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spk13: Hello, everyone, and welcome to the Amniel Third Quarter 2022 Conference Call. My name is Emily, and I'll be your operator today. At the end of the presentation, we will have the opportunity for questions, and you can do so by pressing Start, followed by the number 1 on your telephone keypad. I'll now turn the call over to Maria Licuri, Amniel Investor Relations. Please go ahead.
spk06: Good morning, and thank you for joining Amniel's Third Quarter 2022 Earnings Call. Today, we issued a press release reporting our financial results. The press release and presentation are available at amnial.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 on our SEC filings for 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 to U.S. GAAP can be found in the earnings presentation. On the call today are Chirag and Shintu Patel, co-CEOs, Tasos Canidares, CFO, Andy Boyer, Generics, Harsher Singh, Biosciences, Gustavo Peskin, Specialty, and Jason Daly, Chief Legal Officer. I'll now turn the call over to Chirag.
spk12: Thank you, Maria, and good morning, everyone. Our third quarter results reflect solid performance across our diverse business portfolio. Q3 revenues were $546 million and adjusted EBITDA was $126 million. We are on track to achieve our full year 2022 guidance. Let me now walk through our strategy and how we have been executing towards our key priorities since Chintu and I returned to MNEO a bit over three years ago. First, in generics, our goal was to stabilize and grow our complex generics business. We have done that. Over the last two years, through Q3 2022, generic stop line has grown at a 3% category. New launches and our diversified portfolio of increasingly complex medicines are driving durable top line performance and growth. With our focus on complex and higher barrier products, where we now expect 56% of 2022 genetics revenue will be non-oral solids. That is a clear proof point of success. This has increased remarkably from 35% in 2019. We see that shifting further as 88% of our pipeline is non-oral solids. We expect continued top-line growth in generics driven by our portfolio of complex products. Second, in injectables, the strategic focus has been on scaling our business. With an expanded portfolio, additional capacity, and new capabilities, we expect over $170 million in revenue this year, and we are well underway to achieving our goal of over $300 million in injectables revenue by 2025, which represents 24% CAGR from 2021. Third, in specialty, we have been driving substantial growth of our key branded products with Rytorin for Parkinson's and Unitroid for hypothyroidism. Over the last two years, through Q3 2022, These two brands have grown at a 13% failure combined. At the same time, we are advancing our specialty pipeline of new CNS and endocrinology products. IPX203 is expected to launch in mid-2023 upon approval, followed by DHE Auto Injector and K127. Whether organically, or inorganically, we look to further expand our portfolio and drive meaningful growth in our specialty business going forward. Fourth, we're building our biosimilar business. We were delighted to launch our first biosimilar in October. is launching this month, followed by in January. The commercial team is fully deployed and focused across payers, providers, and channels to ensure effective uptake of our products. In terms of reimbursement, we have a Q code already in place for Luco, and our Q code for Ellipsis is approved and will go live on January 1st, with Filnetra expected to follow. For these first three products, we see peak sales of over 200 million in the next two to three years. Beyond these, we are working to expand our biosimilars portfolio with additional molecules where we can be early to market and are working to be vertically integrated over time. We look to be in top five in this past growing $28 billion U.S. biosimilar market over the next five to seven years and a global player. We are driving growth in our healthcare distribution business. We're expanding across multiple channels including distribution, the federal government healthcare market, and unit doors. There is a good momentum in that business and we expect it to continue. Sixth, internationally we are looking to leverage our diverse product portfolio globally. We believe this strategy will add considerable revenue and profits in time as we work with distribution partners such as Fosun in China or utilize our own sales and marketing infrastructure to be direct in select markets such as in India. Around the rest of the world, including Europe, we are pursuing targeted distribution opportunities with strategic partners. Overall, we are very excited about the momentum that is building across MNEO. With the recent additions of new leaders, RIM, Meryl and Gustavo, we have a deep and talented leadership team. As we progress in implementing our strategy, MNIL is becoming increasingly durable, diversified, and differentiated. We are launching new products in high-growth areas such as complex generics, injectables, specialty, and biosimilars that are additive to our current strong position. As these new catalysts come to market, We expect the growth drivers to build and generate higher levels of financial performance. With that overview of key strategic priorities and progress, I'll hand it over to Chintu.
