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Amneal Pharmaceuticals, Inc. (AMRX) Q1 2021 Earnings Call Transcript

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Amneal Pharmaceuticals, Inc. (NYSE:AMRX)
Q1 2021 Earnings Call
May 7, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the Amneal First Quarter 2021 Conference Call. [Operator Instructions] Please note today’s event is being recorded.

I would now like to turn the call over to Amneal’s Head of Investor Relations, Tony DiMeo.

Anthony DiMeoSenior Director, Investor Relations

Good morning, and thank you for joining us for Amneal’s first quarter 2021 earnings call. Earlier this morning, we issued a press release reporting our financial results. The press release as well as the slides that will be presented on this call are available on our website at amneal.com. We’re conducting a live webcast of this call, a replay of which will also be available on our website after its conclusion.

Please note that today’s call is copyrighted material of Amneal and cannot be rebroadcast without the company’s expressed written consent. I would like to remind you that statements made during this call, stating management’s outlook or predictions for future periods are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the section entitled Cautionary Statements on Forward-looking statements in our press release and presentation, which applies to this call.

Our future performance may differ due to numerous factors, many of which are listed in our most recent Annual Report on Form 10-K and are revised and updated on our Quarterly Reports on Form 10-Q and current reports on Form 8-K, which you can also find on our website and on the SEC’s website at sec.gov. We’ll also discuss certain non-GAAP measures. You will find important information on our use of these measures and our reconciliations to the U.S. GAAP in our earnings release. Included in the appendix of today’s presentation, you will find U.S. GAAP financial metrics that correspond to some of our U.S. non-GAAP measures we reference throughout the presentation.

On this call this morning are Chirag and Chintu Patel, our Co-CEOs; Tasos Konidaris, our CFO; Andy Boyer and Joe Todisco, our Chief Commercial Officers for the Generics and Specialty segments, and Steve Manzano, General Counsel and Corporate Secretary.

I will now turn the call over to Chirag.

Chirag PatelPresident and Co-Chief Executive Officer

Thank you, Tony. And welcome to Amneal. Good morning all, and thank you for joining us this morning. First, I want to acknowledge the public health crisis in India. COVID-19 has challenge the world in many ways but even by the standards set over the last year, the situation in India is very challenging and access to medical care is limited. We are working diligently with Indian government officials, charitable foundations and other pharmaceutical leaders to utilize our expertise, resources to secure critical care medications and equipment. Our hearts are with our colleagues in India as well as all those who continue to fight COVID-19 around the world.

As an essential business, we are proud of the investments we continue to make in protecting the health and well-being of our employees. In addition, we are also ensuring the continuous supply of medicines, corporations and customers in the United States. Our robust global supply chain is operating well and the efforts of our procurement quality and manufacturing teams have been truly heroic.

Finally, this latest COVID outbreak is a reminder of the dependency of the U.S. generics pharmaceutical industry on foreign manufacturing. We believe it remains a critically important to make more products in America for America. Fortunately, Amneal’s significant domestic manufacturing base super quality record and the U.S. domicile enable us to work closely with federal and state legislators and public policy maker to provide meaningful solutions. We look forward to sharing updates as we make progress.

Turning now to our financial and operating results. I’m extremely pleased with our first quarter results and how the full year is shaping up. We remain confident that our momentum, the strength of commercialize and pipeline assets, solid execution will deliver another year of strong top and bottom line performance, consistent with our guidance.

Let me now provide you with an update on key initiatives across our business. First, we believe companies in our industry are only as strong as there are in the organizations. Innovation is growth and we continue to invest in product development in both Generics and Specialties. In Generics, we have established a well-oiled engine to replenish our development portfolio and drive increasingly complex product launches. Our strong innovation capabilities are a major reason we have delivered growth in an industry experiencing secular pressure. While our base business faces competition, our R&D team is constantly moving us up the value chain with higher value to entry products that have longer tails of revenues and profits. In Specialty, we are acutely focused on executing the development plans for IPX203 and Kashiv Specialty Pharmaceuticals programs we acquired earlier this year. Chintu will touch on innovation in greater detail shortly.

Second, we are excited to see our manufacturing and supply chain continue to improve every quarter. When we came back, it was one of our first public goals optimize our global operations, reduce excess overhead and cost, improve our margins in Generics and ultimately increase profitability. We are executing well toward these goals as Generics gross margin in first quarter grew to 45%. Going forward, we are pursuing additional efficiencies to improve margins over time.

Third, we know the execution of strategic accretive and creative transactions can help us accelerate our growth. Just after the end of first quarter, we completed our acquisition of Kashiv Specialty Pharmaceuticals. With Kashiv, Amneal gained best-in-class, small molecule formulation and development talent, which we expect will drive substantial organic long-term value across our portfolio. We also gained several near-term NDA programs across neurology and endocrinology that we expect to begin to launch as early as 2023. But we are not stopping there. Given our existing commercial infrastructure in neurology and endocrinology, we are pursuing complemented commercial stage assets as well as late-stage clinical programs to provide near-term synergistic revenues streams.

We believe we are uniquely positioned to drive substantial value to all stakeholders and further strengthen our balance sheet over time. Finally, we continue to grow our AvKARE distribution business where we saw solid top line and profitability performance this quarter. As we have discussed in the past, AvKARE represents the strategic long-term opportunity for us as we focus on the federal government channel. This business is buoyed by favorable tailwinds, including the continued stream of branded pharmaceuticals going generics every year.

As we look toward the rest of 2021 and beyond, Chintu and I could not be more excited about our business and confident in our strategic direction. Today, Amneal is truly firing on all cylinders, and we expect continued strong financial and operational performance as we move forward.

