Amphastar Pharmaceuticals, Inc.

Greetings and welcome to Amphistar Pharmaceuticals Q4 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. Please note, this conference is being recorded. All statements on this conference call that are not historical are forward-looking statements, including, among other things, statements relating to the company's expectations, regarding future financial performance, backlog, sales and marketing of its products, market size and growth, product development, and the timing of FDA filings or approvals, including the DMFs of AMP, and the timing of product launches, acquisitions of other matters related to its pipeline of product candidates, and its share buyback program and other future events, such as the impact of COVID-19 pandemic and related responses of businesses and governments to the pandemic on our operations and personnel and on commercial activity and demand across our business operations and results of operations. These statements are not historical facts, but rather are based on AMFSTAR's historical performance and its current expectations, estimates and projections regarding AMFSTAR's business, operations and other similar or related factors. Words such as may, might, will, could, would, should, anticipate, predict, potential, continue, expect, intend, plan, project, believe, estimate, and other similar or related expressions are used to identify these forward-looking statements, although not all forward-looking statements contain these words. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and assumptions that are difficult or impossible to predict and, in some cases, beyond Infrastars control. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in Infrastars filing with the Security and Exchange Commission, including an annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 15, 2021. In particular, the extent of COVID-19's impact on our business will depend on several factors, including the severity, duration, and extent of the pandemic, as well as actions taken by governments and businesses and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time. You can locate these reports through the company's website at ir.amphistar.com and on the SEC website at www.sec.gov. Forward-looking statements in this release speak only as of the date of the release. Amphistar undertakes no obligation to revise or update information or any forward-looking statements in the conference call referenced above to reflect events or circumstances in the future, even if new information becomes available or if subsequent events cause Amphistar's expectations to change. I will now turn the conference over to your host, Mr. Dan Dishman. Vice President, Human Resources, and Corporate Communications. Thank you. You may begin.

Thank you, operator. Good afternoon, and thanks for joining Amphistar Pharmaceuticals' fourth quarter earnings call. My name is Dan Dischner, VP of Corporate Communications. Joining me on the call are Bill Peters, CFO, and Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations. We appreciate you joining us today, and we look forward to announcing some very exciting updates. While 2020 was quite an exhilarating year, to say the least, and for obvious reasons, on the positive, I'd like to say it was an exceptional year for the company. To start it off, we reported net revenues of $349.8 million for the fiscal year, while the fourth quarter saw a net revenue of $95.9 million, making it the best quarter in terms of our sales history. Prime Team Miss saw a 3% increase in sales compared to Q3. attributing this mainly to our nationwide TV, radio, and digital advertising, along with unit volume increases in our online sales and our recent launch with Kroger. As a result, we are still confident in reaching our $65 million in annualized sales for the product. Furthermore, putting the company on the path towards reaching our sales goals with more ease, we are excited to announce Primateen's launch into Target stores later this month. To add momentum to that launch, We will coincide it with a new television commercial ad campaign. As we have said in the past, we may increase our marketing spend where we expect our marketing expense to be a lower percentage of sales. However, we're more interested in spending smarter as we plan to expand our reach to the younger 18 to 34-year-old demographic through the use of digital marketing. In other words, as the time-tested and proven marketing saying goes, it's all about reaching the right person with the right message at the right time. and with that kind of thinking, whether it's TV or digital, we'll be poised to structure our marketing expenses at a reasonable enough level while optimizing its influence. Turning to Inoxaparin, you'll notice the product saw an increase in sales due to Teva exiting the market. While we've seen the Inoxaparin market ebb and flow over the years, and regardless of others entering, leaving, or even re-entering this market, I'd like to reiterate that our vertically integrated structure beginning and being the only company that manufactures the API and finished product in the United States, continues to make Amphistar a long-term player in this market. In terms of our pipeline, we entered 2021 in a position of strength. Last year, we saw four ANDA approvals in addition to our state-of-the-art high-speed fill line approval. Of the four ANDAs, we saw one grandfathered product approved, Atropine. Mid-year, we saw Succalcinylcholine Chloride, while the remaining two were epinephrine multidose vial and glucagon, otherwise known as AMP001. With respect to epinephrine multidose vial, you'll notice some incredible movements as the product saw an 86% sales growth compared to Q3. Meanwhile, we continue to see no other generics entering the market. As said in our last call, while we stated we expected to get a fair share of the epinephrine market, We're seeing an upward trend without disrupting the pricing as we've originally planned. However, given the fact that we've recently seen a tremendous upside, we'll continue to look at opportunities that drive our market share while balancing this effort with maintaining optimal pricing. Regarding our newly launched glucagon product, I'd like to say the approval continues to demonstrate the strengths and technical and scientific capabilities of Amphistar. This approval was highlighted in the FDA's Office of Generic Drugs 2020 Annual Report. specifically citing it as a significant first generic approval. Since the launch of this product in February, we're observing some very positive uptake so far in the first quarter and continue to expect to see increases in sales. We're confident in Glucagon's launch, relying on our previous experience in the retail markets with products such as Inoxaparin and Midroxypogesterone. On the matter of our AMP002 product in development, We previously disclosed that we received a CRL for the product in late December, and we've already responded to the CRL earlier this year. While CRLs are often common amongst complex products like AMP002, we have a GDUFA date in the fourth quarter of this year. Moving forward with previously discussed items, we anticipate our intranasal naloxone to be refiled in the fourth quarter of this year. Regarding our first inhalation ANDA, which I'd like to announce is AMP008, We've seen very promising results with our PD and PK studies, having been completed with some good guidance and dialogue with the agency. We anticipate AMP-008 to be filed in the first half of this year instead of 2020 because we had some delays due to the COVID pandemic. Additionally, as a gauge of confidence, I can report that we've been building additional capacity at our Massachusetts facility for the inhalation product pipelines. Continuing on the topic of previously discussed items, our insulin programs have seen some exciting development with a path towards interchangeable status. With that said, we're planning to disclose more about this program later this year and just in time to coincide with the 25th anniversary of the company's founding. Turning to our proprietary items, our intranasal epinephrine has produced clinical study results with a good efficacy and safety profile as reported to the FDA. Thank you for joining us. and many more. I'd like to conclude my portion by emphasizing that Amphistar is on the path towards transitioning from a generic and specialty-based pharmaceutical company into a proprietary product and biopharmaceutical-based company. While 2020 has been a year where many businesses in our niche have slowed down, it's been an exceptional year for Amphistar. Of course, we owe this thanks to our vertically integrated business model and our original intent, which was to place quality as our first priority. This vertically integrated model coupled with a robust and diverse R&D portfolio, a trait often rare to be seen in a historically generic focused company since Amphistar towards a path of resiliency, growth, and progression. Amphistar was able to weather through the COVID constraints thanks to our vertically integrated structure, and we were also able to weather through sector influence shutdowns such as elective surgeries thanks to our diversified portfolio, adjusting and offsetting the imbalances seen. And finally, Amphisar has been primarily focused on growing organically. While the company remains diligent in finding opportunities that could enhance our capabilities, we remain focused on our internal development first and foremost, thus allowing us to transition from a generic and specially farmer-based company into a biopharma-based company more focused on proprietary products. I will now turn the call over to our CFO, Bill Peters, to discuss the year-end and fourth quarter's financials.