spk11: Thank you, Chirag. I'll start by thanking the MNIL family who make healthy possible for so many. Across our global operations, we are driving our company's growth strategy through several key initiatives. First, we are executing key operational excellence programs in each of our facilities to add efficiencies and drive savings, including transferring products across locations and insourcing certain CMO products. Second, we are focused on the strength of our global supply chain and continuously taking actions to improve our cost position and resiliency. Third, we are adding new infrastructure in key high growth areas such as injectables and biologics. We are empowering our best people to build new capabilities and add capacity. We are doing all these while continuing to advance our quality culture. Next, across our R&D teams, we are increasingly focusing our efforts and investments toward high growth and high impact areas particular injectables, complex generics, biosimilars, and specialty branded products. Let me now walk through the different aspects of our innovation and growth agenda. In generics, we are innovating in complex categories with a rich pipeline extending out for years. We have 18 launches so far in 2022, including vasopressing in Q3 and another five plus launches expected to come by the end of the year including recently approved liprolyte acetate in the near term we see a significant cadence of key new product launches similar to the impact of new product launches we saw 18 to 24 months ago from where we are today we expect over 30 new product launches in 2023 and they are mainly complex higher barriers to entry products Please refer to the key catalyst slide in the earnings presentation for a summary of the notable upcoming launches. The list continues to grow. Overall, we have 102 ANDAs pending across all dosage forms with about 60% in non-oral solid products. To put this in context, two years ago in Q3-20, we had 79 ANDAs with about half OSD. So in just a few years, we now have meaningfully more ANDA spending that represents meaningfully more complex and high-value products. And the good work continues as we are on track to file 25 to 30 more ANDAs this year, mainly in injectables. In our pipeline of 106 products, 88% are non-oral solids, and over 50% are expected to be first-to-market, first-to-file, or 505 . In ophthalmics and otics, we have seven ANDAs pending and 11 products in the pipeline. In inhalation and nasal, there are three ANDAs pending and 11 more products in development. The diversity of our existing portfolio and vertical integration combined with the breadth and the depth of pipeline gives us high confidence in sustainable financial performance and generic. In injectables, we are seeing substantial growth as we expand our infrastructure and portfolio. Our two new manufacturing sites are coming online. The first new site was FDA approved quickly in 18 months, which will allow us to launch five or more LVP bags in the first half of 2023. The second new site is on track and expected to have FDA approval by Q2 2023. Across four sites and 19 production lines, we have the capabilities to produce vials, prefilled syringes, cartridges, and LVP bags. across dosage forms for small and large molecules with both aseptic and terminal sterilization. At this level of capabilities and scale, we can both develop new differentiated products that serve to meet unmet hospital and pharmacy needs and provide consistent supply in markets plagued by shortages. Our innovation focus continues to shift towards injectables as we have five new launches this year so far, and we expect 30 to 40 new injectable launches from now through 2025. Overall, we have 31 injectables ANDA spending and another 59 pipeline products. For context, we expect our annual ANDA filings in injectables to more than double from five to seven per year previously to 15 to 20 per year with our new sites. We are well on our way to scaling our injectables business to be a sustainable long-term global supplier. In biosimilar, we have launched and are launching Reluco and Filentra near term. We are very excited about these three current products. The overall growth prospects of the biosimilar space and the purpose steps we are taking to be a long-term player in this market beyond these first three products we look to further expand our portfolio and key capabilities we believe the keys to success are having the right science regulatory manufacturing and commercial skills with the goal to be vertically integrated over time overall biosimilars are highly aligned with our strategy and to provide high quality affordable medicine to patients and its key area of future growth for us. In specialty, we are expanding our branded portfolio with new growth drivers. Our NDA for IPX203 was filed on August 31 and we expect to launch in mid 2023 upon approval. As a reminder, IPX203 is a novel oral extended release formulation of carbidopa-ligodopa that can offer Parkinson's disease patients better efficacy than immediate release tablets, even with less frequent dosing. Importantly, in our post-hoc analysis, IPX203 provided 1.55 more hours of good on versus immediate release CDLD per dose. Beyond IPX203 and our currently disclosed pipeline, we are also working to add new 505 programs, which utilize our proprietary drug delivery technology platforms. As a reminder, Grande is an advanced gastric retention system, and Chronotech is a modified release technology. We believe these technologies will continue to provide high-value reformulation pipeline opportunities. In summary, we are focused on executing our strategy, advancing our pipeline, and driving success in the high growth vectors for MNIL. I will now pass it over to Tasos.
