AMRX Amneal Pharmaceuticals Holding Co

‒ Q3 2020 Net Revenue of $519 million; GAAP Net Loss of $(9) million; Diluted Loss per Share of $(0.06) ‒

‒ Q3 2020 Adjusted Net Income (1) of $49 million; Adjusted EBITDA (1) of $114 million; Adjusted Diluted EPS (1) of $0.16‒

‒ Updating 2020 Full Year Financial Outlook ‒

Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the “Company”) announced its results today for the third quarter ended September 30, 2020.

“Amneal delivered another strong quarter, providing further evidence that our Amneal 2.0 strategy is positioning the company for sustained growth,” said Chirag and Chintu Patel, Co-Chief Executive Officers. “While the COVID pandemic continues to affect some aspects of the business, we continue to focus on execution, improving the productivity of our operations and building a strong, diverse platform of generic and specialty pharmaceuticals. We appreciate the hard work of our employees in achieving these results and supporting Amneal’s mission of bringing affordable medicines to patients.”

Net revenue in the third quarter of 2020 was $519 million, an increase of 37% compared to $378 million in the third quarter of 2019. This increase was primarily attributable to $90 million from our AvKARE acquisition, and $51 million from new product launches including EluRyng and Sucralfate Oral Suspension as well as broad generic volume growth, partially offset by competition to Levothyroxine Sodium Tabs and Diclofenac Gel 1%. Net loss attributable to Amneal Pharmaceuticals, Inc. was $9 million in the third quarter compared to a net loss of $265 million in prior year period. The year over year improvement was primarily driven by lower intangible asset impairment and restructuring charges, lower interest and taxes, favorable foreign exchange, and stronger underlying performance, partially offset by the prior year benefit of the gain from the reduction in the tax receivable agreement liability. Diluted loss per share in the third quarter was $0.06 compared to a loss of $2.03 in the prior year period.

Adjusted EBITDA(1) in the third quarter of 2020 was $114 million, an increase of 60% compared to the prior year period, primarily due to higher Generic adjusted gross profit driven primarily by new launches and the addition of AvKARE. Adjusted net income(1) of $49 million in the third quarter of 2020 compared to $12 million in prior year period, reflected higher adjusted EBITDA and lower interest expense, offset in part by higher adjusted taxes. Adjusted diluted EPS(1) in the third quarter of 2020 was $0.16 compared to $0.04 in the prior year period.

(1)

See “Non-GAAP Financial Measures” below.

Updating Full Year 2020 Financial Outlook

Amneal is updating its previously provided 2020 guidance.

 

Existing Full Year 2020 Financial Guidance

Revised Full Year 2020 Financial Guidance

Net revenue

$1,875 million - $1,975 million

$1,950 million - $2,000 million

Adjusted gross margin

44% - 46%

41% - 42%

Adjusted EBITDA (1)

$400 million - $450 million

$430 million - $460 million

Adjusted diluted EPS (2)

$0.45 - $0.60

$0.55 - $0.65

Operating cash flow (3)

$150 million - $200 million

$170 million - $220 million

Capital expenditures

$60 million - $70 million

$60 million - $70 million

Weighted average diluted shares outstanding (4)

Approximately 300 million

Approximately 300 million

(1)

Includes 100% of EBITDA from the AvKARE acquisition.

(2)

Accounts for 35% non-controlling interest in AvKARE.

(3)

Operating cash flow excludes a $110 million cash tax refund, which was substantially received as of September 30, 2020.

(4)

Assumes the weighted average diluted shares outstanding of Class A and Class B shares under the if-converted method.

Conference Call Information

Amneal will host a conference call and live webcast at 8:30 am Eastern Time on November 6, 2020 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) 746-0741 (in the U.S.) or (412) 317-5273 (international callers). 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 (877) 344-7529 (in the U.S.) or (412) 317-0088 (international callers). The access code for the replay is 10149078.

About Amneal

Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is a fully-integrated pharmaceutical company focused on the development, manufacturing and distribution of generic and specialty drug products. The Company has operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.

Amneal has an extensive portfolio of approximately 250 product families and is expanding its portfolio to include complex dosage forms, including biosimilars, 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 and endocrine disorders.