With that, I’ll now turn the call over to Chintu.

Chintu PatelCo-Chief Executive Officer

Good morning, everyone. Thank you, Chirag. As always, I would like to begin by recognizing our employees whose tremendous dedication inspires Chirag and I every day and drives our continued success in making healthy possible. The team’s relentless commitment to delivering medicines for our customers and patients even in these trying times is truly remarkable. To our employees, we thank you for your service and I filled with gratitude for all you have contributed.

Our employees in India have demonstrated amazing courage and we are actively supporting them to ensure they get the care they need in light of the most recent COVID outbreak. Our India team has continued to ensure our supply chain remains strong and the flow of products is uninterrupted. From the beginning of the pandemic, we focused on building an even more resilient global supply chain, which has led to strong inventory levels across all locations these are unprecedented times and we pray for those who have lost family members to this terrible virus in India and across the world.

Now let me provide a few key business updates. First, I’m happy to share that we are advancing key initiatives across the company to improve efficiencies, which will save cost and expand margins. For example, while we manufacture most of our generic in-house, we are transferring several products from external manufacturing partners through our facilities, which will reduce cost and improve supply chain. Many of these types of initiatives will help improve our gross margin in a sustainable way. And as always we continue to uphold the highest standards of good manufacturing practices and integrity across every aspect of our business. From the very beginning, we have prioritized quality and compliance at all levels, it is truly in Amneal’s DNA and part of our culture.

As Chirag said, R&D is the growth engine for our industry and we continue to invest in our future pipeline. I will start with Generics. We believe that we are at an exciting time for Amneal 2.0 as we begin to see the benefits of the transition of our development activity toward complex dosage forms, drug-device combination and other high-value programs. Over 80% of our pipeline is non-oral solid products and an increasing share of that is drug-device combination. Therefore, mean, which we launched in March and is a complex hormonal patch, is a perfect example of our generic strategy in action.

Zafemt received CGT designation which granted 180 days of exclusivity. And given the complexity of its development and manufacturing, we believe it will have limited competition, even post-exclusivity. Of the 80 generics approved with the CGD designated industrywide Amneal has launched can by far the highest number in our industry. Looking forward, we will continue refreshing our pipeline, we expect to deliver at least six to seven high-value products on an annual basis. In addition, we are actively looking to expand our high-value complex generic portfolio into select international markets via external partners. Our existing partnership with Fosun is proceeding nicely. Together, we have already filed four products in China and expect to file another five by the end of the year. And this is just the first of multiple international collaborations. Overall, we see global expansion as another vector for long-term sustainable growth.

Next, biosimilar will be an increasingly meaningful component of our pipeline going forward. As we have shared in the past, we think the biosimilars market will behave more like complex generics over time. We believe our core strength in high-quality manufacturing, innovation and strong commercial execution will position us extremely well in this space. Currently, we have filed three biosimilar products, which we expect to launch over the next couple of years. Beyond that, we are actively evaluating additional opportunities via partnership models where we can be first or second to market. We believe biosimilars will be a key strategic opportunity for us over the next five to 10 years.

Turning to our Specialty pipeline. IPX203 is the most advanced of our four Specialty pipeline programs, and is currently increased preclinical clinical trials with an estimated launch in 2023. As a reminder IPX203 is our next generation product for Parkinson’s disease. We expect the product will offer a material improvement over Rytary and existing therapies. In the United States, 60% of PD patients or roughly 600,000 people are on some form of levodopa therapy to help manage off time, which are periods of drastically reduced motor function due to low levels of dopamine. Immediate release carbidopa-levodopa is a first-line therapy for Parkinson’s.

Our current leading product, Rytary is an extended release carbidopa-levodopa product designed to provide better on-time for moderate and severe patients compared to generic immediate release. In this patient population an hour or two of additional on time can be a large improvement in quality of life as off periods can be stressful and painful. We expect IPX203 will demonstrate a clinically superior efficacy profile versus immediate release and will bolster much more convenient dosing regimen. As a result, we believe that IPX203 has the potential to be a much larger product than Rytary and help us grow further market leadership in the management of Parkinson’s disease. We are excited to see top line data in the second half of this year.

The integration of Kashiv Specialty Pharmaceuticals is proceeding well. This deal has expanded our Specialty product pipelines significantly in both endocrinology and neurology. We have K127 for myasthenia gravis K128, a modify trihexyphenidyl for the treatment of Sialorrhea and K114, a modified D3 product for the treatment of hypothyroidism. With the addition of these programs, we are well positioned to launch at least one specialty product per year starting in 2023. And we believe the various drug delivery technology platforms we acquired will also provide a wellspring of new branded products for years to come.

To summarize, we build this company to deliver affordable, essential medicines for patients and create value for all our stakeholders. The company is executing well. Our pipeline, our technologies, our commitment to quality and most importantly, our people are elevating Amneal to new heights. Chirag and I share excitement and confidence in the journey ahead.

I will turn the call over now to Tasos.

Tasos KonidarisExecutive Vice President, Chief Financial Officer

Thank you, Chintu. Our first quarter financial momentum reflects the relevancy and diversification of our product portfolio, successful new product launches and our focus on execution and driving of efficiencies. As a result, in the first quarter of this year, we reported net revenue of $493 million, adjusted EBITDA of $126 million and adjusted diluted EPS of $0.20. In addition, we generated $148 million of operating cash flow and further reduced our net leverage.

Let me now move to our segment results, starting with generics, where net revenue of $313 million was down $40 million or 11% compared to Q1 2020. This decline was not surprising and was primarily driven by an almost non-existent flu and cold season, which adversely impacted products like generic Tamiflu as well as higher purchases last year at the onset of the COVID-19 pandemic.

