Dive Brief:
- As it reels from financial woes, the big generic drug maker Amneal has brought back its founders as co-CEOs and let the CEO go. But CFO Todd Branning, who joined the company in January from Teva Pharmaceuticals, is kept on.
- Amneal Pharmceuticals founders Chirag Patel and Chintu Patel have reassumed top positions at the company, replacing as co-CEOs Rob Stewart amid a business restructure and falling sales.
- News of the boardroom shuffle comes less than a month after Amneal was forced to reduce its 2019 profit guidance. Paul Bisaro is also out as executive chairman, replaced by Paul Meister, who held various positions at Thermo Fisher.
- The New Jersey-based company on Monday also released second quarter results, which missed Wall Street analyst estimates and led to a 5% slump in share price. Amneal lost one-third of its market value when it revised its guidance last month.
Dive Insight:
Amneal bought Impax Laboratories in 2017, borrowing $2.7 billion to finance the transaction, which gave the acquiring company its first-ever public stock listing. With that listing came enhanced shareholder scrutiny — newly a thorn as Amneal has been forced to acknowledge that 2019 will not be as good a year as forecasted.
Before joining Amneal in late 2017, Stewart had been chief operating officer of Allergan. Bisaro moved up to executive chairman of the combined organization from the CEO's suite at Impax. He had previously been CEO at Actavis, the generics company that since has become Allergan.
In addition to the New York Stock Exchange listing, the Impax acquisition vaulted Amneal up the rankings of generics companies, making it the fifth largest generics company by gross revenue.
This year net revenue has sputtered, shrinking between the first and second quarters 9% to $405 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) were down 18% to $92 million, while net diluted earnings per share declined 36% to $0.09. Wall Street consensus estimated EPS of $0.15, according to Cantor Fitzgerald analyst Louise Chen.
The profit declines came against a backdrop of cost reductions. Research and development costs declined 15% to $42 million from the first quarter and sales, general and administrative costs declined 23% to $55 million.
With significant amounts of debt left over from the Impax deal, the slide in revenue and profitability needs to be addressed quickly before investors should return, Cowen analyst Ken Cacciatore wrote in a note to clients.
"At the current level of debt and stagnating cash flow we believe aggressive action to deleverage is warranted, but with this change in management we believe this could become even more protracted," he wrote.
As Amneal announced the management change and disappointing earnings, it also outlined a plan to return to growth. This includes cost-cutting in generics manufacturing, focusing R&D on the highest return projects, expanding production of sterile injectables for the hospital market, in-licensing and potential acquisitions that could help expand its product lines.
Changes at Amneal occur amid broader turmoil among generic drugmakers, which face continued price pressures from consolidated buying groups. Heightened government scrutiny, including a 44-state investigation into price fixing, has also brought problems for the sector.
