Amneal Reports Fourth Quarter And Full Year 2018 Financial Results

BRIDGEWATER, N.J., Feb. 28, 2019 /PRNewswire/ -- Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”) announced its results today for the fourth quarter and year ended December 31, 2018.

Executive Commentary

“We ended a year of significant progress with improved financial results in the fourth quarter,” said Rob Stewart, President and CEO of Amneal. “Our fourth quarter performance is the direct result of our strategic investments, accelerated synergy capture and solid performance from our base business, which helped to offset recent competition on several of our largest products. Both our Generics and Specialty segments grew net revenue sequentially and compared to last year’s fourth quarter as we delivered improved consolidated net revenue of $498 million, combined adjusted EBITDA⁽⁴⁾ of $187 million and combined adjusted diluted EPS⁽⁴⁾ of $0.33.”

“The full year 2018 was marked by several key strategic milestones, most notably the reshaping of our Company through the merger of Impax and Amneal. By the end of 2018, we completed the merger integration and accelerated the capture of synergies, resulting in approximately $60 million of cost savings for the year. We strategically deployed capital with the acquisition of Gemini Laboratories and through several partnerships including agreements with Jerome Stevens Pharmaceuticals, Inc. and Lannett for Levothyroxine. Through our R&D investments, we achieved 62 ANDA approvals, 10 tentative approvals and we submitted 31 ANDAs with the FDA. We launched 42 new generic products, which contributed $171 million in revenue in 2018.”

“Operationally we are doing well as we achieved industry-leading pipeline execution in 2018 with a consistent pace of new approvals and launches. However, the financial benefits of this execution have been slower to materialize than expected as market dynamics are constraining the uptake of certain products. Our 2019 financial outlook reflects the current pricing and competitive challenges within the generic industry, which is impacting our previously expected growth rate. We continue to expect to deliver at least $200 million in merger cost synergies by the end of 2020, as we focus on generating cash to invest in strategic opportunities to diversify the business and accelerate our growth.”

Basis of Presentation

The Company’s financial results are presented in accordance with U.S. GAAP, which include the results of operations of Impax Laboratories, LLC (“Impax”) and Gemini Laboratories, LLC (“Gemini”) subsequent to the transaction closing dates of May 4, 2018 and May 7, 2018, respectively. As used in this press release the term “actual” 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.

Fourth Quarter 2018 Performance

Net revenue in the fourth quarter of 2018 was $498 million, an increase of 69.6%, compared to the prior year period, primarily due to the combination with Impax and the acquisition of Gemini in May 2018, as well as new generic product launches. Net loss was $20 million in the fourth quarter of 2018, compared to net income of $62 million in the fourth quarter of 2017, primarily due to charges related to the combination with Impax and the acquisition of Gemini, including approximately $23 million of incremental interest expense. Diluted EPS in the fourth quarter of 2018 was a loss of $0.07. Diluted EPS in the fourth quarter of 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented.

Combined net revenue⁽⁴⁾ in the fourth quarter of 2018 was $498 million, an increase of 2.1%, compared to the prior year period, due to an increase in net revenue from both Generics and Specialty segments. Combined adjusted net income⁽⁴⁾ in the fourth quarter of 2018 was $100 million, an increase of 30.8%, compared to the prior year period. Combined adjusted EBITDA⁽⁴⁾ in the fourth quarter of 2018 was $187 million, an increase of 33.7%, compared to the prior year period. The increase in both combined adjusted net income⁽⁴⁾ and combined adjusted EBITDA⁽⁴⁾ was primarily due to higher revenues and cost synergies from the combination with Impax. Combined adjusted diluted EPS in the fourth quarter of 2018 was $0.33.

Full Year 2018 Performance

Net revenue for the full year 2018 was $1,663 million, an increase of 60.9%, compared to full year 2017, primarily due to the combination with Impax and the acquisition of Gemini in May 2018, as well as the contribution from 42 new generic product launches. Net loss was $201 million for full year 2018, compared to net income of $169 million for full year 2017, primarily due to charges related to the combination with Impax and the acquisition of Gemini, including approximately $73 million of incremental interest expense. Diluted EPS for full year 2018 was a loss of $0.16. Diluted EPS for full year 2017 is not available as Amneal Pharmaceuticals LLC was a privately-held company for the period presented.

Combined net revenue⁽⁴⁾ for full year 2018 was $1,861 million, a slight increase compared to full year 2017. Combined adjusted net income⁽⁴⁾ for full year 2018 was $294 million, an increase of 8.6%, compared to full year 2017. Combined adjusted EBITDA⁽⁴⁾ for full year 2018 was $584 million, an increase of 16.0%, compared to full year 2017. The increase in both combined adjusted net income⁽⁴⁾ and combined adjusted EBITDA⁽⁴⁾ was primarily due to favorable product sales mix and cost synergies from the combination with Impax. Combined adjusted diluted EPS for the full year 2018 was $0.98.

⁽⁴⁾ See “Non-GAAP Financial Measures” below.

Fourth Quarter 2018 Performance

Generics net revenue of $411 million increased 40.1% for the fourth quarter of 2018, compared to the prior year period. The increase is primarily attributable to the combination with Impax as well as 42 new product launches in 2018, including Methylphenidate Hydrochloride extended release tablets, Phytonadione tablets, Levothyroxine tablets, Potassium Chloride oral solution, Erythromycin instant release tablets and Colesevelam Hydrochloride tablets. Generics combined net revenue⁽⁴⁾ in the fourth quarter of 2018 was $411 million, an increase of 1.1%, compared to the prior year period. The increase is primarily due to new product launches as noted above, partially offset by lower sales across a number of existing products due to lower pricing and additional competition.

