Amneal Pharmaceuticals, Inc. (AMRX) on Q2 2021 Results - Earnings Call Transcript
Operator: Good morning, and welcome to Amneal's Second Quarter 2021 Earnings Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Amneal's Head of Investor Relations, Tony DiMeo. Please go ahead.
Tony DiMeo: Good morning, and thank you for joining Amneal's second quarter 2021 earnings call. Today, we issued a press release reporting our financial results. The press release and presentation are available on our website at amneal.com. We are conducting a live webcast of this call, a replay of which will also be available on our website after its conclusion. Please note that certain statements made during this call, regarding matters that are not historical facts, including but not limited to managing outlook or predictions for future periods are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the section entitled Cautionary Statements on Forward-Looking Statements in our press release and the presentation, which applies to this call. Also please refer to our SEC filings, which can be found on our website and the SEC's website, for a discussion of numerous factors that may impact our future performance. We also discuss certain non-GAAP measures. Important information on our use of these measures and reconciliations to US GAAP maybe found in our earnings release and the appendix of today's presentation. On the call this morning are Chirag and Chintu Patel, Co-CEOs; Tasos Konidaris CFO; Andy Boyer and Joe Todisco, Chief Commercial Officers for the Generics and Specialty segments; and Steve Manzano, General Counsel and Corporate Secretary. Chintu and Tasos are in separate locations today, so hopefully we maintain good connectivity. I will now turn the call over to Chirag.
Chirag Patel: Thank you, Tony. Good morning, everyone. I'm pleased to share with you Amneal's strong second quarter results with net revenue of $535 million, adjusted EBITDA of $151 million and adjusted EPS of $0.25. As a matter of fact, these results are the highest levels our company has delivered since 2018 and a testament to the soundness of our strategy and excellence in execution by our global team. As you will hear from Tasos later on, all three business segments Generics, Specialty and Distribution performed very well. And at the halfway point of the year, we remain confident in our ability to meet or exceed our financial guidance for 2021. Let me now discuss each of these three segments and provide updates on key initiatives. Over the last two years, we have significantly strengthened our Generics portfolio through our core competencies in R&D, manufacturing and commercial excellence. As a result, we have seen an increased cadence of new more complex product introductions creating substantial value for Amneal as well as our customers and patients. Since we rejoined Amneal two years ago, we have demonstrated consistent Generics performance while increasing adjusted gross margins from 30% in third quarter of 2019 to 47% in this most recent quarter. That's a significant improvement. In Generics, we are often asked what makes our generic business durable? Fortunately, the answer is many things. Let me share a few highlights with you. First, a third of our current generics net revenue comes from products launched since 2019. That's a meaningful portion of the business. This fact reflects the robustness of our R&D engine. Second, for about half of these new products, Amneal was either first or second to be approved for that product, which speaks of the ingenuity of our team. Third, our business mix is increasingly from more complex products, which provide more durable revenues at higher profitability. Over the course of time, we have seen -- we have been successfully migrating our business towards less commoditized products and we expect that to continue. As a result, about half of our current revenue base is non-oral solids, while 80% of our R&D pipeline is non-oral solids. That's a significant and deliberate shift in mix towards a more complex product portfolio. Fourth, our excellence in manufacturing and leading operational capabilities, allow us to manufacture the majority of our products in-house. That's driving our speed of execution and higher profitability. I hope these thoughts demonstrate the soundness of our strategy, which along with solid execution, makes us confident in the sustainability of generics performance over the long term. In addition, we continue to bring certain generic products into select international markets, which with external partners. Overall, we see global expansion as another factor for long-term sustainable growth. Let me now move on to our specialty business, where we are continuing to build our specialty portfolio. We are focused on growing the business through organic growth, advancing our R&D pipeline and pursuing suitable inorganic opportunities, focused primarily in neurology and endocrinology. First, to drive organic growth, we strategically invested to expand our endocrinology