Amneal Pharmaceuticals Inc.

11/04/2022 | Press release | Archived content

Amneal Pharmaceuticals Third Quarter 2022 Earnings Results

‒ Q3 2022 Net Revenue of $546 million; GAAP Net Loss of $3 million; Diluted Loss per Share of $(0.02) ‒
 ‒ Adjusted EBITDA (1) of $126 million; Adjusted Diluted EPS (1) of $0.14 ‒
 ‒ Maintaining 2022 Full Year Outlook ‒

BRIDGEWATER, N.J.--(BUSINESS WIRE)-- Amneal Pharmaceuticals, Inc. (NYSE: AMRX) ("Amneal" or the "Company") announced its results today for the third quarter ended September 30, 2022.

"Third quarter results reflect continued solid performance across our diversified portfolio. Over the last several years, we have driven our growth strategy through new product innovation, leveraging key capabilities, and strong execution. We continued our momentum this quarter with numerous new product approvals, scaling of our injectables business, launching our first biosimilar, and filing our IPX203 NDA in Specialty. As we successfully execute on our strategic priorities, we see our momentum building," said Chirag and Chintu Patel, Co-Chief Executive Officers.

Net revenue in the third quarter of 2022 was $546 million, an increase of 3.2% compared to $529 million in the third quarter of 2021. These results reflected consistent performance of Generics and Specialty, and double-digit growth of AvKARE.

Net loss attributable to Amneal Pharmaceuticals, Inc. was $3 million in the third quarter of 2022 compared to a net loss of $4 million in the third quarter of 2021. Adjusted EBITDA(1) in the third quarter of 2022 was $126 million, a decrease of 5.1% compared to the third quarter of 2021, reflective of investments to drive upcoming new product launches. Diluted loss per share and adjusted diluted EPS(1) in the third quarter of 2022 were $(0.02) and $0.14, respectively, compared to $(0.03) and $0.21, respectively, in the third quarter of 2021.

(1)

See "Non-GAAP Financial Measures" below.

Maintaining Full Year 2022 Guidance

The Company is maintaining its previously provided full year 2022 guidance.

Full Year 2022 Guidance

Net revenue

$2.15 billion - $2.25 billion

Adjusted EBITDA (1)

$500 million - $520 million

Adjusted diluted EPS (2)

$0.65 - $0.70

Operating cash flow (3)

$200 million - $225 million

Capital expenditures

$65 million - $75 million

Weighted average diluted shares outstanding (4)

Approximately 305 million

(1)

Includes 100% of EBITDA from the AvKARE acquisition. Beginning in the first quarter of 2022, the Company no longer excludes research and development ("R&D") milestone expense from its non-GAAP financial measures. In the third quarter of 2022, R&D milestone expenses were $3 million.

(2)

Accounts for 35% non-controlling interest in AvKARE. Beginning in the first quarter of 2022, the Company no longer excludes R&D milestone expense from its non-GAAP financial measures.

(3)

Represents cash provided by operating activities. Guidance does not contemplate one time and non-recurring items such as legal settlements and other discrete items. These amounts exclude anticipated cash payments this year of approximately $131 million related to the settlements and preliminary settlements of the Opana ER® antitrust litigation.

(4)

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

Amneal's 2022 estimates are based on management's current expectations, including with respect to prescription trends, pricing levels, the timing of future product launches, the costs incurred and benefits realized of restructuring activities, and our long-term strategy. The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company cannot provide a reconciliation between non-GAAP projections and the most directly comparable measures in accordance with GAAP 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, legal settlements, restructuring expenses and benefits, asset impairments and other gains and losses. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results.

Conference Call Information

Amneal will host a conference call and live webcast at 8:30 am Eastern Time on November 4, 2022 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) 200-6205 (in the U.S.) or (929) 526-1599 (international callers). The access code for the call is 585341. 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 (866) 813-9403 (in the U.S.) or +44 (204) 525-0658 (international callers). The access code for the replay is 049751.

