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Amneal Pharmaceuticals, Inc. (AMRX) Q1 2019 Earnings Call Transcript

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AMRX earnings call for the period ending March 31, 2019.

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Amneal Pharmaceuticals, Inc. (AMRX -0.69%)
Q1 2019 Earnings Call
May 9, 2019, 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning and welcome to the Amneal Pharmaceuticals first quarter 2019 earnings conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the * key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press * then 1 on your touchstone phone. To withdraw your question, please press * then 2. Please note this event is being recorded.

At this time, I'd like to turn the conference over to Mark Donohue, Vice President of Investor Relations and Communications. Please go ahead.

Mark Donohue -- Vice President of Investor Relations and Corporate Communications

Thank you, Allison. Good morning, everyone. Welcome to Amneal's first quarter 2019 earnings call. Earlier this morning, we issued a press release reporting our results. The press release as well as the slide that we presented on this call are available on our website at 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'd also like to remind you that during the course of this call, management will make projections for other forward-looking remarks regarding future events for the future financial performance of the company. It's important to note that such statements about estimated or anticipated Amneal results, prospects, or other non-historical facts are forward-looking statements and reflect our current perspective of existing trends and information as of today's date.

Amneal disclaims any intent or obligation to update these forward-looking statements, except as expressly required by law. Actual results may differ materially from current expectations and projections depending on a number of factors affecting the Amneal business. These factors are detailed in our periodic public filings with the Securities and Exchange Commission, including but not limited to Amneal Pharmaceuticals, Inc., Form 10-K of the period ending December 31, 2018.

Our discussion today includes certain non-GAAP measures as defined by the SEC. Management uses both GAAP financial measures and disclosed non-GAAP financial measures internally to evaluate and management the company's operations and to better understand its business. Further, management believes the conclusion of non-GAAP financial measures provides meaningful supplementary information to facilitate analysis by investors in evaluating the company's financial performance, results of operations, and trends.

A reconciliation of GAAP to non-GAAP measures is available in this morning's press release and in the appendix of today's presentation. On the call this morning are Rob Stewart, our President and Chief Executive Officer and Todd Branning, our Chief Financial Officer. Following prepared remarks, we will hold a Q&A session. Also on the call and available for Q&A is Paul Bisaro, our Executive Chairman, Andy Boyer, our Executive Vice President of Commercial Operations, Joe Todisco, Senior Vice President of Specialty Commercial, and David Buchen, Chief Legal Officer and Corporate Secretary.

So, for our agenda, Rob will begin with a review of our first quarter highlights. Following that, Todd will review our financial results, after which Rob will conclude and reaffirm our guidance for 2019 and also review our strategic priorities going forward. With that I'm going to turn the call over to Rob.

Robert Stewart -- President and Chief Executive Officer

Thank you, Mark. Good morning, everyone. Thank you for joining us today to review Amneal's first quarter results. Please turn to slide six to begin with a few highlights from the quarter.

We began 2019 with a good first quarter as we grew revenue and EBITDA over the same period last year, executed on priorities across our business, and continued to follow through on the key strategic objectives outlined as integral to drive our long-term growth.

First, we continued to keep our industry-leading generic launch engine intact, delivering 11 approvals, 2 tentative approvals during the quarter, and launching 6 new generic products. This included the approval and launch of Rivastigmine patch, our first generic transdermal product, and another important milestone in the diversification of our portfolio into more valuable, complex dosage forms, a key stated goal for our company.

We remain positioned to launch up to 50 new products in 2019, approximately 20% more launches than we had in 2018. The successful transition of levothyroxine also paid immediate dividends and helped us achieve year over year growth amid a challenging time for our sector.

Second, we maintained momentum in our specialty franchise with our key promoted products Rytary and Unithroid both delivering year over year growth and solid prescription growth sequentially. We are investing in additional sales and marketing efforts to build on and accelerate the continued growth we expect from both of these franchises.

Third, we continued to simplify our operational footprint and optimize our business to focus on our core areas of strength. We took strategic action to divest our commercial business in the UK during the quarter and in Germany earlier this month, allowing us to concentrate our focus and resources on strengthening our growing position in the US market.

Additionally, with all the major tasks of the Amneal and Impax integration now complete, we are continuing to realize synergy capture across the organization. We have now captured more than $100 million in cost synergies since the close and remain on track to achieve more than $200 million in cost savings at a faster pace than we had originally planned.

