Amneal Announces Solid Third Quarter 2018 Financial Results

BRIDGEWATER, N.J., Nov. 7, 2018 /PRNewswire/ -- Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the "Company") announced its results today for the quarter ended September 30, 2018.

"The third quarter was defined by solid financial performance and strategic accomplishments as we advanced the integration of Impax and Amneal, completed two strategic partnerships that strengthen our portfolio and launched 11 new generic products," said Rob Stewart, President and CEO of Amneal. "We delivered revenue of $476 million and adjusted EBITDA.¹ of $163 million as both our Generics and Specialty Pharma businesses grew sequentially, on a combined basis, compared with the second quarter of 2018.

"The Generics business benefited from higher sales of Yuvafem^® and the seasonality of Epinephrine Auto-injector despite the product's ongoing supply constraints. Additionally, our large and diverse generic pipeline has delivered 27 new product launches through September of this year including the 11 launched in the third quarter. Within our Specialty Pharma business, we delivered solid sequential growth led by revenue increases for Rytary^®, Emverm^® and Zomig^®.

"We are focused on long-term strategic initiatives to position Amneal for future growth. In August, we announced partnership agreements with Jerome Stevens Pharmaceuticals, Inc. for Levothyroxine and with American Regent for a generic alternative to Makena®, important steps forward in our strategy to enhance our portfolio. Pursuing additional external growth opportunities to fuel growth remains a strategic priority.

"The integration of Impax is essentially finished and all actions required to deliver our synergy target of at least $200 million annually within three years of closing the combination are completed. We have tightened our existing 2018 guidance range to reflect the late third quarter generic competition on a few key products including Yuvafem, Aspirin Dipyridamole ER, and Oseltamivir, together with the slow start to the flu season, and ongoing Epinephrine Auto-Injector supply constraints. Despite this, we continue to focus on building Amneal from our position of strength and deploying our capital to support long-term growth initiatives that will maintain double-digit earnings growth," concluded Stewart.

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¹ Please see "Non-GAAP Financial Measures" below.

The Company's financial results are presented in accordance with GAAP, which includes the results of Amneal Pharmaceuticals LLC consolidating the results of Impax Laboratories, LLC ("Impax") from the transaction closing date of May 4, 2018. Management believes that using additional non-GAAP measures on a combined company basis will facilitate the evaluation of the financial performance of the Company and its ongoing operations. The adjusted results presented combine the results of Amneal with Impax as if the closing date had occurred on the first day of all periods presented. All combined business results presented in this News Release are unaudited. Such combined business results are not prepared in accordance with Article 11 of Regulation S-X. Refer to the "Non-GAAP Financial Measures" section for additional information, including reconciliations of all GAAP to non-GAAP financial measures. The calculation of Non-GAAP adjusted diluted earnings per share assumes the conversion of all outstanding shares of Class B Common Stock to shares of Class A Common Stock.

GAAP Basis Results

• GAAP net revenue in the third quarter of 2018 was $476.5 million, an increase of 87.1%, compared to the third quarter of 2017, primarily due to the combination with Impax and the acquisition of Gemini Laboratories, LLC in May 2018, as well as new generic product launches.
• GAAP net income in the third quarter of 2018 was $17.5 million, compared to net income of $27.1 million for the third quarter of 2017. The third quarter's results were impacted by the combination with Impax and Gemini, including approximately $24.0 million of incremental interest expense.
• GAAP diluted EPS in the third quarter of 2018 was $0.05. GAAP diluted EPS for the third quarter of 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented.

Non-GAAP Combined Results

• Net revenue in the third quarter of 2018 was $476.5 million, an increase of 0.4%, compared to the third quarter of 2017, primarily due to a 24.0% increase in Specialty Pharma business revenue, partially offset by a 3.6% decline in Generics business revenue.
• Adjusted net income in the third quarter of 2018 was $82.2 million, an increase of 3.4%, compared to the third quarter of 2017, primarily due to favorable product sales mix.
• Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter of 2018 was $162.9 million, an increase of 10.2%, compared to the third quarter of 2017, primarily due to favorable product sales mix and cost synergies from the combination with Impax.
• Combined adjusted diluted EPS in the third quarter of 2018 was $0.28.

