Good morning, and welcome to the Amneal Pharmaceuticals First Quarter 2024 Earnings Call. I will now turn the call over to Amneal's Head of Investor Relations, Tony DiMeo.

Good morning, and thank you for joining Amneal Pharmaceuticals' First Quarter 2024 Earnings Call. Today, we issued a press release reporting Q1 results. The earnings press release and presentation are available at amneal.com. 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 see the section entitled Cautionary Statements on Forward-Looking Statements for factors that may impact future performance. We also discussed non-GAAP measures. Information on the use of these measures and reconciliations to GAAP are in the earnings release and presentation. On the call today are Chirag and Chintu Patel, Co-Founders and Co-CEOs; Tasos Konidaris, CFO; our commercial leaders, Andy Boyer for Generics; Joe Renda for Specialty; and Jason Daly, Chief Legal Officer. I will now hand the call over to Chirag.

Thank you, Tony. Good morning to everyone. Our first quarter performance was outstanding. Record Q1 revenues of $659 million grew 18%. For the first time, all 3 of our segments generated double-digit growth in the same quarter. Q1 adjusted EBITDA of $152 million grew by 31%, as strong execution continues to drive sustainably higher levels of profits. As momentum builds across Amneal, we are confident in our ability to achieve our financial commitments for 2024 and beyond. Our strategic vision for Amneal is to be a global, diversified pharmaceutical company that provides patients, providers, and payers with access to high-quality, affordable, and essential medicines. In the United States, Amneal fills approximately 175 million prescriptions per year. In retail pharmacies, we provide complex generic medicines such as transdermals, topicals, oral solids, and ophthalmics. For hospitals and clinics, we supply important acute care injectables, where there are chronic shortages. In biosimilars, we are expanding access to oncology therapies and adding more to our portfolio. In specialty, our innovative medicines advanced the standard of care, such as in Parkinson's disease. In our healthcare distribution business, we provide military veterans with access to high-quality medicines. Globally, we are addressing unmet healthcare needs in developing and developed countries. As we continue to grow larger, Amneal is leading a new era of affordable medicines and having a significant societal impact. Nowhere is our commitment to this mission more evident than in our recent approval of naloxone. Opioid overdose remains a U.S. public health emergency. We are expanding access to this critical rescue medicine as an OTC product at pharmacies and for the public interest through states and cities across the United States. We were pleased to finalize our partnership with the state of California, with more to come. We are so proud that this essential life-saving medicine is made in America, manufactured here in New Jersey by Amneal. Let me now walk through our business at a high level, where we remain confident in our strategy, our ability to execute well, drive growth, and the opportunity to have a tremendous impact. First, our affordable medicines business, which is our Generics segment, has consistently grown each year since 2019. We are seeing this growth accelerate in 2024, driven by our diverse portfolio of retail, injectables, and biosimilars. Amneal has a track record of quality, innovation, and customer service. Those hallmarks continue to resonate in the U.S. pharmaceutical market, plagued by supply shortages with persistent demand for high-quality medicines. The durability of our complex portfolio and regular cadence of new launches each year position Amneal well to continue expanding our leadership position in affordable medicines and driving sustainable long-term growth. In the retail pharmaceutical market, our portfolio of around 240 medicines is complex and diversified, with industry-wide supply chain disruption due to site inspections and manufacturer discontinuations. Price erosion in the United States generic industry remains lower than it has been in several years. In injectables, we are expanding our portfolio and have a significant capacity to help address drug shortages in hospitals and clinics. Our injectable strategy focuses on providing unique ready-to-use products like our recent launch of PEMRYDI RTU for the treatment of certain lung cancers. Across retail and injectables, we are on track to launch over 30 new products this year, following our record 39 new launches last year. In biosimilars, we are seeing the next wave of affordable medicines. From 2024 to 2028, an estimated $192 billion in annual branded biologics value will lose exclusivity. We expect most biosimilar markets to be less competitive, given the inherent complexities of these molecules and the investment required to bring them to market. Adoption rates for early biosimilars are now 80%, particularly in oncology, where we operate. Our excellent commercial team is driving strong adoption at both community oncology and hospital-integrated delivery networks. That, coupled with our pipeline with trusted partners, gives us confidence and continued momentum. We are well on our way to achieving over $125 million in revenue in '24, with $90 million in biosimilars revenue over the last 12 months. We look to in-license 1 to 2 biosimilars each year or more and to be vertically integrated over time. Internationally, we'll continue to expand our reach and build a strong foundation. This is happening most notably in India, where we are building a customized portfolio of therapies for unmet needs such as critical care, ophthalmology, oncology, and diagnostics. In other geographies, we are working with partners to register and commercialize select Amneal products. We expect international expansion will add $50 million to $100 million in revenues by 2027 and rapidly scale after that. Next, in our specialty business, we continue to make good progress with our key neurology and endocrinology-branded products as revenues are growing double digits. In Q1, we successfully launched ONGENTYS, an objective therapy for Parkinson's disease, which we recently in-licensed to our specialty portfolio. Next up is IPX203, with our action date on August 7. Carbidopa-levodopa has been the main therapy for Parkinson's disease for over 5 decades. We believe IPX203 meaningfully advances that standard of care with a broad application for all patients. In our healthcare distribution business, we have more than doubled revenues and profit since our acquisition in 2020. We are expanding all 3 channels: distribution, government, and unit dose. Driven by new products from suppliers, including Amneal, we now expect over $650 million in healthcare revenue next year as we expect this to remain a high-growth business. In short, we are starting 2024 with very strong momentum. Our diversified growth profile is sustainable, and our financial performance is accelerating remarkably. I'll now hand it to Chintu.

