Title

Presentation

Operator: Hello, everyone. And welcome to the Amneal Fourth Quarter 2022 Earnings Conference Call. My name is Bruno, and I’ll be operating your call today. I will now turn the call over to Amneal’s Head of Investor Relations, Tony DiMeo. Please go ahead.

Anthony DiMeo: Good morning, and thank you for joining Amneal’s fourth quarter 2022 earnings call. Today, we issued a press release reporting our Q4 results. The 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 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. Information on our use of these measures and reconciliation to U.S. GAAP are 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’ll now turn the call over to Chirag.

Chirag Patel: Thank you, Tony, and good morning, everyone. We delivered a strong fourth quarter results with $610 million of revenue and adjusted EBITDA of $154 million. We saw growth across all three business segments in Q4 and closed out 2022 well. Looking forward, our 2023 outlook reflects continued, resilient top and bottom-line performance. Overall, we believe Amneal is uniquely positioned for sustainable long-term growth. The Generics business is robust and growing each year. We are shifting towards more complex, high growth and high impact products. With each new launch in injectables, complex generics and biosimilars, our portfolio of affordable medicines is increasing the diversified. In Specialty, we are focused on expanding our branded business through the upcoming IPX203 launch and advancing our pipeline.

Together with the consistently growing healthcare business, we see multiple vectors of growth and value creation that the heart of our strategy is the focus on unmet patient needs, affordability and providing access to essential medicines globally. Like we now talk about how we are advancing our key strategic priorities. First, in Generics, we are constantly innovating, moving up the value chain of product complexity and expanding our impact on patients. Our strategic focus has been and it continues to be developing complex innovations, such as and injectables that creates tremendous value for patients, the next frontier of our affordable medicines journey in biologics and international. Since 2019, the team has done an extraordinary job our R&D engine, driving strong operational execution and ensuring the commercial success of our business.

As a result, our increasing diversified portfolio is generating durable top line growth. Over the last three years, we have consistently grown faster than the overall U.S. Generics market. Today, Amneal is the fourth largest U.S. Generics company in the terms of our annual prescriptions, and is responsible for saving American patients over $10 billion every year. We expect our topline growth algorithm in Generics will endure long-term. In injectables, we are focused on expanding our product portfolio, adding capacity, and building key capabilities. In 2022, the business was very successful, generating $181 million in revenue, today, we have about 30 institutional products with over 30 new launches expected by 2025. From an operational standpoint, we are more than doubling our capacity with our two new U.S. sites.

As we launch new products and bring new capacity online during 2023, we expect the next inflection of revenues will come in 2024. We are on track to achieving our goal of over $300 million in injectable revenue by 2025. Next, Biosimilars represent the next wave of affordable medicines and are highly aligned with our mission of providing access to high quality, affordable medicines. So, we are so excited about the growth prospects for Biosimilars. As the U.S. market alone is expected to approach $40 billion in net sales by 2027. With the long-term horizon, we see a very strong ROI as the cost to develop new biologics continue to come down, we expect this market will be less competitive than others. In Q4, we launched ALYMSYS, our biosimilar of Avastin; RELEUKO, our biosimilar of Neupogen.

We expect to launch our third product FYLNETRA, our biosimilar of Neulasta in the next few months in conjunction with our reimbursement coverage. Similar to the first-year adoption curve of other biosimilars, we expect 2023 will be a busy year as the commercial team works across payers, providers, and channels to drive uptake. For these three biosimilars, we see peak sales of over $200 million. We look to expand our portfolio and be strategically vertically integrated over time. Our goal is to be top five in the U.S. Biosimilars market, and a global player over time like U.S. Generics we expect to get that. To expand access to essential medicines globally, we are leveraging our diverse U.S. FDA approved product portfolio of complex generics, injectables, specialty, and biosimilars.

We believe our international expansion strategy will add considerable revenues and profits in time. In the fast moving $25 billion Indian pharmaceutical market, we are expanding our presence with a new brand and leveraging our local commercial team as we focus on the hospital market in India. In Europe, we signed a long-term distribution agreement with Orion at year-end. We will register complex generic products starting this year and look to begin commercializing in Europe late next year. In addition, we are pleased to share that we’ve recently signed another long-term distribution partner agreement in Canada. We are partnering with Sterimax to bring our injectable portfolio to Canada. We will continue to pursue additional partnership opportunities around the world.

Second, in Specialty, we expect to be much bigger and more sustainable player over time. Our strategy focuses on 505(b)(2) opportunities that leverage our reformulation technologies to improve existing medicines and provide new innovative therapies for patients. Today, our key branded products Rytary for Parkinson’s and Unithroid for hypothyroidism continued to grow low double-digits combined. Next up is IPX203. We are so excited about the potential of IPX203 to be a best-in-class therapy for Parkinson’s patients. Beyond IPX203, we are advancing our pipeline of neurology and endocrinology programs. We look forward — we look to expand our — over $500 million in specialty revenue by 2027. Third, in AvKARE, we look to expand across multiple channels, distribution, the Federal Government, and unit dose.