Finally, we also strengthened our experienced management team during the quarter with the appointment of several key senior leaders who will play important roles in optimizing our business to position Amneal for sustainable, long-term growth. In addition to Todd joining our team as CFO, we have brought on David Buchen as Chief Legal Officer and Corporate Secretary, and Pradeep Bhadauria as Chief Scientific Officer.

Turning now to slide seven, from a financial perspective, we had a good quarter with combined net revenue growth of 5% and adjusted EBITDA growth of 17% as generic segment performance, the growth of Rytary and Unithroid, and synergy capture more than offset generic-based business erosion and the loss of exclusivity of Albenza.

Combined adjusted diluted EPS of $0.14 was flat with prior year quarter primarily due to the incremental interest expense of $12 million net of tax or approximately $0.04 per diluted share. As a reminder, the first quarter of 2018 does not include the impact of the higher interest expense used to finance the combination with impacts that closed in May of 2018.

Before Todd covers the details of our financial results, I'd like to review highlights from our segments. Starting with our generic segment on slide eight, we have continued to build momentum with pipeline execution and advancing our strategy to diversify our portfolio through a focus on higher value, higher return opportunities.

In Q1, generics combined net revenue grew 7% as we benefited from the 2018 new product launches, including levothyroxine, which more than offset the impact of additional competition on our base generics business. We launched six new generic products in Q1. As I noted earlier, this included the approval and launch of Rivastigmine, our first generic transdermal product, which marks an important milestone in the expansion of our portfolio into transdermal products, which will see additional success throughout the year.

During the quarter, we played to our strength as a reliable and consistent supplier and capitalized on supply chain disruptions and shortages. We will continue to explore opportunity to leverage our position as a partner of choice to fulfill customer product needs as they arise. A core component of our generics business strategy is to drive sustainable growth by building a diversified, high-value generic business that includes more complex products. As you'll see on the next two slides, both our FDA-submitted and R&D-developed pipelines support and align with this strategy.

Turning to slide nine as shown here, of Amneal's 105 products submitted at the FDA, almost 50% are from non-oral solid dosage products. Our pipeline has delivered 14 ANDA approvals so far this year, including the transdermal patch approved and launched in Q1. In addition, we have three tentative approvals so far this year. The diverse and strong pipeline positions Amneal to launch up to 50 products for the balance of the year.

Turning to slide 10 for an update on our generic R&D development pipeline, as shown here, approximately 70% of the 77 products in our R&D pipeline are focused on non-oral solid dosage products that have the potential to be more durable and have higher and more sustainable value.

Within our specialty segment on slide 11, we are continuing to see strong performance from our key promoted products Rytary and Unithroid, both of which saw double-digit gains in prescription. This played a significant role in helping to offset the impact of the entry of generic competition to Albenza.

Within the Rytary franchise, effective February 1st, we added approximately 12 million additional covered Med-D lives under new agreements with Humana and United Healthcare. Our team's marketing efforts to more effectively establish the importance of the Rytary value proposition is clearly resonating with both prescribers and patients. As Rytary patients move through the Med-D coverage gap, we expect to see progressive growth in prescriptions over the remainder of the year.

With Unithroid, we grew new prescriptions by 30% year over year and will continue to execute on our successful sales and marketing strategy to maintain our historical growth trend.

With that, I'll turn the call over to Todd.

Todd Branning -- Senior Vice President and Chief Financial Officer

Thanks, Rob. Good morning, everyone. Turning to slide 13 and a review of the generic segment results for the first quarter, as Rob noted, our first quarter year-over-year results were positive. Compared to last year's first quarter, net revenue increased 7% to $382 million. We benefited from the more than 40 products launched in 2018, including Levothyroxine, which more than offset a decline in sales of both Oseltamivir and Aspirin Dipyridamole due to new competition.

On a sequential basis compared to the fourth quarter of 2018, results were lower, as is typically the case between the fourth and first quarters and were also impacted by added competition on base business products, including Aspirin Dipyridamole and Yuvafem. Partially offsetting the decrease was a full quarter of Levothyroxine and higher sales of a number of base business products, including Oseltamivir as flu season picked up and Guanfacine.

