U.S. Markets open in 2 hrs 22 mins

Edited Transcript of AMRX.N earnings conference call or presentation 6-Nov-19 1:30pm GMT

Q3 2019 Amneal Pharmaceuticals Inc Earnings Call

Nov 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Amneal Pharmaceuticals Inc earnings conference call or presentation Wednesday, November 6, 2019 at 1:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Chintu Patel

Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director

* Chirag K. Patel

Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director

* Mark J. Donohue

Amneal Pharmaceuticals, Inc. - VP of IR & Corporate Communications

* Todd P. Branning

Amneal Pharmaceuticals, Inc. - CFO & Senior VP

================================================================================

Conference Call Participants

================================================================================

* Ami Fadia

SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst

* Dana Carver Flanders

Guggenheim Securities, LLC, Research Division - Senior Analyst

* Daniel James Busby

RBC Capital Markets, Research Division - Senior Associate

* David A. Amsellem

Piper Jaffray Companies, Research Division - MD and Senior Research Analyst

* Ekaterina V. Knyazkova

JP Morgan Chase & Co, Research Division - Analyst

* Elliot Henry Wilbur

Raymond James & Associates, Inc., Research Division - Senior Research Analyst

* Gary Jay Nachman

BMO Capital Markets Equity Research - Analyst

* Gregory B. Gilbert

SunTrust Robinson Humphrey, Inc., Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Amneal Pharmaceuticals Third Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Mark Donohue, Vice President, Investor Relations and Corporate Communications. Please go ahead.

--------------------------------------------------------------------------------

Mark J. Donohue, Amneal Pharmaceuticals, Inc. - VP of IR & Corporate Communications [2]

--------------------------------------------------------------------------------

Thank you. Good morning, everyone. Welcome to Amneal's Third Quarter 2019 Earnings Call. Earlier this morning, we issued a press release reporting our quarterly results. The press release as well as the slides that will be presented on this call are available on our website at www.amneal.com. We're conducting a live webcast of this call, a replay of which will also be available on our website after its conclusion. Please note that today's call is copyrighted material of Amneal and cannot be rebroadcast without the company's express written consent.

I'd also like to remind you that during the course of this call, management will make projections or other forward-looking remarks regarding future events or the future financial performance of the company. It's important to note that such statements about estimated or anticipated Amneal results, prospects or other nonhistorical facts are forward-looking statements and reflect our current perspective of existing trends and information as of today's date. Amneal disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Actual results may differ materially from current expectations, projections, depending on a number of factors affecting the Amneal business. These factors are detailed in our periodic public filings with the Securities and Exchange Commission, including, but not limited to, the Amneal Pharmaceuticals, Inc. Form 10-K for the period ended December 31, 2018.

Our discussion today will include certain non-GAAP measures as defined by the SEC. Management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the company's operations and to better understand its business. Further, management believes the inclusion of non-GAAP financial measures provide meaningful supplementary information to and facilitates analysis by investors in evaluating the company's financial performance, results of operations and trends. A reconciliation of GAAP to non-GAAP measures is available in the morning's press release and the appendix of today's presentation.

On the call this morning are Chirag Patel and Chintu Patel, our co-CEOs; Todd Branning, our Chief Financial Officer. Following their prepared remarks, we will hold a Q&A session. Also on the call and available for Q&A is Andy Boyer, our Executive Vice President of Commercial Operations; Joe Todisco, Senior Vice President of Specialty Commercial; Pradeep Bhadauria, Chief Scientific Officer; and David Buchen, our Chief Legal Officer and Corporate Secretary.

For our agenda today, Chirag and Chintu will begin with a discussion of our strategic direction. Following that, Todd will review detailed financial results. We will have a question-and-answer session following the prepared remarks.

With that, I'd like to turn the call over to Chirag.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [3]

--------------------------------------------------------------------------------

Thank you, Mark. Good morning, everyone, and thank you for joining us today to review Amneal's third quarter results. When Chintu and I returned as co-CEOs in August, we promised that we would evaluate every aspect of our business and come back to you with our findings and a plan to return Amneal to growth. In the last 3 months, we have done just that. As you know, we were passionate and enthusiastic about Amneal when we founded the company. Today, we are equally excited about this business and the opportunities ahead.

Let me share why we are optimistic despite the near-term results. Since August 5, we have done a top to bottom analysis of our business and our operations. We have visited our clients, talked to all employees at all levels, met with customers and commercial partners to find ways to work more closely together. While conversations are continuing, the majority of our review is complete.

Before we discuss our findings and action plan, let me summarize where we are today. First and foremost, we believe context is important, particularly as it pertains to our generics business. The generics industry is a critical part of the health care system. It is an important force in the delivery of health care that is affordable to all. Put simply, it is a growth industry. That is not to understate the challenges. But in a necessary and essential industry, there will be winners, and we believe we have the foundation to create a winner.

Second, our review only serve to reinforce our belief that Amneal is a fundamentally strong company with robust generic portfolios across multiple dosage forms. We have worked hard to earn a leading track record of producing high-quality products. And today, our diverse pipeline, including injectables, ophthalmics and other complex products that drive value for multiple years. In addition, we have a strong specialty franchise that has the opportunity to serve as an exciting platform for growth.

Third, 2019 is a transition year for Amneal. We can't expect results overnight. We believe the right way to create value is by being thoughtful and really getting to the heart of the issues. In other words, developing tangible plans and executing on them. Importantly, we are strategically adapting our business to stay ahead of the curve as the market continues to evolve.

