Amphastar Pharmaceuticals Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 9 speakers on the call.

Operator

Greetings, and welcome to the Amphastar Pharmaceuticals First 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. These statements are based solely on information that is now available to us.

Operator

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. S.

Operator

GAAP may be found in our earnings release. Please note this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO Mr. Dan Dischner, Senior Vice President of Corporate Communications and Mr.

Operator

Tony Morris, Executive Vice President of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dischner, Senior Vice President of Corporate Communications. Dan, you may begin.

Speaker 1

Thank you, Paul. Good day, everyone, and welcome to Amphastar Pharmaceuticals Q1 earnings call for the year 2024. We're thrilled to have you all join us today as we reflect on the company's performance over the past quarter. Amidst the dynamic landscape of the pharmaceutical industry, we are eager to share our progress, milestones and strategic insights with you. Thank you for your ongoing support and interest in Amphastar.

Speaker 1

Joining me on the call today are 2 key members of our leadership team, Bill Peters, our Chief Financial Officer and Executive Vice President of Finance and Tony Mars, our Executive Vice President of Regulatory Affairs and Clinical Operations. Let's get started. Amphastar's performance remains robust, evidenced by our impressive financial results. We are pleased to report a notable year over year increase in net revenue, soaring to $171,800,000 making a substantial increase of 23% over the same time last year. This achievement underscores our product portfolio's enduring strength and adaptability amidst an ever changing environment.

Speaker 1

As expected, our products such as Glucagon Injection, Vaccimi, Primatene Mist and our hospital and clinical use offerings continue to experience steady growth. This reflects their ongoing importance and relevance in the market. A particular note is the consistent demand trend for our hospital products, which we anticipate will remain robust throughout the year. Our glucagon injection saw changes in demand specifically in the diagnostic sector due to another manufacturer's product availability. However, our recent entry into the Canadian market underscores our ability to adapt and mitigate market fluctuations effectively.

Speaker 1

Regarding Primatene Mist, although there have been fluctuations in distribution orders from stores, a steadily positive growth trajectory with consistent weekly in store sales. Furthermore, we remain committed to achieving the 100,000,000 dollars sales milestone for this product in 2024. Shifting our focus, I'd like to highlight our proprietary prescription product, Baximi, our intranasal glucagon. The transition from Eli Lilly continues as expected, which is evident in the 22% year over year sales increase compared to the Q1 of 2023. This achievement underscores our proficiency in integrating acquired products into our portfolio and driving growth.

Speaker 1

At the same time, the sales also benefited from initial stockings as we started Baximy distribution in the United States. Baximy has swiftly become a cornerstone of our diabetes portfolio, offering patients a convenient and effective solution to severe hypoglycemia. We believe the glucagon market remains underserved with significant growth potential as Baximy continues to be underutilized among diabetic patients. Similarly, our global transition of Baximi has continued to make progress. Our dedication to broadening our capabilities to provide investments in sales and marketing endeavors to bolster Baximy's market standing seizing upon the existing underutilization of glucagon.

Speaker 1

Looking forward, Baximia remains a primary focal point for Amphastar and we are eagerly anticipate its significant impact on individuals navigating diabetes management. Turning our focus to our pipeline products. Our efforts are directed towards potentially launching 4 to 5 products this year. We are pleased to announce the recent launch of REKTOVI, our intranasal naloxone product. In terms of teriparatide, we have received a minor complete response letter and we anticipate responding to this in the Q2.

Speaker 1

Additionally, we anticipate a GDUFA date in the Q3 for this filing, noting that it is still in its second review cycle. Moving on to AMP-eight, our first inhalation ANDA has a GDUFA goal date in the 2nd quarter, while our other inhalation ANDA filing AMP-seven has a GDUFA goal date in the 4th quarter. FDA has designated this application as a competitive generic therapy. With regard to AMP002, we are actively engaging in a positive, routinely scheduled dialogue with the regulatory agency with the FDA affirming its commitment to prioritizing the review of this application. In our diabetes portfolio, we are on track to refile insulin aspart AMP-four in the Q2.