We also added revenue contribution, though minimal, from six new generic product launches in the first quarter. Our adjusted gross margin declined in the first quarter by approximately 300 basis points on a sequential basis, due primarily to the impact of shelf stock adjustments, product returns, inventory reserves, and unfavorable product mix. Adjusted operating income in the first quarter compared to last year's first quarter increased $15 million to $97 million, driven by higher revenues, lower R&D and SG&A expenses as we realized the benefit of cost synergies.

On a sequential basis, adjusted operating income was down compared to the fourth quarter of 2018 as a result of lower revenue, margin compression, and increased expenses on legal fees, REMS program costs, and freight shipping charges. Additionally, last year's fourth quarter included the favorable impact of $19 million of legal product settlements, for which there were none in this year's first quarter.

Moving to slide 14 and our specialty segment results, on a year over year basis, net revenue decreased 7% to $64 million as higher sales of Rytary and Unithorid were more than offset by an 80% or $11 million decline in sales of Albenza as a result of generic competition. On a sequential basis, net revenue in the first quarter decreased 27% due to lower volumes across the portfolio, primarily the result of seasonal customer ordering patterns in December versus January and higher gross to net adjustments on Rytary from new managed care rebate agreements as well as higher Med-D coverage gap liability.

Adjusted gross margin for the first quarter was 83%, up when compared to both the fourth and first quarter of 2018, driven by favorable product sales mix. On a year over year basis, adjusted operating income for the specialty segment declined $2 million to $29 million, due primarily to the loss of exclusivity of Albenza. On a sequential basis, adjusted operating income decreased due to lower revenues and higher SG&A expenses as a result of the timing of spend associated with new marketing programs and our annual sales meeting.

Moving to slide 15, we ended the first quarter with $64 million in cash and cash equivalents, down compared to the fourth quarter of 2018. The decrease in cash and in operating cash flow was the result of a number of factors which we expect to improve over the course of this year. The first quarter was impacted by lower revenues and operating income, as previously noted, compared to the fourth quarter of 2018. As part of the impacts integration, we completed the order to cash conversion in last year's fourth quarter, which accelerated AR collections last year but led to lower collections of receivables during the first quarter.

Cash flow from operations was also impacted by an increase in inventory levels, driven by our decision to make strategic investments to position ourselves to take advantage of potential generic market opportunities. Additionally, we incurred approximately $40 million of payments related to transaction, integration, and restricting costs, including severance payments.

As Rob noted earlier, we are continuing our focused efforts to streamline our operations, accelerate savings, and generate resources to drive organic growth. For the remainder of the year, we expect to see decreased spending within SG&A, COGS, and R&D, including lower cash payments for severance, integration related and restructuring expenses, and lower employee-related costs as 2018 bonuses were paid in Q1 2019.

These actions, combined with an increase in revenues as new product launches, accelerate into the back-half of the year are expected to fuel an improvement in our cash flow from operations throughout 2019. I will now turn the call back to Rob for closing remarks.

Robert Stewart -- President and Chief Executive Officer

Thanks, Todd. One slide 18, we are reconfirming our 2019 guidance. We are doing so even with the divestiture of our European commercial businesses, which reflects our ongoing focus on streamlining our operations and accelerating savings as drive organic growth and pursue external growth opportunities.

We continue to expect revenues to increase in the remainder of 2019, driven by the full year impact of 2018 product launches and up to 50 new generic products this year accelerating into the back-half of the year. This includes generic NuvaRing, which we currently project as a second half opportunity, assuming FDA approval. This will be partially offset by declines from additional competition on key products.

We expect to generate positive cash flow this year, which we anticipate utilizing for the optionality of either de-levering or investing in other M&A transactions. We expect improved profitability through decreased spending within COGS, SG&A, and R&D as a result of reduced project spend and the benefits of full year cost synergies. We continue to expect adjusted EBITDA in the range of $600 million to $650 million and adjusted diluted EPS in the range of $0.94 to $1.04. Based on the expected timing of 2019 approvals and launches, we expect our results to be back-half weighted.

Turning now to slide 18, our strategic priorities for 2019 are to build Amneal from our position of strength in order to achieve strong operational cash flows. We'll do this by leveraging the Amneal and impacts combination to capture synergies and capitalize on organic growth opportunities, driving operational excellence while remaining committed to being a high-quality reliable supplier with exceptional customer service and compliance and diversifying our business through internal R&D and external business development opportunities.