About Amneal

Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in Bridgewater, NJ, is a fully-integrated essential medicines company. We make healthy possible through the development, manufacturing, and distribution of generic and specialty pharmaceuticals, primarily within the United States. The Company has a diverse portfolio of over 250 products in its Generics segment and is expanding across a broad range of complex products and therapeutic areas, including injectables and biosimilars. In its Specialty segment, Amneal has a growing portfolio of branded pharmaceutical products focused primarily on central nervous system and endocrine disorders, with a pipeline focused on unmet needs. Through its AvKARE segment, the Company is a distributor of pharmaceuticals and other products for the U.S. federal government, retail, and institutional markets. For more information, please 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 or estimated operating results and financial performance, the Company's growth prospects and opportunities as well as its strategy for growth; product development and launches; the successful commercialization and market acceptance of new products, 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: our ability to successfully develop, license, acquire and commercialize new products on a timely basis; the competition we face in the pharmaceutical industry, in general, specifically from brand and generic drug product companies, and the impact of that competition on our ability to set prices; our ability to obtain exclusive marketing rights for our products; 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; 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 continuing trend of consolidation of certain customer groups; our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods and any associated supply chain disruptions; existing and future legal proceedings, the outcome of which are uncertain and may divert management resources and require us to incur substantial defense or settlement payments and costs; legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives; the impact of severe weather; the impact of the ongoing COVID-19 pandemic, and the emergence of variant strains; risks related to federal regulation of arrangements between manufacturers of branded and generic products; our reliance on certain licenses to proprietary technologies from time to time; the significant amount of resources we expend on research and development; 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 Food and Drug Administration ("FDA") product approval requirements; the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers; our dependence on third-party agreements for a portion of our product offerings; the impact of global economic conditions, including any economic effects stemming from adverse geopolitical events, an economic downturn, inflation and rising interest rates; our ability to identify, make and integrate acquisitions or investments in complementary businesses and products on advantageous terms; our obligations under a tax receivable agreement may be significant; 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 EBITDA, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted cost of goods sold, adjusted selling general and administrative expense, and adjusted research and development expense, which are intended as supplemental measures of the Company's performance that are not required by or presented in accordance with 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 under the if-converted method.

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 operations and trends while viewing the information through the eyes of management.

As previously disclosed, beginning in the first quarter of 2022, we no longer exclude research and development milestone expenses related to license and collaboration agreements from our non-GAAP financial measures and our line item components, including adjusted research and development, adjusted EBITDA, adjusted operating income, adjusted net income and adjusted earnings per share. Prior period adjusted results have been revised to reflect this change. Refer to our Form 8-K filed with the Securities and Exchange Commission on May 4, 2022 for a full reconciliation of previously reported non-GAAP results to revised non-GAAP results for prior periods.

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, selling general and administrative expense, and research and development expense 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.

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Operations

(Unaudited; In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net revenue

$

545,557

$

528,593

$

1,602,545

$

1,556,773

Cost of goods sold

350,653

329,394

1,027,439

953,514

Cost of goods sold impairment charges

674

688

5,786

688

Gross profit

194,230

198,511

569,320

602,571

Selling, general and administrative

100,071

91,397

297,542

268,280

Research and development

50,235

48,927

153,781

149,973

In-process research and development impairment charges

-

-

-

710

Intellectual property legal development expenses

1,411

1,627

2,996

6,574

Acquisition, transaction-related and integration expenses

39

134

714

7,219

Charges related to legal matters, net

285

19,000

249,836

19,000

Charges (insurance recoveries) for property losses and associated expenses

-

8,186

(1,911

)

8,186

Restructuring and other charges

581

425

1,312

788

Change in fair value of contingent consideration

(1,425

)

300

(1,495

)

300

Other operating income

(1,320

)

-

(2,495

)

-

Operating income (loss)

44,353

28,515

(130,960

)

141,541

Other (expense) income:

Interest expense, net

(42,391

)

(34,400

)

(111,349

)

(102,368

)

Foreign exchange loss, net

(5,491

)

(29

)

(12,933

)

(185

)

Loss on refinancing

-

-

(291

)

-

Other income, net

5,709

3,871

15,061

8,697

Total other expense, net

(42,173

)

(30,558

)

(109,512

)

(93,856

)

Income (loss) before income taxes

2,180

(2,043

)

(240,472

)

47,685

Provision for income taxes

4,570

4,049

8,459

7,056

Net (loss) income

(2,390

)

(6,092

)

(248,931

)

40,629

Less: Net (income) loss attributable to non-controlling interests

(299

)

1,855

123,716

(23,628

)

Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest

(2,689

)

(4,237

)

(125,215

)

17,001

Accretion of redeemable non-controlling interest

-

-

(438

)

-

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

$

(2,689

)

$

(4,237

)