On a pro forma basis, as we adjust for the various discrete events, generic net revenues grew low to mid-single digits. We continue to be very pleased with the performance of our new product launches, where products launched since January of last year delivered over $36 million in net revenue growth offsetting price deflation as well as the lingering negative impact of the pandemic. From a product perspective, epinephrine, azathioprine, levothyroxine and sucralfate were strong contributors in the current quarter. In addition, Zafemy is performing very well. And as you may remember, we launched it in March of this year, so there is only one month of it in the current quarter.

Looking ahead, we expect a step-change increase in generic net revenue due to continued new product growth, strong commercial execution, and the fact that the seasonal nature of the flu and high purchases last year due to the pandemic are behind us. Adjusted gross margin for generics was 44.6%, 250 basis points higher than Q1 2020 and 630 basis points ahead of full year 2020. This growth reflects our strategy and solid execution in transitioning to more complex generics as well as the efforts of our team to drive supply chain efficiencies and favorable pricing on certain manufacturing materials.

Let me now turn to our specialty segment with net revenue in line with our expectations of $96 million, up $8 million or 9% from Q1 2020. As a reminder, our specialty segment centers around neurology to endocrinology with our promoted brands right away getting to it. Both brands continue to grow. And in aggregate, they delivered $56 million, up 11% versus Q1 2020. This growth as well as improvements in our gross to net offset declines in Zomig due to its upcoming loss of exclusivity. Adjusted gross margin for specialty was 78.4%, 380 basis points higher than Q1 2020 and 420 basis points ahead of full year 2020, mostly due to a favorable product mix.

Let me now move to AvKARE, which reported net revenue of $84.7 million, up $26.7 million or 46%. As a reminder, the acquisition was closed on January 31, 2020. As a result, the current quarter reflects three months of sales versus two months last year. Adjusted gross margin for the quarter for AvKARE was 19.6% in line with Q1 2020 and 210 basis points higher than full year 2020. While the top line was slightly lower than our expectations due to lingering effects of the pandemic, the business was able to overcome it by leveraging a more profitable product mix as well as operating expense efficiencies.

Total company adjusted EBITDA of $126 million was slightly ahead of our expectations and $8 million below Q1 2020, reflecting three dynamics. First, higher gross profit, primarily due to a favorable product mix and operating efficiencies this year. Second, we’re making substantial investments in our R&D and sales and marketing to drive long-term growth. And third, the tough comparison to Q1 of 2020, where our adjusted EBITDA of $134 million was substantially higher than the $107 million average for the remaining three quarters of the last year.

Adjusted diluted EPS of $0.20 was flat in Q1 2020, as our adjusted EBITDA performance and lower interest expense offset the very high prior year comps. Again, last year’s first quarter of $0.20 in EPS was much higher than the $0.14 average of the remaining three quarters of 2020. From a cash perspective, operating cash flow of $148 million was ahead of our expectations and well ahead of the $49 million we generated in Q1 2020. We have to be mindful that this metric is inherently variable. Nevertheless, the strong performance was driven by top line performance, lower DSO and some favorable timing.

As a result of our strong financials in the quarter, we strengthened our balance sheet and our financial flexibility. Cash and cash equivalent in March 2021 was $456 million compared to $347 million in December 2020, and our net debt to adjusted EBITDA ratio improved to 5.1 times compared to 6.2 times in March 2020.

In summary, we’re pleased with our top line performance, higher levels of profitability, cash generation and improved balance sheet. Consequently, our full year 2021 guidance remains unchanged, and we remain confident in our financial and operating performance for the remainder of the year.

With that, let me turn the call over to Chirag.

Chirag PatelPresident and Co-Chief Executive Officer

Thank you, Tasos. We are pleased with our continued positive momentum through the start of 2021 as we continue to execute against our Amneal 2.0 strategic vision of long-term sustainable growth.

I would now like to turn the call over to the operator to take your questions.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Gregg Gilbert with Truist.

Gregg GilbertTruist Securities — Analyst

Thanks. I have a few. Chirag, I want to start with a high-level strategic question. I understand the desire for companies, including yours, to — want to move up the value chain and have more durable products and brands. I certainly understand that. But also, I wonder why the generic industry in the U.S. hasn’t consolidated more, given what we’ve seen on the customer side. Do you think that’s in the cards sort of independent of your stand-alone strategy?

Let me ask the other questions right upfront. Tasos, maybe you could comment a little bit on the AvKARE strength and how lumpy that is and what some of the drivers are there? And lastly, for Chintu, is generic NEXPLANON a project that is interesting to you and perhaps under way? And curious how challenging something like that would be compared to other projects you’ve had your team work on? Thank you.

Chirag PatelPresident and Co-Chief Executive Officer

Greg, you’re so fresh this morning. Good morning. Consolidation in generics, that’s the holy grail, I guess. As you know, it is tough. And the reason it is tough is the FTC requires to divest many products we went through. With Impax merger, we had to go back and forth with the agency and ended up divesting a lot of value away. And also moving the products from their plants, Impax plants to Amneal, we lost a lot of revenue in between. So it becomes very hard. You look back and say, OK, why should we do that? Of course, there are lots of synergies we can pick up. But the overlaps are so many.

So if we find a target without overlaps, really good. And I hope — and it is needed. The consolidation is a must. It’s just what form it comes in. And if new players without overlaps, if they can emerge, which Perrigo’s generic divesting was good. There are a couple of small companies, do they consolidate together? Good. Good for the industry, and we need that. As you know, Indian companies have a very hard time doing anything. So they go on for a legacy of their families for many years to go, so they do not consolidate. It’s a little bit uphill slope. I hope I answered that question to you.