Speaker 1

Additionally, we plan to file AMP-eighteen, a GLP-one abbreviated new drug application in the coming months. In conclusion, it's vital to highlight our remarkable performance during the Q1. The transition and year over year growth of Baximi showcase our ability to foster expansion. This achievement underscores our adaptness in integrating acquired products efficiently and reaffirms our commitment to growth. Beyond Baximi, our diverse portfolio and strategic initiatives position us well for sustained success amidst market fluctuations.

Speaker 1

With Baximy meeting our expectations and as we anticipate upcoming product launches and continued constructive dialogue with regulatory agencies, we are optimistic about our growth prospectus. Now, I'd like to hand the call over to our CFO and Executive Vice President of Finance, Bill Peters, to further discuss the financial results for the Q1. Thank you, Dan.

Speaker 2

Revenues for Q1 increased 23 percent to $171,800,000 from $140,000,000 in the previous year's period. Glucagon injection sales increased 11 percent to $28,500,000 from $25,700,000 as we had our 1st full quarter of sales in Canada during the quarter. Primatene Mist sales grew to $24,200,000 in the Q1, which represents a sales growth of 3% from $23,500,000 in the Q1 of last year. Epinephrine and phytonodione sales increased 30% 29%, respectively, due to other supplier shortages for part of the quarter, with epinephrine sales increasing to $26,100,000 from $20,100,000 and phytanodione sales increasing to $10,000,000 from $7,700,000 Other finished pharmaceutical product sales decreased $1,400,000 to $29,200,000 due to the API shortage for MPA, caused us to temporarily stop selling the finished product. This was partially offset by increased sales of other products such as dextrose and sodium bicarbonate as well as newer launches such as regadenosine.

Speaker 2

Vaccimi revenues now fall into 2 categories as we began shipping the product in the United States and a few European countries. The first category relates to products we ship directly to our customers for which we recorded net revenues of $13,800,000 These revenues are recorded in our product revenues net line on the income statement. The second category relates to products sold by Lilly on our behalf under the TSA agreement, totaling $24,600,000 which had a cost of sales and expenses of $10,400,000 This resulted in net revenues of $14,200,000 in our other revenues category, which corresponds to Amphastar's net economic benefit from Vaccimi. Total worldwide Vaccimi sales were $38,400,000 in the quarter, up 22% from $31,400,000 in sales reported by Lilly in the Q1 of 2023. We will continue to book revenue on a net basis for those countries where Lilly continues to distribute the product on our behalf.

Speaker 2

Our own distribution in Vaccine will increase throughout 2024 on a country by country basis once Lilly has finished their inventory and we have Amphastar labeled inventory available. This will result in an increase in product sales and a decline in the net economic benefit recognized in our net in our other revenues. Our

Operator

as MannKind cut purchases while

Speaker 2

they qualified the API produced on our new production line. Cost of revenues increased to $81,700,000 from $66,400,000 Gross margins were essentially unchanged at 52.4 percent of revenues in the Q1 of 2024 52.7 percent of revenues the previous year. Changes include increased amortization and depreciation of Vaccimi assets and an increase in labor and certain component costs. These changes were partially offset by vaccine sales as well as increased sales of glucagon, primatene mist and epinephrine, all of which are higher margin products. Selling, distribution and marketing expenses increased 32% to $9,400,000 from $7,100,000 in the previous year's period due to the sales force expansion and marketing expenses related to Baximi.

Speaker 2

General and administrative spending increased 16% to $15,700,000 from $13,500,000 due to increased expenses related to Baximi. Research and development expenditures decreased 14% to $17,000,000 from $19,800,000 due to the timing of clinical trials and lower material expenses related to our insulin and inhalation pipeline products as a result of a ramp up in 2023. Our non operating expenses of $100,000 compares to a non operating income last year of $100,000 as a $5,200,000 gain on our interest rate swap associated with our term loan offset higher net interest expense. Net income increased over 66% to $43,200,000 or $0.81 per share in the Q1 from $26,000,000 or $0.50 per share in the Q1 of 2023. Adjusted net income increased to $55,300,000 or $1.04 per share compared to an adjusted net income of $32,100,000 or $0.62 per share in the Q1 of last year.