sales force this year. And accordingly, we are seeing continued strong commercial execution. As a result, in spite of continuing COVID-19 headwinds, we are pleased with year-to-date performance of our two largest specialty products Rytary and Unithroid. Second, in terms of advancing our pipeline, we expect to share our upcoming Phase III clinical data for IPX203 in the coming weeks. Furthermore, we continue to advance our broad R&D specialty pipeline projects, which are in various stages of preclinical and clinical development. Chintu will touch on innovation in more detail shortly. As we have discussed in the past, we continue to pursue complementary commercial stage assets and late-stage clinical programs to leverage our existing specialty commercial infrastructure. That is exactly the rationale for our recently announced licensed DHE prefilled syringe autoinjector for acute migraines and cluster headaches. We expect to begin our commercialization efforts in the second half of 2022 was this 505(b)(2) product is approved. Let me now move on to our AvKARE distribution business where we saw solid performance again this quarter. As a reminder, AvKARE plays in three main channels. That is the federal government, the institutional market by leveraging unit dose packaging; and a niche distribution channel. We are focused on the growth and profitability of AvKARE, as we continue to launch numerous new products, expand its unit dose offerings and ensure strong commercial and operational execution. Finally, as a mission-driven and purpose-led company, I would like to share more about our ongoing efforts in driving environment, social and governance initiative at Amneal. We truly integrate ESG into every aspect of our business. Underlying everything we do and stand for at Amneal is our mission of providing affordable, essential medicines for patients. Since our founding in 2002, we have always been committed to the highest quality standards and good manufacturing practices and our industry-leading quality track record speaks for itself. We also believe that our people are our greatest asset. It's our people who generate innovations, operate our plants and drive the commercial success of our business. We hope, you will read more about this inaugural sustainability report, which will come out later this year. With that, I'll now turn the call over to Chintu.
Chintu Patel: Thank you, Chirag. Adding to those points around ESG, we always strive for improvements across the organization. For instance, Amneal is known for its best-in-class quality system and we are constantly looking for ways to push that quality bar higher. Most importantly, it is our people that drive the success of Amneal. As always, we would like to recognize the service of our nearly 6,500 associates who work very hard every day to make healthy possible. We thank them deeply. On our call last quarter, we shared how the pandemic was impacting our organization and team in India. Thankfully, the local situation has improved considerably. However, we are saddened by the toll the pandemic has had on our Amneal family and their loved ones. The India team has demonstrated tremendous courage and resiliency and we are very proud of our team. Now let me provide some key updates on our operations and our innovation agenda. Two years ago, when Chirag and I returned as co-CEOs, we stated our key priorities were to optimize global operations, improve supply chain and enhance margins. These goals continue to be a key area of focus. Two years later we are seeing considerable progress across all those initiatives. Most notably our product offerings are much more diversified across numerous therapeutic areas and multiple drug delivery mechanisms with much improved profitability. This is remarkable improvement in two years. Next our innovation strategy has been well, thought out and deliberate over the years. Looking back, we have a reach history of innovating across numerous drug dosage form categories. We believe Amneal is differentiated from its peers in its ability to deliver innovations across these complex dosage forms. Our internally developed R&D and manufacturing capabilities build methodically over time are driving the velocity of innovation we are seeing today. And we believe that these are competitive advantages for us. Since these are internally developed innovations we also have better control over the vital supply chains for these products. Going forward, we'll continue to prioritize complex products across different dosage forms such as inhalation, injectables, implants, drug device combinations and biosimilars. Overall, we feel great about our current generics pipeline. Today over 80% of our pipeline is non-oral solid products. We are very pleased with our new product launches in 2021 such as Zafemy, Abiraterone and recently approved TobraDex, which is a complex ophthalmic suspension product. Later this year, we expect several additional meaningful approvals. On Copaxone, we expect to launch in the first half of 