Tasos on AvKARE and then Chintu…

Tasos KonidarisExecutive Vice President, Chief Financial Officer

Yeah. Yeah, good morning. So let me try this if that works. So AvKARE overall is growing nicely. So last year, we did about almost $300 million. This year, it will grow mid-double digits, so feel good about the top line growth. Profitability. We knew that when we did the deal, profitability for the business is around high double digits. So last year, it was 18%. And Q1, we’re seeing at 20%. So we’re pleased with that improved level of profitability. One of the things we like about the business, about more than 50% of that $300 million growing double-digit this year is the government business. And what we like about this, many of the contracts are long-term contracts. So it gives us a nice, stable platform that we can grow over time.

And for that reason, we cannot turn the growth rate overnight, right? But it embeds us with our government customers and the team has a lot of expertise. So over time, we’re looking to grow that segment, not only by leveraging third-party products, but also Amneal products, which, as you can imagine, provide a nice, much more profitable growth there. The rest of the business is a number of other more distribution like businesses with low single margin business. And that’s been growing nicely, and that’s where we’re looking for more operating efficiencies over time. So I think overall, I think the business, again, this year is going to grow mid-double digits. I think for the next few quarters, it will be low of $80 million to low $90 million in terms of quarterly revenues and profitability will be in that 18% to 20% gross margin. Hopefully, Greg, that helps.

Chirag PatelPresident and Co-Chief Executive Officer

And just to add a bit, we’re also growing the unit dose business by launching eight to 10 our own liquid products out of our branch at New Jersey site. So that should be a nice uptick for AvKARE next year. Chintu?

Chintu PatelCo-Chief Executive Officer

Greg, so good question on NEXPLANON. So Amneal, as you know, has been investing into a complex generic space, and we continue to move up the value chain. And the products like NEXPLANON, which is a drug-device combination implant product sits on the top of the most complexity from the development and from the device perspective and also how to conduct and work with FDA. With Kashiv’s acquisitions, we acquired that — some of the talent that is required. I will not get into the particular product, but Amneal, we have the good knowledge on how to develop these three to five years long implant products.

We have the very good drug-device group within the organization. We understand the formulation and the other challenges and the PK studies and other regulatory requirements. But absolutely, Amneal is moving up, and it’s part of our portfolio, not the particular product but entire drug-device combination implant category is something we are very excited. And we have the knowledge, and we are working aggressively to bring that to the market

Gregg GilbertTruist Securities — Analyst

Thanks, gentlemen.

Operator

Thank you. And the next question comes from Daniel Busby with RBC Capital Markets

Daniel BusbyRBC Capital Markets — Analyst

Good morning. Thanks for the questions. Maybe sticking with the big picture theme. As we think about the business longer term, in your view, what is the ideal revenue mix between generics and specialty, and also, I guess, U.S. versus OUS? Clearly, right now, you’re still more heavily weighted toward U.S. generics. But what would you ideally like to see when we look at the business five years from now? And how does business development play into that?

And second, how should we think about the cadence of additional generic new launches over the remainder of this year? And how important are those for the anticipated step-change increase in generic revenue that you mentioned? Thank you.

Chirag PatelPresident and Co-Chief Executive Officer

Thank you, Daniel. So the big picture, how do you see Amneal growing, say, Amneal 2.0? So we said the complex generics is a driver of the business within generics, right? We’ve got complex genetics all kind of dosage forms. As Chintu mentioned, the device products, the inhalation products, injectable products. And as we have said it a year ago that biosimilars, we put them in complex generics.

So that segment going from somewhere at $1.4 billion, $1.5 billion to a higher level in five years. We’re not going to give you exact number now, but there is enough growth for us because of all these scientific capabilities and investment we have made over the years to produce this. So it will be excellent growth in that one segment of the business. The Specialty, we have our own pipeline. We haven’t given forecast to that pipeline. IPX203 is moving nicely so is K127. And we are very serious on, and we got the platform, we’ve got the technology. And one thing Amneal does really well is once we get in, we do it, we finish the job. So we — it’s a long-term view for us, five, 10 years.

We’ll build the specialty business to be at a great level on a more contribution on EBITDA than revenue. And I don’t want to say the mix exactly, but it is on a tremendous growth trajectory. And also, it will be complemented by accretive strategic M&A because we have the strength. We’ve got the cash flow, we’ve got the complex generics complementing the Specialty. So our Parkinson’s disease side, we like to consolidate as many products as we can. Same thing on endocrinology, it’s how our T3 comes and then there’s more to come. So very excited and very targeted on those two areas. Do you want to take this?

Tasos KonidarisExecutive Vice President, Chief Financial Officer

Yeah, Dan. Good morning. Yes. Just in terms of overall, new product launches are critical to us, right? But we are really not relying on any additional new product launches to lead to that step change I spoke to. Based on the product portfolio that we currently have, we’re very confident of the step change, number one. Number two, as new products come in, those new products will be fueling growth mostly toward Q4 and into next year.

Daniel BusbyRBC Capital Markets — Analyst

Great, thanks for the color.

Operator

Thank you. And the next question comes from David Amsellem with Piper Sandler.

David AmsellemPiper Sandler — Analyst

Thanks. So just a couple. So on the biosimilars, can you just talk about — I know that this is a partnership model, but how should we think about your net economics, and how these three opportunities you’ve identified, what kind of margins they’ll have relative to your overall Generic margins, given the shared economics? So that’s number one.

