Document Exhibit 99.1
AMNEAL REPORTS FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL RESULTS
‒ Q4 2020 Net Revenue of $510 million; GAAP Net Loss of $3 million; Diluted Loss per Share of $0.02 ‒
‒ Q4 2020 Adjusted Net Income (1) of $43 million; Adjusted EBITDA (1) of $107 million; Adjusted Diluted EPS (1) of $0.14 ‒
‒ Full Year Net Revenue of $2 billion; GAAP Net Income of $91 million; Diluted Income per Share of $0.61 ‒
‒ Full Year 2020 Adjusted Net Income (1) of $191 million; Adjusted EBITDA (1) of $456 million; Adjusted Diluted EPS (1) of $0.63 ‒
‒ Provides 2021 Financial Outlook ‒
BRIDGEWATER, NJ, February 26, 2021 - Amneal Pharmaceuticals, Inc. (NYSE: AMRX) (the "Company") announced its results today for the fourth quarter and full year ended December 31, 2020.
"We are extremely proud of the progress our company has made since we re-joined as leaders of Amneal," said Chirag and Chintu Patel, Co-Chief Executive Officers. "In just a year and a half, we have made significant strides towards strategically positioning Amneal, both operationally and financially, for the next phase of growth. Our strong financial performance over the course of 2020 is indicative of the successful execution of our Amneal 2.0 strategy. We reinvigorated the Generics business in the United States, continued to build our Specialty franchise, enhanced our operational execution, and diversified our distribution channels. As a result of the solid momentum we are seeing, we have introduced 2021 financial guidance, which reflects our expectations for another year of strong top and bottom line growth. We thank our global team for their dedication and commitment to providing affordable and innovative medicines to our patients; they have been an integral part of navigating the COVID-19 pandemic this year, and will continue to help drive our success in the year ahead."
Net revenue in the fourth quarter of 2020 was $510 million, an increase of 28% compared to $397 million in the fourth quarter of 2019. This increase was primarily attributable to $82 million from our AvKARE acquisition and $44 million from new product launches including EluRyng and Sucralfate Oral Suspension. Broad generic volume growth was partially offset by pricing pressure from competition relating to Levothyroxine Sodium Tabs and Diclofenac Gel 1% as well as a reduction in non-promoted product revenues in our Specialty segment. Net loss attributable to Amneal Pharmaceuticals, Inc. was $3 million in the fourth quarter of 2020 compared to a net loss of $32 million in prior year. The year-over-year improvement was primarily driven by stronger underlying Generics operating performance, lower intangible asset impairment charges, lower interest and taxes and favorable foreign exchange. Diluted loss per share in the fourth quarter of 2020 was $0.02 compared to a loss of $0.23 in the prior year.
Net revenue for the year ended December 31, 2020 was $1,993 million, an increase of 23% compared to $1,626 million for the year ended December 31, 2019. This increase was primarily attributable to $294 million from our AvKARE acquisition, and $214 million from new product launches including EluRyng and Sucralfate Oral Suspension. Broad generic volume growth was partially offset by pricing pressure from competition mainly relating to Levothyroxine Sodium Tabs and Diclofenac Gel 1% as well as the divestiture of our international businesses in 2019. Net income attributable to Amneal Pharmaceuticals, Inc. was $91 million in the year ended December 31, 2020 compared to a net loss of $362 million in prior year. The year-over-year improvement was primarily driven by favorable year-over-year discrete tax events, a reduction in intangible asset impairment charges of $136 million as well as a stronger underlying Generics operating performance and lower interest. Diluted income per share in the year ended December 31, 2020 was $0.61 compared to a loss of $2.74 in the prior year.
Adjusted EBITDA(1) in the fourth quarter of 2020 was $107 million, an increase of 33% compared to the prior year, primarily due to higher Generic adjusted gross profit driven, which was primarily due to new launches, the addition of AvKARE and operating expense management. Adjusted net income(1) of $43 million in the fourth quarter of 2020 compared to $23 million in prior year period, reflected higher adjusted EBITDA and lower interest expense, offset in part by higher adjusted taxes and minority interest. Adjusted diluted EPS(1) in the fourth quarter of 2020 was $0.14 compared to $0.08 in the prior year.
Adjusted EBITDA(1) in the year ended December 31, 2020 was $456 million, an increase of 28% compared to the prior year, primarily due to higher Generic adjusted gross profit, which was primarily due to new launches, the addition of AvKARE and operating expense management.
Adjusted net income(1) in the year ended December 31, 2020 was $191 million compared to $104 million in prior year, reflecting higher adjusted EBITDA and lower interest expense, offset in part by higher adjusted taxes and non-controlling interests. Adjusted diluted EPS(1) in the year ended December 31, 2020 was $0.63 compared to $0.35 in the prior year.
(1) See "Non-GAAP Financial Measures" below.
2021 Financial Outlook
Amneal’s full year 2021 estimates are based on management's current expectations, including with respect to prescription trends, pricing levels, inventory levels, the costs incurred and benefits realized of restructuring activities and the anticipated timing of future product launches and events. The Company cannot provide a reconciliation between non-GAAP projections and the most directly comparable GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. The items include, but are not limited to, acquisition-related expenses, restructuring expenses and benefits, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP reported results for 2021.
| | | | | |
| Full Year 2021 Financial Guidance |
Net revenue | $2.1 billion - $2.2 billion |
Adjusted EBITDA (1) | $500 million - $540 million |
Adjusted diluted EPS (2) | $0.70 - $0.85 |
Operating cash flow | $220 million - $250 million |
Capital expenditures | $60 million - $70 million |
Weighted average diluted shares outstanding (3) | Approximately 303 million |
(1) Includes 100% of Adjusted EBITDA from the AvKARE acquisition.