2022. On Vasopressin, we are working with FDA on the CRL and we expect to respond in the third quarter. We believe that puts us on a path to have approval as soon as the first half of 2022. Having said that, we never rely on one product as we have a very large and diversified pipeline. Let me now discuss our injectable business where we have made significant progress over the last two years and expect substantial growth in the years ahead. We view injectables as an attractive and strategic opportunity for Amneal. Today we have about 25 commercial injectable products with approximately $125 million in annual revenues. We see this business more than doubling over the next four years based on our rich pipeline as we look to meaningfully expand our offerings for the institutional market. Our talented R&D team is focused on developing a variety of injectable products in complex areas such as drug device combinations, peptides, long-acting injectable, large volume parenteral bags and others. Each of these injectable categories requires R&D and manufacturing expertise that we possess at Amneal and which have been barriers to entry for others in this space. We look to share more about new injectable products approvals in the near term. Further, we look to leverage our complex generics portfolio by out-licensing certain products internationally through partnership. Our existing partnership with Fosun is progressing well where we expect to have about 10 products filed in China by the end of the year. Let me now move on to biosimilars. We were pleased that our BLA for Avastin was accepted by the FDA in June. We now have three oncology biosimilars, currently filed and under review. We expect to start commercializing these products in 2022. Beyond these first products, we are actively evaluating additional opportunities via partnership models where we can be first or second to market. Looking forward to 2022 and beyond, we are highly confident in the long-term growth prospects of our generic business, bolstered by new product launches, the diversity and durability of the business has never been stronger. Going forward, we expect the pace of new product launches in complex generics will continue. At any point in time, we have approximately 100 products in our pipeline and another approximately 100 products with ANDA spending. Currently, we expect to file 25 to 30 ANDAs and launch 20 to 30 new products on an annual basis. This innovation will constantly turn at Amneal as we continue to refresh our pipeline. We see a long runway for innovations in generics. And as a result, we expect the trend of durable generics revenue growth and profitability to extend for some time. Turning to our specialty pipeline. We look forward to sharing our Phase III clinical trial data for IPX203 in the coming weeks. The Phase III clinical trial has completed with the last patient out and we are performing the data analysis now. As a reminder, IPX203 is our next-generation levodopa treatment for Parkinson's disease. Immediate-release carbidopa-levodopa is a first-line therapy in the treatment for Parkinson's disease. We are hopeful that our Phase III data, will demonstrate increased on time versus IR while meaningfully decreasing the dosing frequency per day. We believe that IPX203 has the potential to be a larger product than Rytary and would help us drive further market leadership in the management of Parkinson's disease. Beyond IPX203, we continue to advance our development activities for K127 for Myasthenia Gravis; K114 a modified T3 product for hypothyroidism; and K128 a modified release trihexyphenidyl for Sialorrhea and movement disorders. On K127, we are currently in the clinical study phase and we expect to complete the pivotal PK study in the second half of 2022. On K114 and K128, we expect to file the IND application for each in 2022. These are all 505(b)(2) programs for, which the risk level is relatively lower than the new molecular programs. As a reminder, our specialty programs utilize the proprietary drug delivery technology platform from the Kashiv acquisition. GRANDE is the gastric retentive drug delivery technology, utilized in K114 and K127. KRONOTEC is an advanced osmotic oral delivery technology that provides timed, customized and pulsatile drug release to match the timing of disease symptoms. To build our longer-term specialty pipeline, we continue to evaluate further programs that can leverage these unique technologies. We remain well positioned to launch at least one specialty product per year going forward. Now starting next year with the DHE auto-injector. In summary, our strategy is centered on delivering affordable, essential medicines for patients and creating value for all our stakeholders. The company continues to execute well across three businesses: generics, specialty and distribution. With this distinct combination of people, products and purpose at Amneal, Chirag and I, share the vision, excitement and confidence in the road ahead. I will turn the call over now to Tasos.