The Company also owns 65% of AvKARE. AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing. For more information, 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 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 the Company. Such risks and uncertainties include, but are not limited to: the potential impact of the COVID-19 pandemic on our business, manufacturing, supply chain, financial results, financial condition, and planned capital expenditures and national and international economies; the risk that our goodwill may become impaired, which could adversely affect our financial condition and results of operations; the impact of global economic conditions; our ability to successfully develop, license, acquire and commercialize new products on a timely basis; our ability to obtain exclusive marketing rights for our products; 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 through acquisitions and otherwise; 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 identify and 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; 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 adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted gross margin, adjusted operating income and adjusted cost of goods sold, which are intended as supplemental measures of the Company’s performance that are not required by or presented in accordance with U.S. General Accepted Accounting Principles (“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.

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 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, 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 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.

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 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.

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,

 

2020

 

2019

 

2020

 

2019

Net revenue

$

519,294

 

 

$

378,283

 

 

$

1,482,489

 

 

$

1,229,045

 

Cost of goods sold

353,345

 

 

267,717

 

 

986,589

 

 

873,841

 

Cost of goods sold impairment charges

32,364

 

 

56,132

 

 

34,579

 

 

112,441

 

Gross profit

133,585

 

 

54,434

 

 

461,321

 

 

242,763

 

Selling, general and administrative

83,120

 

 

63,797

 

 

242,040

 

 

215,514

 

Research and development

44,519

 

 

38,125

 

 

126,470

 

 

139,999

 

In-process research and development impairment charges

—

 

 

23,382

 

 

960

 

 

46,169

 

Intellectual property legal development expenses

2,134

 

 

2,586

 

 

6,954

 

 

9,263

 

Acquisition, transaction-related and integration expenses

1,041

 

 

3,131

 

 

5,403

 

 

12,682

 

Charges related to legal matters, net

60

 

 

14,750

 

 

5,860

 

 

14,750

 

Restructuring and other charges

276

 

 

20,937

 

 

2,657

 

 

29,933

 

Operating income (loss)

2,435

 

 

(112,274)

 

 

70,977

 

 

(225,547)

 

Other (expense) income:

 

 

 

 

 

 

 

Interest expense, net

(34,895)

 

 

(42,209)

 

 

(111,463)

 

 

(129,376)

 

Foreign exchange gain (loss), net

9,673

 

 

(12,531)

 

 

7,958

 

 

(9,684)

 

Gain on sale of international businesses, net

—

 

 

—

 

 

123

 

 

6,930

 

Gain from reduction of tax receivable agreement liability

—

 

 

192,844

 

 

—

 

 

192,844

 

Other income, net

898

 

 

446

 

 

2,102

 

 

1,702

 

Total other (expense) income, net

(24,324)

 

 

138,550

 

 

(101,280)

 

 

62,416

 

(Loss) income before income taxes

(21,889)

 

 

26,276

 

 

(30,303)

 

 

(163,131)

 

Provision for (benefit from) income taxes

144

 

 

389,668

 

 

(105,843)

 

 

375,539

 

Net (loss) income

(22,033)

 

 

(363,392)

 

 

75,540

 

 

(538,670)

 

Less: Net loss attributable to non-controlling interests

13,058

 

 

98,386

 

 

18,556

 

 

208,881

 

Net (loss) income attributable to Amneal Pharmaceuticals, Inc.

(8,975)

 

 

(265,006)

 

 

94,096

 

 

(329,789)

 

Net (loss) income per share attributable to Amneal

Pharmaceuticals, Inc.'s common stockholders:

 

 

 

 

 

 

 

Class A and Class B-1 basic

$

(0.06)

 

 

$

(2.03)

 

 

$

0.64

 

 

$

(2.56)

 

Class A and Class B-1 diluted

$

(0.06)

 

 

$

(2.03)

 

 

$

0.63

 

 

$

(2.56)

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Class A and Class B-1 basic

147,558

 

 

130,729

 

 

147,377

 

 

128,822

 

Class A and Class B-1 diluted

147,558

 

 

130,729

 

 

148,622

 

 

128,822

 

Amneal Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; In thousands)

 

 

September 30, 2020

 

December 31, 2019

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

281,278

 

 

$

151,197

 

Restricted cash

2,372

 

 

1,625

 

Trade accounts receivable, net

707,103

 

 

604,390

 