And finally, Amneal strengths far outweigh its weaknesses. Over the last 3 months, we believe we have identified the root causes of the company's issues. We have developed and begun implementing strategies to attack the diverse drivers of underperformance head-on, at the same time, reinvigorate the business, and we are already seeing improvements. While our pivot to growth won't happen overnight, we have the platform and capabilities in place to drive our transformation.

Now let's turn to our tactical plan. To drive higher revenue and profitability, our initiatives include: maximizing the value of our base business portfolio of more than 225 marketed products, which adds incremental business; improving our gross margin by increasing plant utilization; streamlining our inventory and supply chain management; improving our gross to net sales conversion and rightsizing our operating expenses; refocusing our R&D efforts to better leverage the strong assets we have in place, ensuring new product launch preparedness and execution; continuing to invest in growing our specialty franchise; and finally, utilizing M&A and business development activities to augment our organic growth initiatives.

Let me start with our base business. When we came on board, our base generics business was eroding significantly each quarter. In order to reverse this decline, we identified and evaluated roughly 25% of our approximately 225 marketed commercial products, in which we can win new business and grow volumes. In fact, we have already won new awards for 20 base business products that will be incremental in 2020. In addition, we have more than 30 other product opportunities in the works, demonstrating in a short time how we can maximize our existing asset base to support incremental volume and growth. We expect meaningful value and volume growth in 2020 across many dosage forms that will help offset the inevitable price pressure. In some areas, such as transdermals, liquids, injectables, we expect even more uplift.

Now turning to our second area of focus, improving our gross margin. In the last 18 months, generics gross margin has declined from around 50% to 30%. There's no question that the industry has changed. There is more competition and more concentration in buying power today. However, this level of compression is simply unacceptable and unsustainable. More importantly, we believe it is fixable.

The first and most obvious way to improve gross margin is to drive higher plant utilization and new product launches. As I said earlier, we are acutely focused on winning more base business and launching new high-value products, which will help further our manufacturing footprint. We are working to streamline our inventory and supply chain management. We are strengthening our forecasting, improving coordination across finance, operations, supply chain, R&D and with our customers and leveraging our scalability and network of reliable suppliers. We expect these changes will drive improvement in our business by reducing inventory obsolescence charges and back-orders.

In terms of supply chain, we are developing a centralized intelligence database focused on providing easy access to mission-critical product data, which will increase our supply chain efficiency. This effort is already well underway and will generate very real savings in our cost of goods sold, specifically in the areas such as failure to supply penalties from our customers. These penalties cost our business valuable revenue and are within our control to reduce. Collectively, we believe the initiatives we have already taken and those we are targeting will enable us to expand our gross margins. While we are still evaluating a number of moving pieces, we are confident that an appropriate target for the generics business is a gross profit margins of at least 40% once the components of our plan fully take effect.

I will now turn the call over to Chintu to discuss our plans for optimizing our R&D spend and for the specialty franchise.

--------------------------------------------------------------------------------

Chintu Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director [4]

--------------------------------------------------------------------------------

Thank you, Chirag. Good morning, everyone. I would like to echo my brother's comments and express my enthusiasm for the opportunity to reposition Amneal as a growth company. We look forward to the next chapter in our story. While 2019 is a transition year, we have every reason to believe we will return to growth and enhance profitability in 2020.

Let me start off with R&D, which has been and remains the primary engine for the growth of our business. As the generics market has become more competitive, we have refocused our R&D efforts away from commodity products and more towards complex products, first-to-market opportunities, sterile injectables, biosimilars, ophthalmics, inhalation and 505(b)(2)specialty products, which Amneal is very uniquely positioned to deliver. Importantly, we are prioritizing our R&D spend on opportunities where we see the best ROI. While we remain disciplined about our operating expenses, we are committed to refocusing our R&D efforts and taking a thoughtful approach to better leverage our infrastructure and asset base. Indeed, over the last 30 days, we have added 15 products to our development portfolio. And by end of 2019, we expect to have filed 15 to 17 ANDAs to FDA. And next year, we expect to file 25, 30 products.

As we discussed on our last call, we are shifting our product selection and channel focus, and we are already putting this strategy into action. We have filed the ANDAs in almost all the dosage forms referenced a moment ago, and we anticipate filing our first inhalation product in the coming months. This shift in our product mix is already generating results. For example, through a combination of base business wins and new product launches, we anticipate double-digit volume growth in 2020 for transdermal, oral liquids and sterile products, which will also drive improvement in our margins. We expect this focus to become even more evident over the next 18, 24 months as we work to launch approximately 15 complex products. Additionally, to meet the expected production requirements of a large sterile business, we also recently made the decision to expand capacity in 2020 at our injectable facility with addition of new ophthalmic and vial line.

Turning to new product launch strategy, we are focused on complex product launches to drive long-term top line growth and operating cash flows. For instance, our R&D and tech ops teams have already implemented enhancements to our new product launch process that increased our speed to market. These efforts have delivered 10 successful new product launches since early August, including paliperidone, aminocaproic acid oral solution and Fulvestrant injection. Since we returned in August, we have already reduced our approval to launch time lines substantially and expect to expedite it even further over time. Looking ahead, we expect to continue this momentum with potential key launches in the fourth quarter and into next year.

Turning now to specialty business. We are keenly focused on building pipeline opportunities and growing top line in this business. We are strategically building our branded business in a disciplined and cost-effective manner, including completing our ongoing IPX203 development program and identifying and executing on new pipeline development candidates that fit our investment criteria. With respect to IPX203, patient enrollment in the study is ongoing, and we currently expect to have top line results by end of 2020.

