Amneal Reports Third Quarter 2022 Financial Results

‒ Q3 2022 Net Revenue of $546 million; GAAP Net Loss of $3 million; Diluted Loss per Share of $(0.02) ‒

‒ Adjusted EBITDA ⁽¹⁾ of $126 million; Adjusted Diluted EPS ⁽¹⁾ of $0.14 ‒

‒ Maintaining 2022 Full Year Outlook ‒

BRIDGEWATER, N.J.–(BUSINESS WIRE)–Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (“Amneal” or the “Company”) announced its results today for the third quarter ended September 30, 2022.

“Third quarter results reflect continued solid performance across our diversified portfolio. Over the last several years, we have driven our growth strategy through new product innovation, leveraging key capabilities, and strong execution. We continued our momentum this quarter with numerous new product approvals, scaling of our injectables business, launching our first biosimilar, and filing our IPX203 NDA in Specialty. As we successfully execute on our strategic priorities, we see our momentum building,” said Chirag and Chintu Patel, Co-Chief Executive Officers.

Net revenue in the third quarter of 2022 was $546 million, an increase of 3.2% compared to $529 million in the third quarter of 2021. These results reflected consistent performance of Generics and Specialty, and double-digit growth of AvKARE.

Net loss attributable to Amneal Pharmaceuticals, Inc. was $3 million in the third quarter of 2022 compared to a net loss of $4 million in the third quarter of 2021. Adjusted EBITDA⁽¹⁾ in the third quarter of 2022 was $126 million, a decrease of 5.1% compared to the third quarter of 2021, reflective of investments to drive upcoming new product launches. Diluted loss per share and adjusted diluted EPS⁽¹⁾ in the third quarter of 2022 were $(0.02) and $0.14, respectively, compared to $(0.03) and $0.21, respectively, in the third quarter of 2021.

(1)

See “Non-GAAP Financial Measures” below.

Maintaining Full Year 2022 Guidance

The Company is maintaining its previously provided full year 2022 guidance.

	Full Year 2022 Guidance
Net revenue	$2.15 billion – $2.25 billion
Adjusted EBITDA (1)	$500 million – $520 million
Adjusted diluted EPS (2)	$0.65 – $0.70
Operating cash flow (3)	$200 million – $225 million
Capital expenditures	$65 million – $75 million
Weighted average diluted shares outstanding (4)	Approximately 305 million

(1)		Includes 100% of EBITDA from the AvKARE acquisition. Beginning in the first quarter of 2022, the Company no longer excludes research and development (“R&D”) milestone expense from its non-GAAP financial measures. In the third quarter of 2022, R&D milestone expenses were $3 million.
(2)		Accounts for 35% non-controlling interest in AvKARE. Beginning in the first quarter of 2022, the Company no longer excludes R&D milestone expense from its non-GAAP financial measures.
(3)		Represents cash provided by operating activities. Guidance does not contemplate one time and non-recurring items such as legal settlements and other discrete items. These amounts exclude anticipated cash payments this year of approximately $131 million related to the settlements and preliminary settlements of the Opana ER® antitrust litigation.
(4)		Assumes the weighted average diluted shares outstanding of class A and class B common stock under the if-converted method.

Amneal’s 2022 estimates are based on management’s current expectations, including with respect to prescription trends, pricing levels, the timing of future product launches, the costs incurred and benefits realized of restructuring activities, and our long-term strategy. The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company cannot provide a reconciliation between non-GAAP projections and the most directly comparable measures in accordance with GAAP 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, legal settlements, restructuring expenses and benefits, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results.

Conference Call Information

Amneal will host a conference call and live webcast at 8:30 am Eastern Time on November 4, 2022 to discuss its results. The live webcast and presentation will be accessible through the Investor Relations section of the Company’s website at https://investors.amneal.com. To access the call through a conference line, dial (844) 200-6205 (in the U.S.) or (929) 526-1599 (international callers). The access code for the call is 585341. A replay of the conference call will be posted shortly after the call and will be available for seven days. To access the replay, dial (866) 813-9403 (in the U.S.) or +44 (204) 525-0658 (international callers). The access code for the replay is 049751.

