speaker
Bill Peters
CFO and Executive Vice President of Finance

Our commitment to providing continuity of supply during periods of competitor shortage exemplifies our role as a reliable provider in the pharmaceutical landscape and supports our projection for sustained performance. As we address our adaptive response to evolving market conditions, the launch of Rexcovi, our proprietary naloxone nasal spray, is now scheduled for release in the first quarter of 2024. due to production needs for shortages products. Furthermore, due to the API supplier for our MPA injection having discontinued manufacturing this API, we will have minimal to no sales of MPA over the inserting quarters. We plan to resume manufacturing MPA following the anticipated FDA approval for qualification of the new API, which will be reduced at our A&P facility. The FDA authorization will enable us to leverage our in-house production capabilities, ensuring a steady supply to meet market demand. I would now like to shift our dialogue on the progress within our pipeline and the regulatory endeavors related to our proprietary biosimilar and complex generic products. Regarding the regulatory progress of AMP002, we acknowledge the delay beyond its initial GDUFA goal date. We are currently engaged in discussions with the agency. The agency remains committed to moving the application forward in the regulatory review process as quickly as possible. There remains a significant market demand for this product, which would represent itself as the first generic in the market niche exceeding 600 million, according to Equivia. Recognizing the need for generic options, we are dedicated to advancing our dialogue with the FDA. For our teriparatide ANDA, referenced as AMP015, as previously stated, we have responded to the CRL. We have a goal date in the first quarter of 2024. This date adheres to the conventional schedule, allowing for an additional quarter's extension should a pre-approval inspection be necessary. In reference to our AMP008 inhalation ANDA, which received priority review status, we believe we have addressed the issues identified in the minor CRL, As a result, we have a GDUFA goal date set for the fourth quarter of this year. Concurrently, our AMP007 application is progressing as planned and is scheduled for submission by the end of this year. Regarding our proprietary product, intranasal epinephrine, identified as AMP019, we are diligently advancing through the clinical development phases in collaboration with the FDA. In alignment with our strategic objectives for our biosimilars, I am pleased to report today steady progress with AMP004, our insulin Aspart biosimilar candidate. We are on track to submit the BLA for this product by the end of this year with the intent of securing interchangeable status. In summary, the solid performance and strategic advancement detailed today underscore the strength and adaptability of our product portfolio in response to the competitive and regulatory environments we operate within. Our strong sales growth, strategic pipeline advancements, and regulatory foresight align with our company's sustained growth and value creation vision. We remain dedicated to advancing unmet medical needs as we continue to invest in our high margin products and innovate in proprietary, biosimilar, and complex products. We are confident in our ability to capitalize on market opportunities and navigate industry challenges strategically. I would now 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. Thank you, Dan. Revenues for the third quarter increased 50% to $180.6 million and $120.1 million in the previous year's period. Lukagon sales increased 107% to $29.5 million from $14.2 million as two suppliers left the market and we experienced seasonally strong back-to-school sales. Primatine mist sales grew to a new record of $24.8 million in the third quarter, which represents a sales growth of 35% from sales of $18.4 million in the third quarter of last year as retailers replenished their inventories. Lidocaine sales increased to $15.5 million from $12.6 million due to higher unit volumes as a result of continued supplier shortages during the quarter. Phytonodione saw increased competition as sales decreased 47% to $7.4 million from $14 million. Other finished pharmaceutical product sales increased $14.1 million to $37.7 million on increased sales of legacy products, such as dextrose, atropine, calcium chloride, and sodium bicarbonate, and on sales of newer launches, including regadenosine, ganarelix, and vasopressin. This marks the first quarter of revenues from Baximi. We recorded net revenues of $28.7 million, which corresponds to Amphistar's net economic benefit from Baximi. This net economic benefit was calculated based on Eli Lilly's sales of $48.7 million, less their expenses of $20 million, which included cost of goods, selling expenses, and research and development expenses. We will continue to book revenues on a net basis until we begin distributing Baximi in 2024. This change will occur on a country by country basis. Our insulin API business had sales of $4.2 million, up from $1.2 million last year, primarily due to the timing of orders. Cost of revenues increased to $72.2 million from $61.6 million. Gross margins improved to 60% of revenues from 49% on increased sales of higher margin products, such as glucagon, primatine, mist, ganarelix, and vasopressin. Additionally, revenues from Baxemia reported net of related expenses. Selling, distribution, and marketing expenses increased 34% to $6.4 million from $4.8 million in the previous year's period due to Salesforce expansion expenses related to Baximi and increased advertising expenses for Primatine Mist. General and administrative spending increased 6% to $12.7 million from $12 million due to increased compensation and expenses related to Baximi, which were partially offset by lower legal expenses. Research and development expenditures decreased 10% to $16.7 million from $18.5 million due to the timing of clinical trials and material expenses related to our insulin and inhalation pipeline products. Our non-operating expense of $9 million compared to a non-operating expense last year of $600,000 primarily due to interest expense and costs incurred for the term loan we entered into to complete the Baximi acquisition and convertible debt issued this quarter. These expenses were partially offset by mark-to-market adjustments related to our interest rate swaps. Net income increased over 200% to $49.2 million, or $0.91 per share in the third quarter, from $15.9 million, or $0.30 per share in the third quarter of 2022. Adjusted net income also increased significantly to $61.9 million or $1.15 per share compared to an adjusted net income of $20.2 million or 38 cents per share in the third quarter of last year. Adjusted earnings excludes amortization, equity compensation, impairment of long-lived assets, and one-time events. In the quarter, we had cash flow from operations of approximately $64.3 million. We issued $345 million of convertible notes in September and used $200 million of the proceeds to concurrently pay down our term loan and $50 million to buy back approximately 1.1 million shares of our common stock. Subsequent to the end of the quarter, we paid down an additional $50 million of our term loan. When we entered into the term loan, we hedged $250 million of the loan by swapping into a fixed rate for five years. At this point, we do not have any more floating rate debt, which will enable us to lower our interest expense in the coming years. I'll now turn the call back over to Dan. Thank you, Bill, for the update. With that, we'll now take your questions. Operator, please open the line for Q&A.

