speaker
Dan Dishner
Chief Executive Officer

This remarkable achievement can be attributed to our expanded market share in this space, gaining market share in the diagnostic market, and our carefully planned capacity increase, resulting in an impressive 131% growth on an annualized basis. We anticipate the glucagon injection demand to remain durable. Concerning our other key high margin products that have been usual contributors to our quarterly primatine mist, and epinephrine, sales for the quarter reached $16.5 million and $16.7 million respectively. We note that our retail in-store primatine mist weekly sales maintain a positive growth trend with a 5% increase from Q2 of last year. However, retailers have readjusted their inventory levels leading to a decline in sales at the factory level. As for epinephrine's total sales, We note that this shift was attributable to competitors returning to their normal distribution levels. Shifting our focus to our other finished pharmaceutical products, especially regarding our products in our portfolio benefiting from competitor shortages, we have seen a significant increase in sales, ending the quarter with a 47% increase. While we are aware of the recent natural disaster that affected a large sterile injectable facility, We anticipate that Amphistar will play a significant role in addressing the nationwide drug shortage, especially regarding products used in the hospital setting. We are pleased to announce that the FDA has recently approved the brand name Rokstovi for our intranasal naloxone product. After careful assessment, we plan to delay the launch of this product to the fourth quarter of this year because it utilizes the same manufacturing suite as products needed to supply the critical emergency products during this drug shortage. This will allow us to maximize our current capacity and augment our revenue opportunities with the impacted products. Having covered our revenue drivers for the quarter, I would like to turn our attention to our pipeline and regulatory activities concerning our proprietary biosimilar and complex products. In a recent development for AMP002, the action date was not achieved due to unresolved regulatory matters. However, the FDA has assured us of their commitment to progress with this application swiftly and remain in positive dialogue and are hopeful of a successful response. This product continues to be without a generic with a plus $600 million market opportunity based on annualized Equivia sales. For our teriparatide ANDA or AMP015, we responded to the CRL and have a GDUFA date in the first quarter of 2024 with the standard subsequent quarter GDUFA date if an inspection is needed. With regard to our AMP008 inhalation ANDA, which is classified under priority review, the filing recently received a minor CRL. We plan to respond in the third quarter of this year which we would expect to lead to a late 2023 action date. While our second inhalation ANDA, AMP007, we plan to file in the fourth quarter. As for our proprietary product, intranasal epinephrine, we continue working with the FDA and progressing with the clinical development. Turning to our biosimilars pipeline strategy, our AMP004 product, or our insulin ASPART, is progressing according to plan. and we expect to submit our BLA with interchangeable status by the end of 2023. If nothing else, this quarter shows the strength of our portfolio of products and the flexibility we have to adapt and take advantage of presented opportunities. We remain focused on our strategies to invest for growth, improve margins and cash flow, and stay committed to advancing our product pipeline. Research and development remain an integral part of our future, that we believe will continue to drive growth. In summary, we see significant growth opportunities ahead with new products emerging from our pipeline, and we remain committed to delivering consistently strong performance. I would now like to turn the call to our CFO and Executive Vice President of Finance, Bill Peters, to discuss the second quarter's financial results. Thank you, Dan.