Then number two is, you’ve talked about other programs, other biosimilar programs. When are you going to be in a position to identify those other opportunities? And do you expect those other opportunities to have better economics or similar economics to Avastin and the G-CSFs? And then lastly, is there anything that you can add on the Copaxone generic? And is this still part of your expectation that you expect that opportunity to bear fruit later this year? Thank you.

Chirag PatelPresident and Co-Chief Executive Officer

Thank you, David. So our biosimilars strategy, as you pointed out, it’s a partnership model to begin with, which is very cost effective for us. We waited, and we wanted to see how it develops because we did not want to spend or invest $150 million, $200 million per biologic. And the patent dance, the thicket of patents, so we want to see how — plus the adoption of biosimilars, which is all playing now nicely over — now and over the next 10 years, we see biosimilar as a great business.

And not only biosimilars, it will then, just like in small molecule 505(b)(2), biosimilars may end up into biobetters or follow-on branded biologics because — which could be brought earlier in the market. So we’ve been very diligently working over last couple of years to identify great partners. We understand the manufacturing is a key. I would put 80% value to a very high-end manufacturing and consistent manufacturing. And we are working on our strategies on how do we become champion just like on a complex generics for the manufacturing of biosimilars. And then R&D, we will establish our capabilities sooner than later.

Margins, we expect them to be in — the split is almost like 60% in our favor, 40% to partner. We probably will continue with that model, which gives us around 25% to 30% EBITDA per product. If we do it in-house, whenever we start doing it, obviously, it will go up to 35-plus percent. So that’s the plan for now. And you know David, when will we announce the next partnership? This year.

Chintu PatelCo-Chief Executive Officer

And David, your last question on Copaxone. Yes, we are working, and the product can have launch later this year or early first quarter 2022.

David AmsellemPiper Sandler — Analyst

That’s helpful. Thank you.

Operator

Thank you. And the next question comes from Elliot Wilbur with Raymond James.

Lucas LeeRaymond James — Analyst

Hi, good morning. This is Lucas Lee, on for Elliot. The question I have is, what drove the gross margin upside during the quarter? Is this sustainable? And how does that impact your prior expectations around generic gross margin trends? And as a follow-up, how are you thinking about a potential generic competition on Zomig? Thank you.

Tasos KonidarisExecutive Vice President, Chief Financial Officer

So, hello, Lucas. Good morning. Lucas, this is Tasos. Listen, we’re incredibly pleased on the gross margin performance. And it was, as you saw, every business expanded margins, which is something we’re very focused on improving profitability. Generics had a great quarter with margins about 45%. We believe those are sustainable. My gut feel is that we were going to see some moderation, right, to the low 40s, some moderation. But I think we’re going to finish the year on the generic side most likely in the low 40s, which, as you know, which is a substantial increase versus the 38% we delivered last year and the 35% we finished 2019.

So as you can see, we are executing in terms of what we had said over the last couple of years. We see generic margins going over 40%. So I think we’ll be pleased to cross that bridge this year. That’s in terms of our expectations. So pretty much sustainable. And it’s the same thing across the remaining other two parts of the business. On generic Zomig, I mean this is not overall. One of the things we are proud is about what we have created. We have created a very diversified business, much more so than three years ago. So we have AvKARE, that’s a big part of the business. Specialty has grown. We have a portfolio of generic products, over 250 products. So we’re not dependent on any single product. With that on Zomig, let me turn it over to Joe to kind of give us a little bit more insight.

Joseph TodiscoExecutive Vice President, Chief Commercial Officer-Specialty

Sure. Thanks, Tasos. With respect to specific generic competition on Zomig nasal spray, we’re aware of two filers that are already publicly known, but we always do assume that someone else could be coming to market. We had pre-emptively launched an authorized generic earlier this year. We’ve got sufficient inventory of both labels, and we’ve taken steps to maximize the value of the product regardless of the number of generic competitors that come to market at the end of May.

Lucas LeeRaymond James — Analyst

Thank you. That’s very helpful.

Operator

Thank you. And the next question comes from Dana Flanders with Guggenheim.

Dana FlandersGuggenheim — Analyst

Great, thank you very much for the questions. I just had two. My first is, I was wondering if you could comment on just base business generic pricing trends. We are hearing some comments from the supply chain and other manufacturers that they’re seeing a little bit more pressure this year, kind of independent of competition. So just wondering if you’re seeing that as well?

And then my second question, I was wondering if you could comment on just the unfortunate and sad situation going on in India with COVID. And wondering if you are seeing or expecting to see kind of shortages start to pop up, impacting the U.S. market and just how Amneal’s overall supply chain is just relatively positioned? Thank you.

Tasos KonidarisExecutive Vice President, Chief Financial Officer

Dana, this is Tasos. I’ll take the first question on pricing. And we’re seeing just a high level. We’re seeing consistent behavior, as you’re hearing from some of the other manufacturers. But also I want to point out, this is exactly what we planned this year. So as a reminder, in our guidance, we assumed mid-to-high single-digit deflation. As you mentioned, it’s coming in certain areas. Certain areas, it’s coming a little worse than that.

But our ability, right, to get new product launches is actually ahead of our own expectations. And our ability of our supply chain to drive operating efficiencies and the new market share growth that we are seeing by the commercial team is offsetting that, and ultimately, is increasing our profitability in a sustainable way. So we’re pretty much very happy how the company is dealing with this and so forth. As in terms to India, let me turn it over to Chirag. I think he has a good perspective on that.