About Amneal

Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is a fully-integrated essential medicines company. We make healthy possible through the development, manufacturing, and distribution of generic and specialty pharmaceuticals, primarily within the United States. The Company has a diverse portfolio of over 250 products in its Generics segment and is expanding across a broad range of complex products and therapeutic areas, including injectables and biosimilars. In its Specialty segment, Amneal has a growing portfolio of branded pharmaceutical products focused primarily on central nervous system and endocrine disorders, with a pipeline focused on unmet needs. Through its AvKARE segment, the Company is a distributor of pharmaceuticals and other products for the U.S. federal government, retail, and institutional markets. For more information, please visit www.amneal.com.

Cautionary Statement on Forward-Looking Statements

Certain statements contained herein, regarding matters that are not historical facts, may be forward-looking statements (as defined in the U.S. 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: discussions of future operations; expected or estimated operating results and financial performance, the Company’s growth prospects and opportunities as well as its strategy for growth; product development and launches; the successful commercialization and market acceptance of new products, and expenditures. Words such as “plans,” “expects,” “will,” “anticipates,” “estimates,” 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 the Company.

Such risks and uncertainties include, but are not limited to: our ability to successfully develop, license, acquire and commercialize new products on a timely basis; the competition we face in the pharmaceutical industry, in general, specifically from brand and generic drug product companies, and the impact of that competition on our ability to set prices; our ability to obtain exclusive marketing rights for our products; 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; our ability to manage our growth through acquisitions and otherwise; our dependence on the sales of a limited number of products for a substantial portion of our total revenues; the continuing trend of consolidation of certain customer groups; our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods and any associated supply chain disruptions; existing and future legal proceedings, the outcome of which are uncertain and may divert management resources and require us to incur substantial defense or settlement payments and costs; legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives; the impact of severe weather; the impact of the ongoing COVID-19 pandemic, and the emergence of variant strains; risks related to federal regulation of arrangements between manufacturers of branded and generic products; our reliance on certain licenses to proprietary technologies from time to time; the significant amount of resources we expend on research and development; 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 U.S. federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws; changes to Food and Drug Administration (“FDA”) product approval requirements; the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers; our dependence on third-party agreements for a portion of our product offerings; the impact of global economic conditions, including any economic effects stemming from adverse geopolitical events, an economic downturn, inflation and rising interest rates; our ability to identify, make and integrate acquisitions or investments in complementary businesses and products on advantageous terms; our obligations under a tax receivable agreement may be significant; and the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal Group. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the Securities and Exchange Commission, including under Item 1A, “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and in its subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. 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.

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted cost of goods sold, adjusted selling general and administrative expense, and adjusted research and development expense, which are intended as supplemental measures of the Company’s performance that are not required by or presented in accordance with GAAP. 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 under the if-converted method.

Management uses these non-GAAP 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 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 operations and trends while viewing the information through the eyes of management.

As previously disclosed, beginning in the first quarter of 2022, we no longer exclude research and development milestone expenses related to license and collaboration agreements from our non-GAAP financial measures and our line item components, including adjusted research and development, adjusted EBITDA, adjusted operating income, adjusted net income and adjusted earnings per share. Prior period adjusted results have been revised to reflect this change. Refer to our Form 8-K filed with the Securities and Exchange Commission on May 4, 2022 for a full reconciliation of previously reported non-GAAP results to revised non-GAAP results for prior periods.

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, our historical adjusted results are not intended to project our adjusted 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, gross profit, gross margin, operating income, cost of goods sold, selling general and administrative expense, and research and development expense 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 historical non-GAAP measure to the most directly comparable GAAP measure is set forth below.

