AMRX - Earnings call transcript Q3 2019 | Amneal Pharmaceuticals, Inc.

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Operator

Good day, and welcome to the Amneal Pharmaceuticals’ Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mark Donohue, Vice President, Investor Relations and Corporate Communications. ahead. go Please

Mark Donohue

as good website Earnings and Releases to Third are as Amneal's our presented will Thank this amneal.com. on Earlier morning. this XXXX call well releases press Call. results. on Press slides morning, Quarter that quarterly be our you, available The Welcome the at we reporting issued

on call, which will of are a our after We website replay conducting live a webcast its conclusion. be of available this also

and is also make call of rebroadcast copyrighted performance you today's cannot that regarding the Amneal written would be management projections the of I that note remarks financial forward-looking like of Company. future expressed Company's will Please other this call, course without or material events future remind or during consent. the to the

results periodic by the and factors differ business. to, limited law. Exchange Inc. factors Amneal Pharmaceuticals, note including, of affecting Actual in number about statements information are trends and facts forward-looking anticipated important may on estimated other prospects update to perspective that with forward-looking as required expressly statements expectations results, the materially from of intent today's detailed It's are but not These public projections Amneal depending statements except filings these current the or existing or our as our such current disclaims Amneal in any date. or non-historical a obligation of and and Commission, reflect Securities the to Amneal

Form XX-K ended for XXXX. the XX, period December

and measures its non-GAAP measures evaluate manage the and SEC. business. uses financial Management includes to and Company's understand Our the better operations discussion financial both non-GAAP today measures as the certain by defined to also disclosed GAAP internally

results of presentation. meaningful to morning's is inclusion to operations the in by appendix financial of and non-GAAP GAAP press measures facilitates supplementary performance, measures and today's the evaluating Further, management analysis of Company's A trends. release of non-GAAP financial in believes reconciliation information the investors in available and provides this

the co-CEOs; Officer. Patel Chirag Todd Chintu and Amneal's Chief this On Financial call as Patel, well our as morning are Branning,

we call Commercial; and available the Following Specialty President session. Chief Legal Commercial President Vice Officer; Executive and of Bhadauria, prepared Andy Scientific hold Senior Vice Also Chief remarks, of Q&A and Todisco, their Pradeep will Operations; for is Officer our Corporate Joe David Boyer, Q&A Buchen, on the Secretary.

Chirag strategic agenda Todd direction, our will will our For detailed results. a of today, financial and discussion following with that, Chintu review begin

will have over turn remarks. We like and that to And call a I prepared the by Chirag. session would answer followed with to

Chirag Patel

and quarter business today you Thank a Amneal’s and we to Chintu our we return in us August, and aspect to growth. every names that with returned back and come of our and our as Good point thank you you, for everyone to Amneal Co-CEOs joining promised morning evaluate review to third Mark. plan results. would When I

last the have months In three we done just that.

we Company. enthusiastic and this know made when passionate are and about Amneal you were As about excited Today, - we business ahead. equally opportunities we the

bottom the Since our near-term work is we to to while more customers ways analysis closely talked to visited partners we a we review have plans, find of August Xth, done why me Let are conversations at met and complete. all levels, commercial employees continuing together, of with majority our to optimistic, business share have operations, the top results. are our our and despite our our

summarize plan we where Before today. discuss our findings let and me are we action

system, to in understate winners a of believe the challenges, will business. essential pertains a and believe healthcare foundation particularly have That is but foremost, industry. contacts growth the is a to is it a critical be we is part generics we winner. important industry the it original simply as put The and healthcare we force all, necessary in to not First there that an delivery is industry and the is a of important to affordable create

Company fundamentally review a Second, robust reinforce Amneal with that cross forms. serve only belief is our to our generic the dosage portfolios strong multiple

We quality of high have products. to a earn producing leading worked track-record hard

our and that products ophthalmic other diverse complex years. for value multiple pipeline including today And injectables, drive

strong addition, In exciting to franchise specialty that for an we has have platform a as serve opportunity the growth.

tangible is executing for of thoughtful a right that. Third, and value XXXX the on heart getting results words, Amneal, transition to we by the believe expect In can’t other we being really create way to the plans year developing and overnight, issues. is

are stay of way finally, the strengths we out And our continues its curve evolve. far weaknesses. the strategically Importantly, ahead to Amneal’s to adapting as business market

of three identified we months, Over issues. the we the have believe causes last Company’s the root

have begin the growth drivers same and and time, while are head-on. of won’t strategies overnight. our developed to At attack already business the the seeing underperformance implementing pivot reinvigorate improvements, We we to happen

platform in We transformation. our have to drive the and capabilities place

of turn and technical let’s by our right maximizing XXX our which has portfolio than and marketed streamlining management, operating chain Improving gross more value higher our supply and to Now profitability, our include business sizing our margin base plant utilization, conversion inventory drive incremental. sales our plan. the improving revenue expenses. our of initiatives increasing products, To gross-to-net

launch finally activities Refocusing and to development we specialty organic and growth invest our our our utilizing augment initiatives. growth leverage better and to assets M&A the franchise business R&D new efforts have execution, in to and product in place preparedness ensure strong continuing

can me significantly came evaluated identified which roughly reverse we Let marketed new base in grow with start to decline of business generics quarter, on-board business, XX% volumes. order our products, in business XXX our each and in this eroding our we was and win we approximately main commercial when

products awards will have XXXX. XX that the incremental in business we won already base be for fact In

demonstrating maximize are base in than and product XX-year we volume time we works asset a incremental opportunities In the in more support to addition growth. existing can short how our

we transdermals, even volume We expect help such XXXX injectables expect pressure. growth dosage uplift. areas and that many liquids, will price offset across in some forms meaningful value more inevitable In as

more the area has margin there generics gross today. in margin. around compensation Now industry declined more our concentration is group of XX-months XX% the last to no and question from is XX%. second There turning power has focus to In gross improving volume changed that

