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spk04: pipeline and regulatory activities. On the topic of our filed ANDAs, we are engaged in positive and ongoing discussions with the FDA for AMP 002 with anticipated progress in the near future. For AMP 015, our terapeurotide ANDA, we have submitted our response to address the minor CRL and the FDA has assigned the GDUPA goal date in the fourth quarter. Additionally, our second inhalation ANDA, AMP 007, remains on track for a fourth quarter GDUPA goal date. With regards to our diabetes products, I'm pleased to announce that we have filed our ANDA for AMP 018, which is a generic GLP-1 product, and the FDA has accepted review with the GDUPA goal date in second quarter of 2025. As for our BLA for insulin aspart or AMP 004, the product is expected to be refiled in the third quarter of 2024. In closing, I'd like to note that Ampostar is well positioned for a promising second half of 2024 with the potential for three significant product approvals, terapeurotide AMP 015, AMP 007, and AMP 002. These anticipated approvals are expected to substantially contribute to our revenue growth and enhance our market presence. Our efforts to further strengthen our operational efficiencies and manufacturing capabilities will improve the foundation for transitioning from generics to higher value products, including branded offerings, biosimilars, and complex products with significant barriers to entry. By continuing to optimize our resources while strategically advancing our product pipeline, along with our commitment to grow our current branded product offerings, vaccine and primatine mists, we are confident in our ability to drive long-term growth and deliver value. With that, I would now like to turn the call over to our CFO and Executive Vice President Finance Bill Peters to discuss the second quarter's financial results. Bill Peters Thank you,
spk05: Dan. Revenues for the second quarter increased 25% to $182.4 million from $145.7 million in the previous year's period. Primatine mist sales grew 38% to $22.9 million in the second quarter from $16.5 million in the second quarter of last year. Remember that in the quarter of last year we experienced a one-time inventory drawdown by retailers which held back sales of primatine mists in that period. Epinephrine sales increased 67% to $27.9 million from $16.7 million due to other supplier shortages in the quarter. Phytoniodione sales decreased to $10.3 million from $17.9 million due to increased competition. Anoxaparin and Naloxone sales also declined due to increased competition. Glucagon injection sales were flat as sales in Canada offset the decline in the United States during the quarter. Other finished pharmaceutical product sales decreased to $34.7 million from $37.5 million primarily due to a decrease in Madroxy progesterone sales of $4.6 million due to the discontinuation of the API by our previous supplier which has caused us to temporarily stop selling the finished product. This was partially offset by increased sales in other products such as dextrose and sodium bicarbonate. Vaccine revenues fall into two categories as we begin shipping the product in the United States and a few European countries in the first quarter of this year. The first category relates to products we ship directly to our customers for which we recorded net revenues of $30.9 million. These revenues are recorded in our product revenues net line on the income statement. The second category relates to products sold by Lilly on our behalf under the transition service agreement totaling $7.6 million which had a cost of sales and expenses of $4.6 million. This resulted in net revenues of $3 million in our other revenues category which corresponds to AmpStar's net economic benefit for vaccine. Total worldwide vaccine sales were $38.5 million for the quarter up 10% from $34.9 million in sales reported by Lilly in the second quarter of 2023. We will continue to book revenues on a net revenue basis for those countries where Lilly continues to distribute the product on our behalf. For our own distribution of vaccine, we will increase throughout 2024 on a country by country basis based on local regulations as Lilly has wound down their inventory and we have AmpStar label inventory available. This will result in an increase in product sales and a decline in the net economic benefit recognized in our other revenues. We would like to note that we just completed the first contract year of the five contract year period for potential milestone payments to Lilly. The four potential milestone payments are based on annual and cumulative five-year sales of vaccine. Cumulative vaccine sales in the first quarter or the first year totaled $163.2 million so none of these milestone payments were triggered. Our insulin API business had sales of $3.5 million up from $2.8 million last year as we have shipped RHI API to mankind for the last time until they have qualified our updated material. Cost of revenues increased to $87.2 million from $73 million and gross margins improved to .2% from .9% in the previous year. The benefit of increased sales of higher margin products such as primatein, MIST and epinephrine were partially offset by increase in depreciation and amortization related to vaccine and increases in labor and certain component costs. Selling distribution and marketing expenses increased 34% to $9 million from $6.7 million in the previous year's period due to sales force expansion and marketing expenses related to vaccine. The general and administrative spending increased 8% to $13.3 million from $12.3 million primarily due to increased expenses related to vaccine. Research and development expenditures increased 5% to $17.7 million from $16.8 million due to an increase in salary and personnel related expenses as well as the ANDA filing fee for AMP 018. These increases were partially offset by decreases in clinical trial expenses due to the timing of clinical trials. Non-operating expenses increased to $5 million from $4.1 million primarily driven by increased interest expense on loans associated with the acquisition of vaccine. Net income increased 45% to $37.9 million or $0.73 per share in the second quarter from $26.1 million or $0.49 per share in the second quarter of 2023. Adjusted net income increased to $48.7 million or $0.94 per share compared to an adjusted net income of $34.8 million or $0.65 per share in the second quarter of last year. Adjusted earnings exclude amortization, equity compensation, impairments of loan with assets and one-time events. In the second quarter we had cash flow from operations of approximately $69.1 million. During the quarter we made the required $129 million payment to Lilly for the vaccine acquisition. In addition we used a portion of our cash to buy back $8.5 million worth of shares and to pay down a mortgage for $8 million. I will now turn the call back over to Dan.