Chirag PatelPresident and Co-Chief Executive Officer

Thank you, Tasos. So situation is very grim. There are local lockdowns. But pharmaceuticals being essential industry, it is allowed to operate. The inventory levels are — for Amneal is very good three plus month, and we have secured the APIs. And if you come overall inventory, it’s almost four to six months. So we don’t expect, as far as Amneal is concerned, any shortages from our product. Others may face it based on where they are located and how much preplanning have they done. But for now, next month or two should be fine.

We expect the situation to improve, hopefully, after one month. And Amneal India, we’re doing everything we can to help the situation with oxygen concentrators or with working on supplying or donating remdesivir and steroid products. We got Indian government license to sell. We never sold anything to local market from our U.S. FDA-approved plant in India.

So — and everybody is assisting. Many countries have, as you know, offered lots of help. So there’s enough — seem to be enough remdesivir. I was in a call with Gilead, they — 15 million vials, they will produce this month. So they’re all trying to help. Same thing with Pfizer, and hopefully, more vaccines will be available besides just AstraZeneca. So it’s very grim there, and we hope it improves soon.

Chintu PatelCo-Chief Executive Officer

And just to add, just one point, we were very proactive in vaccinating many of our Amneal India employees. So large population of our employee base has been vaccinated. And that has led to very good attendance and a strong supply chain. But we are working diligently with everyone to make sure we do everything to provide health and support. But our supply chain still in this current situation is very, very strong.

Operator

Thank you. And the next question comes from Nathan Rich with Goldman Sachs.

Nathan RichGoldman Sachs — Analyst

Good morning. Thanks for the questions. Maybe Tasos starting with you. I just wanted to make sure that I understood the revenue cadence for the generic segment. You called out the $23 million headwind related to the mild flu and cold season. I’m assuming that, that revenue kind of doesn’t come back over the balance of the year. Is that a fair assumption? And if so, it looks like your kind of underlying view of the business got better. It sounds like pricing trends have been consistent, but you did mention the traction with new product introduction. So is that what is kind of driving the implied increase in outlook over the remainder of the year?

And then just as a follow-up, as we think about the margin opportunity for complex generics, how should we be thinking about those margins relative to maybe the generic segment average. I think you had maybe mentioned biosimilar margins — EBITDA margin being north of 30%, if I caught that number right. Where would you feel like the kind of complex generic average kind of be relative to margins for that segment? Thank you.

Tasos KonidarisExecutive Vice President, Chief Financial Officer

Yeah, so good morning. So yeah, I think that $23 million, right, in Q1 related to low flu season, etc., that’s not going to come back. So I think you’re spot on. But nevertheless — but the rest of the year remains unchanged or slightly ahead of our own initial projections, and that really reflects new product introductions and primarily the Zafemy launch just doing extremely, extremely well, that’s number one. And the margins, I think we see sustainability in the low 40s for the rest of the year on the generic side, so that bodes well for increased profitability overall with generics versus our initial expectations.

In terms of the new product, the complex generics, overall, the generic margins is in the low 40s, right? So you can assume that’s substantially more so than that, and primarily during the first, call it, six, seven months, where we have an exclusivity. So that kind of bodes well as we think about next year and the year after that about improving gross margins of the generics. Biosimilars, I think it’s early stages. I think the first three biosimilars we have in place, just because there is just more competition at this point in time, and because it’s much more partnered, I think the EBITDA that Chirag talked about earlier on, call it, the 30%, I think that’s a good number. Over time as we enhance our manufacturing capabilities and our internal expertise, I think we see those going up from there.

Chirag PatelPresident and Co-Chief Executive Officer

Yes. Nathan, this is Chirag. So what we see is durability for the complex generics and biosimilars. The complex generics may be shorter, biosimilars will be longer. And the margins, and let’s stay with the EBITDA margins, would be north of 30%. It may start out between 25% to 30% because these products are highly competitive, the three we have filed. But as we come out as a first or second biosimilar, just like first or second complex generics, it will be much higher than 30%.

Nathan RichGoldman Sachs — Analyst

Thanks for the comments.

Operator

Thank you. [Operator Instructions] And the next question comes from Gary Nachman with BMO Capital Markets.

Gary NachmanBMO Capital Markets — Analyst

Thanks. Good morning, Chirag and Chintu, when you’re having discussions with different parties about expanding your portfolio, what segments or technologies are you most focused on? Or where are you seeing the most opportunities at this point? So I’m curious how competitive is the BD environment for assets, especially biosimilars? Do you feel like sellers or partners are being reasonable? And what sort of advantages do you have in getting some of these deals done? Thank you.

Chirag PatelPresident and Co-Chief Executive Officer

Thank you. The portfolio on biosimilars, we have the oncology assets, so we’ll go for a few more oncology assets. But we’ll also go on to autoimmune on the eye side as well because we are establishing a long-term biosimilar or follow-on biologics platform, 10, 15 years, just like we did with complex generics. So we’ll be pretty much looking at more of where we can navigate the patent, where we can be first or second to market, even the small ones. Those are the — how we build the complex generics portfolio, those same thinking, same playbook we are using to come up with a biosimilar platform.

BD side, on biosimilars actually, assets are available. Because the companies invested in the last 10 years, mostly, they’re focused on R&D. And then they got stuck because of the patent situation in the United States and the brands and all those, you know how it goes with the branded company. So it takes time to really launch the biosimilars unlike Europe. So there is excess capacity in manufacturing sitting out there, especially in Europe and South Korea and China. So we are tapping on to those.