Tasos Konidaris: Thank you, Chintu. In the second quarter of this year, we reported total company net revenues of $535 million up 15% versus Q2 2020. Adjusted EBITDA of $151 million up 50% and adjusted EPS of $0.25 up 92%. Our growth was balanced and driven by strong commercial execution across our three business segments operational efficiencies and targeted investments to drive long-term value. In addition, we continue to improve our balance sheet and further reduce net leverage to adjusted EBITDA to 5 times compared to 5.3 times in December 31, 2020 and 7 times in December 2019. Starting with generics. Second quarter net revenues of $360 million were up $54 million or 18% year-over-year. The strength of new product launches and resiliency of our portfolio offset lingering COVID-19 headwinds and price deflation. Our quarterly growth rate of 18% also reflects favorable comparison to prior year where COVID-19 disrupted our supply chain. From a product perspective, Zafemy, Abiraterone and EluRyng were strong contributors to revenue growth. On a year-to-date basis, generics recorded $673 million in net revenues up 2% organically year-over-year. As we have discussed in the past, a productive R&D pipeline is critical to ensuring a robust generics business. We continue to be pleased with the performance of new product launches and products launched in 2020 and 2021 accounted for $61 million of revenue growth this quarter. As a result of the performance of new products and the resiliency of our more complex product portfolio, we're driving profitable growth while bringing more value to our patients and customers. Adjusted gross margin for generics was 47.1% in the second quarter substantially higher than the 35% of the prior year quarter and ahead of our expectations. This 12 percentage point expansion reflects two key components. First, about half of the growth is due to operating efficiencies such as insourcing of third-party manufacturing and procurement savings in certain materials. Second, the other half of the growth is due to favorable product mix in new product launches. For the second half, we expect some moderation in the generics gross margin due to mix of products and timing of manufacturing overhead absorption. Let me now turn to the specialty segment with net revenues of $89 million down $6 million or 6% year-over-year, which was in line with our expectations. As a reminder, our specialty segment centers around neurology endocrinology with our promoted brands Rytary and Unithroid. Both brands continue to grow nicely. And in aggregate they delivered $55 million in net revenues up 6% year-over-year. This growth was offset by declines in Zomig due to increased competition and lower promotional efforts ahead of expected generics. Looking to the second half, we see continued strength in Rytary and Unithroid as second quarter total scripts for both were up high single-digits and new scripts were up double-digits. This growth reflects our action at the beginning of the year to increase our specialty sales force. Adjusted gross margins for specialty was 76.1% in the second quarter which is 240 basis points improvement year-over-year due to favorable product mix. Let me now move to AvKARE, our distribution business where second quarter net revenue of $86 million were up $22 million or 35% year-over-year again in line with our expectations. Growth was driven by new product launches in the federal government channel and a favorable prior year comparison. Adjusted gross margin for AvKARE was 18.9% in the second quarter about 200 basis points lower than prior year due to product mix, but in line with our expectations. Let me now move to total company adjusted EBITDA were $151 million for the second quarter, which was $50 million higher than the prior year quarter. The net revenue growth in our three segments added $62 million in gross profit and that was partially offset by $4 million in higher R&D as we incorporate the Kashiv acquisition and $8 million in high-risk G&A, due to our sales force expansion and higher expenses as the economy opens. Also I want to be mindful, that we had favorable comparisons to last year's second quarter, due to COVID-19 impact. Adjusted diluted EPS for the second quarter of $0.25 almost doubled, compared to the prior year quarter driven by the very strong EBITDA performance partially offset by higher taxes. From a cost perspective, operating cash flow of minus $52 million was in line with our expectations. As we have discussed in the past, operating cash flow is inherently variable quarter-to-quarter. In the first half, we generated $96 million of operating cash flow. And we expect a stronger performance in the second half, due to timing of collections and cash expenses. In summary, we are pleased with the strong top line performance and sustained higher levels of profitability, driven by new products and a focus on efficiency and strong execution. As a result, our full year 2021 guidance remains unchanged and we remain confident in our outlook for the second half of the year. With that, let me turn it over to Chirag.
Chirag Patel: Thank you, Tasos. To close, Amneal is driving strong performance, across our businesses, which reflects, the diversity and durability of our product portfolio. The story this year is the success of new complex product launches, which we believe will continue to differentiate Amneal. As a direct result, we see sustainable growth and profitability going forward. We would now like to open the call to questions.
Question-and:
Operator: We will now begin the question-and-answer session. The first question comes from Gary Nachman with BMO Capital Markets. Please go ahead.
Gary Nachman: Hi. Good morning guys. First, on the plan to double the generic injectable business in several years, is that all organic, or are you assuming some inorganic growth as well? So talk about, how much is in the pipeline there and some of the bigger drivers over the next few years? And then, just on, the specialty business. Talk about the additional Endo reps on Unithroid. How much of a benefit are you seeing from that? Do you hope to leverage that with more assets through business development? And then, just the expectations for IPX203 Phase III data in -- coming soon, just what you're, hoping to see from the data that would be meaningful in terms of that product? Thank you.
