Amneal Pharmaceuticals, Inc.

Good morning and welcome to Amnail Pharmaceutical's second quarter 2020 earnings conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd now like to turn the conference over to MNIL's Chief Financial Officer, Mr. Tasos Kanaderos. Please go ahead.

Good morning. Thank you for joining us at MNIL's second quarter 2020 earnings call. Earlier this morning, we issued a press release reporting our quarterly results. The press release, as well as the slides that will be presented on the call, are available on our website at www.mnil.com. We're conducting a live webcast of this call and a replay of which will also be available on our website after its conclusion. Please note that today's call is copyrighted material of MNIL and cannot be rebroadcast without the company's expressed written consent. I'd 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 and 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 I revised and updated on our quarterly reports on Form 10Q and current reports on Form 8K, which you can also find on our website or on SCC's website at scc.gov. We also discussed certain non-GAAP measures. You will find important information on our use of these measures and other reconciliations to use GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial statements that correspond to some of our non-U.S. GAAP measures we referenced throughout the presentation. On the call this morning are Shirak and Chintu Patel, our co-CEOs, Andy Boyer and Jota Disco, our chief commercial officers of our generics and specialty segments, respectively, as well as Steve Manzano, our general counsel and corporate secretary. I would now like to turn the call over to Shirad.

Thank you, Darshan. And good morning, everyone. Hope everyone is safe and healthy. Thank you for joining us to review MNU's second quarter results. I'm pleased to report solid top and bottom line results with net revenue of $465 million, up 15% versus Q2 2019, adjusted EBITDA of $101 million, up 9%, and adjusted EPS of $0.13. up 44%. Overall, our business performed in line with our expectations and reflects our organizational focus and resiliency in meeting the needs of our patients against headwinds related to COVID-19 pandemic. This solid performance reflects the strong foundation of the company and the growth vision that Chintu and I laid out a year ago when we returned as a row of co-CEOs. As we said then, we plan to reinvigorate the generics business in the United States, build out our specialty franchise, enhance our operational execution, and diversify our distribution channels. We had a strong base for growth with three core businesses, retail generics, the hospital market for injectable drugs, and the specialty pharmaceuticals, where we already had a growing presence in neurology and endocrinology. In the past 12 months, we, along with 5,500 employees, have been executing on three strategic priorities. We have reignited companies' genetics R&D engine, advanced differentiated specialty R&D assets like IPX203, and K127 successfully launched numerous new products and improved our efficiency and cost structure. In addition, we expanded our distribution with the acquisition of , which gave us a new avenue of growth with the U.S. federal agency sector. Consequently, MNIL now has a well-diversified portfolio of more than 250 approved products, a best-in-class manufacturing organization in the United States, India and Ireland and a pipeline of new complex generics and innovative brands. We are moving forward with our strategy to develop more high-value generics portfolio and a larger specialty business. Let me provide an update on our progress. We are strengthening our generics portfolio with new products. So far, we have launched seven of our target of 15 new complex generic products by 2021. Our generic versions of Nuering and Carapet continue to perform strongly, and we recently launched generic Lupinazine, which we also expect to perform well. Within the specialty segment, sales of our top products remain robust. For the quarter, Riteria and Unitroid total prescriptions grew 8% over 2Q 2019. Successful execution of marketing strategies has driven top-line growth as well as improved growth to next. leading to a strong quarter for the segment. Over time, we expect to devote a larger share of our R&D spending to the specialty segment as we seek attractive business development opportunities that leverage our existing platform in CNS and endocrinology. Moving on to our distribution strategy, we're very pleased with our acquisition. which is providing us with an attractive differentiated asset. We are expanding the higher margin unit dose business at Evcare, see potential for additional opportunities as well. The integration has gone very well, and over time, we would expect to further accelerate Evcare's growth. Let me provide some highlights on the second quarter results. Starting with our genetics business, as we expected, COVID-19 had a temporary negative effect. Demand for some products dipped as patient delayed procedures and physician's office visits. We also temporarily experienced larger than usual backorders due to supply chain disruptions. For example, we experienced manufacturing and packaging delays at our New York and New Jersey facilities as those states were hit hard by the initial wave of coronavirus. However, I'm pleased to report that the situation improved as the quarter progressed, and we are now in a better position on back orders and rebuilding our preferred levels of finished goods inventory. In the specialty business, we were pleased by the strong performance of Rytary and Unithroid, which offset weakness of some other brands due to COVID-19. This is the result of successful transition of marketing programs from in-person to virtual, physician comfort with prescribing Rytary and Unithroid through telemedicine, and the resiliency of refills for those brands. Revenue from Rytary and Unithroid increased 25% compared to Q2 2019, highlighting our successful commercial strategy and execution. Turning to healthcare, this business continued to perform well, though COVID caused some temporary delays in the launch of new products by other providers. In sum, we are moving forward strongly and continue to focus on operational excellence. In this effort, Shintu and I leveraged a wealth of experience, having grown MNIL from a modest startup to more than a billion in revenue by 2017. Our performance through the first half of the year Despite the impact from COVID, it gives us confidence as we continue to position MNEO for long-term success. With that, let me turn it over to Chindu.