However these unacceptable pretty has been compression and unsustainable. level of

we importantly it More fixable. believe is

most The first gross new product is to high and way to utilization launches. obviously drive improve margin plant and

are said products, acutely on earlier, launching help base I value further As winning more will we which footprint. high focused business our and manufacturing new

stream to working inventory management. are chain We line and supply our

our improving leveraging coordination finance strengthening reliable supply and chain, and customers We scalability across R&D and our with network are supplies. of our forecasting operation,

changes obsolescence will drive these back inventory orders. business reducing and by expect charges We in improvement our

telling access to machine supply focused product on easy we the our In delivering terms data are providing based chain efficiency. centralizing of data will chain increase critical which a in supply

sold. and These efforts well savings is underway already generate in our very cost-of-goods little will

such failure from penalties customers the cost as our in our that to control of our business within to Specifically penalties and supply value reduce. revenue areas our

those plan still margins pieces initiatives components already taken and fully evaluating enable appropriate generics are at of of to that we price. a a is we once least gross the number gross business believe will we we take the target have up are the us our confident XX% profit moving Collectively our of an we expand while targeting are margins for

to optimizing for spend over call our the franchise. to specialty and plans the Chintu R&D turn now will discuss I our for

Chintu Patel

express in Good to as profitability to We to for a a in return reposition morning we enhance would you, while my story, believe forward transition the XXXX enthusiasm is I the look growth will Amneal echo XXXX. comments chapter like reason and every Thank Chirag. Company. growth and to everyone. opportunity brother’s our to year next my have we

growth Let and from me start which more remains out the towards products products. our become for market refocused as more efforts away has R&D complex the competitive our R&D, been and with generics of engine primary we has commodities have business, the

opportunities, First uniquely to XXX(b)(X) and to inhalation is sterile injectables, market product, Amneal which specialty ophthalmic, positioned deliver. biosimilars, very

see our Importantly, opportunities spend we prioritizing we are best the on R&D ROI. where

our we asset While to are committed disciplined infrastructure efforts and base. and operating we to expenses our R&D thoughtful approach taking refocusing leverage our about a better remain

to days, to XX products. have FDA ANDAs XX XX last by year we the XX have filed end over XXXX, to expect and Indeed development file added to expect portfolio we to and of XX we products next our with XX

call, discussed on we last focus. products shifting our As and selection are channel our we

this the coming in strategy in action, and almost into the have among, we inhalation the forms first putting ANDAs - filed already product referenced our months. all are we We anticipate filing

transdermal, shift This our business results, base mix is product sterile oral already margins. and drive wings we for for anticipate generating in in launches, combination a growth our improvement and products, will also liquids XXXX example in of product double-digit volume new which through

XX-months We XX-months to as expect this next more products. the become approximately we evident XX over even to work to launch focus complex

to decision injectable the sterile new the requirements production at expected that ophthalmic we made meet XXXX of line. to of capacity also business, facility large the recently the vial our in with addition and Additionally expand

we to complex are on Turning product growth flows. top-line to new focused launch product launches drive operating and cash long-term strategy,

For enhancement horse implemented speed increases market. to are product R&D our instance, already and teams our to track have our launches that new

reduced timelines new aminocaproic even injection. acid our in launch and have already further to substantially early paliperidone, successful Fulvestrant August, efforts oral XX it approval have These including delivered since expedite expect launches product solution to and we Things August, returned overtime. we

fourth expect year. to Looking into we the and potential in this quarter with momentum next ahead continue

in growing building Turning are this keenly now pipeline top to focused line specialty business we and business. opportunities

discipline and our new manner building XXX cost strategically identifying that are We on development branded a pipeline including our effective IPX in and investment criteria. ongoing executing candidates and development business our completing program fit

to specialty result and of advances over end IPXXXX months we the top-line study the to XXXX. capabilities business. strategy the and our respect by currently for strengthening patient several ongoing made is have With three expect past in enrollment have in we Specially

to with pleased for we Kashiv KXXX announce BioScience Gravis. First agreement Myasthenia have treatment of development of we that licensing commercialization into and pyridostigmine are for the a the today entered

as product designation we obtain add U.S FDA XX-months. our to believe deployment well to with expect This over is highly to KXXX first products next many XX-months, into expect meet capability. We synergistic and internal new commercial orphan the the specialty the from clinical drug development of as clinical the

by the house, our our reps targeted announced will nimble specialty sales which to capabilities also more be and contracts outreach. bringing in successfully approximately commercial we allow in sales expansion Second XX of us

generics and is infrastructure generic traditional product Amneal’s retail which valuable for not model. biosimilar we well. not launches certain Which but specialty a complex asset, new the only fit with as brand distribution leverage do launches, in commercial

reiterate to customers, continued employees launch and management improvements In readiness. to including suppliers utilization, chain profitability on support and their operational plant worldwide driving supply closing product I for like and would through our our and intense focus thank optimization, inventory growth

