Amphastar Pharmaceuticals, Inc.

Greetings and welcome to the Amphistar Pharmaceuticals, Inc. fourth 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 star zero on your telephone keypad. 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. 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 the measures and reconciliations to U.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, 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, Vice President of Corporate Communications. Dan, you may begin.

Thank you, Operator. Good afternoon, everyone. I want to welcome you to Amphistar Pharmaceuticals' fourth quarter earnings call. After my prepared remarks covering commentary regarding Amphistar's quarter and full year's performance for 2021, I'll turn the call over to Bill Peters, our CFO and Executive Vice President of Finance, who will provide an update on the company's financials. After Bill concludes his remarks, we will move the call to our Q&A portion where Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations, Bill and myself will be answering your questions. As stated in our press release and financial results published earlier, net revenues were at an all-time high, coming in at $437.76 million for the fiscal year. This represents a 25% increase in revenue and a 39% increase in gross profit. primarily due to our high margin products like primatine mist, glucagon, and epinephrine. On our last earnings call, the company stated that it would file its first inhalation ANDA in the fourth quarter of 2021. And I'm pleased to announce that AMP-008 was filed during that time. As mentioned before, this is a paragraph four filing with the usual possibility of a 30-month stay being triggered. Nonetheless, we believe in our strong non-infringement position and have a fourth quarter GDUFA date this year. AMP008 represents one of multiple inhalation ANDAs in our pipeline, targeting a combined plus six billion market in annualized Equivia sales. Our intranasal naloxone is anticipated to be refiled in the second quarter of 2022 as we maintain a positive dialogue with the agency and receive productive guidance. Concerning our ANDAs on file, and many more. Our second product, AMP006, which represents a market of 50 million in Equivia sales, remains on track with a second quarter GDUFA date. For our third product, teriparatide, or AMP015, the product remains on track with a second quarter GDUFA date. And finally, our fourth product is again our first inhalation filing, AMP008, which I had previously mentioned has a fourth quarter GDUFA date this year. Regarding Vazopressin, which received tentative approval late last year, we anticipate a launch in Q3 this year. The product demonstrates the strength of our vertical integration as we will produce the API and finished product in the United States. Two main components of our long-term strategy include proprietary and biosimilar products. Our intranasal epinephrine remains on schedule to be filed next year, and the company continues to have a positive dialogue with the agency as we work to obtain interchangeable insulin. A milestone was reached with our Primatine Mist product, with over 73 million in annualized sales, surpassing the original 65 million in prior peak sales under Primatine Mist CFC. In-store weekly sales maintain a positive trend, seeing a 9% increase from last quarter and a 31% increase on an annualized basis. Therefore, as primatine mist sales continue to trend upward, we remain confident that the product can reach 100 million by 2024. The company anticipates investing in more frequent nationwide digital, TV, and radio marketing campaigns, coupled with our physician sampling program. Regarding our other two high-margin products, Glucagon has seen an impressive 26% increase compared to the previous quarter. and Epinephrine have seen a 36% increase compared to the same period. With that said, we expect Gluvigon to maintain its market position with the possibility for growth. At the same time, we believe the current market conditions for Epinephrine will remain and we continue to be the reliable supplier where our competitors cannot. To end my prepared remarks, you can see that Amphistar is already headed into 2022 with a schedule of several pending GDUFA action dates and potential launches. The company's current capacity has room for growth to accommodate these new product launches. With that said, the current robustness and further diversification of our pipeline and scaling up our existing capacity are in line with Amphistar's long-term strategy towards self-funded investment to grow the company organically. Therefore, we anticipate investment in capital expenditures to increase in order to meet future pipeline demands. As the company continues to execute on our vision and strategy, Amphistar becomes well-positioned to continue transforming into a significant U.S. biopharmaceutical company catered towards novel treatments and biosimilars. I will now turn the call over to Bill to discuss our fourth quarter and year-end financial results.

Thank you, Dan. Sales for the fourth quarter of 2021 increased 26% to $120.9 million from $95.9 million in the previous year's period. Importantly, Primatine Mist surpassed our long-term annual sales target of $65 million, with sales growth of 60% in the fourth quarter to $21.5 million from $13.4 million for the same period in 2020, as we continue to see the benefits of our national advertising program. Glucagon also had strong sales during the quarter of $15.3 million. Epinephrine showed strong sales amid continued shortages by our competitors, growing to $18.9 million from $7.5 million in 2020. Anoxaparin sales dropped to $7.9 million in the fourth quarter from $17.6 million amid continued competition in that market. API sales decreased to $2.9 million due to the timing of orders from Mankind and other customers. Gross margins significantly increased to 47% of revenues in the fourth quarter of 2021 from 38% of revenues in the fourth quarter of 2020 due to strong sales of higher margin products like primatine mist, glucagon, and epinephrine. Selling, distribution, and marketing expenses increased at a rate lower than our sales, rising to $4.1 million from $3.8 million due to television, radio, and digital expenses for marketing primatine mist. General and administrative spending decreased 12% to $10.6 million from $12 million, primarily due to decreased legal expenses as we settled several ongoing lawsuits. Research and development expenditures decreased 5% to $17.3 million from $18.1 million due to decreased expenses in China as a result of our restructuring there. Other income included a $2.7 million gain on the settlement of a legal dispute. Net of Contingent Legal Fees The company reported net income of $19.8 million or $0.39 per share compared to previous year's fourth quarter net loss of $6.3 million or $0.13 per share. The company reported an adjusted net income of $20.8 million or $0.42 per share compared to an adjusted net income of approximately $8 million or $0.16 per share in the fourth quarter of the previous year. Adjusted earnings includes 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 $40.4 million, and for the full year, cash flow from operations were $98 million. During the quarter, the company repurchased approximately $13.4 million of stock during the total repurchases for the year to over $28.9 million. Let me review a few of the financial assumptions that we are using as we look to 2022 and beyond. First, let me state that Primatine Mist, with sales of $73 million, far exceeded our long-discussed goal of $65 million in sales this year. We now forecast that sales of this core product will continue to grow and hit $100 million by 2024. Glucagon sales will continue to grow in 2022 as we have a full year of sales compared to last year. We could have sales contributions from three ANDAs which have GDUFA dates in the first and second quarter this year, plus sales from the launch of Vasopressin in the second half of 2022. These trends could lead to significant sales increases in the second half of the year. We expect gross margins to increase once we are able to launch the ANDAs currently pending approval. As with most companies these days, we have been are challenged with higher costs for labor and both higher costs and longer lead times for certain inputs. 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. We expect G&A spending to increase but remain a similar percent of sales. Turning to research and development, We plan to ramp up spending on clinical trials this year as we adjust the timing for trials delayed in 2021 due to COVID. This includes trials for our insulin candidates, two inhalation candidates, and our intranasal epinephrine product. I would also like to note that we recently settled our litigation with Astellas & Gilead for Regedensin, and we received a one-time litigation avoidance payment of $5.4 million which will be booked to other income in the first quarter of 2022. We also anticipate a significant increase in capital spending this year as we continue to double our capacity for inhalation products in order to be aligned with our pipeline development. We are also expanding the capacity of insulin API production at our AENP facility in China. At our Amphistar facility, We are beginning an expansion project that will ultimately quadruple our capacity in Rancho Cucamonga as we look to major insulin and complex injectable opportunities. We plan to finance this expansion with cash flow from operations. At the same time, we will utilize our strong cash position to continue to buy our stock in our stock buyback program. I will now turn the call over to the operator for Q&A.