Q2 2020 Amphastar Pharmaceuticals Inc Earnings Call
[music].
Her when you're Comping for begin momentarily. Thank you for your patience.
Again, thank you for waiting your conference will begin momentarily. Thank you for your patience.
[music].
Later, we will conduct a question and answer session. During the question answer session. If you have a question. Please press Star then one on your Touchtone phone.
All statements in the company called that are not historical are forward looking statements, including among other things statements relating to the company's expectations regarding future financial performance.
Backlog sales and marketing of its product market size and grow the timing of ft filings our pool.
But the amount of A.M.P., the timing of product launch or.
Acquisitions, and other matters related to what pipeline product candidate its share buyback program and other future events, such as the impact of Cobot 19 pandemic unrelated responses of there's nothing governments to the pandemic and our operations personnel and <unk> and on our commercial activity of the men across our business operations Andy.
Oh I'm operation.
Statements are not historical facts, but rather are based on Apple starts historical performance and the current expectations estimates or projections regarding epithets business operations and other similar or related factors.
Words, such as me, Mike well could would should anticipate predicts potential continue expects intend plan project believe Ethernet and other similar or limited expressions are used to identify these forward looking statement.
Although not all forward looking statements contained use words, you should not place undue reliance on forward looking statements because they involve known and unknown risks.
Certainties and assumptions that are difficult or impossible to predict and in some cases, the I'm appathon control.
Actual results may differ materially from those in the forward looking statements as a result of number of factors, including those described in at the first filings with the Securities and Exchange Commission, including in the annual report on form 10-K for the year 2020.
For the year ended December 31st like <unk> 2019 filed with the FCC, a mark 16 2020.
In particular, the extent of cobot, 19th impact on our business will depend on several factors, including the severities duration and expansion of the pandemic as well as action taken by government businesses and consumers in response to the pandemic all of which continue to evolve and remain uncertain at this time.
You can locate these reports through the company's website at each TPP.
Colin both west forward Slash I art that at the start dot com and on the Fccs website at Www Dot FCC Dot Gov.
Forward looking statements and this really speak only as of that they have the release.
The first undertakes no obligation to revise or update information in this press release or the conference call referenced above to reflect events or circumstances in the future. Even if the new information becomes available or subsequent events called empathize expectations. The change I'll now turn the call worth the Dan Dishner, Vice President of human resources.
And corporate Communications, Dan you may begin.
Thank you Ana.
Good afternoon, everyone and thank you for taking the time to join in on Amphastar Pharmaceuticals second quarter earnings call. My name is down Dishner VP of corporate communications.
Joining me on the call our Bill Peters, CFO and Tony Mark Senior Vice President of regulatory Affairs and clinical operations. We appreciate you joining us today and we look forward to sharing our latest update.
I first want to take some time to personally recognized and thanks, everyone at Apus Star as we continue to maintain our safety and well being amidst the pandemic, we strive to ensure that huge employee can work safely and confidently to supply our nation's critical care injectable products. So these products remain in a reliable and safe supply our manager.
The team has worked very hard on creating and implementing measures to maintain a safe work environment and thanks to the help of our employees. We believe we've been successful as a result of this I'm happy to report that there, but minimal impact on our workforce or operations as a result of cold in 19.
Moving on to business as per our guidance based on previous calls I'd like to characterize the second quarter damper star as reaching closer to our catalyst rich second half of 2020.
Navistar continues to demonstrate resiliency and growth our second quarter sock sales growth of 9% compared to the same period in 2019 net revenues in Q2 compared to the prior quarter saw a marginal increase of 1%. We are attributing this bill to covert 19 impact on patient access to.
Health care providers, resulting in a decrease in demand for our products such as lighter came in for Toyota primarily use an elective procedures.
Regarding primacy myth, we continue to see growth as a result of the success of our nationwide TV radio and digital marketing campaigns. We continue to see Primegene missed sales growth remain uncapped and tremendous opportunities as we continue advertising to build up the brands product.
As a result, we maintain our guidance of reaching our prior peak sales of 65 million an annualized sales next year potentially growing even greater as our marketing spend becomes a lower percentage of sales that self feeds into a continuous growth cycle.
On a further note with primacy Miss I'm pleased to announce that we continue to execute on our strategy of expanding the prime if you Miss brand and that will be launching the product in the Kroger store shelves beginning in the third quarter of this year. We expect this launch the add an additional layer to the products gaining momentum as Kroger currently encompasses over 27.