Amneal Pharmaceuticals, Inc. Consolidated Statements of Operations (Unaudited; In thousands, except per share amounts)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net revenue	$	545,557			$	528,593			$	1,602,545			$	1,556,773
Cost of goods sold		350,653				329,394				1,027,439				953,514
Cost of goods sold impairment charges		674				688				5,786				688
Gross profit		194,230				198,511				569,320				602,571
Selling, general and administrative		100,071				91,397				297,542				268,280
Research and development		50,235				48,927				153,781				149,973
In-process research and development impairment charges		—				—				—				710
Intellectual property legal development expenses		1,411				1,627				2,996				6,574
Acquisition, transaction-related and integration expenses		39				134				714				7,219
Charges related to legal matters, net		285				19,000				249,836				19,000
Charges (insurance recoveries) for property losses and associated expenses		—				8,186				(1,911	)			8,186
Restructuring and other charges		581				425				1,312				788
Change in fair value of contingent consideration		(1,425	)			300				(1,495	)			300
Other operating income		(1,320	)			—				(2,495	)			—
Operating income (loss)		44,353				28,515				(130,960	)			141,541
Other (expense) income:
Interest expense, net		(42,391	)			(34,400	)			(111,349	)			(102,368	)
Foreign exchange loss, net		(5,491	)			(29	)			(12,933	)			(185	)
Loss on refinancing		—				—				(291	)			—
Other income, net		5,709				3,871				15,061				8,697
Total other expense, net		(42,173	)			(30,558	)			(109,512	)			(93,856	)
Income (loss) before income taxes		2,180				(2,043	)			(240,472	)			47,685
Provision for income taxes		4,570				4,049				8,459				7,056
Net (loss) income		(2,390	)			(6,092	)			(248,931	)			40,629
Less: Net (income) loss attributable to non-controlling interests		(299	)			1,855				123,716				(23,628	)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest		(2,689	)			(4,237	)			(125,215	)			17,001
Accretion of redeemable non-controlling interest		—				—				(438	)			—
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.	$	(2,689	)		$	(4,237	)		$	(125,653	)		$	17,001
Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.’s class A common stockholders:
Basic	$	(0.02	)		$	(0.03	)		$	(0.83	)		$	0.11
Diluted	$	(0.02	)		$	(0.03	)		$	(0.83	)		$	0.11
Weighted-average common shares outstanding:
Basic		151,393				149,290				150,765				148,771
Diluted		151,393				149,290				150,765				151,655

Amneal Pharmaceuticals, Inc. Condensed Consolidated Balance Sheets (Unaudited; In thousands)
	September 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	87,335		$	247,790
Restricted cash		8,556			8,949
Trade accounts receivable, net		628,737			662,583
Inventories		543,858			489,389
Prepaid expenses and other current assets		149,650			110,218
Related party receivables		1,696			1,179
Total current assets		1,419,832			1,520,108
Property, plant and equipment, net		470,150			514,158
Goodwill		599,504			593,017
Intangible assets, net		1,159,005			1,166,922
Operating lease right-of-use assets		34,252			39,899
Operating lease right-of-use assets – related party		18,566			20,471
Financing lease right-of-use assets		64,468			64,475
Other assets		108,262			20,614
Total assets	$	3,874,039		$	3,939,664
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	531,462		$	525,345
Current portion of liabilities for legal matters		176,094			58,000
Revolving credit facility		60,000			—
Current portion of long-term debt, net		29,940			30,614
Current portion of operating lease liabilities		10,266			9,686
Current portion of operating and financing lease liabilities – related party		2,809			2,636
Current portion of financing lease liabilities		3,557			3,101
Related party payables – short term		3,867			47,861
Total current liabilities		817,995			677,243
Long-term debt, net		2,607,217			2,680,053
Note payable – related party		39,279			38,038
Operating lease liabilities		26,366			32,894
Operating lease liabilities – related party		16,653			18,783
Financing lease liabilities		61,311			60,251
Related party payables – long term		10,296			9,619
Other long-term liabilities		78,258			38,903
Total long-term liabilities		2,839,380			2,878,541
Redeemable non-controlling interests		22,375			16,907
Total stockholders’ equity		194,289			366,973
Total liabilities and stockholders’ equity	$	3,874,039		$	3,939,664

