Amneal Pharmaceuticals Inc. (NASDAQ:AMRX) Q4 2021 Earnings Conference Call March 2, 2022 8:30 AM ET

Company Participants

Chirag Patel - President, Co-Chief Executive Officer
Chintu Patel - Co-Chief Executive Officer
Tasos Konidaris - Chief Financial Officer
Joe Todisco - Chief Commercial Officer, Specialty
Tony DiMeo - Head of Investor Relations

Conference Call Participants

David Amsellem - Piper Sandler
Balaji Prasad - Barclays
Gary Nachman - BMO Capital Markets
Chris Schott - JP Morgan
Greg Fraser - Truist Securities
Elliot Wilbur - Raymond James

Operator

Hello and welcome to Amneal’s fourth quarter and full year 2021 earnings call. My name is Alex and I will be coordinating the call today. If you would like to ask a question at the end of the presentation, you can press star, one on your telephone keypad. If you’d like to withdraw your question, you can press star, two.

I’d like to turn the call over to Amneal’s Head of Investor Relations, Tony DiMeo. Over to you, Tony.

Tony DiMeo

Good morning and thank you for joining Amneal’s fourth quarter and full year 2021 earnings call. Today we issued a press release reporting our financial results. The press release and presentation are available at amneal.com. We are conducting a live webcast of this call, a replay of which will be available on our website after the call.

Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to management’s 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 that applies to this call.

Also, please refer to our SEC filings 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 U.S. GAAP may be found in our earnings release and the appendix of the 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 Jason Daly, our Chief Legal Officer and Corporate Secretary.

I will now turn the call over to Chirag.

Chirag Patel

Thank you Tony and good morning everyone. Yesterday, we were so thrilled to announce the approval of Releuko, our biosimilar version of filgrastim. This is truly a watershed moment for Amneal and reflects the teams’ tireless effort to bring this important oncology biosimilar to the market. On the call, we will discuss our broader growth strategy in biosimilars.

Turning to results, Amneal delivered solid results in the fourth quarter, capping off a year of exceptional performance and execution. For the full year 2021, revenue grew 5% and adjusted EBITDA grew 18%.

Before we go forward, let us look back for a moment. Since Chintu and I returned two and a half years ago, Amneal is now a much stronger company with a more diversified portfolio. We are driven by our R&D engine with a rich innovation pipeline and talented global team in place that is executing well. Since 2019, revenue is $468 million or 29% and adjusted EBITDA is up $182 million or 51%. As we have grown, our innovation pipeline is as deep as ever. Also, we have added key capabilities through the acquisitions of Kashiv Specialty, Puniska Healthcare, and Saol’s baclofen franchise that we believe will power our next chapter of growth.

Now looking forward, our 2022 guidance reflects continued top and bottom line growth that includes investments ahead of launches in the higher growth areas of business, such as injectables, specialty, and biosimilar. Our ability to continue growing while making long term investments reflects the diversity and sustainability of our growth profile. We believe we have the right strategy to be successful and the right team to continue executing and innovating, and we are well positioned in several key growth areas.

At the core of the strategy is our focus on affordability, unmet patient needs, and providing access as a global essential medicine company. Overall, we see Amneal’s growth profile accelerating over the next several years as we increasingly shift our business mix towards higher growth and higher growth end markets.

Let me now walk through our key business areas at a high level, both where we are today and our strategy for growth in each.

Starting with our retail generics business, which has grown consistently over the last few years as our robust R&D engine has significantly diversified the portfolio with new complex products. In 2021, we delivered $1.37 billion in net revenue and launched 28 new products. We see the USD $20 billion retail generics market continue to expand and grow. The pipeline for the industry remains robust with approximately $284 billion in total brand product revenues facing loss of exclusivity in the next decade. We are confident that our core competencies in R&D, manufacturing, quality and commercial excellence will drive our continued momentum in retail generics for years.

About half of our 2021 generics revenue came from non-oral solids and 87% of our pipeline is non-oral solids, which underscores our shift to more durable and complex portfolio. With a clear line of sight to continued innovation and the increasing complexity of our portfolio, we expect continued growth in our retail generics business going forward.

Regarding our injectable generics, we announced the acquisition of Puniska Healthcare in Q4. As a reminder, the acquisition adds key manufacturing infrastructure, capabilities and capacity to support the U.S. and international markets. Building on that, we were pleased to announce another tuck-in transaction in January with the acquisitions of Saol Therapeutic’s baclofen franchise, which advances our strategy in a few key ways. First, it expands our neurologic presence into spasticity with an established, durable institutional product in Lioresal and expands our Amneal institutional injectables business to about $150 million. Second, it also adds the recently approved Lyvispah to our specialty bag with commercial launch planned in June, and third, it adds a specialized institutional commercial team in advance of further biosimilar launches this year. We expect strong growth in the $5 billion institutional injectable market as we scale the injectable business with a remarkably larger portfolio. Over time [indiscernible] expanded global capabilities, we expect injectable revenues will ramp up substantially in the later part of 2023 on our way to annual revenues in excess of $300 million by 2025 as we aspire to be the top five in the United States and also become a global player.