Chirag the now call will our to turn M&A. back to for discuss I framework

Chirag Patel

is not development. and least M&A Chintu. but certainly business Last, Thanks,

for accelerating last in send As evaluating in quarter we potentially business discuss M&A. including inorganic lay are foundation growth and specialty, we to and transformation taking the the generics our we both actions

Specially to which this could strategic channels include and will market customers. new us opportunities new access distribution enable partners, key expand to through international into

looking at We side number returns compelling smaller to believe are are we of on United the transaction way, a investment. we along sterile also offer specialty on the actively manufacturing our in And analyzing continue XXX(b)(X) States opportunities and these. the

Before I with call disappointed extremely results let over by doing that me are Todd, turn saying to summarize what we would we are this we the do. said U.S exactly we while

digging and attacking head-on. holding the that back issues into We business, the us are identifying are them

we not the actions we are working are XXXX any That a environment with will is year the going urgency make We said, the recognize for easier. market to taking and confident company. are make task that growth that

an already improvements coming uncovered foundation in quarters. that and we will the have incredibly show We have strong

thank is I of we wanted to our since because support generic come tremendous to take Amneal drugs for able customers patients essential in our have a and System. the States back Healthcare to its continue moment role important provide to United customers Amneal, their to

their any thank have transformation you. to Finally, for Amneal contributions of commitment they of like I made without our to shown the we the workforce remarkable to couldn’t these and would our for they do ongoing have Company, global

Todd. quarter. like financial call the over to our would Todd I results discuss for Now, to the turn to

Todd Branning

Thanks, morning everyone. Chirag. Good

by with that to QX hamper generics those respect and that balance the of in of commenting have and inefficiencies a shareholders we year. to results challenging continue me disappointment for and the with our marketplace first internal compounded we It Let challenges have our results. start the share our our takes forecast

improvements. opportunities appreciate Chintu said those as we which to interest many and drive The into good financial have we and performance exists in Chirag is take in better news time the areas results. opportunities will importance that short-term performance, to It while convert

creation. Our value long-term focus will on always be

third exclusivity year’s of of $XXX was and revenue million our divestitures Epinephrine to segment. million net in erosion Total impact in The generic of decline businesses, loss Albenza and including ongoing attributable our our last the the on new competition, quarter. international primarily segment price $XXX to specialty constrains the compared was the in supply volume

sales of in offset decline some products launched from the We Levothyroxine from with XXXX. and

Our sales inefficiencies, our gross product margin by mix, manufacturing loss and generic exclusivity price in the erosion chain negatively third Albenza. impacted and was of supply the quarter

the operating reductions We across last this expenses aggregate. organization expenses combination or are $XX million tightly with cost R&D in managing from year’s adjusted with and impact and SG&A declined XX% combine

by strong third lower positive from Adjusted in result earnings failure $X.XX sales reduced unfavorable and flow quarter, financial developments $XX quarter improvement to and diluted EBITDA the respectively penalties. adjusted of to XXXX driven of share million There and the during these supply capital operations manufacturing declined included some were and third a cash per working for as cost.

generic product The compared sales and million, declined of third and net to decline the new revenues new Epinephrine revenue partially XX% sale supply issue. and $XX $XX results; million in to quarter product decrease from from to year’s of divestitures review last nine-months a the offset decrease XXXX. excluding revenue Moving Levothyroxine and competition, our to primarily by million re-class, decreased $XX was of XX%. first million was international a of divestitures segment due The in launched $XXX

a our we source year's generic third and re-classed promoting through consistent segment its of $XX to We Oxymorphone single marketing minimal wholesalers Additionally, third sales quarter because status due practice, as be included product with sell to this product. product. this we million of sales existing our branded quarter or specialty won't this

the quarter lower to net On a XX%. revenues compared were XXXX basis, second of sequential by

sales agreement quarter. divestitures quarter of generic during was X%. from The additional Excluding product quota. partially third Oxycodone the our result Oxymorphone The annual base was decrease primarily exhausted the and minimal contribution launches as re-class offset by business on re-class supply we of a revenue product decline competition only declined and new the third-party

gross margin the compared in quarter. and second adjusted third to to XX% quarter last in this Our in year's XX% declined XX% year's third quarter

competition, and the of product was variances margin due Our primarily mix, to charges. obsolescence compression impact sales inventory unfavorable manufacturing

year’s During the we quarter. third supply by progress second failure penalties quarter, on from reducing to significant our made million this $XX

drive action initiated improve to Chintu capacity address in noted, As gross the to order expansion margin underutilized have future. plant we plan in efficiency and

sequential as $XX in benefit third year's by of compared income were was last adjusted decreased quarter to in profit gross synergies the a compared expenses second operating the $XX third down of quarter lower partially operating we and initiatives. million Adjusted to to cost $XX million. basis, million revenue and quarter the On income reduction offset other a XXXX realize

