Amneal Pharmaceuticals, Inc. Q3 FY2025 Earnings Call

Good morning and welcome to the Amneal Pharmaceuticals Third Quarter 2025 Earnings Call. I will now turn the call over to Amneal's Head of Investor Relations, Tony DiMeo. Please go ahead.

Good morning, and thank you for joining Amneal Pharmaceuticals' third quarter 2025 earnings call. Today we issued a press release reporting Q3 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 discuss non-GAAP measures. Information on use of these measures and reconciliation 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 Affordable Medicines; and Joe Renda for Specialty. I will now hand the call over to Chirag.

Thank you, Tony. Good morning, everyone. We are pleased with our strong third quarter performance, which represents another consecutive quarter of growth, with revenues of $785 million and adjusted EBITDA of $160 million. At Amneal, we focus on delivering innovative and affordable medicines that make a difference for patients and providers. Since our founding in 2002, we have strategically expanded from generics into specialty, injectables, biosimilars, GLP-1, and complex medicines. This portfolio diversification has driven significant and sustainable top and bottom line growth. From 2019 through now, Amneal revenues have grown 11% and adjusted EBITDA has grown 13% on a CAGR basis. With growth in each of the last 6 consecutive years, we are very confident our momentum will continue in the years ahead. Today there are multiple growth drivers that are shaping the future of Amneal. First, in Specialty segment, CREXONT for Parkinson's disease continues to outperform expectations. One year post-launch, CREXONT is delivering strong results across all key indicators. Notably, about 80% of prescriptions are coming from IR patients, underscoring the success of our strategy to expand into the broader patient population. We are confident in peak U.S. sales of $300 million to $500 million for CREXONT. Next, our BREKIYA autoinjector for migraine and cluster headache has now launched. This is the first and only product allowing patients to self-administer with the same medication used in hospitals. It addresses an unmet need for patients who have historically had to go to the hospital ER for relief. Second, in GLP-1s, our strategic collaboration with Metsera positions us very well to play a meaningful role in this very large therapeutic category over time. Metsera's broad portfolio of injectable and oral weight loss programs continue to quickly advance through the clinical Phase. Third, in biosimilars, we are on track to have 6 marketed biosimilar products by 2027, led by our biosimilars to Xolair. With the U.S. market over $4 billion for this key allergy and asthma product, this represents our largest current biosimilar opportunity. Last month we submitted our BLA for Xolair biosimilar, and we are well positioned to be among the first 2 entrants in this growing market. Both in complex generics and injectables, in our Affordable Medicine segment, we continue to receive approval for meaningful new products, including risperidone injectable, sodium oxybate, and Bimatoprost Ophthalmic Qvar among others. We expect this segment will continue to grow driven by our diversified portfolio of complex products and steady cadence of impactful new launches. Finally, our health care segment continues to provide diversification, stability, and growth, with a broad portfolio for government, distribution, and unit dose channels. In summary, our growing portfolio is creating meaningful value for patients by expanding access and advancing standards of care, and for providers by delivering a broader and more differentiated portfolio and for investors by driving consistent growth and margin expansion. Over time we have strategically evolved from generics to innovative and complex medicines and our current chapter of growth is the most exciting one yet. As we grow and expand our portfolio, we are advancing towards our strategic goal of becoming America's #1 affordable medicines company. I'll turn the call over to Chintu now.