(2) Accounts for 35% non-controlling interest in AvKARE. EPS guidance reflects the current tax laws in effect as of February 26, 2021. Any potential increase in statutory tax rates will have an adverse impact on EPS.
(3) Assumes the weighted average diluted shares outstanding of Class A and Class B Common Shares under the if-converted method.
Conference Call Information
Amneal will host a conference call and live webcast at 8:30 am Eastern Time on February 26, 2021 to discuss its results. The live webcast and presentation will be accessible through the Investor Relations section of the Company’s website at https://investors.amneal.com. To access the call through a conference line, dial (844) 746-0741 (in the U.S.) or (412) 317-5273 (international callers). A replay of the conference call will be posted shortly after the call and will be available for seven days. To access the replay, dial (877) 344-7529 (in the U.S.) or (412) 317-0088 (international callers). The access code for the replay is 10152029.
About Amneal
Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is a fully-integrated pharmaceutical company focused on the development, manufacturing and distribution of generic and specialty drug products. The Company has operations in North America, Asia, and Europe, working together to bring high-quality medicines to patients primarily within the United States.
Amneal has an extensive portfolio of approximately 250 generic product families and is expanding its portfolio to include complex dosage forms, including biosimilars, in a broad range of therapeutic areas. The Company also markets a portfolio of branded pharmaceutical products through its Specialty segment focused principally on central nervous system and endocrine disorders.
The Company also owns 65% of AvKARE. AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing. For more information, visit www.amneal.com.
Cautionary Statement on Forward-Looking Statements
Certain statements contained herein, regarding matters that are not historical facts, may be forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995). Such forward-looking statements include statements regarding management’s intentions, plans, beliefs, expectations or forecasts for the future, including among other things: discussions of future operations; expected operating results and financial performance; impact of planned acquisitions and dispositions; the Company’s strategy for growth; product development; regulatory approvals; market position and expenditures. Words such as "plans," "expects," "will," "anticipates," "estimates" and similar words are intended to identify estimates and forward-looking statements.
The reader is cautioned not to rely on these forward-looking statements. These forward-looking statements are based on current expectations of future events. If the underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations and projections of the Company.
Such risks and uncertainties include, but are not limited to: the impact of the COVID-19 pandemic; the impact of global economic conditions; our ability to successfully develop, license, acquire and commercialize new products on a timely basis; our ability to obtain exclusive marketing rights for our products; the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices; our ability to manage our growth through acquisitions and otherwise; our dependence on the sales of a limited number of products for a substantial portion of our total revenues; the risk of product liability and other claims against us by consumers and other third parties; risks related to changes in the regulatory environment, including U.S. federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws; changes to FDA product approval requirements; risks related to federal regulation of arrangements between manufacturers of branded and generic products; the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers; the continuing trend of consolidation of certain customer groups; our reliance on certain licenses to proprietary technologies from time to time; our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods; our dependence on third-party agreements for a portion of our product offerings; our ability to identify and make acquisitions of or investments in complementary businesses and products on advantageous terms; legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives; the significant amount of resources we expend on research and development; our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, and the impact of interest rate fluctuations on such indebtedness; and the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal Group. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the Securities and Exchange Commission, including under Item 1A, "Risk Factors" in the Company’s most recent Annual Report on Form 10-K and in its subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements included herein speak only as of the date hereof and we undertake no obligation to revise or update such statements to reflect the occurrence of events or circumstances after the date hereof.
Non-GAAP Financial Measures
This release includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted gross margin, adjusted operating income and adjusted cost of goods sold, which are intended as supplemental measures of the Company’s performance that are not required by or presented in accordance with U.S. General Accepted Accounting Principles ("GAAP"). The calculation of non-GAAP adjusted diluted earnings per share assumes the conversion of all outstanding shares of Class B Common Stock to shares of Class A Common Stock.
Management uses these non-GAAP measures internally to evaluate and manage the Company’s operations and to better understand its business because they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results calculated under GAAP. These non-GAAP measures also isolate the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. The compensation committee of the Company’s board of directors also uses certain of these measures to evaluate management's performance and set its compensation. The Company believes that these non-GAAP measures also provide useful information to investors regarding certain financial and business trends relating to the Company’s financial condition and operating results facilitates an evaluation of the financial performance of the Company and its operations on a consistent basis. Providing this information therefore allows investors to make independent assessments of the Company’s financial performance, results of operation and trends while viewing the information through the eyes of management.
These non-GAAP measures are subject to limitations. The non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies because other companies may not calculate one or more in the same manner. Additionally, the non-GAAP performance measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements; do not reflect changes in, or cash requirements for, working capital needs; and do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt. Further, our historical adjusted results are not intended to project our adjusted results of operations or financial position for any future period. To compensate for these limitations, management presents and considers these non-GAAP measures in conjunction with the Company’s GAAP results; no non-GAAP measure should be considered in isolation from or as alternatives to net income, diluted earnings per share, gross profit, gross margin, operating income, cost of goods sold or any other measure determined in accordance with GAAP. Readers should review the reconciliations included below, and should not rely on any single financial measure to evaluate the Company’s business.