GAAP Results

Generics business revenues of $391.2 million increased 53.6% for the third quarter of 2018, compared to the prior year period. The increase is primarily attributable to the combination with Impax as well as strong 2018 launches, including Potassium Chloride oral solution, Phytonadione tablets and Methylphenidate Hydrochloride extended release tablets, higher demand for Yuvafem, Spironoctalone cream and Diclofenac Sodium gel 1%. These increases are partially offset by lower demand for Oseltamivir, Diclofenac sodium gel 3%, and Epinephrine auto-injector due to supply constraints.

Gross margin for the third quarter of 2018 was 39.2%, compared to 53.0% for the third quarter of 2017. The decrease is primarily as a result of higher cost of sales due to incremental amortization and inventory acquisition accounting adjustments, inventory related charges, manufacturing plant closure charges, impairment of product intangible assets and lower margin products in the Impax portfolio.

Non-GAAP Combined Results

Generics business combined net revenue in the third quarter of 2018 was $391.2 million, a decrease of 3.6%, compared to $405.8 million in the prior year period. The decrease is primarily due to lower sales of Epinephrine Auto-Injector due to an ongoing supply shortage at the Company's third-party manufacturer, increased competition on Budesonide, Lidocaine, Aspirin Dipyridamole ER and Diclofenac Sodium Gel 3%. The decrease was partially offset by increased revenue from new product launches and increased sales of Yuvafem, Spironoctalone cream and Diclofenac Sodium gel 1%.

Gross margin for the third quarter of 2018 on a combined basis was 39.2%, compared to 32.4% for the third quarter of 2017, primarily due to a decline in inventory related charges and amortization expense. Adjusted gross margin on a combined adjusted basis was 49.7% for the third quarter of 2018, compared to 47.1% in the prior year period.

GAAP Results

The Specialty Pharma business is comprised of the Impax Specialty business acquired on May 4, 2018 and the Gemini Laboratories, LLC business acquired on May 7, 2018. Prior to these two transactions, Amneal did not have a specialty business.

Non-GAAP Combined Results

Specialty Pharma business net revenue in the third quarter 2018 was $85.3 million, an increase of 24.1%, compared to $68.8 million in the prior year period, driven by higher revenue from Rytary^®, Zomig^® and the anthelmintic products franchise.

Gross margin for the third quarter of 2018 was 54.9%, compared to 66.5% for the third quarter of 2017, driven primarily by higher amortization expense. Adjusted gross margin was 78.9% for the third quarter of 2018, compared to 79.8% in the prior year period, primarily due to product sales mix.

GAAP Results

General and administrative expenses in the third quarter of 2018 were $37.3 million, an increase of $24.9 million, compared to the third quarter of 2018, primarily due to general and administrative expenses of the Impax organization since combination, which includes certain public company costs that will remain on a go-forward basis. The increase is also attributable to stock-based compensation.

Non-GAAP Combined Results

General and administrative expenses in the third quarter of 2018 were $37.3 million, a decrease of $7.0 million, compared to the third quarter of 2017, primarily due to cost synergies as a result of the business combination with Impax.

Other Information

Interest expense, net for the third quarter of 2018 was $43.0 million, compared to $19.2 million in the third quarter of 2017, due to an increase in long-term debt as a result of the business combination with Impax.

2018 Financial Guidance

Amneal's full year 2018 estimates are based on management's current expectations, including with respect to prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. Management believes that using additional non-GAAP measures on a combined company basis will facilitate the evaluation of the financial performance of the Company and its ongoing operations. The Company does not provide forward-looking guidance metrics on a GAAP basis. Consequently, the Company cannot provide a reconciliation between non-GAAP expectations and corresponding GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. The items include, but are not limited to, acquisition-related expenses, restructuring expenses, asset impairments and certain and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for the guidance period.

2018 Key Guidance Assumptions

• Tightened the range of full year 2018 adjusted EBITDA and adjusted EPS guidance due to generic competition, which occurred late in the third quarter on Yuvafem, Aspirin Dipyridamole ER, Diclofenac Sodium Gel 1%, and Oseltamivir (including the slow start to flu season), the loss of exclusivity on Albenza^® and the ongoing supply constraints for Epinephrine Auto-Injector.
• Generics business growth driven by new product launches which are expected to more than offset additional competition on existing portfolio.
• Potential opportunity to launch up to 47 generic products in 2018 including 8 the last two months of 2018
• Specialty Pharma business growth driven by Rytary^®, Zomig^® nasal spray and Emverm^®.

