Amphastar Pharmaceuticals Q1 2023 Earnings Call Transcript

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May 9, 2023

There are 5 speakers on the call.

Operator

Greetings, and welcome to the Amphastar Pharmaceuticals, Inc. 1st Quarter Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions for future periods are forward looking statements.

Operator

These statements are based solely on information that is now available to us. We encourage you to review the section entitled Forward looking statements in the press release issued today and the presentation on the company's website. Also, Please refer to our SEC filings, which can be found on our website and the SEC's website for a discussion of numerous factors that may impact our future performance. We will also discuss certain non GAAP measures. Important information on our use of these Measures and reconciliations to U.

Operator

S. GAAP may be found in our earnings release. Please note this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO and Mr.

Operator

Dan Dischner, SVP of Corporate Communications and Mr. Tony Marrs, VP of Regulatory Affairs and Clinical Operations. I will now turn the conference over to our host, Mr. Dan Dischner, SVP of corporate communications. Dan, you may begin.

Speaker 1

Thank you, Karen. Good afternoon, Thank you all for joining us for Amphastar Pharmaceuticals 2023 First Quarter Earnings Call. Joining me today on the call are Bill Peters, CFO and Executive Vice President of Finance and Tony Mars, Executive Vice President of Regulatory Affairs and Clinical Operations. For the Q1 of 2023, I am pleased to announce that Amphastar has begun another year on a strong note as our continued execution in our portfolio resulted in $140,000,000 in revenue or a 16% increase on a year over year basis. Equally important, our gross profit for the quarter saw an impressive 32% increase on an annualized basis.

Speaker 1

Once again, we attribute this success to our key high margin Primatene Mist, Glucagon and Epinephrine products, Seeing notable increases for sustained growth. Concerning Primatene Mist, in store sales for the product had a 5% growth compared to the previous quarter. We remain confident that this product is on its path towards $100,000,000 in annualized sales by the end of 2024 As we continue our strategic investment of an additional $2,000,000 to $3,000,000 in marketing spend in 2023. This investment is already in progress And we are increasing consumer awareness across multiple advertising platforms and remain committed to our physician sampling program. Regarding glucagon, we remain optimistic that with our recent approved capacity increase to which our glucagon output has now doubled, We can continue to meet strong demand.

Speaker 1

As such, Gluvagon sales have seen a meaningful 134% increase year over year And a 40% increase in sales compared to our previous quarter. For epinephrine, we continue to see significant opportunity for this product due to our previous efforts to increase our capacity to meet the increasing demand despite competitors falling short. To that end, epinephrine sales for our prefilled syringe and multi dose vials presentation have increased sales by 33% annually. Again, we acknowledge that this increase is due to our ability to fill the gaps left by our other suppliers. We maintain a positive outlook on this product as a growth driver and its potential to remain durable as one of our key high margin products for the duration of the year.

Speaker 1

After covering our key revenue drivers for the I'd like to shift our focus towards our pending business development opportunity, product launches, pipeline and regulatory activities. As previously communicated, Amphastar has signed an asset purchase agreement to buy Baximi from Lilly. This move aligns with 2 of our strategic goals of expanding our diabetes portfolio, which is currently being developed further this year and strengthening our proprietary products portfolio. Fulfilling these two strategic goals through Baximy comes with many advantages. Primarily, the acquisition would add significant scale to Amphastar With our future proprietary product offerings having a solid base of support in the international space, it expands Amphastar's international footprint in 26 And strengthens our internal marketing capabilities.

Speaker 1

Moreover, this transaction aligns with our long standing disciplined approach to business development, while fulfilling strategic goals. Our assessment of the transaction is that it is progressing smoothly And we anticipate its closure in the second or third quarter this year. With Daximi potentially being part of our portfolio, We are poised to accelerate our long standing goals of being a leader in the diabetes therapeutic space and a strong contender in the proprietary product market. Moving forward, I'd like to turn our attention to our recent intranasal naloxone approval and launch of a new product in our portfolio. For intranasal naloxone, the product was approved in March with an anticipated launch in the Q3.