Thank you, Chirag. Good morning, everyone. It has been an eventful year since we returned as co-CEOs, and we are enthusiastic about the progress we have made thus far and the significant opportunities ahead. The COVID-19 pandemic caused the temporary disruption, but hasn't changed our long-term vision. Let me start with an update on our key initiatives and our response to the public health crisis. We have made significant strides in growing our portfolio and pipeline while focusing on operational excellence. Over the course of past year, we have significantly strengthened our supply chain and improved our operations. Our progress in reducing our backorder was temporarily interrupted by the COVID pandemic, but the situation improved in June. We are well positioned to meet volume demand across our manufacturing sites and see the potential for further improvement in these measures in the second half of the year. We have been extremely impressed and proud of our organization's ability to adapt to the difficult circumstances caused by COVID-19. After some initial disruption, our operations recovered swiftly. By the end of June, more than 90% of employees were back to work at our US manufacturing facilities. Although the pandemic spread later in India, we are also seeing attendance back about 80% of our facilities in India and Ireland. We have initiated multiple protocols at our facilities for the safety of our employees, including social distancing and thermoscreening. We have also launched innovative information technology tools to enable our team to maintain productivity and to allow us to support and remain engaged with our employees. We appreciate their hard work and commitment to our vision and expect to achieve our full-year plant utilization target as originally set. I would also like to highlight that while we continue to make operational improvements and get our operations back to full staffing, we have maintained our record for high quality with no FDA issues. We believe that our organizational structure also helped our ability to weather the COVID disruption. First, we have a diversified supply chain with six manufacturing plants in India, four across the USA, and one in Ireland. There is substantial amount of redundancy between those plants as well as substantial amount of incremental capacity. In addition, our API supply chain is fairly diversified without being over-reliant in any one supplier. I would also like to spend the rest of my time talking about our R&D engine. because it is truly the force that drives our company forward. As you know, we are a mission-oriented company, and that mission has always been simple, providing access to affordable, safe, and effective medicines to as many patients as possible. The way we built our company and our path to growth has and will always center around value-added, science-driven innovation. I will start with generics where we have a robust R&D department with over 750 scientists globally. Our goal of transitioning our product portfolio to complex generics is progressing nicely. We expect to file 20 to 25 generic products in 2020, which consists of mainly first to market and high value and we have 91 products in the pipeline awaiting FDA approval. We continue to focus on more complex products, including sterile injectable, ophthalmic, transdermal, topical, and inhalation formulation, which offer less intense competition, higher margin, and higher return on investment. In addition, we have 132 products actively in development mainly in non-oral solid dosage forms. MNIL has a solid track record of filing, getting approval, and launching high-value generics. For instance, we recently announced approvals for Butrans TransThermal System and Flufenazine hydrochloride tablets. Both launches speak to our team's ability to formulate complex molecules navigate the regulatory landscape, and ultimately launch very valuable products. Furthermore, we continue to improve the efficiency of our development process. These gains not only improve our cost on a per-product basis, but also allows us to file products at a faster pace than we were before. As a result, we are seeing more launches each year, but with more modest spending. I will now turn to our specialty segment. As you know, we have a growing commercial presence in neurology and endocrinology, led by Unithroid and Rytary. In addition, we are also investing significant time and resources in specialty product development, which will become a bigger driver of future growth. For instance, our phase three clinical trial for IPX203, which is our next generation Carbidopa-Lividopa product for the treatment of Parkinson's has resumed enrollment following a brief COVID-related interruption. At this time, 70% to 75% of sites are open and screening patients. We expect to have top-line data in the second half of 2021, file for approval in 2022, and begin commercialization in late 2023. We are also continuing development work on K-127, an extended release tablet of phytostigmine for the treatment of myasthenia gravis, which may be eligible for orphan disease designation. This program is very exciting and may be ready for filing with FDA as early as quarter one, 2022. We are enthusiastic about the prospect for our specialty business and plan to direct more of our r d spending to this segment over time we expect to grow the specialty business both organically and inorganically through selective in licensing of products and acquisitions our focus as always is on therapeutic areas that will leverage our strong infrastructure and capabilities next i will provide a brief update on biosimilars where we have in licensed three oncology products from external partners. Our Neupogen biosimilar program is currently filed and we await further comments from FDA. We are very excited to announce our recent filing of our Neulasta biosimilar and our Avastin program is making good progress towards BLS submission. Lastly, I would like to acknowledge our suppliers, customers, and employees for their efforts during the COVID pandemic and thank them for their hard work and dedication during these challenging times. I will turn the call over now to Tasos.