Conference Call Information

Amneal will hold a conference call on November 7, 2018 at 8:30 a.m. Eastern Time to discuss its results. The call and presentation can also be accessed via a live Webcast through the Investor Relations section of Amneal's Web site at https://investors.amneal.com/investor-relations, or directly at https://event.on24.com/wcc/r/1821566/B0F8BD4D6CEF9543C52C47B3B3FA1A30. The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The conference ID is 3488019.  A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (855) 859-2056 (in the U.S.) and (404) 537-3406 (international callers).

About Amneal
Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is an integrated pharmaceutical company focused on developing, manufacturing and distributing generic, brand and biosimilar products. The Company has approximately 6,500 employees in its operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.

Amneal is one of the largest and fastest growing generic pharmaceutical manufacturers in the United States, with an expanding portfolio of generic products to include complex dosage forms in a broad range of therapeutic areas. The Company also markets a portfolio of branded pharmaceutical products through its Specialty Pharma division focused principally on central nervous system disorders and parasitic infections. For more information, visit www.amneal.com.

Safe Harbor Statement
Certain statements contained herein, regarding matters that are not historical facts, may be forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements include statements regarding management's intentions, plans, beliefs, expectations or forecasts for the future, including, among other things, future operating results and financial performance, product development and launches, integration strategies and resulting cost reduction, market position and business strategy. Words such as "may," "will," "could," "expect," "plan," "anticipate," "intend," "believe," "estimate," "assume," "continue," and similar words are intended to identify estimates and forward-looking statements.

The reader is cautioned not to rely on these forward-looking statements.  These forward-looking statements are based on current expectations of future events.  If the underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations and projections of Amneal Pharmaceuticals, Inc. (the "Company").  Such risks and uncertainties include, but are not limited to: the impact of global economic conditions; our ability to integrate the operations of Amneal Pharmaceuticals LLC and Impax Laboratories, LLC pursuant to the business combination completed on May 4, 2018, and our ability to realize the anticipated synergies and other benefits of the combination; our ability to successfully develop and commercialize new products; our ability to obtain exclusive marketing rights for our products and to introduce products on a timely basis; the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices; our ability to manage our growth; the illegal distribution and sale by third parties of counterfeit versions of our products or of stolen products; market perceptions of us and the safety and quality of our products; our dependence on the sales of a limited number of products for a substantial portion of our total revenues; our ability to develop, license or acquire and introduce new products on a timely basis; the ability of our approved products to achieve expected levels of market acceptance; the risk that we may discontinue the manufacture and distribution of certain existing products; the impact of manufacturing or quality control problems; the risk of product liability and other claims against us by consumers and other third parties; risks related to changes in the regulatory environment, including United States federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws; changes to FDA product approval requirements; risks related to federal regulation of arrangements between manufacturers of branded and generic products; the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers; our dependence on a few locations that produce a majority of our products; relationships with our major customers; the continuing trend of consolidation of certain customer groups; our reliance on certain licenses to proprietary technologies from time to time; our dependence on third party suppliers and distributors for raw materials for our products and certain finished goods; the time necessary to develop generic and branded drug products; our dependence on third parties for testing required for regulatory approval of our products; our dependence on third party agreements for a portion of our product offerings; our ability to make acquisitions of or investments in complementary businesses and products on advantageous terms; regulatory oversight related to our international operations; our increased exposure to tax liabilities due to our international operations and the impact of recent U.S. tax legislation; payments required by our Tax Receivable Agreement; our involvement in various legal proceedings, including those brought by third parties alleging infringement of their intellectual property rights; legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives; the significant amount of resources we expend on research and development; our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, and the impact of interest rate fluctuations on such indebtedness; risks inherent in conducting clinical trials; our reporting and payment obligations under the Medicaid rebate program and other government purchase and rebate programs; quarterly fluctuations in our operating results; adjustments to our reserves based on price adjustments and sales allowances; investigations and litigation concerning the calculation of average wholesale prices; the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by a group of stockholders.  A further list and descriptions of these risks, uncertainties and other factors can be found in the Company's most recently filed Quarterly Report on Form 10-Q and in the Company's subsequent filings with the Securities and Exchange Commission.  Copies of these filings are available online at www.sec.gov, www.amneal.com or on request from the Company.

Forward-looking statements included herein speak only as of the date hereof and we undertake no obligation to revise or update such statements to reflect the occurrence of events or circumstances after the date hereof.

Trademarks referenced herein are the property of their respective owner.

CONTACT:
Mark Donohue
(908) 409-6718

 

SOURCE Amneal Pharmaceuticals, Inc.

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