Speaker 1

While we recognize that the market conditions for this product may be more competitive And thus potentially deliver incremental sales, it is important to highlight that the approval included our proprietary intranasal device technology that we have developed and will be manufacturing exclusively at our facilities. This development reinforces our unique vertical integrated business model And strengthens our commitment to innovation and quality. We believe it will enhance our intranasal pipeline and potentially strengthen our commercial capabilities. Nonetheless, the product continues to address a strong community need to address the opioid crisis. In terms of new product added to our portfolio, I'm pleased to announce that our raggedennisin was recently launched in April.

Speaker 1

Likewise, we acknowledge this product will be Enter a more competitive market. Therefore, we expect annualized sales for this product will be incremental compared to our other key revenue drivers. Having covered our business development opportunity with Baximi, product approval and launches, I want to turn our attention to our pipeline and regulatory activity. For our diabetes portfolio, we are on track to file a BLA for insulin aspart or AMP-four by the end of 2023. It's our goal of achieving interchangeable status.

Speaker 1

To our teriparatide ANDA or AMP-fifteen, we are on track to respond to the CRL In the Q2, as for GDUFA date for AMP002, it remains in the Q2 of this year. As for AMP-seven product, which is our 2nd inhalation ANDA, we expect filing in the Q3 of this year. As for our proprietary product in our pipeline, AMP-nineteen or intranasal epinephrine, we continue to work with the agency on this product as it continues to actively be developed. And finally, our AMP-eight ANDA product remains on track for a Q3 GDUFA date. As a final point, we'd like to reiterate how excited we are about the upcoming opportunities ahead of us.

Speaker 1

As 2023 has been off To a great start in terms of sales performance, pending GDUFA date's filings and our diabetes and proprietary products portfolio possibly gaining momentum with And our first interchangeable biosimilar insulin BLA being filed at the end of this year. I will now turn the call over to our CFO and Executive Vice President Finance Bill Peters to discuss the Q1's financial results and provide further details regarding the Vaccimi transaction.

Speaker 2

Thank you, Dan. Sales for the Q1 increased 16 percent to $140,000,000 from $120,400,000 In the previous year's period, glucagon sales increased 134 percent to $25,700,000 from $11,000,000 due to Market demand. Epinephrine sales grew to $20,100,000 from $15,200,000 While lidocaine sales grew 29 percent to $13,600,000 from $10,600,000 in the Q1 of 2023 on both strong unit demand. Primatene Mist saw sales decline 5% to $23,500,000 from $24,700,000 but we saw in store growth of 5% in the quarter. So we believe this is a timing issue.

Speaker 2

Fitonodion sales dropped to $7,700,000 from $10,500,000 as a new supplier entered the market. Sales of other products in our finished pharmaceutical product portfolio grew 13% due to higher unit volumes of dextrose and the full quarter of sales of Ganorelix and vasopressin, Which were both launched in 2022. Insulin API sales grew to $4,000,000 from $3,800,000 in the prior year, primarily due to the timing of shipments. Gross margins increased to 53% of sales from 46% Due to increased sales of high margin products such as glucagon and epinephrine as well as sales of Ganorelix and vasopressin. These trends were partially offset by higher labor and material costs.

Speaker 2

Selling, distribution and marketing expenses increased $7,100,000 from $5,500,000 primarily due to increased advertising costs. General and administrative spending increased to $13,500,000 from $12,500,000 due to increased fee costs related to our planned acquisition of Vaccimi. Research and development expenditures increased to $19,800,000 from $16,200,000 due to increased labor costs, Increased expenses related to clinical trials for our insulin and inhalation programs and purchases of materials and components for our pipeline. We anticipate these expenditures will continue this upward trend in the coming quarters. Non operating income was $100,000 for the quarter Compared to $7,400,000 in the prior year's Q1 when we booked the $5,400,000 gain for legal avoidance costs in relation to our rigadendis and patent litigation.

Speaker 2

The company reported net income of $26,000,000 or $0.50 per share in the Q1 compared to the net income of $24,300,000 or 0.47 The company reported an adjusted net income of $32,100,000 or $0.62 per share Compared to an adjusted net income of $24,600,000 or $0.47 per share in the Q1 of last year, a growth of 31%. Adjusted earnings exclude amortization, equity compensation, impairments of long lived assets and one time events. In the Q1, cash flow provided by operations was a very strong $40,400,000 We used a portion of this cash repurchase $8,000,000 of treasury stock during the quarter. As you know, we have signed an asset purchase agreement to buy back Cimi from Eli Lilly. At this time, I'd like you to give you an update on the progress of this transaction.