Speaker 2

Adjusted earnings exclude amortization, equity compensation, impairments of long lived assets and one time events. In the Q1, we had cash flows from operations of approximately $55,300,000 I will now turn the call back over to Dan.

Speaker 1

Thank you, Bill for the updates. With that, we will now take your questions. Operator, please open the line for Q and A.

Operator

Thank you. We'll now be conducting a question and answer session. Our first question is from Ekaterina Kannikova with JPMorgan. Please proceed with your question.

Speaker 3

Hi. Thank you so much. Just 2 for me, if I may. So first, on Baximy, can you talk about any of the feedback and discussions you've had with payers post the Lilly transition? And any implications as we think about price over the next few quarters?

Speaker 3

And any changes in that market from a competitive standpoint, anything different you're seeing from GVOC? And then second question is just on AMP-two. Can you just elaborate a bit on the interactions you've had with the FDA? I think you mentioned in your prepared remarks. Just have they asked for any additional data or anything else?

Speaker 3

And kind of what's your latest confidence in getting that product approved later this year? Thank you so much.

Speaker 2

Yes. So for the first question on the pricing for Baximy, we have had conversations with payers. And in general, most of those contracts are lining up with exactly the same price that Lilly had for those. So we've been able to do that. What we did mention on the last conference call though was, when we're paying fees to the wholesalers out there, we're paying a higher fee than Lilly paid because they have much better bargaining power.

Speaker 2

So that's why we said, this year for Vaccine, we were guiding towards high single digit unit growth, but low single digit pricing declines. And so those pricing declines are based on the that net difference in pricing that we have to pay to the wholesalers.

Speaker 4

And for your second question regarding AMP002, we have scheduled routinely scheduled meetings with the agency. They have not asked us for anything new regarding this application and we remain cautiously optimistic as we typically have for it. But I think just routinely having these meetings with the agency is giving us and they're sharing with us their desire for moving this application forward.

Speaker 3

Thank you.

Operator

Our next question is from David Amsellem with Piper Sandler. Please proceed with your question.

Speaker 5

Hi, this is Skyler on for David. First, could you give us the latest update on the Vaximy sales force in terms of sizing and whether you plan to only use a contract sales organization going forward? And just how the overall transition is going for Lilly? And also any thoughts on eventually bringing manufacturing of BaXenia in house? And then second, on injectable glucagon, could you talk about the mix between diagnostic usage and hypoglycemia usage and how much room there is for more penetration in both of those settings?

Speaker 5

Thanks.

Speaker 1

So I would say we haven't really disclosed the Baximy, the size of our Baximy sales force. We are continuing to use, an outside sales force on that. We will continually monitor if there's a need for us to bring it in house, we will continually monitor to do that. But right now, I think we're satisfied with the progress they're making at this time.

Speaker 2

As far as the manufacturing goes, because of the complexity in the machinery and the setup, bringing that in house would take several years best case scenario. So I don't see that as happening or being very likely. And then the other question was related to the split on the glucagon injection. And right now, it's about 1 third anti hypoglycemic and about 2 thirds for diagnostic. And we what we've seen now is that on the anti hypoglycemic, the change that we've seen there is more towards the ready to use products, such as Vaccimi.

Speaker 2

So that's what we've seen the growth in and why we said this year that we did expect to see our Glubion injection product to decline in units overall this year. While we did have growth in Q1, we're still saying that our total units in the United States will decline and that decline will be offset by revenue growth in Canada.

Speaker 5

Got it. Thank you. And if I could just sneak in one more, could you just talk to the extent to which you think you're going to benefit from shortages in 2024 compared to 2023?