spk12: Thank you, Chintu. Our third quarter financial results reflect solid and consistent performance driven by our increasingly diverse product portfolio. For the third quarter, we reported total net revenue of $546 million, adjusted gross margin of 44%, adjusted EBITDA of 126 million, and adjusted diluted EPS of 14 cents. Versus the prior year period, revenue was up 3%, while adjusted EBITDA was down 5% due to ongoing investments in high-growth areas such as biosimilars, injectables, and specialty. We're on track to meet our full year 2022 guidance metrics. Let me now review each business segment, starting with generics, which delivered Q3 net revenue of $350 million, an increase of $3 million, or 1% versus the prior year period. Our results were driven by strong growth in our injectable portfolio, our Adrenaclic epinephrine auto-injector brand, and new product launches, which offset declines in our legacy products. Our diversified portfolio continues to perform well as new innovations and increasingly complex products balance price pressures while delivering substantial benefits to our customers and patients. Looking to Q4, we expect a sequential increase in generics revenue due to two factors. First, a full quarter benefit of Zafemi and Vasopressin. As you may recall, the Zafemi AB rating was resolved in the middle of Q3 and vasopressing was launched around the same time. Second, our first biosimilar, Alimsys, launched in October, and we expect our second biosimilar, Reluco, to launch in the next couple of weeks. Given the fact our sequential growth relies on already approved products, and we're confident in this sequential acceleration. Moving on to our specialty group, Q3 net revenue of $89 million, decreased 3 million, or 4%, versus prior year period. The small decline was driven by the loss of exclusivity of zomic nasal spray, which was partially offset by strong growth of Unitroid, up 39%, and Rytary, up 12%. At 69 million in the quarter, Unitroid and Rytary account for approximately 80% of our specialty revenues, and we are very pleased with our consistent growth, with year-to-date total prescriptions being up 14% and 6%, respectively. Looking to Q4, we expect a sequential increase in specialty revenue, as well as given the strength of Unithroid and Rytory and the normal seasonality of the business, similar to prior year. In Upcare, Q3 net revenue of $106 million, grew 17 million, or 19%, compared to the prior year period, reflecting continued expansion of the distribution channel. The distribution channel has been the driving force of Upcare growth this year, albeit at low levels of profitability due to the nature of the business, and we expect this growth to continue in the fourth quarter. Moving down to P&L, Q3 2022 adjusted gross margin of 44% is consistent with the prior two quarters reflecting stability. Compared to Q3 of 2021, gross margin was 130 basis points lower as product mix and inflation upset operating efficiencies. Q3 adjusted EBITDA of 126 million was 7 million lower than Q3 of 2021. Our performance reflects substantial incremental sales and marketing investments in support of new products that will drive future growth, as well as absorbing higher inflation in areas like freight and labor costs. From a cash flow perspective, we continue to generate a lot of cash. For year-to-date Q3 2022, and excluding the $115 million legacy legal settlement regarding Opana ER, It generated $203 million of operating cash flow, compared to $179 million in the comparable prior year period. From a balancing perspective, we're focused on deleveraging. Three years ago, we were at seven times net leverage, and we're now at five point times EBITDA growth. Housing will continue to drive a substantial portion of our delivery. At the same time, we will work to reduce our total debt levels. For the full year 2022, our guidance remains unchanged, with revenue of $2.15 to $2.25 billion, reflecting mid-single-digit top line growth. Adjusted EBITDA, $500 to $520 million, which is in line with the prior year adjusted EBITDA of $512 million. As a reminder, our full year adjusted EBITDA expectations include about $40 million of incremental investments to drive future growth, and $25 million of inflation. Let me turn to Q4 and summarize the factors that we expect will drive sequential acceleration from Q3. First, as previously mentioned, we expect strong top-line performance across our three businesses driven by key products such as Raitari, Unitroid, Zephem and Injectables. The addition of multiple already approved new products, such as Alemsys, Razopressin, and other 2022 new launches ramping up. And third, stable gross margins like we've seen all year long with favorable operating expense actions. Looking beyond 2022, we expect our consistent, durable financial profile to continue with four key catalysts. First, in Q4 of this year, we began commercializing our first biosimilars And in 2023, we will have a full year benefit of these launches, which we expect them to peak at approximately $200 million plus over the next few years. Second, injectables revenues are building considerably at $140 million year-to-date, compared to $88 million at the same time last year. Third, as Gitu mentioned, we're entering a rich period of new product launches. And four, continued strong growth in unithroid and rightary with IPX expected to launch later on in 2023. In summary, we're pleased with the consistency of our financial performance and the product portfolio investment choices we have made to drive long-term sustainable growth. With that, I'd like to pass it on to Shirai. Thank you, Tasos. Q3 represented continued solid performance across our diversified portfolio. At the same time, we are launching new impactful products in high growth areas, such as our first biosimilars with a pipeline behind them that continues to advance. As key catalysts continue to come to market, we see these new growth drivers building and accelerating our financial performance. That's the value creation story for MNIL. It doesn't change. It only advances. I'll now open the call to questions.