Now in biosimilars, we expect to enter the market in 2022 with our initial oncology portfolio of three products. The total addressable market for these products is $6.3 billion with $2.9 billion representing the biosimilar portion. Beyond those, we’re also actively looking at additional partnership opportunities where we can be early to market, preferably first or second. The pipeline for the industry remains robust with approximately $148 billion in total biologics products revenue facing loss of exclusivity in the next decade.

After [indiscernible] initial launches gaining share and adding to the portfolio, we expect biosimilar revenues will build over time. Our goal is to build a global business through in-licensing and being vertically integrated as we look to become a meaningful player in biosimilars.

In our AvKARE business, we saw solid performance in 2021 with $349 million in net revenue. We are focused on strong commercial and operational execution as we expand across multiple channels, including the federal government healthcare market, distribution channel and unit dose. We expect substantial growth in this durable business going forward.

In specialty, we see multiple growth opportunities over the next several years. In 2021, our commercial organization executed very well, delivering $378 million in net revenue. A year ago we invested to expand our endocrinology sales force which led to significant growth this year in Unithroid, our branded product for treating hypothyroidism. Rytary, our branded carbidopa-levodopa product for Parkinson’s also had a strong year, while at the same time the team did an excellent job advancing our IPX-203 pipeline product. Positive Phase III data showed that this innovation has the potential to achieve more good on time and less frequent dosing for Parkinson’s patients. We expect high single digit growth in the $7 billion brand market for our products and pipeline. As we execute on our existing portfolio and rich pipeline, we see the specialty business expanding meaningfully over the next several years.

In international, we are advancing our global expansion plans in several key markets. As you know, in China we have our Fosun partnership and look to be commercial starting next year in this second largest pharmaceutical market. In India, we have a small hospital business today that came through the Puniska Healthcare acquisition and we look to build our in-market presence in the estimated $25 billion Indian pharmaceutical market today, projected to go to $36 billion by 2025. Also, in other geographies are pursuing distribution agreements to leverage our portfolio to enter certain emerging markets.

I hope you share our excitement as we see several businesses that are healthy, expanding and growing through innovation and new capabilities and execution. As we progress and implement our strategy, we expect Amneal will be increasingly durable, diversified and differentiated.

With that overview, I’ll pass it over to Chintu.

Chintu Patel

Thank you Chirag and good morning everyone. As always, I will start by acknowledging and thanking our 7,000-plus Amneal team members who work incredibly hard to make healthy possible. As you know, at Amneal we live our culture and core competencies every day. We remain relentlessly focused on operational excellence, ensuring a resilient supply chain, and driving cost efficiencies across the business.

In 2021, our team executed on these areas brilliantly, driving supply chain savings and better inventory management with reduced obsolescence and the lowest level of backorders in our history. At the same time, we are committed to the highest standards of quality and current good manufacturing practices. We are proud that we have maintained our excellent manufacturing quality track record with an impeccable compliance history at all of our sites.

Let me now walk you through the tenets of our growth strategy and our focus on innovation across our business lines.

In generics, we continue to find new development opportunities across complex product categories such as inhalation, implants, drug/device combinations, and ophthalmics. Our internal R&D and manufacturing capabilities make this fast-to-market and hard to make complex launches possible, which we believe differentiates Amneal in the industry. In 2021, our 28 new product launches went excellent, including generic version of Zafemy, Zytiga, TobraDex, Decadron, and Burasol [ph], and we expect another 20 to 30 launches in 2022 as well as every year going forward. In 2022, we expect to file approximately 30 ANDAs of which 15 to 20 are injectables. Importantly, Amneal continues to maintain the highest number of CGT-designated products in the industry.

In retail generics, we have 85 ANDAs pending for approval and expect to launch 15 to 20 of them in 2022. We also have clear visibility to a long runway of future launches with another 55 pipeline products. Of these, roughly 40% are expected to be first to market or first to file.

In injectables, we remain acutely focused on expanding our portfolio and growing our commercial business. We expect to launch five to 10 injectables in 2022. So far in Q1, we have already received approval for four new products. We have 29 injectable ANDAs pending and another 73 for our pipeline products, over half of which are expected to be first to market, first to file, or [indiscernible]. As previously stated, we expect over 40 new injectable launches from 2021 through 2025 in a variety of complex areas, including drug/device combinations, peptide, long acting injectables, [indiscernible], and large volume parenteral bags.

