Amneal Reports First Quarter 2019 Financial Results
May 9, 2019
‒ Q1 2019 Net Revenue of $446 Million; GAAP Loss per share of $0.37;
Combined Adjusted Diluted EPS(1) of $0.14 ‒
‒ Continued Progress in Diversifying Portfolio and Optimizing Business
‒
‒ Reaffirming Full Year 2019 Financial Guidance ‒
BRIDGEWATER, N.J.–(BUSINESS WIRE)–Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”)
announced its results today for the first quarter ended March 31, 2019.
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Summary of GAAP and Non-GAAP Combined and Adjusted Results (Unaudited; In thousands, except per share amounts) |
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| Three Months Ended | |||||||||||||||
|
March 31, |
March 31, |
Year/ Year |
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| GAAP Results(2) | |||||||||||||||
| Net revenue | $ | 446,120 | $ | 275,189 | 62.1 | % | |||||||||
| Net (loss) income | $ | (124,752 | ) | $ | 51,652 |
(341.5) |
% |
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| Diluted loss per share attributable to Amneal Pharmaceuticals, Inc. | $ | (0.37 | ) | N/A | N/A | ||||||||||
| Non-GAAP Results(1)(3) | |||||||||||||||
| Combined net revenue | $ | 446,120 | $ | 425,130 | 4.9 | % | |||||||||
| Combined adjusted net income | $ | 42,165 | $ | 41,846 | 0.8 | % | |||||||||
| Combined adjusted EBITDA | $ | 111,967 | $ | 95,880 | 16.8 | % | |||||||||
| Combined adjusted diluted EPS | $ | 0.14 | $ | 0.14 | — | % | |||||||||
(1) See “Non-GAAP Financial Measures” below.
(2)
GAAP results prior to May 4, 2018 reflect the results of Amneal
Pharmaceuticals LLC only.
(3) For March 31, 2018,
assumes the combination between Amneal Pharmaceuticals LLC and Impax
Laboratories, LLC, and the acquisition of Gemini Laboratories, LLC,
excluding the impact of financing and acquisition accounting
adjustments, occurred on January 1, 2018.
Executive Commentary
“Amneal is off to a good start in 2019 as we continue to optimize our
business and diversify our portfolio,” said Rob Stewart, President and
CEO of Amneal. “We increased generics first quarter combined net revenue(1)
by 7% year over year driven by the addition of Levothyroxine, the
benefit of more than 40 product launches last year and the launch of six
new products this year. We also took steps forward in our efforts to
expand our portfolio into complex dosage forms, highlighted by the
approval and launch of our first generic transdermal product, generic
Exelon® Patch.”
“We further sharpened our focus on our core business by divesting our UK
commercial business in late March and our German business earlier this
month. These portfolio moves enable us to concentrate time and resources
on growing our position in the U.S. market. In addition, we strengthened
our experienced management team with the appointment of several key
senior leaders who will play important roles in optimizing our business
to position Amneal for sustainable, long-term growth.”
“Looking ahead, we are continuing our focused efforts to streamline our
operations and accelerate savings as we drive organic growth and pursue
external growth opportunities. For the remainder of the year, we expect
to see improved profitability through decreased spending within COGS,
SG&A and R&D, combined with an increase in revenues as new product
launches accelerate in the back half of the year.”
Basis of Presentation
The Company’s financial results are presented in accordance with U.S.
GAAP. As used in this press release, the term “actual” or
“reported”refers to measures under the accounting principles generally
accepted in the United States. The Company has two reportable segments,
Generics and Specialty, and does not allocate general corporate services
to either segment.
First Quarter 2019 Performance
Net revenue in the first quarter of 2019 was $446 million, an increase
of 62.1% compared to the prior year period, primarily due to the
combination with Impax and the acquisition of Gemini in May 2018, as
well as the benefit of new generic product launches throughout 2018 and
into 2019. Net loss was $125 million in the first quarter of 2019
compared to net income of $52 million in the first quarter of 2018,
primarily attributable to $76 million of intangible asset impairment
charges, incremental expenses related to the combination with Impax and
acquisition of Gemini, site closure costs of $10 million and royalties
of $21 million. Additionally, the Company incurred $22 million of
incremental interest expense, $14 million of unfavorable foreign
exchange impact and $6 million of restructuring and other charges.
