This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk07: Hello, and welcome to Amniel's first quarter 2022 conference call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I will now hand over to Amniel's head of investor relations, Tony DeMeo. Over to you, Tony.
spk03: Good morning, and thank you for joining Amniel's first quarter 2022 earnings call. Today, we issued a press release reporting our financial results. The press release and presentation are available at anneal.com, and a replay of this call will be posted after the call. 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 review 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 discussed non-GAAP measures. Important information on our use of these measures and reconciliation US GAAP may be found in the earnings presentation. Beginning in the first quarter of 2022, the company will no longer exclude R&D milestone expense from non-GAAP financial measures. In our press release, we provide revised prior period results reflecting this change. On the call this morning are Chirag and Shintu Patel, co-CEOs, Tasos Konidera, CFO, Andy Boyer, Generics, Joe Tedisco, Specialty, and Jason Daly, our Chief Legal Officer and Corporate Secretary. I will now turn the call over to Chirag. Thank you, Tony, and good morning, everyone.
spk04: The first quarter was a good start to the year with a revenue of $498 million and adjusted EBITDA of $100 million, as expected. We are on track to achieve our full year 2022 guidance commitments of continued top and bottom line growth. Building on our consistent results and continued success in executing our strategy over the last several years, we are expanding in high growth areas, including specialty, injectables, and now biosimilars. As a global essential medicines company, underlying our strategy is our focus on affordability, access, and addressing unmet patient needs. Looking forward, as we continue to execute, we see our growth profile accelerating. Our business mix increasingly diversifying and our impact on global healthcare expanding. Let me now provide a few updates across our businesses. Starting with generics, our business continues to grow as our productive R&D engine continues to diversify the portfolio with new complex medicines. As a result, MNIL has a low product concentration with our largest generics product represents only 5% of total company revenues, and our top five genetics products are only 17%. With our focus on more complex and higher barrier products, over half of genetics revenue today is non-oral solids, as compared to 35% a few years ago. The mix shift towards complex medicines is continuing as 86% of Our pipeline is non-oro solids. Accordingly, we expect durable growth in this business and we continue allocating returns into high growth areas. In regards to our injectable business, as we have shared with you in the past, this is a key growth area for MU. We are pleased that injectables will grow approximately 30% this year to more than $160 million in revenue as we are well on our way of achieving 300 million plus by 2025. We look to scale our business with expanded capabilities, increased capacity, and new products in our portfolio. We believe these initiatives will drive substantial and sustainable growth in injectables for years. In biosimilars, We are very excited to enter the U.S. biosimilar market with the upcoming launch of our first three oncology products. We are pleased with the approvals of Reluco, a filaggrastin biosimilar, and Olymsis, a bilagizumab biosimilar, which are wonderful achievements by Team Amnio and our partners. In addition, we expect approval for a third biosimilar by filaggrastin, in the next few weeks. As we have shared with you in the past, we are positioning MNU to play a large, critical, and long-term role in the fast-growing $28 billion U.S. biosimilar market. We estimate the market size for these three products based on net revenue is approximately $4 billion, of which about half is biosimilar. We see peak sales for these three U.S. biosimilars of $200 million. This is the first time we are sharing a biosimilar revenue estimate for us. We are also looking for additional opportunities where we can be early to market as we build our portfolio through in-licensing to start and vertical integration in time to become a meaningful player in biosimilars. In healthcare, our distribution business, we saw continued nice growth in Q1. We expect sustainable growth driven by strong commercial and operational execution as we expand across multiple distribution channels. In international, we're leveraging our portfolio of complex generics, injectables, specialty, and biosimilars medicines to meet local needs. We believe this strategy will add considerable revenues in time and be highly profitable as we utilize partners and our existing infrastructure. In China, we are making good progress with our enforcement partnership, and we look to be a commercial later this year or early next year. In the $25 billion branded Generics India market, we have launched our label there and are expanding our in-market presence. Around the rest of the world, we are pursuing distribution agreements and look forward to share with you as we make progress. In specialty, we remain focused on driving strong commercial execution of our key branded products and advancing the pipeline. We expect continued full-year growth from Riterion, Parkinson's, and erythroid and hypothyroidism. As our pipeline delivers new branded products, including Libespa, and DHE this year, and IPX203 next year, we see our specialty business expanding very meaningfully over the next several years. Before I pass it over to Chintu, I would like to acknowledge Joe Tedisco, who is