To-date, since its acquisition in 2022, the revenue of the business has grown double-digits. We expect momentum in this durable $400 million plus revenue business will continue going forward. In summary, we are very excited about Amneal’s future that our key catalysts happening now across our business such as Biosimilars is more ahead, particularly the planned launch of IPX203 in specialty, as we execute our strategy and launching products in high growth areas, our durable and this billion business continues to grow. We believe these growth drivers will accumulate and generate higher levels of financial performance over time. I will now hand it over to Chintu.

Chintu Patel: Good morning, everyone. Thank you, Chirag. First, thank you to the Amneal family, who worked so hard to make healthy possible for so many. Let me start out with operations, we are focused on operational excellence and optimizing our global footprint. In 2022, the team drove record production of key products such as Adrenaclick, achieved operational efficiencies and expanded infrastructure in key areas such as injectables. Next in R&D, our global innovation team continues to drive a highly productive R&D engine as we shift our efforts towards a wide array of complex pipeline products. In Inhalation, we recently entered a partnership to in-license the soft technology platform for the development of inhalation pipeline products such as Respimat inhalers.

As always, Amneal is built upon our strong quality track record and commitment to the highest standards of quality. Since our founding in 2002, the FDA has conducted over 80 successful inspections of our sites. We are continuously looking for ways to push the quality bar higher to investments and best practices. Let me now walk through the different aspects of our innovation agenda. In Generics, our focus is on complex innovations for about 90% of our pipeline. With over half expected to be first-to-market, first-to-file or 505(b)(2). In 2022, we launched 26 new generic products. In 2023, we expect over 30 new launches with five already launched in the first two months. Today, we also announced our FDA submission of generic Narcan, manufactured at our Branchburg, New Jersey facility.

We see a meaningful opportunity to improve access to this critical opioid overdose treatment. Please refer to our key catalyst slide in the earnings presentation for a list of notable launches. In Injectables, we are scaling up as we expand infrastructure and add to our portfolio. Our newest injectable site is on track for inspection next month, with FDA approval expected later this year. Once approved, we will have all the key capabilities of a leading injectables company with the ability to produce across dosage forms, vials, prefilled syringes, cartridges, and LVP bags. With our expanded capabilities, we have shifted our innovation focus towards injectables. In the last few months, we received approval for our first two LVP bags, Esmolol and Magnesium sulphate.

There are 33 injectables ANDA’s pending and another 59 products in the pipeline. We have made good progress advancing our programs in several complex areas including drug-device combination, peptide, long-acting injectables, liposomals, LVP bags, and 505(b)(2) products. Similar to 2022, we expect to file 10 to 15 more ANDAs in 2023. We are well on our way to scaling our injectables business to be a major player. In Biosimilars, we are very excited about Amneal’s potential in this space. To start, we are pleased to launch our first two biosimilars in Q4 with one more launching soon. Beyond this, there is tremendous opportunity to expand our portfolio with additional molecules as a large number of branded biologics come off patent in the coming years.

Currently, biosimilars are in development for 27 molecules, representing approximately $96 billion of the total $260 billion U.S. biologics market for IQVIA. We are looking at innovative and cost-effective development and manufacturing pathways with partners. As our goal is to be first or second to market in future biosimilars. Over time, we look to be vertically integrated to scale this business effectively. We expect biosimilar will be a key growth area for Amneal long-term. Looking globally, we see 2023 as a foundational year in executing our international expansion strategy. Our focus and effort extend beyond the key initiatives in India, Europe, and China which Chirag highlighted. In addition, we have comprehensively analyzed our entire product portfolio in the context of all emerging markets.

As a result, we have systematically identified over 50 product opportunities across different emerging market countries. In 2023, we have begun registering products locally. We have a dedicated team at Amneal focused on driving international expansion. In specialty, we are expanding our branded portfolio to advancing our pipeline. Our PDUFA date for IPX203 is coming up on June 30. We continue to see this as a $300 million to $500 million peak sales opportunity as we look to impact a broader portion of U.S. Parkinson’s patients. We are also looking at international licensing opportunities. Beyond IPX203, we have continued to advance our branded pipeline and are pleased to share the addition of K-130 to our specialty pipeline. K-130 is the new R&D program for symptomatic neurogenic orthostatic hypotension.

There is a potential broad use case across several patient population, including Parkinson’s and other chronic diseases. This 505(b)(2) program utilizes our proprietary drug delivery technology platform, GRANDE, which is an advanced gastric retention system. We are working on additional R&D program in the pipe — in the preclinical phase. In summary, we are executing our innovation strategy and advancing our pipeline, particularly in high growth areas. I will now hand it over to Tasos.