spk13: Thank you. If you would like to ask a question, you may do so by pressing Start followed by the number 1 on your telephone keypad now. If you change your mind and would like to remove yourself from the queue, please press Start and then 2. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. Our first question today comes from the line of David Amselm with Piper Sandler. Please go ahead, David. Your line is open.
spk05: Hey, thanks. Just a few. So first, on AdrenaClick, these are product-specific questions. And on AdrenaClick, you cited some strength. And I guess I'm just wondering, what are the dynamics there? What's happening there? And how sustainable is that strength? And also, what's AdrenaClick's uh, sales, if you can, or just talk about it's, it's overall importance to the overall mix. Um, so that's number one. And then on Zafimi, uh, you just talk about what your thoughts are on potential competition down the road. Um, do you think there could be other AB rated generics coming in that we should be thinking about? And then lastly, on the DHE auto injector, you, um, You're now guiding to a 24 launch, so I may have missed this, but just wondering what's going on there. Thanks.
spk12: Thank you, David. Good morning. So GraniteClick has been our growth driver since we came back. The product was doing around 80, 90 million. Now it's in the range of 140, 150 million. So we're growing steadily. As you know, epinephrine is just three suppliers, Mylan, Teva, and us. We pretty much have. We grew our market share from 18% to 28%, and we expect to hold on to the similar market share or grow in small percentages going forward. It's an excellent product for us, and as you know, it's a much-needed product out there, and the choices are three in the marketplace. So we expect that product to be durable. The second question on Zofemi, we're very excited. Our sales has grown tremendously as soon as we have received the AB rating because we already had the market share. Now utilization is more, and it's an excellent product even going forward in 2023. Competition, I think it's publicly stated that Teva has the approval but has not launched. I do not know the launch timing. And DHE Auto Injector, unfortunately, our partner is continuing to suffer through the FTA issues until they're resolved, or we are able to do the product transfer. It will not be launched, so this is why we have pushed it out to 2024.
spk03: Yeah, it's helpful. Thanks. Thank you.
spk14: Our next question comes from Balaji Prasad with Barclays.
spk01: Please go ahead. Hi, good morning. This is actually Makayla Ahn for Balaji, but thank you for taking my questions. Just two from me. I guess could you just provide color on the initial traction you're seeing with illnesses And I guess, by when do you think you can realize your U.S. peak sales guidance of 200 million for your three biosimilars? Thank you.
spk12: Sorry, could you please clarify the first question? And second, the line wasn't clear.
spk01: Yeah, sorry. I'll try and speak up a little bit. Just any additional color on the initial traction you're seeing with your ELMSs so far? And then just by when can you realize your U.S. peak sales guidance of 200 million for your three biosimilars?
spk12: Excellent. So I'd like to introduce Harsher Singh, who leads our bioscience division along with the institutional cells. Harsher, would you like to comment, please? Good morning, Mikaela. With regard to initial traction, we've seen good initial traction with Olympsis, It's early. We're about a month in, and our J-code has just been approved and will go live in January, but we have already started to see usage in the oncology channel. With regard to peak sales, we expect peak sales to be in the late 2024-2025 period, somewhere in that zone, in line with other biosimilars at this stage of their life cycle.
spk03: Thank you, Harsha.
spk14: Our next question comes from Gary Nuckman with BMO Capital Markets.
spk13: Please go ahead, Gary.
