Amphastar Pharmaceuticals, Inc.

Greetings and welcome to the Amphistar Pharmaceuticals Inc. third 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 discussion of numerous factors that may impact our future performance. We will also discuss certain non-GAAP measures, important information on the use of these measures, and reconciliations to U.S. GAAP. may be found in our earnings release. Please note that this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO, Mr. Dan Dishner, Vice President of Corporate Communications, and Mr. Tony Mars, Senior Vice President of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dishner, Vice President of Corporate Communications. Dan, you may begin.

Thank you, Paul. And I'd like to thank everyone for joining us today. On the call with me will be Bill Peters, CFO and Executive Vice President of Finance, and Tony Mars, Senior Vice President of Regulatory Affairs and Clinical Operations. Following my prepared remarks and Bill's financial update, we'll open up for Q&A with the management team. I want to start by highlighting our third quarter's financials at a high level and then provide some remarks regarding our products and our pipeline with further discussion on glucagon's evolving market dynamics. We remain encouraged by our progress, with net revenues of $120.1 million, up 7% from the same period last year. Our balance sheet is stronger than ever and provides us the flexibility to continue investing in our robust pipeline. Therefore, R&D investments, as seen in the third quarter, continue to be a priority for us as we remain committed to advancing our pipeline toward approval and launch of special regard to our inhalation, internasal, and insulin products. As stated in previous calls, our existing products, primatine mist, glucagon, and epinephrine, have once again provided a solid baseline of support. Primatine mist continues to perform as projected with some seasonality in demand. Glucagon and epinephrine have grown at 21% and 8%, respectively, compared to the previous quarter. Likewise, we remain confident that the demand for these products will remain robust for the remainder of the year and into 2023. Regarding our pipeline and regulatory activities, I'd like to bring our discussion towards our AMP-008 inhalation filing, which received a CRL last month during its first cycle review. We believe the issues raised are relatively simple and addressable and are within the scope of our pipeline's focus on developing complex products with innovative delivery systems. As such, we intend to respond to that CRL in the fourth quarter of this year. Likewise, with our teriparatide application, we believe the issues are clear and we plan to refile in the first quarter of 2023. Turning to our generic pipeline product, AMP002, the CRL we received in July has been fully responded to with the new GDUFA action date scheduled in the second quarter of 2023. I want to note that our AMP002 and teriparatide ANDA filings are for products that remain without a generic due to the product's complexity. As stated previously, if a pre-approval inspection is needed for any of our filings, the goal date is typically extended to the following quarter. Our second inhalation generic pipeline product disclosed on our last call, AMP007, remains on track for filing in the first quarter of 2023. As for AMP004, our interchangeable generic insulin Aspart product in development, We continue to maintain a positive dialogue with the agency as we finalize the details of our application and remain on track for a filing in 2023. As we turn to our proprietary pipeline products, our intranasal naloxone refiling in September has been issued a goal date in the first quarter of 2023. Our intranasal epinephrine product remains on track for filing in 2023 and we anticipate further discussion with the agency on this product in the fourth quarter of this year. Before I turn the call over to Bill, I want to speak in more detail with Glucagon. As you may be well aware, the Glucagon market dynamics have increasingly evolved towards a strong position for the company due to Eli Lilly's planned discontinuation of their product by the end of this year. and Nova Nordisk or Boehringer Ingelheim's planned discontinuation of their glucagon product. These changing market dynamics in the retail and diagnostic spaces equate to significant potential growth for our glucagon product. With this evolving glucagon market, we are working closely with the FDA to increase our production capacity for glucagon and remain in fruitful dialogue with the agency to provide a reliable supply to accommodate this changing market. We are committed to maximizing our opportunity to supply glucagon's projected increase in demand. I would like to turn the call over to our CFO and Executive Vice President of Finance, Bill Peters, to discuss the third quarter's financial results. Bill Peters Thank you, Dan. Sales for the third quarter increased 7% to $120.1 million from $112.2 million in the previous year's period. Primatine Mist saw sales growth of 11% to $18.4 million from $16.6 million in the third quarter of last year, with strong sales on all of our current customers. Leucagon sales increased 17% to $14.2 million from $12.2 million on strong back-to-school sales. Phytonodion saw stronger demand this quarter as sales increased 21% to $14 million from $11.6 million. Epinephrine sales increased to $19.5 million from $13.9 million on strong sales of both the multi-dose vial and the pre-filled syringe, the latter of which saw strong demand due to competitor shortages. Other finished pharmaceutical products saw sales decrease of $3.4 million to $23.6 million, as lower sales of atropine and calcium chloride were partially offset by increased sales of dextrose and the recent launches of Ganirelix and Vazopressin. Our insulin API business had sales of $3 million, down from $3.2 million last year, primarily due to the timing of orders. Cost of revenues increased slightly to $61.6 million from $61 million. Gross margins improved to 49% of revenues from 46%, as increased sales of higher margin products, such as glucagon, primatine mist, betonadione, and epinephrine, as well as sales of newly launched ganarelics and vasopressin more than offset higher labor costs. Selling, distribution, and marketing expenses were relatively unchanged at $4.8 million. General and administrative spending increased 10% to $12 million from $10.9 million due to increased legal and compensation expenses. Research and development expenditures increased 72% to $18.5 million from $10.8 million as we had significant clinical trial and material expenses related to our insulin and inhalation products. Our non-operating expense of $400,000 compares to a non-operating income last year of $12.9 million as the 2021 amount included a one-time gain on the divestiture of 80% of ANP's subsidiary Hansen. The company reported net income attributable to Amphistar shareholders of $15.9 million, or 30 cents per share, in the third quarter, a decrease from the $29.5 million, or 59 cents per share, in the third quarter of 2021, which benefited from the one-time gain on the divestiture of Hansen. The company reported an adjusted net income of $20.2 million, or $0.38 per share, compared to adjusted net income of $23 million, or $0.46 per share in the third quarter of last year, primarily due to increased R&D spending. Adjusted earnings exclude amortization, equity compensation, impairment of long-lived assets and one-time events, including the gain on the divestiture of the 80% of our interest in Hansen in 2021. In the third quarter, we had cash flow from operations of approximately $20.4 million, and we used a portion of our cash to buy back approximately $14.5 million of stock. We also announced today that our Board has authorized an additional buyback program of $50 million. I will now turn the call back over to Dan. Thanks, Bill, for the update. With that, we will now take any questions you will have. Paul, please open the line for Q&A.

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