Diluted EPS in the first quarter of 2019 was a loss of $0.37. Diluted
EPS in the first quarter of 2018 is not available as Amneal
Pharmaceuticals LLC was a privately-held company for the period
presented.
Combined net revenue(1) in the first quarter of 2019 was $446
million, an increase of 4.9% compared to the prior year period, due to
an increase in net revenue from the Generics segment. Combined adjusted
net income(1) in the first quarter of 2019 was $42 million,
an increase of 0.8% compared to the prior year period. Combined adjusted
EBITDA(1) in the first quarter of 2019 was $112 million, an
increase of 16.8% compared to the prior year period. The increase in
combined adjusted EBITDA(1) was primarily due to higher
revenues and cost synergies from the combination with Impax. Combined
adjusted diluted EPS in the first quarter of 2019 was $0.14, compared to
$0.14 in the first quarter of 2018, primarily due to higher revenues
offset by incremental interest expense of $12 million, net of tax, or
approximately $0.04 per diluted share in the current year period related
to the combination with Impax.
(1) See “Non-GAAP Financial Measures” below.
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Amneal Pharmaceuticals, Inc.
Reconciliation of Generics Operating (Loss) Income to Generics (Unaudited; In thousands) |
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| Generics | Three months ended March 31, 2019 | Three months ended March 31, 2018 | |||||||||||||||||||||||||||||
| Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||||||||||||||
| Actual |
Impax/ |
Combined | Actual |
Impax/ |
Combined | ||||||||||||||||||||||||||
| Net revenue – Generics | $ | 382,477 | $ | — | $ | 382,477 | $ | 275,189 | $ | 81,242 | $ | 356,431 | |||||||||||||||||||
| Cost of goods sold | 278,878 | — | 278,878 | 130,594 | 93,137 | 223,731 | |||||||||||||||||||||||||
| Cost of goods sold impairment charges | 53,297 | — | 53,297 | — | — | — | |||||||||||||||||||||||||
| Gross profit | 50,302 | — | 50,302 | 144,595 | (11,895 | ) | 132,700 | ||||||||||||||||||||||||
| Selling, general, and administrative | 24,148 | — | 24,148 | 11,203 | 2,994 | 14,197 | |||||||||||||||||||||||||
| Research and development | 50,151 | — | 50,151 | 44,209 | 9,639 | 53,848 | |||||||||||||||||||||||||
|
In-process research and development |
22,787 | — | 22,787 | — | — | — | |||||||||||||||||||||||||
| Restructuring and other charges | 2,081 | — | 2,081 | — | — | — | |||||||||||||||||||||||||
| Litigation, settlements and related charges | — | — | — | — | 89,159 | 89,159 | |||||||||||||||||||||||||
| Intellectual property legal development expenses | 3,121 | — | 3,121 | 4,576 | 23 | 4,599 | |||||||||||||||||||||||||
|
Acquisition, integration and transaction |
2,597 | — | 2,597 | — | — | — | |||||||||||||||||||||||||
| Operating (loss) income | $ | (54,583 | ) | $ | — | $ | (54,583 | ) | $ | 84,607 | $ | (113,710 | ) | $ | (29,103 | ) | |||||||||||||||
| Gross margin | 13.2 | % | 13.2 | % | 52.5 | % | (14.6 | %) | 37.2 | % | |||||||||||||||||||||
| Adjusted gross profit (Non-GAAP)(4) | $ | 162,276 | $ | — | $ | 162,276 | $ | 146,355 | $ | 4,936 | $ | 151,291 | |||||||||||||||||||
| Adjusted gross margin (Non-GAAP)(5) | 42.4 | % | — | % | 42.4 | % | 53.2 | % | 6.1 | % | 42.4 | % | |||||||||||||||||||
| Adjusted operating income (Non-GAAP) | $ | 96,819 | $ | — | $ | 96,819 | $ | 87,463 | $ | (5,413 | ) | $ | 82,050 | ||||||||||||||||||
(4) Adjusted gross profit and combined adjusted gross profit
are calculated as net revenue less adjusted cost of goods sold. See
Non-GAAP reconciliations below for calculation of adjusted cost of goods
sold.
