Amneal Pharmaceuticals, Inc.

Hello, everyone, and welcome to the Emanuel Fourth Quarter 2022 Earnings Conference Call. My name is Bruno, and I'll be operating your call today. During this presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. I will now turn the call over to Emanuel's Head of Investor Relations, Tony DeMell. Please go ahead.

Good morning, and thank you for joining AMUIL's fourth quarter 2022 earnings call. Today, we issued a press release reporting our Q4 results. The press release and presentation are available at amuil.com. Certain statements made on this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions, are forward-looking statements that are based solely on information that is now available to us. please see the section entitled Cautionary Statements on Forward-Looking Statements in the earnings presentation and our SEC filings for a discussion of factors that may impact our future performance. We also discuss non-GAAP measures. Information on our use of these measures and reconciliations to U.S. GAAP are in the earnings presentation. On the call today are Shirag and Chintu Patel, co-CEOs, Tatas Konideris, CFO, Andy Boyer, Generics, Harsher Singh, Biosciences, and Jason Daly, Chief Legal Officer. I will now turn the call over to Shiraz.

Thank you, Tony, and good morning, everyone. We delivered strong fourth quarter results with $610 million of revenue and adjusted it with $154 million. We saw growth across all three business segments in Q4 and closed out 2022 well. Looking forward, our 2023 outlook reflects continued resilient top- and bottom-line performance. Overall, we believe Amir is uniquely positioned for sustainable long-term growth. The generics business is robust and growing each year. We are shifting towards more complex, high-growth, and high-impact products. With each new launch in injectables, complex generics, and biosimilars, our portfolio of affordable medicine is increasingly diversified. In specialty, we are focused on expanding our branded business through the upcoming IPX2 relaunch and advancing our pipeline. Together with the consistently growing healthcare business, we see multiple vectors of growth and value creation. At the heart of our strategy is the focus on unmet patient needs affordability, and providing access to essential medicines globally. Let me now talk about how we are advancing our key strategic priorities. First, in genetics, we are constantly innovating, moving up the value chain of product complexity and expanding our impact on patients. Our strategic focus has been and continues to be developing complex innovations such as cancer moves and injectables, That creates tremendous value for patients. The next frontier of affordable medicines journey is biologics and international. Since 2019, the team has done an extraordinary job re-regulating our R&D engine, driving strong operational execution and ensuring the commercial success of our business. As a result, Our increasingly diversified portfolio is generating durable top-line growth. Over the last three years, we have consistently grown faster than the overall U.S. genetics market. Today, Ammeen is the fourth-largest U.S. genetics company in the terms of annual prescriptions and is responsible for saving American patients over $10 billion every year. We expect our top-line growth algorithm in genetics will endure long-term. In injectable, we're focused on expanding our product portfolio, adding capacity, and building key capabilities. In 2022, the business was very successful, generating 181 million MW. Today, we have about 30 institutional products with over 30 new launches expected by 2025. From an operations standpoint, We are more than doubling our capacity with our two newest sites. As we launch new products and bring new capacity online during 2023, we expect the next inflection of revenues will come in 2024. We are on track to achieving our goal of over $300 million in projectable revenue by 2025. Next, biosimilars represent the next wave of affordable medicines and are highly aligned with our mission of providing access to high-quality, affordable medicines. So, we are so excited about the growth prospects for biosimilars, as the U.S. market alone is expected to approach 40 billion in net sales by 2027, with a long-term horizon We see a very strong ROI as the cost to develop new biologics continue to come down. We expect this market to be less competitive than others. In June 4, we launched Azensys, our biosimilar of Avacyn, Luco, our biosimilar of Nucurgen. We expect to launch our third product, Rilnetra, our biosimilar of Neolesta, in the next few months in conjunction with our reimbursement coverage. Similar to the first-year adoption curve of other biosimilars, we expect 2023 will be a good year as the commercial team works across pairs, providing end channels to drive uptake. For these three biosimilars, We hope to expand our portfolio and be strategically vertically integrated over time. Our goal is to be top five in U.S. biosimilars market and a global player over time, like U.S. Genetics, we expect to get there. To expand access to essential medicines globally, we are leveraging our diverse U.S. FDA-approved product portfolio of complex genetics, injectables, specialty, and biosimilars. We believe our international expansion strategy will add considerable revenues and profits in time. In the past going $25 billion Indian commercial market, we're expanding our presence with a new brand and leveraging our local commercial team as we focus on the hospital market in India. In Europe, we signed a long-term distribution agreement with Orion at the end. We will register complex genetic products starting this year and look to begin commercializing in Europe late next year. In addition, we are pleased to share that we have recently signed another long-term distribution partner agreement in Canada. We are partnering with Sterimex to bring our injectable portfolio to Canada. We will continue to pursue additional partnership opportunities around the world. Second, in specialties. We expect to be much bigger and more sustainable player over time. Our strategy focuses on 55B2 opportunities that leverage our reformulation technologies to improve existing medicines and provide new, innovative therapies for patients. Today, our T-branded products, Ritory for Parkinson's and Unifor for hypothyroidism, continue to grow in multiple digits combined. Next up is IPX203. We are so excited about the potential of IPX203 to be a best-in-class therapy for Parkinson's patients. Beyond IPX203, we're advancing the pipeline of neurology and endocrinology programs. We look to expand over $500 million in specialty revenue by 2027. Correct. In healthcare, we look to expand across multiple channels, distribution, the federal government, and UNICORPS. To date, since its acquisition in 2022, the revenue of the business has grown double digits. We expect momentum in this durable $400 million-plus revenue business will continue going forward. In summary, we're very excited about NEA's future. There are key catalysts happening now across our business, such as bar simulators, with more ahead, particularly the planned launch of IPX203 in specialty. As we execute our strategy and launch new products in high-growth areas, our durable and resilient business continues to grow. We believe these growth drivers will accumulate and generate higher levels of financial performance over time. I will now hand it over to Chirag.