Speaker 2

Yes. So with the shortages, what we've said in the past is we've frequently said we've given the number of $20,000,000 plus of benefit from those products. And as of right now, there are a few products that have continued to be on shortage such as dextrose sodium bicarbonate and epinephrine and those are still on shortage have been on shortage since July of last year. And then there's a couple other products like Fisonodion that had a short lived shortage during the quarter this quarter. So some of those other products they come and go quickly.

Speaker 2

But what we have said though is that every quarter since I've been here and I've been here for 10 years now, we've had we've benefited from other companies' inability to buy product and for one product or another. So we've been able to have that benefit every quarter for the last 40 plus quarters.

Operator

Thank you. Our next question is from Tim Chiang with Capital One. Please proceed with your question.

Speaker 6

Hey, thanks. Bill, maybe you could talk a little bit about the Beksami rollout in the U. S. What sort of feedback has your contract sales force given you in terms of just demand for the product, 1? And 2, is there really any change with your customers?

Speaker 6

Obviously, this is a market where you're only getting a small sliver of the potential market. Could you talk a little bit about how you can penetrate more of the market in 2024?

Speaker 2

Yes. So, the feedback has been very good and sales have been growing very nicely, particularly in the United States. And we've seen that transition happening. And we do we have seen growth of the ready to use because we think that those are definitely the better solution for Lubigon.

Speaker 6

And again, I mean, the U. S. Market is about 80%. This is going back to Baximmy. So the other 20% is going to basically flip to your responsibility this year, is that right?

Speaker 2

Yes. So the plan so right now, of the other 25 countries where we distribute vaccines, 3 of them we've picked up in Europe. The other 21 countries around the world we plan to pick up, and that's once Lilly has depleted all of their labeled inventory and we have Amphastar labeled inventory ready to go. So we're working on that. I think a lot of those countries will happen.

Speaker 2

We think a majority of those companies will probably convert in the Q3, but we're looking for most of those in the June to August timeframe. And then there's probably be a couple lingering countries that don't convert until the end of Q4 though.

Speaker 6

Okay. And just one last question, if I may. Epinephrine, I mean this product, I think you've had your best quarter to date with epinephrine sales in the Q1. Do you expect these types of continued year over year growth figures for the next couple of quarters going forward?

Speaker 2

It's hard to keep that kind of growth up because I think we're maxed out on what we've been able to produce this quarter. So it's a combination of us. Right now for the prefilled syringe presentation of that product, we are the only company in the country making that for the hospital market. So we're making as much as we can and we're at our capacity for that product. So I really don't see it going any higher than it is right now.

Speaker 2

Okay, great. Thanks a lot. And I see it probably continuing at this level for at least another quarter, if not longer.

Operator

Thank you. Our next question is from Jason Gerberry with Bank of America. Please proceed with your question.

Speaker 7

Hey, guys. This is Bhavan Patel on for Jason. Two questions from us. The first is, to what extent is mix driving growth in terms of the market moving from single use generic kits to brands offering 2 units, like what's the product shelf life? And does that create a risk that patients might take longer than expected to work down their inventory?

Speaker 7

And then my second question is that insulin use in type 2 diabetes has declined. And we generally hear from physicians that these glucagon rescues make more sense for type 1 diabetics versus type 2, who can manage their blood sugar. Do you see type 2 diabetes as a meaningful area to expand Vexamine? And is that embedded in your peak sales outlook for Vexamine? Thank you.

Speaker 2

Yes. So as far as the expiration goes, most of these products have a 2 year shelf life from the date of manufacturing. So that usually takes a little while to get released and then into the wholesale channels, into the retail, into the customer. So generally, the customer, depending on when they get it, has 12 months to 20 months of shelf life from when they buy the product. And

Speaker 4

Yes. I think as far as Type 2 diabetic patients, I think that's true. And I would agree that the bulk of the percentage of people with Type 1 that are needing these glucagon products is higher for Type 1 as compared to Type 2. Just partially it's a compliance issue. Type 1 diabetics because they're dependent on the insulins are more compliant than Type 2.