moving on from MNIL to be a CEO of a biopharmaceutical company here in New Jersey. I want to thank Joe for his awesome contribution to MNIL over 11 years. and his strong leadership. He has built a great team and has contributed to MNU in a great way. We wish him all the best. And with that, I'll hand it over to Chinder. Thank you, Chirag, and good morning, everyone. First, my sincere thanks to 7,000-plus members of the MNU family who work hard every day to make healthy possible. We believe our relentless focus on excellence across operations supply chain, quality, and science-driven innovation differentiates MNIL. Through our excellence programs, we are constantly reducing cost and improving efficiencies. In R&D, we are directing more spend towards high-growth areas, particularly biosimilars, specialty, injectable, and complex generics. Let me now walk through the different aspects of our business. In generics, We feel great about our pipeline and continued innovation in complex categories. So far in 2022, we have eight new launches. We expect 20 to 30 new launches this year and each year going forward. Just this past week, we received another CGT approval for Baxo Retin-Gel. MNIC is the industry leader in CGT approvals. Overall, we have 111 ANDS pending across all dosage forms in generics and expect to find approximately 30 more ANDS this year. In our pipeline of 101 products, 86% are non-oral solids and most are expected to be first to market, first to file, or 55B2s. We continue to move towards an increasingly complex differentiated portfolio of over 250 molecules that is driving sustainable growth. One of the key product launches in 2022 is RetanoWear, which is co-administered with Paxloid. We are excited to be one of the main US suppliers for this key COVID-19 treatment. RetanoWear is an already approved ANDA that our team has been working hard to fulfill substantial demand. In addition, we improved supply chain for a drain-out leak or epinephrine auto-injector and expect more revenue in 22. As we look to the rest of 22 and into 23, we see significant launches on the horizon that will start to materialize later this year and drive growth in 23 and beyond. We don't disclose many launches for competitive reasons, but let me share a few key upcoming ones among many others, including in ophthalmics and otics, generic Bratfolder and generic Ziprodex, in oral solids, carbidinol ER and masalamin, in injectable vasopressin, liprolyte, multi-dose methylprednisolone acetate, and extenatide, in LVP bags, dexmedidavidin, ropivacaine, and magnesium sulfate. In retail generics, we expect the depth of our pipeline and leading commercial presence to drive consistent financial performance. In ophthalmic otics, we have eight ANDAs pending and 11 products in the pipeline. In inhalation nasal, there are four ANDAs pending and seven more products under development. In injectable, we expect substantial growth as we expand our portfolio and add new capacity and capabilities. As a reminder, in January, we acquired the Sol Baclofen franchise, which added live results to our institutional bag and additional commercial capabilities. Last November, we acquired Punishka Healthcare, which added state-of-the-art manufacturing capabilities and doubled our capacity to 16 production lines in total. The integration is going very well, and we are preparing for commercial production in 2023. This acquisition and expansion of other sites has enhanced MNIL's ability to do more R&D and supply commercial product from multiple sites. In terms of innovation in injectables, we expect five to ten new launches in 22 with four already this year. We have 28 ANDS pending and another 61 pipeline products. They are in a variety of complex areas including drug-device combination, peptides, long-acting injectables, liposomals, LVP bags, and 505 products. Overall, we are on track for over 14 injectable launches from 22 through 25. As we have shared in the past, we believe the combination of our robust quality track record, increasing supply capacity, and continued innovation positions us very well to scale our injectables business and be a sustainable long-term supplier globally. We are very excited about the large and growing biosimilars market and how MNIL is well positioned for near and long-term growth. The recent approvals of our first two years biosimilars and one more approval expected later this month is a watershed mark for MNIL. We are planning for Q3 launch of Reluco and Alumsys. We expect to be one of a few companies with three U.S. biosimilars on the market in the oncology space. We were pleased that alumnus received a first cycle approval. This is a tremendous accomplishment by the team and demonstrates our core competencies in this space. Combined with our partners, we have substantial science, regulatory, manufacturing, and commercial capabilities needed in our universe. We believe the key to success are having the right development path, manufacturing capabilities, and being vertically integrated over time from development to commercialization. We are actively working to enhance our key capabilities and expand our portfolio to drive growth organically and inorganically as we target to add new biosimilar launches in the years ahead. We are very enthusiastic about our future in biopharmaceuticals, particularly biosimilars, as the opportunity is coming to fruition now for us. In international, we are advancing our strategies in China and India and the rest of the world. We see global expansion as another vector for long-term sustainable growth. In China, we currently have five products filed with 10 to 15 expected by the end of 2022. and 20 to 30 over time. In March, we were pleased to be one of the