(5) Adjusted gross margin is calculated as
adjusted gross profit divided by combined net revenue.
Generics net revenue of $382 million increased 39.0% for the first
quarter of 2019 compared to the prior year period. The increase is
primarily attributable to the combination with Impax, the contribution
from more than 40 new product launches throughout 2018 and six in 2019,
and favorable volume growth driven by sales of Levothyroxine, Guanfacine
and Hydroproxyprogesterone Caproate Injection, partially offset by
declines in sales of Oseltamivir and Aspirin Dipyridamole ER Capsules
due to lower volumes and pricing pressure. Generics combined net revenue(1)
in the first quarter of 2019 was $382 million, an increase of 7.3%
compared to the prior year period, primarily due to favorable volume
growth as noted above.
Generics gross margin for the first quarter of 2019 was 13.2% compared
to 52.5% for the first quarter of 2018. The decrease was primarily
related to a $53 million impairment charge associated with two marketed
products as a result of significant price erosion during the first
quarter of 2019, due to new competition entering the market, resulting
in significantly lower expected future cash flows from those products,
$36 million of expenses related to the Levothyroxine transition
agreement with Lannett and incremental expenses related to the
combination with Impax, including royalties of $21 million, site closure
costs of $10 million, and amortization of intangible assets of $9
million. Generics combined adjusted gross margin(1) for the
first quarter of 2019 was 42.4% compared to 42.4% for the first quarter
of 2018.
Generics operating income for the first quarter of 2019 was a loss of
$55 million compared to operating income of $85 million for the first
quarter of 2018, primarily due to the charges and expenses as noted
above, as well as an additional $23 million of in-process research and
development impairment charges and $3 million of integration related
expenses. Generics combined adjusted operating income(1) for
the first quarter of 2019 was $97 million, an increase of 18.0% compared
to $82 million in the prior year period, primarily due to increased
revenue as noted above.
(1) See “Non-GAAP Financial Measures” below.
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Amneal Pharmaceuticals, Inc.
Reconciliation of Specialty Operating Income to Specialty (Unaudited; In thousands) |
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| Specialty | Three months ended March 31, 2019 | Three months ended March 31, 2018 | |||||||||||||||||||||||||||||
| Add: | (Non-GAAP) | Add: | (Non-GAAP) | ||||||||||||||||||||||||||||
| Actual |
Impax/ |
Combined | Actual |
Impax/ |
Combined | ||||||||||||||||||||||||||
| Net revenue – Specialty: | |||||||||||||||||||||||||||||||
| Rytary® | $ | 29,436 | $ | — | $ | 29,436 | $ | — | $ | 26,508 | $ | 26,508 | |||||||||||||||||||
| Unithroid® | 9,721 | — | 9,721 | — | 6,509 | 6,509 | |||||||||||||||||||||||||
| Zomig® | 8,992 | — | 8,992 | — | 10,478 | 10,478 | |||||||||||||||||||||||||
| All other specialty products | 15,494 | — | 15,494 | — | 25,204 | 25,204 | |||||||||||||||||||||||||
| Total net revenue – Specialty | 63,643 | — | 63,643 | — | 68,699 | 68,699 | |||||||||||||||||||||||||
| Cost of goods sold | 30,865 | — | 30,865 | — | 20,020 | 20,020 | |||||||||||||||||||||||||
| Gross profit | 32,778 | — | 32,778 | — | 48,679 | 48,679 | |||||||||||||||||||||||||
| Selling, general, and administrative | 21,327 | — | 21,327 | — | 20,235 | 20,235 | |||||||||||||||||||||||||
| Research and development | 3,707 | — | 3,707 | — | 2,657 | 2,657 | |||||||||||||||||||||||||
| Intellectual property legal development expenses | 1,045 | — | 1,045 | — | — | — | |||||||||||||||||||||||||
| Restructuring and other charges | 178 | — | 178 | — | — | — | |||||||||||||||||||||||||