spk09: Hi, guys. Good morning. First, generally speaking, how has FDA been getting to new generic approvals? One of your competitors told us recently that there have been some delays with infections and getting some andes through. So when you talk about the greater than 30 new approvals next year, just what's your confidence level and getting those. Um, and then on specialty, um, is the Salesforce right size as you look to bring in IPX two or three next year and talk about how two or three will be positioned relative to right. Terry, uh, will it mostly cannibalized or will it be incremental to the overall franchise? Yeah.
spk11: Hi Gary.
spk09: Good morning.
spk11: Uh, So on the first question, so we had an injectable plant in India within 18 months, brand new site. We are able to get the product filed and get FDA approval, which was within a short 18 months of time. So we are not experiencing any delays because of the pre-approval inspections because MNIL has the best quality track record. This is a huge advantage. So none of our end has been delayed. and we are confident of launching 30-plus. Year-over-year, we have the highest number of approvals. So we have not experienced any delays from FDA's pre-approval inspection perspective or travel restrictions, anything like that, on our ANDAs. And the second question, I'd like Gustavo.
spk12: Gustavo, yes. Good morning, everyone, in the call. So, in regards to the size of the team, we are very confident that with the existing team, we can cover not only the whole existing prescribing group of right, but more than 60% of the existing writers. of IR and CR IR, which takes me a little bit to the second part of the question, which is, are we going after the Raitari market, or are we thinking about market expansion? When you look at the profile of 203, this is not designed to be an intensification strategy for patients in IR. a first line of treatments and and and really try to to work with the medical community to do the right thing for patients first and that's why we're not limiting the opportunity to the existing right tary segment today we are looking at these as a potential best-in-class first-line treatment in in in in cblb yeah just additional comment is there's a large market to capitalize on this with all our learnings on RITERI over years and almost 3.2 million prescriptions for seven, 800,000 patients in America. We see a large opportunity currently. RITERI has 210,000 prescriptions out of 3.1 million. So there's a lot of room with the ease of use the battery product it's a different technology and Gustavo now leading who joined us from Sanofi Pfizer and Abbott we are very excited about our specialty growth coming up and just to add one more point just one more point that IPX203 in post hoc analysis has shown 1.55 hours of good on time against the
spk11: So it is a different technology, and we are confident that the patient would benefit a lot more from IPX203.
spk09: Okay, great. Actually, Chirag, if I could squeeze in one more, I think, for you. Just the expansion internationally, so leveraging your portfolio better, just how long before you can really execute on that and get distribution partners in the various regions? I'm just curious when we should see a real impact from that strategy. Yeah, good.
spk12: Okay, Gary. So we've been talking about China. So we have filed more than 10 products now and keep filing products with our partner. They should start commercializing first half of next year. We are not in a position to forecast that revenue yet. We're still understanding They're forecasting how the net sales works in China. So once we have a complete grip of China, we'll be providing that. So incremental revenue starts next year. India is small, but it started with $5 million a year, and we expect that to keep growing over time. We're very excited. hospital business has been launched in India and we're looking at two more therapeutic categories excellent growing market the market is highest growth in the world is in India pharma business it's the entire market is about 25 billion going to 50 billion so well India adds a little bit next year China adds a little bit next year in Europe we are very close partnering for our key products, almost 15 products with one partner who has a reach across Europe. And Europe will obviously be the second largest market for us after United States. Very exciting on European side. And this strategy this time is work with key partners in Europe for our complex GX, as well as specialty, as well as biologics. South America, with Gustavo's experience in South America, will be speaking to certain companies, and we will choose the right partner or partners because Brazil and Mexico will have different dynamics, and we expect to have that partnership in place by mid-next year, and European partnership we're hoping for end of this year.
spk03: Okay, great. Thanks for that. Thank you.
spk14: Our next question comes from Nathan Rich with Goldman Sachs.
spk13: Please go ahead, Nathan. Hi.
spk00: Good morning. My first question is on the revenue outlook for the generic segment in 2023. I guess, Tassos, can we annualize the implied 4Q revenue? And would that be kind of a good proxy for what you'd expect from the generic segment? next year, and are there any other kind of headwinds or tailwinds that you would call out? And then my second question is a follow-up on biosimilars. I'd just be curious to go into a little bit more detail about the line of sight you have on the uptake and revenue contribution from Olympus and Reluco for the fourth quarter, and can you maybe talk about pricing strategy and the receptivity you've seen by the GPOs that manage kind of the hospital and community oncology channels? Thank you.
