Amneal Pharmaceuticals Inc (AMRX) 2020 Q3 法說會逐字稿

Good morning, and welcome to the Amneal Third Quarter 2020 Earnings Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Amneal's Chief Financial Officer, Tasos Konidaris. Please go ahead.

Thank you, Andrew. Good morning, and thank you for joining us for Amneal's Third Quarter 2020 Earnings Call.

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

I would like to remind you that statements made during this call stating 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 titled Cautionary Statements on Forward-looking Statements in our press release and presentation, which applies to this call. Our future performance may differ due to numerous factors, many of which are listed on our most recent annual report on Form 10-K and are revised and updated on our quarterly reports on Form 10-Q and current reports on Form 8-K, which you can also find on our website or on the SEC's website at sec.gov.

We'll also discuss certain non-GAAP measures. You will find important information on our use of these measures and our reconciliations to U.S. GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial statements that correspond to some of our non-U. S. GAAP measures we reference throughout the presentation.

On the call this morning are Chirag and Chintu Patel, our Co-CEOs; Andy Boyer and Joe Todisco, our Chief Commercial Officers for our Generics and Specialty segments; as well as Steve Manzano, our General Counsel and Corporate Secretary.

I would now turn the call over to Chirag.

Good morning, and thank you for joining us in the review of Amneal's third quarter results. We are pleased with the strong performance this quarter versus prior year, with net revenue of $519 million, up 37%; adjusted EBITDA of $114 million, up 60%; and adjusted EPS of $0.16, up substantially versus $0.04.

Our strong and consistent financial performance over the course of 2020 reflects the successful execution of our Amneal 2.0 strategy. This could not have been possible without the resiliency and excellent work of our global team. We know their dedication and commitment to providing affordable and innovative medicines to patients is an integral part of navigating the COVID-19 pandemic this year. We all know how difficult the last few months have been due to COVID-19. And unfortunately, we are clearly not out of the woods yet.

From our perspective, in Q3, we saw a sequential pickup in demand and lower supply chain disruption compared to the second quarter. Having said that, we continue to be vigilant and actively preparing for the next wave of COVID-19 to ensure we meet the demands of our customers and avoid any material disruptions over the coming months.

As we discussed in our first quarter 2020 call, this pandemic raised the issue of domestic preparedness and the need to fortify production of critical medicines based in the United States. Amneal is the largest U.S. generics company domicile in the United States. And we believe our operational expertise and excellent quality track record uniquely positions us to be part of an expanded domestic drug manufacturing strategy.

Over the course of last few months, we have spent substantial amount of energy and resources to respond to this bipartisan effort. And we look forward to working with legislators from both parties as well as the industry to help protect the health and safety of our citizens.

Ever since we rejoined as Co-CEOs last summer, we shared with you our intent to reinvigorate the R&D pipeline, successfully launch new products, bolster our base business, diversify our distribution channels and focus on operational excellence to improve profitability.

In Q3, we executed on all these objectives. And let me start with our Generics segment, where net revenue increased 17% compared to Q3 of 2019. The double-digit net revenue growth reflects the successful launch of 8 of the 15 complex new products we target launching by August 2021 as well as the continued strong performance by EluRyng and Sucralfate.

We are building on our strong presence with a steady flow of new product launches, including fluphenazine hydrochloride tablets for treatment of schizophrenia and generics Butrans Transdermal System for pain management and [sold] the generics lidocaine patch.

As we mentioned in the past, continuing to shift our mix of products to more complex or differentiated products is a strategic priority of ours. This is reflected by the substantial increase in our R&D pipeline focused on the non-oral solid products.

In addition to new product growth, we were pleased by the strength in our base business. This growth reflects the relevancy of our broad commercial portfolio and customer focus by our commercial and supply chain organizations.

Finally, we are constantly looking for ways to leverage our generic product portfolio and manufacturing capability in new channels such as over-the-counter. An example of such initiatives is the recent launch of the store brand equivalent of Voltaren Arthritis Pain Gel, which we introduced in partnership with PLD. Top line growth as well as keeping a close eye on operating efficiencies led to a substantial increase in Generics adjusted gross margin to 37.4% compared to 29.8% in Q3 of 2019.

As Co-CEOs, along with our broader team, we are acutely focused on operational excellence, continuing to find ways to improve efficiency and optimize our expense base is a key component of our Amneal 2.0 strategy. We have a robust list of company-wide activities on gross generic net deductions, to purchasing, to manufacturing and SG&A expenses, which will help drive Generics adjusted gross margin above 40% over the course of time.