Tasos Konidaris: Thank you, Chintu. I will start with our fourth quarter results, then move on to our full-year 2022, followed by 2023 guidance. We’re very pleased with our fourth quarter results with total net revenue of $610 million, growing 14%, adjusted EBITDA of $154 million, growing 26%, and adjusted diluted EPS of $0.23, up 35%. Q4 Generics’ net revenue was $399 million, an increase of $53 million or 15% versus the prior year period. Our results reflect favorable prior-year comparisons, solid growth of Zafemy, and the breadth of our new product launches. As a point of reference, new products launched in 2021 and 2022 accounted for $35 million or 70% of our growth this quarter. Q4 specialty net revenue of $103 million, increased $2 million or 2% versus the prior year period, driven by Unithroid, up 34%, Rytary, up 13%, partially offset by the final quarter impact from the loss of exclusivity for Zomig nasal spray.

Our AvKARE business continues to perform exceedingly well with Q4 net revenue of $108 million, up $18 million or 21%, compared to the prior year period, due to continued growth of our distribution channel and new products to better meet the demands of our customers. As we outlined on our Q3 earnings call, the drivers of sequential revenue acceleration from Q3 to Q4 played out as expected. Our expansive and diversified portfolio continues to perform well and increases our financial resiliency and predictiveness. Q4 2022 adjusted gross margin of 43.4% was slightly up, compared to the prior year period. Q4 adjusted EBITDA of $154 million was $32 million or 26% greater than the prior year period. We believe strong Q4 results are indicative of our P&L profile over time with a faster-growing top line, solid gross margin and operating expense leverage, generating robust profitability.

Now looking at full-year €˜22 results, where we met on our financial guidance metrics. Total net revenue of $2.2 billion grew $118 million or 6%. Full-year 2022 generics top line grew 5%, driven by new product launches, growth of our injectable portfolio and our Adrenaclick epinephrine auto injector. (ph) net revenue grew 16% driven by the distribution channel, while specialty net revenue declined $4 million or 1%, a strong growth in Unithroid, up 33% and Rytary up 8% offset the Zomig loss of exclusivity, which is an impact we could now annualize. Full-year 2022 adjusted EBITDA was $514 million, up $2 million year-over-year, reflecting top line growth partially being offset by inflationary pressures and growth in our sales and marketing functions in support of numerous product launches.

Full-year 2022 adjusted diluted EPS of $0.68 declined 13%, in part due to higher interest expense. From an operating cash flow perspective, we generated $210 million, of which $145 million was used to settle certain legacy legal matters. As we discussed in the past, we’re very focused on resolving expeditiously various legacy legal issues. Earlier in 2022, we resolved the Opana year matter, and in the fourth quarter of 2022, we recorded an $18 million charge related to majority of opioid cases. We believe this amount is consistent with our position as a generic manufacturer with limited market share. From a balance sheet perspective, we finished 2022 with net debt of $2.6 billion and net debt to adjusted EBITDA of 5.1 times, compared to 7 times three years ago.

In 2023, we expect to refinance our $2.6 billion Term Loan B and continue to delever over time through EBITDA growth and debt pay down. Let me now turn to our 2023 guidance where we expect another year of stable results as we build for sustainable long-term growth. From a top line perspective, we expect 2023 total company net revenue of $2,250 million and $2,350 million, which reflects continued mid-single-digit growth driven by all segments. In generics, we expect low single-digit growth, reflective of the following four dynamics. First, we believe our three biosimilars should add $40 million to $60 million this year, driven by ALYMSYS. 2023 represents our first year of commercialization in this new products market and we believe our products and commercial teams can add substantial value to our customers.

Second, we expect the strength of our generics R&D pipeline to add over $100 million in net sales with many of these new products having already been approved. Third, we expect resolution of the capital supply chain issues that impact our controlled substance products, as well as a few future injectable pipeline products. Fourth, we expect the competitive nature of our generics segment to persist from a price and volume perspective. In specialty, we expect mid-single-digit growth driven by Rytary and Unithroid. We’re very excited about the potential FDA approval of IPX-203, but we have not included that in our net sales guidance. At AvKARE, we expect continued double-digit growth driven by the ongoing expansion of the distribution segment, as well as new product innovations in the government and hospital segments.

Moving down the P&L. We expect 2023 adjusted EBITDA of $500 million to $530 million. Our outlook includes approximately $15 million of inflation and $30 million of incremental investments in sales and marketing to scale up in higher growth areas, such as specialty, biosimilars and injectables. From an adjusted EPS perspective, we expect $0.40 to $0.50, which reflects higher interest expense related to our likely Term Loan B refinance. On the cash side, we expect 2023 operating cash flow, excluding any legal settlements between $200 million and $230 million, which is in line with the $210 million we delivered in 2022, despite higher interest costs. Furthermore, we expect $50 million to $60 million in capital spend. Finally, from a phasing perspective, we expect 2023 to develop in a similar manner of 2022.