Generics gross margin for the fourth quarter of 2018 was 36.0%, compared to 51.6% for the fourth quarter of 2017. The decrease was primarily as a result of higher cost of sales due to incremental amortization and inventory acquisition accounting adjustments, manufacturing plant closure charges and product sales mix primarily due to additional competition on several key products. Generics combined adjusted gross margin⁽⁴⁾ for the fourth quarter of 2018 was 45.1%, compared to 47.0% for the fourth quarter of 2017, primarily due to product sales mix.

Generics operating income for the fourth quarter of 2018 was $43 million, compared to $102 million for the fourth quarter of 2017, primarily due to higher amortization charges, acquisition and site closure expenses, in-process research and development impairment charges and restructuring and asset-related charges, principally a result of the combination with Impax. Generics combined adjusted operating income⁽⁴⁾ for the fourth quarter of 2018 was $150 million, an increase of 22.5%, compared to $123 million in the prior year period, primarily due to lower selling, general and administrative expenses, lower research and development expenses and an increase in legal settlement gains.

⁽⁴⁾ See “Non-GAAP Financial Measures” below

Full Year 2018 Performance

Generics net revenue of $1,439 million increased 39.2% for the full year 2018, compared to full year 2017. The increase is primarily attributable to the combination with Impax as well as the contribution from 42 new product launches in 2018, including Methylphenidate Hydrochloride extended release tablets, Phytonadione tablets, Levothyroxine tablets, Potassium Chloride oral solution, Erythromycin instant release tablets and Colesevelam Hydrochloride tablets. Generics combined net revenue⁽⁴⁾ for full year 2018 was $1,541 million, a decrease of 2.6%, compared to full year 2017. The decrease was primarily driven by lower sales of Epinephrine Auto-Injector due to an ongoing supply disruption, and lower sales of existing base business products, including Budesonide Inhalation Suspension, Lidocaine, Diclofenac Sodium Gel 3% and Loratadine/PSE as a result of lower pricing and additional competition.

Generics gross margin for full year 2018 was 41.4%, compared to 50.9% for full year 2017. The decrease was primarily as a result of higher cost of sales due to incremental amortization, inventory acquisition accounting adjustments, inventory-related charges, manufacturing plant closure charges, impairment of product intangible assets and lower margin products in the Impax portfolio. Generics combined adjusted gross margin⁽⁴⁾ for full year 2018 was 46.5%, compared to 48.7% for full year 2017, primarily due to product sales mix.

Generics operating income for full year 2018 was $163 million, compared to $308 million for full year 2017, primarily due to acquisition, integration and transaction-related expenses, principally a result of the combination with Impax, as noted above. Generics combined adjusted operating income⁽⁴⁾ for full year 2018 was $467 million, an increase of 0.2%, compared to $466 million for full year 2017.

⁽⁴⁾ See “Non-GAAP Financial Measures” below

Fourth Quarter 2018 Performance

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⁽⁴⁾ in the fourth quarter of 2018 was $87 million, an increase of 6.9%, compared to the prior year period, driven primarily by higher revenue from Rytary®, Zomig® and Unithroid®, partially offset by significantly lower sales of Albenza® as a result of the loss of exclusivity in September of 2018.

Specialty combined gross margin⁽⁴⁾ for the fourth quarter of 2018 was 52.5%, compared to 71.1% for the prior year period, driven primarily by higher amortization expense. Specialty combined adjusted gross margin⁽⁴⁾ was 80.9% for the fourth quarter of 2018, compared to 78.2% in the prior year period, primarily due to product sales mix.

Specialty combined operating income⁽⁴⁾ for the fourth quarter of 2018 was $24 million, an increase of $67 million, compared to a combined operating loss of $43 million for the fourth quarter of 2017, primarily due to fixed asset impairment charges in the fourth quarter of 2017, for which there were no comparable charges in the current year period, and increased revenue, as noted above. Specialty combined adjusted operating income⁽⁴⁾ for the fourth quarter of 2018 was $51 million, an increase of $12 million, compared to $39 million for the prior year period, primarily due to increased revenue and lower selling, general and administrative expenses.

⁽⁴⁾ See “Non-GAAP Financial Measures” below

Full Year 2018 Performance

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⁽⁴⁾ for full year 2018 was $320 million, an increase of 16.4%, compared to full year 2017, driven primarily by higher revenue from Rytary, Zomig and Unithroid.

Specialty combined gross margin⁽⁴⁾ for full year 2018 was 59.3%, compared to 64.1% for full year 2017, driven primarily by higher amortization expense. Specialty combined adjusted gross margin⁽⁴⁾ was 79.2% for full year of 2018, compared to 73.1% for full year 2017, primarily due to product sales mix.

Specialty combined operating income⁽⁴⁾ for full year 2018 was $93 million compared to $146 thousand of operating income for full year 2017, primarily due to fixed asset impairment charges in 2017, for which there were no comparable charges in 2018. Specialty combined adjusted operating income⁽⁴⁾ for full year 2018 was $162 million, an increase of $60 million, compared to $102 million for full year 2017, primarily due to increased revenue and lower selling, general and administrative expenses.

⁽⁴⁾ See “Non-GAAP Financial Measures” below.

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 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 2019.

2019 Key Outlook Assumptions

Conference Call Information

Amneal will hold a conference call on February 28, 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 division 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, 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 results of Impax and Gemini as if the transaction closing dates had occurred on the first day of all periods presented herein. 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 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.

All combined business results presented in this release are not prepared in accordance with Article 11 of Regulation S-X. Adjusted gross profit is calculated as total revenues less adjusted cost of goods sold. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. 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.

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 of 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. 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, including its Annual Report on 10-K for the fiscal year ended December 31, 2018 expected to be filed on or about March 1, 2019. 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.