$XX basis, offset the by September of sales Albenza exclusivity Rytary a decline specialty million loss generic X% a segment as our and year-over-year were in the revenues of the and sales to million. XXXX. results, to of Turning Higher Oxymorphone $XX segment on in sales the re-class result net Unithroid increased of of in

gross margin year for significant in decline of increased Unithroid XX% On basis, and revenue Oxymorphone sales in margin quarter higher Adjusted due of was and second down this net year’s and compared Albenza. the third the sales due to quarter from the in XX%, addition a primarily addition the to lower to of sequential quarter. Rytary third a of XX% the prior Oxymorphone

quarter basis, year-over-year for adjusted a And On adjusted third due million, on income operating XXXX by we and or by expect in third to coverage rebates higher year's XXX to income basis primarily will this Medicare This the quarter quarter. the gross fourth year's decline a which D million operating $X declined quarter impacted increased margin. Liability, normalizing was sequential part third million. $X

the Now our third second million flow and million to $XXX review ended in with cash for sheet up cash balance of of quarter a $XXX XXXX. quarter information. We compared the

and deferred in policies surrender the improvement of non-qualified the result As insurance $XX cash compensation fund flow operating plan. legacy used life to of an received from million value a cash impact

positive as from receivable cash of the in in result third million the working quarter included reduction improved of operations $XXX from a accounts to XXXX. Our This capital. quarter million $XXX in flow improvement second

quarter current interest rate to fluctuations. reduce interest We interest executed expenses by third estimate will swap the During we exposure annual this action hedge rate to million. $X an our approximately

revise Turning fourth EBITDA expect to our outlook. our our the guidance impact and fourth We to similar results adjusted quarter quarter third be will XXXX of outlook, full-year have quarter we to currently XXXX. third updated quarter reflect our of

remarks growth are greater beyond. and Chintu margin we gain generate expansion in efficiencies, improve As gross XXXX and Chirag drive working operations aggressively and to their noted in and

are we Even with and near-term a concerns. continue we covenant to or position changes, navigating solid through internal though maturities compliance financial in challenges debt operate no

their cash more external flows investing and We service in generating than are while debt to fund internal growth initiatives.

turn that will With call you. I to Thank back the Mark.

Mark Donohue

Todd. you, Thank

we for so and questions queue. before a up of open get we keep to questions, please you number the to follow-up So in can I would one one ask line the through callers

So to up call please. back the open it to with that, will Elysea turn for I questions

Operator

Thank you.

We RBC go Randall question [Operator begin Your Question-&-Answer Markets. session today will from ahead. now first Stanicky Instructions] Please of Capital the comes

Daniel Busby

Hey, Busby Randall. This dab for good on morning. is

run as support performance specifically provide said. you follow-up XXXX. the can XXXX. probably roughly the think enter XQ And Your in rate business what as Is XQ we to to flat in details can relative you. a is from the you updated guidance about any as just in right pipeline around that Thank

Chirag Shah

Chirag. This Dan. you, Thank is

run take guidance. as quarter a fourth the should You not rate

XXXX as new XXXX value launches the As some launching that year. to new in high launches becoming products actions growth the annualized increase have reiterated XXXX as the taken we we will XXXX, launches in the well incurred new just business, make base

Daniel Busby

we of products see around Okay. launch XXXX? the specific any details And in could some

Chirag Shah

have the we no patients. we target earning on is Well, fourth then and was last disclosed have quarter, disclosed it in in and others few still

be XXXX product we and about we our guidance. our are be But to in six we will new we year launched in-line talk to XXXX more complex updating will talk guidance. products eight give when about So more launches when you details next

Daniel Busby

Thank Great. Okay. you.

Chirag Shah

you. Thank

Operator

comes next Please of from David Jaffray. Amsellem ahead. Piper question The go

David Amsellem

Thanks.

other expect particularly understand struggling sense concept trying you to is and to just with dosage when companies give many are that get are capabilities, that aspire that I it many get initiatives us But retail are how there like form to sophisticated more that I’m growth many generic a with to. So, articulating and other into companies of pipeline of It returning non-retail are you the there companies sounds of to the clear you articulate. vision by a the of kind out trying channels. non-traditional,

trying are I'm how business growth where do in in landscape understand just you competitive you peers So trying of to know of context same Thanks. thing. the many drive your to the the the