With that, let me hand it back to Chirag.

Chirag Patel: Thank you, Tasos. In summary, 2022 was a year of strong performance across our diversified portfolio. Amneal is a fundamentally different company were in 2019, when Chintu and I came back. The business is expanding into high-growth areas such as biosimilars, specialty, injectables and complex generics. The top line is growing each year, we had provide — devoting our strategic focus, investment and energy to the high-impact areas of the global pharmaceutical industry. Looking out one year from now, we envision an even stronger Amneal with a flourishing biosimilar business, specialty accelerating with IPX-203, a generics business that has a whole new basket of complex innovations, injectables, inflecting higher, healthcare continue to grow double-digits, all building on our consistent durable financial profile.

Over the long-term, we believe Amneal is uniquely well positioned to drive sustainable growth and create value for all stakeholders and society. We will now open the call to questions.

See also Billionaire Ken Fisher’s New Purchases and 25 Most Profitable Companies in the World.

Operator: Our first question is from Elliot Wilbur from Raymond James. Elliot, your line is now open. Please go ahead.

Elliot Wilbur: Good morning. Thank you. Good morning, everyone. Question real quickly on the pipeline, and I guess specifically thinking about the specialty segment and I’m referring to slide five in the deck. Previously, the company had talked about peak sales potential for pipeline assets in the specialty segment of being $500 million to $1 billion. Now the language is $500 million by 2027. I’m presuming there’s no change there, and that’s just a desire on your part to be a little bit more granular in terms of the timing, but I wanted to confirm that? And then a follow-up, big-picture question, Chirag, I think you sort of addressed this in your closing commentary. But in conversations this morning, investors clearly sends a change in the generics landscape, maybe not necessarily getting better for the industry as a whole, but certainly not getting any worse.

They looked at Amneal as one of the best managed companies and that’s the only company has been able to produce organic top line growth in the last couple of years. But they sort of express frustration with the fact that EBITDA has been roughly flat the last couple of years as you kind of scaled up investments and a lot of kind of one-offs have prevented — has kind of diluted the cash conversion metrics and prevented the company from kind of attacking its debt load. So I guess as I think out to 2024 and beyond, I mean, where do we get to a point where we really start to see the EBITDA leverage relative to top line growth kick in, meaning that they — and that’s kind of, I guess, a question on both investment spend and also gross margin dynamics and relative mix.

Thanks.

Chirag Patel: Thank you, Elliot, and thank you for your compliments on Amneal. It is over 7,000 people strong team culture, pipeline, investment that we have done over the years. We’ll continue to believe in the United States market, which is where we are from. So let me answer your big picture question first and then the clarification on the $500 million to $1 billion in just granularity nothing different there. We hope to get (ph) billion as soon as we can on specialty. So big picture, what we see, and as I mentioned, a year from now or two years from now, we have multiple vectors of growth. So let’s take each one of them. Generics, you’re right, it’s not getting worse. It may be getting a bit better where certain responsible buyers we have reached out.

You know the three big buying rooms, so when I say buyers, they’re not thousands. And some of them has said that we hear you. There is no room for any price reduction any further. These are extremely low-priced drugs. And if anything goes further down, there is the risk of shortages companies like us, other companies, Teva, already have done it, in even Indian companies getting out of those molecules, that leaves going for investment in generics business, R&D investments, as well as quality and manufacturing automation that FDA is pushing for it. So all of these do not work if ruthlessly the prices keep going down, because government has allowed the three buyers to consolidate and these are large companies that have been consolidated. And it’s just unfair for suppliers, who cannot even do a small consolidation, and that has to change.

And we are, as an industry, very vocal about it, right? It is for the patient. If you think about it, that companies will find different avenues move away, but what happens to the patient, if 90% of the prescription in the United States, how and who are going to fill those prescriptions. Then will you be dividing on a lower quality suppliers on reliable supply chain. So we believe the generics have picked the bottle in that sense for mature products. And we are seeing it a responsible behavior from certain biggest fine groups, and we appreciate that. For us, within generics, we got Plan D, because we have moved up to the value chain. And if you look at where we are going is that creating the next frontier of affordable medicine company, which includes €“ obviously, we will continue on the products we have and will enter the market as needed for the commodity generics products.