Good morning, everyone. Thank you, Chirag. First, thank you to the MNIL family who works so hard to make healthy possible for so many. Let me start out with operations. We are focused on operational excellence and optimizing our global footprint. In 2022, the team drove record production of key products such as Adrena Click, achieved operational efficiencies and expanded infrastructure in key areas such as injectables. Next, in R&D, our global innovation team continues to drive highly productive R&D engine as we shift our efforts towards a wide array of complex pipeline products. In inhalation, We recently entered a partnership to in-license the soft mesh technology platform for the development of inhalation pipeline products, such as recipe-made inhalers. As always, MNIL is built upon our strong quality track record and commitment to the highest standards of quality. Since our founding in 2002, the FDA has conducted over 80 successful inspections of our sites. we are continuously looking for ways to push the quality bar higher through investments and best practices. Let me now walk through the different aspects of our innovation agenda. In generics, our focus is on complex innovations for about 90% of our pipeline, with over half expected to be first-to-market, first-to-file, or 5-5-B-2. In 2022, we launched 26 new generic products. In 2023, we expect over 30 new launches with five already launched in the first two months. Today, we also announced our FDA submission of generic Narcan manufactured at our Branchburg, New Jersey facility. We see a meaningful opportunity to improve access to this critical opioid overdose treatment. please refer to our key catalyst slide in the earnings presentation for a list of notable launches. In injectables, we are scaling up as we expand infrastructure and add to our portfolio. Our newest injectable site is on track for inspection next month with FDA approval expected later this year. Once approved, we will have all the key capabilities of a leading injectables company with the ability to produce across dosage forms, wires, pre-filled syringes, cartridges, and LVP bags. With our expanded capabilities, we have shifted our innovation focus towards injectables. In the last few months, we received approval for our first two LVP bags, Esmolol and magnesium sulfate. There are 33 injectables ANDS pending and another 59 products in the pipeline. We have made good progress advancing our programs in several complex areas, including drug-device combinations, peptides, long-acting injectables, liposomals, LVP bags, and 505B2 products. Similar to 2022, we expect to file 10 to 15 more NDAs in 2023. We are well on our way to scaling our injectables business to be a major player. In biosimilars, we are very excited about MNIL's potential in this space. To start, we are pleased to launch our first two biosimilars in Q4 with one more launching soon. Beyond this, there is tremendous opportunity to expand our portfolio with additional molecules as a large number of branded biologics come of pattern in the coming years. Currently, biosimilars are in development for 27 molecules representing approximately $96 billion of the total $260 billion U.S. biologics market for IQIA. We are looking at innovative and cost-effective development and manufacturing pathways with partners, as our goal is to be first or second to market in future biosimilars. Over time, we look to be vertically integrated to scale this business effectively. we expect biosimilar will be a key growth area for MNIL long term. Looking globally, we see 2023 as a foundational year in executing our international expansion strategy. Our focus and effort extend beyond the key initiatives in India, Europe, and China, which Chirag highlighted. In addition, we have comprehensively analyzed our entire product portfolio in the context of all emerging markets. As a result, we have systematically identified over 50 product opportunities across different emerging market countries. In 2023, we have begun registering products locally. We have a dedicated team at MNIL focused on driving international expansion. In specialty, we are expanding our branded portfolio to advancing our pipeline. Our PADUFA date for IPX203 is coming up on June 30th. We continue to see this as a $300 million to $500 million peak sales opportunity as we look to impact a broader portion of U.S. Parkinson's patients. We are also looking at international licensing opportunities. Beyond IPX203, we have continued to advance our branded pipeline and are pleased to share the addition of K-130 to our specialty pipeline. K-130 is the new R&D program for symptomatic neurogenic orthostatic hypertension. There is a potential broad use case across several patient population, including Parkinson's and other chronic diseases. This 505 program utilizes our proprietary drug delivery technology platform, Grande. which is an advanced gastric retention system. We are working on additional R&D programs in the preclinical phase. In summary, we are executing our innovation strategy and advancing our pipeline, particularly in high growth areas. I will now hand it over to Tasos.