From a long-term perspective on slide 19, we are exceptionally optimistic about Amneal's long-term growth potential. Now, one year removed from the completion of our combination with Impax, we have achieved a tremendous amount, successfully integrating our businesses, working creatively and quickly to capture new opportunities, advancing and diversifying our pipeline and maintaining our unwavering commitment to safety and quality, all while remaining laser-focused on execution and delivering an industry-leading rate of product approvals and launches.

I want to thank all of our employees around the world for the remarkable contributions they have made to get Amneal to where we stand today. We are building this organization from a position of strength. For the remainder of 2019, we're going to focus on continuing to drive organic growth within both our generic and specialty businesses, exploring additional opportunities to diversify our commercial footprint, and utilizing excess cash flow to pursue creative business developments to further accelerate our growth.

Amneal is solidly positioned to execute our near-term priorities to deliver on our 2019 targets, while also implementing our long-term strategy to deliver sustainable growth for our shareholders in years to come. With that, I'll turn the call back to Mark to start our Q&A.

Mark Donohue -- Vice President of Investor Relations and Corporate Communications

Thanks, Rob. Allison, will you please give the instructions to prompt callers for the Q&A and we'll open the lines up. Thank you.

Questions and Answers:


Okay. Certainly. Thank you, sir. We will now begin the question and answer session. To ask a question, you may press * then 1 on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press * and then 2. Our first question today will come from Louise Chen of Cantor Fitzgerald. Please go ahead.

Jennifer Kim -- Cantor Fitzgerald -- Analyst

Thank you. This is Jennifer Kim on for Louise. I have a few questions here. My first question is just thinking about the six product launches in this quarter, you said they had pretty minimal contribution. I'm just wondering if you can update us on how you think that level of contribution for new products will change over the course of the year and sequentially.

My second question is when you talk about diversifying your portfolio away from specialties and generic, is it fair to say that you're talking about biosimilars? Is biosimilar insulin something that you'd be interested in just because of the noise around insulin recently? Then my last question is just maybe for Todd -- as the CFO, what are your short and long-term goals and what are your priorities? Thanks.

Robert Stewart -- President and Chief Executive Officer

Okay. Obviously, I'll handle the first two and hand the third off to Todd. In terms of the product launches, because of the timing of when those launched within the quarter, they had somewhat of a muted contribution in the first quarter. Those products that we did launch will continue to gradually improve in terms of market share volume as well as contribution throughout the course of the year, again, only six products launched out of the 50 in the first quarter.

So, you will see not only the gradual ramp in contribution from the products already launched, but as we continue to launch products and some of our more highly valuable product launches are in the back half of the year. So, that kind of gives you the perspective on how to think about launch contribution as we progress through the year. It will be a gradual build but with a greater contribution in the second half of the year versus the first half of the year. But all of these launches provide incremental value as they do launch and as you do begin to see uptake in terms of share.

In terms of diversifying the business, we continue to look at other adjacencies in and around our specialty franchises as well as in our institutional platform. So, when you think about Amneal today, we've got a very good retail component with our generics business. We also have a growing institutional footprint that allows us to be very relevant to hospitals. If we could add additional products into that infrastructure, that's an area of focus for us as we diversify and try to find ways to accelerate that segment within our business.

That include biosimilars and will include biosimilars in the future. I wouldn't necessarily say that our near-term priority is to build a biosimilar portfolio. I still think that segment is going to be a slow uptake. Our focus is probably more on generic injectables and branded injectables that we think could fit that institutional platform that we have and continue to build both organically, if we have ways to accelerate that through M&A, that would be my area of focus.

In terms of insulin, we continue to look at the space. We continue to evaluate it. I don't have anything specific to announce on this call, but it's an area of interest that we continue to explore. I'll leave it at that and then I'll turn it over to Todd for his short and long-term priorities.

Todd Branning -- Senior Vice President and Chief Financial Officer

Jennifer, thanks for your questions. So, I would highlight three things in relation to short-term and long-term priorities. The first is to continue to work closely with our generics and specialty businesses to drive growth and identify opportunities in those segments of our business. In connection with that, to maintain good discipline our cost base and decline ways to optimize opportunities to drive our spend base to a lower level as we progress throughout 2019.

The second would be to focus on our cash flow generation and cash flow from operations, to drive that and progress that throughout 2019 so that we have the capability to pursue both internal and external growth opportunities. The third would be to just maintain our balance sheet in a good position so that we've got flexibility and optionality as we move forward.