Thank you, Chirag, and good morning. As always, I will begin by thanking the global Amneal family. Your unwavering dedication and commitment continue to drive our success. The recipe for continued strong performance is clear: operational excellence, robust innovation, and strategic portfolio expansion. First, in operations, our global manufacturing network and leading capabilities remain a core strategic advantage. We continuously strengthen our operational efficiency through digitalization, automation, and cost discipline, while at the same time innovating in new complex dosage forms to expand our reach. Furthermore, with one of the largest U.S. pharmaceutical manufacturing footprints, Made in America remains a key differentiator for Amneal in the industry. In GLP-1s, our collaboration with Metsera is progressing very well. Leveraging our expertise in R&D and manufacturing, we are building 2 state-of-the-art facilities, one for large-scale peptide production and another for advanced sterile fill-finish designed to produce prefilled syringes, cartridges, or vials. At the same time, Metsera's injectable and oral clinical programs continue to show strong efficacy and product profiles with timelines bringing us closer to entering this fast-growing market. In Affordable Medicines portfolio, we look to launch 20 to 30 new products each year. So far in 2025, we have launched 17 new products, with approvals for 13 more to launch in the future. Importantly, it is not just the number of new launches but the value of these recent launches and approvals and how they position Amneal for future growth. For years, our focus has been on complex generics innovation, including injectables, ophthalmics, inhalation, and other advanced dosage forms, essentially the most complex drug-device combinations in pharmaceuticals. And as a result of years of hard work and strategic focus, we are in the midst of a concentrated wave of Affordable Medicines new product launches coming to market in the near term. In the third quarter we expanded our portfolio with several important approvals across key therapeutic areas, including our first long-acting injectable risperidone extended-release in the mental health space, sodium oxybate for narcolepsy, and Bimatoprost for glaucoma, as well as new otic and injectable products like multidose epinephrine for hospitals. Just yesterday we were pleased to receive tentative approval for our first metered dose inhalation product beclomethasone dipropionate generic for Qvar. This is the first of several new inhalation products expected in the coming years as inhalation is a new growth vector starting in 2026. For years we have been discussing the strategic portfolio shift towards the complex products, and with so many meaningful launches, we are at an inflection point. Looking ahead, we have 69 ANDAs pending, of which 64% are complex products and 44 additional products in development of which 95% are complex products. We continue to focus our R&D on high-growth, high-impact products across dosage forms such as inhalation, microspheres, liposomes, and 505(b)(2) specialty injectables. With this strategic portfolio expansion and robust pipeline, we are reshaping our Affordable Medicine business and expect our strong momentum to drive meaningful growth and value creation for years to come. In biosimilars, we remain focused on building our leadership position over time. Our most exciting near-term opportunity is our biosimilar to Xolair, where we submitted our BLA in September, ahead of schedule. Alongside Xolair, we are advancing other key programs including denosumab, with multiple new biosimilar launches expected in 2026 and 2027. In Specialty, our CREXONT open-label Phase 4 study is progressing very well. We are very pleased with early results and look forward to sharing additional data later this year on real-world time performance that further supports CREXONT's clinical value and differentiation for Parkinson's patients. We continue to work on several specialty R&D initiatives in focus area of CNS and endocrinology, and we look forward to sharing more as these programs advance. In summary, we are driving operational excellence, advancing our innovation agenda, and expanding our portfolio to deliver robust growth and leadership across our business areas. I will hand it over to Tasos.

Thank you, Chintu, and good morning, everyone. Q3 was another terrific quarter with continued and sustainable strong growth across our 3 business segments. The resilient and consistent growth is a testament to our strategic choices, diversified portfolio, and robust execution. In addition, we further strengthened our balance sheet with strong cash flow generation, reduced net leverage ratio, and increased our expected full year bottom line guidance. So all in all, an excellent quarter. As I usually do, I'll start with our Q3 and year-to-date results, move on to our balance sheet, and our updated 2025 guidance. Starting with the third quarter, total company revenues grew 12% to $785 million. Our Affordable Medicines revenue grew 8% year over year to $461 million, reflecting strong performance across our broad portfolio of more than 280 products. Key contributors to our growth this quarter were products launched in 2024 and 2025, which added $24 million in revenue and included a number of 505(b)(2)s that meet real customer needs. Specialty revenue was again very strong in Q3, up 8% year over year to $125 million, driven by CREXONT and UNITHROID. In the third quarter, as expected, AvKARE revenues grew 24% to $199 million, fueled by strong growth in the government channel. AvKARE's growth continues to be driven by strong underlying demographics as well as providing substantial savings to the government with timely access to innovative and often newly available affordable medicines products. Moving down the P&L, Q3 adjusted gross margins were 42.7%, down 150 basis points year over year. However, margins on a year-to-date basis are up 130 basis points. We view our year-to-date gross margin growth as indicative of our underlying performance, and we're confident of growing our full year gross margin compared to 2024. The expansion of gross margin is primarily driven by the innovation and strength of new product launches as well as our relentless focus on driving operating expense efficiencies. Third quarter adjusted EBITDA of $160 million grew 1%, driven by top line growth, higher gross profit, and higher commercial costs in support of CREXONT and BREKIYA. It is worth noting that our third quarter adjusted EBITDA includes $22.5 million of R&D milestone payment related to the Xolair BLA filing. Lastly, Q3 earnings per share of $0.17 grew 6% versus prior year on the back of lower interest expense. Let me now shift to our year-to-date performance where total revenue increased 7% driven by growth of 5% in Affordable Medicines, 11% growth in specialty, and 8% growth in AvKARE. Adjusted EBITDA grew 9% and adjusted EPS grew 35% year-to-date. The drivers of our year-to-date growth are very similar to those of the third quarter. Turning to the balance sheet. As a reminder, we're very pleased to complete our full debt refinancing in July which reduces interest costs substantially and extends debt maturities from 2028 to 2032. Also, net leverage at the end of Q3 was 3.7x, down from 3.9x at the end of last year. Overall, our capital allocation priorities remain consistent, that is, invest in higher-return organic revenue growth; number two, reducing net leverage below 3x over the course of time; and finally, remain strategic with business development opportunities that enhance our growth profile and value creation. Moving on to our financial guidance. We're pleased for the second consecutive quarter to update our guidance. For revenues, we continue to expect a range of $3 billion to $3.1 billion. We have raised the lower end of our adjusted EBITDA by $10 million to a new range between $675 million and $685 million, and we have raised the full range of adjusted EPS by $0.05 to a new range between $0.75 and $0.80. Lastly, we expect continued strong operating cash flow between $300 million to $330 million this year and further year-over-year debt and net leverage reduction. Looking to 2026 and beyond, we continue to expect top and bottom line growth supported by our diversified portfolio and multiple growth drivers including CREXONT, BREKIYA, new biosimilars such as Xolair, and a very strong wave of new Affordable Medicines and continued growth in AvKARE. Furthermore, our focus on profitable growth, operating expense synergies, and lower interest costs are strong catalysts for strong shareholder value creation. With that, I'll turn the call back to Chirag.

