how important is that from a competitive standpoint in that space just to bring more into the overall portfolio?

Thank you. I'll pass it over to Tasos for gross margins and the Ritonavir next year opportunity, and I'll take the rest of this question. Go ahead, Tasos.

So I think as we think about the overall gross margin for the company, we’re looking at around 44% this year compared to about 46% last year in 2021 and compared to 42% in 2020. So it’s essentially coming in between 2020 and 2021. So from a historic perspective, I think there is a huge turnaround on the performance of the business. I think in terms of gross margin performance, I think we’re looking for overall stability. So I hope that helps.

As for Ritonavir, we would know more about the forecast and purchasing possibilities as demand has been slow. We expect less than the 2022 expectations, but it’s good to maintain a relationship with the supplier and continue to build beyond in 2023. For the biosimilars, the strategy has been to in-license the products, which we have done. We continue to in-license, but as we have stated, and we have highlighted in the generics market, it's apparent that eventually, the vertically integrated companies will win. This market will become more competitive, not as competitive as retail generics, but having control over quality, having control over science, understanding CMC, expertise in regulatory, working with FDA on designs of the trials and manufacturing with continuous manufacturing and other technologies, all this will play a role. Therefore, we would like to be vertically integrated to have U.S. manufacturing, as that has done really well for us over the years and also make use of India's infrastructure to better sell to the world, because biosimilars will become a global market and it's a very large opportunity for us. So we'll do fewer licenses, and our goal will be to have 75% to 80% of the portfolio in-house over time.

If I could just get one follow-up. Just on the net leverage coming up due to the legal settlement, at what point could you potentially trip your debt covenants, and how long will it take to get back to a more normalized level?

Yes. We're way away from tripping any debt covenants. Just as a point of reference, it was only a couple of years ago that our net debt to EBITDA was over 7x. Right now, we are at 5.4%. Our expectation is to be at about 5x at the end of the year. Looking ahead, we have stated publicly that we want to get below 4x, so it's another turn that we need to deliver on. It will take a couple of years to get there, and it's going to be a steady decline from here.

Our next question comes from Greg Fraser from Truist Securities.

You bumped up your target for injectable sales this year. How much of that change was driven by better performance of the current portfolio versus higher expectations for new launches? And if the base portfolio is doing better than anticipated, can you speak to the drivers behind that? And then just a question on opioid exposure and the litigation that you’re involved in. Can you just give us an update there? Are you working towards a settlement? We’ve recently seen progress on that front from other companies, so just curious how you’re thinking about the path forward for Amneal?

So Greg, on injectable sales, the current portfolio has grown as well. We have seen substantial sales growth this year as well as from new product launches. All three contributed this year to grow over $170 million. As we look ahead, we have multiple new launches coming even this year in injectables including multidose and potentially the first back products, and next year we look to continue with more launches from our new sites. We are excited about injectable growth from both new launches and current portfolio. One thing is for sure, a great quality track record in the sterile business carries much more weight compared to the oral solid business, and we have successfully established ourselves as a hallmark of quality in affordable medicines. We are also committed to perform well in injectable products as we look to meet biosimilars and facilitate the sterile products, so we are definitely positioned well. Your second question: We have Jason, our Chief Legal Officer, here to address that.

With respect to the outcome of the opioid litigation, it's uncertain, but we are encouraged by certain recent outcomes that have been reported. Our focus is on defending those cases effectively and maintaining market share. We will continue to defend those cases while exploring opportunities to resolve them. We are constantly evaluating our positioning based on ongoing developments, and will align our legal strategy accordingly.

Our next question comes from Elliot Wilbur from Raymond James.

Just if I might, one financial question for Tasos and then I had a question for Chintu on the pipeline as well. So first for Tasos, just trying to get my arms around trends in the SG&A line, specifically within the generics segment. I think last quarter run rate was $21 million; this quarter, $25 million. Those are adjusted figures, but basically, looking at the annualized rate there, I mean it’s roughly twice the level that company was spending two years ago. So just trying to understand sort of what may be behind the step-up in spending?

I just want to make sure, Elliot, so you're talking about the step-up in the operating expense of the company, essentially, right? I just want to confirm.

Specifically within the generics segment, the step-up in the SG&A trend.

I got it. Yes. Overall, one of the things we said this year is we're looking to spend an incremental $40 million in terms of investments. So that's driven by the investments in biosimilars. That's the direct answer to your question. Overall, our level of investment in generics has remained the same, relatively limited change there. And then what we had this year, we acquired Sol; so we have the upcoming portfolio that has added to the operating expenses and getting ready for the biosimilars. So I think that's the answer to your question. Next year, now that we have these expenses primarily in the base, next year, we should see the expected growth in generic spend to be flat to slightly up as opposed to the rate of growth this year.