speaker
Conference Call Operator
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 two if you'd like to remove your questions from the queue. For participants using speaker equipment, it 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 Glenn Santangelo with Jefferies. Please proceed with your question.

speaker
Glenn Santangelo
Analyst, Jefferies

Oh, yeah. Thanks, guys. Thanks for taking my question. Hey, Bill, I wanted to start out talking about vaccine because obviously I think this is a bigger result than most of all of us were expecting. You know, when you look at the sales generated, you know, by literally 48, $49 million. I mean, I thought, you know, at least in your, in your most recent sort of marketing deck, we were talking about, you know, closing out this year at 145 to 155 million annualized, you know, with the potential to get the peak sales of 250 to 275. I mean, How do you think about those targets that you had previously laid out relative to, you know, the fact that Lilly almost did $49 million in residence quarter?

speaker
Bill Peters
CFO and Executive Vice President of Finance

Well, two things. One, first of all, thanks for noticing the projections and seeing the updated slide deck because we did update the projections from a previous number to increase that slightly. And the big thing about this is that this is a back-to-school quarter, so the third quarter has historically been the high point of the year. So we expect sales will drop going into the fourth quarter, and that's just been the trend. If you take a look at the graph of the script, the Acuvia script data, you see it really does have a big peak in the August-September timeframe. So we expect it to decrease, but that said, The $250 to $275 million is still just a forecast that we have at this point, and we think we have a very good plan to get to that. Could we beat that forecast? I think we possibly could. So it's just right now certainly something that we could do, and we didn't want to set a forecast that was something that we'd ever have to lower. So I'm glad to say that we did increase it once already.

speaker
Glenn Santangelo
Analyst, Jefferies

All right, that's helpful. I appreciate that. Maybe I just ask one other quick question, maybe a high level question. You know, the quarter, you know, it always benefits to some extent from shortages in one product or another. And it's always, you know, hard sitting in our seats to sort of, you know, forecast which ones, you know, is there anything specifically you'd call out going on in the market this quarter? Like, you know, obviously lidocaine benefited again, epinephrine benefited, vitonidine obviously was the opposite. And You know, we know that Pfizer had some manufacturing issues, some unfortunate issues, but is there anything specifically this quarter that you may call out that may have a little bit more sustained impact or something, you know, to the opposite might have a little bit of a shorter duration to it?