In addition to complex injectables, we are focused on 505(b)(2) opportunities that target unmet patient needs in hospitals. We will leverage our in-house capabilities including our expanded commercial infrastructure to bring more products to market, including our first 505(b)(2) injectable launches expected in 2024.

The next key piece to the injectable strategy is adding global capacity and capabilities. Earlier in 2021, we expanded our existing manufacturing capabilities in LVP bags and vials, then with the Puniska Healthcare acquisition we added even more infrastructure. The integration of Puniska Healthcare is going well and we expect [indiscernible] inspection and approval of the site in early 2023. Altogether, we now have 16 production lines, twice as many as we had one year ago with a broad range of production capabilities across LVP bags, emulsion, pre-filled syringes, wires and cartridges to serve the U.S. and international markets. We believe there is a clear opportunity and need to better serve the global injectable market with consistent supply of high demand products to avoid drug shortages and provide a broad portfolio of high value products to meet patient needs.

In biosimilar, we expect to enter the U.S. market this year with our first three biosimilars: filgrastim, pegfilgrastim, and bevacizumab. Our first approved biosimilar for filgrastim, Releuko, will launch in quarter three and this product will be made in Chicago. We are so proud of the team for this significant accomplishment as it signals Amneal has a bright future ahead in biopharmaceuticals, particularly biosimilars. Pegfilgrastim and bevacizumab have [indiscernible] action dates upcoming and we look forward to launching both this year upon approval. By the end of ’22, our target is to add more biosimilar products in our portfolio where we can be first or second to market.

As the dynamics and economics of the biosimilar market shift over time, similar to our success in complex generics, we believe the key to success is being vertically integrated from development to commercialization to manage margins well. In biosimilars, we look to build our business in a smart way as we leverage partnerships and acquisitions to start, and then develop products organically over time. We are very excited about the future potential pipeline in biosimilars.

In specialty, we continue to advance our pipeline and expect to launch two new branded products this year, the recently acquired and approved Lyvispah product for spasticity is expected to launch in June. In addition, we are hopeful that the DHE autoinjector for migraine and cluster headaches will launch in Q4 pending inspection of the CMO site and FDA approval.

Next, IPX-203 remains on track for ANDA submission in Q2 with expected launch in the middle of 2023. Our market development work continues to validate the view that 1.55 hours of increased good on time per dose with IPX-203 as compared to I-R CD/LD is very meaningful and the commercial opportunity is broader, as we see the potential for $300 million to $500 million in peak sales for IPX-203.

For K127 for myasthenia gravis, we expect to file our NDA by end of ’22 and we are pursuing multiple other indications. For K114, a modified release T3 product for hypothyroidism, we plan to file our IND application in the middle of this year. This 505(b)(2) program utilizes our proprietary drug delivery technology platforms, Grande and Kronotec. Going forward, we expect to launch at least one new specialty product per year. For our full specialty pipeline, we see between $500 million to $1 billion in potential peak sales.

In international, we are pursuing expansion in several key markets. In China, we currently have five products filed with 10 to 15 expected by the end of 2022 and 20 to 30 over time. In the last year, we have strengthened our team and infrastructure to enable us to register our products in select markets around the world. Overall, our strategy for growth is built on the strong foundation established over the last few years with a clear plan in place for each area of our business. As a company, we are leveraging our core competencies in innovation, superb quality and manufacturing to position us for sustainable long term growth. Our team is squarely focused on execution.

With that, I will hand it over to Tasos.

Tasos Konidaris

Thank you Chintu. Good morning everybody. I’ll discuss our fourth quarter and full year results and then I’ll move onto our 2022 guidance.

For the fourth quarter of 2021, we reported total net revenue of $537 million, up 5%; adjusted gross margin of 43.3%, a 270 basis point expansion; adjusted EBITDA of $126 million, up 18%; and adjusted EPS of $0.18, which grew at 29%. As has been the case throughout the year, Q4 performance was driven by our revenue growth and higher gross margins across all of our three business segments.

Q4 generics net revenue of $346 million grew 1%. Our growth was driven by the strength of new product launches, particularly Zafemy, [indiscernible] which contributed $35 million in incremental revenue in the quarter. Also as an update on [indiscernible] from last quarter, the team has been working very closely with the FDA and we’re happy to report that we expect resolution during the first half of 2022 for our key products. Q4 specialty net revenue of $101 million grew 18%, driven by unit growth up 38% and Rytary up 6%. Our Q4 AvKARE net revenue of $90 million was up 9%.

Our Q4 adjusted gross margin of 43.3% was driven by all three segments with generics expanding 130 basis points, specialty up 400 basis points, and AvKARE expanding 280 basis points. As you may recall, in our second quarter call we said that after our strong first half, we expected some moderation in the second half gross margins due to the mix of products and timing of overhead absorption, and that’s exactly how it played out.