| Litigation, settlements and related charges | — | — | — | — | 940 | 940 | |||||||||||||||||||||||||
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Acquisition, transaction-related and |
1,884 | — | 1,884 | — | — | — | |||||||||||||||||||||||||
| Operating income | $ | 4,637 | $ | — | $ | 4,637 | $ | — | $ | 24,847 | $ | 24,847 | |||||||||||||||||||
| Gross margin | 51.5 | % | — | 51.5 | % | — | 70.9 | % | 70.9 | % | |||||||||||||||||||||
| Adjusted gross profit (Non-GAAP)(4) | $ | 52,989 | $ | — | $ | 52,989 | $ | — | $ | 53,263 | $ | 53,263 | |||||||||||||||||||
| Adjusted gross margin (Non-GAAP)(5) | 83.3 | % | — | % | 83.3 | % | — | % | 77.5 | % | 77.5 | % | |||||||||||||||||||
| Adjusted operating income (Non-GAAP) | $ | 28,726 | $ | — | $ | 28,726 | $ | — | $ | 31,495 | $ | 31,495 | |||||||||||||||||||
(4) Adjusted gross profit and combined adjusted gross profit
are calculated as net revenue less adjusted cost of goods sold. See
Non-GAAP reconciliations below for calculation of adjusted cost of goods
sold.
(5) Adjusted gross margin is calculated as
adjusted gross profit divided by combined net revenue.
The Specialty segment 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 segment.
Specialty combined net revenue(1) in the first quarter of
2019 was $64 million, a decrease of 7.4% compared to the prior year
period, driven primarily by lower revenue from Albenza® as a result of
the loss of exclusivity in September of 2018, partially offset by higher
revenue from Rytary® and Unithroid®.
Specialty combined gross margin(1) for the first quarter of
2019 was 51.5% compared to 70.9% for the prior year period, driven
primarily by higher amortization expense. Specialty combined adjusted
gross margin(5) was 83.3% for the first quarter of 2019
compared to 77.5% in the prior year period, primarily due to product
sales mix.
Specialty combined operating income(1) for the first quarter
of 2019 was $5 million, a decrease of $20 million compared to the prior
year period, primarily due to higher amortization expenses and lower
revenue as noted above. Specialty combined adjusted operating income(1)
for the first quarter of 2019 was $29 million, a decrease of $2 million
compared to the prior year period, primarily due to lower revenue.
(1) See “Non-GAAP Financial Measures” below
|
Corporate and Other Information (Unaudited; In thousands) |
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| Three months ended March 31, 2019 | Three months ended March 31, 2018 | |||||||||||||||||||||||||||||
| Add: | (Non-GAAP) | Add: | (Non-GAAP) | |||||||||||||||||||||||||||
| Actual |
Impax/ |
Combined | Actual |
Impax/ |
Combined | |||||||||||||||||||||||||
| General and administrative | $ | 38,961 | $ | — | $ | 38,961 | $ | 13,918 | $ | 20,737 | $ | 34,655 | ||||||||||||||||||
|
Acquisition, transaction-related and |
1,551 | — | 1,551 | 7,135 | 6,544 | 13,679 | ||||||||||||||||||||||||
| Restructuring and other charges | 3,902 | — | 3,902 | — | 4,900 | 4,900 | ||||||||||||||||||||||||
|
Total general, administrative and |
$ | 44,414 | $ | — | $ | 44,414 | $ | 21,053 | $ | 32,181 | $ | 53,234 | ||||||||||||||||||
General and administrative and other operating expenses in the first
quarter of 2019 increased to $44 million compared to $21 million in the
prior year period, primarily due to the combinations with Impax and
Gemini in 2018. General and administrative and other operating expenses
on a combined basis in the first quarter of 2019 decreased to $44
million compared to $53 million in the prior year period, primarily due
to lower acquisition, transaction-related and integration expenses.
2019 Financial Outlook
Amneal’s full year 2019 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. The Company cannot provide a reconciliation between
non-GAAP projections and the most directly comparable 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 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 2019.