Thank you, Chintu. Net revenue in the current quarter was $465 million, up $60 million or 15% compared to Q2 2019. Upcare and specialty were up 64 million and 24 million respectively, while generics were down 28 million. These results reflect the resiliency of our portfolio, which upset temporary softness in demand due to COVID-19. Approximately 20 million of unfulfilled customer orders as our supply chain was stretched. and a negative 6 million adjustment for the metformin recall. Adjusted gross profit of 191 million was up 19 million, or 9% compared to Q2 2019, reflecting solid performance despite the high level of backorders and metformin costs. Adjusted gross margin of 41% was 150 bps lower than Q2 2019, and in line with our expectations. Alkyr diluted our margins by 320 basis points, while the rest of the business margins grew by about 170 basis points. On a sequential basis, adjusted gross margin was also down due to an expected level of price erosion, lower manufacturing absorption, and the metformin recall. Adjusted EBITDA of 101 million was up 9 million, or 9% compared to Q2 2019, as UpCare and the rest of the business contributed to growth. Adjusted diluted EPS of 13 cents were favorable to the 9 cents we reported in Q2 of 2019, as higher adjusted EBITDA and lower interest expense offset higher minority interest due to upkeep. From an operating cash flow perspective, we're pleased to report a significant increase generating $179 million for the second quarter 2020, compared with the $21 million in Q2 2019. This performance reflects our top-line growth and favorable timing of collections and working capital. Finally, our performance has improved our financial flexibility. Consequently, at the end of the second quarter, we had $268 million in cash and cash equivalent, an additional $414 million available through our ABL facility, And we also reduced our net debt to EBITDA ratio to six times versus seven times at the end of 2019. In summary, we continue to deliver solid financial results and reducing our leverage ratios despite the challenging pandemic environment. Let me now move to our segment results, starting with generics. where net revenue of 307 million was down 28 million from Q2 2019 and down 46 million sequentially. This performance reflects the following four factors. First, compared to prior year, 20 million of the 28 million reduction reflects the shift of oxymorphone to the specialty segment, the metformin recall, and the divestment of our international operations. Second, as I mentioned earlier, about 20 million of customer orders were foregone as COVID-19 adversely impacted our manufacturing operations. We believe this is mostly behind us as back orders have declined substantially. Third, it is well known that COVID-19 has led to generally softer prescription trends in elective surgeries. Some of the demand softness may also relate to early fills of prescriptions in Q1 due to customer supply concerns, which we discussed in our prior May earnings poll. Finally, our newer products, such as L-urine and sucralfate, continue to perform well, and our ability to resolve a number of epinephrine supply issues were positive contributors in the quarter. Adjusted gross margin for the generic segment was largely in line with our expectations of 35% compared to 34% in Q2 2019 and 42% in the prior quarter. The sequential decline reflects price erosion slightly better than our expectations, lower manufacturing absorption due to COVID-19, and the metformin recall. We expect that over the course of the year, generic adjusted gross margins will improve as our supply chain recovers and will further benefit from new product introductions. Let me now turn to our specialty segment, which performed ahead of our expectations, with net revenues of $94 million, up $24 million from Q2 2019. Adjusting for the reclass of oxymorphone, net revenues were up 14% versus prior year, driven by Rikeri and Unitroid. As expected, COVID-19 was a headwind, but solid commercial execution mitigated some of the negative impact. On a sequential basis, specialty net revenues were up 6 million or 7% demonstrating broad growth. Adjusted gross margin for the specialty segment was in line with expectations at 74% compared to 82% in Q2 of 2019, and 75% in the prior quarter due to product mix and the Riclas of oxymorphone, which carries a lower margin than our other specialty products. Let me now turn to Apker, which reported net revenues of 64 million and adjusted gross margin of 21%. This performance was in line with our expectations and reflects the durability and strong customer relations of this business. From a balancing perspective, as I mentioned earlier, we added a quarter with 268 million in cash and cash equivalent and no near-term debt maturities. In addition, we fully repaid the $300 million drawn from our ADL facility last quarter as markets destabilized due to COVID-19. Looking to the second half of 2020, we felt confident in our ability to meet our financial commitments and annual guidance we issued earlier this year. As I did last quarter, let me provide some context. we have a broad portfolio and expect normalization of our manufacturing operations and over time normalization of patient demand as well. Second, we expect improvements in our generics adjusted gross margin as we improve our ability to fulfill all customer orders and launch new products. Third, we expect an increase in operating expenses as clinical sites begin to open up and economic activity rebounds. Finally, From a cash flow perspective, we expect some reversal of working capital, and that being offset by the $110 million cash tax refund we discussed last quarter. With that, I will turn the call back to Shirat.