Specifically, over the past 3 months, we have made several advances in strengthening our capabilities and strategy for the specialty business. First, we are pleased to announce today that we have entered into a licensing agreement with Kashiv BioSciences for the development and commercialization of K127, pyridostigmine, for the treatment of Myasthenia Gravis. We expect K127 to obtain orphan drug designation from the U.S. FDA and believe the product to be highly synergistic with our existing commercial deployment as well as internal clinical capability. This is the first of many new specialty products we expect to add into clinical development over the next 24, 36 months.

Second, we also announced the expansion of our specialty sales capabilities by successfully bringing approximately 30 contract sales reps in-house, which will allow us to be more nimble and targeted in our commercial outreach. Amneal's commercial infrastructure in specialty is a valuable asset, which we will leverage not only with new brand product launches, but for certain complex generics and biosimilar launches as well, which do not fit the traditional generic retail distribution model.

In closing, I would like to thank our customers, suppliers and employees worldwide for their continued support and to reiterate our intense focus on driving growth and profitability through operational improvements, including plant utilization, supply chain optimization, inventory management and product launch readiness.

I will now turn the call back to Chirag to discuss our framework for M&A.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [5]

--------------------------------------------------------------------------------

Thanks, Chintu. Last but not certainly least is M&A and business development. As we discussed last quarter, the actions we are taking to strengthen our business, we lay the foundation for accelerating and evolving inorganic growth in both generics and specialty, including potentially transformational M&A. Specifically, this could include opportunities to expand into new distribution channels and key international markets through strategic partners, which will enable us to access new customers. We are also looking at smaller transactions along the way. On the specialty side, we continue to believe 505(b)(2) opportunities and sterile manufacturing in the United States offer compelling returns on our investment, and we are actively analyzing a number of these.

Before I turn the call over to Todd, let me summarize by saying that while we are extremely disappointed with this year's results, we are doing exactly what we said we would do. We are digging in to the business -- into the business, identifying the issues that are holding us back and attacking them head-on. We recognize that the market environment is not going to make the task any easier. That said, we're working with urgency and are confident that actions we are taking will make 2020 a growth year for the company. We have an incredibly strong foundation and have already uncovered improvements that we'll show in the coming quarters.

I want to take a moment to thank our customers for their tremendous support since we have come back to Amneal. Because of our customers, Amneal is able to provide important generic drugs to patients and continue its essential role in the United States health care system.

Finally, I would like to thank our global workforce for their remarkable contributions they have made to Amneal and for the commitment they have shown to the ongoing transformation of our company. We couldn't do any of these without you.

Now I would like to turn the call over to Todd to discuss our financial results for the quarter. Todd?

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [6]

--------------------------------------------------------------------------------

Thanks, Chirag. Good morning, everyone. Let me first start by commenting that we share in the disappointment of our shareholders with respect to our Q3 results and our forecast for the balance of the year. We faced a challenging generics marketplace, and we have compounded those challenges with internal inefficiencies that have and continue to hamper our results. The good news, as Chirag and Chintu said, is that we have many areas in which opportunities exist to drive performance improvements, but it will take time to convert those opportunities into better financial performance. While we appreciate the importance and interest in short-term results, our focus will always be on long-term value creation.

Total net revenue was $378 million compared to $476 million in last year's third quarter. The decline was primarily attributable to price and volume erosion in the generics segment, including the impact of new competition, the divestitures of our international businesses, ongoing epinephrine supply constraints and the loss of exclusivity on Albenza in our specialty segment. We offset some of the decline with sales from Levothyroxine and from products launched in 2019.

Our gross margin in the third quarter was negatively impacted by product sales mix, manufacturing and supply chain inefficiencies, generic price erosion and the loss of exclusivity of Albenza. We are tightly managing operating expenses across the organization. And when combined with cost reductions from last year's combination with Impax, adjusted R&D and SG&A expenses declined $18 million or 16% in aggregate.

Adjusted EBITDA and adjusted diluted earnings per share for the third quarter of 2019 declined to $71 million and $0.04, respectively, as a result of lower sales and unfavorable manufacturing costs. There were some positive financial developments during the third quarter. These included strong cash flow from operations, driven by improvement in working capital and reduced failure to supply penalties.

Moving to a review of our generics segment results. Compared to last year's third quarter, net revenue decreased 26% to $291 million. Excluding divestitures and a product sale reclass, revenue declined 20%. The decrease was primarily due to new competition, a decline of $12 million in international revenues from divestitures and the epinephrine supply issue. The decrease was partially offset by $40 million from sales of Levothyroxine and $19 million from new products launched in the first 9 months of 2019. Additionally, this year's third quarter included minimal sales of oxymorphone because we reclassed $17 million of third quarter sales to our specialty segment due to its status as a single-sourced generic product. We sell this product through branded wholesalers, and consistent with our existing practice, we won't be promoting or marketing this product.

On a sequential basis compared to the second quarter of 2019, net revenues were lower by 13%. Excluding divestitures and a product reclass, revenue declined 9%. The decline was primarily a result of the oxymorphone reclass, additional generic competition on the base business and minimal sales of oxycodone as we exhausted our annual third-party supply agreement quota. The decrease was only partially offset by contribution from new product launches during the third quarter.

Our adjusted gross margin declined in the third quarter to 30% compared to 50% in last year's third quarter and 34% in this year's second quarter. Our margin compression was primarily due to the impact of competition, product sales mix, unfavorable manufacturing variances and inventory obsolescence charges. During the third quarter, we made significant progress on reducing our failure to supply penalties by $10 million from this year's second quarter. As Chintu noted, we have initiated action plans to address underutilized plant capacity in order to improve efficiencies and drive gross margin expansion in the future.