A reconciliation of each historical non-GAAP measure to the most directly comparable GAAP measure is set forth below.
Contacts
Tasos Konidaris
Executive Vice President, Chief Financial Officer
invest@amneal.com
Amneal Pharmaceuticals, Inc.
Consolidated Statements of Operations
(Unaudited; In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended
December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Net revenue | $ | 510,034 | | | $ | 397,328 | | | $ | 1,992,523 | | | $ | 1,626,373 | |
| Cost of goods sold | 342,962 | | | 273,373 | | | 1,329,551 | | | 1,147,214 | |
| Cost of goods sold impairment charges | — | | | 13,721 | | | 34,579 | | | 126,162 | |
| Gross profit | 167,072 | | | 110,234 | | | $ | 628,393 | | | $ | 352,997 | |
| Selling, general and administrative | 84,687 | | | 74,084 | | | 326,727 | | | 289,598 | |
| Research and development | 53,460 | | | 48,050 | | | 179,930 | | | 188,049 | |
| In-process research and development impairment charges | 1,720 | | | 450 | | | 2,680 | | | 46,619 | |
| Acquisition, transaction-related and integration expenses | 3,585 | | | 3,706 | | | 8,988 | | | 16,388 | |
| Restructuring and other charges | (259) | | | 4,412 | | | 2,398 | | | 34,345 | |
| (Gains) charges related to legal matters, net | — | | | (2,308) | | | 5,860 | | | 12,442 | |
| Intellectual property legal development expenses | 3,701 | | | 4,975 | | | 10,655 | | | 14,238 | |
| Operating income (loss) | 20,178 | | | (23,135) | | | 91,155 | | | (248,682) | |
| Other (expense) income: | | | | | | | |
| Interest expense, net | (34,535) | | | (38,829) | | | (145,998) | | | (168,205) | |
| Foreign exchange gain (loss) | 8,392 | | | 4,722 | | | 16,350 | | | (4,962) | |
| | | | | | | |
| Gain on sale of international businesses | — | | | 328 | | | 123 | | | 7,258 | |
| Gain from reduction of tax receivable agreement liability | — | | | — | | | — | | | 192,884 | |
| Other income (expense) | 488 | | | (197) | | | 2,590 | | | 1,465 | |
| Total other (expense) income, net | (25,655) | | | (33,976) | | | (126,935) | | | 28,440 | |
| Loss before income taxes | (5,477) | | | (57,111) | | | (35,780) | | | (220,242) | |
| Provision for (benefit from) income taxes | 1,485 | | | 7,792 | | | (104,358) | | | 383,331 | |
| Net (loss) income | (6,962) | | | (64,903) | | | 68,578 | | | (603,573) | |
| | | | | | | |
| Less: Net loss attributable to non-controlling interests | 3,925 | | | 32,775 | | | 22,481 | | | 241,656 | |
| | | | | | | |
| | | | | | | |
| Net (loss) income attributable to Amneal Pharmaceuticals, Inc. | $ | (3,037) | | | $ | (32,128) | | | $ | 91,059 | | | $ | (361,917) | |
| Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders: | | | | | | | |
| Class A and Class B-1 basic | $ | (0.02) | | | $ | (0.23) | | | $ | 0.62 | | | $ | (2.74) | |
| Class A and Class B-1 diluted | $ | (0.02) | | | $ | (0.23) | | | $ | 0.61 | | | $ | (2.74) | |
| Weighted-average common shares outstanding: | | | | | | | |
| Class A and Class B-1 basic | 147,640 | | | 141,853 | | | 147,443 | | | 132,106 | |
| Class A and Class B-1 diluted | 147,640 | | | 141,853 | | | 148,913 | | | 132,106 | |
Amneal Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(Unaudited; In thousands)
| | | | | | | | | | | |
| December 31,
2020 | | December 31,
2019 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 341,378 | | | $ | 151,197 | |
| Restricted cash | 5,743 | | | 1,625 | |
| Trade accounts receivable, net | 638,895 | | | 604,390 | |
| Inventories | 490,649 | | | 381,067 | |
| Prepaid expenses and other current assets | 73,467 | | | 70,164 | |
| Related party receivables | 1,407 | | | 1,767 | |
| Total current assets | 1,551,539 | | | 1,210,210 | |
| Property, plant and equipment, net | 477,754 | | | 477,997 | |
| Goodwill | 522,814 | | | 419,504 | |
| Intangible assets, net | 1,304,626 | | | 1,382,753 | |
| Operating lease right-of-use assets | 33,947 | | | 53,344 | |
| Operating lease right-of-use assets - related party | 24,792 | | | 16,528 | |
| Financing lease right-of-use assets - related party | 58,676 | | | 61,284 | |
| Other assets | 31,885 | | | 44,270 | |
| Total assets | $ | 4,006,033 | | | $ | 3,665,890 | |
| Liabilities and Stockholders' Equity | | | |
| Current liabilities: | | | |
| Accounts payable and accrued expenses | $ | 613,661 | | | $ | 507,483 | |
| Current portion of long-term debt, net | 44,228 | | | 21,479 | |
| Current portion of operating lease liabilities | 6,474 | | | 11,874 | |
| Current portion of operating and financing lease liabilities - related party | 3,978 | | | 3,601 | |