Good morning, everyone. Thank you, Chirag, and thanks to the global Amneal family for their hard work in making health possible. I will discuss how our core strengths in operations and innovation allow us to sustain growth in both revenue and profit. Quality has been our focus since our inception in 2002. We're continuing to invest in quality through automation and AI technologies to enhance our global infrastructure. Our success also stems from our commitment to operational excellence, ongoing efficiency programs, and a strong supply chain. All our plants are FDA approved, and each plant is working on optimization and efficiency initiatives to maintain high customer service levels and reduce costs. We prioritize redundancy, resiliency, and reliability in our supply chain. Drug shortages are a persistent issue in the market. The U.S. FDA currently lists 114 drug shortages, including 75 injectables. At Amneal, we aim to be part of the solution, with about 20 commercial and pipeline injectables on the shortage list, including oncology medications. We have also significantly increased our injectables manufacturing capacity in recent years across multiple plants, focusing on alleviating shortages in the market, especially for injectables. Our track record in innovation is impressive, and we are excited about our strong start in 2024 with five significant complex product launches: naloxone nasal spray, PEMRYDI RTU, Carvedilol ER, FML eyedrops, and generic Ciprodex. Currently, we have 86 new products in the pipeline, 63 of which are non-oral solids. Additionally, we have 67 products in development, with 94% being non-oral solids. Our shift towards complex innovations has enhanced our R&D efficiency, enabling us to invest more in external R&D over time. We are especially proud of last week's approval of naloxone nasal spray, a vital treatment for drug overdoses. This marks a substantial achievement for the entire Amneal team. The product is now available as an OTC item through retail pharmacies and to various states and counties across the U.S. We have developed manufacturing capacity to produce up to 10 million units starting next year, significantly increasing access to combat the opioid crisis affecting many Americans. We anticipate launching over 10 new injectables this year, following the 14 new injectables we introduced in 2023. Our R&D efforts are focused on oncology, ready-to-use bags, and long-acting injectables. For years, we have engaged with clinicians to understand their needs. This customer-centric approach has enabled us to create unique presentations for existing products. Last month, we launched our first 505(b)(2) injectable, PEMRYDI RTU, which offers a new ready-to-use format for a commonly used oncology medication, enhancing efficiency and reducing medication errors. We plan to release 2 to 3 505(b)(2) injectables annually, with around 15 in development. Biosimilars remain a strategic priority for us. Following the success of our initial three commercial products, we in-licensed two denosumab biosimilar candidates for Prolia and XGEVA in the fourth quarter. These programs are progressing well with our partner, mAbxience. Additionally, we recently in-licensed two more peg-filled grafting programs: an on-body injector and a prefilled auto-injector. Currently, around 30% to 40% of the peg-filled resting market is on-body, which is expected to have fewer competitors. In total, we have three commercial biosimilars and an additional four in development, all focused on oncology. As we position Amneal as an important player in the biosimilars market, we aim to add more biosimilar molecules to our pipeline over time. Internationally, we have distribution partners in approximately 40 emerging market countries, including strong markets such as Saudi Arabia, Mexico, South Africa, and the Philippines. We are actively registering products globally, including in Europe, Canada, China, and emerging markets. In the specialty sector, we are evolving our R&D initiatives to enhance our value proposition. Our IPX203 complete response resubmission is currently under review, and we are making progress with our DHE auto-injector program for migraine and cluster headache. We have transitioned production internally and are on track to complete our application later this year, positioning us to launch in the first half of next year, pending approval. We continue to expand our pipeline with K114 for endocrinology and other initiatives, aiming to introduce one to two specialty products each year moving forward. Overall, Amneal is growing in key areas of medicine, including complex generics, injectables, biosimilars, international distribution, and specialty branded products. We are deeply committed to our company's mission and are excited about the work ahead. I will now hand it over to Tasos.