Adjusted operating income in the third quarter compared to last year's third quarter decreased $91 million to $40 million. On a sequential basis, adjusted operating income was down $25 million compared to the second quarter of 2019. Lower revenue and gross profit were partially offset by a reduction in expenses as we realize the benefit of cost synergies and other initiatives.

Turning to our specialty segment results. On a year-over-year basis, net revenue increased 2% to $87 million. Higher sales of Unithroid and Rytary and the reclass of oxymorphone sales from the generics segment were offset by a $15 million decline in sales of Albenza as a result of the loss of exclusivity in September 2018. On a sequential basis, net revenue in the third quarter increased 25% due to the addition of oxymorphone and higher sales of Unithroid and Rytary compared to this year's second quarter.

Adjusted gross margin for the third quarter was 74%, down from 79% in the prior year period primarily due to the addition of lower margin oxymorphone and a significant decline in sales of Albenza. On a year-over-year basis, third quarter 2019 adjusted operating income declined by $3 million primarily due to the decline in gross margin. And on a sequential basis, adjusted operating income for the third quarter increased $2 million to $41 million. This year's third quarter was impacted by higher rebates and Medicare Part D coverage gap liability, which we expect will normalize in this year's fourth quarter.

Now for a review of our cash flow and balance sheet information. We ended the third quarter with $217 million in cash, up $160 million compared to the second quarter of 2019, as a result of an improvement in operating cash flow and $43 million received from the cash surrender value of life insurance policies used to fund a legacy Impax non-qualified deferred compensation plan.

Our cash flow from operations improved in the third quarter to positive $140 million as a result of improvements in working capital. This included a $117 million reduction in accounts receivable from the second quarter of 2019. During the third quarter, we executed an interest rate swap to hedge exposure to interest rate fluctuations. We estimate this action will reduce our current annual interest expenses by approximately $8 million.

Turning to our revised 2019 outlook. We have updated our full year guidance to reflect the impact of our third quarter results and fourth quarter outlook. We currently expect fourth quarter adjusted EBITDA will be similar to our third quarter of 2019. As Chirag and Chintu noted in their remarks, we are aggressively working to improve operations and gain greater efficiencies, drive gross margin expansion and generate growth in 2020 and beyond. Even though we are navigating through internal challenges and changes, we continue to operate in a solid financial position with no near-term debt maturities or covenant compliance concerns. We're generating cash flow to more than fund our debt service while investing in internal and external growth initiatives. Thank you.

With that, I'll turn the call back to Mark.

--------------------------------------------------------------------------------

Mark J. Donohue, Amneal Pharmaceuticals, Inc. - VP of IR & Corporate Communications [7]

--------------------------------------------------------------------------------

Thank you, Todd. (Operator Instructions) So with that I turn the call back to Lisa to open it up for questions, please.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question today comes from Randall Stanicky of RBC Capital Markets.

--------------------------------------------------------------------------------

Daniel James Busby, RBC Capital Markets, Research Division - Senior Associate [2]

--------------------------------------------------------------------------------

This is Dan Busby on for Randall. Your updated guidance implies roughly flat performance in 4Q relative to 3Q, as you just said. Is that the right run rate to think about as we enter 2020? And as a follow-up, can you provide any details around what specifically from the pipeline can support the business in 2020?

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [3]

--------------------------------------------------------------------------------

Thank you, Dan. This is Chirag. You should not take the fourth quarter as a run rate guidance. As we just reiterated that, the actions we have taken to increase the base business, launching new products, the 2019 new launches becoming annualized in 2020 as well as 2020 new launches, including some high-value launches will be -- will make the 2020 growth year.

--------------------------------------------------------------------------------

Daniel James Busby, RBC Capital Markets, Research Division - Senior Associate [4]

--------------------------------------------------------------------------------

Okay. And on the -- any specific details around some of the products we could see launch in 2020?

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [5]

--------------------------------------------------------------------------------

Well, we have disclosed NuvaRing in fourth quarter. It's still on target. And we will -- we have disclosed few others in the last presentation. So we'll be updating our new product launches when we talk about our guidance. About 6 to 8 more complex products are in line to be launched next year in 2020, and we will give you more details when we talk about 2020 guidance.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

The next question comes from David Amsellem of Piper Jaffray.

--------------------------------------------------------------------------------

David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [7]

--------------------------------------------------------------------------------

So I'm just struggling with the concept of returning to growth. And I understand the initiatives that you're just -- that you're trying to articulate. But give us a sense of how you expect to get there, particularly by a pipeline when it's clear that there are many, many other companies with sophisticated dosage form capabilities, many companies that are trying to get out of retail and into more nontraditional, nonretail channels. It sounds like you're articulating the kind of vision that many other generic companies aspire to. So I'm just trying to understand how you drive growth in the business in the context of a competitive landscape where many of your peers are trying to do the same thing?

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [8]

--------------------------------------------------------------------------------

Thank you, David. I'd like to just go a bit to back in 2007 when we launched our first label. So we probably were the last people entering the generics industry in a big way. And we became the fastest-growing generics company from 2007 to 2017 in the United States. So we are used to operating in a competitive field. It is -- after all, we are providing affordable medicine. So it will be competitive. Yes, it has become more competitive. So how do we differentiate ourselves? We have a very large portfolio. Our focus is United States market. We are the largest U.S. domiciled company with various dosage forms, great quality track record, great customer supply track record with quality over years in multiple dosage forms.