Our next question will come from Gary Nachman of BMO Capital Markets. Please go ahead.

Gary Nachman -- BMO Capital Markets -- Analyst

Hi, good morning. First, the competitive pressures with some of your key generic products like Aspirin Dip and Yuvafem, have you been able to do anything with your customers to try and maintain share for those products? Explain how those situations have been playing out. Then how do you weigh the need to spend sufficiently behind your pipeline while also scaling back your spending, which is what you said. Where are you focusing mostly in R&D in terms of prioritization and making sure you continue to fund the pipeline that you've always been talking about? Thanks.

Robert Stewart -- President and Chief Executive Officer

Thanks, Gary. Regarding the competitive pressures on our products, when you're a good high-quality reliable supplier that doesn't have the type of intermittent supplies or back orders or poor customer service, that gives you the ability to have constructive conversation with your customers and also provides you opportunities to hold on to market share positions. I think that's a key component of kind of our focus and the way that we operate our supply chain and the way we invest in our facilities and invest in our supply chain.

I also think it also matters when you're in that number one, two, or three position once a product does go generic. So, on Dipyridamole Aspirin or generic Aggrenox, that's a good example where we've been able to hold on to market share despite the fact that there have been many competitive launches that have now come into the market over the last 12 months.

When you're in that incumbent seat, we then control the decision in terms of whether or not we want to give up the volume or at what price point do we want to try and drive down to. We make those decisions on a one-off basis on each particular product depending on how important that product is to our portfolio, how it fits our overall supply chain strategies and manufacturing capacity analysis.

So, you think about we've got over 350 product families that we make those kinds of decisions day in and day out. The positive element about Amneal and Amneal's supply chain is that generally, customers don't want to move the product away from us, provided they feel they're getting a fair price. Again, we're always looking at ways where we can maximize the value for our companies and our shareholders.

As we think about R&D, a lot of companies over time have really focused on the number ANDA applications and not necessarily really focusing on what the ANDA opportunities are. So, with the addition of Pradeep as well as they way that we are kind of reconfiguring as we've integrated Impax and Amneal together and as we've looked at our R&D spend, we've kind of challenged ourselves to go back and say, "Okay, in this new market reality, where are the right opportunities to make the best investments that we think are going to generate the greatest returns?" and not necessarily just feeding investment into the number of ANDAs.

We're now at a point where we've got a good enough portfolio and a large enough portfolio that we think it's not any more about targeting a certain number of ANDAs, but it's really targeting the opportunities. We're very disciplined in that approach. We've introduced new processes around looking at return on investments of each of our R&D dollars and we're making sure that we're channeling the dollars to those right opportunities and those opportunities are going to generally have higher returns.

We think that we have the internal expertise and capability of manufacturing the infrastructure to be able to have confidence that our technical probability of success is high. We also think they may be the type of assets that would have fewer number of competitors and more durable contribution for us over the long-term.

That's the process that we've been going through for this last year and really, that's kind of the focus on us going forward is challenging every investment dollar to make absolutely sure it's being invested in the right area that we think is going to generate a return. Hopefully, that kind of gives you a flavor on how we've been thinking about aligning our infrastructure to the new reality of the market.


The next question will come from David Amsellem of Piper Jaffray. Please go ahead.

David Amsellem -- Piper Jaffray -- Managing Director

Thanks. Just on the previously limited competition products that are now facing competition, so, Voltaren and Vagifem and Aggrenox, can you talk maybe qualitatively about how resilient or not resilient those products have been in the face of that competition? Then specifically on Voltaren, what's your view on potential deterioration in that market given that Akorn is planning to enter the market later this year? Thanks.

Robert Stewart -- President and Chief Executive Officer

Anything that has margin in generics these days are always going to be targeted by other competitive launches. Over the course of the last six months, we've seen a significant number of competitive launches against the top 20 products that we have in our portfolio. We saw the impact of that a bit in the fourth quarter. We saw the continued impact of that in the first quarter, which is why it's so important to have launch productivity to be able to offset that.

That said, even with the competition that we've seen on many of these products, because of the fact that we were there at market formation, because of the fact that we're in the position that we can reliably supply theses products, we've been able to hold on to market share and we've been able to still, I think, pricing in many of these have remained a little bit more resilient, again, because of the fact that we can get maybe a bit more premium for our supply chain and our reliability.

