Amphastar Pharmaceuticals, Inc.

Greetings and welcome to the Amphasta Pharmaceuticals Inc. 3rd 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 0 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 a discussion of numerous factors that may impact our future performance. We will also discuss certain non-GAAP measures. Important information on our use of these measures and reconciliation to US GAAP may be found in our earnings release. Please note, this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO, Mr. Dan Dishner, Senior Vice President of Corporate Communications, and Mr. Tony Mars, EVP of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dishner, Senior Vice President of Corporate Communications, Dan, you may begin.

Thank you, Zico. Good afternoon, and thanks for joining us for our third quarter's earnings call of 2024. Today, I'm joined by Bill Peters, our CFO and Executive Vice President of Finance, and Tony Mars, Executive Vice President of Regulatory Affairs and Clinical Operations. In the third quarter of 2024, Amphistar reported net revenues of $191.2 million, marking a 6% increase year-over-year, reflecting the resilience and growing strength of our diversified product portfolio and the strategic initiatives. Despite facing challenges such as the impact of Hurricane Helene, which impacted our logistics and resulted in delayed shipments, the core business of Amphistar remains robust, leading the path to end this year with a solid footing for the execution of our portfolio. Our strategic initiatives regarding our regulatory filings and commercial portfolio execution remain on track, and we are well positioned to continue the growth of our key revenue drivers with Vaximi, Primatine Mist, and our core hospital and clinical use products in the critical care arena. A key highlight for the quarter was Primatine Mist, which achieved its highest quarterly sales since the launch, reaching 26 million in sales. This performance is a significant step toward our goal of $100 million in annual sales for this product by the end of 2024. We believe there are additional growth opportunities with Primatine Mist, and therefore, in 2025, we will expand our current physician sampling program by initiating a pilot sales program targeting more primary care physicians. The transition for Baximi is progressing smoothly, with sales performance meeting expectations. Baximi remains an essential part of our portfolio, and we are dedicated to expanding this market's presence. To enhance the brand's visibility in the United States, we plan to strengthen the sales force for Baximi. This product exemplifies the kind of innovative, user-friendly solutions we strive to develop and serve as a benchmark for our impactful products we are committed to advancing through our pipeline. As anticipated, competition in the glucagon injection kit market has intensified, leading to a 9% decline in sales from the previous year, seeing 26.7 million in sales for the third quarter. We believe the increased competition reflects the rising awareness of effective hypoglycemia management options and the attractiveness to the market. On a different note, we are pleased to announce the launch of our Albuterol MDI product occurring in the third quarter of 2024, marking a significant expansion of our respiratory portfolio and operations in our Armstrong facility. This launch positions us to meet the growing demand for affordable, high quality asthma management options. Entering a competitive market, we continue to actively pursue business opportunities. On a regulatory front, We have continued routine, productive discussions with the FDA regarding AMP002 and believe that a clear path forward for approval is near. The generic teriparatide ANDA, AMP015, we received a CRL for this filing, and we are on track to submit our response by the end of this year. Turning to our diabetes portfolio, we are scheduled to refile our BLA for our first insulin product, AMP004, or insulin aspart in the fourth quarter of this year. For our GLP-1 ANDA, AMP-018, which was filed in the second quarter of 2024, we are pleased to announce that this filing was granted competitive generic therapeutic designation and priority review. As mentioned on our last call, this product remains on track for a GDUFA goal date in the second quarter of 2025. Regarding AMP007, our second inhalation ANDA, as previously announced, has experienced an extension in the GDUFA goal date to the second quarter of 2025, and there are currently no pending items with the agency regarding this application. On a separate note, we are proud to announce or introduce AMP028, a new biosimilar addition to our pipeline. This product has equivalent sales of plus $2 billion with no current biosimilars. We believe our unique capabilities will limit the potential number of competitors in the market, and it marks our first BLA target outside of insulin. Additionally, it highlights the strategic transition towards more advanced therapeutic areas where we can maximize value and impact. This shift represents a deliberate move to focus our efforts on high-value projects that have the potential to drive sustainable growth and utilize