Todd Branning

go Thank became like way, in when United bit a we so the probably were the the David. we back in XXXX just from last to the big I you, to and States. people launched fastest label industry we generics genetics XXXX our a entering XXXX first Company in to growing

be record, very customers domicile dosage has great the So results, focus we track relationship United we more in are in medicines, providing with our great are quality States are to supply After become multiple track our with company largest forms, so competitive quality record affordable it over differentiate we it market, portfolio, we dosage a field. various super. large will U.S operating form, we years a all are have used do competitive, competitive. how Yes, so is

multiple value multiple even at that creates The the more about or companies value they launch is question. products. that are products demand though complex there know capacity products would always We high more talking

we last a years over on couple is question won and last investing strengthened pipeline suffers every higher with XX-years in the products product. have have through which we timing always of our realized launch complex a value companies delays these The and and in understand R&D to

after approved XX-years. Neulasta Sandoz probably got saw You

through So our new which we and in base I pipeline franchises coming confident growth are the specialty our said with the as growing. is business,

are comfortably we why year in XXXX. growth is - this So

Chirag Patel

to portfolio to inefficiency very into of even And operational chain the of on know way failure we utilization, be is products, opportunities and XXX, our see inventory we is is commercial managing plant our been XXXX. and is few fixable David, base scripts, have XXX just things robust fixed add a reiterate we to like our which that group morning supply just supply lot we talking growth what you can provide large see of we areas for in since with our management, and products can a itself substantial everything in

integration. Company we we expiration dosage mean product where about Secondly are confident are category very each filled commercialized and of we complex complex, except I unique on in the for

in a that key forward now months XXXX. eight going that stated, are included reality of are successful and toXX become is XX expiration six as confident we XX to our we next So in differentiator and launches Company’s months

Todd Branning

improvements, sustainable is thing today margin I and that. on fixed, taken think have is actions are we already can margin can you XX% expansion margin its fix in-house must. know be that it problems nice And running we we that are gross and when The at

David Amsellem

Okay. Thank you.

Chirag Patel

Thank you, Dave.

Todd Branning

Thank you, Dave.

Operator

Please comes BMO Markets. The Nachman Gary next of question go from Capital ahead.

Gary Nachman

morning. Good Hi.

even bolt-on high will pipeline. in to deals. the the organically more term go complex after that some do longer is products or Can opportunities at high help what And value rationalization to have to you strategy So need achieve aggressively point. do you this looking are any to how you. at deals capacity leverage Thank improve such you at then do profitability. And you

Chirag Patel

I my will brother will jump start and in. Gary. you, Thank

a own products, complex the of device great products. do have we So complex pipeline products, biosimilars, our three fortunately products including medical injectable ophthalmic products

may a generics the covered. in biosimilars, other - have to look deal I need complex we So, we do not for

be going cost our through be assets, the XX have announced singles a is into specialty I, development that and those II move partnership, our then can would becomes to Phase it we we we is will specialty a so are we of global team where million as million well. side how we doubles, the on footprint afford would XXX(b)(X) scale On Phase today it. business until larger, specialty larger And building around the as may one but is XX which

our space, generics three years maturing is in as as several coming like inhalation will well be next within over four that injectable the years, we years, years, filing two which complex So, ophthalmic and that biosimilars, our strategy see already or third or as we is our setting the regulatory biosimilars have we to are maturing commercial be at fifth fourth this for as and well. we market point and expertise up

And the And rationalization injectables, We of R&D, not are investing which specialty solid and allocating of have our R&D. we in would to will as retail but all we biosimilars those. be almost investments, institutional we lot of we to still well generics and believe still XX% products, inhalation, be today. smartly specialty do revenue as take and focusing in ophthalmic

Chintu Patel

add to thing scientific uniquely are today, Gary in-house. very very that, just positioned, And one are we in because pressure capabilities we robust

many dosage very many and large was Amneal will our we product through complex execution cost complex a have mover - years form. on call, first So

we acquired biosimilars. in filing have that in dosage the forms including transdermal future So ophthalmic a is complex knowledge help accelerate

extremely growth, that parties don’t So, the opportunity we bring away think would there I is from we that other if shy CMO we in-house. fuel but and are will looking,

are still and but the trials, at looking not with fits clinical specialty and improvise which products, capitalize our does the I did heavy product And leverage think franchise investment announce we long to on really really well - salesforce our we existing specialty right value. or we have space expect this we product that

about our set the will excited So at we specialty next more to to five the portfolio. and are looking XX-months over XX-months products bring products to into six

Gary Nachman

Okay. you. Thank

Operator

comes SunTrust. from Gilbert of question next The Greg

Greg Gilbert

a have I you, Thank couple.

to if how that point you about get not can there get. where and that is help you margins is us XX% a bps a gross I you start can understand could that starting Todd is me XXXX Let from would anything lead XX% to us to ask XX% below temporary

are more So is, is things a the on the hopeful your I margin much specifically I have of and kind then guess product that much follow-up. gross question the control, and mix how of how

Todd Branning

I thanks gross margin. Right, okay Greg, question. our the for answer will

So maybe that. will answer I

of the we QX a were QX, If you QX in so between about QX at gross on to about I if we the business generics generic we and XX%. look margin we bridge in landed sides do XX% the generated business where - in were and the XX% related and quick

the that the business, Probably in margin to gap both price in also specialty we compression erosion generics XX% from come some about have at given majority our liabilities of has in the XX% point but to year. degree coverage our this business

rest coming plants, for variances comes charges from absorption like utilization, has inventory mix. under manufacturing generating that some The it product from of compression of things obsolescence us, and element

achievable QX, So of go from how get think we where then XX%. we is to we we were that is we terms in do are from think up in where QX how but right now to we what

our come have things overall things the ship we level. where to variances customers internal manufacturing that and spend back going lead penalties, that fixing failure like to to to plant the portion orders Some like inefficiencies from the of lead of at we can’t is supply control

heavily will at it, conversion look of dropped be the newer can we have over ratio, sales few has will gross-to-net it. of of introduction need our the quarters. also to new generics our products business, achieve through last some in will which we for significantly the launches, so we we margin, which but ways particular, that are in part part pricing products in we second lower improvement And commoditized that of story, to trading So product be improve out expect