$

(125,653

)

$

17,001

Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.'s class A common stockholders:

Basic

$

(0.02

)

$

(0.03

)

$

(0.83

)

$

0.11

Diluted

$

(0.02

)

$

(0.03

)

$

(0.83

)

$

0.11

Weighted-average common shares outstanding:

Basic

151,393

149,290

150,765

148,771

Diluted

151,393

149,290

150,765

151,655

Amneal Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; In thousands)

September 30, 2022

December 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

87,335

$

247,790

Restricted cash

8,556

8,949

Trade accounts receivable, net

628,737

662,583

Inventories

543,858

489,389

Prepaid expenses and other current assets

149,650

110,218

Related party receivables

1,696

1,179

Total current assets

1,419,832

1,520,108

Property, plant and equipment, net

470,150

514,158

Goodwill

599,504

593,017

Intangible assets, net

1,159,005

1,166,922

Operating lease right-of-use assets

34,252

39,899

Operating lease right-of-use assets - related party

18,566

20,471

Financing lease right-of-use assets

64,468

64,475

Other assets

108,262

20,614

Total assets

$

3,874,039

$

3,939,664

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

531,462

$

525,345

Current portion of liabilities for legal matters

176,094

58,000

Revolving credit facility

60,000

-

Current portion of long-term debt, net

29,940

30,614

Current portion of operating lease liabilities

10,266

9,686

Current portion of operating and financing lease liabilities - related party

2,809

2,636

Current portion of financing lease liabilities

3,557

3,101

Related party payables - short term

3,867

47,861

Total current liabilities

817,995

677,243

Long-term debt, net

2,607,217

2,680,053

Note payable - related party

39,279

38,038

Operating lease liabilities

26,366

32,894

Operating lease liabilities - related party

16,653

18,783

Financing lease liabilities

61,311

60,251

Related party payables - long term

10,296

9,619

Other long-term liabilities

78,258

38,903

Total long-term liabilities

2,839,380

2,878,541

Redeemable non-controlling interests

22,375

16,907

Total stockholders' equity

194,289

366,973

Total liabilities and stockholders' equity

$

3,874,039

$

3,939,664

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(Unaudited; In thousands)

Nine Months Ended September 30,

2022

2021

Cash flows from operating activities:

Net (loss) income

$

(248,931

)

$

40,629

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

Depreciation and amortization

179,119

172,223

Unrealized foreign currency loss

12,893

(94

)

Amortization of debt issuance costs and discount

6,489

6,873

Loss on refinancing

291

-

Intangible asset impairment charges

5,786

1,398

Insurance recoveries for property and equipment losses

(1,000

)

-

Non-cash property losses

-

5,152

Stock-based compensation

24,016

20,670

Inventory provision

28,884

39,290

Change in fair value of contingent consideration

(1,495

)

300

Other operating charges and credits, net

7,077

3,965

Changes in assets and liabilities:

Trade accounts receivable, net

33,570

10,894

Inventories

(91,326

)

(65,643

)

Prepaid expenses, other current assets and other assets

(34,380

)

(27,493

)

Related party receivables

(517

)

7,201

Accounts payable, accrued expenses and other liabilities

165,437

(32,819

)

Related party payables

2,479

(3,987

)

Net cash provided by operating activities

88,392

178,559

Cash flows from investing activities:

Purchases of property, plant and equipment

(34,941

)

(30,230

)

Deposits for future acquisition of property, plant, and equipment

(2,388

)

(2,655

)

Acquisition of intangible assets

(41,800

)

(500

)

Acquisitions of businesses, net of cash acquired

(84,714

)

(73,828

)

Proceeds from insurance recoveries for property and equipment losses

1,000

-

Net cash used in investing activities

(162,843

)

(107,213

)

Cash flows from financing activities:

Payments of deferred financing and refinancing costs

(1,663

)

-

Payments of principal on debt, revolving credit facility, financing leases and other

(105,618

)

(68,240

)

Borrowings on revolving credit facility

85,000

-

Proceeds from exercise of stock options

662

834

Employee payroll tax withholding on restricted stock unit vesting

(3,483

)

(2,595

)

Tax distributions to non-controlling interests

(13,131

)

(36,678

)

Acquisition of redeemable non-controlling interest

(1,722

)

-

Payments of deferred consideration for acquisitions - related party

(44,498

)

-

Payments of principal on financing lease - related party

-

(93

)