But we have moved up to the non-commodity products. What I mean by that, where the competitors are 10 to 15, not 100. Those are the products we have been working on, and we have introduced many of them. So that’s trial of the inhalation products, the injectable products, complex injectables coming up. So we’re very excited about the entire pipeline within generics and that is a part of being a next 20-year affordable medicine company globally (ph) biosimilars. And those are the companies if you see next two, three, four, five, seven years, will have plenty of products to use from, as you know, globally $400 billion of biologics lose exclusively over the next 10-years. So it’s plenty of products to work and it’s very difficult, very complicated manufacturing.

We do not expect even 30 competitors . It would be more of a 10 to 15 companies eventually stays in the United States and Western European markets, which are most regulated the requirements are stringent. So very excited building that affordable medicine company in the next 20-year and lead that. The second is the specialty. Specialty, that we added K-130, we have an excellent pipeline. People do underestimate IPX203, but we don’t we are ready. As you know, we have a lot of experience in launching Rytary, relaunching Rytary. We are very close to Parkinson patients and providers. They need this, I don’t think (ph) should exist. It’s a 30-years old technology. Why should you take IR when you have the product that’s giving you good on time, almost 1.55 hours per dose, that’s a meaningful improvement in Parkinson’s patient lives.

I think we are going to go for as big of a patient conversion as we can with affordable prices. So that is — we’re really excited on the specialty business. Healthcare is performing superbly well, double-digit. As you know, it’s a large distribution market, and we love to find our missions and compete in the distribution market. We have excellent team led by Steve and we’ll continue to grow that business, reusing great opportunities for us. And it also allows us to avoid the middleman and go direct to customer. And then the last thing I would mention is, we are not giving you full picture on our international expansion plans as we go in the next few quarters, we will. We’ve been working on it; you saw some highlights what we are doing. And why we are saying India, Middle East, these are the next 20-years of growth in the pharma for affordable medicines.

And they are keen to know to have very high-quality products, complex products, unmet need, because many of these advanced therapies do not make it to those countries. The rare diseases are hardly been talked about it. So Amneal has a great strategy, we already launched our commercial business in India with few hundred commercial people already in Mumbai. And as you know, India’s economy is growing by leaps and bounds and the cost of living, I mean, the signings of living everything is going up and we — and more people are covered in insurance as well. So really excited about that. Europe remains obviously second largest market after United States and we are partner early on expanding, and we’ll look forward to other partners as we go forward.

And countries like Brazil, we’ll look for partners as well. So very excited long answer, but it — your question was very awesome, so I had to give a long answer. So thank you Elliot.

Operator: Our next question is from Gary Nachman from BMO Capital Markets. Gary, your line is now open. Please go ahead.

Gary Nachman: Okay. Great. Just following on a couple of answers to the last question. So for IPX-203, how have conversations with FDA been going? What are you doing to prepare for that launch? You’re obviously pretty excited about it. I think you said you’re not factoring anything in the revenue guidance for this year, but is it in the spending guidance? And then ultimately, how much will it cannibalize Rytary — or will it be additive for new patients when you talk about the $300 million to $500 million peak over time. And on the international expansion. Maybe just give a little bit more color when that could start to contribute? I think you said it’s all incremental. So I want to confirm there’s nothing in the guidance for that for this year, if that’s the case?

And then lastly, on gross margin. That came in weaker than we thought in the fourth quarter. What are the big drivers behind that? And what are you assuming for gross margin trends specifically, in 2023? And how much is that weighing on EBITDA this year? Thanks.

Chirag Patel: Thank you, Gary. Chintu, would you like to give IPX-203 regulatory update?

Chintu Patel: Sure. Good morning, Gary. So IPX-203 is moving very well in a regulatory process. We are engaged with FDA and so far, it’s moving in a very positive direction, and we are very optimistic to have approval on its goal date of June 30th. And there is nothing — there has been a showstopper. So it’s in a right direction, right place on IPX-203 from FDA perspective.

Chirag Patel: Gary, your second question on the cannibalization. We don’t see it that way. We see IPX-203 as a much broader market. We’re going up to 3 million prescriptions were all 95% of them use IR. And Rytary has not penetrated with general neurologists, so we’re going for a broader market. We believe some of the Rytary patients will switch over to IPX-203, but that’s not our strategy. We are going for bigger market, much bigger penetration with the excellent pricing strategy that makes it affordable for both the medicare patients, as well as commercial patients, so very excited. On margin question, I’ll — again you said international, let me answer that before I give it to Tasos. We see that going from zero to several hundred million dollars within the next three, four, five years.

So it’s all incremental, very exciting using our own portfolios in the United States FDA approved products, command premium and respect all over the world. And we’re proud to bring all of that portfolio to partners and our own in India. We may be doing our own commercialization in certain market opportunistically as we go forward, but very exciting international expansion, and it would be — it’s embedded for the complex products that we are working on from the beginning we’re filing globally. So we do not out in timing such a biosimilars and complex injectables. Tasos?

