- Amneal Pharmaceuticals will restructure its business and cut costs in a plan aimed at saving the company about $50 million a year, it said Wednesday.
- The New Jersey-based drugmaker said it's working to "right size" the company and streamline manufacturing operations. Further details on the restructuring will be announced later, Amneal said.
- Amneal also slashed its estimate for core profits in 2019, forecasting between $425 million and $475 million in adjusted earnings before interest, taxes and other expenses. That's a sharp cut to earlier estimates of between $600 million and $650 million, sending shares in the company down by a third Wednesday.
CEO Rob Stewart said the overhaul is necessary as competition for its top generic products and the time to market for pipeline products exceed the company's expectations. Amneal also singled out a delayed launch for generic NuvaRing and an uncertain supply of epinephrine auto-injector from a third-party supplier.
Challenges to the entire generic industry — including a limited number of buyers — are also impacting Amneal, Stewart said.
"These decisive actions represent a difficult but necessary step forward to position Amneal for future success," Stewart said in the company's statement.
Most of the restructuring will be finished in 2020, with full cost savings starting in 2021. Amneal plans to reduce its operating budget, reprioritize R&D projects and realign manufacturing "to be more cost efficient."
Amneal manufactures most of its products internally, with 10 manufacturing sites and seven R&D centers in the U.S., India and Ireland, according to an annual regulatory filing. The company looks to third-party manufacturers for most of its specialty products and says that outsourced production represented about a quarter of its combined net revenue last year.
Investors in other generic companies, including Teva, Mylan and Endo International, should take note of Amneal's action as they too are facing some of the same challenges, Cantor Fitzgerald analyst Louise Chen wrote in a Wednesday note to clients.
"Customer consolidation has created greater leverage for the buying consortiums to extract price concessions from generics companies," Chen wrote.
Consolidation in the generics industry itself may also threaten Amneal, she wrote.
"Small and mid-size generics companies need to consolidate to stay competitive in markets in which customers have increased buying power," Chen wrote. "If Amneal's competitors get bigger while Amneal stays the same, this could make it hard for Amneal to compete in the industry."
In 2017, Amneal combined with Impax Laboratories that created at the time the fifth largest generic drugmaker in the U.S.
Amneal said it will issue further guidance on 2019 results on Aug. 8, when it reports second-quarter earnings.