Amneal is reaffrming its previously provided 2019 Outlook as follows:
| Full Year 2019 Financial Guidance | ||||
| Adjusted gross margin | 47% – 50% | |||
| Adjusted R&D as a % of net revenue | 9% – 10% | |||
| Adjusted SG&A as a % of net revenue | 11% – 12% | |||
| Adjusted EBITDA | $600 million – $650 million | |||
| Adjusted diluted EPS | $0.94 – $1.04 | |||
| Adjusted effective tax rate | 19% – 21% | |||
| Capital expenditures | Approximately $100 million | |||
| Weighted diluted shares outstanding | Approximately 300 million | |||
Conference Call Information
Amneal will hold a conference call on May 9, 2019 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/1898588/19E7D09970ECDA91F9B21D94F3CEC0AB.
The number to call from within the United States is (866) 652-5200 and
(412) 317-6060 internationally. A replay of the conference call will be
available shortly after the call for a period of seven days. To access
the replay, dial (877) 344-7529 (in the U.S.) and (412) 317-0088
(international callers). The access code for the replay is 10128077.
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 6,000 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 segment focused
principally on central nervous system disorders and parasitic
infections. For more information, visit www.amneal.com.
Non-GAAP Financial Measures
This release includes certain non-GAAP financial measures, including
adjusted EBITDA, adjusted net income, adjusted net income per diluted
share, adjusted gross profit, adjusted gross margin and adjusted
operating income, which are intended as supplemental measures of the
Company’s performance that are not required by or presented in
accordance with GAAP. In addition, this release includes these non-GAAP
measures and our reported results on a non-GAAP combined basis to
include the historical results of Impax and Gemini, not adjusted for
financing and acquisition accounting impacts of the combination, as if
the transaction closing dates had occurred on the first day of all
periods presented herein. All combined business results presented in
this release are not prepared in accordance with Article 11 of
Regulation S-X. 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.
Management uses these non-GAAP historical and combined measures
internally to evaluate and manage the Company’s operations and to better
understand its business because they facilitate a comparative assessment
of the Company’s operating performance relative to its performance based
on results calculated under GAAP. These non-GAAP measures also isolate
the effects of some items that vary from period to period without any
correlation to core operating performance and eliminate certain charges
that management believes do not reflect the Company’s operations and
underlying operational performance. The compensation committee of the
Company’s board of directors also uses certain of these measures to
evaluate management’s performance and set its compensation. The Company
believes that these non-GAAP measures also provide useful information to
investors regarding certain financial and business trends relating to
the Company’s financial condition and operating results, and doing so on
a combined basis facilitates an evaluation of the financial performance
of the Company and its operations on a consistent basis. Providing this
information therefore allows investors to make independent assessments
of the Company’s financial performance, results of operation and trends
while viewing the information through the eyes of management.
These non-GAAP measures are subject to limitations. The non-GAAP
measures presented in this release may not be comparable to similarly
titled measures used by other companies because other companies may not
calculate one or more in the same manner. Additionally, the non-GAAP
performance measures exclude significant expenses and income that are
required by GAAP to be recorded in the Company’s financial statements;
do not reflect changes in, or cash requirements for, working capital
needs; and do not reflect interest expense, or the requirements
necessary to service interest or principal payments on debt. Further,
the combined results may not represent what our combined results of
operations and financial position would have been had the transactions
occurred on the dates indicated, nor are they intended to project our
combined results of operations or financial position for any future
period. To compensate for these limitations, management presents and
considers these non-GAAP measures in conjunction with the Company’s GAAP
results; no non-GAAP measure should be considered in isolation from or
as alternatives to net income, diluted earnings per share or any other
measure determined in accordance with GAAP. Readers should review the
reconciliations included below, and should not rely on any single
financial measure to evaluate the Company’s business.
A reconciliation of each non-GAAP measure to the most directly
comparable GAAP measure is set forth below.
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; our dependence on the sales of a limited
number of products for a substantial portion of our total revenues; 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; 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; 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; 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; the high
concentration of ownership of our Class A Common Stock and the fact that
we are controlled by a group of stockholders.
Contacts
Mark Donohue
(908) 409-6718