Thank you, Darshan. We are proud of how well the company responded during the COVID pandemic. We continue to work on building the pipeline and operational excellence to execute the long-term vision we have for the business. I would like to now turn the call over to the operator to take your questions. Thank you.

So now I'll begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To draw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster. First question comes from Greg Gilbert of SunTrust. Please go ahead.

Thanks. It's Greg Gilbert with Truist Securities. I have a brand one and a generic one. First, on the generic side, I was curious on NuvaRing. It's clear that some of your competitors are not so close, but I had assumed you would be able to ramp more on the supply side. Can you tell us what's going on there in terms of the ability to gain more share and whether there are any issues preventing you from doing so? and how long-lasting you think that opportunity could be in light of kind of the competitive environment. And perhaps Joe could comment on the brand side, on the growth of Rytarian Unithroid revenue versus prescriptions and what that disconnect is being driven by. Is it just quarterly variability, or is there something else to understand about that dynamic? Thanks a lot, guys.

Good morning, Greg. This is Chirag. I'll take the first one, and I'll pass it to Joe for the second question. So, new range production has been ramped up. We have double the capacity, and we will be seeking additional market share starting this month. Competitions, you know as much as we know. Whenever that comes, that comes, but our market share would be in line to where 20, 25%. So, when competition comes, We do not see our volume dropping because it's two players today, authorized gem generics and us. So third player coming in, we should be able to maintain what capacity we have. Joe, you want to take that?

Sure. Thanks, Chirag. On retire growth, the dollar growth did outpace the script growth a little bit, which is attributable to two factors, both price and volume. From a price standpoint, We implemented some strategies at the end of last year to target more profitable patient segments, and we've seen over the last two quarters that's had a positive impact on gross-to-net. From a volume standpoint, we saw a bolus of scripts in March, and the inventory that kind of replenished the trade shipped out in April. So we had a little bit higher April than what would have been expected because of restocking in the trade, and we saw that for both Rectari and for Unitroid.

Okay, thanks for that. And if I could sneak in one follow-up for Chirag and Chintu. On the biosimilar side, I can certainly understand your desire to be in that market long-term. I am a little concerned and curious about your thoughts on sort of the return potential for products like Avastin and Elasta. If you're not first or second or third in, are you confident you can still get a good financial return if you're not among the first? Thank you very much.

