Amphastar Pharmaceuticals, Inc.

Welcome to the Amphistar Pharmaceuticals, Inc. 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. If anyone should require operator assistance during the conference, please press zero on your telephone keypad. All statements on this conference call that are not historical are forward-looking statements, including, among other things, statements relating to our expectations regarding future financial performance, backlog, sales and marketing of our products, market size and growth, product development, the timing of FDA filings or approvals, including the DMFs of A&P, the timing of product launches, acquisitions, and other matters related to our pipeline of product candidates. Our share buyback program and other future events, such as the impact of the COVID-19 pandemic and related responses of business 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 facts, but rather are based on Amphistar's historical performance and our current expectations, estimates, and projections regarding our 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 and 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 AMFSTAR's 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 AMFSTAR's filings with the Securities and Exchange Commission, including in our 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, 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 our website at ir.amphastar.com and on the SEC's website at www.sec.gov. Forward-looking statements in this release speak only as of the date of the release. AMPHASTAR 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 our expectations to change. Please note this conference is being recorded. Our speakers are Bill Peters, CFO, Dan Dischner, VP Corporate Communications, and Tony Marrs, Senior VP of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, VP of Corporate Communications, you may begin.

Thank you, operator, and good afternoon, everyone. Earlier this afternoon, Amphistar reported a very strong start of the year in executing our growth strategy with another quarter of solid revenue growth. We look forward to sharing details behind the quarter's growth and provide a company's update regarding our pipeline. Following my prepared remarks, Bill Peters, CFO, will provide an update on the company's financials and will open up for Q&A with Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations, Bill and myself. To begin, we've ended the first quarter with the continuing trend of our diverse portfolio materializing to drive top-line and bottom-line growth. With the first quarter seeing $103 million in top-line net revenue, and our bottom line increasing substantially to $5 million. This represents a back-to-back period of record net revenues. Against the backdrop of a 7% increase in revenues versus the fourth quarter, we saw the successful execution of glucagon's launch, growth with primatine mist sales, and our epinephrine products continuing to gain momentum. Regarding Glucagon, while the product saw its launch in mid-February, we've seen tremendous progress with its intake in the retail pharmacy space as we've executed on the same launch platforms as our enoxaparin and medroxyprogesterone products and expect this trend to be durable into the year. Likewise, the same trend can be observed with our epinephrine products as growth in this area was driven organically by higher unit volumes prompted by a competitor shortage. seeing a 52% increase in total sales compared to previous quarter. Though competitor shortages tend to resolve themselves, we can consistently supply the product when our competitors cannot. Turning back to Glucagon, while its launch and its initial loading can be seen to offset a mid-quarter launch, we're keeping an eye on important factors, such as its 72% share in the retail market, according to Equivia data as of March 2021. Nonetheless, we continue to believe the fundamentals are strong for glucagon, epinephrine, and primatine. Our vertically integrated business and planning efforts afford a reasonable resiliency to support the product's growth and demand around the potential supply chain bottlenecks seen among suppliers. Turning to primatine mist, the product has reached $65 million in annualized sales this year. seeing a strong increase of 27% compared to the fourth quarter as week-over-week retail sales have continued to trend strongly as observed in the updated slide in our company presentation. Recall that Primatine in the first quarter of last year was driven by significant COVID pantry loading. We've closely reached those levels organically through our updated nationwide TV, radio, and digital advertising campaigns before launching into Target's retail stores. Adding another layer to our marketing strategy, we'll be relaunching a physician sampling program this month to increase awareness of the product as we continue with our digital media campaign to add to our consumer awareness strategy amongst asthmatics in the 18 to 34-year-old demographic. Turning to products in the pipeline, we received a minor CRL for AMP006 in late April, and we have already responded to it. While this product has a plus $50 million opportunity based on annualized Equivia sales, we are still confident to anticipate a GDUPA date in the third quarter of this year, pending the agency's usual response after minor CRLs, roughly within 90 days. We believe we are in the closing stage of this product's development. AMP002, a plus $300 million opportunity, based on annualized Equivia data, continue to have no generic for this product. We announced earlier in April that the FDA has reclassified our CRL status to minor. Therefore, we now have a second quarter GDUFA date. We have no reason to believe that this product will not meet the newly established action date. However, given that this is a complex product, that there could be additional questions about the development of AMP002. As for AMP015 products, we announced in mid-April that our paragraph 4 filing saw no legal challenges as the 45-day window expired in the same month. Again, this product remains a plus $500 million opportunity with no generics on the market. At the same time, we have a GDUFA date in the fourth quarter of this year or the first quarter of next year if a pre-approval inspection is needed. Likewise, this is another complex product, and we can't anticipate further review given the product's complexity. Concerning our proprietary product in development, intranasal epinephrine continues to progress well, as our second clinical study has started after a positive response from the FDA was received regarding its safety and efficacy profile. Therefore, the product remains on track for filing in 2022 as planned. Finally, with updates in intranasal naloxone and AMP008, we still anticipate our intranasal naloxone to be refiled in the fourth quarter as we are closer to completing our stability studies. Regarding AMP008, the product is still on track to be filed in the coming months as this is another paragraph four filing where we believe we have strong non-infringement position as stated last quarter. However, notwithstanding the usual possibility of a 30-month stay could be triggered regardless of our IP strength. Regarding previously discussed business items, our insulin program update is still anticipated to occur in the second half of the year, and our IMS UK products launch is now anticipated to occur in the third quarter of this year as MHRA has afforded more flexibility following COVID restrictions being subsided in the UK. Lastly, I'd like to conclude by noting that our pipeline continues with a clear path forward. AMP002's reclassification, the recent news on the legal clearing for AMP015, the continued progression of our intranasal epinephrine product through its clinical process, an update on our insulin programs soon to be announced, and a filing expected for intranasal naloxone sets an ambitious yet achievable schedule. Meanwhile, our already launched growth drivers have time to mature in gaining market share. We've seen tremendous execution on primatine mist, epinephrine, and glucagon and anticipate this trend to be durable while aligning their success with the progression of our pipeline, which in turn ultimately strengthens our growth driver portfolio. I will now turn the call to our CFO, Bill Peters, to discuss the first quarter's financial results.