| Current portion of note payable - related party | 1,000 | | | — | |
| Related party payables - short term | 7,561 | | | 5,969 | |
| Total current liabilities | 676,902 | | | 550,406 | |
| Long-term debt, net | 2,735,264 | | | 2,609,046 | |
| Note payable - related party | 36,440 | | | — | |
| Operating lease liabilities | 30,182 | | | 43,135 | |
| Operating lease liabilities - related party | 23,049 | | | 15,469 | |
| Financing lease liabilities - related party | 60,193 | | | 61,463 | |
| Related party payable - long term | 1,584 | | | — | |
| Other long-term liabilities | 85,683 | | | 39,583 | |
| Total long-term liabilities | 2,972,395 | | | 2,768,696 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Redeemable non-controlling interest | 11,804 | | | — | |
| Total stockholders' equity | 344,932 | | | 346,788 | |
| Total liabilities and stockholders' equity | $ | 4,006,033 | | | $ | 3,665,890 | |
Amneal Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(Unaudited; In thousands)
| | | | | | | | | | | |
| Year Ended
December 31, |
| 2020 | | 2019 |
| Cash flows from operating activities: | | | |
| Net income (loss) | $ | 68,578 | | | $ | (603,573) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | |
| Gain from reduction of tax receivable agreement liability | — | | | (192,884) | |
| Depreciation and amortization | 235,387 | | | 207,235 | |
| Amortization of Levothyroxine Transition Agreement asset | — | | | 36,393 | |
| Unrealized foreign currency (gain) loss | (16,728) | | | 7,342 | |
| Amortization of debt issuance costs | 8,678 | | | 6,478 | |
| | | |
| Gain on sale of international businesses, net | (123) | | | (7,258) | |
| Intangible asset impairment charges | 37,259 | | | 172,781 | |
| Non-cash restructuring and asset-related charges | (536) | | | 12,459 | |
| Deferred tax provision | — | | | 371,716 | |
| Stock-based compensation | 20,750 | | | 21,679 | |
| Inventory provision | 75,236 | | | 82,245 | |
| Other operating charges and credits, net | 11,818 | | | 7,309 | |
| Changes in assets and liabilities: | | | |
| Trade accounts receivable, net | 16,787 | | | (132,726) | |
| Inventories | (113,782) | | | (20,393) | |
| Prepaid expenses, other current assets and other assets | 33,312 | | | 38,870 | |
| Related party receivables | 412 | | | (939) | |
| Accounts payable, accrued expenses and other liabilities | 307 | | | (10,257) | |
| Related party payables | 1,646 | | | 5,228 | |
| Net cash provided by operating activities | 379,001 | | | 1,705 | |
| Cash flows from investing activities: | | | |
| Purchases of property, plant and equipment | (56,445) | | | (47,181) | |
| Acquisition of product rights and licenses | — | | | (50,250) | |
| Deposits for future acquisition of property, plant, and equipment | (5,391) | | | — | |
| Acquisition of intangible assets | (4,350) | | | — | |
| Acquisitions, net of cash acquired | (251,360) | | | — | |
| Proceeds from surrender of corporate owned life insurance | — | | | 43,017 | |
| | | |
| Proceeds from sale of international businesses, net of cash sold | — | | | 34,834 | |
| Net cash used in investing activities | (317,546) | | | (19,580) | |
| Cash flows from financing activities: | | | |
| Payments of deferred financing costs and debt extinguishment costs | (4,102) | | | — | |
| Proceeds from issuance of debt | 180,000 | | | — | |
| Payments of principal on debt, financing leases and other | (35,933) | | | (27,000) | |
| | | |
| | | |
| Proceeds from exercise of stock options | 321 | | | 1,400 | |
| Employee payroll tax withholding on restricted stock unit vesting | (863) | | | (926) | |
| | | |
| | | |
| | | |
| Distribution of earnings to and acquisition of non-controlling interest | (3,300) | | | (3,543) | |
| Tax distribution to non-controlling interest | (3,237) | | | (13,494) | |
| | | |
| Payments of principal on financing lease - related party | (1,079) | | | (2,270) | |
| | | |
| Net cash provided by (used in) financing activities | 131,807 | | | (45,833) | |
| Effect of foreign exchange rate on cash | 1,037 | | | (2,249) | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 194,299 | | | (65,957) | |
| Cash, cash equivalents, and restricted cash - beginning of period | 152,822 | | | 218,779 | |
| Cash, cash equivalents, and restricted cash - end of period | $ | 347,121 | | | $ | 152,822 | |
| Cash and cash equivalents - end of period | $ | 341,378 | | | $ | 151,197 | |
| Restricted cash - end of period | $ | 5,743 | | | $ | 1,625 | |
| Cash, cash equivalents, and restricted cash - end of period | $ | 347,121 | | | $ | 152,822 | |
Amneal Pharmaceuticals, Inc.