Inventories

475,760

 

 

381,067

 

Prepaid expenses and other current assets

76,264

 

 

70,164

 

Related party receivables

942

 

 

1,767

 

Total current assets

1,543,719

 

 

1,210,210

 

Property, plant and equipment, net

462,438

 

 

477,997

 

Goodwill

522,690

 

 

419,504

 

Intangible assets, net

1,349,113

 

 

1,382,753

 

Operating lease right-of-use assets

43,643

 

 

53,344

 

Operating lease right-of-use assets - related party

25,463

 

 

16,528

 

Financing lease right-of-use assets - related party

59,328

 

 

61,284

 

Other assets

31,142

 

 

44,270

 

Total assets

$

4,037,536

 

 

$

3,665,890

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

613,619

 

 

$

507,483

 

Current portion of long-term debt, net

29,776

 

 

21,479

 

Current portion of operating lease liabilities

11,527

 

 

11,874

 

Current portion of operating and financing lease liabilities - related party

3,895

 

 

3,601

 

Current portion of note payable - related party

1,000

 

 

—

 

Related party payable - short term

8,069

 

 

5,969

 

Total current liabilities

667,886

 

 

550,406

 

Long-term debt, net

2,757,139

 

 

2,609,046

 

Note payable - related party

36,048

 

 

—

 

Operating lease liabilities

34,849

 

 

43,135

 

Operating lease liabilities - related party

23,777

 

 

15,469

 

Financing lease liabilities - related party

60,490

 

 

61,463

 

Related party payable - long term

1,031

 

 

—

 

Other long-term liabilities

96,188

 

 

39,583

 

Total long-term liabilities

3,009,522

 

 

2,768,696

 

Redeemable non-controlling interests

11,932

 

 

—

 

Total stockholders' equity

348,196

 

 

346,788

 

Total liabilities and stockholders' equity

$

4,037,536

 

 

$

3,665,890

 

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(Unaudited; In thousands)

 

 

Nine Months Ended September 30,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net income (loss)

$

75,540

 

 

$

(538,670)

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Gain from reduction of tax receivable agreement liability

—

 

 

(192,884)

 

Depreciation and amortization

175,514

 

 

152,932

 

Amortization of Levothyroxine Transition Agreement asset

—

 

 

36,393

 

Unrealized foreign currency (gain) loss

(7,779)

 

 

10,552

 

Amortization of debt issuance costs and discount

6,449

 

 

4,849

 

Gain on sale of international businesses, net

(123)

 

 

(6,930)

 

Intangible asset impairment charges

35,539

 

 

158,610

 

Non-cash restructuring and asset-related (credit) charges

(536)

 

 

11,923

 

Deferred tax benefit

—

 

 

371,683

 

Stock-based compensation

15,617

 

 

16,666

 

Inventory provision

56,198

 

 

67,844

 

Other operating charges and credits, net

6,248

 

 

5,945

 

Changes in assets and liabilities:

 

 

 

Trade accounts receivable, net

(50,748)

 

 

(46,457)

 

Inventories

(80,722)

 

 

(25,906)

 

Prepaid expenses, other current assets and other assets

17,638

 

 

41,256

 

Related party receivables

870

 

 

(1,305)

 

Accounts payable, accrued expenses and other liabilities

21,737

 

 

(13,932)

 

Related party payables

1,601

 

 

25

 

Net cash provided by operating activities

273,043

 

 

52,594

 

Cash flows from investing activities:

 

 

 

Purchases of property, plant and equipment

(26,912)

 

 

(42,664)

 

Deposit for future acquisitions of property, plant and equipment

(4,229)

 

 

—

 

Acquisition of intangible assets

(3,250)

 

 

(50,000)

 

Acquisitions, net of cash acquired

(251,360)

 

 

—

 

Proceeds from surrender of corporate owned life insurance

—

 

 

43,017

 

Proceeds from sale of international businesses, net of cash sold

—

 

 

34,834

 

Net cash used in investing activities

(285,751)

 

 

(14,813)

 

Cash flows from financing activities:

 

 

 

Proceeds from issuance of debt

180,000

 

 

—

 

Payments of principal on debt, financing leases and other

(26,500)

 

 

(20,250)

 

Payments of deferred financing costs

(4,102)

 

 

—

 