And we do have existing two great partnership, and we would probably expand to one more and manage with three partners, and we’re very keen in bringing manufacturing to United States as well for many reasons, including the pandemics and climate changes or emergencies. We have our biologics manufacturing in the United States as well. We — in a war footing, we put up a vaccine manufacturing, expanded and it is helping. We got our people vaccinated fast than other countries, and we are now in a position to export that. So I believe making it here would be very, very advantageous. And other deals we’re looking at is on our Parkinson’s category where we have a leading asset already, commercial asset. We have IPX203, which is coming up, their top line results second half of this year. And we like to consolidate the space. So that — those are the main focus right now from expanding the portfolio on the BD side.

Gary NachmanBMO Capital Markets — Analyst

Okay. And actually, if I could just squeeze in one other. Just back to the gross margin, how many products are you shifting from external to internal manufacturing? And how will that be faced to help the gross margin efficiencies over time? And just talk about where you’re getting most of the efficiencies in manufacturing?

Chirag PatelPresident and Co-Chief Executive Officer

Thanks. Yeah, sorry. So pretty much our work is done since we came back. We have brought in most of the products in-house. The partnered products such as EpiPen comes from Pfizer and Philips, our trusted partner, very reliable, great partners. Then we continue to expand that relationship.

And our levothyroxine, our Long Island partner, Jerome Stevens, is excellent over the years and one of the best quality levothyroxine in the market. So those — besides those, we pretty much have brought everything like 14-or-so products in-house from various CMOs, which allowed us to now produce more and more margins. So very, very highly efficient already.

Tasos KonidarisExecutive Vice President, Chief Financial Officer

Yes. I think that’s spot on the other areas, right? So we spent close — more than $500 million kind of purchasing raw material. So that gives us a nice opportunity for our strategic sourcing organization. The same way our customers are pushing for price that kind of goes down the supply chain, right? So I think that’s an area of opportunity as well as our efficiencies within our own global manufacturing footprint, right? The efficiencies on the plant. So Chintu and his team are very focused on that. And we see this continue to produce income for us for the foreseeable future. And that we won’t — we cannot — it’s not done yet.

Chirag PatelPresident and Co-Chief Executive Officer

Yes. Just to give you an example, a year ago, our back order was $30 plus million. Last week it’s $1 million. So we have gained tremendous efficiencies all across New Jersey operations, in New York, India and now Ireland is coming up soon. So it’s fantastic. Thank you.

Gary NachmanBMO Capital Markets — Analyst

Okay, very helpful. Thank you.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Anthony DiMeoSenior Director, Investor Relations

Chirag PatelPresident and Co-Chief Executive Officer

Chintu PatelCo-Chief Executive Officer

Tasos KonidarisExecutive Vice President, Chief Financial Officer

Joseph TodiscoExecutive Vice President, Chief Commercial Officer-Specialty

Gregg GilbertTruist Securities — Analyst

Daniel BusbyRBC Capital Markets — Analyst

David AmsellemPiper Sandler — Analyst

Lucas LeeRaymond James — Analyst

Dana FlandersGuggenheim — Analyst

Nathan RichGoldman Sachs — Analyst

Gary NachmanBMO Capital Markets — Analyst

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Pharmaceuticals

Authorities Raid Pharmaceuticals In Bolangir 

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With vulnerability of people at an all time high amid the second wave of the Covid pandemic crisis, the wrong doers have found perfect opportunities to make profits especially in health sector which is evident from the back to back incidents of seizure of spurious pharma drugs from several parts of the State. 

After Cuttack and Rourkela, the Drugs Inspector of Bolangir on Sunday raided some pharma outlets in the city on the basis of orders from the Drugs Controller.

With vulnerability of people at an all time high amid the second wave of the Covid pandemic crisis, the wrong doers have found perfect opportunities to make profits especially in health sector which is evident from the back to back incidents of seizure of spurious pharma drugs from several parts of the State. 

A team of the drugs control squad suddenly visited Modi Pharmaceuticals situated in Sudpara and seized large stock of medicines used for the treatment of cold and cough from the unit.

The samples of the medicines will be sent to laboratory for testing and the details on the drugs can be ascertained only after that, said the Drugs Inspector Babulal Tudu.

The official informed that the authorities of the pharma unit failed to produce satisfactory documentation regarding the production or procurement of the seized medicines. 

A few days ago, a State Drugs Control squad seized huge quantities of fake anti-covid drugs ‘Favipiravir’ in Cuttack.
On Saturday, the State Health Department ordered the Drugs Controller and Police to carry out a joint investigation into the transaction of spurious medicines and submit a report in this regard.

As per sources, as many as 170 boxes of the counterfeit drugs consignment were seized from a chemist shop at Kanika Chhak in the millennium city.

Similarly, in Rourkela, three drugs stores were raided by a team leading to exposure of more than 300 strips of duplicate medicines.



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Pharmaceuticals

Glenmark Pharmaceuticals Limited (NSE:GLENMARK) Is Going Strong But Fundamentals Appear To Be Mixed : Is There A Clear Direction For The Stock?

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Glenmark Pharmaceuticals’ (NSE:GLENMARK) stock is up by a considerable 36% over the past three months. However, we decided to pay attention to the company’s fundamentals which don’t appear to give a clear sign about the company’s financial health. In this article, we decided to focus on Glenmark Pharmaceuticals’ ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company’s success at turning shareholder investments into profits.

See our latest analysis for Glenmark Pharmaceuticals

How Is ROE Calculated?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Glenmark Pharmaceuticals is:

14% = ₹9.7b ÷ ₹71b (Based on the trailing twelve months to March 2021).

The ‘return’ is the amount earned after tax over the last twelve months. Another way to think of that is that for every ₹1 worth of equity, the company was able to earn ₹0.14 in profit.

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.