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

Sales for the quarter increased 18% to $145.7 million from $123.5 million in the previous year's period. Glucagon sales more than doubled to $27.3 million from $11.8 million in the prior year, primarily due to continuing strong market demand as some suppliers discontinued selling glucagon. Phytonodion sales increased to $17.9 million from $13.4 million in the second quarter of last year as a result of supplier shortages. Primatine mist declined to $16.5 million from $19 million in the previous year due to inventory drawdown by retailers. Sales of primatine mist continued to grow at the retail level, increasing by 5% in the second quarter. Lidocaine and epinephrine saw sales declines as competitors returned to these markets. Our other finished pharmaceutical products category also had strong growth, due to higher unit volume sales of dextrose, atropine, calcium chloride, and sodium bicarbonate, as well as sales of new products such as Ganarelix, vasopressin, and regadenosine. Since we closed our Baximi acquisition on June 30, 2023, we do not have any sales of Baximi in the quarter. However, Lilly recorded sales of $34.9 million, up 20% from the second quarter of 2022. While we usually don't talk about quarterly sales trends, there are a few items I would like to point out for our third and fourth quarters. First, in the third quarter, we will begin recording a net economic benefit of Baximi, which will be Lilly's sales less the cost they incur on our behalf until we take over responsibility for Baximi distribution. Once we have taken over distribution, we will begin recording sales and expenses as we would for any other product. We have estimated the impact of Vaximi on adjusted EPS will be 12 to 18 cents in 2023. Second, we plan to launch glucagon injection in Canada in the near future, adding to this product sales. Finally, we've had to temporarily stop selling our medroxyprogesterone, one of our larger products in the other finished pharmaceutical products category, because our API supplier has discontinued manufacturing the product. Our AMP subsidiary has developed this API and continues to pursue an approval of the DMF. We hope to obtain FDA approval in the first half of next year, at which time we would relaunch this product. Our insulin API business had sales of $2.8 million, down from $3.3 million in the prior year, primarily due to the timing of shipments. As we've discussed in the past, the products we've launched in the last few years, including Glucagon, Vasopressin, Ganarelix, and Regadensin, have higher margins than our corporate average. While these trends continued this quarter, gross margins dropped slightly to 50% of sales in the second quarter of 2023 from 51% of sales in the same quarter last year. As we decided to impair all of our UK product rates intangible assets, which were purchased several years ago, resulting in an impairment charge of $2.7 million. These products were to be made at our IMS facility, but given better market opportunities in the US, we've decided to focus on our US products there. Selling, distribution, and marketing expenses increased to $6.7 million from $5.8 million, primarily due to increased advertising of primatine mist. General and administrative spending increased to $12.3 million from $10 million, primarily because of increased personnel-related costs and costs related to the Baximi acquisition. Research and development expenditures decreased to $16.8 million in 2023 from $22.8 million last year, as spending in the prior year was elevated due to purchases of raw materials and components for our AMP-018 and insulin pipeline products. Non-operating expenses increased to $4.1 million from $1.7 million due to one-time costs related to our credit agreement used to finance the back CME acquisition, currency fluctuations, and mark-to-market adjustments related to our interest rate swaps. The company recorded net income of $26.1 million, or 49 cents per share, in the second quarter, compared to net income of $17.3 million, or 33 cents per share, in the second quarter of 2022. The company reported a 68% increase in adjusted net income to $34.8 million or $0.65 per share compared to an adjusted net income of $20.7 million or $0.39 per share in the second quarter of last year. Adjusted earnings excludes amortization, equity compensation, impairments of long-lived assets, and one-time events. In the second quarter, cash flows provided by operations was $54.9 million. bringing our year-to-date cash flow provided by operations to $95.3 million. I will now turn the call over to the operator to begin Q&A.

speaker
Operator
Conference Call Operator

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from Tim Chang with Capital One. Please proceed with your question.

speaker
Tim Chang
Analyst, Capital One

Thanks. Maybe just a few questions on the branded side. Obviously, Paximi, you've just recently closed that product acquisition. Could you talk a little bit about the marketing strategy with that product? When is the switchover going to happen in the third quarter? And do you expect to benefit from the new school year with that product? And then on primatine mist, maybe just talk about, do you expect a recovery in sales in the third quarter given demand trends?

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

Yes. So on the branded side of vaccine, let me start there. Right now, This transition is going in phases. Currently, we're in the phase where Lilly is doing everything that they were doing prior to the acquisition, and that will continue until the end of September. At that time, we're going to begin taking over the marketing of Baximi from Lilly. We've already hired a contract sales force to begin detailing that product for us. They've begun the hiring process and they're going to begin training relatively shortly after that so they can hit the ground running on October 1st. As far as the school year goes, Baximi is a product that does see seasonal trends with the back-to-school timeframe usually resulting in higher sales. So this is our first year, but we've seen in the past that the August-September timeframe usually shows an increase in sales of that period. And the third quarter is usually the peak quarter of the year for that product. As far as primating missed goes, we do expect, it's hard to say from the second quarter to the third quarter whether sales will be down, up, or flat. Historically, going from the second quarter to the third quarter, they've been flat to down slightly. But what we've seen in the trend is each of the last two quarters, we've seen increasing sales at the retail level, but decreased sales at the factory level. So we believe that trend can't continue forever. So at some point, the destocking that the retailers are doing right now will have to come to an end. So eventually the sales will have to match, the factory sales will have to match the store sales. So whether that takes another quarter or two quarters, it's hard for us to say right now. but at some point the sales growth we expect to continue.

speaker
Tim Chang
Analyst, Capital One

And maybe I'll just squeeze in one follow up. You know, obviously you're still benefiting from a lot of the supply shortages that are ongoing in the US on the generic side. I mean, are there specific products that you think you will be able to benefit from outside of the products that you're currently selling at this point?

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

So I'm not sure what you mean by products that we're not selling at this point. Because, you know, in the shortage area, you know, there's a lot of products that we have benefited from in the past. We expect to see those benefits in the future. There's a number of products that right now we're the only company selling into the hospital market for at least the time being. So our plan is to ramp up production of those to help out the country as best we can.

speaker
Tim Chang
Analyst, Capital One

Okay. That helps a lot. I'll jump back in queue and ask another question after. Yep.

speaker
Operator
Conference Call Operator

Thanks, Tim. Thank you. Our next question is from David Emicellen with Piper Sandler. Please proceed with your question.

speaker
David Emicellen
Analyst, Piper Sandler

Hey, thanks, Ode. Got a few. On glucagon, can you talk about the mix between retail and institutional? in terms of your sales mix and talk about also how penetrated you are in the institutional setting. I'm just trying to get a sense of, you know, how big this opportunity could be. I'm not talking about vaccine here, just the glucagon injection. And then secondly, on the CRL for AMP008, can you provide a little more color on the nature of that CRL, you know, complex or not complex, the issues that were raised there, just any color there would be helpful. And then on shortage products, as we move through the back half of the year, how should we think about the impact of the damage at the Pfizer North Carolina facility and how you could benefit from that? I guess maybe the best way to ask it is, should we see even more of an impact from shortage products in the back half of the year compared to what we've seen thus far in the first half of 23?