Proceeds from exercise of stock options

216

 

 

1,385

 

Employee payroll tax withholding on restricted stock unit vesting

(795)

 

 

(926)

 

Tax distribution to non-controlling interest

(1,628)

 

 

(13,494)

 

Distribution of earnings to and acquisition of non-controlling interest

(3,300)

 

 

(3,543)

 

Payments of principal on financing lease - related party

(802)

 

 

(1,707)

 

Net cash provided by (used in) financing activities

143,089

 

 

(38,535)

 

Effect of foreign exchange rate on cash

447

 

 

(967)

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

130,828

 

 

(1,721)

 

Cash, cash equivalents, and restricted cash - beginning of period

152,822

 

 

218,779

 

Cash, cash equivalents, and restricted cash - end of period

$

283,650

 

 

$

217,058

 

Cash and cash equivalents - end of period

281,278

 

 

212,738

 

Restricted cash - end of period

2,372

 

 

4,320

 

Cash, cash equivalents, and restricted cash - end of period

$

283,650

 

 

$

217,058

 

Amneal Pharmaceuticals, Inc.

Generics Operating Results

(Unaudited; In thousands)

 

Generics

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Net revenue – Generics

$

341,920

 

 

$

291,021

 

 

$

1,001,065

 

 

$

1,008,562

 

Cost of goods sold

229,067

 

 

217,773

 

 

666,841

 

 

760,074

 

Cost of goods sold impairment charges

32,364

 

 

49,115

 

 

34,579

 

 

105,424

 

Gross profit

80,489

 

 

24,133

 

 

299,645

 

 

143,064

 

Selling, general, and administrative

13,153

 

 

14,256

 

 

42,578

 

 

52,783

 

Research and development

39,232

 

 

34,316

 

 

108,582

 

 

129,915

 

Charges related to legal matters, net

60

 

 

14,750

 

 

5,610

 

 

14,750

 

In-process research and development impairment charges

—

 

 

23,382

 

 

960

 

 

46,169

 

Intellectual property legal development expenses

2,132

 

 

2,586

 

 

6,947

 

 

8,218

 

Restructuring and other charges

(536)

 

 

14,702

 

 

(158)

 

 

17,201

 

Other operating expenses

—

 

 

502

 

 

325

 

 

4,086

 

Operating income (loss)

$

26,448

 

 

$

(80,361)

 

 

$

134,801

 

 

$

(130,058)

 

 

 

 

 

 

 

 

 

Gross margin

23.5

%

 

8.3

%

 

29.9

%

 

14.2

%

Adjusted gross profit (Non-GAAP) (1)

$

128,047

 

 

$

86,789

 

 

$

384,593

 

 

$

364,500

 

Adjusted gross margin (Non-GAAP) (2)

37.4

%

 

29.8

%

 

38.4

%

 

36.1

%

Adjusted operating income (Non-GAAP)

$

82,436

 

 

$

39,693

 

 

$

246,771

 

 

$

201,260

 

(1)

Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.

(2)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.

Generics net revenue was $342 million for the three months ended September 30, 2020, an increase of $51 million or 17% when compared with the same period in 2019. The year over year increase was primarily due to new product launches of $51 million, including EluRyng and Sucralfate Oral Solution, and growth in Generic volume from new commercial initiatives, partially offset by competition to Levothyroxine Sodium Tabs and Diclofenac Gel 1%.

Generics gross margin was 23.5% compared to 8.3% for the prior year period. The increase primarily related to new product launches, which contributed $36 million of gross margin growth, the impact of new volume won during 2020 and operational efficiencies and product mix, which more than offset the pricing pressures on Levothyroxine Sodium Tabs and Diclofenac Gel 1% and a $17 million decline in intangible asset impairment charges. Generics adjusted gross margin was 37% compared to 30% in the prior-year period. The increase primarily related to new product launches which contributed $36 million of gross margin growth, the impact of new volume won during 2020 and operational efficiencies and product mix, which more than offset the pricing pressures on Levothyroxine Sodium Tabs and Diclofenac Gel 1%.