We improve position we ourselves. are that even we where below some occurs there have the can got might at call to that ways find well that where as particular selling areas our to some perhaps cost some leakage to other of at we and look capture that products be which back, look need how as

we would at how is are to XX% that we where go expect So from XX%. hopefully to

Greg Gilbert

sorry that. sorry Todd, about Yes

so Just out the I’m failure in supply clear correct? that XX stuff pretty is backed

Todd Branning

than the our we part still were we in are and there margin is we some while have QX gross that supply penalties were QX. in that No, have of did QX, we still in lower

Greg Gilbert

will more Okay, follow-up that maybe on -. we

Chirag Patel

on Greg are things a has new add, incremental launching Amneal that these And XX just so many may have level. gross XX% get utilization, new gross to recently, of and business more. under historically unsustainable man won I going we margin, increases XX% this base XX% is margin, after incremental at base between are done already business, sorry, operated we control to to which our products XX we XX product the

products, products. transdermal injectable more next more year we We are producing liquid more than this did year,

all that with the perspective from - thoroughly ratio of the early there. evaluate along certain about find a appropriate where So smart and big the perspective returns we mentioned, that or way because we from Medicaid a its dollars product be expense as gross-to-net taking have have to lot gross-to-net, to with Todd have products

throwing is which And failure money have this year. thing we large the obsolescence just supply, inventory number same with

So put the last plans at days. its all already an we XX action, in to those underway expect have of and these, we improvements all the do

Greg Gilbert

Great. Alright.

bit on Chirag you remarks talk about, distribution and be bit major maybe midst think would I finer very spoke massive are this serious and expansion sort management to method, in business So which if of and do your so hear I here near-term can prior point so sort But underway, be evolution turnaround surprised like much moves the model and sort international international. actually effort. you was alternate because about things a to turnaround of the prepared see what follow-up seems to restructuring things type put bigger the something in team those, is you picture question folks in and With such the considering Chintu. a you for international my not of surprised of

meant if maybe a of bit could around context there So comments more you put you what terms little priorities just near-term just or whether Thanks. in functionalities.

Chirag Patel

Thank you, Greg. Excellent question.

let with what me So, we mean expansion. start by do international

certain assets markets other in any markets. of highly they our are other or whether have or China valuable We European Eastern are markets

very So those interactive. two look

assets. we players our the do strategically partner those maximize value and the how five of with markets So areas top in those in

the U.S. maximizing is value So, a to in expanding the planning of key we and are in base we portfolio our asset you assets are not have our States FDA and all or we international go Ireland doing approved. company, as buy or imagine plants market. as in are made Indian which as well FDA our everybody United can our products products approved the likes And plants

about excited opportunity. are we So that

again we in we the largest like company, in I the U.S. channels that do communities there the to manufacturing to we and manufacture are large untapped, stay to dose government say are are serving channel America like channels, and when and domicile are footprint unit here, U.S. the expansion, channels. And going America are everything

add additional and products. those be channels for So sales expanding our will

Greg Gilbert

Thank you.

Operator

next from Wilbur Raymond comes The of question James. Elliot

Elliot Wilbur

of just ask you to in provide Thanks, Maybe color prepared deck. to the you bit good your morning. optimization referred commentary to could the in portfolio course process that I a little more and on prepared

those of on opportunities at in current looks relative identifying successful offset respect observational such would and of growth able Specifically erosion base, you would third analysis at generate majority the to to seem provide be any fairly the least to to positive with point are additional would if the XX sufficient to like price products, we what you growth about in volume your at number saw large this in I that my what actually be that least quarter. base that XXXX guess

just those I'm what maybe So feedback wondering on observations. your

help of little And of cash operating difficult same balance at income adjusted thinking about about guess I'm flow, underperforming the should net half. to cash operating as the follow-up relative for flow been Todd if net first guess think a projections. in in where to of still looking predict XXXX bit conversion, in Thanks. very then you terms numbers bit second I look at with then a little we I still cash sort have guess sort the we I half but conversion adjusted us us be we terms volatile, secondly heavy and five income, think pattern, And pronounced about help are cash light year, the in

Chirag Patel

well. pursuing. few won are Chirag can is base we this we XX Yes is commercial a we have and continue, incremental back few we to have products XX Elliot, very from which working XX, whether On as more team our We the may are add as add are actively we said there segment business incremental more as to discontinue government in we identified again. through bringing you much already business thank and have

very can base comes XX-months as very, are we competition new this done excited which business base have very optimistic over is and about and have business the always would we case So should in in. what these offset in now, decline our

can and and product grow we launches we capabilities have up coming in becoming complex well. launches which eight utilizing up. But new have, and lined six our the did the we to product business are All have XXXX XXXX we that we launches, plus and we all and and aggressive plants full-year in offset are also hard as working

would help our offset So the from us that competition you business. correctly stated

add One is XXXX launch, generic more new lot we the we not as concentrated have of Top to is XX now now be We products constantly had business. EBITDA must highly list, products concentrated. do enough list in thing of replace better high and which not and value than will driving we XX to in side, is those it few Top are generics