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

Let me take the first one, which is the glucagon question. In the retail versus the institutional market, The last we looked, it was about over 60% retail for us, and so we feel that we have penetrated some of the other markets. I remember our product was slightly higher priced than some of the alternatives, and while we think it's a more convenient package, the kit is more convenient, there are some people that would be unwilling to pay that little bit extra for that. And then for the CRL, I'll turn to Tony.

speaker
Tony
Regulatory Affairs Executive

Sure. Hey, David. For AMP008, as Dan said, it's a minor CRL. And I think the most notable item on that is we've said that our response is going to be in the third quarter this year. So from a complexity perspective and kind of the funnel analogy that I use, I think just the timeliness of our response should give an indication on the complexity of the CRL.

speaker
Dan Dishner
Chief Executive Officer

And in regards to the shortage products, David, we actually are anticipating having to pick up some of the work there. So we do think, especially in the products in the hospital setting and the CCD products, we should see an increase And that's why we decided to postpone the launch of our intranasal naloxone product.

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

And while we are going to see an increase, it won't be too material because we were already running those suites pretty much full out on this. So there is a little bit of room and we are looking for ways to increase the capacity that we can push through there by doing some small steps to increase things here and there. But this isn't going to be something where we can, you know, boost sales by 20% out of that factory. It's going to be incremental because we were already running, you know, effectively full shifts on the two lines at that IMS factory that produced product for that. And as Dan mentioned, unfortunately, you know, we were planning to start manufacturing the intranasal naloxone Rextovia this quarter, but we've postpone that because of the shortages that are out there. And so we've had to stop that process.

speaker
David Emicellen
Analyst, Piper Sandler

Just on glucagon, just going back there, on the institutional piece of the glucagon business, can you say or quantify what the opportunity is there just on the institutional side?

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

I think a significant portion of the pickup that we've had there has been on the institutional side, so the increase. Okay. So from compared to a year ago, because remember a year ago we already had 80% of pretty much the retail market. So, you know, let's say we, you know, if you say that we've more than doubled, so a big portion of that doubling was picking up some of the retail, I mean the institutional side.

speaker
David Emicellen
Analyst, Piper Sandler

That's helpful. All right, thanks.

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

Thanks, Dan. Thank you.

speaker
Operator
Conference Call Attendant

As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Thank you. Our next question is from Tim Chang with Capital One.

speaker
Operator
Conference Call Operator

Please proceed with your question.

speaker
Tim Chang
Analyst, Capital One

Hey, thanks. I think you mentioned on AMP02 there's a slight regulatory question that the FDA had asked. Is it still possible that you could respond and then get that product onto the market at the end of this year?

speaker
Tony
Regulatory Affairs Executive

Yeah, Tim, it's not that the FDA is waiting for us to respond to anything. We haven't had a response that we provided to them in some time for this, so it's not that the FDA is waiting for us to do anything. The way we have had our conversation with the agency is they're assuring us that they're working diligently on the application, and we view that as seeing a path forward with this. And we do see this as something that we're very optimistic that we will have a path forward for this. And we do anticipate having positive news for this. And it's just based upon just dialogue that we're having with the agency. And we are hopeful of that.

speaker
Tim Chang
Analyst, Capital One

I see. Okay. And then I guess just back on back, Simi. I mean, obviously, you're inheriting a lot of the formulary access that Lila Lilly has already established for the product. I mean, is there anything else you think you will need to do once the handover occurs around, what, October?

speaker
Bill Peters
Chief Financial Officer and Executive Vice President of Finance

Yeah, so they do have, you know, we're basically following their playbook and following the actions that they did and plan to keep marketing very similar to the way they did We're also working with different groups throughout the country, like the Juvenile Diabetes Foundation and other groups that are working with patients with diabetes. So, you know, we're, you know, we think they set up a good playbook. You know, we have a lot to learn from them, and we're, you know, in the process of taking what they've done and implementing it here. So we don't expect anything significantly different from what they did.

speaker
Tim Chang
Analyst, Capital One

Got it. Okay, great.

speaker
Operator
Conference Call Operator

Thank you. There are no further questions at this time. I would like to hand the floor back over to Dan Dishner for any closing comments.

speaker
Dan Dishner
Chief Executive Officer

I want to thank everyone for joining us today. The second half of 2023 remains to be a highly anticipated period in terms of our filings, our progression of our recent acquisition of Maximi, our role in helping address the nationwide drug shortage, in addition to our upcoming launch of Rick Stobie in the fourth quarter. We look forward to updating you all again. And again, thank you. Have a great day.

speaker
Operator
Conference Call Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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