Generics operating income was $26 million compared to an operating loss of $80 million in the prior year period. The improvement primarily reflected increased gross margin, an in-process research and development impairment charge of $23 million in the prior year period, a decrease in charges related to legal matters of $15 million and a decrease in restructuring and other charges of $15 million, partially offset by an increase in research and development, primarily associated with milestone achievements and upfront license payments. Generics adjusted operating income for the third quarter of 2020 was $82 million compared to $40 million for the prior year period due to improved gross margin.

Amneal Pharmaceuticals, Inc.

Specialty Operating Results

(Unaudited; In thousands)

 

Specialty

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Net revenue - Specialty:

 

 

 

 

 

 

 

Rytary®

$

37,646

 

 

$

33,710

 

 

$

113,881

 

 

$

95,538

 

Unithroid®

13,079

 

 

10,155

 

 

39,805

 

 

28,780

 

Zomig®

10,842

 

 

13,971

 

 

35,330

 

 

39,522

 

All other specialty products

26,301

 

 

29,426

 

 

81,085

 

 

56,643

 

Total net revenue – Specialty

87,868

 

 

87,262

 

 

270,101

 

 

220,483

 

Cost of goods sold

47,735

 

 

49,944

 

 

145,782

 

 

113,767

 

Cost of goods sold impairment charges

—

 

 

7,017

 

 

—

 

 

7,017

 

Gross profit

40,133

 

 

30,301

 

 

124,319

 

 

99,699

 

Selling, general, and administrative

19,181

 

 

20,228

 

 

56,993

 

 

57,705

 

Research and development

5,287

 

 

3,809

 

 

17,888

 

 

10,084

 

Charges related to legal matters, net

—

 

 

—

 

 

250

 

 

—

 

Intellectual property legal development expenses

2

 

 

—

 

 

7

 

 

1,045

 

Other operating expense, net

1

 

 

2,668

 

 

83

 

 

6,096

 

Operating income

$

15,662

 

 

$

3,596

 

 

$

49,098

 

 

$

24,769

 

 

 

 

 

 

 

 

 

Gross margin

45.7

%

 

34.7

%

 

46.0

%

 

45.2

%

Adjusted gross profit (Non-GAAP) (1)

$

65,259

 

 

$

64,421

 

 

$

200,336

 

 

$

174,190

 

Adjusted gross margin (Non-GAAP) (2)

74.3

%

 

73.8

%

 

74.2

%

 

79.0

%

Adjusted operating income (Non-GAAP)

$

41,546

 

 

$

40,907

 

 

$

130,651

 

 

$

108,945

 

(1)

Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.

(2)

Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.

Specialty net revenue for the three months ended September 30, 2020 remained consistent at approximately $88 million and $87 million, respectively, for the three months ended September 30, 2020 and 2019 as demand growth for Rytary® and Unithroid® were offset by declines in non-promoted products.

Specialty gross margin for the third quarter of 2020 was 45.7% compared to 34.7% in the prior year period primarily due to $7 million in cost of goods sold impairment charges in the prior year period. Specialty adjusted gross margin for the third quarter of 2020 of 74% was in line with prior year margin.

Specialty operating income for the third quarter of 2020 was $16 million compared to $4 million in the prior year period. The improvement primarily reflected increased gross margin and $2 million of acquisition, transaction-related and integration expenses in the prior year period. Specialty adjusted operating income for the third quarter of 2020 was $42 million compared to $41 million as adjusted gross margin and operating expenses remained flat.

Amneal Pharmaceuticals, Inc.

AvKARE Operating Results

(Unaudited; In thousands)

 

AvKARE (1)

Three Months Ended September 30,

 

Nine Months Ended eptember 30,

 

2020

 

2019

 

2020

 

2019

Net revenue - AvKARE (2)

$

89,506

 

 

$

—

 

 

$

211,323

 

 

$

—

 

Cost of goods sold (2)

76,543

 

 

—

 

 

173,966

 

 

—

 

Gross profit (2)

12,963

 

 

—

 

 

37,357

 

 

—

 

Selling, general, and administrative

15,374

 

 

—

 

 

41,809

 

 

—

 

Operating loss

$

(2,411)

 

 

$

—

 

 

$

(4,452)

 

 

$

—

 

 

 

 

 

 

 

 

 

Gross margin

14.5

%

 

—

%

 

17.7

%

 

—

%

Adjusted gross profit (Non-GAAP) (3)

$

12,963

 

 

$

—

 

 

$

37,357

 

 

$

—

 

Adjusted gross margin (Non-GAAP) (3)

14.5

%

 

—

%

 

17.7

%

 

—

%

Adjusted operating income (Non-GAAP)

$

6,283

 

 

$

—

 

 

$

18,732

 

 

$

—

 

(1)

The AvKARE segment includes the results of operations of AvKARE from January 31, 2020, the date of the acquisition, to September 30, 2020.