spk04: Thank you Bill for the update. With that we will now take your questions. Operator please open the line for Q&A.
spk06: Thank you. We'll now be conducting a question and answer session. If you would like to ask a question please press star one 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 question from the queue. For participants using speaker equipment it may be necessary to pick up your hand step before pressing the star keys. One moment please while we poll for questions.
spk02: Thank you. Our first question
spk06: is from Ekaterina Nyakova with JP Morgan. Please proceed with your question.
spk10: Hi thank you so much. Just two from me if I may. So first just an epinephrine seems like another very strong quarter for the product. Can you just maybe talk about expectations for that franchise over time both from a competitor or supply shortage standpoint if you're seeing any changes there as well as with potentially other players either entering or filing an application in that market. And then just second question is generic pro-wear. Can you just help us frame how you're thinking about the size of that opportunity and how quickly you can launch as soon as you decide to do so and how quickly you can I guess get uptake for that product. Thank you so much.
spk05: So for the EPI we do have you know we have two different presentations for that product. First of all there's a multi-dose vial and a pre-filled syringe and the pre-filled syringe has been on the drug shortage supply list for almost a year now or that portion of the business has remained relatively robust. However as Dan had mentioned and in his comments what we've done is we've taken some steps to increase the capacity of that plant by increasing some of the efficiency of some of the labor and the different packaging steps. So we've been able to increase the production of that product and pump out more sales as we showed this quarter. So we do expect that shortage for that product will be we're you know we're seeing from the competitor that they're going to start returning to the market in the fourth quarter now. I think last quarter they said the third quarter. This quarter they're saying the fourth quarter so but returning to a regular supply sometime next year. So you know it's hard to say exactly but you know right now we're just preparing ourselves to make sure that we can take advantage of this and we can supply as much as needed to the industry. As far as the multi-dose vial there is a new competitor to that one out there so we do expect that the sales of that presentation will drop somewhat as the market has gone from two to three suppliers.
spk04: Yeah on the generic pro-air as we mentioned in the call we have launched the product so we've already got it out there. Where we're going with that is you know obviously there are other competitors in the market and we're still working on securing business there. So right now I don't know that we're really have a good idea but we it's been received well so far so hopefully we'll be able to give an update a better update later.
spk05: And one of the things with that one is that we're increasing the capacity of the packaging over time so we might be off to I don't want to say a more moderate start but then we expect to increase that the ability to meet the demand for that product over the course of the next few quarters.
spk10: Thank you appreciate it.
spk06: Thank you our next question is from David Amselman with Piper Sandler. Please proceed with your question.
spk08: Thanks so got a couple of pipeline questions so I know 002 has kind of been beaten over the head but is there anything new that you could add regarding your interactions with the FDA or more specifically what they're hung up on. That's number one. Number two on the GLP-1 just remind us is that a P4 or a P3 is that a litigated filing and is there already generic competition or do you anticipate that there will be others when you're in a position to launch. So that's number two and then number three on 017. Similar kind of question is that a P4 is that going to be a litigated filing and talk about the nature of competition in that market.
spk03: Thanks. Yeah for for AMP 002 we continue to have routine conversations with the agency. The last conversations we've had have been and I guess maybe stepping back the idea is just to kind of get a sense of what they're doing and the progress that they're making for the issue. We think we understand what their issue is and based on those conversations we feel that they're coming to an end to be able to resolve their issue and so based on those calls that we routinely have with them is why we feel that we believe it'll be a near future that they'll take action on the application. For the AMP 018 the GLP it is a paragraph four filing on that product
spk05: and
spk03: we're
spk05: within the period of time where we have not been sued to date but we still could be and that we do expect competition on this one when we're in a position to launch the product.