Thank you, Dan. Sales for the first quarter increased 22% to $103.84 million in the previous year's period. The launch of Glucagon in February was the biggest driver of this increase, with sales of $8 million, including an inventory buildup by most major retailers. Primatine Mist once again showed strong growth, with sales up 43% to $18.4 million from $12.9 million in the prior year. Epinephrine sales nearly quadrupled to $15.6 million from $4 million in the prior year as we increased the market penetration of multi-dose vials and had strong demand for our pre-filled syringe product as it was in a shortage situation with competitors unable to fill orders. And our parents saw sales increase to $10.7 million from $9.2 million in the prior year, primarily due to a pickup of a new customer after Teva left the market in 2020. Naloxone sales declined to $6.3 million from $8.9 million on increased competitive pressures, while lidocaine products and phytonodione saw sales declines due to weaker market demand. Our insulin API business had sales of $5.1 million, up from $3.4 million in the prior year, primarily due to the timing of shipments. Gross margins increased to 44% of sales from 43%, as increased sales from high-margin products such as glucagon, primatine mist, and epinephrine more than offset lower prices and higher costs related to anoxaparin. Selling, distribution, and marketing expenses increased to $4.5 million from $3.3 million primarily due to marketing costs as we implemented a second commercial campaign for primatine mist. General and administrative spending increased to $15.3 million from $10.7 million due to increased legal costs for Paragraph 4 cases and employment-related lawsuits. Subsequent to the quarter, we settled various employment lawsuits and arbitrations for $1.3 million, which was booked to G&A expense. On a related note, we booked a $4.4 million charge to other expenses for additional reserve for our litigation with Aventis, after the court order increased the fees, interest, and costs. We intend to appeal this case. Research and development expenditures increased to $14.8 million from $15.3 million due to the timing of clinical trials. We anticipate that these expenditures will increase in the upcoming quarters. The company reported net income attributable to Amphistar shareholders of $5 million, or 10 cents per share, in the first quarter compared to a net income of $3.9 million or $0.08 per share in the first quarter of 2020. The company reported an adjusted net income of $13.6 million or $0.27 per share compared to an adjusted net income of $8.4 million or $0.17 per share in the first quarter of last year. Adjusted earnings excludes amortization, equity compensation, impairment of long-lived assets and one-time events. In the first quarter, cash flow from operations was $22.8 million. We used a portion of this cash flow to repurchase $3.8 million of Treasury stock during the quarter, leaving $13.6 million remaining on our buyback authorization. I will now turn the call back over to the operator to begin Q&A.