Thank you, Chintu, and good morning. At a high level, our diversified business is driving sustainable higher levels of revenues and profits and continued deleveraging. Our first quarter results were excellent, with total net revenue of $659 million, up 18%. Q1 generics net revenue of $391 million grew 14%, driven by our diverse portfolio of complex products. Biosimilars generated $27 million in revenue, driven by Alymsys. New products launched in 2023 and 2024 added $19 million to Q1 revenue growth. In addition, the remaining base portfolio continued to grow due to the relevancy of our products, strong market demand, less pricing pressure, and Amneal's high-quality supply chain. Q1 specialty net revenues of $105 million grew 15%, driven by double-digit growth of our key branded products, plus the recent launch of ONGENTYS in March. Q1 AvKARE net revenues of $163 million grew 33%, reflecting continued strong growth across all 3 customer channels driven by new products. Our Q1 adjusted gross margins of 42% increased 250 basis points year-over-year and were ahead of our expectations. Strong gross margins were driven by the favorable mix of revenues that reflected the complexity of our portfolio, combined with higher fixed overhead absorption. Q1 adjusted EBITDA of $152 million grew 31%, reflecting robust revenue growth, higher gross margins, tight management of operating expenses, and a favorable comparison to the prior year. Our leverage growth profile in Q1 is the blueprint for sustainable higher P&L results for the company going forward. Q1 adjusted EPS of $0.14 grew 17%, driven by higher adjusted EBITDA, partially offset by interest costs. As a reminder, we have made substantial progress over the last 4 years, driving accelerated top and bottom line growth, reducing leverage, and resolving legacy matters. As a result, our annual adjusted EBITDA has increased from $339 million in 2019 to $594 million over the last 12 months ended Q1 2024. Also, net leverage has declined from 7.4x in 2019 to 4.6x now. As I mentioned earlier, settling legacy legal matters has been a priority of ours. Two years ago, we settled upon an ER litigation, and we just made our final payment in Q1. In addition, today, we announced that we reached an agreement in principle for a nationwide opioid settlement payable over 10 years that resolved substantially all opioids litigation. Accordingly, in the first quarter, we recorded a pretax charge of $94 million, which reflects cash payments in the supply of naloxone nasal spray both over the next 10 years. As a result, we have now substantially resolved dispute legacy legal matters, which removes this overhang for the company. Given the strong start to the year and our improved visibility, including the recent naloxone approval, we're targeting the higher end of our full-year outlook. As a reminder, we expect total net revenue of $2.550 billion to $2.650 billion and adjusted EBITDA of $580 million to $620 million, which reflects high single-digit growth on both top and bottom lines.

Thank you, Tasos. Amneal's Q1 performance was excellent across the board and reflects our continued upward trajectory in driving higher financial results over the years. We are so excited about the opportunities ahead. Let's now open the call for Q&A, Anthony.

Our first question is from Nathan Rich with Goldman Sachs.

Congratulations on a strong quarter. I wanted to start with naloxone and specifically, the California contract. Can you talk about when that contract starts? And how long it is? And any details you can share on the type of volume commitment the state made? And have you gotten additional interests from other states on the back of that? And any comments on the margin profile of naloxone, maybe relative to the corporate average would be helpful?

So California supply starts now, and we will see the increased demand as they ramp up our label. According to the state's press release, they could buy up to 3.2 million units per year. We don't expect them to buy that in the first year; they will ramp it up as they go. So we expect somewhere between 2 million to 3 million units in the state of California. The remaining contractual terms are confidential. It was a great win for us, and we're very proud of the agreement with the state of California for trusting us to supply and valuing the made in the United States product. In terms of the margin profile, it is going to be higher and accretive compared to the current gross margins.

It's obviously not just an issue in just the state of California. This is impacting all our states. Our commercial teams are actively engaged with other internal parties, both on the state and federal level. So we are really excited to kind of fill the incremental need that's going to provide for many years.

We have built the capacity to supply up to 10 million units, starting early next year. This year, we're producing somewhere between 2.5 million to 3 million units.

That's great. Maybe just a follow-up on the cadence of earnings this year. Tasos, I know you pointed to the high end of the range. But looking at the historical EBITDA cadence, I think 20% comes in the first quarter typically. Based on what you did this year, that would imply a number well above the high end of the range. Is there anything to note on just earnings cadence this year that would be different than normal?