Thank you, Chintu. I'll start with our fourth quarter results, then move on to a full year 2022, followed by 2023 guidance. We're very pleased with our fourth quarter results, with total net revenue of $610 million, growing 14%, adjusted EBITDA of $154 million, growing 26%, and adjusted diluted EBS of $0.23, up 35%. Two-point generic set revenue was $399 million, an increase of $53 million, or 15% versus the prior year period. Our results reflect favorable prior year comparisons, solid growth of Zafemi, and the breadth of our new product launches. As a point of reference, new products launched in 2021 and 2022 accounted for $35 million, or 70% of our growth this quarter. Q4 specialty net revenue of $103 million increased 2 million, or 2% versus the prior year period, driven by Unitroid, up 34%, Rytary, up 13%, partially upset by the final quarter impact from the loss of exclusivity for Zomic nasal spray. Our after-business continues to perform exceedingly well, with Q4 net revenue of $108 million, up 18 million or 21% compared to the prior year period, due to continued growth of our distribution channel and new products that better meet the demands of our customers. As we outlined on our Q3 earnings call, the drivers of sequential revenue acceleration from Q3 to Q4 played out as expected. Our expansive and diversified portfolio continues to perform well and increases our financial resiliency and predictiveness. Q4 2022 adjusted gross margin of 43.4% was slightly up compared to the prior year period. Q4 adjusted EBITDA of 154 million was 32 million or 26% greater than the prior year period. We believe strong Q4 results are indicative of our P&L profile over time, with a faster-growing top line, solid gross margin, and operating expense leverage generating robust profitability. Now, looking at full year 2022 results, where we met all our financial guidance metrics. Total net revenue of $2.2 billion grew 118 million, or 6%. Full year 2022 generic stop line grew 5%, driven by new product launches, growth of our injectable portfolio, and our Adrenaclick epinephrine photoinjector. After, net revenue grew 16%, driven by their distribution channel, while specialty net revenue declined 4 million, or 1%, a strong growth in Unitroid, up 33%, and right away, up 8 percent, offset the zoning loss of exclusivity, which is an impact we have now annualized. Full-year 2022 adjusted EBITDA was $514 million, up $2 million year-over-year, reflecting top-line growth partially being offset by inflationary pressures and growth in our sales and marketing functions in support of numerous product launches. Full year 2022 adjusted diluted EPS of 68 cents declined 13% in part due to higher interest expense. From an operating cash flow perspective, we generated 210 million, of which 145 million was used to settle certain legacy legal matters. As we discussed in the past, we're very focused on resolving expeditiously various legacy legal issues. Earlier in 2022, we resolved the Opana ER matter, and in the fourth quarter of 2022, we recorded an $18 million charge related to majority of opioid cases. We believe this amount is consistent with our position as a generic manufacturer with limited market share. From a balancing perspective, we finished 2022 with net debt of $2.6 billion, and net debt to adjusted EBITDA 5.1 times compared to seven times three years ago. In 2023, we expect to refinance our 2.6 billion term loan B and continue to deliver over time through EBITDA growth and debt pay down. Let me now turn to our 2023 guidance where we expect another year of stable results as we build for sustainable long-term growth. From an upline perspective, we expect 2023 total company net revenue of $2,250,000,000 and $2,350,000,000, which reflects continued mid-single-digit growth driven by all segments. In generics, we expect low single-digit growth reflective of the following four dynamics. First, We believe our three biosimilars should add 40 to 60 million this year, driven by Olympus. 2023 represents our first year of commercialization in this new-for-us market, and we believe our products and commercial teams can add substantial value to our customers. Second, we expect the strength of our generics R&D pipeline to add over 100 million in net sales, with many of these new products having already been approved. Third, we expect resolution for the couple supply chain issues that impact our controlled substance products, as well as a few future injectable pipeline products. Fourth, we expect the comparative nature of our generic segment to persist from a price and volume perspective. In specialty, we expect mid-single-digit growth driven by writery and unitoid. We're very excited about the potential FDA approval of IPX203, but we have not included that in our net sales guidance. At Apkir, we expect continued double-digit growth driven by the ongoing expansion of the distribution segment, as well as new product innovations in the government and hospital segments. Moving down the P&L, we expect 2023 adjusted EBITDA of $500 to $530 million. Our outlook includes approximately $15 million of inflation and $30 million of incremental investments in sales and marketing to scale up in higher growth areas, such as specialty biosimilars and injectables. From an adjusted EPS perspective, we expect $0.40 to $0.50, which reflects higher interest expense related to our likely term loan B refinancing. On the cash side, We expect 2023 operating cash flow, excluding any legal settlements, between 200 and 230 million, which is in line with the 210 million we delivered in 2022, despite higher interest costs. Furthermore, we expect 50 to 60 million in capital spent. Finally, from a phasing perspective, we expect 2023 to develop in a similar manner as 2022. With that, Let me hand it back to Shivad. Thank you, Dr. Suresh. In summary, 2022 was a year of strong performance across our diversified portfolio. Amnio is a fundamentally different company than in 2019 when Chintu and I came back. The business is expanding into high-growth areas such as biosimilars, specialty injectables, and complex genetics. The top line is growing each year. We are promoting our strategic focus, investment, and energy to the high-impact areas of the global pharmaceutical industry. Looking out one year from now, we envision an even stronger annual with a flourishing biosimilar business, especially accelerating with IPX203. a genetics business that has a whole new basket of complex innovations, injectables inflecting higher, healthcare continuing to grow double digits, all building on our consistent, durable financial profile. Over the long term, we believe M&E is uniquely well-positioned to drive sustainable growth and create value for all stakeholders and societies. We will now open the call to questions.

Ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your telephone keypad now. Please do also remember to unmute your microphone and limit to one question, one follow-up. Our first question is from Elliot Wilbur from Raymond James. Elliot, your line's now open. Please go ahead.

Good morning. Thank you. Good morning, everyone. Question real quickly on the pipeline, and I guess specifically thinking about the specialty segment, and I'm referring to slide five in the deck. Previously, the company talked about peak sales potential and for pipeline assets in the specialty segment of being $500 million to $1 billion. Now the language is $500 million by 2027. I'm presuming there's no change there, and that's just a desire on your part to be a little bit more granular in terms of the timing, but I wanted to confirm that. And then follow-up big-picture question, Jorgen. I think you sort of addressed this in your closing commentary, but You know, in conversations this morning, investors, you know, clearly sense a change in the generics landscape, maybe not necessarily getting better for the industry as a whole, but certainly not getting any worse. They look at Amniel as one of the, you know, best managed companies and about the only company that's been able to produce organic top line growth the last couple of years. But they sort of express frustration with the fact that, you know, EBITDA has been roughly The last couple of years have used kind of scaled up investments and a lot of kind of one-offs have prevented, have kind of diluted the cash conversion metrics and prevented the company from kind of attacking its debt load. So I guess as I think out to 2024 and beyond, I mean, where do we get to a point where we really start to see the EBITDA leverage relative to top line growth? kick in, meaning that, you know, and that's kind of, I guess, a question on both investment span and also gross margin dynamics and relative mix. Thanks.