our in-house expertise and resources. As we close 2024 and look towards 2025, our focus remains on advancing our portfolio through proprietary filings and high-value areas like biosimilars, positioning us for sustainable growth and reduced competitive pressures. In the coming year, we plan to announce additional candidates in our proprietary and biosimilar aligning with our strategic direction. Our R&D expertise and self-funded investments continue to drive progress, while strong sales from Vaximi and Primatine Mist provide a solid foundation. We're confident in the potential of our upcoming projects, including AMP002, Terra Paratide, AMP007, and our first GLP-1 ANDA. With a clear strategy and an expanding pipeline, we are excited about the opportunities ahead and remain committed to delivering long-term value. With that, I'd 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. Revenues for the third quarter increased 6% to $191.2 million from $180.6 million in the previous year's period. Vaximi sales through Amphistar totaled $40.4 million in the third quarter. Sales of Vaximi by Eli Lilly totaled $6.4 million during the same period, and we recorded a net economic benefit in our other revenues line of $2.4 million, and that's of their expenses of $4 million. Our product sales have increased, while the net economic benefit has decreased throughout the year, as we have taken over distribution responsibilities for Baximi in various countries around the world. We will assume distribution of Baximi in the remaining territories on a country-by-country basis through the end of this year. During the quarter, while this distribution transition was ongoing, we faced a temporary supply disruption in 14 European countries and ran out of literally labeled Baximi before we were able to receive any Amphistar labeled product. This temporary disruption limited European sales of Baximi by approximately $2 to $3 million. Glucagon sales decreased 9% to $26.8 million from $29.5 million due to a decrease in unit shift as more hypoglycemia patients moved to ready-to-use products such as Baximi. Primatine mist sales grew to a new record of $26.1 million in the third quarter compared to $24.8 million in the third quarter of last year, which represented sales growth of 5%. Epinephrine sales increased 6% to $21.3 million from $20.2 million, primarily due to an increase in units of our pre-filled syringe product as we entered the Canadian market this quarter. Phytonodion sales increased increased 57% to $11.7 million from $7.4 million due to an increase in demand this quarter. Anoxaparin and naloxone sales decreased primarily due to a decrease in unit volumes. Other finished pharmaceutical product sales decreased $2.2 million to $35.5 million from $37.7 million on lower sales of products such as atropine and calcium chlorides. These decreases were partially offset by higher unit volumes of sodium bicarbonate due to an increase in capacity at our international medication subsidiary, as well as the launch of our albuterol MDI in August 2024. Overall sales were negatively impacted by Hurricane Helene as between $2 million and $4 million in sales that were expected in the third quarter were not recognized due to delayed deliveries. Revenues for these shipments are expected to be recognized in the fourth quarter. Cost of revenues increased to $89.3 million from $79.2 million. Gross margins declined to 53% of revenues from 60% in the prior year, primarily because Baximi sales in the prior year were made by Lilly and were booked net of cost of goods. which contributed to higher gross margins in the previous year. This year, most sales are made by Amphistar, which books the cost of goods. Additionally, we had an increase in labor costs and certain component costs. Selling distribution and marketing expenses increased 40% to $9 million from $6.4 million in the previous year due to our Baximi Salesforce expansion. General and administrative spending increased 17% to $14.8 million from $12.7 million, primarily due to increased expenses related to Baximi and the personnel. Research and development expenditures increased 26% to $21.1 million from $16.7 million due to increases in material expenses related to our insulin pipeline products. Our non-operating expense of $9.4 million compared to an operating expense of $9 million in the third quarter of last year. Net income decreased by 18% to $40.4 million or 78 cents per share in the third quarter from $49.2 million or 91 cents per share in the third quarter of 2023. Adjusted net income decreased to $49.6 million or 96 cents per share compared to an adjusted net income of $61.9 million or $1.15 per share in the third quarter of last year. Adjusted earnings excludes amortization, equity compensation, impairments of long-lived assets, and one-time events. In the third quarter, we had cash flow from operations of approximately $60 million. We used $35 million of this cash to repurchase 797,000 shares. 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 your questions. Zico, please open the lines for Q&A.

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from Ekaterina Nyakova. With JP Malkin, please go ahead.