spk03: And AMP 007 that is a paragraph four filing as well.
spk08: And do you expect competition?
spk05: It's hard to say at this point. We'd rather not say at this point.
spk08: All right fair enough thanks.
spk06: Thanks. Thank you. Our next question is from Jason Gerbery with Bank of America. Please proceed with your question.
spk01: Hey guys thank you for taking my questions. Two for me. First with Baximi, presumably it's going to grow in the second half. This overall company gross margins second half first half we saw a little bit of margin degradation in 2Q versus 1Q. So just wondering how we think about the impact of mix and more Baximi in the revenues dropping to the gross profit line. And then on business development, wondering how you're thinking about that as something that might kick start your goal of getting to pipeline 50% proprietary programs by next year versus using BD more as a tool to maybe add a complementary market ready asset like Baximi. Thanks.
spk05: Yes so first one on the Baximi and the market depends there. Yeah third quarter is always biggest quarter so we're expecting it to certainly ramp up from the second quarter on that basis. And the other thing is that on the accounting remember that when Eli Lilly books the sale when they're the distributor and we get the net economic benefit that's at 100% gross margin there's no cost of goods associated with that so we're getting that net. So when we move from having them sell a majority of Baximi to having us sell a majority of Baximi that we start incurring significantly more cost of goods for those revenues therefore the gross margin trend does drop. And so one of the things I want to make sure people realize is that that trend will continue on into the next quarter as we start picking up more countries in the quarter. As far as the business development goes yeah so we're actively looking for things and we've actually looked at things that are both in development and more like Baximi already on the market. So we've actually been in discussions with both of those things. There's nothing to announce at this time and I don't want to say we're close on anything but we remain diligent and also want to make sure that we're paying the right price for these assets. So a couple of the processes that we've looked at this year have been competitive processes where we're not necessarily the highest bidder so but we're okay with that because we want to remain disciplined. We have a strong faith in our R&D pipeline so we really want to make sure that that's our first number one focus and if we do any business development on top of that that's really just icing on the cake. Okay
spk06: thanks guys.
spk05: Thanks.
spk06: Thank you. Our next question is from Tim Chang with Capital One. Please proceed with your question.
spk07: All right thanks. So just a couple. Could you just comment on how you think Rex Tovey will do for you guys under you launched that in the second quarter and then secondly just sort of comment on you know how you expect selling and marketing costs to shape up in the back half of the year versus the first half as you you know fully take over back semi in the U.S. and some of these other countries well not just in the U.S.
spk04: Yeah thanks Tim. You know Rex Tovey as you know is a crowded field and one thing you know our focus is on more of the government first responders or municipalities and first responders and as we discussed before our product is also is different. You know we're using our proprietary device so it's still too early to really say how we're going to do there. It takes time to secure those contracts but we don't really anticipate it being a big product for us just because of the competitive nature of that environment there.
spk05: And then on the sales and marketing trend two things there one is that for most of the foreign entities we don't really have a significant sales and marketing trend. It's mostly a distribution agreement so we will have distribution expense that's going to fall into the cost of cost of goods category there. However as we look at the United States and we ramp up we are planning to add some people to the sales force so the sales force is is slated to grow in the third quarter and you know I'll say that's an incremental growth as we make sure that we cover some more territories that were not not as well covered in the past. So we are growing that and one way to think about it is that we're probably going to spend a similar percentage of on sales as we did for for vaccine a year ago so the sales are up about 10 percent so the sales and marketing expense should grow about 10 percent as well.
spk07: Okay got it thank you.
spk05: Thank them.
spk06: Thank you our next question is from Serge Bank Belanger with Needham and Company. Please proceed with your question.
spk00: Say good afternoon a couple questions. First on vaccine I think you mentioned sales were up about 10 percent year over year this quarter. Just curious if that was volume and market share driven or there was a price increase involved in that growth and then secondly on the pipeline you highlighted three and approvals that you're expecting over the second half. Maybe just talk about the the market opportunity for each and how they compare to the generic for wear opportunity in terms of being impactful to the amphistar's top line. Thanks.