Let me now turn over to our Specialty segment where our business was stable compared with the prior year. We feel good about this performance, considering the fact we came off a very strong second quarter and the headwind of COVID-19 is having on a physician office visits and new patient starts.

Both Rytary and Unithroid continue to show strong growth, with sales up approximately 12% and 29%, respectively, and combined prescriptions volume up 6%.

Moving on to AvKARE, which continues to generate strong top line growth, revenues increased to $89.5 million from $64 million in the prior quarter. The AvKARE team has done a nice job growing the top line business despite a slowdown in new product introductions from third-party suppliers due to COVID-19, and usually, such new products carry higher margins. We continue to be excited about the long-term opportunities in the growing government segment.

With that, let me turn the call over to Chintu now.

Good morning, everyone. Thank you, Chirag. Let me first start with our COVID-19 response, and I echo my brother's sentiment. I'm truly proud of how our team members have responded and are working with our customers and suppliers to mitigate interruptions.

Last quarter, we discussed that approximately $20 million of customers' orders were not filled due to COVID-19 disruptions. In the third quarter, unfulfilled orders declined to approximately $10 million. And I'm pleased to report that overall, our manufacturing facilities are operating close to pre-COVID-19 levels. We are building our inventory on hand and strengthening our global supply chain.

As Chirag mentioned, since we rejoined last August, we have led a number of strategic initiatives to improve performance in a sustainable way, including rebuilding the R&D pipeline as well as operational excellence to improve efficiency across our supply chain.

Let me spend a few minutes highlighting our Generics segment and R&D pipeline. Every action we take is aligned to our quality-first mindset and will continue its strong quality track record as demonstrated by successful inspections in 2020 and all prior years.

Our Generic business continues to improve with strong sales and increasing margins. Our results reflect strong volume gains and increased manufacturing for EluRyng, which enabled our commercial team to increase its market share to 23% compared to 15% in the second quarter.

In addition, we are on track to deliver 15 high-value complex generic products by next August and plan to file close to 30 ANDAs this year, up from our prior expectations of 20 to 25. Our portfolio transition to complex generics continues, and over 60% of these 30 ANDAs are non-oral solid dose.

Also, our current pipeline of over 100 products is about 80% non-oral solids and includes many complex products. Through our focused R&D efforts, which are made possible by our in-house development and manufacturing capabilities, we'll be constantly refreshing and expanding our generics pipeline for many years to come.

In particular, we are very focused on generating meaningful growth in our injectable product line over the next 18 to 24 months to better meet demands of our hospital business.

Turning to our Specialty pipeline. We have a number of attractive product candidates that we plan to bring to market over the next few years. We are excited about the potential opportunities as they leverage both our R&D team and our commercial infrastructure.

Let's start with IPX203, which is our next-generation product for treatment of Parkinson's disease, which we expect will be a material improvement over Rytary and existing therapies. PD is a degenerative disorder that affects dopamine-producing neurons in the brain that affect movement.

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on managing the symptoms

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such as tremors and dyskinesia. There are roughly 1 million Parkinson's patients in the United States and approximately 60,000 new patients are diagnosed each year. 60% of PD patients in the U.S. are on some form of levodopa therapy. An immediate-release carbidopa-levodopa is a first-line therapy in PD.

Amneal currently markets Rytary, an extended-release product that is targeted to more moderate to severe patients than generic immediate-release. We see IPX203 as addressing the same patient population as Rytary with improvements in terms of efficacy and patient convenience.

Based on our Phase II clinical results, we expect that our Phase III clinical trial will demonstrate IPX203 to have a superior profile in terms of good on time, which is the time in which a patient has symptomatic relief without troublesome dyskinesia. Such benefit may translate to 1 to 2 hours per day improvement in good on time, while decreasing the daily dosing to 3x versus the current 4 to 6x per day. Such outcomes would be a material improvement in quality of life for PD patients and expand the addressable market for our product accordingly.

There are currently 2 Phase III clinical trials ongoing, and we expect to see top line data in the second half of next year, with commercial launch planned for 2023.

A second near-term pipeline opportunity in specialty is K127, which is a 505(b)(2) program for treatment of Myasthenia Gravis that we in-licensed from Kashiv BioSciences last year. MG is a rare autoimmune disease that causes extreme muscle weakness, double vision, droopy eyelids and difficulties with speech and swallowing.

K127, developed through a proprietary drug delivery technology platform, is an improved formulation of pyridostigmine, which is the most commonly prescribed first-line therapy for MG. If successful, K127 could offer improved tolerability, once-daily dosing with rapid onset and 24-hour symptomatic coverage. This product profile would be a significant improvement over the current generic formulation, which is given 3 to 4 times a day.