Generics Operating Results
(Unaudited; In thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
Generics | Three Months Ended December 31, | | Year Ended
December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Net revenue – Generics | $ | 342,145 | | | $ | 300,281 | | | $ | 1,343,210 | | | $ | 1,308,843 | |
| Cost of goods sold | 227,581 | | | 224,708 | | | 894,422 | | | 984,782 | |
| Cost of goods sold impairment charges | — | | | 13,721 | | | 34,579 | | | 119,145 | |
| Gross profit | 114,564 | | | 61,852 | | | 414,209 | | | 204,916 | |
| Selling, general and administrative | 13,556 | | | 16,100 | | | 56,134 | | | 68,883 | |
| Research and development | 41,486 | | | 42,281 | | | 150,068 | | | 172,196 | |
| In-process research and development impairment charges | 1,720 | | | 450 | | | 2,680 | | | 46,619 | |
| Acquisition, transaction-related and integration expenses | 3 | | | 547 | | | 328 | | | 4,633 | |
| Restructuring and other (credit) charges | (456) | | | 2,900 | | | (614) | | | 20,101 | |
| (Gains) charges related to legal matters, net | — | | | (2,308) | | | 5,610 | | | 12,442 | |
| Intellectual property legal development expenses | 3,700 | | | 4,975 | | | 10,647 | | | 13,193 | |
| Operating income (loss) | $ | 54,555 | | | $ | (3,093) | | | $ | 189,356 | | | $ | (133,151) | |
| | | | | | | |
| Gross margin | 33.5 | % | | 20.6 | % | | 30.8 | % | | 15.7 | % |
Adjusted gross profit (Non-GAAP) (1) | $ | 129,425 | | | $ | 99,770 | | | $ | 514,018 | | | $ | 464,270 | |
Adjusted gross margin (Non-GAAP) (2) | 37.8 | % | | 33.2 | % | | 38.3 | % | | 35.5 | % |
| Adjusted operating income (Non-GAAP) | $ | 78,834 | | | $ | 48,740 | | | $ | 325,605 | | | $ | 250,000 | |
(1) Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.
(2) Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.
Generics net revenue was $342 million for three months ended December 31, 2020, an increase of $42 million or 14% when compared with the same period in 2019. The year-over-year increase was primarily due to our 2019 and 2020 new product launches of $44 million, including EluRyng and Sucralfate Oral Solution, and growth in Generic volume from new commercial initiatives, partially offset by competition relating to Levothyroxine Sodium Tabs and Diclofenac Gel 1%.
Generics gross margin was 33.5% compared to 20.6% for the prior year period. The increase primarily related to new product launches, which contributed $31 million of gross margin growth, the impact of new volume won during 2020 and operational efficiencies and product mix, which more than offset pricing pressures relating to Levothyroxine Sodium Tabs and Diclofenac Gel 1%. In addition, gross margin improvement resulted from a $14 million decline in intangible asset impairment charges and a $5 million reduction in ongoing intangible asset amortization compared to the prior year. Generics adjusted gross margin was 37.8% compared to 33.2% in the prior-year period as the strength in new product contribution and operational efficiencies offset pricing pressure on Levothyroxine Sodium Tabs and Diclofenac Gel 1%.
Generics operating income was $55 million compared to an operating loss of $3 million in the prior year period. The improvement primarily reflected increased gross profit of $53 million as well as efficient operating expense management. Generics adjusted operating income for the fourth quarter of 2020 was $79 million compared to $49 million for the prior year due to improved gross margin.
Amneal Pharmaceuticals, Inc.
Specialty Operating Results
(Unaudited; In thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
Specialty | Three Months Ended December 31, | | Years Ended
December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Net revenue - Specialty: | | | | | | | |
| Rytary® | $ | 45,412 | | | $ | 39,235 | | | $ | 159,293 | | | $ | 134,773 | |
| Unithroid® | 13,773 | | | 12,309 | | | 53,578 | | | 41,089 | |
| Zomig® | 13,062 | | | 15,458 | | | 48,392 | | | 54,980 | |
| All other specialty products | 13,219 | | | 30,045 | | | 94,304 | | | 86,688 | |
| Total net revenue – Specialty | $ | 85,466 | | | $ | 97,047 | | | $ | 355,567 | | | $ | 317,530 | |
| Cost of goods sold | 47,128 | | | 48,665 | | | 192,910 | | | 162,432 | |
| Cost of goods sold impairment charges | — | | | — | | | — | | | 7,017 | |
| Gross profit | 38,338 | | | 48,382 | | | 162,657 | | | 148,081 | |
| Selling, general and administrative | 18,924 | | | 21,960 | | | 75,917 | | | 79,665 | |
| Research and development | 11,974 | | | 5,769 | | | 29,862 | | | 15,853 | |
| | | | | | | |
| Acquisition, transaction-related and integration expenses | 2 | | | 2,641 | | | 85 | | | 8,346 | |
| Restructuring and other charges | — | | | — | | | — | | | 391 | |
| Charges related to legal matters, net | — | | | — | | | 250 | | | — | |
| Intellectual property legal development expenses | 1 | | | — | | | 8 | | | 1,045 | |
| Operating income | $ | 7,437 | | | $ | 18,012 | | | $ | 56,535 | | | $ | 42,781 | |
| | | | | | | |
| Gross margin | 44.9 | % | | 49.9 | % | | 45.7 | % | | 46.6 | % |
Adjusted gross profit (Non-GAAP) (1) | $ | 63,465 | | | $ | 73,077 | | | $ | 263,801 | | | $ | 247,267 | |
Adjusted gross margin (Non-GAAP) (2) | 74.3 | % | | 75.3 | % | | 74.2 | % | | 77.9 | % |
| Adjusted operating income (Non-GAAP) | $ | 38,209 | | | $ | 45,880 | | | $ | 168,860 | | | $ | 154,825 | |
(1) Adjusted gross profit is calculated as net revenue less adjusted cost of goods sold.
(2) Adjusted gross margin is calculated as adjusted gross profit divided by net revenue.