Repayment of related party note

-

(1,000

)

Net cash used in financing activities

(84,453

)

(107,772

)

Effect of foreign exchange rate on cash

(1,944

)

(76

)

Net decrease in cash, cash equivalents, and restricted cash

(160,848

)

(36,502

)

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

256,739

347,121

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

$

95,891

$

310,619

Cash and cash equivalents - end of period

$

87,335

$

302,655

Restricted cash - end of period

8,556

7,964

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

$

95,891

$

310,619

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited, In thousands)

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA (1)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net (loss) income

$

(2,390

)

$

(6,092

)

$

(248,931

)

$

40,629

Adjusted to add:

Interest expense, net

42,391

34,400

111,349

102,368

Provision for income taxes

4,570

4,049

8,459

7,056

Depreciation and amortization

61,608

60,186

179,119

172,223

EBITDA (Non-GAAP)

$

106,179

$

92,543

$

49,996

$

322,276

Adjusted to add (deduct):

Stock-based compensation expense

7,689

7,708

24,016

20,670

Acquisition, site closure, and idle facility expenses (2)

3,468

2,220

12,230

13,976

Restructuring and other charges (3)

538

425

1,269

788

Loss on refinancing

-

-

291

-

Inventory related charges

-

44

-

245

Charges related to legal matters, net (4)

285

19,000

249,836

19,000

Asset impairment charges

3,108

688

8,358

1,752

Foreign exchange loss

5,491

29

12,933

185

Regulatory approval milestone

-

-

5,000

-

Change in fair value of contingent consideration

(1,425

)

300

(1,495

)

300

Charges (insurance recoveries) for property losses and associated

expenses (5)

-

8,186

(1,911

)

8,186

Other

300

1,282

(445

)

3,088

Adjusted EBITDA (Non-GAAP)

$

125,633

$

132,425

$

360,078

$

390,466

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 Earnings Per Share (1)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net (loss) income

$

(2,390

)

$

(6,092

)

$

(248,931

)

$

40,629

Adjusted to add (deduct):

Non-cash interest

1,882

2,183

5,830

6,232

GAAP provision for income taxes

4,570

4,049

8,459

7,056

Amortization

42,778

41,651

122,146

122,526

Stock-based compensation expense

7,689

7,708

24,016

20,670

Acquisition, site closure expenses, and idle facility expenses (2)

3,468

2,220

12,230

13,976

Restructuring and other charges (3)

538

425

1,269

788

Loss on refinancing

-

-

291

-

Inventory related charges

-

44

-

245

Charges related to legal matters, including interest, net (4)

1,758

19,000

251,662

19,000

Asset impairment charges

3,108

688

8,358

1,752

Regulatory approval milestone

-

-

5,000

-

Change in fair value of contingent consideration

(1,425

)

300

(1,495

)

300

Charges (insurance recoveries) for property losses and associated expenses (5)

-

8,186

(1,911

)

8,186

Other

300

1,282

(303

)

3,088

Provision for income taxes (6)

(13,494

)

(16,821

)

(41,153

)

(52,006

)

Net income attributable to non-controlling interests not associated

with our class B common stock

(5,075

)

(1,541

)

(9,163

)

(5,391

)

Adjusted net income (Non-GAAP)

$

43,707

$

63,282

$

136,305

$

187,051

Weighted average diluted shares outstanding (Non-GAAP) (7)

304,319

303,861

304,415

303,772

Adjusted diluted earnings per share (Non-GAAP)

$

0.14

$

0.21

$

0.45

$

0.62

Amneal Pharmaceuticals, Inc.

Non-GAAP Reconciliations

(Unaudited; In thousands)

Explanations for Reconciliations of Net (Loss) Income to EBITDA and Adjusted EBITDA and

Net (Loss) Income to Adjusted Net Income and Calculation of Adjusted Diluted Earnings per Share

(1)

Beginning in the first quarter of 2022, we will no longer exclude research and development milestone expenses related to license and collaboration agreements from our non-GAAP financial measures and our line item components, including adjusted research and development, adjusted EBITDA, adjusted operating income, adjusted net income and adjusted earnings per share. Prior period adjusted results have been revised to reflect this change. Refer to our Form 8-K filed on May 4, 2022 for additional information.