Thank you, Tasos. Our strong Q3 results and updated 2025 guidance underscore the continued momentum across our diversified business. We remain confident as we advance this chapter toward becoming America's #1 affordable medicines company. Let's now open the call for Q&A.

Operator Instructions. We will now take our first question from Matt from Goldman Sachs.

Congrats on the quarter. Maybe on the Metsera partnership, could you give us your latest thinking on how the acquisition by Pfizer may impact the agreement? I know you said prior you don't expect this to change anything, given there's a Change in Control clause and that you all collaborated with Pfizer in the past. So just curious on your latest thinking there. And then we obviously saw this morning there's another bid for Metsera by Novo at a higher price. So maybe your thoughts on that dynamic as well. And if there's any meaningful difference from an annual perspective in terms of who ultimately acquires the company. And then maybe secondly, FDA came out with new draft guidance yesterday that essentially removes the need for comparative Phase III efficacy studies for biosimilars. Just curious on your thoughts in terms of how this impacts Amneal and the broader industry and market dynamics going forward.

Matt, I guess we chose the right partner. Metsera is doing well, I guess. And obviously there are 2 bidders now. And for us, it's really great. We've been working with Metsera for the last couple of years and have devoted lots of resources from science, engineering, operations, and manufacturing. Very close partner, great relationship, great company, and their programs are advancing well. As you know, Matt, I cannot comment on the current events between Pfizer and Novo, and either one of them, Amneal stands to win because of the higher name recognition on both brands with our partnership where Amneal has rights to 18 countries to market the products and agreement for supply, which is very meaningful as well. So stay tuned. And as it progresses, we'll keep you updated. Your second question, it's awesome. We've been experiencing that. We know from our partners what FDA is willing to do now since they have a lot of data over the last almost more than 12, 13 years; they have seen the biosimilars, the safety data, their biosimilarity data from the clinics as well. So finally, they are in agreement to push for more biosimilar approval, cutting down the cost and time by half. And this is where Amneal's vertical integration would play a key role because it will still take 3 to 5 years for competitors to catch up. So it's great for the industry. Most importantly, it's great for the patients. It's going to create great access. And FDA and HHS are behind us and the entire CMS to call out all the games that are being played by the brand companies and really promote and create a market for biosimilars. And making those biosimilars in the United States will even further give the advantages for the companies that invest in America. So we're very excited. There are 117 molecules, and only 30 are being worked on. And biologics, as you know, represents half of the value for the entire pharmaceutical spend. And most of those drugs are very expensive. Bringing affordable access, this is our mission, allows Amneal to take the leadership position. And what we've been saying is to become America's #1 affordable medicines company, allows us, in the future if we get the vertical integration done as soon as possible, to have a bigger, broader portfolio of 20 to 30 biosimilars and keep adding 5 to 7 every year. I hope that answers your question on where the biosimilars are headed. Very exciting.

Next we will have our next question from Leszek Sulewski from Truist Securities.

