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Amneal (AMRX) Down on Guidance Update & Restructuring Plan

Zacks

Shares of Amneal Pharmaceuticals, Inc. AMRX crashed 35.96% after the company announced a restructuring plan and updated its annual guidance.

Notably, the stock has plunged 68.3% in the year so far against the industry’s 9.7% growth.


The company recently initiated an in-depth, company-wide review of its organizational structures, operational budgets, current and future capital projects, and existing capability and infrastructure alignments. The review was in response to the continuing industry challenges impacting its business.

The plan will lead to substantial operating budget reductions, and revised and more efficient organizational structures across all company functions.

Consequently, the total cost base will be reduced approximately $50.0 million. A large chunk of the milestones will be achieved during 2020, with the full benefit of these actions being realized in 2021 and beyond.

Amneal has been in troubled waters for a while now. We remind investors that the company’s base generics business is facing persistent pressure from the limited number of buyers. The key generic products are also facing stiff competition, which is adversely impacting performance. The company’s complex product pipeline is yet to produce any substantial result.

Moreover, as a result of continued market pressure and additional competition for the company’s key generic products, uncertainty regarding the supply of epinephrine auto-injector (generic Adrenaclick) from a third-party supplier during the highly-seasonal third quarter, and delays in key product approvals and launches, including generic NuvaRing, the company updated its guidance. Management now expects adjusted EBITDA for 2019 to be $425-$475 million, down from the previous guidance of $600-$650 million.

The generic industry is facing challenging business conditions. Both Mylan MYL and Teva Pharmaceuticals TEVA are also trying to combat slowdown in generic business through various means.

Zacks Rank & A Key Pick

Amneal currently carries a Zacks Rank #4 (Sell). A better-ranked stock in the healthcare sector is Novartis AG NVS, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Novartis’ earnings per share estimates increased from $4.98 to $5.01 for 2019 and from $5.48 to $5.56 for 2020 over the past 60 days.

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