(2)

Acquisition, site closure, and idle facility expenses for the three months ended September 30, 2022 primarily included integration costs associated with the acquisition of the baclofen franchise from certain entities affiliated with Saol International Limited, which closed on February 9, 2022 (the "Saol Acquisition"); and (ii.) site closure costs associated with the planned cessation of manufacturing at our Hauppauge, NY facility. Acquisition, site closure, and idle facility expenses for the nine months ended September 30, 2022 primarily included (i) transaction and integration costs associated with the Saol Acquistion; (ii.) integration costs associated with the acquisition of Puniska Healthcare Pvt. Ltd., which closed on November 2, 2021; and (iii) site closure costs associated with the planned cessation of manufacturing at our Hauppauge, NY facility. Acquisition, site closure and idle facility expenses for the three and nine months ended September 30, 2021 primarily included (i) transaction and integration costs associated with the acquisition of Kashiv Specialty Pharmaceuticals, LLC (the "KSP Acquisition"); (ii) integration costs associated with the acquisition of AvKARE; and (iii) site closure costs associated with the planned cessation of manufacturing at our Hauppauge, NY facility.

(3)

For the three and nine months ended September 30, 2022 and 2021, restructuring and other charges primarily consisted of cash severance charges associated with cost of benefits for former senior executives and management employees.

(4)

For the three months ended September 30, 2022 charges related to legal matters, net were immaterial. For the nine months ended September 30, 2022, charges related to legal matters, net, primarily included charges for the settlements and preliminary settlements of the Opana ER® antitrust litigation, net of insurance recoveries associated with class action shareholder lawsuits. For the three and nine months ended September 30, 2022, charges related to legal matters, including interest, net, also included interest associated with the settlements and preliminary settlements of the Opana ER® antitrust litigation. For the three and nine months ended September 30, 2021, charges related to legal matters, net were for commercial legal claims.

(5)

For the three and nine months ended September 30, 2021, property losses and associated expenses were a result of damage to two of our facilities from Tropical Storm Ida which consisted of impairment of equipment and inventory, repairs and maintenance expenses and salaries and benefits. The nine months ended September 30, 2022 included $1.9 million in insurance recoveries.

(6)

The non-GAAP effective tax rates for the three and nine months ended September 30, 2022 were 23.6% and 23.2%, respectively. The non-GAAP effective tax rate for both the three and nine months ended September 30, 2021 was 21.0%.

(7)

Weighted average diluted shares outstanding consisted of class A common stock and class B common stock under the if-converted method.

Amneal Pharmaceuticals, Inc.

Generics Segment

Reconciliation of GAAP to Non-GAAP Operating Results (1)

(Unaudited; In thousands)

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

Net revenue

$

350,266

$

-

$

350,266

$

347,127

$

-

$

347,127

Cost of goods sold (2)

217,997

(18,367

)

199,630

208,670

(13,049

)

195,621

Cost of goods sold impairment charges

674

(674

)

-

688

(688

)

-

Gross profit

131,595

19,041

150,636

137,769

13,737

151,506

Gross margin %

37.6

%

43.0

%

39.7

%

43.6

%

Selling, general and administrative (3)

30,259

(1,191

)

29,068

15,941

(988

)

14,953

Research and development (4)

41,987

(1,142

)

40,845

34,999

(1,042

)

33,957

Intellectual property legal development expense

1,369

-

1,369

1,584

-

1,584

Acquisition, transaction-related and integration expenses

16

(16

)

-

-

-

-

Charges related to legal matters

285

(285

)

-

-

-

-

Charges (insurance recoveries) for property losses and associated expenses (5)

-

-

-

8,186

(8,186

)

-

Restructuring and other charges

507

(507

)

-

-

-

-

Other operating income

(1,320

)

-

(1,320

)

-

-

-

Operating income

$

58,492

$

22,182

$

80,674

$

77,059

$

23,953

$

101,012

(1)

Operating results for the sale of Amneal products by AvKARE were included in our Generics segment.

(2)

Adjustments for the three months ended September 30, 2022 and 2021, respectively, were comprised of stock-based compensation expense ($0.8 million and $1.3 million), amortization expense ($12.3 million and $10.2 million), site closure and idle facility expenses ($2.8 million and $1.5 million), and asset impairment charges ($2.5 million and none).

(3)

Adjustments for the three months ended September 30, 2022 and 2021, respectively, were comprised of stock-based compensation expense ($0.6 million and $0.5 million), and site closure costs ($0.6 million and $0.5 million).