Amneal Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (Unaudited; In thousands)
	Nine Months Ended September 30,
		2022				2021
Cash flows from operating activities:
Net (loss) income	$	(248,931	)		$	40,629
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		179,119				172,223
Unrealized foreign currency loss		12,893				(94	)
Amortization of debt issuance costs and discount		6,489				6,873
Loss on refinancing		291				—
Intangible asset impairment charges		5,786				1,398
Insurance recoveries for property and equipment losses		(1,000	)			—
Non-cash property losses		—				5,152
Stock-based compensation		24,016				20,670
Inventory provision		28,884				39,290
Change in fair value of contingent consideration		(1,495	)			300
Other operating charges and credits, net		7,077				3,965
Changes in assets and liabilities:
Trade accounts receivable, net		33,570				10,894
Inventories		(91,326	)			(65,643	)
Prepaid expenses, other current assets and other assets		(34,380	)			(27,493	)
Related party receivables		(517	)			7,201
Accounts payable, accrued expenses and other liabilities		165,437				(32,819	)
Related party payables		2,479				(3,987	)
Net cash provided by operating activities		88,392				178,559
Cash flows from investing activities:
Purchases of property, plant and equipment		(34,941	)			(30,230	)
Deposits for future acquisition of property, plant, and equipment		(2,388	)			(2,655	)
Acquisition of intangible assets		(41,800	)			(500	)
Acquisitions of businesses, net of cash acquired		(84,714	)			(73,828	)
Proceeds from insurance recoveries for property and equipment losses		1,000				—
Net cash used in investing activities		(162,843	)			(107,213	)
Cash flows from financing activities:
Payments of deferred financing and refinancing costs		(1,663	)			—
Payments of principal on debt, revolving credit facility, financing leases and other		(105,618	)			(68,240	)
Borrowings on revolving credit facility		85,000				—
Proceeds from exercise of stock options		662				834
Employee payroll tax withholding on restricted stock unit vesting		(3,483	)			(2,595	)
Tax distributions to non-controlling interests		(13,131	)			(36,678	)
Acquisition of redeemable non-controlling interest		(1,722	)			—
Payments of deferred consideration for acquisitions – related party		(44,498	)			—
Payments of principal on financing lease – related party		—				(93	)
Repayment of related party note		—				(1,000	)
Net cash used in financing activities		(84,453	)			(107,772	)
Effect of foreign exchange rate on cash		(1,944	)			(76	)
Net decrease in cash, cash equivalents, and restricted cash		(160,848	)			(36,502	)
Cash, cash equivalents, and restricted cash – beginning of period		256,739				347,121
Cash, cash equivalents, and restricted cash – end of period	$	95,891			$	310,619
Cash and cash equivalents – end of period	$	87,335			$	302,655
Restricted cash – end of period		8,556				7,964
Cash, cash equivalents, and restricted cash – end of period	$	95,891			$	310,619

Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited, In thousands)
Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA (1)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net (loss) income	$	(2,390	)		$	(6,092	)		$	(248,931	)		$	40,629
Adjusted to add:
Interest expense, net		42,391				34,400				111,349				102,368
Provision for income taxes		4,570				4,049				8,459				7,056
Depreciation and amortization		61,608				60,186				179,119				172,223
EBITDA (Non-GAAP)	$	106,179			$	92,543			$	49,996			$	322,276
Adjusted to add (deduct):
Stock-based compensation expense		7,689				7,708				24,016				20,670
Acquisition, site closure, and idle facility expenses (2)		3,468				2,220				12,230				13,976
Restructuring and other charges (3)		538				425				1,269				788
Loss on refinancing		—				—				291				—
Inventory related charges		—				44				—				245
Charges related to legal matters, net (4)		285				19,000				249,836				19,000
Asset impairment charges		3,108				688				8,358				1,752
Foreign exchange loss		5,491				29				12,933				185
Regulatory approval milestone		—				—				5,000				—
Change in fair value of contingent consideration		(1,425	)			300				(1,495	)			300
Charges (insurance recoveries) for property losses and associated expenses (5)		—				8,186				(1,911	)			8,186
Other		300				1,282				(445	)			3,088
Adjusted EBITDA (Non-GAAP)	$	125,633			$	132,425			$	360,078			$	390,466

Contacts

Anthony DiMeo

Head of Investor Relations

[email protected]

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