Thank you, Elliot, and thank you for your compliments on that, Neil. It is a 7,000 people strong team culture pipeline investment that we have done over the years and continue to believe in the United States market, which is where we are from. So let me answer your big picture question first, and then the clarification on the 500 to billion, it's just granularity, nothing different there. We hope to get to billion as soon as we can on specialty. So the big picture, what we see, and as I mentioned, a year from now or two years from now, We have multiple vectors of growth. So let's take each one of them. Generics, you're right. It's not getting worse. It may be getting a bit better. We have certain responsible buyers. We have reached out. As you know, there are three big buying groups. So when I say buyers, they're not thousands. And some of them have said that we hear you. There is no room for any price reduction any further. These are extremely low-priced drugs. And if anything goes further down, there is a risk of shortages. Companies like us, other companies have already have done it. And even Indian companies getting out of those molecules. That leaves void for investment in genetics business, R&D investments. as well as quality and manufacturing automation that FTA is pushing for it. So all of these do not work if, ruthlessly, the prices keep going down because government has allowed the three buyers to consolidate. And these are large companies that have been consolidated. And it's just unfair for suppliers who cannot even do a small consolidation. And that has to change. And we are, as an industry, very vocal about it. And it is for the patient. If you think about it, the companies will find different avenues, move away. But what happens to the patient? 90% of the prescription in the United States. How and who are going to fill those prescriptions? Then will you be relying on a lower quality suppliers? On the reliable supply chain? So we believe the generics have hit the bottom in that sense for mature products. And we are seeing a responsible behavior from certain biggest fine groups. And we appreciate that. For us, within generics, we got plenty because we have moved up to the value chain. And if you look at where we are going is creating the next frontier of affordable medicine company, which includes, obviously, we'll continue on the products we have and we'll enter the market as needed for the commodity genetics products. But we have moved up to the non-commodity products. What I mean by that, where the competitors are 10 to 15, not 100. Those are the products we have been working on, and we have introduced many of them. So that's sterile ophthalmic, the inhalation products, the injectable products, complex injectables coming up. So we're very excited about the entire pipeline within genetics. And then as a part of being a next frontier affordable medicine company globally, generating biosimilars. And those are the companies, if you see, next two, three, four, five, seven years, We'll have plenty of products to choose from. As you know, globally, $400 billion of biologics lose exclusivity over the next 10 years. There's plenty of products to work, and it's very difficult, very complicated manufacturing. We do not expect even 30 competitors in that field. It would be more of 10 to 15 companies eventually staying in the United So we're excited building that affordable medicine company next 30 years and lead that. The second is the specialty. Specialty, as my brother just said, we added K130. We have an excellent pipeline. People do underestimate IPX203, but we don't. We are ready. As you know, we have a lot of experience in launching right today, relaunching right today. We are very close to Parkinson's patients and providers. They need this. I don't think IR should even exist. It's a 30 years old technology. Why should you take IR when you have the product that gives you good on time, almost 1.55 hours per dose? That's a meaningful improvement in Parkinson's patient lives. I think we are going to go for as big of a patient conversion as we can with affordable prices. So that is, we're really excited on the specialty business. AdCare is performing superbly well, double business. As you know, it's a large distribution market, and we love to find our niches and compete in a distribution market. We are an excellent team led by Uncle Steve, and we'll continue to grow that business. Really, really great opportunities for us. And it also allows us to avoid the middleman and go direct to customers. And then the last thing I would mention is we are not giving you a full picture on our international expansion plans. As we go in the next few quarters, we will. We've been working on it. You saw some highlights, what we are doing, and why we are saying India, Middle East, these are the next 20 years of growth in the pharma for affordable medicines. And they are keen to now to have very high-quality products, complex products, unmet needs, because many of these advanced therapies do not make it to those countries. Rare diseases are hardly even talked about it. So MNIL has a great strategy. We already launched our commercial business in India with a few hundred commercial people already in Mumbai. And as you know, India's economy is growing by leaps and bounds. And the cost of living, I mean, the standards of living, everything is going up. And more people are covered in insurance as well. So really excited about that. market up to the United States, and we are through a partner only on expanding, and we'll look forward to other partners as we go forward. And countries like Brazil will look for partners as well. So very excited, long answer, but your question was very awesome, so I had to give a long answer. So thank you, Alia.

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

Okay, great. Just following on a couple of the answers to the last question. So for IPX203, how have conversations with FDA been going? What are you doing to prepare for that launch? You're obviously pretty excited about it. I think you said you're not factoring Anything in the revenue guidance for this year, but is it in the spending guidance? And then ultimately, how much will it cannibalize, right, Terry? Or will it be additive for new patients when you talk about the 300 to 500 million peak over time? On the international expansion, maybe just give a little bit more color when that could start to contribute. I think you said it's all incremental. So I want to confirm there's nothing in the guidance for that for this year, if that's the case. And then lastly, on gross margin, you know, that came in weaker than we thought in the fourth quarter. What are the big drivers behind that? And what are you assuming for gross margin trends specifically in 2023? And how much is that weighing on EBITDA this year? Thanks.