(2)

AvKARE excludes net revenue, costs of goods sold and gross profit from sales of Amneal products through this distribution channel. These financial results are included in the Generics segment.

(3)

There are no non-GAAP adjustments associated with gross profit and gross margin.

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Cost of Goods Sold to Adjusted Cost of Goods Sold

 

Generics

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Cost of goods sold

$

229,067

 

 

$

217,773

 

 

$

666,841

 

 

$

760,074

 

Cost of goods sold impairment charges

32,364

 

 

49,115

 

 

34,579

 

 

105,424

 

Adjusted to deduct (add):

 

 

 

 

 

 

 

Amortization

10,728

 

 

10,912

 

 

31,899

 

 

36,300

 

Inventory related charges (4)

435

 

 

(2,038)

 

 

5,065

 

 

19,739

 

Acquisition and site closure expenses (2)

2,262

 

 

3,956

 

 

7,834

 

 

20,436

 

Asset impairment charges (3)

32,648

 

 

49,115

 

 

35,822

 

 

105,424

 

Stock-based compensation expense

1,151

 

 

711

 

 

3,212

 

 

2,120

 

Amortization of upfront payment (6)

—

 

 

—

 

 

—

 

 

36,393

 

Other

334

 

 

—

 

 

1,116

 

 

1,024

 

Adjusted cost of goods sold (Non-GAAP)

$

213,873

 

 

$

204,232

 

 

$

616,472

 

 

$

644,062

 

Specialty

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Cost of goods sold

$

47,735

 

 

$

49,944

 

 

$

145,782

 

 

$

113,767

 

Cost of goods sold impairment charges

—

 

 

7,017

 

 

—

 

 

7,017

 

Adjusted to deduct:

 

 

 

 

 

 

 

Amortization

25,126

 

 

27,103

 

 

76,017

 

 

67,474

 

Asset impairment charges (3)

—

 

 

7,017

 

 

—

 

 

7,017

 

Adjusted cost of goods sold (Non-GAAP)

$

22,609

 

 

$

22,841

 

 

$

69,765

 

 

$

46,293

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Reconciliations of Operating Income (Loss) to Adjusted Operating Income

 

Generics

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Operating income (loss)

$

26,448

 

 

$

(80,361)

 

 

$

134,801

 

 

$

(130,058)

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

Acquisition and site closure expenses (2)

2,849

 

 

5,941

 

 

11,637

 

 

35,611

 

Amortization

10,728

 

 

10,912

 

 

31,899

 

 

36,300

 

Inventory related charges (4)

1,053

 

 

(2,038)

 

 

5,683

 

 

19,739

 

Stock-based compensation expense

2,174

 

 

3,982

 

 

6,051

 

 

9,355

 

Asset impairment charges (3)

32,716

 

 

72,530

 

 

37,490

 

 

151,741

 

Restructuring and other charges (5)

(536)

 

 

14,702

 

 

(158)

 

 

17,201

 

Charges related to legal matters, net (7)

60

 

 

15,000

 

 

5,610

 

 

15,000

 

Amortization of upfront payment (6)

—

 

 

—

 

 

—

 

 

36,393

 

R&D milestone payment

6,304

 

 

—

 

 

13,145

 

 

9,929

 

Other

640

 

 

(975)

 

 

613

 

 

49

 

Adjusted operating income (Non-GAAP)

$

82,436

 

 

$

39,693

 

 

$

246,771

 

 

$

201,260

 

Specialty

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Operating income

$

15,662

 

 

$

3,596

 

 

$

49,098

 

 

$

24,769

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

Amortization

25,126

 

 

27,103

 

 

76,017

 

 

67,474

 

Acquisition and site closure expenses (2)

—

 

 

2,522

 

 

83

 

 

8,328

 

Stock-based compensation expense

707

 

 

456

 

 

2,033

 

 

966

 

Restructuring and other charges (5)

—

 

 

213

 