Specialty net revenue for the three months ended December 31, 2020 was $85 million, a decline of $12 million, or 12%, compared to $97 million for the prior year period. Growth in demand for Rytary® and Unithroid® was offset by declines in non-promoted products as well as unfavorable Emverm® sales due to the impact of COVID-19 on pinworm related prescriptions.
Specialty gross margin for fourth quarter of 2020 was 44.9% compared to 49.9% in the prior year period primarily due to the mix of revenues, including the impact of non-promoted products. Specialty adjusted gross margin for the fourth quarter of 2020 of 74% was generally in line with margin for the prior period.
Specialty operating income for the fourth quarter of 2020 was $7 million compared to $18 million in the prior year period. The decline in operating income primarily reflected the impact of unfavorable gross margin and increased research and development expense of $6 million including milestone expenses of $5 million for the expansion of the Specialty pipeline. Specialty adjusted operating income for the fourth quarter of 2020 was $38 million compared to $46 million for the prior period as adjusted gross margin declined.
Amneal Pharmaceuticals, Inc.
AvKARE Operating Results
(Unaudited; In thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
AvKARE (1) | Three Months Ended December 31, | | Years Ended
December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
Net revenue - AvKARE (2) | $ | 82,423 | | | $ | — | | | $ | 293,746 | | | $ | — | |
Cost of goods sold (2) | 68,253 | | | — | | | 242,219 | | | — | |
Gross profit (2) | 14,170 | | | — | | | 51,527 | | | — | |
| Selling, general, and administrative | 16,735 | | | — | | | 58,544 | | | — | |
| Acquisition, transaction-related and integration expenses | 641 | | | — | | | 641 | | | — | |
| Operating loss | $ | (3,206) | | | $ | — | | | $ | (7,658) | | | $ | — | |
| | | | | | | |
| Gross margin | 17.2 | % | | — | % | | 17.5 | % | | — | % |
Adjusted gross profit (Non-GAAP) (3) | $ | 14,170 | | | $ | — | | | $ | 51,527 | | | $ | — | |
Adjusted gross margin (Non-GAAP) (3) | 17.2 | % | | — | % | | 17.5 | % | | — | % |
| Adjusted operating income (Non-GAAP) | $ | 6,129 | | | $ | — | | | $ | 24,861 | | | $ | — | |
(1) The AvKARE segment includes the results of operations of AvKARE from January 31, 2020, the date of the acquisition, to December 31, 2020.
(2) AvKARE excludes net revenue, costs of goods sold and gross profit from sales of Amneal products through this distribution channel. These financial results are included in the Generics segment.
(3) There are no non-GAAP adjustments associated with gross profit and gross margin.
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliations of Cost of Goods Sold to Adjusted Cost of Goods Sold
| | | | | | | | | | | | | | | | | | | | | | | |
Generics | Three Months Ended December 31, | | Year Ended
December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
Cost of goods sold | $ | 227,581 | | | $ | 224,708 | | | $ | 894,422 | | | $ | 984,782 | |
Cost of goods sold impairment charges | — | | | 13,721 | | | 34,579 | | | 119,145 | |
Adjusted to deduct (add): | | | | | | | |
Amortization | 10,047 | | | 15,483 | | | 41,946 | | | 51,783 | |
Inventory related charges (4) | 400 | | | 3,089 | | | 5,465 | | | 22,828 | |
Acquisition and site closure expenses (2) | 2,746 | | | 4,715 | | | 10,580 | | | 25,151 | |
Asset impairment charges (3) | — | | | 13,721 | | | 35,822 | | | 119,145 | |
Stock-based compensation expense | 954 | | | 910 | | | 4,166 | | | 3,030 | |
Amortization of upfront payment (6) | — | | | — | | | — | | | 36,393 | |
Other | 714 | | | — | | | 1,830 | | | 1,024 | |
Adjusted cost of goods sold (Non-GAAP) | $ | 212,720 | | | $ | 200,511 | | | $ | 829,192 | | | $ | 844,573 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Specialty | Three Months Ended December 31, | | Year Ended
December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
Cost of goods sold | $ | 47,128 | | | $ | 48,665 | | | $ | 192,910 | | | $ | 162,432 | |
Cost of goods sold impairment charges | — | | | — | | | — | | | 7,017 | |
Adjusted to deduct: | | | | | | | |
Amortization | 25,127 | | | 24,695 | | | 101,144 | | | 92,169 | |
Asset impairment charges (3) | — | | | — | | | — | | | 7,017 | |
Adjusted cost of goods sold (Non-GAAP) | $ | 22,001 | | | $ | 23,970 | | | $ | 91,766 | | | $ | 70,263 | |
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
Reconciliations of Operating Income (Loss) to Adjusted Operating Income
| | | | | | | | | | | | | | | | | | | | | | | |
Generics | Three Months Ended December 31, | | Year Ended
December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Operating income (loss) | $ | 54,555 | | | $ | (3,093) | | | $ | 189,356 | | | $ | (133,151) | |
| Adjusted to add (deduct): | | | | | | | |
Acquisition and site closure expenses (2) | 3,195 | | | 6,028 | | | 14,832 | | | 41,639 | |
Amortization | 10,047 | | | 15,483 | | | 41,946 | | | 51,783 | |
Inventory related charges (4) | 400 | | | 5,938 | | | 6,083 | | | 25,677 | |
Stock-based compensation expense | 2,046 | | | 2,588 | | | 8,097 | | | 11,943 | |
Asset impairment charges (3) | 5,505 | | | 14,655 | | | 42,995 | | | 166,396 | |
Restructuring and other charges (credit) (5) | (456) | | | 2,900 | | | (614) | | | 20,101 | |
(Gain) charges related to legal matters, net (7) | — | | | (2,409) | | | 5,610 | | | 12,591 | |
Amortization of upfront payment (6) | — | | | — | | | — | | | 36,393 | |