Thank you, Gary. Chintu, would you like to do an IPH2 or 3 regulation on the updates?

Sure. All right. Good morning, Gary. So IPX203 is moving very well in a regulatory process. We are engaged with FDA. And so far, it's moving in a very positive direction. And we are very optimistic to have approval on its goal date of June 30th. And there is nothing that has been a showstopper. So it's in the right direction, right place on IPX203 from FDA perspective.

Great. Your second question on the cannibalization, we don't see it that way. We see IPX203 is a much broader market. We're going after 3 million prescriptions. They're all, 95% of them use IR. Riteri has not penetrated with general neurologists. So we're going for a broader market. We believe some of the Riteri patients will switch over to IPX203, but that's not our strategy. We are going for a bigger market, much bigger penetration with an excellent pricing strategy that makes it affordable for both the Medicare patients as well as commercial patients. So very excited. On a margin question, I'll end it. You said international. Let me answer that before I give it to Tasos. We see that going from zero to several hundred million dollars within the next three, four, five years. So it's all incremental. Very exciting. We're using our own portfolio of the United States FDA-approved products, a command premium. and respect all over the world. And we're proud to bring all that portfolio through partners and our own in India. So maybe doing our own commercialization in certain market opportunities as we go forward, but very exciting international expansion and it would be It's embedded for the complex products that we're working on. From the beginning, we're finding globally, so we do not lose out in timing, such as biosimilars and complex injectors. Tarsus? Hey, Gary. Good morning. We've got margins. Q4 was pretty much in line with our expectations. Generic margins were 41.6%, up 250 basis points. Specialty was up 200-and-some basis points. I think what's happening is a mix where we have our – and the total company margin actually at 43.4% was flat to Q4. So I think what's happening here a little bit is a mix of business where we have out-of-care top-line growth kind of growing, you know, double-digit, much – more so than the rest of the business and that's the lower margin gross margin business so i think i think that's kind of a little bit perhaps the the weakness you may you may be uh talking about but you know the real profitable segments of generics and specialty uh great terrific marching expansion in q4 um looking at uh looking at 2023 so you know if you think about generic gross margins in 2022 were about, you know, low 42, about 42.3%. My gut feel is 2023 budget's probably between 41 and 43%, something in that neighborhood. It's all going to be a function of the cadence of new product introductions and kind of what happens from a competitive standpoint. I'm curious, probably going to be at about, you know, 13% versus 14% this year, just because their own distribution business is growing faster within their segment. And finally, specialty business, which are incredibly profitable, we expect them to stay at the 82%. So overall, 23 to 22, you know, not a much big difference in overall gross margins. Hopefully that helps.

Yeah, it does. And just, you didn't address before, but in terms of the guidance on the spend, how much of the launch for IPX203 is factored in there?

Yeah, so all the spend is in there. And that's one of the reasons, to your point, to Elliot's previous question, right? It's like, all right, guys, you keep growing top line, you keep diversifying the business. You finally have created stability on EBITDA, but we don't see the growth. And a big part of it is the investments we're making to the business. So our guidance includes, as I mentioned before, $30 million of incremental social marketing expenses. So, that has all the incremental expense for a full-year commercialization of our biosimilars and the full-year commercialization expenses of IPX203. So, depending on the timing of approval, as you know, we have a PDUFA date on June 30th, depending on, obviously, we intend to launch, you know, quickly, as quickly after that as possible, right? Depending on the uptake of revenues, you know, the incremental gross margin provides an opportunity for us.

Great. Thank you.

Our next question is from Chris Scott from JP Morgan. Chris, your line is now open. Please go ahead.