As a point reference, MG is a rare disease affecting 36,000 to 60,000 patients in United States. We see this as an attractive commercial opportunity based on the concentrated prescriber base and synergistic deployment with our neurology field team. We will be starting the Phase III trial for K127 soon. And assuming successful results of the trial, we plan to file this product with FDA in 2022.

Beyond these exciting candidates, we are actively monitoring opportunities to make Specialty a larger part of Amneal's business in the coming years. This includes external partnerships as well as M&A targeting specific platforms that leverage our expertise and have a reasonable probability of success. In addition, we expect to increase the share of our internal R&D budget directed to branded product development in a measured way.

At last, I would like to acknowledge our suppliers, customers, and employees for their efforts during the COVID pandemic and thank them for their hard work and dedication during these challenging times.

I will turn the call over now to Tasos.

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$141 million or 37% compared to Q3 2019. Our AvKARE acquisition accounted for $90 million of growth, which implies a quarterly organic net revenue growth of 14% for the rest of the business.

Generics performed strongly, up 17%, while our Specialty segment was consistent to prior year quarter. This performance reflects solid execution in a challenging, albeit improving market environment. COVID-19 disruption continues to be a headwind across selected products. And while the volume of patient visits is recovering, it is not back to normal levels and acute health care utilization is lagging as well.

As Chintu mentioned, we're making very good progress in reducing lost sales due to COVID-19 supply chain disruptions, and we're steadily improving our finished goods inventory position.

Adjusted gross profit of $206 million was up $55 million or 36% compared to Q3 2019, reflecting strong Generic sales, AvKARE and stable performance by Specialty. Adjusted gross margin of 39.7% was in line with our expectations and essentially flat to the 40% in Q3 2019. Excluding the AvKARE acquisition, adjusted gross margin in the current quarter would have been 45%. So approximately 500 basis points higher than prior year, driven by the strength of Generics.

Adjusted EBITDA of $114 million was up $43 million or 60% compared to Q3 2019, reflecting strong Generic growth, tight expense management and a $6 million contribution by AvKARE.

Adjusted diluted EPS of $0.16 were well ahead of the $0.04 we reported in Q3 2019, mainly driven by the adjusted EBITDA growth, lower interest expense offsetting higher AvKARE minority interest and taxes.

The improvement in business trends and our financial management efforts have resulted in strong operating cash flow. By nature, operating cash flow fluctuates substantially at any given quarter. And in this third quarter, we generated $45 million or $273 million year-to-date.

Our year-to-date performance is substantially ahead of the $53 million we generated the first 9 months of 2019. A strong financial performance is strengthening our balance sheet and improves our financial flexibility. As of September 30, we had $284 million in cash and cash equivalents as well as an additional $498 million available through our ABL facility. As importantly, our net debt-to-EBITDA ratio continued to improve to 5.6x versus 7x at the end of 2019.

Let me now turn to our segment of Generics, which reported net revenue of $342 million, a $51 million increase or 17% from the prior year quarter or $35 million or 12% sequentially.

I would highlight that this performance reflects 3 factors: first, the benefit of our strategy delivering stronger product introductions. Consequently, EluRyng and Sucralfate, both of which were launched late last year more than offset the declines in Levothyroxine and the Diclofenac Gel.

Second, the resiliency of our base business due to the effectiveness of our commercial initiatives and the relevancy of our broad portfolio of products. Third, less of a headwind than the prior quarter in terms of COVID-19-related back orders and lingering negative effects on prescription trends in [elective surgeries].

Moving on to adjusted gross margin for the Generics segment, which was 37.4%, substantially higher than the 29.8% in Q3 2019 and 35.3% in second quarter 2020. The year-to-year gain reflects new product launches, a [number] of operational improvements and favorable product mix offsetting pricing pressures.

Let me now turn to our Specialty segment, and we're pleased with the resiliency of our commercial execution, considering the negative impact of COVID-19. Net revenues of $88 million were in line with Q3 2019, as solid demand growth for Rytary and Unithroid were offset by declines in our nonpromoted products. Similarly, adjusted gross margin for the Specialty segment was in line with Q3 at approximately 74%.

Turning over to AvKARE, which reported net revenues of $90 million and adjusted gross margin of about 15%. While top line growth has been ahead of our expectations, COVID-19 and channel mix is a temporary headwind to AvKARE's profitability. Furthermore, the fact that AvKARE adds substantial revenue at lower margin creates a mathematical headwind to our overall gross margin percentage.