R&D milestone payment | 2,626 | | | 6,650 | | | 15,771 | | | 16,579 | |
Other | 916 | | | — | | | 1,529 | | | 49 | |
| Adjusted operating income (Non-GAAP) | $ | 78,834 | | | $ | 48,740 | | | $ | 325,605 | | | $ | 250,000 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Specialty | Three Months Ended December 31, | | Year Ended December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Operating income | $ | 7,437 | | | $ | 18,012 | | | $ | 56,535 | | | $ | 42,781 | |
| Adjusted to add (deduct): | | | | | | | |
Amortization | 25,127 | | | 24,695 | | | 101,144 | | | 92,169 | |
Acquisition and site closure expenses (2) | 2 | | | 2,641 | | | 85 | | | 10,969 | |
Stock-based compensation expense | 645 | | | 532 | | | 2,678 | | | 1,498 | |
Restructuring and other charges (5) | — | | | — | | | — | | | 391 | |
R&D milestone payment | 5,000 | | | — | | | 7,000 | | | — | |
Asset impairment charges (3) | — | | | — | | | — | | | 7,017 | |
Other | (2) | | | — | | | 1,418 | | | — | |
| Adjusted operating income (Non-GAAP) | $ | 38,209 | | | $ | 45,880 | | | $ | 168,860 | | | $ | 154,825 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| AvKARE | Three Months Ended December 31, | | Year Ended December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Operating loss | $ | (3,206) | | | $ | — | | | $ | (7,658) | | | $ | — | |
| Adjusted to add: | | | | | | | |
Amortization | 8,694 | | | — | | | 31,878 | | | — | |
Acquisition and site closure expenses (2) | 641 | | | — | | | 641 | | | — | |
| Adjusted operating income (Non-GAAP) | $ | 6,129 | | | $ | — | | | $ | 24,861 | | | $ | — | |
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands, except per share amounts)
Reconciliation of Net (Loss) Income to Adjusted Net Income and Calculation of Adjusted Diluted EPS
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
Net (loss) income | $ | (6,962) | | | $ | (64,903) | | | $ | 68,578 | | | $ | (603,573) | |
| Adjusted to add (deduct): | | | | | | | |
Non-cash interest | 2,015 | | | 1,629 | | | 7,900 | | | 6,478 | |
Gain from reduction of tax receivable agreement liability (1) | — | | | — | | | — | | | (192,884) | |
GAAP Income tax expense (benefit) | 1,485 | | | 7,792 | | | (104,358) | | | 383,331 | |
Amortization | 40,833 | | | 40,178 | | | 163,842 | | | 143,952 | |
Stock-based compensation expense | 5,133 | | | 5,013 | | | 20,750 | | | 21,679 | |
Acquisition and site closure expenses (2) | 6,777 | | | 14,983 | | | 23,384 | | | 73,471 | |
Restructuring and other charges (credit) (5) | (259) | | | 4,412 | | | 2,398 | | | 34,345 | |
Inventory related charges (4) | 395 | | | 5,963 | | | 6,574 | | | 25,702 | |
(Gains) charges related to legal matters, net (7) | — | | | (2,409) | | | 5,610 | | | 12,591 | |
Asset impairment charges (3) | 5,505 | | | 14,655 | | | 43,629 | | | 175,210 | |
Amortization of upfront payment (6) | — | | | — | | | — | | | 36,393 | |
Foreign exchange (gain) loss | (8,392) | | | (4,722) | | | (16,350) | | | 4,962 | |
Gain on sale of international businesses, net (8) | — | | | (328) | | | (123) | | | (7,258) | |
R&D milestone payments | 7,626 | | | 6,650 | | | 22,771 | | | 16,579 | |
Other | 1,696 | | | 342 | | | 1,926 | | | 578 | |
Income tax at 21% | (12,411) | | | (6,138) | | | (54,271) | | | (27,621) | |
Net loss attributable to NCI not associated with our Class B shares | (89) | | | (113) | | | (1,240) | | | (344) | |
| Adjusted net income (Non-GAAP) | $ | 43,352 | | | $ | 23,004 | | | $ | 191,020 | | | $ | 103,591 | |
Adjusted diluted EPS (Non-GAAP) (9) | $ | 0.14 | | | $ | 0.08 | | | $ | 0.63 | | | $ | 0.35 | |
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited, In thousands)
Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | Year Ended December 31, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Net (loss) income | $ | (6,962) | | | $ | (64,903) | | | $ | 68,578 | | | $ | (603,573) | |
| Adjusted to add (deduct): | | | | | | | |
Interest expense, net | 34,535 | | | 38,829 | | | 145,998 | | | 168,205 | |
Income tax expense (benefit) | 1,485 | | | 7,792 | | | (104,358) | | | 383,331 | |
Depreciation and amortization | 59,873 | | | 54,303 | | | 235,387 | | | 207,235 | |
| EBITDA (Non-GAAP) | $ | 88,931 | | | $ | 36,021 | | | $ | 345,605 | | | $ | 155,198 | |
| Adjusted to add (deduct): | | | | | | | |
Gain from reduction of tax receivable agreement liability (1) | — | | | — | | | — | | | (192,884) | |
Stock-based compensation expense | 5,133 | | | 5,013 | | | 20,750 | | | 21,679 | |
Acquisition and site closure expenses (2) | 6,777 | | | 14,983 | | | 23,384 | | | 73,471 | |
Restructuring and other charges (credit) (5) | (259) | | | 4,412 | | | 2,398 | | | 34,345 | |
Inventory related charges (4) | 395 | | | 5,938 | | | 6,574 | | | 25,677 | |
(Gains) charges related to legal matters, net (7) | — | | | (2,409) | | | 5,610 | | | 12,591 | |
Asset impairment charges (3) | 5,505 | | | 14,655 | | | 43,629 | | | 175,210 | |
Amortization of upfront payment (6) | — | | | — | | | — | | | 36,393 | |
Foreign exchange (gain) loss | (8,392) | | | (4,722) | | | (16,350) | | | 4,962 | |
Gain on sale of international businesses, net (8) | — | | | (328) | | | (123) | | | (7,258) | |
R&D milestone payments | 7,626 | | | 6,650 | | | 22,771 | | | 16,579 | |
Other | 1,696 | | | 342 | | | 1,926 | | | (446) | |
| Adjusted EBITDA (Non-GAAP) | $ | 107,412 | | | $ | 80,555 | | | $ | 456,174 | | | $ | 355,517 | |
Amneal Pharmaceuticals, Inc.