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

Yeah, good morning, Chris. Yeah, you're spot on. So that's why, you know, when you talk about generics, we're seeing for 2023, you know, low single digits overall. We have said we expect mid-single digits. So 2023 is a little bit of not growing as fast as we think we can grow the business. A part of it is, you know, cadence of new products. Part of it is, you know, we're planning for a similar growth. competitive pressures, both in terms of price and volume, as historically, right? So as Suag said, we believe the environment may improve this year, and if it improves, we'll drop the incremental profitability bottom line. If the environment continues to persist, both in terms of price pressures and competition, then I think our guidance is covered. So that's kind of the... the first topic uh the second topic about kind of higher uh interest rate costs i i think everyone right i think everyone not only ourselves i think every everyone is reassessing of capital allocation so uh obviously in terms of uh m a we have been fortunate the last number of years we have made substantial investments that kind of build out our specialty pipeline, build out our biosimilars pipeline. And as Shirak and Chintu said, you know, we put over $150 million in our infrastructure to expand our injectable portfolio, right? And now we're going to reap those rewards late this year and next year. So we're fortunate in a substantial amount of investments. And also we settled a lot of legacy projects legal issues, right? So a lot of that is behind us. So now in terms of M&A, I think we will be raising our own expectations in terms of the expected rate of return. So we're going to be even more disciplined, number one. And number two, in terms of overall debt pay down, I think becomes more so the priority than what was in the past. So hopefully that helps. And IPX203 has such an awesome pipeline, the organic pipeline, that we do not need to be chasing any M&A.

Perfect. Thanks for the color there. And then just one quick clarification on IPX203. I know you're taking a conservative approach of not including that in the guidance this year, but just maybe just a little bit of – I know you've touched on this in a couple of the prior questions, but assuming that was approved around the PDUFA – Should we be thinking about this as a product that takes a few quarters to get kind of reimbursement in place and kind of physicians prepped for this product, or is it something that actually could have a fairly kind of quick uptake, assuming approval, and all goes well around the PDUFA? Thank you.

Yeah, I think a couple things. I think you can assume that our commercial team, our reimbursement teams, already will begin engaging with payers even now as we speak. So, you know, our ability, that's number one. Number two, I think considering the unmet need, the product profile, my expectation, you know, as you know, it's not going to be reimbursed day one, right? It's going to take some time to build on reimbursement. So I think that's going to happen. And the other thing is I think the buildup for revenues will be over time, right? And that is because our primary focus will be on new patient starts, which we think will resonate very well in that patient population. And over the course of time, I think we're going to see nice switches from the IR, which is a 30-year-old technology. So I don't think it's going to be an incredibly rapid acceleration of revenues at the latter part of this year. I think it's going to build over time in the latter part and into 2021. for and beyond.

Thanks so much.

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

Hey, thanks. So I just had a couple of product-specific questions. Can you talk through how you're thinking about the long-term sustainability of unithroid growths I know there's some unique features regarding the levothyroxine market. So what's your level of confidence? You continue to grow that business just significantly just beyond not only 2023, but beyond 2023. That's number one. Number two, adrenoclic with a number of different formulations of epinephrine that are in development. Do you think that could be disruptive to adrenoclic over the long term? In other words, the injectable formulations. And then lastly, maybe another question on IPX03. Do you envision most RITARI patients switching over, or do you envision overall market expansion? What's the right way to think about the opportunity there? vis-a-vis switching versus market expansion. Thank you. Thank you, David.

Good morning. So let's say Unitoid is, as you know, the multiple genetics product in the market and patients do not like to, some of the patients have a hard time switching over and they're used to Unitoid and they're continuing on Unitoid. It's a very small market share, like 0.05, you know, how large the market is. So we believe that steadily keeps growing, and more and more patients and providers and physicians want their patient to be on a consistent drug rather than switching over, have a subject to be switching over to multiple genetics products. AgranicLink, the new NIFI nasal spray. First of all, it's still not approved. If you want to get approved, for mothers and parents to have or use it, not to have the adrenoclique with it, it's kind of not possible. It will take time. They have not done any clinical. So I bet knowing parents and being myself being a parent, I would not take that chance and just give nasal spray versus EpiPens adrenoclique. maybe carry boats for a while. So we see, even if it brings any penetration, it will be over time, and it will be a slow penetration. And we have to see the pricing dynamic. Are they going to be competitive to Adraniclick? And that's another one. IPX203, right now we expect Over time, half of the patients would move over to IPX2. It is a better product, obviously, and we're going for the broader market, as I mentioned earlier, much broader market. There are 3 million prescriptions for CDLDs, so we have correctly 150,000 only. So we're going to grow the business into a 5% penetration, try to go for pretty much converting as many as we can And our pricing strategy is so unique and awesome, which we well received, that we believe the coverage will be much bigger for both Medicare and commercial patients. Very exciting on ITX2.

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

Sorry, Balaji.

There's some interference on your line, Balaji. I don't know if there's anything you could do about that.

Hey, Balaji. Yeah. Hey, Balaji. We kind of lost you a little bit. Do you mind if you come across very clear? So do you mind if you repeat your question, please? Absolutely, got it.