You take one quarter; we can never annualize this. If you think about we finished the year last year with EBITDA of about $554 million. So we added Q1 to our run rate of nearly $600 million. The year is playing out how we were hoping, which is acceleration of top and bottom line growth. So we have some great improvement. Now we are targeting the high end of the range. But at the same time, we want to ensure we have room in our operating expenses to make investments over the next nine months, primarily in R&D.

The next question is from Les Sulewski with Truist Securities.

Can you just provide some initial update commentary on ONGENTYS, given the new ownership structure? And perhaps some feedback from prescribers? And then also on PEMRYDI, and I have a follow-up.

Yes, great. Les, we will turn it over to Mr. Joe Renda here.

Yes, thanks, Les. So far, we've been very pleased with ONGENTYS as well as the partnership with BIAL. It's been a great partnership, and we've been working very closely with them and their global team, executing upon the strategies that they've learned over the years. I would say probably the 3 pieces of feedback that would be significant would be: one, we are hearing very positive feedback from prescribers. There was a concern that ONGENTYS would not remain in the market. So prescribers were very pleased when they heard we were going to be taking over this brand. And we've been able to sign on a few more contracts from an access standpoint. Our goal there is to increase the market access for ONGENTYS beyond what it was. We have been very pleased with that performance and progress, and one of the things we're looking at closely to determine the uptick is what our NBRx performance has been, new patients to the brand. We are up about 20% in NBRxs from a performance standpoint, so far the partnership has been very good.

And Les, you had a question on PEMRYDI RTU. It's our first 505(b)(2) launch. We will do 2 to 3 a year going forward. It is a ready-to-use oncology therapy that reduces steps. This is a new factor of growth for the company.

Great. Now moving on to IPX203, with your action date circled for August 7, can you just talk about perhaps your launch readiness, your plans with the sales force, and just overall impact to potential guidance, if any?

Yeah, go ahead, Joe.

First of all, I would say one of the things that is significant for us is we've really become a leader in the Parkinson's space. RYTARY has enabled us to develop and deepen relationships with key prescribers and movement specialists across the country and around the world. That also is coupled with the fact that we've developed a market access capability that has created an access stream for RYTARY that's the best in the Parkinson's community. So we enjoy some 70% commercial coverage and about 60% of the Part D coverage. The ONGENTYS that I just spoke to has enabled us to increase our prescriber base, going deeper now into general neurologists. When you look at our go-to-market strategy with IPX, there are 3 components: leveraging the deep relationships we've built over the last decade in the Parkinson's community, leveraging our market access capability to gain access for IPX203 comparable to what we have with RYTARY, and finally, the novel formulation of IPX203, which offers greater efficacy, better on-time, and fewer dosing. The Parkinson's community is very excited. There's a lot of buzz about when IPX203 is coming to market.

In terms of potential revenues, assuming approval, we continue to feel great about it. There are a couple of hundred million dollars in annual revenues. The guidance we have given about IPX203 is peak revenues of $300 million to $500 million. We think based on the product profile, IPX203 has only been used by about 5% of the available patients. Therefore, there is a tremendous market opportunity for the remaining 95% of the market that has not been utilizing RYTARY.

The next question is from David Amsellem with Piper Sandler.

I have a few questions. I wanted to drill down on the $100 million-plus in new product revenue in 2024. Can you talk about the mix between retail and injectable contribution in that $100 million? That's number one. Number two is, how much of the injectable contribution is coming from shortage products versus complex products? And switching gears to Alymsys or bevacizumab biosimilar, can you just talk about the dynamics here that are driving the strong sales? Is it limited competition in the market? Are there other things at play here? And just talk about your expectations for that product. What informs your $100 million-plus in sales by 2025?

So new product launches, if you look back over the last 5 years, the total revenue from NPLs, and you total that to this year's revenue, it's about $765 million we have added in new product launches. We see this growing as we expect the U.S. market to grow. The expectation is for the next 4 years, if you annualize our revenue from '28, that would be an additional $800 million to $1 billion from new NPLs. So we are excited and have been working on a strong pipeline and in-licensing strong products. On Page 7 of our presentation, we have listed out many of them, like 60 products being launched in '24 and '25, with 15 of them being high value. The majority of our new product launches will be within generics, injectables, and biosimilars.

The $100 million is a combination of a few things. Last year, towards the end of Q4, quite a number of new products were approved, which contributed to the annualization of revenues. The breakdown is approximately 50-60% between retail and injectables, with naloxone being one of the retail products.