Chintu Patel

And just to it. point one on add more

the As process but many the plant products and CMO. had part inventory in started, of California was we some of the cost. Hayward, lot The merger there at home also of our

profitability. California our So will form as our it a groups give in-house of we products cost improve bringing the more CMO are in Hayward, This will plant. and

mentioned we XXX. product as Chirag product, approved also commercial but actually XXX And have is

looking where the in of at overall that. bring business some see even supply still and on third, our we to we And are we opportunity cost are So source qualification second actively base chain down. increase streamlining working

in help So XXXX. year ingredients growth to I think these all would us a

Todd Branning

in regarding more seems from that now generated since cash CFO, cash cash actually be flows. terms and in probably the we pleased normalized bit became the are saw to of of the us with first for is we we I have quarter little the And very operations, This conversion that there. a flow sort third the quarter

the Having payments the said international that, of the balance we timing did timing have helped some right that very benefits at in towards operations the quarter. very probably end charge the of the our of of end quarter backs and of in terms

through see just we quarter surprised to the not So, the in proceed decline and the giving the you always would of end flow the those, operations I of position fourth but some terms of as case sort be that in quarters. from is of that timing cash to get cash the especially when

next right In XXXX, detail all on I plans that we terms little about year. a working our are it of talk mean pre-mature to still now, for is

lot think say for more about share to cash XXXX we we flow projections a I into that. get once year So next would

Chintu Patel

Elliot. Thanks,

question, Next please.

Operator

The next Chris from comes question Schott JPMorgan. of

Unidentified Analyst

if from And Hi, overtime. Chris. would about for for you profile me. a just like you Company go to have profile at. against you the mind. leverage how some that external looking Thanks. are balance that are the [Katerina] this the talk about thinking question on is you these you opportunities leverage target of (Ph) leverage need you business how to Where Can in And diversify

Todd Branning

numbers we is be we Katrina. This around with expect I it There put elevated for take hard on, the the of will thanks a balance that we a that So, that elevated isn’t now XXXX. will say are leverage it question. that and Todd, more guidance is focused let’s

it on this generation we and heavily year in to going this and look is for proceed that XXXX a are might matter. position comment what on be of focused into to priority the at Certainly very a flow us as beyond to for like for not We we balance that in be and cash going point XXXX. are

maintain is view internally provide stronger that position to the business the be able to flexibility shape to in our have, externally the capital that see able to to financial extent a to fund to our not well. we need and service opportunity able only try obligation the as as we as My we both to we do can and debt that but be be also and allocation our priorities

but are to our cash target not where we be to So purchase how let say we around. that, in are we leverage going a we working we balance will be have flow, view, particular disciplined mind we that is prioritizing that in and there

Chirag Shah

entrepreneur leverage the less we or Xx leverage may leverage little we sometimes as and right which levered the many and our add, higher. then take we an Chirag, have to care I with ratio not appropriately the mindful but I to organically boost opportunities deal can’t to number, highly will EBITDA put And we around are growth Amneal we like of do having company personally can grow. of this a XXXX is sometimes on I XXXX Todd,

Unidentified Analyst

you. Great. Thank

Todd Branning

you. Thank

Operator

Ami comes Leerink. SVB The next from Fadia question of

Ami Fadia

in likelihood next and how launching much much - of and - upon broad Hi it - you that a Thank year complex of divide about that I gross fruition initiatives how did have to you the expansion two and - good questions. have the product you much XX% morning. have - XXXX indicated questions. talk you second got from the applied I and question. the of When range, margin for today XX% internal how in then

Chirag Patel

Todd want do you to?

Todd Branning

is say product I on what margin Sure. there, around think or you little much up gross are basis but and expansion in how new the increases. a controllable let's breaking other versus launches bit mean the just reliance I were we the gaining revenue

expand as gross is both of it combination to our look of the So we those margin.

mid-XXs, think inventory be from charges that can probably terms in basis reducing go you generated XX% of our think I plant inefficiencies in simply we the able have broad we internal to on supply, third that just the we fixing the probably utilizing quarter capacity. should to obsolescence the

are smart conversion moving what and would going higher to margins better the it rationalize launch say I on more now. right a that ability portfolio in than at to gross-to-net certainly to ways generate beyond we products to our reliant is be new

Chirag Patel

Incremental base business.