spk05: Sure so I'll take the the first thing. The units were up remember the the main thing in the United States is now that we're selling there is that we actually have a net pricing decrease in the United States because we have higher fees that we have to pay to the wholesalers so that's a growth in that item so we actually see a price reduction in the United States this year for the second quarter so all of that and more is unit growth and the pricing outside of the U.S. really hasn't changed much at all other than maybe there's only one country that had a material change and that's because it moved from a government pay to a non-government pay over some price negotiations so the price went up but the units went down and as far as the A&DA's for the market share so teraparitide as you know there's already a multiplayer market so I think our expectations are that we'll get a reasonable market share of that product but it's not going to be as big as we had thought at one point. AMP 002 I think what we've said in the past is that it's a relatively large market but we're going to be somewhat capacity constrained for that market so we're going to probably get a lower market share than what you'd consider to normally have in a two-player market but we still see it as being a good market and a large market for us and then AMP 007 we haven't said because we've been somewhat consciously clouding the issue there because we don't want to let people know what the product is for competitive reasons so I will say that we see this as a very good market opportunity for us.
spk02: Thanks, Serge.
spk06: Thank you. Our next question is from Glenn Santangelo with Jefferies. Please proceed with your question.
spk09: Oh yeah, thanks for taking my question. Hey Bill, I also wanted to unpack vaccine a little bit because what's interesting is the results were probably better than I think we were expecting. You know looking at some of the script data it looked like the numbers were trending in negative territory for the first quarter based on your response to the previous question you kind of made it sound like it was more volume driven than price driven so you know could you maybe reconcile those data points and what drove the strength in the quarter and then maybe related to that as we look at the back after the year could you maybe give us a little more color on the country by country transition and when you think the transition to Amplistar will be fully complete?
spk05: Sure, so yeah, so the units in the quarter yeah we I will say that we had a couple hiccups as we transitioned from Lilly supply numbers to ours and DC numbers in certain drug store chains and certain government programs so we we did have a hiccup and there was a little bit of a time during the second quarter where we weren't getting every script we should have been getting but I think all of those problems were resolved by the end of the quarter and so I think we're expecting the third quarter to tick back up the way it should be. To a certain extent some of the units sold later in the quarter were I think more some of the wholesalers trying to gear up to make sure they had enough inventory in the in the channel because they want to make sure that they had enough for the the large -to-school surge that's usually happening in in August so I think that's part of it and and ex-US we still had some some nice trends there so that's so that's been been going well as well. As far as the country by country basis our goal is to get a majority of other countries that are not not distributed by Amplistar over to our distribution by the end of this quarter so we have a lot of countries planned for cut over in August and September so this is going to be another one of those quarters that's a little bit mixed and that there's going to be multiple countries that are cutting over throughout this so our expectation is that by the fourth quarter there will only be three countries that are still being distributed by by Lilly. Our goal is probably on those final three they might not we might not take over distribution of them until January 1st so we're still we're looking at either a December transition for those final three countries or maybe maybe January 1st so but most countries should be our distribution by the end of the third quarter which means that fourth quarter will be a a little cleaner from that standpoint it'll be a little truer.
spk09: Perfect I appreciate all those details maybe I just asked one quick follow-up you know on some of the other product categories like when we think about like lidocaine and phytonidine you know we see you know the supply issues you know ebbing and flowing in the market and that creates sort of these big swings in the results and so as you look look to the back half without maybe giving specific guidance are there any sort of you know product areas you'd call out where you're seeing either shortages or or competitors sort of coming back online that may influence you know some of those some of those product categories in the back half and I'll stop there thanks.
spk05: Yeah so as I mentioned the the competitor that had the supply problems over the last year has said that they will begin distribution of some of these supply constrained products in the fourth quarter so we do expect that some of the you know they will be able to do that further further disclosures so any of those things could could drop off in the fourth quarter we're not seeing that in the third quarter yet so the third quarter is kind of holding steady but and and as Dan had mentioned I'll just point out again we have increased the capacity of the facility that makes all of those products so that we could better take advantage of those and that was one of the reasons that drove the epinephrine sales in this quarter we think it probably should drive higher studying bicarbonate and dextrose sales in the third quarter so with that we can you know make more product out of that out of that facility hopefully I'm taking advantage of these things as they come up and so that you know we want to be in a position so that if there is a supply shortage by another competitor on these products that we're able to supply the entire market so we're kind of gearing up to be able to do that perfect
spk09: thanks thank
spk05: you go ahead
spk06: thank you there are no further questions at this time I'd like to hand the floor back over to for any closing comments
spk04: I want to thank everyone for joining us today the second half of 2024 remains to be a highly anticipated period with three potential launches we look forward to updating you all again and again thank you and have a great day
spk06: this concludes today's conference you may disconnect your lives at this time thank you for your participation
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