Relationships are superb. We know that the high-value products always creates more demand, more value, even though there are companies talking about that they would launch multiple products or multiple complex products, their capacity is at question. The timing is always a question, and we realize higher value. And we have -- the investing in R&D over the last 10 years have strengthened our pipeline to launch these products. I understand we had delays in the last couple of years, which every company suffers through on a complex product. You saw Sandoz Neulasta got approved after probably 10 years. So we are confident with, as I said, in a base business, the growth, the new pipeline coming through and our specialty franchise which is growing. So this is why we are comfortable that it could be a growth year in 2020.

--------------------------------------------------------------------------------

Chintu Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director [9]

--------------------------------------------------------------------------------

And just to add a few things, David, we have a very large portfolio, 225 commercial products where actual approved product is 327. We see lot of opportunities in our base business. And just like to reiterate what we've been talking since morning even in our script is that we see lot of operational inefficiency which can be fixed and everything is fixable in all the areas of plant utilization, inventory management, our failure to supply and managing our supply chain in a robust way itself, we see can provide substantial growth for 2020. Secondly, your comment about aspiration on complex. I mean we are a very unique company, where we have filed and commercialized complex products in each of the dosage category except for inhalation. So that's a key differentiator that now our company's aspiration has become reality. And going forward, as we have stated, we are confident of 15 successful launches in the next 18 to 24 months and included 6 to 8 in 2020.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [10]

--------------------------------------------------------------------------------

And margin improvements, right, margin expansion is must. The gross margin we are running at today 30% is unsustainable. And we know that it can be fixed. We already have taken actions. And it's a nice thing that when problems are in-house, you can fix them.

--------------------------------------------------------------------------------

Operator [11]

--------------------------------------------------------------------------------

The next question comes from Gary Nachman of BMO Capital Markets.

--------------------------------------------------------------------------------

Gary Jay Nachman, BMO Capital Markets Equity Research - Analyst [12]

--------------------------------------------------------------------------------

So what is the strategy longer-term to go after even more high-value complex opportunities in the pipeline? Can you achieve that organically? Or will you need to do some bolt-on deals? And it's such high leverage, do you have capacity to do any deals at this point? And then how aggressively are you looking at product rationalizations to help improve profitability?

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [13]

--------------------------------------------------------------------------------

Thank you, Gary. I'll start, and my brother will jump in. So the complex products, fortunately, we do have a great pipeline of our own complex products, including 3 biosimilars, ophthalmic products, injectable products, medical device products. So we do not need to -- we may look for a deal in biosimilars. The other complex generics are covered. On the specialty side, as we announced today, one partnership, our team is going through global footprint on where we may have a Phase I, Phase II assets, the 505(b)(2), which is the development cost would be around $15 million to $40 million. So it's -- we can afford it. And those would be singles and doubles, but that is how we're building our specialty until it becomes larger, then we will move into the largest scale of specialty business as well.

So our complex generics, injectables within that, ophthalmics, inhalation will be filing and coming in several years. We like that space as well as the biosimilars, which is maturing over next 2 years, 3 years, 4 years, it is we -- our strategy is to be third or fourth or fifth at this point as we see market maturing, and we are setting up our commercial and regulatory expertise we already have for the biosimilars as well. And the rationalization of R&D, we would still be investing almost 10% of our revenue in R&D, and we'll be allocating smartly to specialty products, to biosimilars and injectables, inhalation, ophthalmic, and oral solids do not take lot of investments, but we still have those. We believe in retail generics as well as institutional and specialty, which we are focusing today. Thank you, Gary.

--------------------------------------------------------------------------------

Chintu Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director [14]

--------------------------------------------------------------------------------

And just to add one thing, Gary, that we are very uniquely positioned because we have very robust infrastructure and scientific capabilities in-house. So even for a complex product, our call -- we'll have very cost-effective execution. And through last many years, Amneal was the first mover on many complex dosage form. So we have acquired knowledge which help accelerate the future findings in a complex dosage forms in -- that is in ophthalmic, transdermal, including biosimilars. So I think that would fuel the growth, but we are actively looking. We don't shy away from CMO and other parties. If there's opportunity, we will bring that in-house.

And on specialty products, we did announce that I think the space really fits well with our specialty franchise, and we can really leverage our existing sales force to capitalize, and we expect this product -- we are looking at products which does not have heavy investment or the long clinical trials, but still it provides the right value. So we are excited about the products that -- and we'll be looking at 5 to 6 more specialty products over next 18, 24 months to bring it to our portfolio.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

The next question comes from Greg Gilbert of SunTrust.

--------------------------------------------------------------------------------

Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [16]

--------------------------------------------------------------------------------

I have a couple. Let me start with gross margin. And if I could ask you, Todd, to help us understand how you can get from 30% to 40%? Is there anything about 30% that's temporary that would lead us to a starting point that's not 1,000 bps below where you think you can get. So I guess the question is, how much is in your control? How much product mix and things that are kind of more hopeful on the gross margin specifically? And then I have a follow-up.

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [17]

--------------------------------------------------------------------------------

Right. Okay, Greg. Thanks for the question. I'll answer on gross margin. So maybe I'll answer that. If you look at the generic side of the business and if I do a quick bridge for you between the Q2 gross margin we generated and where we landed Q3. So in Q2, we were about 34%, 35%, and in Q3 on the generics business we're about 30%. Probably about 60%, 65% of that margin compression has come from price erosion, both the majority in our generics business, but also to some degree in our specialty business, given the coverage gap liabilities we have at this point in the year. The rest of that compression has come from things like manufacturing plant underutilization, generating absorption variances for us. It comes from inventory obsolescence charges and some element of product mix. So that's how we get from where we were in Q2 to Q3.