The next question on shortages versus regular products: shortages make up a very small part at this point. The regular products that we've been expanding the market for are driving demand our way, because we have the best quality and consistent supply in the market. Customers are establishing more trust with us. Regarding Alymsys, we have a very strong team. Our commercial team has done a superb job. Amneal's reputation and the 300 products we offer bring much more to the table for customers than if they were pure-play biosimilars. This is why I believe that, in the future, you'll see more companies being successful with broader portfolios. We provide tremendous value, and we have a better negotiating position with our customers. We'll keep improving in this area, and we expect higher market share for Alymsys as well.

Just to clarify, the $100 million does not include naloxone? I think I saw a footnote for that in the slides, but I just want to make sure that's correct. $100 million does not include naloxone?

David, that's correct. We estimated over $30 million for naloxone. The $100 million is for the rest of the NPLs this year.

You can see the 5 key products that have already launched. Those are high-value complex products.

The next question is from Balaji Prasad with Barclays.

Congratulations on the results. A couple of questions from me. I was starting with the generics side. I was slightly surprised to see Amneal's position on XIFAXAN. Bausch has been very mainly defending this from years versus a host of generic companies there. So how differentiated is your position versus others? How realistic of an opportunity is there versus any other generic company? A similar question on Restasis, too. I mean, for years, generic companies have flagged this as an opportunity but struggled to get approval for diversion. How should we think about it? Secondly, on health care, I saw that versus last quarter's presentation, where you had the long-term guide at $600 million. You raised it to $650 million. What drove that increase in revenue guidance, and what is the EBITDA impact of it?

Balaji, this is Chintu.

Go ahead, Chintu.

Yes, thank you. On rifaximin, we always work on very unique and key products. There’s something confidential that I don't want to disclose. We are excited about the rifaximin opportunity. However, it remains to be seen how it develops. There are multiple factors involved. On Restasis, we are advancing our ANDA and expect to launch Restasis next year in 2025. We are very hopeful about that.

As for your healthcare question, yes, it is growing really well. A lot of government products for VA/DoD provide an advantage for us being an American company and having manufacturing capacity in the U.S. We're taking full advantage of that growth.

Balaji, can you repeat your other question?

What is the EBITDA impact of AvKARE's guidance raise, and what are the upside and downside risks towards the higher end of your EBITDA guidance?

AvKARE has been growing along with the rest of the business. We're not reliant on any specific segment to carry the day. Our growth continues to be across all our businesses. The upsides and downsides of the businesses, we continue to rely on new product launches and robust new product approvals, and launches aren’t always in our control. We want to ensure we have the cash to make investments in case things are tight. Overall, AvKARE continues to grow nicely.

The momentum has been strong. As you can see, the 6 key products have been approved already. We feel very good about it all as our pipeline continues to deliver.

The next question is from Chris Schott with JPMorgan.

Just a couple for me. First on biosimilars, Prolia and XGEVA. Can you elaborate a little bit more on the opportunity for these two? Maybe just specific launch timelines in light of the recent Sandoz settlement? Is one more interesting to you than the other, given the different market dynamics between the two?

Let's start with biosimilars, Prolia and XGEVA. We are equipped to sell in both channels, the Encore channel as well as PBM. We expect the launch in '26, maybe a bit earlier. We will see how the filing goes. I think one is earlier, and one is going to be a little bit later. We expect market penetration to be very good because we already have established relationships, which are strengthening with community oncology groups, hospital groups, and overall PBM contracting. We expect good peak sales to go well above $100 million for these products. Your second question on naloxone. The retail side is slow. The government is where most of the demand is on a state-wide basis. Retail is only about 10% to 20%. We already have contracts with CVS and Walgreens to supply them and have supplied both. Government contracts, particularly from California, are significant, and we are working with other major states. This opportunity will become considerably larger. Our settlement does not impact this if you do the math. As for AvKARE, as we stated earlier, strategic options are open. The business is performing really well. We are not in a rush to make a decision. If we receive the right price, we will transact, which will massively reduce our gross debt. Ultimately, it's been a great acquisition for us.

We have no further questions. I will hand back over to Chirag Patel to conclude the call.

Thank you. Q1 was an outstanding start to 2024 as the momentum builds across all areas of our diversified business. Our recent naloxone launch is the latest example. At Amneal, we love what we do, and our teams are fired up. There is high momentum across the company all over the United States, Ireland, and India. We could not be more excited overall for the health and performance of our company. Thank you, everyone, and have a great day.

Thank you, Chirag. This concludes today's call. Thank you for joining. You may now disconnect your lines.