 

—

 

 

391

 

R&D milestone payment

—

 

 

—

 

 

2,000

 

 

—

 

Asset impairment charges (3)

—

 

 

7,017

 

 

—

 

 

7,017

 

Other

51

 

 

—

 

 

1,420

 

 

—

 

Adjusted operating income (Non-GAAP)

$

41,546

 

 

$

40,907

 

 

$

130,651

 

 

$

108,945

 

AvKARE

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Operating loss

$

(2,411)

 

 

$

—

 

 

$

(4,452)

 

 

$

—

 

Adjusted to add:

 

 

 

 

 

 

 

Amortization

8,694

 

 

—

 

 

23,184

 

 

—

 

Adjusted operating income (Non-GAAP)

$

6,283

 

 

$

—

 

 

$

18,732

 

 

$

—

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands, except per share amounts)

Reconciliation of Net (Loss) Income to Adjusted Net Income and Calculation of Adjusted Diluted EPS

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Net (loss) income

$

(22,033)

 

 

$

(363,392)

 

 

$

75,540

 

 

$

(538,670)

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

Non-cash interest

2,021

 

 

1,631

 

 

5,885

 

 

4,849

 

Gain from reduction of tax receivable agreement liability (1)

—

 

 

(192,844)

 

 

—

 

 

(192,844)

 

GAAP Income tax expense (benefit)

144

 

 

389,668

 

 

(105,843)

 

 

375,539

 

Amortization

41,514

 

 

38,015

 

 

123,009

 

 

103,774

 

Stock-based compensation expense

5,415

 

 

6,095

 

 

15,617

 

 

16,666

 

Acquisition and site closure expenses (2)

3,979

 

 

11,230

 

 

16,607

 

 

58,488

 

Restructuring and other charges (5)

276

 

 

20,937

 

 

2,657

 

 

29,933

 

Inventory related charges (4)

1,054

 

 

(2,038)

 

 

6,179

 

 

19,739

 

Charges related to legal matters, net (7)

60

 

 

15,000

 

 

5,610

 

 

15,000

 

Asset impairment charges (3)

33,350

 

 

79,547

 

 

38,124

 

 

160,555

 

Amortization of upfront payment (6)

—

 

 

—

 

 

—

 

 

36,393

 

Foreign exchange (gain) loss

(9,673)

 

 

12,531

 

 

(7,958)

 

 

9,684

 

Gain on sale of international businesses, net (8)

—

 

 

—

 

 

(123)

 

 

(6,930)

 

R&D milestone payments

6,304

 

 

—

 

 

15,145

 

 

9,929

 

Other

468

 

 

(1,387)

 

 

230

 

 

196

 

Income tax at 21%

(13,886)

 

 

(3,149)

 

 

(41,860)

 

 

(21,483)

 

Net loss (income) attributable to NCI not associated with our Class B shares

393

 

 

(91)

 

 

(1,151)

 

 

(231)

 

Adjusted net income (Non-GAAP)

$

49,386

 

 

$

11,753

 

 

$

147,668

 

 

$

80,587

 

Adjusted diluted EPS (Non-GAAP) (9)

$

0.16

 

 

$

0.04

 

 

$

0.49

 

 

$

0.27

 

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited, In thousands)

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Net (loss) income

$

(22,033)

 

 

$

(363,392)

 

 

$

75,540

 

 

$

(538,670)

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

Interest expense, net

34,895

 

 

42,209

 

 

111,463

 

 

129,376

 

Income tax expense (benefit)

144

 

 

389,668

 

 

(105,843)

 

 

375,539

 

Depreciation and amortization

59,359

 

 

53,358

 

 

175,514

 

 

152,932

 

EBITDA (Non-GAAP)

$

72,365

 

 

$

121,843

 

 

$

256,674

 

 

$

119,177

 

Adjusted to add (deduct):

 

 

 

 

 

 

 

Gain from reduction of tax receivable agreement liability (1)

—

 

 

(192,844)

 

 

—

 

 

(192,844)

 

Stock-based compensation expense

5,415

 

 

6,095

 

 

15,617

 

 

16,666

 

Acquisition and site closure expenses (2)

3,979

 

 

11,230

 

 

16,607

 

 

58,488

 

Restructuring and other charges (5)

276

 

 