So, even though all of our top 20 have seen, in some respects, additional competition and started, again, in late third quarter and continued to fourth quarter, then even into the first quarter, these assets are still durable. They're still making good contributions to our margins today and to our bottom line today. I will expect they will continue to be good products for us going forward because they've all now kind of suffered the shock of competition.

We will still see more competitors. You mentioned Akorn coming in on Voltaren. We'll deal with those issues as they come up. Within our guidance, we do assume additional competitors in on many of these products, which, again, speaks to the fact that we're committed to our guidance because of the fact that we've got launch productivity. We've got other growth opportunities. We've got synergy capture that will all mute the impact of those competition assumptions that we expect throughout the course of the year.


Our next question will come from Ami Fadia of SVD-Leerink. Please go ahead.

Eason Lee -- SVB-Leerink -- Analyst

Hi, good morning. This is Eason Lee on for Ami. Thank you for taking my questions. I have two product questions, please. On Levothyroxine, we saw the entry of a generic Synthroid, sort of understanding that it's not the same as your generic, but how do you see this market shaping up in 2019, both on a volume and price level? Then secondly, on epinephrine, can you talk about how you're doing with regard to supply as we sort of come into the busy season? How do you see your share shaping up going forward, given that we've sort of seen AUVI-Q and Teva's EpiPen generic gaining share pretty rapidly in the recent weeks? Thank you.

Robert Stewart -- President and Chief Executive Officer

Thanks, Eason. With respect to Levothyroxine, we think this is going to be still a great franchise for us, both branded as well as generic. Again, back to good reliable supply, we've got a great partnership with Jerome Stevens. They've got a long history of being a very good supplier with this particular product. Even with competition that has entered into the market, unless you are AB-rated to all four, let's call it, branded Levothyroxine products out there, it's a challenge for you to be able to really create the opportunity for substitution.

You've got to also remember too that this is a product that's considered a narrow therapeutic index product. When patients switch from one generic to another or from one brand to another, the FDA guidance suggests that patients be retitrated. That creates somewhat of a stickiness or an adhesion to your particular product. So, I believe that Levothyroxine is going to be a great product for us for a very, very long period of time and is in a position to even withstand competition and also, our deal structure with Jerome Stevens contemplates protecting our contribution even in the face of any kind of pricing challenges.

I also would say with this that from a volume standpoint, we continue to see great demand for this product despite the fact there's been a competitive entry and you could see that the market shares have remained relatively stable.

With regarding of Adrenaclick, we are seeing improvements in the supply chain around this product. The efforts that Pfizer has made throughout the course of 2018 are now starting to bear fruit where we're seeing better reliability and better delivery performance of the product. We continue to start -- we're building inventory in advance of the season, the anticipated season in second and third quarter.

Right now, touch wood, I like what I'm seeing and I think that we will have additional inventory this year compared to what we were struggling with throughout the course of last year. Adrenaclick is not AB-rated to the other epinephrine, like EpiPen or the Teva product. So, our product is not interchangeable with EpiPen. It has its own prescription. We see that Teva is essentially taking market share from EpiPen, which you would expect, but Adrenaclick is still, I think, positioned well in the marketplace and I think we expect this to be actually a growth driver in 2019 versus 2018.


The next question will come from Greg Frazier of SunTrust. Please go ahead.

Greg Frazier -- SunTrust Robinson Humphrey -- Analyst

Thanks for taking the questions. It's Greg Frazier on for Gregg Gilbert. I just want to follow-up in cash flow. Was the swing in receivables something that you had expected to happen in the first quarter and are receivables back to a more normalized level now? You noted you expect cash flow to improve throughout the year. I was wondering you could comment on whether you expect year over year growth in operating cash flow for 2019.

Robert Stewart -- President and Chief Executive Officer

First off, I want to say I want to congratulate Gregg Gilbert for actually picking somebody with the same name filling in for him. I'll turn those questions over to Todd. He can give some more clarity on that.

Todd Branning -- Senior Vice President and Chief Financial Officer

Yeah, Greg. This is Todd. Thanks for your questions. Regarding the cash flow swing, we did anticipate that given our order to cash conversion that we completed in the fourth quarter of last year. So, we knew once we did that conversion and how we worked that with customers that we would accelerate cash collections into the fourth quarter and out of the first quarter this year. So, it wasn't something that was unexpected by us.