Chirag Patel: Thank you, Gary. Good morning. Let me start with your first question which is on injectable. So currently our expectation is all from the organic growth. We do have a solid pipeline of 75 injectable products, as Chintu mentioned, across the various complexities such as, peptides, long-acting depot, the drug device combination. So it's a very rich pipeline, we have in injectables. And we have three plans to deliver that. So capital investments have been already made, over the years. And we are ready to become a serious player in injectable market in coming years and really highly valuable player. So that is your answer to the first question. For the second one, I would like to turn the call over to Joe. And you may want to address the third one and Chintu you may want to add on to the IPX203 as well.
Joe Todisco: Sure. Thanks Chirag. So we started building up the endocrinology field force. We're increasing the size in March of this year. And we get a hiring and training around 25 new sales reps, which doubled the size of that team. They essentially went live in the field in June. And we saw an immediate uptick in scripts. We do expect that trend to continue in the back half of the year. So we're very pleased with what we've seen, with the promotion sensitivity of Unithroid. On IPX203, we expect to announce the top line results in the next couple of weeks. We're hoping to show a statistically significant improvement and good on time. We're also meaningfully reducing the dosing frequency versus IR. Beyond that I don't think we're going to comment on -- this one time.
Chirag Patel: Not at this -- only a couple of weeks left. Yes. Thank you Joe. Chintu, would you like to add anything for Gary's question?
Chintu Patel: No you guys covered it. Thank you.
Tony DiMeo: Excellent. Fantastic. Let’s move to the next question, please
Operator: The next question comes from David Amsellem with Piper Sandler. Please go ahead.
David Amsellem: Hey, thanks. Just a few. So first as the business evolves, what are your thoughts on potentially divesting some or parts of the legacy oral solids business and just getting out of oral solid or the more commoditized piece of the business. How do you think about that, or how should we think about that? That's number one. Number two is, can you just give us a road map regarding the competitive landscape for Zafemy? How we should think about other entrants coming in particularly in 2022? And then lastly on the DHE opportunity is it your view that this could be bigger than what -- than the footprint for the Zomig nasal spray. And what I guess, I'm trying to get at here is not just how you're framing the opportunity but how you see the acute migraine landscape evolving given the new entrants? So help us understand your thinking there. Thanks.
Chirag Patel: Good morning, David good to hear from you. So let me start with the first question, which is a very strategic question you did ask. And as you know Endo adopted the strategy to divest out of the OFC more on diverse and -- more of a complex generics portfolio. We do not like that strategy. We are a meaningful player in generics business. We have a base of about $1.4 billion. So we have a long runway we can grow. And our customer appreciates when we are bringing oral solids the commoditized product as well as complex products. We are -- as well as our operational efficiencies are also increased by doing so. Of course we have lowered our commoditized products development to almost 20% and 80% still focus on the complex products. So we like to remain as an essential meaningful company for the United States, which is driving the patient's need reducing the cost creating more access. So we believe, we would play in oral solids as well. Your second question on Zafemy, I'd like to turn it over to Andy Boyer, over Commercial Head of Generics business.
Andy Boyer: Good morning. Thank you. So Zafemy, had performed extremely well this year. We're up to almost 35% market share and we continue to grow our opportunity. We do expect additional competition at some point later this year. And as far as 2022 we haven't commented on that yet but has performed extremely well.
Chirag Patel: Thank you, Andy. And Joe, would you like to touch on the DHE business?
Joe Todisco: Sure. Thanks, David. So we know that the migraine space is getting increasingly more competitive with all the new CGRPs that are launching. We've developed over the last few years Zomig nasal spray a large amount of intelligence in the migraine space. We're not looking to position DHE as a first-line therapy that goes out and competes head-to-head against the larger CGRPs. We know that it's going to be more of a niche second third-line therapy. We're going to position it accordingly and that's how we'll be marketing it. I'm not going to comment beyond that on any other pricing or commercial strategy, at this time. But we're mindful, of the competitive nature of that space.