companies to receive a sub-license to manufacture and commercialize Paxlovid in 95 low and middle income countries. We are evaluating distribution strategies to drive access to this COVID-19 treatment. In specialty, we are expanding our branded portfolio and we see a number of growth drivers. Our current specialty pipeline represents 500 million to a billion dollar U.S. pixels. First, we expect to launch Livispa for specificity in June. Next, we look to launch our DHE auto-injector for migraine and cluster headaches later this year upon approval. For IPX203, we completed our pre-NDA meeting with FDA. At the American Academy of Neurology meeting in April, we presented two extracts sharing top line clinical efficacy results and post hoc analysis showing 1.55 hours more good on time for those. We expect to submit our NDA in Q3 and pending FDA approval remain on track for launch in mid 2023. We see 300 million to 500 million in U.S. pixels for IPX203. On K127 for Myasthenia gravis, we expect to file our NDA by end of 22 and are pursuing other indications. Also, our other pipeline programs, K114 and K128, are progressing well. We look to share more on our expanding specialty pipeline. We are adding new 55B2 programs that look to repurpose existing molecules, utilizing our drug delivery technology platforms, Grande and Chronotech. We believe these technologies differentiate us in specialty. Overall, we are very excited about our specialty growth prospects and expect at least one new launch per year going forward. To summarize, our strategy for accelerated growth is built upon our strong foundation of innovation, superb quality, and operational excellence. Across the business, we remain laser focused on execution this year. I will now hand it over to Tasos. Thank you, Chintu. Our first quarter financial performance was in line with our expectations. And thanks to the good work by all our colleagues who are pleased to reaffirm our full year 2022 guidance for continued top and bottom line growth. For the first quarter, we reported total net revenue of $498 million, adjusted EBITDA of $100 million, and adjusted diluted EPS of $0.12. Our results include $5 million of R&D milestone expenses, which we no longer exclude from our non-GAAP results. The annual run rate of these expenses is $15 to $20 million and represents external collaborations to advance our R&D pipeline. This policy change has no economic or cost impact to our business. Q1 generic net revenue of $318 million grew 5 million or 2%. Products launched in 2021 and 2022 contributed $40 million of growth, offsetting the typical declines in the remaining portfolio. As we have said in the past, our focus on innovation and strong commercial execution is a key differentiating factor that enables our sustainable top-line growth. Consequently, products launched prior to 2019 now account for about 65% of generic net revenue and declining fast. This reduced reliance on older, more prone to competition products bodes well for continued growth and profitability. In specialty, Q1 net revenue of 85 million declined 11 million or 11% and represents the low point of quarterly revenue for the year. This performance reflects Zomix's loss of exclusivity as well as higher than typical quarterly reimbursement costs related to Rhetory. We continue to be excited by the total prescription growth of Rhetory and Unitroy, up 6% and 13% respectively, as well as the upcoming launches of Lysbispa and DHE auto-injector. Our after net revenue of 95 million grew 10 million, or 12%, directing strong customer acquisition success in the non-federal distribution channel. Q1 2022 adjusted gross margin of 43.5% was in line with prior quarter and reflects three dynamics. First, generic gross margin of 42%, a 300 basis points improvement from prior quarter. Second, after gross margin of 15%, 500 basis points declined from prior quarter due to mix of business. And finally, 15 million of costs related to timing of our manufacturing production schedule. The last item is a timing issue and will improve in future quarters, providing substantial additional gross margin and profitability. Q1 adjusted EBITDA of $100 million was actually a few million higher than the expectations we shared with you during our February earnings call. As I mentioned earlier, it also includes $5 million related to our reporting policy change and $15 million of manufacturing overhead allocation. From an operating cash flow perspective, we generated $120 million of cash, which we continue to deploy in driving sustainable long-term growth. Consequently, in the first quarter, we invested $131 million to fully fund the previously announced acquisitions of Sol, Kashib, and Puniska Healthcare. Looking ahead and consistent with our discussion in our February earnings call, we expect substantial acceleration of top and bottom line growth over the course of this year. This growth will be driven by four factors. First, Multiple new product introductions, such as Ritonavir, Lavispa, Lareso, and our new biosimilars. Second, strong underlying demand of key growth brands, such as Adrenaclip, Datemi, Reiter, and Unitroid. Third, favorable fixed overhead manufacturing absorption. And finally, stability in our operating expenses. The top of the above goal parameters are well understood and within our control is this confidential delivery of 2022 financial guidance. Let me hear the call for Dr. Shirag now. Thank you, Darshan. In summary, we are on track for another great year in 2022. We see momentum across our business, including our first US Biosimilar approvals. We see these growth drivers building and accelerating our company performance this year, next year and beyond. I'll now open the call to questions.