Speaker 4

And so with Type 2 there'll be less utilization as a percentage of those of that population for the use of these glucagon products. But I think with that population getting more educated and getting more into the health care system with some of the GLP type products, I think that should increase as they get more into the health care system.

Speaker 2

And then as far as our forecasting goes, we knew about the GLP-two when we bought the product and we ran multiple scenarios on this. And our base case scenario, I think, is relatively conservative, the one that we've forecast and we keep in our presentation. So I think we're very comfortable in getting to that even with the marketing the market changes that people have seen

Speaker 1

year.

Speaker 7

Thank you.

Operator

Thank you. Our next question is from Serge Belanger with Needham and Company. Please proceed with your question.

Speaker 8

Hi, good afternoon, everyone. This is John on for Serge. Just a couple of quick questions. First, regarding the insulin biosimilar AMP-four. You mentioned you're going to be refiling it in the second quarter.

Speaker 8

Do you guys have any context or any feedback that you've gotten from the FDA thus far regarding how many rounds of review you might expect for this product? And then generally speaking, can you give a little color on the overall market opportunity that 4 might enter into? And then just on the side, regarding the patent listing challenges from the FTC reported about a week ago now, I believe you have, if I'm correct, you have inside 30 days to either dispute the letter or amend your patents. Can you give a little color on the process that you guys are going through and what we might expect over the coming weeks? Thanks.

Speaker 4

Yes. For your first question regarding the insulin product, we don't the agency hasn't shared with us how many rounds they would expect. But this is our first biosimilar biologic product that we filed an application for. What I can say is that the dialogues that we've had with the agency and the document that they gave us where they asked us to resubmit our application, the amount of comments that we received on that far exceeded what our hopes would be in the sense that it wasn't as simple as this is the minimum that you could do. They actually gave what I would characterize as a very solid attempt to give us some very positive feedback about items that they'd also like to see in the application that in my mind is almost as though this would prevent us from having a cycle, an additional cycle.

Speaker 4

So I think that from the FDA's desire based upon that, I would expect them to be very forthcoming in this and to kind of help to when they do give, if there are additional cycles, the feedback that they would give would be very clear to really help us. It seems like this is a product based upon the years of dialogue that we've had with them, it seems like this is a product that they realize the capabilities that we have and the technologies that we have, that they are very invested in helping us with this application.

Speaker 2

4, it's over $4,000,000,000 product, there's over 41,000,000 units of the products sold a year. So we see it as a really big opportunity for us in the long run. Definitely, it is a lot we'll be at a lower price point than what they're saying now. But we already have our Then turning to your last question about the letter from the FTC. Yes, Then turning to your last question about the letter from the FTC.

Speaker 2

Yes, we did receive that, that we are one of many companies that received the 2nd round of letters from the FTC about Orange Book listed patents. So we've done 2 things since receiving it. 1, we've had some discussions with the Lilly attorneys who were the ones that submitted it to the Orange Book and they were confident that it was appropriate what they did and that they were following the when they did that. And then the second thing we're doing is that we're engaging outside counsel to also look at that. So we'll get into that.

Speaker 2

And my understanding of the timeline that you mentioned the 30 days is we have 30 days once the FDA sends us a letter and we have not gotten that letter as of today. So once we get that letter, we'll have 30 days to respond from that time. And if our outside counsel is able to analyze it in that time, then we'll do so. But I'd also like to add that there's we have 3 Orange Book patents for this product. There's one that expires in 2,036, which is a formulation patent.

Speaker 2

The patent in question expires in 2,038, but then we also have another patent that expires in 2,039. So this isn't the last patent and it's not the most important patent either. So no matter what happens to this, I don't think it really changes our trajectory or our implication or our forecast for this product.

Speaker 8

Great. Thanks for the clarification on all that.

Operator

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Speaker 2

I want to extend a

Speaker 1

heartfelt appreciation to everyone who joined us today for Amphastar's Q1 earnings call and for your continued support. We look forward to sharing our progress with you in the quarters ahead. Have a great day.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
Amphastar Pharmaceuticals Q1 2024
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