Great question, Greg. And this is, as we have said before, biosimilar is a long-term play. And it is more of a play of affordable medicine and providing values to the system. Fortunately for MNIL, we haven't invested that much of money in biosimilars. So our return expectations, even though being 4th, 5th, 6th, would be lower. offsetting the lower investment. So we are focusing on oncology biosimilars, and you're right, it is tougher for now if you're a fourth player, fifth player, and sixth player in the market. We are setting the stage as this becomes more of a crowded place, which we fully expect biosimilars to be. And that was intended to be, right? It is FTAs, and Chintu can comment more on that, are being more open for new ideas, new science, and not to have expensive biosimilar development. And once that happens, more biosimilar players will come. It almost becomes like a genetics business. Yes, it has, unfortunately, today. specialty pharma kind of sales and marketing infrastructure. So you have generics margin and branded sales and marketing. They don't go together. So we do have to solve for this. As I said, it's a long-term play. More and more competition will be expected in biosimilars. You have to start combining biosimilars to generics. I believe some of our competitors are already doing that. And that's how it will play out. And this is why we're just setting it up with low investment, being smart about it, and opportunistic about it, how we add our pipeline as we go forward. Chintu, you want to comment on how FDA is thinking more on a development cycle?

Sure. Hi, Greg. Good morning. biosimilar is an evolving space, and there is a lot more understanding from a regulatory perspective than it was before, and FDA is willing to sit down with companies and explore new ideas that can speed up the approval and reduce the cost. And you are absolutely right that it's no fun to be forced. So we are looking at the portfolio where we could be potentially one, two, three, but there are a lot more other tools than just full-blown clinical studies that can be utilized to speed up the development of biosimilar in a very cost-effective way, and that's what MDIC would be focusing on.

Thank you, gentlemen. Our next question comes from Randall Stanicki, RBC Capital.

Please go ahead.

Hey, good morning. This is Dan Bostian for Randall. A couple questions. First, with respect to high-value generic launches, it sounds like you've got at least eight left over the next 12 months or so from your targeted 15. How should we think about the cadence of those launches, and specifically how many of those could we see over the remainder of 2020? And second, the midpoint of EBITDA guidance implies a sequential decline from the 2Q level during the second half. Is that the right way to think about it, and can you talk a little bit more about the puts and takes that go into that? Is that driven largely by the step-up in spend, or are there other factors in play? Thank you.

I'll take the first one, and sorry, I didn't catch your name.

It's Randall.

No, it's not Randall.

Oh, yeah, Dan Busby.

Hey, Dan. Sorry, sorry. I wasn't clear. Good morning, Dan. So, yes, we are completely confident launching the remaining eight or ten high-value products. But the key is you should think about is we have reignited our R&D engine, genetics engine. We added 16 new projects, including injectables, IV bags. We are a smaller player in injectables where we aim to become a meaningful player in coming years. So now the pipeline is 132 products. So definitely we'll meet what we said last year that we'll launch 15 to 20 high-value products. We will. I do not have the information or may not want to share the information that how many still is coming up this year, but this year still looks good on new launches coming up. On your guidance question, Dan, I'm going to pass it to Tasos. Tessa, would you?

Sure, sure. Good morning. So, you're right with the math, right? So, year-to-date, we have had EBITDA of about $235 million. We are projecting a full year. We'll maintain our guidance between $400 and $450 million. So, you know, we are expecting, when you do the math, it's approximately the same level of performance in the second half as well as the first half, maybe a little lower. So here's the way we think about it, right? So we expect in the second half of the year, our business to continue to grow. And that is generics, you know, we'll continue to resolve our manufacturing backorder situation for launching new products. Healthcare will continue to do well, and then the specialty Q3, Q4 may come down slightly versus Q2 as some of the inventory buildup in Q2 that Joe mentioned normalizes. But also, we talked about we're expecting higher level of operating expenses in the second half, right? So number one is we're expecting a higher level of R&D expense as we continue to invest in R&D and over time a higher percentage of that on the specialty side. And then certainly we're expecting higher level of SG&A expenses as the economy opens up and we just kind of open up some of our sales and marketing operating expense processes. So that's how we think about it. It's acceleration of revenue, acceleration in operating expenses. And at the end of the day, right, we're still in the middle of a pandemic. So that's what kind of year-to-date performance, expectations about the future. You still have this unknown about the pandemic, but that's what kind of led us and our board to maintain guidance, but at the same time, feel very confident in our ability to achieve it. Hopefully that gives you a little bit more color then.