20,937

 

 

2,657

 

 

29,933

 

Inventory related charges (4)

1,054

 

 

(2,038)

 

 

6,179

 

 

19,739

 

Charges related to legal matters, net (7)

60

 

 

15,000

 

 

5,610

 

 

15,000

 

Asset impairment charges (3)

33,350

 

 

79,547

 

 

38,124

 

 

160,555

 

Amortization of upfront payment (6)

—

 

 

—

 

 

—

 

 

36,393

 

Foreign exchange (gain) loss

(9,673)

 

 

12,531

 

 

(7,958)

 

 

9,684

 

Gain on sale of international businesses, net (8)

—

 

 

—

 

 

(123)

 

 

(6,930)

 

R&D milestone payments

6,304

 

 

—

 

 

15,145

 

 

9,929

 

Other

468

 

 

(1,387)

 

 

230

 

 

(828)

 

Adjusted EBITDA (Non-GAAP)

$

113,598

 

 

$

70,914

 

 

$

348,762

 

 

$

274,962

 

Amneal Pharmaceuticals, Inc. Non-GAAP Reconciliations (Unaudited; In thousands)

1. Gain from reduction of tax receivable agreement liability represents the reversal of the accrued liability associated with the Company’s deferred tax assets created at the Combination.
2. Acquisition and site closure expenses for the three and nine months ended September 30, 2020, include costs related to: (i) system integration associated with the combination with Impax Laboratories, LLC ("Impax"), (ii) integration and transaction activities associated with the acquisition of AvKARE, and (iii) the planned cessation of manufacturing at our Hauppauge, NY facility. Acquisition and site closure expenses for the three and nine months ended September 30, 2019 include costs related to: (i) plant closure and redundant employee costs and (ii) third party costs associated with the combination with Impax and related integration including legal, investment banking, accounting and information technology.
3. Asset impairment charges for the three and nine months ended September 30, 2020 were primarily associated with equipment and intangible assets. Asset impairment charges for the three and nine months ended September 30, 2019 were primarily associated with in-process research and development and intangible assets primarily related to products acquired in the Impax combination.
4. For the three and nine months ended September 30, 2020, inventory related charges represented inventory obsolescence and related expenses associated with recalls. For the three and nine months ended September 30, 2019, inventory related charges primarily represented inventory obsolescence resulting from new initiatives and policies adopted with our restructuring efforts.
5. For the three months September 30, 2020, restructuring and other charges primarily consisted of cash severance charges associated with the cost of benefits for management employees. For the nine months ended September 30, 2020, restructuring and other charges primarily consisted of cash severance charges associated with the cost of benefits for former senior executives and management employees. For the three and nine months ended September 30, 2019, restructuring and other charges primarily consisted of cash severance charges associated with the cost of benefits for employees at our Hauppauge, NY, Hayward, CA and other facilities, as well as asset-related charges associated with the impairment of property, plant and equipment and the right of use asset associated with our Hauppauge, NY facility.
6. Amortization of upfront payment represents the amortization of the upfront payment made to Lannett in connection with our Transition Agreement for Levothyroxine.
7. For the three and nine months ended September 30, 2020, charges related to legal matters, net were approximately $0.1 million and $6 million, respectively, for commercial legal claims in our Generics segment. For the three and nine months ended September 30, 2019, charges related to legal matters, net are primarily associated with an agreement in principle with Teva Pharmaceuticals, Inc. regarding a matter associated with Impax prior to the combination with Amneal.
8. For the three and nine months ended September 30, 2020, gain on the sale of international businesses, net was immaterial. For the nine months ended September 30, 2019, gain on the sale of international businesses, net represents the gain from the sale of our Creo Pharma Holding Limited subsidiary, which comprised substantially all of the Company's operations in the United Kingdom, partially offset by the loss from the sale of our Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany.
9. For the three and nine months ended September 30, 2020, utilizes weighted average diluted shares outstanding of 301,364 and 300,739, respectively, which consists of Class A shares and Class B shares under the if-converted method. For the three and nine months ended September 30, 2019, utilizes weighted average diluted shares outstanding of 299,106 and 299,125, respectively, which consists of Class A and Class B shares under the if-converted method.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201106005114/en/

Investor Relations Helen O’Donnell Solebury Trout (203) 428-3213