Tasos Konidaris: Hey, Gary. Good morning. Regards to margins, so Q4 was pretty much in line with our expectations. So generic margins were 41.6%, up 250 basis points. Specialty was up 200-some basis points. I think what’s happening is the mix where we have our — and the total company margin actually at 43.4% was flat to Q4. So I think what’s happening here a little bit is a mix of business, where we have (ph) top line growth, kind of, growing double digit, much more so than the rest of the business. And that’s the lower margin gross margin business. So I think that’s kind of a little bit perhaps the weakness you may be talking about, but the real profitable segments of generics and specialty, great — terrific margin expansion in Q4.

Looking at 2023, so if you think about generic gross margins in 2022 were about low-42 is about 42.3%. My gut feel is 2023 budgets probably between 41% and 43%, something in that neighborhood. It’s all going to be a function of the cadence of new product introductions and, kind of, what happens from a competitive standpoint. Healthcare is probably going to be at about 13% versus 14% this year, just because their own distribution business is growing faster within their segment. And finally, specialty business, which are incredibly profitable, we expect them to stay at the 82%. So overall €˜23 to €˜22, not a much big difference in the overall gross margins. Hopefully, that helps.

Gary Nachman: Yes, it does. And just I — you didn’t address before, but in terms of the guidance on the spend, how much of the launch for factored in there? Yes, yes.

Tasos Konidaris: Yes. So all the spend is in there. That’s one of the reasons to your point to the — to Elliot’s previous question, right? It’s like alright guys, you keep growing top line, you keep diversifying the business, what — and you finally have created stability, right, on EBITDA, but we don’t see the growth, and big part of it is the investments we’re making to the business. So our guidance includes, as I mentioned before $30 million of incremental sales and marketing expenses. So that has all the incremental expense for the full-year commercialization of our biosimilars and the full-year commercialization expenses of IPX-203. So depending on the timing of approval, as you know, we have a PDUFA date on June 30, depending on — obviously, we intend to launch quickly as quickly after that as possible, right depending on the uptake of revenues, the incremental gross margin provides an opportunity for us.

Gary Nachman: Great. Thank you.

Operator: Our next question is from Chris Schott from JPMorgan. Chris, your line is now open. Please go ahead.

Chris Schott: Great. Thanks so much for the questions. Just a couple for me here. I guess first on the generic growth rate for this year. It seems like you’re getting a decent contribution from biosimilars and new launches. And it sounds like some of the comments you made before that you’re maybe more optimistic on the overall environment, but the growth is only low single-digits. So could you just help me balance in terms of like what headwinds we need to keep in mind for the generic business this year? And then my second question was on just, kind of, interest rate environment here. Does the higher rate environment we’re in change how you think about capital allocation or how you think about, kind of, debt pay down versus kind of incremental business development at all as maybe just start with those two and one follow-up from there.

Tasos Konidaris: Yes. Good morning, Chris. Yes, you’re spot on. So that’s why when you talk about generics that we’re seeing for 2023, low single-digits overall, which we have said we expect mid-single-digits. So 2023 is a little bit of not growing as fast as we think we can grow the business. A part of it is cadence of new products. Part of it is we’re planning for a similar competitive pressures, both in terms of price and volume as historically, right? So as you had said, we believe the environment may improve this year. And if it improves, we’ll drop the incremental profitability bottom line. If the environment continues to persist both in terms of price pressures and competition, then I think our guidance is covered. So that’s kind of the first topic.

The second topic about, kind of, higher interest rate costs I think everyone, right? I think everyone not only ourselves; I think everyone is reassessing of capital allocation. So obviously, in terms of M&A, I mean, we have been fortunate the last number of years, we have made substantial investments that, kind of, build out our specialty pipeline, built out our biosimilars pipeline. And as Chirag and Chintu said, we put over $150 million in our infrastructure to expand our injectable portfolio, right? And now we’re going to reap those rewards late this year and next year. So we’re fortunate a bunch of — and a substantial amount of investments, and also, we settle a lot of legacy legal issues, right? So a lot of that is behind us. So now in terms of M&A, I think we will be raising, right, our own expectations in terms of the expected rate of return.

So we’re going to be even more disciplined, number one. And number two, in terms of kind of overall debt pay down, I think becomes most of the priority than was in the past. So hopefully, that helps.

Chirag Patel: we have such an awesome pipeline, the organic pipeline, we do not need to be changing any M&A.

Chris Schott: Perfect. Thanks for the color there. And then just one just quick clarification on IPX-203. I know you’re being conservative approach of not including that in the guidance this year. But maybe just a little bit of — I know you’ve touched on this in a couple of the prior questions, but assuming that was approved around the PDUFA, should we be thinking about this a product that takes a few quarters to get, kind of, reimbursement in place and kind of physicians prepped for this product? Or is it something that actually could have a fairly, kind of, quick uptake assuming approval and all goes well around the PDUFA. Thank you.

