Amphastar Pharmaceuticals, Inc.

Greetings and welcome to the Amphistar Pharmaceuticals second quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. At this time, if anyone should require operator assistance during the conference, please press star zero on your telephone keypad. All statements in this press release and in the conference call referenced above that are not historical are forward-looking statements, including, among other things, 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 COVID-19 pandemic, including its variants 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 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 Amphistar's control. Actual results may differ materially from those in the forward-looking statement for factors, including those described in Amphistar's filings with the Securities and Exchange Commission, including 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, including its variants, 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 http://ir.amphastar.com and on the SEC's website at www.sec.gov. The forward-looking statements in this release speak only as the date of the release. Amphistar undertakes no obligation to revise or update information or any forward-looking statements in this press release or 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 that this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO, Mr. Dan Dischner, Vice President of Corporate Communications, and Mr. Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dischner, VP of Corporate Communications. Dan, you may begin.

Thank you, Operator, and thank you all for joining us this afternoon. Earlier, Amphistar reported our financial results with strong growth. As for our pipeline, I'd like to characterize the second quarter as another period in further seeing our pipeline progress. With me today is Bill Peters, Amphistar's CFO and Executive Vice President of Finance. He will provide an update on the company's financials. After Bill's update, we'll move to our Q&A portion of the call with Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations, Bill, and myself. Starting with our financial and commercial results, the second quarter saw net revenues of $101.6 million, an 18% year-over-year increase. The company's net income remained strong and increased to $7.8 million, seeing a 56% increase from last quarter as our one-time legal expense saw considerable savings. While some of our products, anoxaparin and naloxone, saw some downward pressure this quarter, we remain committed to these products in the long term as we believe that Amphistar, being one of the few U.S.-based manufacturers of these products, will play in our favor due to our strengths in terms of quality. To that end, we believe our vertically integrated platform meets the needs which call for the quality that emphasizes reliable API sourcing, supply chain resilience, and the ability to continuously meet market demands. Looking at our newest growth driver, Glucagon, based on Equivia, sales grew to 12.1 million for the second quarter. In line with our expectations, of achieving a reasonable market share at a reasonable price. This represents a 51% increase in sales compared to last quarter, and given that sales growth remains strong, we believe glucagon sales are well positioned to be durable for the remaining half of the year. Regarding primatine mist, in-store weekly sales continued an upward trend, seeing a 9% increase from last quarter and a 40% increase from the same period of the previous year. thus highlighting that Primatine's success is independent of COVID-19's impact. We remain our guidance for Primatine Mists seeing annualized sales of 65 million by the end of this year. We believe that our increased distribution channels and our digital, TV, and radio marketing efforts have provided a stronger base of weekly sales to build upon each other. Moreover, our marketing efforts have been complemented with our physician sampling program launched last quarter. While the sampling program results are challenging to quantify, we believe the program will be a crucial component to provide further support for Primatine to grow in the future. Moving toward our pipeline, the company saw some upward momentum. The second quarter can be best characterized as a quarter of FDA inspections, amounting to three in total, one at each of our U.S. manufacturing facilities. Two of those inspections were routine and saw 0483 items, highlighting the strength of our quality systems. The third was a preapproval inspection for AMP015, which was revealed to be generic teriparatide pen for injection. As a result, teriparatide continues to be on track for a GDUFA date in the fourth quarter this year. Moreover, we have taken a conservative approach from a legal perspective giving us the best path to commercialization as soon as we receive approval. Again, this product has no approved generics and has a plus $650 million annual market based on Equivia. With respect to our other filed ANDAs, for ANP002, we announced in June that the ANDA received a CRL, to which it has now been fully responded to. We are awaiting the FDA to make final determination on the GDUFA date. As a reminder, this product is a complex product with no generics and no other filers that we are aware of. As for AMP006, a plus $50 million annual market based on Equivia, the ANDA is still anticipated to have a GDUFA date in the first quarter of next year. On the subject of our proprietary products, Internasal Epinephrine remains on track for a filing in 2022 as the product's clinical program continues to progress. To our other proprietary product, Internasal Naloxone, the product is progressing further in its stability studies with an expectation to refile in the fourth quarter of this year. While we understand that an eight milligram version was recently approved, we believe our product differentiates from others on the market. Regarding our other Paragraph 4 filings, we believe AMP008 and our generic ragadenosone holds strong non-infringement positions. AMP008 is still on track to be filed later this year. To close, I'd like to remark that while the first interchangeable biosimilar insulin was recently approved, this has not changed Amphistar's plans regarding our insulin program. It validates our strategy. There is a pathway for interchangeable biosimilar insulins. We continue to believe that the insulin market will remain robust. At the same time, our pipeline matures from focusing on complex injectable generics and into products with longer product life cycles, namely biosimilars and inhalation products. Considering that our existing technological platforms can already support this development demonstrated by hyaluronidase, anoxaparin, and most recently, Glucagon, we see the pathway as clear, attainable and profitable. I would now like to turn the call to Bill Peters to discuss our financial performance for the second quarter and give further details behind those results.

Thank you, Dan. Sales for the second quarter increased 18% to $101.7 million from $85.8 million in the previous year. Glucagon, which we launched in the first quarter, has already achieved a reasonable market share at a reasonable price and led the growth with sales of $12.1 million. Primatine Mist once again showed strong growth compared to the second quarter of last year with sales up 34% to $16.7 million from $12.5 million. Epinephrine sales grew 32% to $9.2 million from $7 million with strong sales of the multi-dose vials. and Oxaparin saw modest sales decline to $9.3 million as a competitor reentered the market during the second quarter. Naloxone sales declined to $6.6 million due to increased competition. Our insulin API business had sales of $6.9 million, up from $4.9 million in the prior year, primarily due to the timing of shipments and the half million dollars of revenues Thank you for joining us. We showed proof of this trend this quarter, with gross margins increasing to 47% of sales in the second quarter of 2021 from 39% of sales in the same quarter last year. Selling, distribution, and marketing expenses increased slightly to $4.1 million from $4 million, primarily due to the marketing costs associated with our national television and radio ads, including the cost of airing our new TV commercial. General and administrative spending decreased to $14.6 million from $15.9 million, primarily because of one-time expenses associated with the separation agreement with the former executive in the second quarter of last year. Research and development expenditures increased to $18.1 million in 2021 from $16.1 million last year as we continue to develop our insulin and inhalation products. Non-operating income increased to $3.6 million from $1.3 million, as we recognized the gain associated with lowering the litigation accrual for our lawsuit with Aventis, which we settled at the end of the second quarter this year. The company reported net income attributable to Amphistar shareholders of $7.8 million, or 16 cents per share, in the second quarter, compared to a net loss of $200,000, or 0 cents per share, in the second quarter of 2020. The company reported an adjusted net income of $10.6 million or 21 cents per share compared to an adjusted net income of $7.6 million or 16 cents per share in the second quarter of last year. Adjusted earnings exclude amortization, equity compensation, impairments of long-lived assets, and one-time events. In the second quarter, cash flow provided by operations was $32.2 million. We repurchased $6.4 million of stock during the quarter and made $6 million in debt repayments. Today, we announced that the Board authorized an additional $20 million buyback program, which we plan to utilize in the future. We also announced that we've entered into a $140 million debt facility consisting of a $70 million term loan and a $70 million revolving line of credit. We used approximately $30 million of the term loan to pay off existing debt with higher interest rates. We believe this facility will help us lower interest expense and ensure financial flexibility as we grow and expand our business. I will now turn the call back over to the operator to begin Q&A.