Our Q4 adjusted EBITDA of $126 million was up $19 million, growing at 18%. Gross profit growth added $25 million and was partially offset by higher operating expenses, which included the expansion of our endocrinology sales force earlier in the year. Q4 adjusted diluted EPS of $0.18 was driven by the strong EBITDA performance.

Let me now summarize our full year 2021 performance.

For the full year, we reported total net revenue of $2.1 billion, growing 5%. Generics net revenue of about $1.37 billion grew 2% driven by the strength of new product launches. Specialty net revenue of $378 million was up 6% driven by Unithroid up 24% and Rytary up 7%, partially offset by declines in our non-promoted brands. AvKARE net revenue of $349 million was up 19% and up 9% organically.

Moving down the P&L, full year 2021 adjusted gross margin was 45.7%, slightly ahead of our expectations. This reflects 530 basis points of expansion in generics driven by successful new product launches, the renegotiation of a key third party agreement, and a number of other operational efficiencies. 370 basis points of expansion in our specialty business was driven by favorable mix, and 150 basis points of expansion in AvKARE reflects a number of operational improvements.

2021 adjusted EBITDA of $538 million was up $82 million and growing at 18%. 2021 adjusted diluted EPS of $0.85 grew 35%, and our 2021 operating cash flow was $242 million, in line with prior years. We finished the year with $257 million in cash and cash equivalents, which reflects the Puniska Healthcare acquisition closing in Q4. Finally, we’re pleased to finish 2021 with net debt to adjusted EBITDA of 4.6 times compared to 5.3 times a year ago and 7 times two years ago.

Let me turn to our 2022 expectations now.

From a top line perspective, we expect 2022 total company net revenue between $2.15 billion and $2.25 billion, which reflects mid single digit growth. In regards to generics, we expect mid single digit growth which is an acceleration from the 2% growth in 2021. Our growth will be led by retail generics as we introduce new products and the strength of the recent launches enable to offset low double digit price erosion, similar to what we saw in 2021. This consistent growth profile reflects the depth of our R&D pipeline, cumulative impact of years of innovation, and a transition to a more complex, resilient portfolio. In addition, we expect strong growth in injectables driven by new product launches, the addition of Lioresal, and some initial revenue from biosimilars in the latter part of the year.

In specialty, we expect 2022 revenue to be in line with 2021 with continued strong Rytary and Unithroid growth offset by the exclusivity loss of Zomig. The launch timing of Lyvispah will [indiscernible] to the time of launch, and in regards to AvKARE we expect mid single digit growth for 2022.

Moving down the P&L, we expect 2022 adjusted gross margins to be broadly in line with 2021. This includes the benefit of higher margin new product launches, continued operating efficiencies, partially offset by inflation pressures. Keep in mind the [indiscernible] gross margin improvement last year came from supplier efficiencies that will not repeat this year to the same extent.

Next we expect 2022 adjusted EBITDA of $540 million to $560 million. Our outlook includes approximately $40 million in incremental investments as we look to scale the higher growth areas of our business with new launches. In 2022, we’re making those key investments particularly in sales and marketing and R&D to support upcoming launches across injectables, specialty and biosimilars. Our outlook also includes approximately $20 million from inflation on materials and other costs beyond normal merit.

On the bottom line, we expect 2022 adjusted EPS of $0.80 to $0.85, which reflects solid EBITDA growth as well as likely higher interest expense and growth in minority interest related to AvKARE. On the cash side, we expect 2022 operating cash flow between $225 million to $250 million and an increase in capex between $75 million to $85 million.

In terms of quarterly pacing in 2022, we expect our financial performance to accelerate over the course of the year for four reasons: first, we expect to successfully resolve the majority of the Synchron issue over the next coming months; second, the timing of new product launches as they build throughout the year, particularly in the second half; third, timing of manufacturing fixed overhead absorption; and finally, our investments to support our multiple upcoming product launches as they are more front-end loaded. From a dollars perspective, we’re targeting Q1 revenues of about $500 million and adjusted EBITDA of about $100 million.

With that overview of Q4 and full year 2021 and 2022 expectations, let me hand it back to Chirag.

Chirag Patel

Thank you Tasos.

In summary, 2021 was a very successful year for Amneal as the team executed well on all elements of our strategy across the business. We entered 2022 with strong momentum. As a result of our focus in high growth areas and strong pipeline in large [indiscernible] markets, we expect our top and bottom line growth to accelerate over the next several years.

With that, let’s open the call to questions. Tony?

Question-and-Answer Session

Operator

[Operator instructions]

Our first question for today comes from David Amsellem of Piper Sandler. David, your line is now open.

David Amsellem

Okay, thank you. Good morning.