If you then think how do we go from where we're at now up to what we think is achievable in terms of 40%, some portion of that is going to be -- is going to come from fixing the internal inefficiencies we have that lead to things like variances, lead to things like failure to supply penalties, back-orders where we can't ship to customers and overall control of our spend at the manufacturing plant level. So that will be part of the story. But we will also need some improvement in pricing in our generics business, in particular, which we expect to achieve through introduction of new product launches.

We're trading out lower margin, heavily commoditized products for newer products. That will be part of it. And then second of it is we have to look at ways we can improve our gross to net sales conversion ratio, which has dropped significantly over the last few quarters. We've got to find some ways to claw some of that back, look at products where perhaps we're even selling below our cost, and how can we improve that particular position as well as look at other areas where there might be some leakage that occurs in which we need to capture back for ourselves. So that's how we would expect to go from where we're at 30% to hopefully 40%. Greg?

--------------------------------------------------------------------------------

Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [18]

--------------------------------------------------------------------------------

Yes. Sorry, Todd. Just sorry about that. Just so I'm clear, the failure to supply stuff is already backed out in the 30%, correct?

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [19]

--------------------------------------------------------------------------------

No, there's failure to supply penalties that we have that are part of our gross margin. And while we were lower in Q3 than we were in Q2, we still did have some in Q3.

--------------------------------------------------------------------------------

Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [20]

--------------------------------------------------------------------------------

Okay. All right. Maybe we'll follow-up more on that. My follow-up question...

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [21]

--------------------------------------------------------------------------------

But I may add, Greg -- sorry, just it's on a gross margin. So we -- historically, Amneal always operated between 45%, 55% gross margins. This is unsustainable level. And many things are under our control to get to 40%. Incremental base business, which increases plant utilization, the launching of these 10 new products that we have done recently, we already won 20 products, new base business, and we're going after 30 more. We are producing more transdermal next year than we did this year, more liquid products, more injectable products.

So with all that, along with, as Todd mentioned, the gross to net, we have certain products, where we have to evaluate totally from the returns perspective, from Medicaid expense perspective and find ways to -- or be smart about the product -- to have that gross to net ratio appropriate because it's taking up a lot of EBITDA dollars there and failure to supply is to throw away money we have. Same thing with inventory obsolescence, which is large numbers this year. So we expect the improvements in all of those, and we have already put in action the plans to do all these. It's underway in last 93 days.

--------------------------------------------------------------------------------

Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [22]

--------------------------------------------------------------------------------

Great. All right. So my follow-up question, maybe a bit bigger picture for Chirag and Chintu. With this massive sort of restructuring and turnaround underway, I was surprised to hear you talk about in your prepared remarks, things like international expansion and alternate sort of distribution methods which is something the prior management team spoke about, not so much the international piece. But are you actually considering such things in the near term? And if so can you put a finer point on those? Because I think folks would be a bit surprised to see you do major sort of international business model evolution type moves here in the midst of what seems to be a pretty serious turnaround effort. So maybe you could just put a little more context around what you meant by those comments in terms of whether they're near-term priorities or just eventualities?

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [23]

--------------------------------------------------------------------------------

Thank you, Greg. Excellent question. So let me start with what do we mean by international expansion. We have certain of our assets are highly valuable in other markets, whether they are Eastern European markets or China, or any other marketplace. But those 2 look very attractive. So how do we strategically partner in those areas with top 5 players in those markets and maximize the value of our assets. So we're not planning to go and buy a company. All we are doing is expanding our asset base or maximizing the value of key assets we have in our portfolio in the international market.

And as you can imagine, everybody likes the U.S. FDA approved products as well as products made in our United States plants and our Ireland or Indian plants which are FDA approved. So we're excited about that opportunity. And when I say channel expansion, again, we are the largest U.S. domiciled company in the large U.S. manufacturing footprint, and we're going to do everything to stay here. We are serving the communities in America, like to manufacture in America. And there are channels that are untapped, like government channels, the unit dose channels. So those will be expanding and add additional sales channels for our products.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

The next question comes from Elliot Wilbur of Raymond James.

--------------------------------------------------------------------------------

Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [25]

--------------------------------------------------------------------------------

Maybe I could just ask you to provide a little bit more color on the portfolio optimization process that you referred to, of course, in your prepared commentary and in the deck specifically with respect to identifying opportunities, what looks like about 50 of your base products, fairly large number. And I guess my observational analysis at this point would be that if you're successful, at least on the majority of those, that would seem to provide sufficient volume growth to offset any additional price erosion in 2020 such that you would actually be able to generate positive growth in the current base, at least relative to what we saw in the third quarter. So I'm just wondering what your feedback may be on those observations.

And then I guess, secondly, in terms of follow-up for Todd, help us a little bit with operating cash flow. Numbers have been volatile, a little bit difficult to predict, still, I guess, sort of underperforming in terms of cash conversion, looking at adjusted net income. But I guess as we think about the balance of the year, help us think about cash conversion relative to adjusted net income projections. And if we look into 2020, should we still be thinking about sort of the same pronounced operating cash flow pattern, where you're very light in the first half and then heavy in the second half?

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [26]

--------------------------------------------------------------------------------

Yes, Elliot, thank you very much. This is Chirag again. On incremental base business, we have identified, as we said, 50 products. And 20, we have already won incremental business. And 30, our commercial team is actively pursuing. We may have a few more to add, which we're working through the -- whether it's we're bringing back from the discontinued to continued, a few more we can add in government segment as well. So we are very, very optimistic and very excited about the base business increase. And this is what should have been done over 18 months, which can offset now the -- we would always have a decline in our base business as these new competition comes in. But if we are aggressive and working hard and utilizing all our plants and capabilities we have, we can offset that and grow the business. And plus, we have new product launches, which are lined up.