Glenmark Pharmaceuticals’ Earnings Growth And 14% ROE

On the face of it, Glenmark Pharmaceuticals’ ROE is not much to talk about. However, given that the company’s ROE is similar to the average industry ROE of 15%, we may spare it some thought. However, Glenmark Pharmaceuticals has seen a flattish net income growth over the past five years, which is not saying much. Bear in mind, the company’s ROE is not very high. So that could also be one of the reasons behind the company’s flat growth in earnings.

As a next step, we compared Glenmark Pharmaceuticals’ net income growth with the industry and were disappointed to see that the company’s growth is lower than the industry average growth of 16% in the same period.

past-earnings-growth
NSEI:GLENMARK Past Earnings Growth June 13th 2021

Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). Doing so will help them establish if the stock’s future looks promising or ominous. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Glenmark Pharmaceuticals is trading on a high P/E or a low P/E, relative to its industry.

Is Glenmark Pharmaceuticals Making Efficient Use Of Its Profits?

Glenmark Pharmaceuticals has a low three-year median payout ratio of 7.3% (or a retention ratio of 93%) but the negligible earnings growth number doesn’t reflect this as high growth usually follows high profit retention.

Additionally, Glenmark Pharmaceuticals has paid dividends over a period of at least ten years, which means that the company’s management is determined to pay dividends even if it means little to no earnings growth. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 6.3%. Therefore, the company’s future ROE is also not expected to change by much with analysts predicting an ROE of 14%.

Conclusion

On the whole, we feel that the performance shown by Glenmark Pharmaceuticals can be open to many interpretations. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. That being so, the latest analyst forecasts show that the company will continue to see an expansion in its earnings. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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Pharmaceuticals

Euclidean Capital Llc Sells 39,638 Shares of PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) Stock

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PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) major shareholder Euclidean Capital Llc sold 39,638 shares of the stock in a transaction that occurred on Wednesday, June 9th. The shares were sold at an average price of $33.64, for a total transaction of $1,333,422.32. The transaction was disclosed in a document filed with the SEC, which is available through this hyperlink. Large shareholders that own more than 10% of a company’s shares are required to disclose their sales and purchases with the SEC.

Euclidean Capital Llc also recently made the following trade(s):

  • On Monday, June 7th, Euclidean Capital Llc sold 30,721 shares of PMV Pharmaceuticals stock. The shares were sold at an average price of $33.62, for a total transaction of $1,032,840.02.

PMVP stock traded up $1.67 on Friday, hitting $34.40. 208,178 shares of the company’s stock traded hands, compared to its average volume of 176,323. PMV Pharmaceuticals, Inc. has a 1-year low of $26.38 and a 1-year high of $63.22. The firm has a market cap of $1.55 billion and a PE ratio of -13.64. The stock’s fifty day moving average is $33.44.

PMV Pharmaceuticals (NASDAQ:PMVP) last released its earnings results on Friday, May 14th. The company reported ($0.26) EPS for the quarter, meeting the consensus estimate of ($0.26). Equities analysts anticipate that PMV Pharmaceuticals, Inc. will post -1.22 earnings per share for the current fiscal year.

A number of hedge funds have recently added to or reduced their stakes in the stock. JPMorgan Chase & Co. raised its holdings in shares of PMV Pharmaceuticals by 2,421.3% during the first quarter. JPMorgan Chase & Co. now owns 935,390 shares of the company’s stock valued at $30,765,000 after acquiring an additional 898,291 shares during the period. Personal CFO Solutions LLC acquired a new stake in shares of PMV Pharmaceuticals during the first quarter valued at approximately $28,111,000. BlackRock Inc. raised its holdings in shares of PMV Pharmaceuticals by 148.1% during the fourth quarter. BlackRock Inc. now owns 1,345,015 shares of the company’s stock valued at $82,731,000 after acquiring an additional 802,977 shares during the period. Avoro Capital Advisors LLC raised its holdings in shares of PMV Pharmaceuticals by 27.0% during the fourth quarter. Avoro Capital Advisors LLC now owns 2,350,267 shares of the company’s stock valued at $130,536,000 after acquiring an additional 500,267 shares during the period. Finally, Deerfield Management Company L.P. Series C raised its holdings in shares of PMV Pharmaceuticals by 126.3% during the first quarter. Deerfield Management Company L.P. Series C now owns 423,680 shares of the company’s stock valued at $13,935,000 after acquiring an additional 236,488 shares during the period. 88.63% of the stock is owned by institutional investors and hedge funds.

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About PMV Pharmaceuticals

PMV Pharmaceuticals, Inc, a precision oncology company, engages in the discovery and development of small molecule, tumor-agnostic therapies for p53 mutations in cancer. The company’s lead product candidate is PC14586, a small molecule that corrects a p53 protein containing the Y220C mutation and restores p53 function.

Further Reading: How to calculate compound interest

Insider Buying and Selling by Quarter for PMV Pharmaceuticals (NASDAQ:PMVP)

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest and most accurate reporting. This story was reviewed by MarketBeat’s editorial team prior to publication. Please send any questions or comments about this story to [email protected]

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7 Precious Metals Stocks That Will Keep Your Portfolio On Trend

The growing acceptance of cryptocurrency is beginning to make mainstream investors rethink their idea of “store of value.” The trendy possibilities of Bitcoin, Ethereum, and any of the dozens of altcoins that exist on the blockchain are trending like the latest fashion.

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Whether you’re looking to take your first steps at crafting a precious metals portfolio or if you want to fine-tune the one you have, we believe this special presentation is a good place to start your research. We’ve identified seven precious metals stocks that look to retain their allure in 2021.

View the “7 Precious Metals Stocks That Will Keep Your Portfolio On Trend”.

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