spk07: Thank you. If you'd like to ask a question, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. Please ensure you're unmuted locally when asking your question. Our first question for today comes from Gary Nachman of BMO Capital Markets. Gary, your line is now open.
spk02: Oh, sorry, Gary, you might be muted. Sorry, Gary, I'm still not receiving any audio.
spk07: My apologies. If you'd like to ask a question, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2.
spk02: Operator, next question.
spk07: As a reminder, if you'd like to ask a question, you can press star 1 on your telephone keypad. Our next question comes from Michaela Franceschina from Barclays. Michaela, your line is now open.
spk00: Hi, I'm Michaela from Barclays. I'm for Balaji Prasad. Just wondering, by when can you realize your U.S. peak sales guidance of 200 million plus for your three biosimilars? And when thinking about your biosimilars, how do you plan to get vertically integrated and over what time frame?
spk04: Thank you and good morning. So the peak cells, as you know, we are working with getting a reimbursement in place, which should be in place by January 1, 2023. Commercial infrastructure is in place. So we expect contributions this year, adding up to more contribution in 23. And peak sales, I would say somewhere between 23, 24, we should be able to achieve that. And you had a second question on political integration. So as we are committed in a biosimilar for long term, as we have previously stated that our Strategy is dual. One is to license from key partners, trusted partners, and build our own capabilities. So we are exploring different options and should be able to be vertically integrated by end of this year or beginning of next year.
spk00: Thank you.
spk07: Thank you. Our next question comes from David Amselem from Piper Sandler. David, your line is now open.
spk05: Hey, thanks. I joined late, so I apologize if I missed this. But on the margins, I know you talked about, you know, the ask care being a bigger part of the mix. I just had a bigger picture question about the role of ask care in the organization and to the extent that you have periods where it's a bigger part of the mix and there's some margin compression, you know, do you see that, you know, as problematic? I'm just trying to get a better sense of, you know, where AvCare fits and, you know, is the margin profile given where you're taking the business, I guess, acceptable. So that's number one. Number two is on biosimilars. I think you laid out some assumptions about peak sales. So, you know, I wanted to get your thoughts on just your view on share, volume share, and ultimately, you know, how you're seeing overall penetration in the filgrastim, texilgrastim, and bevacizumab markets playing out of biosimilars and you know, what your underlying assumptions are regarding pricing erosion, share, and your penetration. That would be really helpful. Thank you.
spk04: David, good morning. So I'll start with the big picture on AvCare. AvCare is an excellent cash flow business for us and also allows us to put more products in federal markets. healthcare market, which is VADOD. As you know, we are one of the top two there. So margin could fluctuate in that business. There are three businesses within healthcare. One is the federal government, which is steady in their margins. And then they have a unit dose business, which is growing. The third business is pure distribution business for the city of Philadelphia, and they have added a few more cities. So it's a great business. It will fluctuate between 15% to 20% of gross margin, and we'll keep adding the top line. So we should be focused on top line as well. Anything else on healthcare, Kasia? No, I think we'll start there. It's a sustainable business. It is growing both top line and bottom line. David is correct. The overall, you know, margin of that business is less so than the rest of our business, but we're really focused on total absolute dollars. Yeah. Return there. Yeah. And whether or not, you know, one quarter out here is, you know, in this situation, you know, 15% gross margin versus 18. That's where it's going to fluctuate and doesn't really move the needle that much from a total company perspective. So the key driver there is specialty, which continues to be almost 80%. And our generics, which as you know, over the last three years, we've grown it from mid-30s to substantially more than 40%. So that will be it. Yeah. And our second question, thank you, Tasso, is on biosimilars. The excellent part is the commercial team is in place. led by Harsha Singh and excellent team with a couple other people added from ABC and Pfizer and the S.W.A.L.T. team, which added 21 people in institutional sales plus contracting sales force. As we have always done a great job in commercialization, we will do a great job in commercialization here as well. And we have understood the market. So as you know, these are quasi-branded products. We've got to get the reimbursement code in place. We'll do so. The last is a map. We are competing with Amgen and Pfizer and obviously the innovator. And we will try and maximize our market share to about 15% to 20%. We're more focusing on oncologic clinics, integrated regional systems, So many avenues to get there as well. We will have the 340B pass-through status, which is always helpful. And then for the GCSF, we have the pass-through status as well, Phil Grafton. And it's a little bit more competitive with the three active players, but we'll try to With our 340B unique position, we may be able to get, again, 15% to 20% market share or more. And for Pag-Philgraston, it would be a little bit more competitive since there are five active players. So we will try to penetrate different channels, and it should be very helpful to have a Balazism map with Pag-Philgraston. So that would be a nice launch as well. So all three, very excited, and the future of biosimilars, we're very excited as well.