This is clearly demonstrated in the third quarter, where as I mentioned earlier, AvKARE diluted our company gross margin by approximately 500 basis points. This adverse mix will moderate or even disappear next year as AvKARE will be in our base period results.

Considering our performance over the course of the year, we believe it is prudent to update our full year 2020 guidance. Specifically, the new revenue range is $1.95 billion to $2.0 billion, up from the prior guidance of $1.875 billion to $1.975 billion. Gross margin, 41% to 42% compared to 44% to 46%, mostly driven by AvKARE.

EBITDA -- or I'm sorry, adjusted EBITDA, $430 million to $460 million, up from $400 million to $450 million. Adjusted EPS, $0.55 to $0.65, up from $0.45 to $0.60. Operating cash flow, $170 million to $220 million, up from $150 million to $200 million. And finally, CapEx of $60 million to $70 million, no change from prior guidance.

Let me now add a little bit more color around our guidance. First, we need to be mindful we're in the middle of a pandemic and it's impossible to predict all the potential outcomes. Having said that, our growth portfolio and our manufacturing operations continue to improve.

Second, we expect patient volumes will gradually move towards more normal levels. Third, while R&D and G&A expenses were somewhat tempered this year due to COVID-19, we expect an increase in operating expenses as clinical sites are reopening.

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

Thank you, Tasos. We are pleased to have made significant gains this year in executing our Amneal 2.0 strategy, despite the pressures of the COVID-19 pandemic. We look forward to continuing to drive operational excellence and reinvigorate our pipeline.

I would like to now turn the call over to operator to take your questions.

(Operator Instructions) The first question comes from David Amsellem of Piper Sandler.

So just a couple. So first, I wanted to get your thoughts on your biosimilar business. And there's a couple of questions there. One is, how are you thinking about pegfilgrastim and Avastin biosimilars in the context of an increasingly competitive marketplace? And specifically, what do you think pricing will behave like as more competition pours in, in these markets? Do you think you'll see erosion that's anything like what you see for small molecule generics. And then secondly, on biosims, can you talk about other opportunities and when we could get more visibility on other opportunities that you're working on?

As we've mentioned before, biosimilars, we have 3 key products. 2 are filed with FDA. One is to be filed soon. We are hoping and we consider biosimilars as more of a complex generics. Market will behave as such as more competition comes, more people, more doctors feel comfortable prescribing biosimilars. Intent from the Congress was to create competition and reduce pricing. That's exactly what's happening. So from the beginning, we have invested very carefully. And so far, we are only commenting on the 3 programs, not commenting on the additional opportunities we are working on.

The erosion you mentioned like small molecule, no, that will not happen. Small molecule, as you know, it's ridiculous, the erosions get up to 98%, 99%. I do not expect that. It is extremely hard manufacturing, lots of science, lots of investments. So it will more, like, behave between complex, high-value generics and what you see today in biosimilars. Somewhere in between, that's where my guess, we will end up on biosimilar pricing.

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

First, a little of a follow-up to last question. So what have been the dynamics with new launches that you're seeing? How much pricing pressure? How difficult to negotiate managed care contracts? So maybe compare EluRyng and Sucralfate with Fluphenazine that was launched more recently. And then expectations for complex generics going forward. And then just, Tasos, on the gross margin guidance, I guess, I was surprised that it came that much lower. So just talk a little bit more about the mix that's driving that. I know a lot of it is AvKARE. But is there anything else baked in there?

So on your questions on complex generics, they tend to be immediate pickup by the customers and conversion to generics, same as how the small molecules have been working for years. It's immediate conversion to generics. So we don't see any difficulties negotiating with managed care as far as the complex generics.

Biosimilars is a whole new ballgame for us, and we are preparing to launch these products as they get approved. So we will -- we're learning how to -- we have the specialty group. We have the managed care group. So we'll be negotiating with various stakeholders in biosimilars. I'll turnover to Tasos for...

Thank you. Yes, there is nothing going on, on the gross margin other than the impact of AvKARE. So let's peel back the onion. So as you know, we think about it in terms of those 3 segments. So let's take Generics, which by the vast majority -- which is majority of our business, right? So year-to-date, as I mentioned, we are 38.4% margin, that's 240 basis points up from the same period last year. And with 9 months under our belt, the overall Generic margins for the year will be substantially higher than the 35% where we ended up last year. So we feel great about it, right? So the biggest part of our business is increasing revenues, increasing profitability.

The second largest part of our business, right, is Specialty. So that -- margins there -- I mean the gross margins, they are relatively flat. So it's about 75% -- 74%, 75%. There is a lot of stability there, and there's a lot of durability, right? So we feel great about this.