David Amsellem: Okay. Thanks, guys.
Joe Todisco: Thank you, David
Operator: The next question comes from Balaji Prasad with Barclays. Please go ahead.
Balaji Prasad: Hi, good morning. This is Balaji. A couple of questions from me and congrats again on the results. Firstly on the generics industry, the -- while generic see a lot of churn annually, the fact that you called out around one-third of revenues from new generic launches over the last 2.5 years, how does that compare to the industry standard? And kind of an extrapolation of the same question, new launches going by what you called out, seems to be running at a $200 million run rate from 32 products on average of $6 million per product. Despite most of these being first or second market, is that how we should think about the contribution from complex generate, or should we be expecting higher revenue per product, especially from the complex wings? Thanks.
Chirag Patel: Good morning, Balaji. Excellent question. So, in comparing the generic industry other players, may not be a good comparison because, some are already at $3 million, $4 million range like Teva and Viatris. So they will have a harder time to match the one-third of our new product launches within two years. As we keep saying that, we are at the right revenue base as a total of $1.4 billion. And we see tremendous growth in our generics business from now to next five years. As you know, we built the company over time. And we're very excited about that. So that's -- and we have this wheel of innovation where we have 100 products pending at FDA, 100 in pipeline. Every year, we are launching 20 to 30 products. Out of that six to seven are high-value products. The rest are highly competitive products. And then, every year we're filing 25, 30 products. We are increasing our complexities of filing. It's more higher -- potential higher revenue drivers we are filing, drug device combination, inhalation products, the long-acting depot injective was, the bag, some of the 505(b)(2) in the injectable space as well. So we expect the contribution, which is you did the math, it could be $200 million, could be $250 million, could be $180 million, could be $300 million. It all depends on which products get approved within that year. But the key message is that, we have enough to rotate every year into new products launches, as we constantly face competition in our base business and reduction in prices due to the highly competitive nature of the generics business. The complex products are also driving more durability. So, even if we lose in revenue, when the competition came like alluring, we still -- we increased our market share and still maintaining the same revenue as last year. So, we're building this durable portfolio as well. Did I miss anything, Tony?
Tony DiMeo: No. That was good.
Chirag Patel: So, thank you, Balaji. Hopefully, that answers your question.
Balaji Prasad: Thank you, Chirag. That's very helpful. If I could just squeeze in a follow-up, based on the guidance, can you also just describe the pushes and pulls towards the implied second half run rate? Thank you, very much.
Chirag Patel: Thank you, Balaji. So, we're very pleased with our progress and continued momentum. And remain very confident, that we will deliver at the high end of our guidance or even above. For more details and as you know, there are variables that go in the guidance, I'll turn it over to Tasos.
Tasos Konidaris: Thanks, Chirag. Hey, good morning, Balaji. As Chirag said, first half and I think we feel great about the performance. And as you think about the second half, I don't think you should expect anything substantially different, right? So, I think you're going to have the normal play out of typical competitive pressures being offset by continuous new product introduction, number one. Number two, I spoke a little bit about the generics gross margin kind of tapering off a little bit, because in the first half, we were at 46%, 47% for the first half. So that's going to taper a little bit and continue to be thoughtful about the investments we're making to our business, because it's all about driving topline and bottom line growth next year and the year after that. So, I think the first half is a good indicator of how the second half is going to play out, a slight acceleration on revenues, little tapering down on gross margin. And I think, when you look at the adjusted EBITDA, I think we have a good opportunity to be on the high end or exceed the high end of our guidance. I hope that helps the outcome.
Balaji Prasad: Thank you.
Operator: Okay. Was there a follow-up?
Chirag Patel: No. I think, he said, thank you.
Operator: Thank you. The next question comes from Greg Fraser with Truist Securities. Please go ahead.
Greg Fraser: Good morning guys. Thanks for taking my questions. Can you speak to the level of competitive intensity that you're seeing for your key generics and how price erosion has been trending relative to expectations? And then my second question is on FDA. Are you anticipating that Q3 will be strong as it has been historically driven by the back-to-school demand? And how are you thinking about that the FDA market beyond this year? Do you think the market can continue to grow, or do you think erosion is more likely at least in 2022 due to vaccine-related demand declining?