Yeah, that's very helpful. Thank you. Sure.

Thank you. The next question comes from Amy Faria. Please go ahead.

Hi, good morning. Thanks for taking my question. I've got a couple. With regard to levothyroxine, can you talk about the sustainability of this product with changing competitive landscapes? And can you give us an update on some of the pipeline products that you had mentioned in the past approval timeline for Copaxone? And I believe you had mentioned something about an inhaler product that could potentially get approved next year. And then just lastly, you know, we saw Kodak receive a loan from the government. Can you talk about... Emil, as a company that may be positioned to leverage some of its manufacturing footprint in this domestication effort, and can you talk to some of the opportunity there? Thank you.

Thank you, Amy. Good morning to you as well. So the three questions you asked, I'm going to break it down. I'm going to first address the generic levothyroxine. As you already know, the competition's been there since last year. But the product is also hard to switch. So our large customer preferred to stay with the same product. And we're able to manage or maintain the volume. Obviously, we already had the price decline, as you would expect when the new players came in. late last year and beginning of this year. But we should be okay with where we are today. Your second question, or your third question, I'm going to take it first and give the pipeline question to my brother Chintu. So Kodak, yes, the government efforts, we are fully aware of what they're trying to do. We've been in talks with U.S. government and legislators, we do believe in making essential products in the United States because even the friendlier countries sometimes could have the situation where they're unable to ship the products. So we must produce certain of our, or certain percentages of our essential drugs in the United States from the key starting material, API, and finished products. MNIL is well positioned. This U.S. domicile company, only market we serve is United States, and we live in the United States. So we are completely vested on doing the right thing. Obviously, we do want to be mindful of the cost that when you make products in the United States, which we've been making a lot of generic products in the United States, still maybe one of the largest portfolio than any other manufacturers which are made in the United States. Bringing API brings its own set of challenges with EPA, and even using the green technologies may take some time, but it's doable. Finished products is much easier, and we do believe that certain critical antibiotics and other emergency drugs should be made here. So we'll see how it progresses with the executive orders could do not much to sustain the industry in the United States for long term. It will require legislative action, and we hope, as we hear from both sides, Democrats and Republicans, they're keen to do something about this to not have a secure supply chain for certain drugs in the United States. So that's a take from the from the government side and also for pipeline uptake.

Yeah. Hi, Amy. Good morning. So we are very excited about our pipeline and the diversification, what we have done. So very strong pipeline and every dosage form we have capabilities from development to commercialization in-house. Your question on Capaxone is moving forward. We expect to launch that in second half of 2021. And inhalation product is also moving well with FDA. Don't have a firm date yet, but it most likely would be a 2021 launch also. And we are very excited on many other first-to-market and high-value launches coming up over next 12 to 18 months.

Ginger, if I could just have a quick follow-up. Obviously, there was a notable increase in the number of pipeline assets that you have in development. Can you give us some color on when we should expect these products to start hitting the market? Maybe give us a sense of when, you know, over the next two, three years, when do we start to see those products get approved? Thanks.

Good. So we have added more products, especially in sterile injectable space. We have reignited our R&D, so we have made it very efficient. I am personally very passionate about R&D, and we are very thoughtful in product selection, not getting into commodity projects. So our portfolio, including this year, we are filing 20 to 25. Most of them are first-to-market high-value products. So we're very excited. Depending on the complexity of the product, it could be 12 to 18 months, but every year we'll be filing new products. So this portfolio will be able to commercialize some of them in 21, 22, 23 years. but we have enough in our pipeline that we are excited about the growth potential from this pipeline.

Yeah, and just to add on, the FDA is very efficient as well, as you know, on approving especially the first two market products and different dosage form products. Our new development pipeline on slide nine on our presentation, you can see, 132 projects. Again, we added 60 projects. We are well known for years since 2007 about our pipeline and execution. We have been number one on bringing new products to the market, refreshing our pipeline. It's like generic business is running on a treadmill and we've been running on a treadmill really well, gotten used to it. So, We feel very confident where we stand in terms of generics business because our size is such that we can still grow. Yes, we do expect every year competition, but we have enough to offset that and grow. And also look at the injectables, the IV bags we added now. And we are good in execution and manufacturing and quality. We have done it for years, and we continue to – will continue to do so. So we expect good launches every year.