A couple of questions. First, a high level question about business development. You recently acquired the baclofen assets, and with that in mind and with the expansion of the specialty brand portfolio, can you talk about your appetite, or really your capacity for additional acquisition of assets, brand assets, and ultimately what do you see as being the mix between brands and generics over the next few years for the business? I guess that’s number one.

Number two, regarding the biosimilars that you have in the portfolio - filgrastim, pegfilgrastim, bevacizumab, these are fairly crowded markets, not very crowded markets, but I guess how are you thinking about contribution, how are you thinking about pricing erosion in these specific markets, and ultimately your penetration for those three?

Then lastly, wanted to pick your brain on the DHE injector product. The question here is how do you see it coexisting with the intranasal product that Impel has launched recently? Thanks.

Chirag Patel

David, good morning. We’ll start with one at a time.

First, high level BD on specialty, as you know, we did the tuck-in acquisitions with KSP to [indiscernible] pipeline, which we have excellent organic pipelines, so we’re not in a dire need to do some deal. If there’s a good deal, we always are looking, and if we can afford it, because at the same time we are very mindful of deleveraging. We are at 4.6 of our stated goal to be between 3 to 4, so whatever we can afford and when we find the right deal, we’ll do more of a tuck-in deal for the specialty brand side. We expect to have good opportunities this year and next year as the correction is happening in the biotech field. We may acquire pipeline assets as well on the specialty side, so very excited about the growth on the specialty.

Your question, how do we see the breakdown, so the way we see it, as we said, we’re very excited about all growth areas, so let’s talk about our retail generics. We said we would be maintaining stabilized--we have stabilized the business, growing 3% which we would be probably the only company that can say we’re growing our retail generics business because of our very powerful pipeline. We don’t expect that to be high growth, but we do expect it to maintain where it is and grow slowly. The distribution falls under the same umbrella.

Now you take the specialty side, we have various launches - Lyvispah, DHE autoinjector, IPX-203 next year, potentially K127 in ’24, and every year we are lined up. As you know, it takes time to ramp up, but it adds a meaningful contribution and we expect that to become almost 25% of core business from a revenue perspective, and contribution perspective would be higher on specialty.

Then just finishing it off, another powerful growth agent is biosimilars, where we see three launches for this year, and we’re very excited that the first approval came. This is reminding us of folic acid approval in 2005 at Amneal, when we launched [indiscernible], and then right now today, we sit on 350 approvals. [Indiscernible] do not have that many products, but we expect the one to two to three to keep going every year and we are actively looking at various options on how do we vertically integrate, how do we add to the biosimilar pipeline, and commercial we are investing to set the--already have done it and doing it more to set the infrastructure to completely support the providers and patient support.

I will pass the--and the markets will be--as you know, there’s a couple of levers to pull to pass through for our GCSF, which is Releuko, because we would be the new biosimilar, and we would use our collective relationship from the retail injectable, specialty to launch these and the newly built biosimilar team to penetrate as much as we can. It’s going to be competitive, and then same thing with pegfilgrastim and then Avastin, so all three very exciting for this year.

DHE, I’ll pass it onto Joe.

Joe Todisco

Thanks Chirag, hi David. For competitive reasons, I don’t want to disclose too much about our planned marketing strategy, but I’d want to point to a couple of things. First, I do think we’re going to have a little bit different of a label indication from the Impel product. We see it as a differentiated product, different mechanism of action, and a different target patient profile, so from that standpoint, I don’t see us really competing for the same patients. I think we’re going to be competing in a little bit different of a segment of the migraine market, a different niche segment, and as we get closer to launch, we’ll talk more about our launch strategy.

David Amsellem

All right, thank you.

Operator

Thank you. Our next question comes from Balaji Prasad of Barclays. Balaji, your line is now open.

Balaji Prasad

Hi, good morning, and congratulations. A couple of questions from me.

Firstly on the biosimilar side, Chirag, I just want to understand your comments both on the need for being vertically integrated and also your focus on future biosimilars coming from partnered and licensed products, how do these two go up against each other? If you could also give an update on the FDA inspection of the manufacturing site for biosimilar [indiscernible], that would be great.

On the guidance part of things, Chirag, $2.15 billion at the lower end of the range implies an incremental $60 million of revenue, at the lower end EBITDA is flat versus 2021. You called out that you are investing into the business, but considering all the [indiscernible] across each of those segments, I’m just trying to think about how conservative is this guidance. Thanks.

Chirag Patel

Thank you Balaji, and good morning. On biosimilars, on the strategy front, as we discussed several times on the call, look - this market is becoming better and better from all fronts, like regulatory, it’s much easier compared to when we started in 2015, ’16. FDA understanding, our understanding, the requirements for the clinicals, all that is reasonable. It still has room to improve and there are various actors who are working on it to make it much better, because this is one of the key areas to bring more access and affordability is biologics, as you know.