So, a couple of questions for me. Firstly, on IPX4.3, Chirag had mentioned that he doesn't see much cannibalization with this product, which is kind of where the market seems to model IPX4.3 from, about $200, like $20,000. So, what's the...

Sorry, Balaji, this is Tony. It's still hard to hear you. Happy to follow up with you perhaps after the call.

Or even, Balaji, maybe you can email the question over to Tony. You can email him the question, and if we get it in time, Tony can address it on the call, and we can give you an answer. Is that okay?

Yeah, I showed that announcement.

All right, thank you. Our next question. Can we go to the next one, please?

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

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

Thank you.

Chetan, do you want to take this one?

Sure. Yeah. Hi, Greg. Yeah, we have some of the products approved and they are IP-driven launches. The big notable ones are the Liptex and Sodium Oxidant. And there are a few others. We have not disclosed all the upcoming launches, but we are expecting to launch five new injectable products in LVP bags by second quarter. and those ones are almost two are approved and three ones are very near to approval in a clearance phase. So we are very optimistic about our new launches throughout the year, total over 30 new launches we are expecting in 2023.

And this is Tony, the only thing I would add too is you had 26 new product launches in 2022, more of a back-half-weighted contribution in fiscal 22, so that'll annualize this year, in addition to Shinto's point, the 30-plus launches this year, it's a long list. We have the key growth catalyst slide in slide seven. But as Katsos also mentioned, the contribution from new product revenue this year is over $100 million. So it's more than double versus even, you know, so potentially great year for new product launches in 23 with a long list of products that will contribute to those top lines.

Next question, please. Our next question is from Elliott Wilbur from Raymond James. Elliott, your line is now open. Please go ahead.

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

I'll take the DHE then pass it to Tasos on the refinancing. So DHE auto-injector was from one of the CMOs, and the CMO has been stuck with not for the product-related, but GMP-related issues. We've been working on site transfer. It is a complex device-based product, so it's taking longer than we had expected, and that is why the date has moved. Tasos? Yeah, Elliot, you're thinking about the interest rate expense the right way. So probably somewhere around in the 8%. Obviously, it depends exactly what instruments we're going to choose. And you're thinking about this the right way.

And then the final question, Balaji, thank you for sending it. Final question for today. With the goal of being a top five player in biosimilars over time, is this a five-year plan, a 10-year plan, and what's the roadmap to get there, pipeline, et cetera?

Oh, great. So three launches, which check marks the first launch. requirement for that. As we build the, I would take it back a little bit. In 2007, we started building a genetics business and it took 10 years to get to top five. So we do expect this as also a 10-year journey, but every year there's a lot of progress. So the second strategy after these in licensing, obviously we are working on pre-mortem licensing only from the replicate proven And then we were working on vertically being integrated for some of the products to have our own R&D. So we would bring that in-house, our own manufacturing. We love U.S. manufacturing. And couple that with probably India manufacturing as well for the emerging markets or any other markets you can ship from India as well. So multiple approaches. So we should be all set. Our plan is to do that starting next year and continue to add. And that obviously will bring the pipeline. And as Chintu mentioned earlier, just like what we did in the genetics market is we want to be many in cross-to-market. So first biosimilars, second at most. We're not touching where we would be a fifth, sixth, seventh layer or eighth layer. And there are a lot of niches within immunology, within oncology, or we could even go outside of those two as well. And the commercial infrastructure is kick-ass. We are one of the best and keep building it. That's something we did really well in genetics business. We became a trusted partner for our customers, even though they kept consolidating, we still love them and we still enjoy probably the top position with them for all the buy groups. And here we're doing the same thing with oncology groups, the hospitals, the cancer centers, We're just a likable company. And we have a quality they can count on, a supply they can count on. So with all that, and taking it global as well from the beginning, very excited to build and very committed to build this business properly because we know how it's going to play out over three, five, seven years. You will see companies like us and Teva and Sanders playing in this Mgen obviously has another division, and obviously two large Korean players, but you won't see branded companies playing in this much at all. So it leaves more, as I called it earlier, the next frontier of affordable medicine business, and those are the companies that actually want to be one of the leaders that are going forward. Harsha, you want to add anything to that list? Our focus is a bit more buy and build than it is sort of part B in the context of our pipeline and what we're chasing. We do think those markets are more interesting. So that's how you should think about our pipeline, though we're not public on it right now. Thank you.

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

Thank you, everyone. Have a great day.

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