It's not just the 18 to 24 months phenomena. Thank you. Thank you. The next question comes from David Amato, Piper Jaffrey.

Please go ahead.

Thanks. So on NuvaRing, I guess this is one of those markets that even if Teva were to get an entry, would not be all that crowded over time. So with that in mind, what can you do to increase your capacity here and by doing so grow your share? Maybe talk to that. And then secondly, a question on Rytari and just the brand business in general, I mean, if you don't add additional assets focused on neurology and you look at other therapeutic areas, would Rytari and the next-gen product be something you would look at divesting? And just, I guess, philosophically, how do you think about that in terms of either, you know, building the brand business or jettisoning an asset like Rikari that may not be an overall fit. Thanks.

Thank you, David, and good morning to you. As I mentioned before, we double the capacity, so we are producing on our automated lines plus automated pouching, and it we will still keep working on growing the manufacturing capabilities. And we have a very modest share with the two player market. So I'm sure Andy Boyer will receive, will get a more market share as we keep going. And yes, it is a difficult product, it's a long term for us. So we would, we have gotten good at manufacturing, really good now. It's a good asset and durable asset for us, and we will keep growing over manufacturing capabilities. Very interesting question on a specialty. So think about it this way. We have the foundation on the genetics, which includes injectables and now the bags, inhalation product, the ophthalmic products. All these are growth area for us. Nineteen percent is only on oral solid. Eighty-one percent of pipeline is on all different dosage forms. So we, our base of 1.3 to 1.4 billion of generics, we still have room to grow in the United States. So with having that foundation, the specialty engine where we have RITERI, where Joe is doing a great job, And it is the products. We hear great feedback from KOLs and patients. It's much needed, great stories. We're going to keep expanding right here. And we're going to, we have the IPX203, which almost doubles the time, good on time. So that is, and we have learned a lot on the marketing and market. We are preparing already. They were launch planning in 2023. Whatever we do in life, we do it really well. So we are committed to specialty. We'll be adding more assets. We also have K127. We know where to get the platforms and technologies. We will buy companies, and I'm very mindful of leverage. So we will not, we'll be, because our goal is to get to five, five below. and then get to four at some times in the near future. So with increasing EBITDA and deep managing the expenses and growing the business. So we are committed and we will be building, especially the movement disorder franchise and endocrinology. Other areas, I'm not sure yet. We are always looking. So we'll love to know more about it as we keep going. So thank you, David.

Thanks, that's helpful.

Again, if you have a question, please press star, then one.

Our next question comes from Gary Notchman, BMO Capital.

Please go ahead. Good morning. This is Eli on for Gary. Thanks for taking the question. I was wondering if you could provide an update on your partnership with Boston to expand your international presence. and if you filed your first product. And if you did, if you can disclose what it is and if there are any more products expected to be filed for the remainder of the year. Thank you.

Good morning, Gary. Yes, the FOSINT partnership is progressing well. We have identified several IDL products, which means that we would be filing, we have been filing and will file more. We are not in the ability to disclose those products as of now. These products are FDA-approved products, which will be We'll be shipping from the United States plant as well as Indian plants and potentially the Ireland plant as well. And we're expanding the partnership as well, looking at other products. We do like China as a market. It's evolving, so we'll see how it goes. Everybody is learning the new ways of doing business they have put together as Chinese FDA and Chinese government. Very exciting big market. So we have a good partner for soon and we will keep, um, sending our partnership.

Uh, great.

Thanks. And, uh, just to follow up on that, um, you guys have talked about a shift of focus on your specialty franchise. So, uh, long term, is there a directional target for mix there for specialty versus generics?

You're referring, I think, around the R&D spend. So I can take it. I think when we look at the R&D spend right now, it's two-thirds generics, one-third specialty, maybe even more. over time would love to be in that 50-50 split between the two. And we think we can do this without any impact to the strength of the pipeline or the generics. So does that address your question?

Yes, that's helpful. Thank you. Sure. We have reached the end of our Q&A session. Thank you for joining. You may now disconnect.