(4)

Adjustments for the three months ended September 30, 2022 and 2021, respectively, were comprised of stock-based compensation expense ($1.1 million and $1.0 million). Non-GAAP adjusted research and development for the three months ended September 30, 2021, as previously reported, has been revised to include $0.5 million of research and development milestone expenses previously excluded.

(5)

Adjustments for the three months ended September 30, 2021, were a result of damage to two of our facilities from Tropical Storm Ida, which consisted of impairment of equipment and inventory, repairs and maintenance expenses and salaries and benefits.

Amneal Pharmaceuticals, Inc.

Generics Segment

Reconciliation of GAAP to Non-GAAP Operating Results (1)

(Unaudited; In thousands)

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

Net revenue

$

1,032,908

$

-

$

1,032,908

$

1,020,072

$

-

$

1,020,072

Cost of goods sold (2)

640,450

(47,419

)

593,031

598,122

(38,705

)

559,417

Cost of goods sold impairment charges

5,786

(5,786

)

-

688

(688

)

-

Gross profit

386,672

53,205

439,877

421,262

39,393

460,655

Gross margin %

37.4

%

42.6

%

41.3

%

45.2

%

Selling, general and administrative (3)

84,410

(8,641

)

75,769

46,500

(1,803

)

44,697

Research and development (4)

129,382

(3,707

)

125,675

114,547

(3,239

)

111,308

In-process research and development impairment charges

-

-

-

710

(710

)

-

Intellectual property legal development expenses

2,919

-

2,919

6,506

-

6,506

Acquisition, transaction-related and integration expenses

24

(24

)

-

-

-

-

Charges related to legal matters

2,442

(2,442

)

-

-

-

-

Charges (insurance recoveries) for property losses and associated expenses (5)

(1,911

)

1,911

-

8,186

(8,186

)

-

Restructuring and other charges

713

(713

)

-

80

(80

)

-

Other operating income

(2,495

)

-

(2,495

)

-

-

-

Operating income

$

171,188

$

66,821

$

238,009

$

244,733

$

53,411

$

298,144

(1)

Operating results for the sale of Amneal products by AvKARE were included in our Generics segment.

(2)

Adjustments for the nine months ended September 30, 2022 and 2021, respectively, were comprised of stock-based compensation expense ($3.6 million and $3.3 million), amortization expense ($31.8 million and $28.0 million), site closure and idle facility expenses ($9.8 million and $6.2 million), inventory related charges (none and $0.2 million), asset impairment charges ($2.6 and $0.4 million), and other ($(0.3) million and $0.6 million).

(3)

Adjustments for the nine months ended September 30, 2022 and 2021, respectively, were comprised of stock-based compensation expense ($1.9 million and $1.3 million), a regulatory approval milestone ($5.0 million and none), and site closure costs ($1.7 million and $0.5 million).

(4)

Adjustments for the nine months ended September 30, 2022 and 2021, respectively, were comprised of stock-based compensation expense ($3.7 million and $2.9 million) and other (none and $0.3 million). Non-GAAP adjusted research and development for the nine months ended September 30, 2021, as previously reported, has been revised to include $11.8 million of research and development milestone expenses previously excluded.

(5)

Adjustments for the nine months ended September 30, 2021, were a result of damage to two of our facilities from Tropical Storm Ida, which consisted of impairment of equipment and inventory, repairs and maintenance expenses and salaries and benefits. The nine months ended September 30, 2022 included $1.9 million in insurance recoveries.

Amneal Pharmaceuticals, Inc.

Specialty Segment

Reconciliation of GAAP to Non-GAAP Operating Results

(Unaudited; In thousands)

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

Net revenue

$

89,484

$

-

$

89,484

$

92,745

$

-

$

92,745

Cost of goods sold (1)

43,719

(27,328

)

16,391

47,303

(27,503

)

19,800

Gross profit

45,765

27,328

73,093

45,442

27,503

72,945

Gross margin %

51.1

%

81.7

%

49.0

%

78.7

%

Selling, general and administrative (2)

22,201

(380

)

21,821

22,211

(749

)

21,462

Research and development (3)

8,248

(370

)

7,878

13,928

(314

)

13,614

Intellectual property legal development expenses

42

-

42

43

-

43

Acquisition, transaction-related and integration expenses

15

(15

)

-

-

-

-

Change in fair value of contingent consideration (4)

(1,425

)

1,425

-

300

(300

)

-

Operating income

$

16,684

$

26,668

$

43,352

$

8,960

$

28,866

$

37,826

(1)

Adjustments for the three months ended September 30, 2022 and 2021 were comprised of amortization expense.