100 stores by Q3, our presence will be in the Kroger and its broad family of stores Walmart the major retail pharmacies, including Walgreens, Cvs and Rite aid as well as Amazon Dot com.
As such we will continue to seek further launches while reinforcing this effort with an advertising spend increase starting in the third quarter of this year.
Turning to our newly launched up enough and multi dose vial products Q2 was demonstrated that the product benefits from its 180 days of market exclusivity as this affords ample star with the time needed to penetrate this market with a reasonable share and without severely disrupted in the market.
As such we continue to make traction in gaining market share.
On the matter of our AMPU 001 product, we maintain our guidance issued on the last quarter's call, where we anticipate a could do for target action date for the third quarter of this year and subsequently the fourth quarter, if another pre approval inspection as needed.
With an MPV 001, we remain excited about the product potential as it continues on the path of becoming the first generic.
We remain very excited about MP zero zero choose prospects based on our complex submission package, which included a significant amount of scientific studies and the positive response of the agency during our mid cycle review meeting, we're confident that the agency that the agency will find MP zero zero to to be therapeutically equivalent.
This is consistent with our prior achievements in characterizing complex molecules. So therefore, we expect this will be an area of little challenge.
Concerning our facility in China, and P. continues to play an essential role in helping bridge the gap from facing common supply disruptions and P. continues to be a reliable provider supplying the hard to source.
And starting material, which are further synthesised into apiay for producing many of our finished products here in our U.S facilities.
As described in previous calls our development projects for our insulin programs are continuing and we believe our insulin biosimilar products have a clear path board.
Finally, I would like to end by highlighting ample starts continued success towards advancing our pipeline for further portfolio diversification and what it has achieved so far.
Since our IPO in 2014, we have grown from relying on our Inox apparent project, our product, which can contributor to 51% of our revenue to now just being 13% of revenue amongst our more diverse portfolio. This diversification has been essential to the success of our business. These last many months.
Our commercial portfolio includes branded and generic products from a wide range of therapeutic areas, which are intended for a broad range of uses.
In emergency use settings.
Others for elective procedures.
With this diverse coverage, we can remain stable when there are disruptions to one or more of those areas. This in conjunction with our enthusiasm and promising missed trajectory, which we expect to be a great vehicle that moving amistar forward into the future growth.
Promising miss coupled with our strong pipeline supplying hard to source Apiay, which is realized by our facility, our and people's ability to produce difficult high barriers to entry validates our business model.
This time the challenge has been with Covance 19, where none of our products has faced the supply chain issue at the same time, our diverse portfolio and the potential delivered by promising missed affords resilience to the company to propel up to two propel us further into a catalyst build second half of the year I'll now turn the call over.
Over to our CFO Bill Peters to discuss the second quarters financials.
Thank you Dan sales for the second quarter increased 9% to $85.8 million from $79 million in the previous years period primacy missed once again showed strong growth compared to second quarter last year with sales up nearly 400% to $12.5 million from $2.5 million.
FNF from sales grew 122% to $7 million from $3.1 million as we launched the multi dose files in may and had strong demand for our pre filled syringe product and aucs apparent saw sales increased to $10.2 million from $9.8 million in the prior year primarily due.
Due to a change in customer mix.
And the locks on sales increased to $8.7 million from $7.8 million on higher unit volumes.
Sodium bicarbonate also saw sales increases as we were able to utilize our new capacity to satisfy market demands.
As Dan mentioned, we trend this quarter of lower sales for products, which are frequently used an elective surgery, including certain lines became products and petrosur.
Total down also saw sales declines from $12.4 million to $10.7 million.
Our insulin API business had sales of $4.9 million down from $5.3 million in the prior year, primarily due to the timing of shipments.
Gross margins declined to 39% of sales from 41% of sales due to reserves for commitments and purchases of raw materials used in the knocks the parent which were made to help strengthen our supply chain.
Selling distribution and marketing expenses increased to $4 million from $3 million, primarily due to marketing costs associated with our national television and radio ads, which began airing last July.
General and administrative spending increased to $15.9 million from $12.4 million, primarily because of onetime expenses associated with the separation agreement with a former executive.
Research and development expenditures increased slightly to $16.1 million from $16 million due to the expansion of our R&D program at our Chinese subsidiaries Amphastar Nanjing Pharmaceuticals.