Thank you, Dan. Sales for the fourth quarter of 2020 increased 15% to $95.9 million from $13.4 million in the previous year's period. Importantly, Primateam missed to achieve very strong sales growth of nearly 50% to $13.4 million from $9 million as we continue to see the benefits of our national advertising program. Anocroparen sales doubled to $17.6 million in the fourth quarter from $8.8 million in the prior year's fourth quarter as we were able to pick up some new business. Additionally, epinephrine sales increased to $7.5 million in 2020 from $4.3 million in the fourth quarter of 2019 due to the launch of epinephrine multidose vials. Gross margins declined slightly to 38% of revenues in the fourth quarter of 2020, from 40% of revenues in the fourth quarter of 2019, as significantly higher sales of negative margin anoxaparin offset increases in primatine mist and epinephrine multidose vials. Selling, distribution, and marketing expenses increased slightly to $3.8 million from $3.5 million due to television, radio, and digital expenses for marketing primatine mist. General and administrative spending increased 15% to $12 million from $10.5 million, primarily due to increased legal expenses, including the cost of settling some employment litigation. Research and development expenditures decreased 8% to $18.1 million from $19.6 million due to decreased clinical trial expenses. Other expenses included a $12.8 million reserve for our litigation with Aventis, The company reported a net loss of $6.3 million, or $0.13 per share, compared with last year's fourth quarter net loss of $1 million, or $0.02 per share. On an adjusted basis, the company reported net income of $8 million, or $0.16 per share, compared to an adjusted net income of approximately $3.6 million, or $0.07 per share, in the fourth quarter of last year. Adjusted earnings exclude amortization, equity compensation, impairments of long-lived assets, and one-time events. In the fourth quarter, we had cash flow provided by operations of approximately $16.9 million. Also during the fourth quarter, the company repurchased approximately $3.4 million of stock to bring the total repurchases for the year to over $24 million. Now, let me review a few of the financial assumptions that we are using as we look to 2021. First, let me state that we expect Primatine Mist to achieve our previously disclosed goal of $65 million in sales this year. We also expect sales growth to be driven by glucagon, which was launched in February, and continued growth in our epinephrine multi-dose vials, which we launched in the second quarter of 2020. We could have sales contributions from one or two ANDAs, which have GDUFA dates later this year. When we look to our ANP subsidiary, please remember that first and foremost, this business is our critical supplier of APIs for current products and, more importantly, our pipeline. That said, we expect continued sales growth to come from ANP, which saw third-party sales double in 2020 to $3.2 million from $1.5 million in 2019. Our expectation is that third-party sales from this facility will more than double again in 2021. We expect gross margins to increase as we sell more primatine mist, epinephrine multidose vials, and most importantly, glucagon, all of which are high-margin products. We also anticipate high margins from sales of any new ANDA approvals that we receive this year. Our selling, distribution, and marketing expenses will rise as we plan to increase our advertising for primatine mist. However, the advertising expense will decrease as a percentage of primatine mist sales to provide earnings leverage. This year, we expect G&A spending to increase due to litigation expenses related to paragraph 4 patent challenges. Research and development spending will continue to increase in dollar terms, but we expect it to decline as a percentage of sales as we plan to commence clinical trials for three inhalation products, two insulin products, and continued trials on our intranasal epinephrine. I will now turn the call back over to the operator for Q&A.