Todd Branning

better to business base plants. our incremental utilize in And

Chirag Patel

XX Which we products of and in are manufacturing mix sites already more the the coming. have

up product lining So are to I our deliver and would launches pretty within well. as control say that new is

Ami Fadia

business side on had more new of approval as out side. the and and the product as maybe timing over in you a how and about was about flows the and - uncertainties question think far of do broadly for how ebbs specialty the that think half with building you balancing more second generic year probably we I around year, Okay. And last have Chirag the the Chintu seen and

elaborate a that helpful. talked sales Thanks. on bit reps, little that You you in would some be if bringing but could about contracts,

Chirag Patel

most next year. what with in FDA Sure, been on always in important of new place working queries which news has that and The is that Ami good put we but response product so rest the proactively and you. far thank and have year flow the timing launch have of coming is we tricky, is to the product

it also medical requires And complex products that inventory, all other that, preparedness, is launch is by or efforts relation done building to used of device we do launch how most to we will lot is activity is what of have products just the products, complex these especially which important in-place the any that ready, to to preparedness do be for approval. us constantly and or process to on other allow

specialty before like yes XXX our add assets we partner salesforce, specialty into to and as disorder or more companies, is product - do size and things big then going courses, have reach we on Those net as certain focusing will singles today. movement about said side, and are add on, areas add the which we endocrinology other two the would are very we more excited our specialty. doubles On hit we that I we specialty with we the are are

Todd Branning

Thank you Ami.

Operator

Guggenhime of from Securities. The Flanders next Dana question comes

Dana Flanders

complex that into Thank they guess coming generic not problem very guess saying first my companies one base has grow. next few around just of Hi. where but launches just for expect lower. problem, is question And value I to also the here, you year. a pipeline questions. business back I the a are growth moved to it

are the is question, getting tossed. between and equity. how second are your first-to-file, many pipeline. my not multi keep first-to-market loans of asked actually versus trading I question just color And sure complex you about how the where just and add loans this keep the just disconnect And guess the I I valuing can I’m So, any are these but and to asked getting your just then it, you if

is if that. add Thank curious So on you. anything there can just you

Chirag Patel

second one Todd. first I pass Thank take will you, the Dana. to the one will I and

that which good So growth to in so XXXX years, from - growth. are we many down is XXXX underperformance a XXXX helps while in way not it is say the starting

merged we within on and are larger But have the have we base what we because we capitalizing that opportunities portfolio, excited our the this acquired business, again, we Impax why we found diverse have are portfolio, portfolio. is can

year up. have excited launches up been liquid a about annuity, excited product ophthalmic So up, injectable are next launches launches, coming them have that, of as about now catching launches a of the which couple delayed some new as couple such coming up of we coming well, good

are I products. we there of those we will those excited be many we very So, about would believe launches, predict if but cannot competitor whether us, first-to-market, are first market some in - another of to with them be batch the

business and is well. we is well this why and that we specialty So, as expect doing really our

as day. the with out five as we XXXX of the that next enjoy year growth years, do for about every sure we have are doing, year build very and activities growth are entrepreneurs beyond we we So would XX-years, every what we

Chintu Patel

last certain CGT generics a and And on just thing exclusivity. also have we complex potential

get six to R&D, we have on we all line the several that competitive, as firs And where will the And focused it market. is is finish we has criteria. that heavily product the meets the months So about united first. exclusivity on first-to-market in have that are products it who the

think many the really first expedited on and the learning Amneal products people so I was movers and a took launches. tools complex we longer, and future focus the have but it to we little approvals have and now it infrastructure and the and

Chirag Patel

you is what has XXXX, used it in the it XXXX right, Dana it absolutely one are XXXX, not is XXXX, thing XXXX, changed. to value, be

keep So each and to be those what that it is than products of value value of do high lower mind. used we in

Todd Branning

period mature is by XXXX, doesn’t B, B, so our I the that. matures. a to affecting it of probably loan performance of will on level product a the of it the loan is and maturity is in of performance that which influenced so term is Its certainly by an financial our influenced still long bit Company the deterioration before the add. Company extent until of This it trading the Dana of term time May

of by level You but faces also sentiment risk just in there know around is potential been the terms debt equity. our it trading particular loan their exposures rating. the everyone at sector influenced that B, also of know the overall has their term some the around We but at and softening

factored all it. So into have

expect at. influence us in probably not the lot But trades the performance debt do able is to We of all and are outside cognizant in second a be can to the it of our to that. near-term market we where improving trading

Dana Flanders

you. Thank Okay.

Mark Donohue

questions. out is Thank today Unfortunately you the are time We call. available you appreciate today. follow-up joining Investor our relation of weekend rest we Dana. of to really for and

So you. again thank

Chirag Patel

Thank you.

Chintu Patel

you. Thank

Todd Branning

you. Thank

Operator

The We for presentation. you attending has concluded. conference thank today’s now

You may disconnect. now

Mark Donohue	Vice President of Investor Relations
Chirag Patel	Co-Chief Executive Officer and President
Chintu Patel	Co-Chief Executive Officer
Todd Branning	Chief Financial Officer
Andy Boyer	Executive Vice President of Commercial Operations
Joe Todisco	Senior Vice President of Specialty Commercial
Pradeep Bhadauria	Chief Scientific Officer
David Buchen	Chief Legal Officer and Corporate Secretary
Daniel Busby	RBC Capital Markets
David Amsellem	Piper Jaffray
Gary Nachman	BMO Capital Markets
Greg Gilbert	SunTrust
Elliot Wilbur	Raymond James
Chris Schott	JPMorgan
Ami Fadia	SVB Leerink
Dana Flanders	Guggenhime Securities

Amneal Pharmaceuticals (AMRX) 6 Nov 192019 Q3 Earnings call transcript