As we've previously up publicly stated some of our clinical trial did experience minor delays in the second quarter two to precautions concerning the covert 19 pandemic.
We anticipate that these expenses will increase in the upcoming quarters as our clinical trial program returns to normal.
Other income declined due to the $59.9 million settlement related to our longstanding legal case with momentum Sandoz, which was booked to other income in the second quarter of 29 team.
The company reported a net loss attributable to and star shareholders of $200000 or zero cents per share on the second quarter compared to a net profit of $47.8 million or 96 cents per share in the second quarter 2019.
The company reported and adjusted net income of $7.6 million or 16 cents per share compared to a and adjusted net income of $4.1 million or eight cents per share in the second quarter of last year adjusted earnings excludes amortization equity compensation impairments of loans assets and onetime events.
In the second quarter cash flow from operations was $30.1 million, which is emphasize highest quarterly amount ever other than last year. When we had a onetime $59.9 million payment from Momenta and Sandoz.
During the quarter, we repurchased $5.8 million of stock, leaving $5.1 million remaining on our buyback authorization today, we announced that the board authorized an additional $20 million program, which we plan to utilize in the future.
I will now turn the call back over to the operator to begin Q and day.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to remove from the Q. Please press the pound plan or the hash key if you're using a speaker phone you may need to pick up the handset press report pressing the numbers. Once again, if you have a question. Please press star.
Then one on your Touchtone phone.
And we have Tim Chiang on the line with a question. Please go ahead.
Hi, Thanks.
Maybe you guys could talk a little bit about.
How the epinephrine Myles.
How are the uptake for that product is doing obviously you guys.
Or the first generic and in that market and.
How are the.
GPL is sort of receiving on that.
Multi dose vial at this point.
Yes, thanks for the question.
You know we've kind of all long said that we're we're not out to destroy the market we're looking to.
Get a reasonable share of this the market.
We are working with the Gpos, we do feel like this will take some time too.
We stated that on the last call that it would take some time to to penetrate and gain market share.
But we feel like we're making traction and we're progressing in that front today.
And maybe just one follow up.
MP.
No one I guess Thats a.
If the pool decision there could be coming sometime in the second half for the year I mean there.
Our date.
Terms of when you expect an empty decision.
Yes, we've said the third quarter.
Of this year and it is we're waiting for the agency Thats the action day to day provided to us.
Okay, and then just maybe one last question, which is private team is I mean, obviously you guys is still doing well with that product.
Seems like the sales around 12, and I have to $13 million a quarter.
But you do expect that product to get around $65 million.
On an annualized basis next year, what sort of other drivers to get through from.
Sure.
Annualized run rate is currently to the to the $65 million annual target.
Sure. So as we said we're going to increase our advertising spend we feel like our advertising and our digital advertising with TV and radio has been really successful and also launching into the Kroger the Kroger family, which is a large it's a 2700 outlets.
We still have other opportunities that we think our catalyst that will help.
Span this that the market as well, but the first phase of our marketing strategy is building brand awareness, we feel like the were really making headway there and.
And then we continue to expand into into more outlets. So we're really comfortable with that that that 65 million.
We've actually really believed that we can push it even further than that overtime.
Okay, great. Thanks.
Sure.
We have David Amsellem on the line with a question. Please go ahead.
Thanks So.
You'd alluded to in the past some impact from.
Shortage products.
And that was tied into your expanded capacity and I think sodium bicarbonate one of those products. So where you stand to benefit you just remind us for the dollar impact of that is going to be this year in terms of the expanded capacity slash benefit from.
Taking advantage of these markets shortage products.
Sure David what we had said previously was that having this additional capacity was a 20 million dollar opportunity just for the products that we currently sell on the market and could sell into the future now that we had this higher level of capacity. So we did take advantage of that opportunity.
This this quarter.
So in bicarbonate sales were up by several million dollars and in particular this quarter and some of the other prefilled syringes that we make out of that facility.
In South on Monte were were also up Unfortunately at the same time, we did have the offsetting things of that.
Then I have mentioned about those products that are.
Our used for more elective surgeries or.
Down which caused some of some of the weakness in that area.
Sure. Okay. That's helpful. And then just toggling back up enough for us.
Sorry, if I.
I missed any color here, but what's your take over the long term of how much of that market. You can you can capture or maybe photo friendly you know how much of that market can you in new supply with your existing capacity.