spk12: Hey, Nathan. This is Cassius. Good morning. You know, try to extrapolate, and I'll answer your question more directly. Try to extrapolate any given quarter. It's just problematic, right, for any company. So when you look at our generics business, you know, this year, I think we're going to be up, in a year today, we've been up single digits. I think we're going to finish the year low single digits, you know, give or take 3%. We believe this is sustainable. So if you do your math 350 times and you annualize Q3, you probably come up with about 1% growth rate. year over year for 23 versus 22. I think we can do better than that. I think we will do better than that. And I think that's going to be driving the growth will be driven by, I think we're going to have, Zafemi, I think, will be a growth driver, number one. As Suag said, Adrenalink has been a wonderful growth driver for us. It has benefited, obviously, our patients. And I think that will continue to grow into next year. There were, you know, another product launches this year that launched it in the second half of the year. I think we will have a strong manualization of those NPLs, new product launches. And I think we will have, you know, as Chintu said, we're entering a product cycle with growth in new product launches. So I think all of those drivers, those drivers, We'll continue to offset the price erosion. We continue to share our industry. And I think we will end up in the mid single digit growth in generics next year. And as you know, typically in February we'll provide you our annual guidance. But hopefully that gives you good color on rough growth expectations in generics and some of the flows. Biosimilars, do you want? I'll pick up biosimilars, Nathan. With regard to Olympsis, as I said, we're pleased with the initial uptake despite the fact that our Q code only goes live on Jan 1. We, as expected, have better uplift in the oncology channel in the early days of our launch. We expect hospitals to take just a little longer as they turn their EHR systems and make their formulary decisions, which tend to be a little bit slower. I don't expect this to be a substantial Q4 revenue driver. This is much more a ramp through 2024. With regard to Reluco, we expect to launch the drug midway through this month in November. So we have a short runway here. However, we do expect really good uplift through that period based on our initial customer discussions, given that our J-code is live, the dynamics in that market that are positive for our drug. Thank you. So, Nathan, we see, obviously, the products just launched, so 23 is where we start seeing good revenue ramping up to 24.
spk03: Thanks for the comments.
spk14: Our next question comes from Elliott Wilbur with Raymond James.
spk13: Please go ahead, Elliott. Your line is open.
spk07: Thank you. Good morning. follow-up questions for Tasa. First, with respect to generic performance in the quarter, could you provide us what the contribution was from new launches? You provided that metric. I didn't catch it in your prepared commentary. And I'm wondering how the performance of that driver compared to trends in overall erosion in the base from price and or volume where there may have been over or under performance versus your internal expectations. And I want to ask a quick question on balancing an interest expense specifically. What's the effective rate on the debt currently and how much of that is actually hedged? Just trying to get a sense of your exposure to rising rates. And then maybe just last question, around inflation dynamics, how those impacted the quarter versus what you called out specifically last quarter, and then just trying to think about how we should be thinking about higher cost parameters flowing through the P&L and impacting both growth and operating margins over the course of 2023. Thanks.
spk12: Thanks, Elliot. I'm running out of rows to capture your questions, but that's okay. We'll try one at a time. If I miss one, let me know. So let's talk about new product launches. So new product launches, here is the dynamic, right? Usually there is new products that we launch in the year. And those are always a growth driver compared to prior year, just because they're new products. In addition, what we see is products that we launched last year, we get the full year annualization benefit this year. and then everything else kind of kind of offsets and then other product launches from prior years typically offset price erosion and so forth so the key drivers are in general in terms of new product launches new this year and prior year so this year's product launches uh i'll just i'll just speak about annual annual numbers they're probably going to deliver about you know, $40 million, about $40 to $50 million of incremental annual growth, right? So that's probably about three points of organic revenue growth. In the quarter, it's probably, you know, $10 to $15 million. In addition to that, the annual impact of incremental revenue products that we launched last year, the year before, it's probably another, call it two points of organic growth. So combination of those two products gives you those two year launches gives you probably about, you know, five to six points of organic revenue growth. And then the remaining of the portfolio kind of offsets price erosion and value erosion. So I think that's point number one. Your second point, I think it's around interest expense. So interest expense for everybody is going up, right? So if you think about our overall debt, so our biggest debt is about $2.6 billion, which is our term loan B, okay? Half of it is fixed at about 5% actually. The remaining of it is variable, right, at LIBOR plus 350. And so far this year, you will expect the weighted average to be at about 6 percentage points of interest expense, okay? So you can probably do the math. So the good thing is 50% of our interest expense is fixed. 50% is variable, so there is some natural hedge against this interest rate growth that everyone is being seen. The other thing we just want to note is that our debt is not due until May of 2025. So we're about two and a half years out. So I think we have plenty of runway to effectively refinance that or have other vehicles available to us. We can amend and extend our debt. So this is something we feel very good, our ability to refinance the debt. And we're kind of staying close to the markets. The other question was around inflation dynamics. So when we started the year back in February, what we said in terms of our annual guidance was we anticipated about $20 million of inflation headwinds. As inflation got worse right now, we're seeing probably about $25 million of incremental inflation. So it's a little worse than we thought. That's probably happening across every industry. But again, I think our actions to drive operating efficiencies, new product launches that are helping with margins, we're able to offset that to deliver consistency from the bottom line EBITDA perspective. So let me pause here and see if I covered your questions.