All the launches we did in '19 becoming full year in '20. And also we have 6 to 8 complex product launches coming up as well. So you correctly stated that would help us offset the competition from -- additional competition in our business. One more thing is better now than 2018 is we are not highly concentrated. We had few products driving a lot of EBITDA in generic side. Now it's not concentrated, and we have enough of new high-value products to be launched, which will add to the top 20 list and constantly replace those top 20 list as we must do in generics business. And Todd?

--------------------------------------------------------------------------------

Chintu Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director [27]

--------------------------------------------------------------------------------

Just to add one more point on it. We had many -- as part of the merger, we had many products in our Hayward, California plant and also at some of the CMO. The process started, but there was lot of inventory at the old cost. So as we are bringing products in-house from the CMO and our Hayward, California plant, this would improve our cost of goods, and it will give more profitability. And also as Chirag mentioned, we have 225 commercial product, but actually approved product is 327. So we still see some opportunity to even increase base business in that. And third, we are actively working on streamlining our supply chain, where we are looking at the second source qualification and overall bring the cost down. So I think all these ingredients would help us to a growth year in 2020.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [28]

--------------------------------------------------------------------------------

And beyond.

--------------------------------------------------------------------------------

Chintu Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director [29]

--------------------------------------------------------------------------------

Yes. Todd?

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [30]

--------------------------------------------------------------------------------

And then regarding cash flow from operations, we were actually very pleased with the cash flow that we've generated in the third quarter and the conversion that we saw there. This is probably, since I became CFO, the first quarter that seemed to be a little more normalized first in terms of cash flows. Having said that, we did have some benefits towards the very end of the quarter in terms of the timing of chargebacks and timing of payments in our international operations that probably helped the balance right at the very end of the quarter. So I would not be surprised to see some decline in that as we proceed through the fourth quarter in terms of the cash position and the cash flow from operations, just given the timing of those. But that sort of always the case, especially when you get to the end of the quarters. In terms of 2020, it's a little premature for me to talk about that right now. We're still working on all our detailed plans for next year. So I think we'll have more to say about cash flow projections for next year once we get into 2020, and we share that.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

The next question comes from Chris Schott of JPMorgan.

--------------------------------------------------------------------------------

Ekaterina V. Knyazkova, JP Morgan Chase & Co, Research Division - Analyst [32]

--------------------------------------------------------------------------------

This is Ekaterina on for Chris. And just a question for me. Can you talk about how you're thinking about the leverage profile for the company over time? Where would you like leverage to go if you have a target leverage profile in mind? And how do you balance that against the need to diversify the business in some of these external opportunities you're looking at?

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [33]

--------------------------------------------------------------------------------

So thanks, Ekaterina. This is Todd. I'll take that question. We -- there isn't, let's say, a hard number that we put around leverage that we're focused on. It is elevated, and it will be more elevated with the guidance that we expect now for the balance of 2019. We're not in a position to comment at this point on what it might look like in 2020. Certainly, cash flow generation is going to be our priority for us, and we're going to be very heavily focused on that as we proceed for the balance of this year and into 2020 and beyond, for that matter.

We -- my view is to try to maintain our financial position in a stronger shape as we can and provide the flexibility that we, as a business, need to be able to not only service our debt and the obligations we have but also to be able to fund our capital allocation priorities, both internally and to the extent that we see opportunities externally to be able to do that as well. So we're going to be disciplined in our approach to that. We'll be balanced in how we view it. We'll be prioritizing cash flow, but there's not a particular leverage target, let's say, that we have in mind that we're working around.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [34]

--------------------------------------------------------------------------------

And if I may add. This is Chirag. We put at Amneal from 2007 to '17 around 4x leverage or sometimes less, sometimes little higher. I agree with Todd, we can't put the number, but we are mindful of having right leverage. Personally, as entrepreneur, I do not like a highly levered company, and we have many growth opportunities organically to boost our EBITDA, which will take care of the leverage ratio, and then we can appropriately grow.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

Next question comes from Ami Fadia of SVB Leerink.

--------------------------------------------------------------------------------

Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [36]

--------------------------------------------------------------------------------

I've got 2 broad questions. When you talk about the expansion in gross margin from 30% to 40% range, how much of that (technical difficulty) internal initiatives you've identified? And how much of it depends upon launching (technical difficulty) complex products that you indicated in 2020? And how much visibility do you have today the likelihood of these coming to fruition next year? And then I have a second question.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [37]

--------------------------------------------------------------------------------

Todd, do you want to?

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [38]

--------------------------------------------------------------------------------

Ami, you were breaking up a little bit there. But I think we were getting the basic gist of it just around the expansion of gross margin and how much is, let's say, controllable versus reliant on new product launches or other revenue increases. So certainly, there's a combination of both of those as we look to expand our gross margin. I think in broad terms, you can probably think that we should be able to go from the 30% that we generated in the third quarter to probably mid-30s, just simply on the basis of fixing the internal inefficiencies that we have, reducing failure to supply, inventory obsolescence charges, better utilizing our plant capacity. I would say, moving beyond that, it's certainly going to be reliant more on the ability to launch new products at higher margins to rationalize our portfolio in smart ways and to generate a better gross to net conversion than what we're generating right now.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [39]

--------------------------------------------------------------------------------

And incremental base business.

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [40]

--------------------------------------------------------------------------------

And incremental base business to better utilize our plants.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [41]

--------------------------------------------------------------------------------

Which we already have 20 products in the mix at the manufacturing sites and more are coming.