Yes, so so let me take the second half that question first so when we were in this market previously we had about 80% market share and we were not at our full capacity. So we have the capacity to take a 100% of the market, but clearly not going to be we're not going to do that what we've been describing is what we say regional.
I will share at a reasonable share for second entrance.
Should be and I think thats, all we really want to say at publicly at this time on that.
Okay. And then then last question is on on the into the rest of the inhalation pipeline can you just give us some more color on expected filings over the next.
12 to 18 months.
Yes, Hi, David This is Tony Myers.
We've we've disclosed that we have one filing debt will be submitting it.
At the at the end of this year.
Moving forward, we have several other products in our pipeline that will be coming on shortly thereafter.
Okay, great. Thanks.
Thank you.
And we have a question from Gary Nachman. Please go ahead.
Great. Thanks, Ross pay on for Gary.
So for private team could you comment on the most recent weekly trends that you're targeting and then I think you had previously talked about mid to high single digit marketing spend this year behind the product.
Thats still the right level to think about or planning to exceed that with step up in the third quarter.
Sure. So the trend is still the trajectory that we see what the trend in the in store sales is still on a similar path of increasing.
As we said, we do plan to increase our our advertising spend in the second half of this year, probably around 20% or so.
So that's kind of what you can see there and.
Thanks.
And then given some of the strong demand that you're saying for sodium bicarbonate and certain other products from your Imad facility.
How are you thinking about the potential to expand capacity, even further, especially given your strong balance sheet.
Yes, so it's certainly something that we are considering right now we believe we have enough capacity at that facility to to handle the market that we see for all of those products.
But as we look to the future we are considering adding more capacity at our amphastar facility for future products. So when we take a look at our Capex and the long term you know maybe medium term three five years definitely will have a spend here and this facility for increased capacity for our on both pre.
Filled syringes files and as we've mentioned recently, we've also already spent the money.
To do the the pen.
The pen syringes here for the insulin products in the future. So we've already spent the money to get to the first machine and for those for those lines. So we.
We do have a pull a long term plan to add capacity, but probably not as much on the Imus side is at the FSR side.
Thanks, so much.
And we have a question from Elliot Wilbur. Please go ahead.
Thanks, Good afternoon.
First question just want to confirm the timeline for zero zero too is that still a late 2020 potential.
Approval.
Yes, Thats correct. Our action date is the fourth quarter of this year or the first quarter, depending on whether an inspection would be required which we don't anticipate but is a possibility nothing's changed from that perspective.
Okay.
And then with respect to private teen obviously.
We're momentum continues you launch into Walmart late last year Amazon earlier in the year, maybe just kind of a quick update in terms of how the products are forming some of it.
The.
The newer outlets.
And then I don't know if you have the stats in front of yet, but if you could give us a sense in terms of.
How many.
Stores of your of your.
Total number of targets, you're actually on the shelf at.
Sure. So just I will say, we did update the slide in our Investor presentation is available on the IR section of our website. So there's a chart that I think a lot of investors have found very helpful that shows the weekly sales.
At the total aggregate from each store that.
Includes Walgreens Cvs sprayed aid Walmart and now includes Amazon Dot com as well and to your tier your question what we've seen on the more reached the recent ads like.
Amazon picture, we've seen faster growth from those.
From those eplus, but they were starting at a lower base. So.
We're happy with the performance than on all the areas there really all the stores have been performing well and we are in all of the all of the locations for all of those stores that I mentioned other than Walmart. They have a group called the neighborhood market, which is really just a grocery store. So we're not in the Walmart that.
Only a grocery store, but we're in every other Walmart out there and we've been very happy with the performance and we had been a little concerned that there might be some cannibalization from the existing stores as we continued to add new locations, but that has really not in the trend and weve continued to see increasing sales from all of the.
All of the retailers that carry the product very happy about that.
Okay and.
Earlier, you talked about.
Capacity.
Expansion and capabilities with respect to the.
Injectable portfolio, but maybe just a quick update in terms of where you guys. Currently stand with respect to installation capacity, especially considering the strong.
Strong.
Trend in.
Prime attain is an area, where you have to make additional investment spend next couple of years to support in the primary volumes or not yet. So we have enough capacity, we believe for private team for.
For some time, however, with the other Asian Da's that we have in our portfolio that are using similar technology.
The MD eyes, we are adding.