If you look over the two quarters, our cash collections have trended exactly where we think they should be. So, if it's just a function of accelerating some of the cash collection into the fourth quarter in conjunction with our order to cash conversion. We've seen now that we've got just outside of the quarter, we're seeing some normalization of our cash collections with customers. We expect that to continue in Q2 and for the balance of the year.

Regarding year over year operating cash flow growth, we do expect that our operating cash flow is going to progress and continue to grow throughout 2019. That's what we signal when we last spoke with you in February and we still continue to see that for the balance of the year. Of course, it will be driven by our ability to accelerate launches on the generic side in the back half of the year and continue to maintain discipline around our costs and our investments. So, we do see a picture where cash flow growth is progressing as we move through 2019. Again, that's consistent with what we had expected.


The next question will come from Dewey Steadman of Canaccord. Please go ahead.

Dewey Steadman -- Canaccord Genuity -- Analyst

Thanks for taking the questions. On the international businesses, obviously we've seen some sales of the UK business and now the trim in business. What else is out there from an international perspective in this newly combined business and what are your thoughts on international? Obviously, you've dived into this space in the past in prior lives. How attractive are ex-opportunities to you going forward? Thanks.

Robert Stewart -- President and Chief Executive Officer

Thanks, Dewey. As you noted, we did sell both our UK and our German businesses and these were kind of clean-ups of prior acquisition strategies that were not fully integrated into the business, didn't necessarily fit the model that we're trying to create. They were good businesses, but relatively small in size, not necessarily scalable, not to the degree as you pointed out in my past history, it wasn't at the size or scale that I thought was going to be a meaningful enough launch pad for us. To really build, it would take too much time, too much distraction for the organization.

If we found the right acquisition target that came with it, a more significant and sizable international business, that would become somewhat more appealing to me, but trying to greenfield international businesses was a bit more of a distraction to our current strategy today and our current focus. I looked at it as an opportunity where we could sell off those businesses, create value for us, refocus our organization on what I think are going to be important drivers for the short-term.

That doesn't mean that I'm immune to getting back into the international markets. I don't necessarily see that you get as much synergy between playing internationally versus domestically in particular around the generic side. But we would need to find the right acquisition that came with it, something that had an infrastructure, that had a more significant prominent market share for it to become more meaningful and more attractive for us. That would become a priority for us in the longer term.


The next question will come from Randall Stanicky of RBC Capital. Please go ahead.

Dan Busby -- RBC Capital Markets -- Analyst

This is Dan Busby on for Randall. I'll stick to two questions. First, regarding new launch contribution for the remainder of the year, can you provide any color on how much of that pertains to products that have already been approved or tentatively approved, to what extent guidance relies on a few key approvals such as NuvaRing? Then second, you talked about the back half new launch waiting this year. Can you provide any directional guidance on what we should expect in the second quarter versus the first quarter regarding revenue and EBITDA cadence? Thank you.

Robert Stewart -- President and Chief Executive Officer

For competitive reasons, I'm not going to get into all the big product launches because there are others that are obviously neck and neck with us. I don't want to disclose too much on the call. We've provided some color around NuvaRing. Others are talking about NuvaRing as well in the same timeframe that we are.

We've got some other more significant launches that we expect that would be in that late third quarter, fourth quarter type of timeframe. But you'll see a steady build from third quarter and fourth quarter, then continuing into 2020. Second quarter, we're not providing specific guidance, but I would say that we would see a slight increase in second quarter and then ramping up with a greater contribution in third quarter and our most significant quarter we expect this year will be in the fourth quarter.

As we get some of these products approved and launched, we will press release them so we can give you the confidence that these things are coming through. I think the way to think about our business this year is kind of almost looking at last year, the first quarter being our lowest.

Granted, this year, we're starting from a 17% higher rate than we were last year at this same very time, but you can kind of expect that kind of gradual build, where you should see second quarter improved over first quarter, third quarter stepping up again and fourth quarter being our strongest quarter. So, a very, very similar kind of trend line I would think you would expect in 2019 versus 2018.


The next question will come from Tim Chiang of BTIG. Please go ahead.

Timothy Chiang -- BTIG -- Managing Director

Hi, Rob. Can you talk a little bit about the specialty business you guys have today, how you plan on bolstering it? Obviously, you guys have highlighted that it will probably decline this year. Are you guys looking at potentially bringing in some additional products to complement what you already have in the CNS side? What can you do to get that growth engine back, especially brand side?

