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2/28/2024
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.
We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. The 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, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions. Our first question is from Jason Gerberry with Bank of America. Please proceed with your question.
Hey, guys. This is Boblin on for Jason. Two questions from us. First, can you provide some color as to the line of sight into competitor supply? shortages, namely as it pertains to the tailwind we're seeing with generic epinephrine and a handful of products in the other finished pharmaceutical product segment. When can we expect that trend to reverse? And then second question on bexamy growth, are you on track for the transition from Lilly in 1Q in the U.S., and do you expect any sort of headwind during this transition phase while your sales force gets more comfortable with getting out there and driving uptake with prescribers? Thank you.
Yeah, thanks for the question. In regards to shortages, we always seem to come across this. There's always a shortage of some product in this portfolio at one time or another. We don't have any additional insider color on the status of whether or not they'll be back online or come back online, but what we can tell in the near future, at least for the next quarter or two that the demand for the products that we were talking about are still necessary for us to provide.
Some of those products are supposed to be back online according to the communications that we get from the FDA, but the reality is, and I think what Dan was getting to, is that we've had these shortage issues for over 10 years now. Every quarter there's been some product or another where there's been a shortage and we've been able to be there and and be able to supply our customers for that. And our customers have appreciated that and supported us because of that. I think the second question was vaccine. And yeah, as I said in my remarks, we started selling the two-pack in the United States in February, and we're going to start selling the one pack of vaccine in the United States in March. So that's already taken care of in Italy, already transferred in February as well. And the rest of the countries in Europe are going to move on a one-by-one basis. And, you know, the marketing program is going as planned in the United States.
Thank you. Thank you. Our next question is from Tim Chang with Capital One. Please proceed with your question.
Hi, thanks. Bill, I had a question just on the net economic benefit figure. four-back semi, just going forward, I know you indicated you expect sales to be upward in the single-digit growth. I mean, is that sort of the net economic benefit figure that we should be modeling single-digit growth for going forward on a quarter-to-quarter basis?
What I'm talking about is more of the actual sales level, like when I referred to the Baximi sales that Eli Lilly had in the quarter of $37 million. Okay. So that's the level that we're looking at. And as I mentioned, in the United States, which makes up 80% of the sales of Baximi, we transitioned to the two-pack. in February and we're planning to transition to the one pack in March. The first quarter is going to be a mix of both the NEB and our regular sales for the US and for Italy. The rest of the world will still remain on the NEB mostly until the third quarter. We expect most of the transitions for most of the other countries to occur in the third quarter.
And then you mentioned higher sales and marketing expenses going forward. Is it too early to sort of peg just sort of a ballpark increase rate for selling and marketing expenses this year?
Yeah, so what we've said is that the increased SG&A costs are going to be similar to what Lilly spent for them, which is around 17% of revenues. So I think if you're taking a look at something that's in that neighborhood of Baximi revenues is going to be the range of that increase.
Okay. And maybe just one pipeline question, which is AMP015, Terra Paratide, obviously there's some other existing generic companies in that market. I mean, do you still think you'll have the ability to get meaningful share in that market once you get approval sometime in the second quarter?
Yeah, what we've said is that we sort of expect it to be as what you would expect from a generic that has multiple candidates, three other generics in the market at the same time. So it's a market opportunity for us. We still think that it's significant. But, yeah, we do recognize that there are other people that got approval.
Thank you. Our next question is from David Amasella with Piper Simon. Please proceed with your question.
Hey, thanks. So a few pipeline questions. AMP002, what is underlying your confidence in getting it across the finish line? I know the action date came and went and nothing has happened there. So I guess can you talk more about your interactions with the FDA or you know, what just gives you confidence that you can get there. And then on the inhalation product 008, just want to clarify that it is indeed a first-to-market opportunity and how you're thinking about that, particularly to the extent it is a first-to-market opportunity, what a margin is going to look like relative to the overall business. And then lastly on the GLP-1 product, I guess I'll just ask it straight up. Is it liraglutide or is it something else? Thank you.
Hey, David. Thanks for the question. For our AMP002 product, we continue to have discussion with the agency. We view it as positive movement. They have not asked us for any new information or any new data. as of yesterday or today as of that. So we just continue to engage with them and have discussions with them. We're optimistic about it. We feel we understand what the issue is and just work with them as they try to overcome that issue. So from our perspective, we remain optimistic about it.
And on the second one for AMP008, we haven't decided whether or not it's a first to market. And for the third one, the GLP, is we haven't said what the molecule is, but it will be subject or likely to be subject to a paragraph four litigation. So after it's filed, it's likely to become known. And also, as Dan had mentioned, our AMP007 is also subject to paragraph four. So it's possible that that becomes known through that process at some point in the not too distant future as well.
Okay. Let me ask a follow-up on 002. So you characterize it as a, quote, issue, but there's no CRL here. So is that, should we interpret that as a good thing or just, this is just a complete one-off that sort of confounds any attempt at comparison?
Yeah, I think maybe it's just a one-off issue. We have an understanding that we think is the issue that they're trying to overcome. And we engage them on that and try to just keep pressure, keep discussion, keep engaging with them. But we think that it's just the one issue that when they're able to address that issue, that that's the only thing that is holding up this application. And once it's relieved, then it should be very positive.
Thank you. Our next question is from Glenn Santangelo with Jeffrey. Please proceed with your question. Oh, yeah.