Tasos Konidaris: Yes. I think a couple of things. I think our — you can assume with our commercial team; our reimbursement teams are already — will begin engaging with payers even now as we speak. So our ability, that’s number one. Number two, I think considering the unmet need, the product profile, my expectation. As you know, it’s not going to be reimbursed day one, right? It’s going to take some time to build on reimbursement. So I think that’s going to happen. And the other thing is, I think the buildup of revenues will be over time, and that is because our primary focus will be a new patient starts, which we think will resonate very well in that patient population and over the course of time, I think we’re going to see a nice switches from other from the IR, which is a year-old technology.

So I don’t think it’s going to be an incredibly rapid acceleration of revenues at the latter part of this year. I think it’s going to build out — build over time in the latter part and into 2024 and beyond.

Chris Schott: Great. Thanks so much.

Operator: Our next question is from David Amsellem from Piper Sandler. David, your line is now open. Please go ahead.

David Amsellem: Hey, thanks. So I just had a couple of product-specific questions. Can you talk through how you’re thinking about the long-term sustainability of Unithroid growth, I know there’s some unique features regarding the levothyroxine market. So what’s your level of confidence you continue to grow that business just significantly just beyond not only 2023, but beyond 2023. That’s number one. Number two, Adrenaclick with a number of different formulations of epinephrine that are in development? Do you think that could be disruptive to Adrenaclick over the long-term? In other words, the injectable formulations? And then lastly, maybe another question on IPX-203. Do you envision most Rytary patients switching over? And do you — or do you vision overall market expansion. What’s the right way to think about the opportunity there vis-a-vis switching versus market expansion? Thank you.

Chirag Patel: Thank you, David and good morning. So let’s say — Unithroid is, you know, there are multiple generics products in the market and patients do not like to — some of the patients have a hard time switching over in their use to Unithroid and they’re continuing on Unithroid. It’s a very small market share, like 0.05, you know, how large market is it. We believe that study keeps growing and the more and more patients and providers and physicians want that patient to be on a consistent drug rather than switching over and subject to be switching over to multiple generics products. Adrenaclick, we have a new nasal spray for sports through Unithroid, it’s even gets approved for mothers — parents to have use it not to have the with it, it’s kind of not possible.

It will take time. They have not done any clinical. So I bet knowing parents will be my softening a parent, I will not take that chance and just in nasal spray versus epiband Adrenaclick, maybe carry both for a while. So we see — even if it brings any penetration. It will be over time, and it will be a slower penetration. And we have to see the pricing dynamic. Are they going to be competitive to Adrenaclick. And that’s another one. IPX-203, Rytary, we expect over time, half of the patients would move over to IPX-203, it is a better product, obviously. And going on for the broader market, as I have mentioned earlier, much broader market, there are 3 million prescriptions for CDLD, so we have for Rytary 150,000 only. So we’re going to grow the business into a 5% penetration, try to go for pretty much converting as many as we can.

And our pricing strategy is so unique and awesome, which we well received that we believe the coverage will be much bigger for both medicare and commercial patients, really excited on IPX-203.

Operator: Our next question is from Balaji Prasad from Barclays. Balaji, your line is now open. Please go ahead.

Balaji Prasad: Good morning,

Anthony DiMeo: Balaji, your — there’s some interference on your line, Balaji. I don’t know if there is anything you could do about that?

Tasos Konidaris: Hey, Balaji. We kind of lost you a little bit. Do you mind if you can come across very clear. So do you mind if you repeat your question, please?

Balaji Prasad: Absolutely. Got it. So couple of questions for me. Firstly on IPX-203, Chirag you mentioned that it doesn’t see much kind of information with this product. We just kind of where the market seems to model

Anthony DiMeo: Sorry, Balaji, this is Tony. It’s still hard to hear you. Happy to follow-up with you perhaps after the call.

Tasos Konidaris: Or even Balaji, maybe you can e-mail the question over to Tony, if you can e-mail in the question. And if we get it in time, Tony can address it on the call and we will give you an answer. Is that okay?

Balaji Prasad: Yes.

Tasos Konidaris: Alright. Thank you. go to the next one, please.

Operator: Sure. Our next question is from Greg Fraser from Truist Securities. Greg, your line is now open. Please go ahead.

Greg Fraser: Great, thanks for taking the question. On the generics business, among the approved products that will be launched this year, are there any that you would call out as being particularly material contributors to the $100 million plus of new product sales? And are there any generics that are pending approval that could be significant contributors to that number. Thank you.

Tasos Konidaris: Chintu, do you want to take this one?