spk09: Yes, thank you.
spk12: And I would just add, because the inflation this year is here, next year it will be here, afraid we expect to slow down on inflation. But what is our little bit success has been is to convince the customers that we cannot take all the inflation by ourselves. And we were able to pass certain inflation-related costs to our customers. That hasn't happened in any previous years, so we are really thankful that it is a two-way street. We cannot be observing all the costs, and we hope that to continue next year as well.
spk14: Our next question comes from Greg Fraser with Truro Securities.
spk13: Please go ahead, Greg.
spk08: Good morning, folks. Thanks for taking the questions. So growth for AppCare is continuing to strengthen and is tracking well ahead of your mid-single-digit target. How much of that growth year-to-date is durable, and how do we think about, I guess, should we think about mid-single-digit growth for 2023 off of the higher base this year?
spk12: I can take that. We love the after business. The business has done incredibly well since the acquisition of a few years ago, about three years ago. And one of the reasons we acquired the business, we acquired the majority stake of the business is because of its durable nature. A substantial amount of that business from a revenue perspective is really long-term government contracts, so they tend to be sticky, stickier than the usual kind of business. The rest of it is the distribution channel, which has grown tremendously this year, primarily around three or four big businesses, and the team there has done very well. So overall this year, my gut feel is that business is going to grow top line at about 15%. My gut feel is we're in our early stages of our planning for next year. I'm not quite sure it's going to continue to grow at 15%, as you said, given the higher base, but we expect durable growth, most likely low double-digit, to continue next year.
spk08: Got it. That's helpful. I'm not sure if I missed this, but on 2023, how do we think about gross margin? I guess if inflationary pressures continue, do you still expect to offset the pressure with new launches and efficiencies or erosion?
spk12: Yeah, I think our gross margins are sustainable. This year, our overall gross margins are probably going to be around 44%. I think we're going to be hovering around the same level, a little less, a little bit more. Ad care tends to grow top line and bottom line, but its level of profitability is not on the same level as the rest of the business. So you have that headwind in terms of kind of diluting the margins a little bit. but continue to focus on our generics. New product launches, those have to have substantial higher margin than the rest of the business. The injectable products that we have higher gross margin. So I think all of those things should offset most or all the headwinds around inflation. So I think the overall gross margins are sustainable, give or take a point or up or down. Does that help?
spk08: Very helpful. Thank you for that. And then my last question is just on the opioid litigation front. Is there anything new to report there, and how high of a priority is it to resolve that overhang? Thank you.
spk12: Jason, our general counsel is here.
spk10: He will take this question. Thank you. Hi, Gary. Thanks for the question. You know, to date, the focus of those trials and resolutions has been on those who have engaged in direct promotion or large-scale distribution, pharmacy distribution of those products. As a generic manufacturer with low market shares at peak, the sales are to major wholesalers that didn't promote those products aggressively. We perceive ourselves to be differently situated than the others, and we're going to continue to look for resolutions that are appropriate for the shareholders and for the organization. But certainly given our different profile as we see it, you know, we'll be looking to do those things in a way that's amenable to everybody's best interests, particularly ours. So thank you for that question.
spk03: Thank you.
spk14: At this time, we have no further questions, so I'll now turn the call back to Chirag to conclude.
spk12: Well, thank you, everyone. Have a great weekend. Take care. Thank you.
spk13: Thank you everyone for joining us today. This concludes our call. You may now disconnect your lines.
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