And then the other piece that you have is AvKARE, which was, as you know, it was a newly acquired business at the end of January. So when the company gave guidance in February, it was a newly acquired business. That business has overperformed from a revenue perspective, just to be clear, has overperformed on a revenue perspective, right? And just -- it was just its profitability was not as high just because of COVID and slowdown of new product introductions from other companies, not our products. So that created a bigger-than-expected headwind, right, of how AvKARE was going to impact our results. And this is what we are reflecting by getting the guidance of 41%, 42%.

As I mentioned ahead, next year, AvKARE is in our base, right? AvKARE is in our base. So continue down the path from a generic standpoint of launching new products, right, continue to expand our business. Hopefully, COVID-19 will be mostly behind us. So our utilization and manufacturing plants should be better stability. On Specialty, we should see an expanded gross margins.

Sure. And also, we are working to transfer many products to our U.S. plants for AvKARE's business, which will add to the top line and especially on the gross margin.

Gary, that addressed your question?

Yes. No, that's great.

The next question comes from Greg Gilbert of Truist Securities.

Chirag and Chintu, I was hoping you could share with us your thinking about the strategic importance of AvKARE longer term. Obviously, you've lived with the asset for some time now. And as Tasos just said, it's performing well financially. So curious about the strategic importance of that asset longer term beyond simply being a sort of diversification angle?

And then, Joe, I was hoping you could comment on what's going on with Rytary in terms of face-to-face detailing versus other methods you've learned about over the past several months? And what's the outlook for continued growth on that important brand?

This is Chirag. So let me -- on AvKARE, we have 2 -- actually 3 avenues within the business. One is government business, which we are mostly excited about. We have multiple products from us and third parties. Being the largest U.S. domicile generics company, we have more products to offer to AvKARE portfolio. Number of products still going off-patent for the government business over the next 5 years. So we're substantially building our pipeline for government business. So that, we're very excited. Another part is unit dose, which is -- we launched our first product and have built up the capacity to launch 8 more products in next year.

Strategic importance, these are -- and third segment is direct-to-providers, which is a small segment, but -- and with lower margins. It sometimes is helpful to create -- to build over customer bonding and partnership, because when they are in shortage, we're able to supply immediately, which is what we did during the COVID time. So it comes handy. The strategic importance is that we -- the -- all 3 areas we're directly distributing to our customers, so which allows margin expansion for overall revenue as well as increase in sales with different alternative channels. So we continue to be very excited about AvKARE. Joe?

Thanks, Chirag, and thanks, Greg, for the question. Yes, I think we're pretty pleased with the performance of Rytary through the third quarter despite the COVID headwinds. Obviously, new patient starts have been the biggest challenge across all of pharma, especially in the at-risk patient populations that aren't going back to their doctor for their regular visits. But retail dosing remains strong. We've got a decent amount of what we felt were new patient starts to keep some segments of growth over the prior year. But we've also seen -- even though scripts maybe -- script growth may not be as high as revenue growth, but you're seeing a higher number of pills per script in Rytary we could spend. And I think that's indicative of more 90-day sales going out the door, which is overall good for refill rate on that brand.

Now in terms of the efficacy of the sales force, a larger part in the second quarter, they were sidelined due to the lockdown. And we had to adapt, as most companies in the industry did, and we became fairly effective in virtual promotion, holding virtual watch-and-learn through Zoom. And I think going forward, as territories have opened up, we maintained a mix or a balance between in-person detailing and the ability to hold some of these events that we used to do in person virtually, which is why we've seen our SG&A costs come down a little bit. But we feel good about Rytary. We've got runway through 2025 with our settlements, and we're ready to return to growth in 2021.

The next question comes from Ami Fadia of Leerink.

Two questions just for Chirag and Chintu. With the availability of -- can you comment on the availability of opportunities that you can add to your CNS portfolio? With the Zomig expiry next year, what's your commitment to adding some other assets to that portfolio? And then specifically for Chintu, could you comment on the expectations on some of the new product opportunities over the next few months into August 2021? Specifically, if you can give us any additional color on the respiratory product and then also expectations for when you might be able to get Copaxone 20 and 40 mg approved?

Thank you, Ami. This is Chirag. So CNS opportunity, as we have mentioned, that's our top priority for -- from the M&A perspective. We're looking at various products, companies and whatever fits with our neurology [field sales]. And as you know, the Rytary is a lead product we will add on to the movement disorder or particularly to PD category. So we've been active on that front. We are also building organic pipeline in movement disorder overall, which would complement with our neurology field sales . K127 is an example, and we're looking to see if we can build out, with the external partnership, more product partnership. I'll turn it over to Chintu for the new product launches.