Chintu Patel: Sure. Yes, hi. Hi Greg, yes, we have some of the products approved in their IP-driven launches. The big notable ones are the (ph) and sodium alginate and there are a few others. We have not disclosed all the upcoming launches, but we have — we are expecting to launch five new injectable products in LVP bags by second quarter. And those ones are almost two are approved another three got — that are very near to approve in a clear and space. So we are very optimistic about our new launches throughout the year, total over 30 new launches we are expecting in 2023.

Anthony DiMeo: And this is Tony. The only thing I would add, too, is you had 26 new product launches in 2022, more of a back-half weighted contribution in fiscal ’22. So that will annualize this year in addition to Chintu’s, the 30-plus launches this year. It’s a long list. We have the key growth catalyst slide — in slide seven. But as Tasos has also mentioned the contribution from new product revenue this year is over $100 million. So it’s more than double versus even — so potentially a great year for new product launches in €˜23 with a long list of products that will contribute to the top line.

Operator: Our next question is from Elliot Wilbur from Raymond James. Elliot, your line is now open. Please go ahead.

Elliot Wilbur: Yes, thanks. Two quick follow-ups. First, I didn’t catch it in your prepared commentary or the Q&A. But just any commentary around the dihydroergotamine auto-injector filing, that seems to keep getting pushed back in terms of expected timing, hard to believe it’s a molecule formulation issue. Just wondering if you can give any color there in terms of why the time lines there are being extended? And then for Tasos just a real quick question on the debt. Anything you can say about the outlook for interest expense in 2023? I know it’s kind of hard to say when you’re be in market looking to refinance. But just looking at — so far SOFR rates today and your current spread, it would seem like we’re talking about effective rate somewhere around 8%. Just wondering if that’s in the ballpark of what you’re currently thinking? Thanks.

Chirag Patel: I’ll take the DHE to impact on refinancing. So DHE autoinjector executive was from one of the CMOs and the CMO has been stuck with — not for the product related, but GMV-related issues we’ve been working on site transfer. It is a complex device-based product. So it’s taking longer than we had expected, and that is why the date has moved. Tasos?

Tasos Konidaris: Yes. Eliot, you’re thinking about the interest rate expense the right way. So probably somewhere around in the 8%. Obviously, it depends exactly what instruments we’re going to choose and you’re thinking about this the right way.

Anthony DiMeo: And then the final question, Balaji. Thank you for sending it. A final question for today. With the goal of being a top five player in biosimilars over time, is this a five-year plan, a 10-year plan? And what’s the road map to get there pipeline, et cetera?

Chirag Patel: Great. So three launches, which check marks the first requirement for that. As we build the, I mean, I would take it that a little bit in 2007 we started building Amneal Generics business, it took 10-years to get to top five. So we do expect this as also a 10-years journey, but every year, there’s a lot of progress. So the second strategy after these licensing, obviously we are working on a few more licensing only from the proven companies. And then we would — we’re working on vertically being integrated for some of the products to have our own R&D. So we would bring that in-house, our own manufacturing, we love U.S. manufacturing and couple that with probably India manufacturing, as well for the emerging markets or any other markets we can ship from India as well or even U.S. So multiple approaches, so we should be all set — plan is to smooth at starting next year.

and continue to add and that brings, obviously, we’ll bring the pipeline. And as Chintu mentioned earlier, just like what we did in the generics market is we want to be many in cost to market. So first biosimilar second at most, we’re not touching where we would be a eight square and there are a lot of missions within immunology, within oncology or weaker outside of those two as well. And the commercial infrastructure is kickass. We have one of the best and keep building it. That’s something we made really well on generics business, we became a trusted partner for our customers, even though they kept consolidating, we still love them, and we’re still — we enjoy probably the top position with them for all the buy groups. And here, we’re doing same thing with oncology groups, hospitals, the cancer centers, we’re just likeable company.

So — and we are recalling others, they can count on our supply they can count on. So with all that and taking it global as well from the beginning, very excited to build and very committed to build this business probably, because we know how it’s going to play out over three, five, seven years, you will see the companies like us and Teva and Sandoz playing in this and then obviously has a division and always two large Korean players. But you won’t see branded companies playing in this much at all. So it leaves more, as I called it earlier, the next 20-year of affordable medicine business, and those are the companies that actually going to be one of the leaders there going forward. Harsher, you want to add anything if I missed.

Harsher Singh: Hey, Balaji I think our focus is a bit more buy and build and it is — then is sort of Part B in the context of our pipeline and what we’re chasing. We do think those markets are more interesting. So that’s how you should think about pipeline though we’re not public on it right now.

Chirag Patel: Thank you.

Operator: Ladies and gentlemen, we currently have no further questions. I would now like to hand over to Chirag Patel for final remarks.

Chirag Patel: Thank you, everyone. Have a great day.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines. Thank you.