We remain--on the strategy side, we have disclosed three pipeline assets from the partners. We may have more pipeline from the in-licensing, and why vertical integration is important is as we--in the small molecule, same thing, you can’t have two players. The margins are not enough to be shared between two players, so that’s the first thing. We want to maximize, we’re doing all this hard work, we just do not want to have a commercial expertise, we want to have development expertise and entire integrated chain. That allows us the quality controls, which we are best known for, which is going to be even more important in biologics than any other form. It allows us our cost controls, allows us to develop global products for global markets, and we see higher growth opportunities and higher margins. It’s a serious investment in biosimilars as we have made since the last few years, and going forward we’re very excited. This is why I believe why a vertically integrated company would lead and become being the top five in the United States or globally.

You wanted to say something about biologics?

Chintu Patel

Hi Balaji, this is Chintu. Regarding the Avastin inspection, the inspection was conducted. We don’t have feedback from FDA. Overall inspections went well, but at this point we are not able to make any outcome comments, so we’ll wait and see. [Indiscernible] is sometime in April, so it’s in the very near term.

About being vertically integrated, it is very important as Amneal is known for its innovation science and cost effective execution that we have some development to commercialization capabilities in-house, plus it’s a global market reach for us as biosimilars have a very good market outside of the U.S. Given all these reasons, we are working with partners right now, but we firmly believe it’s to have vertical integration.

Chirag Patel

Yes, and Balaji, on your question on the guidance, as you know last two years, we met our guidance and raised our guidance. We like to be like that. The cross segment investments are the $40 million in sales and marketing expenses, which builds up our teams in specialty and biologics, biosimilars. That revenue, as you know, the uptake is slow on the small molecule to convert the patient and providers to using biosimilars, so it slowly ramps up, and then also we got hit by $20 million in inflation-related costs, which unfortunately we cannot pass on the retail side at all because of, as you know, I don’t have to say it again, it’s unfairly set with the three big buying groups completely controlling the buying power. The suppliers, many times it becomes a sustainability issue, it’s very concerning, but hope it doesn’t cause future shortages and other issues. That is why the guidance is given the way it’s given, and look - we still have growth, and we’re very excited about how ’23, ’24, ’25 lines up.

Balaji Prasad

Thank you, that’s helpful.

Operator

Thank you. Our next question comes from Gary Nachman of BMO Capital Markets. Gary, your line is now open.

Gary Nachman

Thanks, good morning. First on the injectables business, you’re looking to more than double that over the next few years, I think you said greater than $300 million was the target. How much of that will be organic with your own pipeline versus going out and doing more tuck-in deals in that space, and the four new approvals in the first quarter, just talk about those and how much you expect they’ll contribute this year.

Then in generics, are there certain dosage forms where you currently don’t have strong capabilities that you want to get into, or perhaps an area that you want to get into in a more meaningful way, or are you happy on that front? The low double digit price erosion in generics, is that a normalized rate at this point that we should be thinking about? Thank you.

Chirag Patel

Good morning, Gary, how are you? On the injectables, growth is mostly organic. It’s pretty much organic because we do have the capabilities, as we said, and capacity in R&D and, as my brother mentioned, all the technology capabilities we have. The four approvals, we expect even more approvals. We do not give product-specific guidance, but they’re good products in injectables and there is always some products that are in shortage, so we expect good contributions from those launches.

On the generic side, what we haven’t launched is an inhalation product, and we’re excited that inhalation can be coming this year and definitely for the next year. Chintu, do you want to expand?

Chintu Patel

Sure, hi Gary. I think just to expand on injectables, our forecast is based on our current capabilities and pipeline. Historically we used to file five or six products. With expanded capacity and the Puniska acquisition, it gives us the manufacturing plus R&D increased capacity, so starting with this year, we will be filing 15 to 20 new products in a variety of differentiated products, so we have a very good diversified manufacturing and R&D capability as far as injectables are concerned.

One of the areas we are expanding is inhalation, as my brother said, but also there is the implant products and more drug/device combination products. Those are complex products which requires device and formulation different capabilities. We have some, but that’s the area we are investing a little more going forward to give us that as they are already high barrier to entry areas.

Chirag Patel

Yes, and your question on the low double digit, Gary, yes, for now it’s the norm for the base business. We don’t expect any changes.

Gary Nachman

Okay, great. Thank you.

Operator

Thank you. Our next question comes from Chris Schott of JP Morgan. Chris, your line is now open.

Chris Schott

Great, thanks so much for the questions. Just a couple from me. I guess first on the 1Q results, I think you said you’re targeting $100 million of EBITDA. Could you just help me understand the dynamics there a bit, as it seems like that is a step down from recent performance, so is that just an expense timing issue or is there something else we should be keeping in mind with the 1Q number?

