Amphastar Pharmaceuticals, Inc.

worldwide distribution from Lilly throughout 2024. Having discussed the main drivers of our revenue and the impact of market nuances on our quarterly performance, I want to pivot the discussion towards our pipeline and regulatory affairs concerning our proprietary, biosimilar, and complex generic products, starting with our insulin ASPART filings. We firmly believe our BLA application aimed at securing interchangeable status will not only mark a significant advancement for our diabetes portfolio, but will also demonstrate our commitment to leveraging our robust U.S.-based capabilities. This strategic move is poised to solidify our position as a frontrunner in being a proud U.S.-finished interchangeable biosimilar insulin manufacturer and supplier. This aspect sets us apart in an increasingly competitive landscape, as the demand for more affordable options for diabetic patients continues to surge we are poised to meet this need with our U.S. manufacturing site. Furthermore, we believe this milestone will pave the way for success of our other insulin products currently in development, including AMP004M, or insulin aspartame, AMP005, recombinant human insulin, and AMP025, insulin degladec, which development continues to advance. Additionally, while on the topic of our diabetes pipeline, Our GLP-1 ANDA in development, known as AMP-018, remains on track for a filing this year. In reference to our proprietary product, intranasal epinephrine, or AMP-019, this product continues to progress through the various development stages. Concluding my remarks and looking ahead, AMPA-STAR has significant opportunities in front of us. Supported by our sustained growth and strategic initiatives, With the eminent launches of Rextovi and promising candidates like Terra Paratide, AMP002, and AMP008, we are optimistic about our trajectory. Our annualized performance underscores the resilience and diversity of our portfolio, signaling growth potential. Moving forward, our dedication to growth is evident through our R&D advancements, which is the engine of our company. And our planned expansion efforts within our inhalation pipeline at our Armstrong facility our continued API expansion at our A&P facility, which is anticipated to be completed this year, and our capacity expansion at our headquarters to capitalize on our insulin and complex injectable opportunities. I would like to turn the call over to our CFO and Executive Vice President of Finance, Bill Peters, to discuss the fourth quarter and year-end financial results.

Thank you, Dan. Sales for the fourth quarter of 2023 increased 32%. of $178.1 million from $135 million in the fourth quarter of 2022. Vaccimi contributed $22.5 million to net sales based on Eli Lilly's sales of $37.6 million plus cost of revenues and transition service fees of $15.2 million. LukaGon sales increased 70%, growing to $31.2 million from $18.3 million as the discontinuation of other injectable glucagon products from two suppliers at the end of 2022 positively impacted demand. Primatine mist continued to show strong sales growth during the quarter, with sales of $24.5 million, up 10% from $22.3 million in the prior year period. Epinephrine showed strong sales in the fourth quarter amid continued shortages by our competitors. growing to $24.6 million from $21.4 million in the previous year's period. Linocaine showed growth of 13% to $15 million in the current quarter from $13.3 million in the fourth quarter of 2022 as we were able to increase capacity and decrease our backorder. Other finished pharmaceutical product sales increased 6% to $35 million in the fourth quarter of 2023 compared to $33.1 million from 2022 As the company recorded stronger sales due to the launch of Regadensin earlier in 2023 and increased unit sales of Atropine, Calcium Chloride, Sodium Bicarbonate, and Ganarelix, which were partially offset by lower sales of Medroxyprogesterone, as the company was in the process of transferring the API production for that product to its facility in China. Gross margins increased to 54% of revenues in the fourth quarter of 2023, from 53% of revenues in the fourth quarter of 2022 due to Baximi sales, which are a recorded net of the lowly's expenses, and to strong sales of higher margin products like glucagon and primatine mist. These positives are partially offset by an inventory reserve of $3.6 million for insulin API due to our amended contract with Mankind, which delays required purchases. Selling, distribution, and marketing expenses increased to $8.6 million from $5.5 million due to the expansion of our sales and marketing efforts for Baximi as we began detailing the product at the beginning of October. General and administrative expenses increased to $13.1 million from $10.6 million in the prior year due to Baximi-related expenses and higher personnel costs. Research and development expenditures increased in the quarter to $20.4 million from $17.2 million in the comparable quarter of 2023, primarily due to spending on materials and supplies for our inhalation programs. Non-operating expense in the fourth quarter of 2023 was $12.6 million, primarily related to interest expense on the debt used to finance the vaccine acquisition, foreign currency fluctuations, and mark-to-mark adjustments on our interest rate swaps. This compares to non-operating income of $3.4 million in the fourth quarter of 2022, due to a re-measurement gain on foreign currency. The tax rate this quarter was lower than usual due to a mix of one-time events combined with an updated review of our international tax structure. The company reported net income of $36.2 million, or 68 cents per share, which was up 7% and 3% respectively, compared to the previous year's fourth quarter net income of $33.9 million, or 66 cents per share. The company reported an adjusted net income of $46.9 million, or $0.88 per share, compared to an adjusted net income of approximately $37.6 million, or $0.73 per share, in the fourth quarter of the previous year. Adjusted earnings exclude 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 $23.9 million, and for the full year, cash flow from operations or $183.5 million. Let me review a few of the financial assumptions we are using as we look to 2024 and beyond. Faximi will drive sales growth in the coming year. We anticipate continued unit growth in the high single-digit range. Average selling price will be impacted slightly due to the difference between the wholesaler fee structure for Amphistar compared to that of Eli Lilly. As for Primatine Mist, we are reiterating our forecast of hitting $100 million in sales this year. We are forecasting up to four product launches this year, including Rex Dovey, which will be launched in the coming weeks. We are also expecting approvals in 2024 for AMP002, AMP008, and Terra Paratide. We expect gross margins to be slightly lower, primarily due to the shift in accounting for Baximi from net economic benefit in which sales are booked net of cost of goods sold to typical revenue recognition with cost of goods sold, thus increasing both the sales and the cost of goods line on the income statement. We've already begun this transition in the United States, where we began shipping the two pack of Baximi at the beginning of February, and we will begin shipping the one pack in March. Last week, we also started distributing Baximi in Italy, the first country outside of the United States, with the remainder of foreign countries converting to our distribution network one by one throughout the remainder of 2024. Our selling and marketing expenses will increase due to efforts related to Baximi. We expect G&A spending to increase due to expenses associated with Baximi and legal expenses associated with paragraph 4 patent challenges. Turning to research and development, we plan to ramp up spending on clinical trials, purchases of materials and supplies, and FDA filing fees this year as we increase spending on our insulin portfolio, two inhalation candidates, and our intranasal epinephrine product. We also anticipate a significant increase in capital spending this year as we continue our project to double the capacity for our inhalation products at our Armstrong facility to align with our pipeline development. Additionally, we plan to finish our insulin API production capacity expansion at our ANP facility in China this year. At our ANSYSTAR facility, we are in the process of an expansion project which will significantly increase the capacity of our Rancho Cucamonga complex as we look to major insulin and complex ingestible opportunities. Spending on this major project will begin this year, but will ramp up more significantly in 2025, reaching $40 million a year for three years. We plan to finance this expansion with cash flows from operations. We will use a portion of our cash this year to make the $125 million payment due to Lilly in June. At the same time, we plan to utilize our strong cash position to continue our stock buyback program. I'll now turn the call back over to the operator for questions. Thank you.

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