spk05: Okay, that's helpful. And just if I may follow up, just to be clear on the shared economics, you just remind me, the margin profile of the biosims, I mean, that's not going to be net margins that are going to be higher than your corporate operating margins, right? Is that a fair way to think about it?
spk04: Yes, it would be higher because it's a bigger market, and PAG and G would be in line with corporate margins.
spk05: Got it.
spk07: Okay. Thank you. Thank you. Our final question for today comes from Gary Nachman from BMO Capital Markets. Gary, your line is now open.
spk06: Okay, great. Sorry I missed you guys before just jumping around a couple of calls. I don't know if you touched on this. I obviously jumped on late, but did you talk about how you expect gross margins to trend for the remainder of this year and sort of what additional initiatives you're taking to improve the gross margin further beyond this year? Just, you know, what sort of levers you think you have at this point? How much more there is to do on that front? And then, you know, with respect to the specialty, Yeah, just one more. With respect to the specialty business, just how comfortable you are with the commercial infrastructure and how much more you want to leverage that in terms of bringing new products in. And, you know, is that going to become a much bigger part of your business, do you think, over the next few years? Or will it be relatively modest when you think of the overall company? Thanks.
spk04: Hey, Gary, I'll take this first one. Good morning. As you know, Q1 gross margin was 43%. We're looking to increase for the rest of the year. My gut feeling is we'll finish the full year probably at about 45%, which is in line where we were last year. That's number one. Now, if you think about the growth drivers, how do we go from Q1 of 43% to, let's say, the rest of the year of about 45%, there are a couple of things. Now, the one is the first piece is just our internal manufacturing production plan, so better fixed overhead absorption, and we're in control of that. It just reflects the demand in our manufacturing operations, so high confidence on getting that benefit. Second is NPLs, new product launches. So as we had shared with you a few months ago, this year we expect new product launches to be more the back end of the year than the front end. And as you know, by nature of the complexity of those products, they have substantial greater gross margin than the rest of the portfolio. And then the third is when you look at our specialty business, as I said in Q1, that's the low point in terms of revenue. Right now we are expected to accelerate the growth and those products have higher gross margins. So those are the three levers. Thank you, Tasos. And Gary, on specialty, as you know, we have committed, we acquired impacts back in 2018 that form our specialty platform. So excellent commercial capabilities already in place for Parkinson's, for movement disorders, as well as endocrinology. So very excited to have a great team in place, relationship for market access in place, marketing teams are in place, and penetration, as you can see, will continue to grow by 6% to 8% every year, unit growth by 10% to 12%, and we have excellent organic pipeline. We got LiveSPA being launched on June 1st. We have DHEA auto-injector based on the outcome at our Partners site from the FDA should be launched this year. IPX203 next year with a much higher peak sales because of the product profile and results what we have seen. K127, Mastinia Gravispor product which we're filing this year. We also have government programs for that as well. And that is also expected to launch in 24. And then we have two additional, and these we acquired from Kashi's specialty, K114, K128, along with K127. And we're adding a couple more pipeline assets and specialty. We have a separate team focusing on specialty R&D. We have two technology platforms which have been well-tested over the last 10 years. So with that, today our business is about $400 million in specialty. This organic pipeline will add substantial revenue to it, and we are open for certain tuck-in deals for adding within these two specialties. And we are constantly evaluating those opportunities, and I think more are being available with this biotech pool in the market and other conditions which are driving companies like us in a bit of a driver's seat because of the constant cash flow from our genetics business, injectable business, specialty business allows us to sustain our growth and keep adding these assets. So very excited. If you ask me a goal on numbers, yes, we'd like to get to a billion in specialty cells. How long it will take? Maybe a few more years. excellent growth drivers you're absolutely right that part of the business is becoming very significant and much higher contribution than the genetics that's very helpful thank you thank you we have no further questions for today so i'll hand back to shirag patel for any closing remarks well thank you everyone i know it was a busy morning so Many people could not join, but everybody who joined, thank you very much and have a great day.
spk07: Thank you for joining today's call. You may now disconnect.
Disclaimer