Yes. So we have -- as we have spoken before, we have a very diverse portfolio, and we are very confident about launching the remaining 7 products in next 9 to 12 months of our complex products. And those are mainly in the non-oral solid area. We have good launches coming up in ophthalmics, in topicals, in transdermal. As far as the glatiramer, we expect -- we are cautiously optimistic that there would be a second half of 2021 launch. And regarding the respiratory product, at this time, we are not giving any more color than what we have done before. But it also seems like towards the end of '21 launch. But as we get closer, we'll be able to provide more detail.

The next question comes from Randall Stanicky of RBC Capital Markets.

Two questions. First, the implied fourth quarter EBITDA based on guidance, is that a good run rate for next year? I think consensus implies a step-up. So if you could just help us understand what some of the moving parts there to that are, that would be helpful. And then secondly, Chirag, on the topic of complex products, I wanted to ask you maybe a bigger picture question here. The drug landscape continues to evolve, and obviously, there's a lead time in terms of building the pipeline. At least one of your peers who also has a branded business has called out digital therapeutics as an opportunity, specifically adding technologies to traditional drugs. Has Amneal looked at that? And are there other 505(b)(2) opportunities or ways to differentiate that you see, that you could pursue to build out your pipeline as we think about the next 3 to 5 years?

Thank you, Randall. We'll get back to your first question later on, I'll pass that on to Tasos. But let me -- on your complex products and building out the portfolio, excellent question. As we have mentioned before, we have -- see, Amneal's stands as a -- we have a strong generics R&D, complex products, diverse base of therapeutic categories. So we're well set on generics. We will be refreshing our pipeline every year.

Now how do we grow Amneal? We have [additionally than] generics, so one focus is biosimilars, which I mentioned, it is. It would be competitive. It would be slow ramp-up. Therefore, we are more excited on the Specialty business. We have been -- we have 2 products, Unithroid and Rytary. We have K127 in pipeline, IPX203 in pipeline. We're looking at the drug delivery technologies, which can deliver more products in (b)(2)'s categories. And the way to look at it, as you know, the 505(b)(2)s are basically taking the older molecules, one that are developed 30 years ago, 20 years ago, apply new technologies to make -- to have the lesser side effects as well as patient conveniency.

So that is what we are working on, and we see multiple opportunities. And it is -- it's not a new thing we're applying our knowledge and experience in this field to build out systematic pipeline, which we can introduce products every year throughout the next 5 years, 6 years, 7 years, and we see tremendous growth. And as we mature, we can take that drug delivery technologies and move into more of programs and other technology-based products. So this is where we are -- we have positioned Amneal, and will keep doing it.

But keep in mind, we're not taking our eyes of the Generics business. It is a stable business, growing business. And we have multiple therapeutic areas where we can constantly add products every year, over the next 5 years, we have seen so far. I hope that answers your question on Specialty and Generics.

I'm sorry, I just wanted to expand on technology and our complex. As Chirag said, complex, we have entire spectrum of diversified portfolio, and we have a in-house developed technology also to address the need for the complex generic to bring to market. Because many products are customized technologies, right? On a 505(b)(2) our second asset, which I talked about, K127, is using a proprietary platform to deliver that product in a certain way. And Randall, there are many products, they're great molecule, but they were not developed properly to deliver right way in the human body to give them a good efficacy and a better profile. So we have a few technology platforms under evaluation, and we'll expand on that and repurpose those products to bring that to market, to provide great quality of life and better drug delivery through many means. So we are laser sharp-focused on our 505(b)(2) by using our very unique platforms. Thank you, Tasos. Go ahead, please.

Just a couple of thoughts. So when you look at the EBITDA in Q3, we delivered $109 million. When you look at the implied full year guidance and what this means for Q4, that implies anywhere between $96 million and $111 million. So essentially, Q4 is in the ballpark of Q3. And Q4 is a strange quarter for everybody, right? So we're in the middle of election, you've got COVID, you have wholesaler inventories with the holidays and so forth. So typically, Q4 just creates just more volatility. So our ability to perfectly project Q4 for every company is just a challenge. But we feel good about how we think about Q4.

As it regards to next year, we'll give you our guidance at the end of February, right? So we'll give you guidance at the end of February. At this point in time, with us -- so what we're focused on is sustainability and growth. That's what we're focused on. So we're not looking to be one quarter here or anything else. The management team is looking for sustainability and growth and this is how we plan to approach next year, okay? And I think when you look at the specialty area, we feel very good about the sustainability and the visibility of that business. Hopefully, we'll have some additional growth as COVID subsides next year.