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [42]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [43]

--------------------------------------------------------------------------------

So I would say pretty much is within our control and new product launches are lining up to deliver that as well.

--------------------------------------------------------------------------------

Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [44]

--------------------------------------------------------------------------------

Okay. And the second question I had was probably more broadly for Chirag and Chintu and how you think about -- over the last year, 1.5 years, we've seen that -- we've seen uncertainties around the timing of new product approval. And as part of that, how do you think about balancing the ebbs and flows in the generic side of the business with maybe building out more on the specialty side? You talked a little bit about bringing in some contract sales reps. But if you could elaborate on that, that will be helpful.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [45]

--------------------------------------------------------------------------------

Sure. So Ami, thank you. The timing of new product launches always been tricky. But what is most important, which we have put in place is a response to the queries. We're working proactively with the FDA. And we so far have good news on product flow that is coming in the rest of the year and next year. And also what is the most important is the preparedness, preparedness to launch all of these complex products. It requires lot of efforts to be ready, especially for the medical device products or any other complex products with validation and other activities, building inventory.

We have done that. And we're constantly -- the process is in place to do that, just how we used to do that, which will allow us to launch on approval. On the specialty side, we -- yes, we have a 130 specialty sales force. We would, as we add more products or more other assets or partner with companies, we will add into -- add our specialty forces, which is on movement disorder and endocrinology today. Those are the 2 areas we're focusing on. We're very excited about it. As I said, we're going to hit singles and doubles before we reach certain size and then do the big things on specialty.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

The next question comes from Dana Flanders of Guggenheim Securities.

--------------------------------------------------------------------------------

Dana Carver Flanders, Guggenheim Securities, LLC, Research Division - Senior Analyst [47]

--------------------------------------------------------------------------------

I guess my first one here, just coming back to that question around growth into next year, I guess, very few generic companies are saying they expect to grow. And it's not just a base business problem, but also a pipeline problem, where the value of complex launches has moved lower. So I guess the question is just how are you valuing the complex pipeline? And just how many of these are actually first to file, first to market versus multisourced? And then just my second question, and I just keep getting asked this, and not sure if you can add any color to it, but I keep getting asked about the disconnect between your loans, where your loans are trading and the equity. So just curious if there's anything you can add on that.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [48]

--------------------------------------------------------------------------------

Thank you, Dana. I'll take the first one, and I'll pass the second one to Todd. So growth in 2020, well, it's -- 2019 is not -- is a downer year. So we're starting from underperformance 2019, which is not a good way to say that helps in the growth. But what we are excited, again, we have found opportunities within our base business. This is why we acquired Impax and merged because we have larger portfolio, we can have diverse portfolio. We are capitalizing on that portfolio. So excited about that, excited about new product launches. Some of them have been delayed, which are now catching up, such as NuvaRing.

We have couple of ophthalmic launches coming up next year as well, couple of good injectable launches coming up, a liquid launch is coming up. So we have -- we are very excited about those launches. Many of them are first to market. I cannot predict if there will be another competitor with us. But we believe whether -- we'll be in the first batch to market some of those products. So this is why we -- and our specialty business is doing really well, and we expect growth there as well. So with that, we are very sure about 2020 as a growth year. And beyond what we are doing as entrepreneurs we build out for next 5 years, 10 years. So every year, we would enjoy the growth of activities we do every day.

--------------------------------------------------------------------------------

Chintu Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director [49]

--------------------------------------------------------------------------------

And just a last thing on certain complex generics also we have potential CGT exclusivity. So that has on a first-to-market product, where we'll have the 6 months exclusivity as a first generic in the market. And we have several products that fits that criteria. And we are heavily focused on R&D. Yes, it's competitive. It's all about who gets to the finish line first. And I think we have the tools and infrastructure and people to really focus. And Amneal was first movers on many complex products. And so it took a little longer. But now we have the learning, and it expedited the future approvals and launches.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [50]

--------------------------------------------------------------------------------

Dana, one thing is the value, you're absolutely right. It's not what it used to be in 2013, '14, '15, '16, '17. It has changed. So value of each of those high-value products is lower than what it used to be. And we do keep that in mind.

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [51]

--------------------------------------------------------------------------------

And Dana lastly, just on the trading level of the term loan B. So that is -- it's certainly influenced by our company performance, and the deterioration in the financial performance of the company is affecting that. It's influenced probably to an extent by the maturity of our term loan B, which we don't -- it doesn't mature until May of 2025. So it's still a bit of a long period of time before that matures. We know it's also influenced by just the sentiment around the overall sector and then the risk around potential exposures that everyone faces, both in terms of their debt, but also their equity. We know that there's been some softening at the trading levels of term loan B at our particular rating. And so those have all factored into it. We're cognizant of where the debt trades at, but it is all trading in the secondary market and outside of us improving our performance, probably not a lot we can expect to do in the near term to be able to influence that.

--------------------------------------------------------------------------------

Mark J. Donohue, Amneal Pharmaceuticals, Inc. - VP of IR & Corporate Communications [52]

--------------------------------------------------------------------------------

Unfortunately, we're out of time for today. We really appreciate you joining our call. Investor Relations is available till the end of the week to answer any follow-up questions. So again, thank you.

--------------------------------------------------------------------------------

Chirag K. Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO, President & Director [53]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Chintu Patel, Amneal Pharmaceuticals, Inc. - Co-Founder, Co-CEO & Director [54]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Todd P. Branning, Amneal Pharmaceuticals, Inc. - CFO & Senior VP [55]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [56]

--------------------------------------------------------------------------------

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.