And then just one final question for Chintu on the pipeline, specifically thinking about the injectable portfolio. Obviously, expected to be sort of a key element of top line growth over the next several years. But how should we think about your strategy sort of within the world of injectables? And if I look at the pipeline today, roughly 30 or 31 ANDAs pending, what percentage of those would you consider complex, I guess, within the world of injectables? And how has your modeling on the injectable portfolio maybe changed in the last 6 months to a year versus what you were thinking about 3 to 4 years ago? I guess the reason I ask the question is, if you look at some recent approvals like Velcade, I mean there were 8 approvals and Vasopressin certainly has turned out to be much more price competitive despite what still is relatively limited competition? It still seems like you sort of need to move up the technology value chain even with injectables in order to sort of read the types of returns that are available from some of the higher quality assets in the space? And just wondering how you guys are thinking about the evolution of your injectable strategy?

Great question. We have a very robust pipeline. We have multiple areas of focus. First of all, we expanded our infrastructure that gave us many more capabilities in emulsions to liposomes. We've been investing heavily also on infrastructure creation organically to cater to microspheres, drug-device combinations, and the back portfolio. Our pending 31 ANDAs, at least half of them or close to half are either shortage products or the first-to-market products. Our approach to pipeline is very robust. Even our current portfolio, not too many people have a suspension product. So we're both focusing on commercial products and tackling complex products, which always comes with a multitude of challenges from R&D to approval to sustainability. With our expanded infrastructure and our focus and our own pipeline, this year, we will file another 15 products. Most of them are very niche products. I totally get your point on a Velcade or Pamitrex and again; other products that's not our strategy. Our strategy is to go after tough-to-formulate products, niche APIs, peptides, liposomal, and also, we have some products which even approved products are always in shortage. We are targeting those products where our quality track record and our manufacturing abilities are well regarded. So we have 61 products in the pipeline, more than half of our portfolio is in this complex injectable space which we are very excited about, and the results should speak for themselves as key launches continue to come from our injectable space.

In the sterile bags, so that’s terminally-sterilized bags; that’s a huge portfolio coming out of our bag products.

Our next question comes from Ekaterina Knyazkova from JPMorgan.

So first, on biosimilars, I guess. So there’s been some debate about the importance of having interchangeability on your label. So where do you stand on that debate? Do you think that having interchangeability is important to drive similar uptake or is more of a nice-to-have feature; with things like having supply and maybe payer relationships being actually more important? And then my second question is on generic pricing. Are you seeing anything different this year than last year? Obviously, inflation is pretty high in the U.S., just wondering if that’s changed in generic pricing dynamics at all and if it’s having any impact on like how you’re negotiating prices or if you can potentially push back when people are asking you to lower prices?

I'll take the first question on interchangeability. So we think interchangeability is definitely a tool that would give much more comfort to doctors, especially depending on the therapeutic category and the product. What we are looking at is that not every product's interchangeability will give you an upper hand. So I think it is essential. The FDA has opened up the guidelines, and clearly as Amneal, we will look for our programs to have as much interchangeability as possible. It will give us a better marketing edge and more comfort levels with our customers and patients.

Let me take the generic pricing that always comes. We have been emphatic that the oral solid markets and certain other generics have become unsustainable for many companies, and product rationalizations have happened which could create shortages in the future. We’ve been in constant dialogues with our customers, and they understand that penny bidding is not a wise thing for American patients, and it's being acknowledged. The FDA is also concerned about the investment in quality control and future R&D for generic drugs which save billions for American patients and accounts for 92% of prescriptions in the United States. There’s concern about the supply chain, especially post-COVID; we can’t afford another emergency without essential medicines made in America. We’ll keep pushing that issue through our industry associations and in discussions with the government: we need to make this happen. It takes 4 to 5 years to make key starting materials, APIs, and finished products in the U.S. Overall, pricing pressure is still present; we urge and hope it reduces because there’s no way for these oral solids and bottom-end products to continue at these prices. Amneal, fortunately, is positioned strategically due to our complex portfolio and all other dosage forms as part of our platform in the company, so we don’t face as much of a problem as other companies who have a larger oral solid portfolio. Sorry, I gave you a more extensive answer and addressed a bit of an industry issue, but I hope that helps you, Ekaterina.

This concludes our Q&A. I will now hand it back to Chirag Patel, Co-CEO for final remarks.

Thank you very much for everyone joining and have a wonderful weekend. Take care.

Today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.