speaker
Bill Peters
CFO and Executive Vice President of Finance

Yeah, so you did mention the lidocaine. One of our lidocaine skews is on shortage and we're producing as much of that as possible. But there's three right now where we're the only one in the country making them, and that's dextrose, sodium bicarbonate, and also the epi syringe, pre-filled syringe that's used in emergency rooms. So those three things are, we're just making as much of those things as we can. And we don't know when our competition will be back on the market, but it looks like that's going to at least go into at least the second quarter of next year from what we understand. for those products, so that's what we can garner out of that. And, you know, as I think we mentioned and also as in the presentation, because of our attempt to take care of the market for these shortages, we've had to delay once again the launch of our intranasal naloxone because it runs on the same equipment at our IMS facility. So, you know, we had an opportunity to launch that or satisfy some of the demand for these shortage products. We decided it was more prudent to make more of the shortage products to try to help the market out of the situation that it's in right now.

speaker
Glenn Santangelo
Analyst, Jefferies

Perfect. Thanks for the update. Appreciate it.

speaker
Conference Call Operator
Operator

Thank you. Our next question is from Tim Chang with Capital One. Please proceed with your question.

speaker
Tim Chang
Analyst, Capital One

Hi. Thanks, Bill. Good quarter. Maybe you could talk just a little bit about the rebound in primatine miss sales, how that might have contributed to your higher gross margins this quarter as well.

speaker
Bill Peters
CFO and Executive Vice President of Finance

Yeah, so two things. One, really the biggest thing to the gross margin is the fact that vaccine is on a net basis. So it's 100% margin product right now. So all the expenses are taken out before we book that revenue because of the accounting guidance that we have to follow. So that's really the big driver to get to that 60%. But as far as primatine mist goes, it's basically what we've been saying the last two quarters is, you know, it was growing at the retail level in the first quarter, but our sales were down. It was growing at the retail level in the second quarter, but our sales were down. That indicated to us that there was a contraction in the level of the inventory at retailers. It reversed this quarter. The growth has actually been relatively steady at about 5% or 6% a quarter this year, 5% or 6% every quarter this year. But you've seen this big fluctuation in our vines, and that just really has to do with the inventory. So this is, I believe, an inventory stocking ahead of what's usually the biggest two quarters of the year for primatine mister, usually the fourth quarter and the first quarter. So I think we've got a little bit of that carryover into the first quarter because the retailer – retailers had lowered their inventory levels going into this quarter.

speaker
Tim Chang
Analyst, Capital One

Got it. And I guess with Baximi, you're still going to report net economic benefit from Baximi in the fourth quarter, but obviously that number probably will be less, right, because the third quarter obviously was the strongest quarter for the year. Is that right?

speaker
Bill Peters
CFO and Executive Vice President of Finance

That's correct. The other thing, well, there's going to be a couple forces that kind of go in different directions for that because starting in the fourth quarter, we are doing our own marketing, our own selling for that. So the expense for that will now be on our selling line, and it will not be borne by Lilly. So they will have a lower expense that's usually deducted. So there, as we saw, the Lilly sales were close to $49 million. So we expect that their top line number to decrease. And as Dan had mentioned, it's historically been about 31% of the annual sales in the third quarter. So it's definitely higher than the other quarters. But the deductions will be a little bit lower as well. So the selling expense that they deduct will not be as high. So we'll still have their cost of goods, their distribution expenses, and a little bit of R&D work as they continue out a couple of the R&D studies that were ongoing. So those expenses will still be borne in that gross debt number. And I know it's a little bit confusing, but it's a moving piece. And as we've mentioned, we plan to take over distribution in the United States in the first quarter of next year. And then the rest of the world will follow depending on the timing of signing of certain contracts and also the transfer of the marketing authorizations in various locales.

speaker
Tim Chang
Analyst, Capital One

Okay, just one last question then, Mel. Is the 60% gross margin, is that sort of your new going forward type of run rate now that you have Vaximi?