On the Generic side, it's a race. Right? It’s a race. This year, we benefited with EluRyng and Sucralfate. Next year, we're likely to have some competitors there, right? But there is a new pipeline, the strength of the pipeline. So our expectation and our hope is that these new products, right, will be offsetting competition on the rest of the portfolio.

And finally, as Chirag said, we're very focused on ensuring every investor dollar gets invested properly, right, so whether or not the gross to net deductions or whether or not where we spend R&D and SG&A expenses. And this year, that has been a good guide for us, right? So we're really focused on investing every dollar and continue to be as efficient as we can. So hopefully, that gives you enough to think about next year.

Tasos, can I just follow up and ask you, because I just don't want this to be a question lingering out of the -- with respect to the stock today. I mean if you annualize Q4, you're getting $400 million-ish in EBITDA. Consensus is close to $500 million. So do you guys have the pipeline confidence that we can see a decent step-up as we think about 2021. I know you're not going to be specific in guidance right now, but just give us some sense of -- are you confident that the pipeline can support a big step-up?

Yes. So my view. You know we cannot comment. Not only we or anybody else on external consensus and others, right? So number one is, if you look at this year, right, which was the first year of, let's call it, turnaround with a new management team, with Chirag and Chintu came in August, there was a substantial step-up in EBITDA, right, from $355 million last year to about the midpoint of the range of about $445 million, right? So that was a 25% increase. So we have seen a meaningful step-up in the business.

And everything -- I think you have heard how we are operating this year and how we're thinking about the year. The focus is on sustainable growth next year and beyond. So I think that's as much as I can tell you at this point in time. And by raising this year -- by raising guidance, right, EBITDA guidance this quarter, I'm not sure that implies things are getting worse. I think this implies things are getting better. So I'll stop there.

Next question comes from Dana Flanders of Guggenheim.

My first one is just on the base generic business. I think in your prepared remarks, you had mentioned capacity utilization is back close to pre-COVID levels. And I know you've had a lot of success winning contracts this year. As you look towards 2021, is that part of the lift for the Generics business passed us now? Or how much of a tailwind could additional kind of contract wins and base business maximization be for you heading into next year?

And then just my second quick question on OTC. I know you had a store brand launch of V Gel with the partner about a month ago. Just curious if that's a channel you plan to get bigger in and if there's a strategy around that.

Thank you, Dana. So base business, we have a large commercial portfolio. We have 250 products, and we'll continue to find opportunities. We have one of the best customer service focused just in the United States. So all 3 large customers and many small customers, were very deep customer relationship. And they're relying on our alternate supply infrastructure with U.S. and India and Ireland coming soon. So that allows us to keep working with our customers to add on. We'll keep finding new opportunities within 250 products. So base business is stable, and we expect to grow. Not counting the competition, and obviously, the new product launches like EluRyng and Sucralfate, that is expected.

So we're very, very proud of what we have done on a base business, and rightfully so. It's a large portfolio over the years. We've built it. We have the capabilities, capacity, quality, to supply, and that's exactly what we are doing. We are one of the most reliable supplier for them and high quality and great customer support. And we are getting rewarded for that.

On OTC, we've been -- we have multiple OTC, basically the ANDAs, which gets the Rx to OTC switches, more than 10 products over the years. We never fully concentrated launching OTC by ourselves. We've been supplying through a partner, PLD, which happens to be a very large OTC distributor in the United States. I believe they're the second largest after Perrigo. It's a private company. Long-term relationships we have, over 10 years, with them. They're Long Island-based, excellent management team and founders.

So we are expanding our -- the retail as we have a substantial market share already. We were the first one to introduce generics retail. So we, obviously, will have a higher percentages in market share for the OTC market as well. We're looking at multiple switches from Rx to OTC. We believe FDA would be more inclined to do that because of the patient convenience as well as cost. So very excited about that. We'll look into other opportunities as well within OTC. It's a good field, and we have a great partner. So we'll keep expanding our portfolio in OTC.

The next question comes from Nathan Rich of Goldman Sachs.

To start, I just wanted to follow up on the topic of biosimilars. I know it's early, but I'd be curious to kind of get your kind of high-level view on what your commercial strategy will be in these markets. Obviously, we're seeing kind of more options out there, more competition. How are you guys thinking about pricing and kind of building market share as these approvals come?