Non-GAAP Reconciliations
(Unaudited; In thousands)
(1) Gain from reduction of tax receivable agreement liability represents the reversal of the accrued liability associated with the Company’s deferred tax assets created at the Combination.
(2) Acquisition and site closure expenses for the three months and year ended December 31, 2020 primarily included costs related to: (i) system integrations associated with the combination with Impax Laboratories, LLC ("Impax"), (ii) integration activities associated with the acquisition of AvKARE, (iii) expenses associated with the pending acquisition of a 98% interest in Kashiv Specialty Pharmaceuticals, LLC (a related party) and (iv) plant closure and redundant employee costs related to the planned cessation of manufacturing at our Hauppauge, NY facility. Acquisition and site closure expenses for the three months and year ended December 31, 2019 included costs related to: (i) plant closure and redundant employee costs related to the planned cessation of manufacturing at our Hauppauge, NY facility and (ii) third party costs associated with the combination with Impax and related integration including legal, investment banking, accounting and information technology.
(3) Asset impairment charges for the three months ended December 31, 2020 were primarily associated with equipment and in-process research and development intangible assets acquired in the combination with Impax. Asset impairment charges for the year ended December 31, 2020 were primarily associated with equipment and in-process research and development and other intangible assets acquired in the combination with Impax. Asset impairment charges for the three months and year ended December 31, 2019 were primarily associated with in-process research and development and other intangible assets acquired in the combination with Impax.
(4) For the three months and year ended December 31, 2020, inventory related charges represented inventory obsolescence and related expenses associated with recalls. For the three months and year ended December 31, 2019, inventory related charges primarily represented inventory obsolescence resulting from new initiatives and policies adopted with our restructuring efforts.
(5) For the three months ended December 31, 2020, restructuring and other charges (credit) consisted of a change in estimate to reduce the amount accrued for the cost of benefits provided pursuant to our severance programs for employees impacted at our Hauppauge, NY facility. For the year ended December 31, 2020, restructuring and other charges (credit) primarily consisted of the cost of benefits provided pursuant to our severance programs for former senior executives and management employees, net of an asset-related credit associated with the contractual cancellation of an asset retirement obligation related to a lease in Hayward, CA. For the three months ended December 31, 2019, restructuring and other charges primarily consisted of the cost of benefits provided pursuant to our severance programs for employees at our Hauppauge, NY facility. For the year ended December 31, 2019, restructuring and other charges primarily consisted of the cost of benefits provided pursuant to our severance programs for employees at our Hauppauge, NY, Hayward, CA and other facilities as well as asset-related charges associated with the impairment of property, plant and equipment and the right of use asset associated with our Hauppauge, NY facility.
(6) For the year ended December 31, 2019, amortization of upfront payment represents the amortization of the upfront payment made to Lannett Company in connection with our transition agreement for Levothyroxine.
(7) For the year ended December 31, 2020, (gains) charges related to legal matters, net of $6 million were associated with commercial legal claims in our Generics segment. For the year ended December 31, 2019, (gains) charges related to legal matters, net were primarily related to an agreement in principle with Teva Pharmaceuticals, Inc. regarding a matter associated with Impax prior to the Combination.
(8) For the year ended December 31, 2019, gain on the sale of international businesses, net represents the gain from the sale of our Creo Pharma Holding Limited subsidiary, which comprised substantially all of the Company's operations in the United Kingdom, partially offset by the loss from the sale of our Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany.
(9) For the three months and year ended December 31, 2020, adjusted diluted EPS (non-GAAP) utilizes weighted average diluted shares outstanding of 301,903 and 301,030, respectively, which consists of Class A shares and Class B shares under the if-converted method. For the three months and year ended December 31, 2019, adjusted diluted EPS (non-GAAP) utilizes weighted average diluted shares outstanding of 299,298 and 299,194, respectively, which consists of Class A and Class B shares under the if-converted method.