More filling capacity at our Armstrong facility and so thats not online yet that's really in the it's been ordered and so we're in the process of doubling the capacity basically going from one one line to two lines there.
In the not too distant future so.
We're optimistic about that that whole inhalation market. So we think the time is right to spend the money now before we need to capacity.
Okay, and then last question.
Sure any update with respect to your current vasopressin filing.
And the.
Outstanding litigation.
Yes, we have we have no comments on on on that as you know where the third filer and.
Yeah, we think it's a great product overall to overcrowded, but.
We're happy with where we are.
In the product development and don't want to comment on litigation.
Our next question is Chung Checkup Hughes. Please go ahead.
Hi, Good afternoon. This is Nick future on for Jacobs on your interim nasal oxen program, how did attend the decision affect your thinking there.
Yes.
Hi, Jason This is Tony.
We're aware of the decision and it really hasn't affected how we plan to do the development of our products. We've we're already invested and we have a clear path to Nick at clear channel with the agency on what we're doing in how we want to do it and we fill essentially that it does not habit.
Change to our plans at all.
Okay. Thank you very much.
Our next question is from David Steinberg. Please go ahead.
Thanks, I had a couple of questions about a one to I think in the past few classified Dennis multiple hundred million branded drugs that.
Right.
I have no competition, because they're hard to copy which is right up your allies curious.
Our both of them still competition free and could you.
Just a frame the current.
The current branded sale opportunity for each and then related I believe one of them. This had several crs two or three.
How confident are you that for the current review that product it will actually get approval after all those CRL. Thanks.
Yeah sure. So and piece 001. We've said is is is the opportunity to a greater than 100 million dollar opportunity and.
You know just I think our confidence comes from the fact that weve. The discussions with the CRL is that we've had have gotten smaller and smaller and smaller overtime and.
We still feel very confident about this product.
The third quarter or the fourth quarter, depending on our inspection if it's required but.
Feel confident that we won't need to do that with a MP zero zero too.
It's a plus 200 million dollar opportunity for us and also another product that you know the technology. The package that we put together for this submission is.
It was was was a little more to draw.
Inclusive than maybe some other things and so we feel like it really showcased our science capabilities more so we feel comfortable the meeting that we had with the FDA. The mid cycle meeting was very positive and so we don't have any reason not to feel confident about this product.
And yes, both of these products still are our free of any other challenge or any other generic at this time and we don't see anybody challenging them at this time, either so the good opportunity both of them are good opportunities for us.
Okay. Thanks.
Our next question is from search Philander. Please go ahead.
Hey, this is 10 officers.
Few questions on permitting this I think you mentioned that it's going to belongs to krogers could you just.
Tell us about the timing expected timing of that launch and then historically.
So that has some tend to reloading effect so against what are your expectations for the rest of 2020 is especially if the the in tech continues for the remainder of the year and I guess along the same line do you expect to some kind of seasonality impacts as we head into the fall in the winter season. Thank you.
Yes. So the first question on for this should be taking it in.
In early fourth quarter, but we probably will be shipping be shipping to them at the end of the third quarter. So they don't have as many stores as the other outlets that were end, but so we won't have as much of a onetime pie in the third quarter, but there will be that effect there.
As for the co that affect the pantry loading effect.
We only thought that for a very short period of time and it returned back to kind of the normal trajectory that we've been seeing all along so.
Not sure they and we anticipate any other pantry loading, but you don't know as cobot as kind of a moving target these days.
But right now we're kind of back to the normal trajectory that we were seeing prior to.
And I think was only about two to three weeks that we had a panther four weeks, maybe that we had a pantry loading situation, but like I said, we've returned back to kind of a normal trajectory.
Well as the third question the seasonality of solar seasonality, we we feel very little bit in seasonality in the past but.
But it's something that we're actually we're watching very closely and we're going to be monitoring this year and.
We might.
Let me make some advertising decisions around certain seasonality as well so it's something that we're tracking and we hope to get better data on this year, but when we use that primacy on the market you know years ago, the seasonality impact was not that large.
Got it thank you.
You're welcome.
And we have no further questions at this time.
Okay. So we want to thank everybody for joining us today on our second quarter 2020 earnings call. We hope that everybody stay safe and we look forward to catching up with everyone and then our next quarter have a good day.
Thank you ladies and gentlemen, this concludes todays conference. Thank you for participating you may now disconnect.
[music].
[music].
[music].