Then the second one for me is maybe a broader biosimilar pipeline question. Can you just talk a bit about the approach you’re taking as you’re thinking about adding further assets? Are you looking to stay kind of hospital focused for the portfolio, would you look more broadly, are there any therapeutic areas that are particularly attractive to you? Just a bit more color of when you envision expanding this out, what kind of criteria are you looking at, I guess, as you think about the products you’re targeting? Thanks so much.

Tasos Konidaris

Hey Chris, this is Tasos - good morning. I’ll take the first question.

A couple things. You’ve seen--if you look at our quarterly performance the last three years, the company is not on autopilot, right, so there happens to be volatility at any given quarter, so we look at it more in terms of full year numbers - that’s number one.

Number two is as we look at Q1, it’s playing out exactly how we were planning in regards to our 2022 internal budget, and what this accounts for is, number one, the substantial amount of investments that we’re making to the business, which we’re not going to sacrifice, right, so we’re delivering growth in 2022 but also we want to position the company for sustainable growth, so we’re not going to sacrifice the required investments. We have front loaded the investments and then you have the product launches and the incremental revenue in the back end of the year, so that’s a key driver, number one. Number two is Q1, you always have some seasonality, it tends to be one of our lower quarters just between Q4 and Q1, some seasonality.

Then number three issue is any given quarter, primarily Q1, we just have a little bit more fixed overhead, less overhead absorption just between the timing, the way we run our manufacturing plants, and some of the lesser impact of COVID [indiscernible] our workforce, so you put those things together, that’s why we’re targeting about $100 million, and then we see a substantial amount of ramp-up from there for the rest of the year.

With that, let me just turn it over to Chintu.

Chintu Patel

Yes, hi Chris. Regarding your second question on biosimilar pipeline and product selection, our approach is that we want to be first or second to market - that’s our key criteria. We are not looking from the therapeutic perspective, we are looking broadly as a global play for biosimilars and we are also looking from acute to chronic, so we are taking an approach from the interchangeability/non-interchangeability product. As you know [indiscernible] there is a lot more adoption and acceptance of biosimilars from the provider and payor perspective, so I think as the markets are opening up more, we are looking at opportunistic approach on biosimilar, our time to development, cost of development, and again the stated goal is to be first and second. Our targeted pipeline puts us in the position to have highest number of first to market biosimilars, so I think it’s a very holistic view keeping IP and other norms in mind, but not focused on therapeutic area.

Chris Schott

Great, thanks so much.

Operator

Thank you. Our next question comes from Greg Fraser from Truist Securities. Greg, your line is now open.

Greg Fraser

Hey, good morning. Thanks for taking the questions.

A couple of follow-ups on the guidance. How much of the anticipated revenue growth for generics will depend on approvals that are pending, and is vasopressin one of the launches that you expect this year, and on your comment about gross margin being grossly in line, does that apply to both generics and specialty?

On biosimilars, clearly expanding the pipeline is a priority. For the next wave of biosimilar launches over the next few years, are there assets available that could be among the first one or two to get to the market, or are deals for biosimilars that will get to market later in the decade more likely? Thanks so much.

Tasos Konidaris

Hey Greg, I’ll take the first two. When we look at the growth of our generic business, it’s, I would say 50/50, so 50% of the growth is coming from brands that we launched late last year, right, so those are growing, and 50% of the growth should come from new product launches. As we talked about, we never rely on any one product, whether or not that’s vasopressin, Zafemy or anything else, so we think about it as a bundle of 20, 30 new product launches and some of them are larger than others, so we’re not overly reliant on any one, which kind of helps with the durability and the predictability of our business. That’s number one.

In terms of gross margin, at a high level I think we feel great about the progress the company has had over the last few years, right, so in 2020 our overall gross margin was about 42%. We finished last year at about 46%, and we expect to stabilize this year at this level. Over the course of time [indiscernible] we push more and more on the specialty business, biosimilars and complex generics, so we feel good about it.

The more specific question about this year, I think generics, I think they’re going to be relatively flat, give or take a point. I think AvKARE is just going to be down a little bit, just because of the mix of business where that’s coming from, and we should see some specialty gross margin growth, just again mix of products and having Rytary unit growing, fueling the growth at our higher margin products.

With that, let me just turn it over to Chirag.

Chirag Patel

Thank you Tasos. Good morning Greg.

Biosimilars next wave, as you probably know, we have a partnership with two partners whom we work very deeply, and there are a few others we are evaluating. As we said, it’s going to be a mix, and the mix will be more of our--we are looking at various development houses to bring them in-house, so Amneal becoming vertically integrated, along with continued opportunistic partnership, the licensing, so if I see the next three, four, five years, it will be pretty much 75% in-house products, 25% in-license products, that’s how the next wave will come. It will come from 2024, ’25 launches and then it continues to build up. That’s our internal plan that we have, and when we have more information, we will be very excited to disclose.