Just a follow-up for each question, actually. On the biosimilars front, how does that change your overall strategy given this draft guidance potentially finalized as it stands? And then on the opposing side to that, do you see potentially for the increased competition where the price erosion curves ultimately resemble the traditional generics? And on Metsera, understand there are clauses in place with the current contract that you have. You're building out the facilities in India. How is your thinking about that sway the new change of control of the company and then potentially your commercialization rights in the emerging markets? Are there any safeguards in place for you to retain those? And I do have a couple of follow-ups.

Thank you, Les. Let's delve deeper into our overall biosimilars strategy. It will shorten development times and reduce costs by nearly 50%, which is promising. However, we still require substantial biologics manufacturing facilities, sufficient capacity, and teams of hundreds in analytics, manufacturing, and engineering to complete these tasks, all while adhering to U.S. and European standards. Companies like those in India that have focused on emerging biologics markets for the past 20 years will need to establish new infrastructure to cater to the U.S. market and develop products from scratch for that market. If Amneal expands its operations through vertical integration, it will position us advantageously over the next five years. Regarding pricing and competitors, yes, we anticipate new entrants. However, the costs remain significant. This isn't about $2 million or $5 million for complex generics; we're discussing investments of $40 million to $60 million depending on the molecule. Establishing the necessary infrastructure, scientific expertise, and engineering capabilities requires considerable capital expenditures. Manufacturing biosimilars is complex, and their pricing is considerably higher than that of small molecules. Even with claims of 80% cost reductions, if the investment is $40 million to $60 million, the return can still be substantial, provided we execute well and choose molecules where fewer competitors enter first. This gives us an advantage regarding insurance coverage and potential collaborations with private labels, plus a buy-and-build strategy, all supported by our marketing capabilities at Amneal. I envision the biosimilar industry flourishing over the next decade despite competition. The market remains robust with significant financial opportunities and complex challenges, offering a wide array of molecules to pursue. We can target $500 million or $1 billion molecules instead of only chasing after those worth $10 billion or $20 billion that face intense competition. This industry is meant to be competitive and will ultimately deliver tremendous value to patients and providers, particularly with strong U.S. government support encouraging its growth, which aligns with the intent behind the legislation. We remain a major player in the U.S. biosimilars market and are poised to expand globally as well. As for your second question regarding Metsera, we cannot disclose too much at this time, but we have a solid partnership with them and look forward to collaborating with their new partner. We are genuinely excited about this development, so stay tuned for updates when the time is right.

And Les, just on biosimilars, I'd like to add a point to what Chirag was saying. First of all, this draft guidance is very encouraging for the entire industry. But unlike small molecules, still in large molecules, there are multiple barriers of entry. So the speed to market is still a lot longer. Plus the capacity, unlike small molecule where there was a floodgate of people filing 20, 30, 40 ANDAs, it's not possible. There are 112, 115 biologics products where only 20 or 30 are being worked on. So still there are manufacturing, science, analytical is a very strong aspect of development, and the R&D does not allow you to take 5, 10 biosimilars a year. So still, the next 10 years if you have a head start and have a vertical integration, there are so many opportunities you can do. And with these new draft guidance, 3 to 4 filings is the max for most of the companies.

Maybe just one more if I could squeeze it in for Tasos. SG&A Q3 run rate, a little bit of a pickup. Is this a good proxy as we move forward? And then second maybe high level, as you think about capital allocation, you're getting into that 3x leverage range over the next couple of years. What do you think of in terms of BD? Is it more transformative or continuation of tuck-ins or even on the biosimilars front, but just in general capital allocations priorities over the next couple of years.

Les, the answer to your first question about the run rate of the sales and marketing expense, I think Q3 is pretty indicative of where we are, because it includes full commercialization expense for CREXONT, which was an additive this year compared to last year. It includes a little bit of a getting the market set up for the exciting new launch of BREKIYA. So I think that's a good run rate. Our priorities here have not changed, and that is, how do we balance building capabilities and products and diversification in a thoughtful way, doing the right deals, and at the same time structuring the deals in a way that is affordable. So that was the case, for example, if you go back to AvKARE. Many years ago, we acquired 65% of that business, did not acquire the whole thing. It was the right, smart thing from a balance sheet perspective. It also kept the management team engaged with a substantial skin in the game. And that allowed us to delever that business quickly. Then you saw the Metsera deal last year. Again, a thoughtful deal, where the partner contributed a substantial amount of cash. There's substantial grants that we are expected to receive from the India government, and the CapEx is over the course of time. And that's the way we're thinking about this. The right deal comes up. We've been very vocal for probably the last couple of years about our desire to vertically integrate in the biosimilar space. So we continue to look at that, and we'll update folks when there's something to update about. But you can continue to expect discipline and doing the right deal at the right time.