Thanks for taking my questions. Hey, Bill, I just want to follow up on a couple of modeling questions. I mean, you gave some color on Baximi, but I was kind of curious if you could maybe help us frame out 2024 a little bit more clearly in terms of this TSA that's in place and how that's going to phase in over to different countries. Because that's obviously going to have a pretty material impact on your revenue and your expenses at the same time. And I just You know, any help you can sort of give us, you know, at a high level from a modeling perspective to think about that transition throughout 2024 would be helpful. Then I maybe have a follow-up.
Sure. So, it's actually a little bit confusing to us, too. So, you know, but here's what I'll say, that as I mentioned, you know, 80% of the revenues from vaccine come from the United States. And part of, you know, part of the, we're making that transition partway through the year. The way we're budgeting this internally is we're just assuming there is no NEB and we just go with the straight sales and the straight expenses because we know that the net income impact is going to be the same either way. So there's gonna be the same amount of money spent or the same amount of sales at the very top line and our revenues will be slightly different but we know that the income will end up being the same. So with 80% of the sales being transitioned in The first quarter, the way I would look at it is that, you know, half of the quarter is going to be NEB and half it's not for 80% of it. Then most of the rest of the countries will come online in the third quarter. But that's only, you know, about 20% of the sales worldwide. So, and, you know, I don't know, I could, feel free to answer some follow-up questions. We don't exactly know the exact date for most of these transitions either. Part of this has to do with inventory levels and winding down Lilly inventory labeling versus the AmpliStar labeled products and making sure that we have sufficient inventory of us to get launched. So it's a little bit of a confusing process, so we don't have exact dates either.
All right. Well, listen, we can maybe explore that a little bit more offline, but maybe as my follow-up, I wanted to ask you about glucagon. You know, obviously, we've been posting some pretty sizable growth in 23 as a couple of those players exited the market late in 22. Did the comps get much stiffer here now as you enter into the first quarter? And as I think about maybe growth flowing in that product and the four new product launches and sort of vaccine sort of phasing in, as we just discussed, you said we should expect gross margins to be trending down this year. Could you maybe just give us a little bit more color on the direction of glucagon and the impact of all these launches on gross margin?
Yeah, so glucagon has a couple things. The comps are tougher now. So we've now posted the last big up order. So that's the end of that trend. So what we do have, though, is our expectation is that for glucagon having now gone to one-third anti-hypoglycemic market, and two-thirds of that is going to be for the diagnostic market. We see that anti-hypoglycemic market continuing to shrink as products like Baximi, which we think are a much better product for that, and take more and more market share over the coming years. So we see that portion of the market declining. However, as we mentioned in our presentation, I think we mentioned briefly, we are launching the glucagon product in Canada now. So some of the U.S. decline, the U.S. decline should be offset by the pickup in Canadian business. And the way to think about it is that Canada is about 10% of the United States business. So we'll have that offset from the decline. And one of the reasons we didn't mention glucagon as a growth item is just because of that. We think a little bit of decline in the U.S. offset by the Canada business. Then going back to the gross margins, on a GAAP basis, we will have cost of goods for Baximi, which we didn't have last year. So that's the biggest impact. The second biggest impact is going back to GAAP again is we'll have a full year of amortization of the intangible for Baximi. Now, that gets pulled out for the adjusted cost of goods, but that's going to be in there for the GAAP cost of goods. And then overall, we're probably not seeing... Prices increase across our product line very much, whereas we do have some cost pressures, so there's going to be a slight decline for some of those products. Now, once we can launch some of these newer products, though, Rex Tovey and AMP002, 008, and Terra Paratize, all of those should have gross margins that are above the corporate average. So those will all help out pull that gross margin back up again. So there's definitely different forces pulling both ways on that gross margin this year.
Thank you. Our next question is from Serge Ballender with Needham & Company. Please proceed with your question.
Hi, good afternoon. First question, can you just talk about your outlook for shortage opportunities this year? I guess whether the ones you've been able to capture will remain. and if you have the capacity to take on additional ones that may materialize. And then secondly, on cherry-paratide, what's your level of confidence for approval at the second quarter, GDUFA, and how does that market opportunity look like now that there's been a couple other approvals? Thanks.
Yeah, back to the shortage opportunities. We anticipated these for a long time. It's one of the reasons we invested in expanding our manufacturing capacity at IMS. It seems like one or several of these products every quarter have some shortage issue. We're happy to pick it up. We're happy to take it on and provide when we need it. I think Bill mentioned that There is some that they may come back under these products, but it will probably create a shortage in another product somehow. So we always look at it as probably about $20 million is what we forecasted with the expansion of our capacity. We're definitely in that ballpark around that, and I think we're still going to see similar scenarios in the future. That's for Terra Paratide.
Yeah, we remain confident in this. The CRL that we addressed related mostly to a study which we performed, and we performed studies of that nature before, so we remain optimistic about the approval for that.
And as far as the market opportunity goes, there are two other participants in that now, two new generics. The market is crowded, and definitely the price has come down pretty significantly and will come down even further with ours. But that said, it's still a product that has a relatively high price and relatively high margins. So we still see this as a good opportunity, but not as big an opportunity as it seemed six months ago.
Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.
I want to thank you all for joining us on today's call. We're excited about the opportunities ahead with the upcoming launches like Rex Dovey and other potential launches with Terra Paratide, AMP02, and AMP008. And we look forward to updating you all in the next call. Have a great day.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.