speaker
Bill Peters
CFO and Executive Vice President of Finance

No, because remember, because Vaximi, we had our net economic benefit was at 100% margin. So the net economic benefit that we get next quarter will also be at 100% margin. But as we move forward, we will start incurring the revenues and the cost of goods. So in the future, our revenue number goes up, but our cost of goods number goes up as well. So instead of vaccine being 100% margin product, it's going to be something that's well above our corporate average, but it will still have a cost associated with it once we begin distributing in locales around the world. And I know that's a little bit complicated and a little bit It's going to be country-by-country basis, so it doesn't all happen at once.

speaker
Tim Chang
Analyst, Capital One

Right. Got it. I think historically, what, U.S. vaccine sales had made up about, what, 80% of the total vaccine pie?

speaker
Mel
Company Representative

That's correct. Okay.

speaker
Conference Call Operator
Operator

Thank you. Our next question is from David Anselm with Piper Sandler. Please proceed with your question.

speaker
David Anselm
Analyst, Piper Sandler

Hey, this is Tim on for David. Thanks for taking the questions. A few from us, and apologies if there's a little overlap here. So on Baximi, I guess stepping back, what's your overall view on the glucagon rescue market growth, both near-term and longer-term? And with respect to your sales force, what are you thinking in terms of sizing? Is that going to be a contract sales organization or will it be internal? And when do you expect for them to hit the field? And then second, on the glucagon injection generics, Could you speak to how penetrated you are in the institutional setting and the extent to which you've been able to leverage your expanded manufacturing capacity? And over time, how big do you think the opportunity is in that setting? And then last, on the shortage products, can you talk to the extent to which you'll continue to benefit from shortages in 2024? I know you called out those three products that the competitors aren't making right now, but Beyond that, what is the impact of the shortages going to look like next year relative to this year? Thanks.

speaker
Bill Peters
CFO and Executive Vice President of Finance

Okay, so the first one I got was overall glucagon growth. And so, you know, as we've said, we think that Baximi is going to grow for us, going to be somewhere in the $250 to $275 million revenue range product for us at peak. So that's really strong growth from where we are today, which is somewhere annualizing around $150 million. and revenues. We do think that some of that market share comes out of the traditional glucagon, the generic glucagon that we're selling today. However, our current glucagon, generic, is also used as a diagnostic aid. And because it's used as a diagnostic aid, that doesn't go away with the conversion to bexamine because the bexamine is not indicated for that. On the sales force, we haven't said how many sales people we have, but we do have said that we have a contract sales force that we did engage. They began selling on October 1st. So they're out there right now marketing the product. So we'll have that expense in our P&L and the selling expense line from now on. We've also repurposed some of our internal sales force to be vaccine sales people as well. So they're also on on the job, but they're already doing this. They trained, all of these people were trained during the third quarter and ready to hit the ground running at the beginning of the fourth quarter, so that's definitely something that's ongoing. On the glucagon injection, the segmented, I think the glucagon injection sales about 31% in the retail space and about 69% in the non-retail space. So that's the different break up there. And then what was the last question? The shortage on the shortage products? We see shortage products every single quarter for as long as we've been reporting our sales. So somewhere, some product somehow is always in need. Currently, because of certain issues We have a little more shortage products, and we're just happy that we planned accordingly and are able to meet those needs at this time. Yeah, and just going back to elaborate on what Dan said, I've been at the company now nine and a half years, and every quarter we've had some benefit from other competitors having shortage problems. And it's frequently the dextrose and the sodium bicarbonate products Sometimes it's epinephrine, sometimes it's phytonodon, sometimes it's lidocaine, sometimes it's atropine or calcium chloride. But there's always something that's going on in the market. And because we've built that extra capacity about three, four years ago, we've been able to capitalize on it over the last several years. And it's something that we did as a strategic decision. And it's working out well for us.

speaker
David Anselm
Analyst, Piper Sandler

Great. Thanks for taking questions.

speaker
Conference Call Operator
Operator

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

speaker
Bill Peters
CFO and Executive Vice President of Finance

I want to thank everyone for joining us today. We would like to characterize 2023 as a year of execution amongst our key high-margin products and the further enhancement of our company portfolio within the proprietary product segment, especially with vaccinee. We look forward to updating you all again. Have a great day.

speaker
Conference Call Operator
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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