Speaker 2

We completed our FTC filing on April 28. Additionally, we are working to finalize the financing for the loan and revolving line of credit. As a reminder, we have fully committed financing from a group of 7 strong banks. We are also involved in transition planning with Lilly, where we are aligned to take over operations as soon as possible after closing either in the 2nd or Q3 of this year. I will now turn the call back over to the operator to begin Q and A.

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. And we'll take our first question from Tim Chiang from Capital One. Please go ahead, Tim.

Speaker 3

Hi, thanks. Maybe you could talk a little bit about glucagon. Obviously, you did really well in the quarter with that product. How sustainable do you think the Google Cloud sales run rate Will be this year. Could you make some comments about that?

Speaker 3

I mean, is this a $25,000,000 to $30,000,000 a quarter type product for you?

Speaker 2

Yes, we believe that this is going to be the run rate for the rest of the year. And just keep in mind that we were able to build up inventory of the product going into Knowing that we are going to have increased demand this quarter, but we did not have the doubling of the capacity online till the end of the quarter. So our operations did a great job of getting the inventory built and, ready for the quarter. And now that we have that additional capacity, We're able to meet that demand on an ongoing basis.

Speaker 3

And maybe just one follow-up, 53%, 54% gross margins you guys did This quarter, is that sort of also an adequate run rate going forward for gross margins?

Speaker 2

Yes. So for the year, we had said that we'd be relatively flat from last year, but it's going to be, I think, close to that range, like in the 50% to 3% range is a good number to look at for the year for the rest of the year.

Speaker 3

Okay, great. Great quarter.

Speaker 1

Thanks, Tim.

Operator

Thank you. And we'll take our next question from David Amsellem from Piper Sandler. Please go ahead, David.

Speaker 4

Hey, thanks. So just a couple from me. 1 on Primatene, can you just talk about the weakness there, at least on the volume side? And then Secondly, shortages, I know this is something that was a recurring feature where you're benefiting from shortages. It looked like it was Maybe perhaps larger this quarter than others.

Speaker 4

So how are you thinking about contribution From products that are benefiting from market shortages like DEXTRA as the year Progressives and can you quantify that? And then sorry if

Speaker 3

I missed this, but on glucagon,

Speaker 4

Can you say what the mix is between institutional and non institutional is? I know that the institutional setting as The diagnostic was something you were prioritizing in the context of the expanded capacity. So just talk about Where are you getting your orders from regarding glucagon? Thank you.

Speaker 2

I'll take the first one on the Primatene. And what I had mentioned was that while our Sales, our unit sales were down in the quarter. We saw the in store data from the retailers actually was up 5%. So I think it's primarily a timing issue of just when orders went out and maybe they bought a little bit more in the 4th quarter Than they normally would have or just lowered their inventory levels during the quarter. But what we keep an eye on is really that in store volume to make sure that that's Trending upwards and it did continue to trend upwards even with the price increase that we instituted during the year.

Speaker 2

So maybe it's possible that some of the retailers bought a little bit more in December knowing that we are increasing the price In January. On the shortages side, yes, I think there might be some we did spike up a little bit in FE and Lidocaine And there's definitely a possibility that some of those numbers come down in the second half of the year, but probably They'll keep that level for at least some time. Also, we're still seeing strong demand for the dextrose as well. So, And as we've always said here, we increased our capacity a few years back to be able to take advantage of these shortages in demand. And we have the ability to move Production to different products depending on where that demand is coming from at any time.

Speaker 2

And like I said, this quarter it was Epinephrine, Lidocaine and dextrose, we're not sure where it will be next quarter, but it's almost certainly coming from somewhere. And glucagon, I don't have the data here on the institutional versus non institutional, but Shoot me an email. I'll see if I could follow-up with Jacob on that.

Speaker 4

Okay. Thank you.

Operator

And there appear to be no further questions at this Time, I'd like to turn the floor back over to management for closing remarks.

Speaker 1

Yes. I want to thank everyone for joining us today. We look forward to updating you on our next call and we remain excited about this year's upcoming opportunities. So thank you again and have a great day.

Operator

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.

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Earnings Conference Call
Amphastar Pharmaceuticals Q1 2023
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