Chirag Patel: Hey, Greg, good morning. This is Chirag. I'll take the FDA question and then pass it to Tasos for the generics price pressure that we see every year. So I think we're doing good. We had a growth and it's growing compared to last year and we expect that to grow slightly as we improve our supply chain. We're working with both of our partners diligently Pfizer and Philips, and we're seeing good results. So we're upbeat. And yes, Q3, Q4 would be higher as well due to the back-to-school and higher demand. So, it's more of our getting ahead on the supply chain. The market is there for us. And for your key generics competitive landscape, let me turn it over to Tasos.
Tasos Konidaris: Thank you, Chirag. The second question was more around pricing, Greg. So our price outlook has not changed since last time we spoke in May. So the oral solids, the older part of the portfolio we continue to see low double-digit price erosion. So in terms of the overall portfolio, I think, we're high single-digits so kind of in line with our conversation in May, so that's how this kind of plays out. But more importantly, right, you know in our business this is part of the business, which is why we have invested substantially in complex in R&D pipeline. So, as a result in cadence of new products allows us to offset the price deflation and the comparative pressure is number one, but at the same time more importantly increase the profitability of the business, which is exactly how things have played out over the last two years, because over the last two years we increased our generic margins from 35% in 2019 to 38% last year, and this year will be substantially over 40%. So we think that creates a lot of value for our patients for our customers, but also for our shareholders. Around comparative pressures, we don't see anything that can substantially change our view of the business. At some point in time Zafemy is going to have competition, the same way levothyroxine had competition the same way EluRyng had competition. But our ability to provide excellent quality products, a very strong supply chain will allow us then to continue to grow our business. So hopefully that helps.
Greg Fraser: Very helpful. Thank you.
Tasos Konidaris: Okay
Operator: The next question comes from Daniel Busby with RBC Capital Markets. Please go ahead.
Daniel Busby: Hi. Good morning. I've got a few questions on biosimilars. First, could you provide us with an update on your biosimilar Neupogen candidate? I think last quarter you guided to a potential 2021 launch. It looks like that's been pushed to 2022. And then more broadly, can you talk about the time lines and level of investment needed to place Amneal in a position to develop and manufacture biosimilar products in-house? Is this something that you're actively pursuing now, or is this more of a longer-term aspiration? And finally, to what extent, are there potential business development targets that could help accelerate the development of in-house capabilities? Thank you.
Chirag Patel: Excellent. Daniel, good morning. An excellent question, we always get the biosimilar question. We love it. So Neupogen, the only reason it has moved to 2022 is the facility inspection in Chicago. FDA has resumed inspections and they're prioritizing it. So hopefully they get to the facility as soon as possible. So that's for the Neupogen. So we do expect, which is a much smaller product as you know the Neulasta, which we expect next year and Avastin if the site inspection goes on time, since it is approved in EU already by our partner mAbxience. We are very hopeful that we can launch Avastin as well next year even though it may get pushed to 2023. So, very exciting all three. As we have mentioned, we build everything in the long-term. So, of course, we are thinking to build the in-house capabilities. We have started certain activities, but we are at a nascent stage at this point. As we see this next 10, 15 years, the roadway we want to do it smartly. We want to be efficient. We do not and cannot spend $100 million for product development. We have to spend $30 million, $35 million. We know that this is a highly competitive market and it will remain so. And that was the purpose to have a biosimilars act, but we'll definitely do what we do best is to manufacture high-quality products and do great science on biosimilars coming in next one, two, three, four, five years. As far as the business development, it's going on. We expect to in-license maybe two to three new products this year. And next year, we will do the probably similar two to three external partnership, while we start developing in-house as well. And yes, we could afford the CapEx and R&D, as we smartly allocate the money towards next generations of manufacturing, which is biologics and next generations of R&D, which is biologics as well. I hope that answers your question Daniel.
Daniel Busby: Yes, it did. Thanks for the color.
Chirag Patel: Thank you.
Operator: This concludes our question-and-answer session and Amneal's Second Quarter 2021 Earnings Call. Thank you for attending today's presentation. You may now disconnect.