Robert Stewart -- President and Chief Executive Officer

Thanks, Tim. I'll work Joe into this question as well and I'll open up on a couple remarks. First off, our specialty business is growing when you exclude the impact of Albenza. Albenza went generic. We had the loss of exclusivity on that. But when you look at the core CNS portfolio as well as you look at Unithroid, those businesses are growing.

If we can find the right assets where we can leverage our sales infrastructure, we would be certainly open to that, but we don't necessarily need that to keep that growth. The real thing that's masking the specialty overall performance number is purely the loss of Albenza. We're also looking at other adjacencies as well because of the fact that we're calling on neurologists in addition to movement disorder specialists. We have opportunities to potentially leverage our sales infrastructure in neurology.

Then I would also say that because of the fact that we're in the institutional setting as well with our oncology platform, with our injectables as well as other assets that we have in our injectable portfolio, we think that that may be an opportunity to add on other franchises, more specialty franchises that have potential selling strategies into the institutions and into the GPOs where we think we can leverage our infrastructure there. But Joe, maybe a comment or two as well on that.

Joe Todisco -- Senior Vice President of Specialty Commercial

Yeah. As Rob pointed out, absent Albenza, all four of our promoted brands are seeing growth year over year from a net sales standpoint, specifically Rytary, which is heavily reimbursed through Med-D, had a strong first quarter from a script standpoint, essentially even with Q4 despite all the typical Med-D headwinds with copay resets and Med-D coverage gaps. Now, we're starting to see a lot of claim-specific data showing growth on the trend that we want to see, indicating that our sales and marketing and promotions are taking effect. So, we feel good about the growth of Rytary and Unithroid as well year-over-year.

Timothy Chiang -- BTIG -- Managing Director

Maybe just one follow-up. I noticed that you guys are going to expand your salesforce in the back-half of the year for Unithroid. How promotion-sensitive are branded Levothyroxine products?

Joe Todisco -- Senior Vice President of Specialty Commercial

I can take that. The business model we have on Unithroid, it is a fairly promotion-sensitive situation. We are essentially what we'll call almost a second line therapy in that space. It's a very new space, has a narrow therapeutic index as Rob mentioned before. A lot of the patients that are on Unithroid have been on other Levothyroxine medications previously and for whatever reason were not stable. We offer a high-quality branded medication that gives patients stability.

So, to that extent, it is very promotion-sensitive, where we're educating physicians on the unique proposition that Unithroid brings. So, the more territories that we do add help maintain our growth trajectory.

Robert Stewart -- President and Chief Executive Officer

I think the way to think about it -- we're constantly evaluating our spend and we see that the performance of these brands is certainly increasing our level of confidence that we could potentially open up some additional territories, put some additional promotion behind some of these products and hopefully accelerate the performance around these assets. So, the confidence now, quarter-over-quarter, year-over-year is certainly improving my confidence that this is an area that we should continue to put some effort behind.

That's why you see some of the choppiness of our SG&A budgets a little bit in the first quarter as well as we've kind of relaunched some of the marketing efforts around these products and we'll see the fruits of that continue throughout the subsequent quarters of the year.

Timothy Chiang -- BTIG -- Managing Director

Thank you.

Mark Donohue -- Vice President of Investor Relations and Corporate Communications

Thank you, Tim. That completes all of our callers for today. We thank you all for joining us. If you have any follow-up questions, please reach out to investor relations. We're available the rest of the week. Thank you.

Robert Stewart -- President and Chief Executive Officer

Thanks, everyone.


The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

Duration: 52 minutes

Call participants:

Mark Donohue -- Vice President of Investor Relations and Corporate Communications

Robert Stewart -- President and Chief Executive Officer

Todd Branning -- Senior Vice President and Chief Financial Officer

Joe Todisco -- Senior Vice President of Specialty Commercial

Jennifer Kim -- Cantor Fitzgerald -- Analyst

Gary Nachman -- BMO Capital Markets -- Analyst

David Amsellem -- Piper Jaffray -- Managing Director

Eason Lee -- SVB-Leerink -- Analyst

Greg Frazier -- SunTrust Robinson Humphrey -- Analyst

Dewey Steadman -- Canaccord Genuity -- Analyst

Dan Busby -- RBC Capital Markets -- Analyst

Timothy Chiang -- BTIG -- Managing Director

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