We will now take our next question from Chris Schott from J.P. Morgan.

This is Ekaterina filling in for Chris. Firstly, regarding RYTARY, do you have any insights on when we might see generic entry? I’m curious if you’ve received any information from the channel about when Teva could potentially launch. Additionally, could you remind us of what you're including in your guidance for the year? Moving on to CREXONT, it's quite early to discuss the outlook for '26, but do you have any initial thoughts on factors that investors should consider for the next year?

Ekaterina, I'll take the first RYTARY question and then if you don't mind repeating your second question on CREXONT. So a couple of things. So on RYTARY, we have no new indication of whatever may or may not happen there. Earlier on this month, we launched our own authorized generics with a partner. So this was part of a well-documented settlement years ago, and we are receiving the majority of potential profits that may come up on that authorized generic. So overall, the delay of Teva has always been a positive for us. And it's going to be positive I believe for both this year and next year.

Yes. I think the second one, Ekaterina, is the 2026 as we mentioned in our script, momentum is already here. The approvals we listed on Page 11 of the company presentation tell you that the excitement over the new product launches. Current business is performing really well. So we expect continued growth in 2026 and beyond.

So just a couple for me. Wanted to pick your brain on the Xolair biosimilar. It doesn't look like a particularly crowded market potentially. So how are you thinking about that opportunity? So that's number one. Number two, can you just give us a better sense of how many biosimilars you're looking to file annually and specifically how you're thinking about Part B versus say Part D products and where your priorities lie in terms of whether it's a retail pharmacy setting or institutional setting? So just philosophically wanted to get your thoughts on that. And then lastly on the DHE autoinjector, how are you thinking about that opportunity, and what that market looks like, given that it's particularly crowded, acute migraine space?

David, we're pleased to announce that we have filed for Xolair biosimilars. Our manufacturing partner is based in the United States, with additional capacity also available internationally. We aim to leverage our existing relationships, built over more than 20 years, with buyers across roughly 300 products. This includes strong ties with CVS, Caremark, Optum, United, Express Scripts, Cigna, as well as smaller private label brands like Kaisers and Primes. One area we are considering is the private label market, which could hold significant potential, especially in a two-player market given that the brand itself is growing at 32%. We're excited about the prospects ahead. Being first to market generally results in broader coverage from pharmacy benefit managers (PBMs), which tends to increase interest from potential customers. We'll capitalize on the market opportunity for Xolair leading up to its expected approval in the fourth quarter of next year. Addressing the market conditions for Part B and Part D, we've consistently stated the necessity of vertical integration, as licensing deals are no longer effective. This model has shown limitations, especially in complex generics, due to the competitive landscape in U.S. markets making it challenging for us to achieve profitability in biosimilars. Companies that are vertically integrated, particularly those capable of developing multiple biosimilars each year, will likely emerge as the frontrunners. Our approach will encompass broader biosimilar opportunities across both Part B and Part D markets. Once vertical integration is achieved, we plan to expand into bispecific and antibody-drug conjugates. Engaging in biologics will allow us to explore more options in that field. Additionally, the FDA's consideration of a 505(b)(2) pathway for branded biologics presents an exciting opportunity for early access to essential treatments. We intend to participate in all market segments, be it Part B, Part D, private label, or smaller insurance clients, and we believe there will be no restrictions regarding our involvement compared to major competitors. Regarding DHE, we're enthusiastic about our market position, especially with CGRP and triptans. Our internal analysis indicates that around 132,000 patients do not respond to first- and second-line treatments and are currently treated with DHE autoinjections in hospital settings. Our innovation allows these autoinjectors to be used at home, alleviating the need for emergency room visits and associated wait and travel times. This has proven to be a significant advancement for patients, and we've received positive feedback early on. Our team is actively collaborating with leading headache centers and key opinion leaders. While it's still early in the process, we are optimistic about our progress. We have mentioned peak sales projections ranging from $50 million to $100 million, and we will continue to provide updates as we move forward.

Thank you. There are no questions waiting at this time. I will pass the conference back over to Chirag Patel for any additional remarks.

Well thank you very much everyone. Have a great day. Thanks.

Thank you.

That concludes the Amneal Pharmaceuticals Third Quarter 2025 Earnings Call. Thank you for your participation. You may now disconnect from your line.