But at Amneal, it’s a very growth area for us, and it’s part of our growth strategy as I mentioned, our key growth area is specialty, biosimilars, injectables and international markets. These four will drive us out of the melting ice cube business of retail generics, which by the way we do really well there as well.

Greg Fraser

Thank you.

Operator

Thank you. Our final question for today comes from Elliot Wilbur of Raymond James. Elliot, your line is now open.

Elliot Wilbur

Thanks. Maybe just two high level questions. Chirag, going back to your commentary earlier with respect to the biopharma environment potentially presenting some unique opportunities in terms of funding assets or acquiring companies that aren’t going to be able to raise capital, one a source of potential new assets or revenue, the other of course being the more traditional generic market. That asset market looks to be gaining a little bit more momentum, a lot more properties coming to market than we’ve seen, I think, in some time, and probably going to see more of those. Not traditionally been your focus, but just wondering how you’re viewing the ongoing dynamics there in terms of larger companies continuing to scale back, put up larger properties for sale. How are you thinking about potentially you advancing some of these very ambitions in some thee areas - injectables and some of the more complex dosage forms, an immediate acquisition that might give you assets that could be in the company’s pipeline already or on the radar screen, just given their availability and pricing, and then I have a follow-up for Chintu, but maybe I’d ask you to respond to that.

Chirag Patel

Okay, thank you Elliot. What I mentioned is the biotech companies, there’s so many, right, and some of them could be injectable companies as well with a platform technology, so we’re looking at all of them, and if it’s the right fit, we would like to do a deal there. The retail generics is going to be very tough for us because we’ve got 350 approved products, 140 in pipeline, 110 pending at FDA, the FDC divestiture process would not allow us to go through a successful transaction. I know with Sandoz out there, with private equity being active, the few other assets--you know, [indiscernible] asset has gone, so we’re excited. We do need consolidation in generics, it’s just unsustainable.

How do we play in that? That’s an entirely different game, which we do not know exactly when that gets played out, but let’s put it this way - at this point, it’s interesting that it is moving in that side because there’s sustainability for many players on the Gx retail side, and if they don’t consolidate, they won’t be able to compete well. But we stay really excited about the biotech and injectable side to look at all the tuck-in opportunities and bolster, obviously, the vertical integration for our biosimilars capabilities.

Elliot Wilbur

Okay, thanks. Then just one last question for Chintu, just thinking about the competitive environment in the overall injectables space, certainly that market still remains much more concentrated, obviously, than most areas of the traditional generic market. I guess we’ve seen sort of the larger entrenched players just seem to conceded share to some of the upstarts and still seems to have sort of protected new product launch dynamics and margins. But if you look at the competitive environment, at least in terms of the companies who want to get into the space, there’s certainly a lot of companies out there with a lot of ANDA into filing, so obviously any new approvals are incremental revenue for you, but how do you think about this from a big picture perspective in terms of all these new entrants looking to get into the space, how does that impact new launch contribution, return on investment and margins, or do you think we’re going to see just continuation of what we have for the past couple of years, where just certain large incumbents just continue to back away from the market, so you don’t really see change in any of those key dynamics.

Thanks.

Chintu Patel

Hi Elliot, great question. First of all, yes, there is capacity and there is maybe new capacity coming in the market for injectables, but always if you see historically, still there is on average 100-plus product in shortages, so I think the key to success in the injectable space is not just approval but consistent quality supply, and that’s where Amneal gets differentiated because we have one of the best quality track records. That’s what we are focused also, we are doing redundancy in our supply chain and trying to be a consistent, long term supplier, so that’s our one key differentiator.

Second, we have so much further diversification in our pipeline as we have long acting injectables, we have these large parenteral bags, large volume bags, we have the BFS, we have drug/device combinations, we have the liposomal products, so plus we have a separate site for our Encore product, so we are well positioned, and plus our infrastructure is also pretty new, brand new. We are so well positioned to kind of cater multiple areas of growth, and with Saol acquisition now, we have the front end commercial team also, where we are looking at [indiscernible], which we already had some but we are bolstering our 505(b)(2) pipeline in injectables, where we are bringing unmet to the hospital--unmet needs to the hospital.

I think looking at our broader pipeline, what we are invested in our people, in our R&D infrastructure and now manufacturing infrastructure, we are very uniquely positioned to be a consistent supplier and also bring high end value products. The combination of that will definitely lead to margin expansion than the regular typical products.

Operator

Thank you. We have no further question for today, so I’ll hand back to Chirag Patel for any closing remarks.

Chirag Patel

Thank you everyone for joining today. Have a great day.

Chintu Patel

Thank you everyone.

Tony DiMeo

Thanks everyone.

Operator

Thank you for joining. You may now disconnect.