(2)

Adjustments for the three months ended September 30, 2022 and 2021 were comprised of stock-based compensation expense.

(3)

Adjustments for the three months ended September 30, 2022 and 2021 were comprised of stock-based compensation expense. Non-GAAP adjusted research and development for the three months ended September 30, 2021, as previously reported, has been revised to include $2.0 million of research and development milestone expenses previously excluded.

(4)

Contingent consideration was recorded in connection with the Saol Acquisition and the KSP Acquisition.

Amneal Pharmaceuticals, Inc.

Specialty Segment

Reconciliation of GAAP to Non-GAAP Operating Results

(Unaudited; In thousands)

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

Net revenue

$

271,571

$

-

$

271,571

$

277,311

$

-

$

277,311

Cost of goods sold (1)

130,363

(80,860

)

49,503

144,184

(82,496

)

61,688

Gross profit

141,208

80,860

222,068

133,127

82,496

215,623

Gross margin %

52.0

%

81.8

%

48.0

%

77.8

%

Selling, general and administrative (2)

69,772

(794

)

68,978

62,748

(2,081

)

60,667

Research and development (3)

24,399

(1,099

)

23,300

35,426

(783

)

34,643

Intellectual property legal development expenses

77

-

77

68

-

68

Acquisition, transaction-related and integration expenses

47

(47

)

-

16

(16

)

-

Change in fair value of contingent consideration (4)

(1,495

)

1,495

-

300

(300

)

-

Operating income

$

48,408

$

81,305

$

129,713

$

34,569

$

85,676

$

120,245

(1)

Adjustments for the nine months ended September 30, 2022 and 2021 were comprised of amortization expense.

(2)

Adjustments for the nine months ended September 30, 2022 and 2021 were comprised of stock-based compensation expense.

(3)

Adjustments for the nine months ended September 30, 2022 and 2021 were comprised of stock-based compensation expense. Non-GAAP adjusted research and development for the nine months ended September 30, 2021, as previously reported, has been revised to include $9.4 million of research and development milestone expenses previously excluded.

(4)

Contingent consideration was recorded in connection with the Saol Acquisition and the KSP Acquisition.

Amneal Pharmaceuticals, Inc.

AvKARE Segment

Reconciliation of GAAP to Non-GAAP Operating Results (1)

(Unaudited; In thousands)

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

Net revenue

$

105,807

$

-

$

105,807

$

88,721

$

-

$

88,721

Cost of goods sold

88,937

-

88,937

73,421

-

73,421

Gross profit

16,870

-

16,870

15,300

-

15,300

Gross margin %

15.9

%

15.9

%

17.2

%

17.2

%

Selling, general and administrative (2)

13,216

(4,933

)

8,283

14,683

(6,303

)

8,380

Operating income

$

3,654

$

4,933

$

8,587

$

617

$

6,303

$

6,920

(1)

Operating results for the sale of Amneal products by AvKARE were included in our Generics segment.

(2)

Adjustments for the three months ended September 30, 2022 and 2021 were comprised of amortization expense.

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

Net revenue

$

298,066

$

-

$

298,066

$

259,390

$

-

$

259,390

Cost of goods sold

256,626

-

256,626

211,208

-

211,208

Gross profit

41,440

-

41,440

48,182

-

48,182

Gross margin %

13.9

%

13.9

%

18.6

%

18.6

%

Selling, general and administrative (2)

39,361

(14,392

)

24,969

41,986

(18,670

)

23,316

Acquisition, transaction-related and integration expenses (3)

-

-

-

1,422

(1,422

)

-

Operating income

$

2,079

$

14,392

$

16,471

$

4,774

$

20,092

$

24,866

(1)

Operating results for the sale of Amneal products by AvKARE were included in our Generics segment.

(2)

Adjustments for the nine months ended September 30, 2022 and 2021, respectively, were comprised of amortization expense ($14.8 million and $18.7 million) and other ($(0.4) million and none).

(3)

Adjustments for the nine months ended September 30, 2021 were comprised of finance integration expenses.

Anthony DiMeo
Head of Investor Relations
[email protected]

Source: Amneal Pharmaceuticals, Inc.