Nathan, excellent question. We are utilizing our specialty infrastructure, led by Joe Todisco, looking at various alternatives. We have the existing relationships with large wholesalers who happen to be -- first 3 products we're launching is in oncology. So they happen to be leaders, ABC and McKesson in oncology, and we enjoy years of great relationship. We want to find a practical solutions. We don't believe you need a field cells of hundreds of people to sell the same approved branded product again. That is waste of resources. As doctors get comfortable, I think what more is needed is customer support, physician education about biosimilars, and that is where Joe is focusing more.

Somewhat of a creative partnership with a large already oncology player such as McKesson or ABC would be also in play. We do want to start laying out the groundwork for what should be the biosimilar distribution. Why does it have to follow the traditional model? How do we work with our managed care partners, the PBMs? And that's all on the table. And I would stick with what I've said before, biosimilars will become more competitive, but it has a lot of products. As you know, there's $200-plus billion of biologics, which are branded. And that is the best way to provide access and affordability in next -- now to next 10 years. It's an excellent business opportunity, but it more fits in with generics player, which fits in the players who are focused on the affordable -- providing affordable medicines. And that's exactly the mindset we are using to launch biosimilars. Hope that answers your question, Nathan.

Yes. That's helpful. If I could just ask a very quick follow-up to Tasos on the Generics business. I think earlier in the prepared remarks, it sounds like volumes are maybe still a little bit below normal levels due to COVID. So I guess a question being, would you continue to expect to see that -- those volumes improve kind of as things normalize into the fourth quarter just as we think about sort of a steady state for the Generic segment before considering new launches that might add to that?

Yes. It's really hard to answer that, right? So from our perspective, we think it's -- as I mentioned before, I think Q4 looks somewhat like Q3, right, with half the country -- more than half the country exploding on COVID, right? Now we've been -- done pretty well in the last 9 months, right? We've done pretty well over the last 9 months. So you have -- I think you have some puts and takes, right? So you have, for example, EluRyng, that should do better. Now we have [uncollect] capacity a bit. So that should be doing better. And -- but then we have other products, some of our injectable products that may be under pressure as people kind of stay out of the hospitals. So I think you have some puts and takes, but we don't expect dramatic shift one way or the other versus Q3. That's how I think about this, Nathan.

Yes. And next year -- we have said that we -- from now to August next year, there are 8 more high-value products. The 7 we already launched. Lidocaine is being launched soon, it's approved, lidocaine patch. So you can just think about that, that complex products and high-value products at tremendous values. And this is -- in Generics business, we've been adding since 2002. Every year, we must refresh our pipeline, I mean, new commercial products, new product launches. And it's exactly what Amneal has. And we have rebuilt this pipeline, added on more products and very excited and feel very comfortable that year-over-year -- over 5 years, we have new product launches, which can offset competition, which is always expected in generics for what you launch the previous year as well as stabilizing the base business and keep finding opportunities since we have a very large base business and it keeps growing. So that -- I hope that answers your question, Nathan.

The last question comes from Balaji Prasad of Barclays.

I joined the call slightly late, so excuse me if this has been asked already. So 2 questions from me, firstly on the biosimilars. We just wrapped up our generic and biosimilar industrial symposium, where lots of experts had the opinion -- multiple experts had the opinion that there is a strong first-mover advantage in biosimilar. So considering your positioning in Neulasta, or filgrastim, Neupogen, where you would be #5, #6, I want to pick your brains on how you think you'll be able to break through this first-mover barrier. And there are multiple movers out of here? Secondly, I want to get your thoughts also on injectables as to where you are currently in terms of your product build-out and your outlook on the injectables side for next year?

Thank you, Balaji. You're absolutely right. The first mover would have advantage in biosimilars, and it will stay there for a longer time. As market opens up, the second, third, fourths will have respective market share. It is difficult being fair to say -- to find creative new channels, and that's what we are trying to do, government channels, the wholesalers channels, the captive channels. We do not expect to match the first mover, definitely. And our future plans for biosimilars will be more focusing on can we be first in the first wave or second wave. I believe, in biosimilars, it would be very difficult if you are in third and fourth wave. So that's exactly where we are focusing on.

On injectables, today, we do approximately $150 million of net sales. Portfolio is growing. Pipeline is growing. We're focusing on products, which are more, again, complex in nature using Amneal's R&D capabilities, more suspension-based products, difficult products, required trials, and again, bringing the first-to-market injectable products than to compete in volume. And also looking at various other strategies in injectable, very excited to grow that business over 5 years.

This concludes our question-and-answer session and today's annual third quarter 2020 earnings call. Thank you for attending today's presentation. You may now disconnect.