Q4 2020 Amphastar Pharmaceuticals Inc Earnings Call
[music].
Greetings and welcome to <unk> Pharmaceuticals.
Most of Q4 earnings call at this time, all participants are in a listen only mode of <unk>.
Question and answer session will follow the formal presentation, if anyone should require operator assistance during the call. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
All statements on this conference call 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 products market size and growth product development and the timing of FDA filings or approvals, including the D. M S of A&P.
And the timing of product launches acquisitions of other matters related to its pipeline of product candidates and its share buyback program and other future events.
Such as the impact of Covid, 19, pandemic and related responses of businesses and governments for the pandemic on our.
The operations and personnel.
And on commercial activity.
And demand across our business operations and results of operations.
These statements are not historical facts, but rather are based on interest towards historical performance and its current expectations estimates and projections regarding emphasizes business.
Operations and other similar or related factors.
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Other.
Similar or related expressions are used to densify. These forward looking statements, although not all forward looking statements contain these words you.
You should not place undue reliance on forward looking statements because they involve known and unknown risks uncertainties and assumptions that are difficult or impossible to predict.
And in some cases beyond <unk> control.
Actual results may differ materially from those in the forward looking statements.
The results of a number of factors, including those described in the infrastructure filing with the security and the exchange Commission, including.
In the annual report on form 10-K for the year ended December 31.
2020 filed with the SEC on March 15th 2021.
In particular, the extent of COVID-19 impact on our business will depend on several factors, including the severity duration and extent of the pandemic as well as actions taken by governments and businesses and consumers in response to.
Of 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 IR day emphasize dot com and on the SEC's website at Www Dot C C Dot Gov.
Forward looking statements in this release speak only as of the date of the release.
<unk> undertakes no obligation to revise or update information or any forward looking statements in the conference call referenced above sort of.
The events or circumstances in the future, even if new information becomes available or if subsequent events cause <unk> expectations to change.
I'll now turn the conference over to your host Mr. Dan. Additionally.
Additionally, Vice President human resources, and corporate communications. Thank you may begin.
Thank you operator, good afternoon, and thank you for joining at the Star Pharmaceuticals fourth quarter earnings call. My name is Dan Dishner VP of corporate Communications joining me on the call are Bill Peters, CFO and Tony Marrs Senior.
Your Vice President of regulatory Affairs, and clinical operations. We appreciate.
Joining us today, and we look forward to announcing some very exciting updates.
While 2020 was quite an exhilarating year to say, the least and for obvious reasons on the positive I would like to say it was an exceptional year for the company.
I'll start it off we reported net.
Sales of $349 8 million for the fiscal year, while the fourth quarter <unk> net revenue of $95 9 million, making it the best quarter in terms of our sales history.
The primacy of Mis saw a 3% increase in sales compared to Q3, attributing this mainly to our nationwide television radio and digital.
<unk> advertising along with unit volume increases in our online sales and our recent launch with Kroger as a result, we are still confident in reaching our $65 million in annualized sales for the product.
Furthermore, putting the company on the path towards reaching our sales goals with more ease we're excited to announce the private teams launch and the targets.
Target stores later this month to add momentum for that launch will coincide with a new TV commercial AD campaign as we have said in the past we may increase our marketing spend where we expect our marketing expense to be a lower percentage of sales. However were more interested in spending smarter as we plan to expand our reach to the younger.
18 to 34 year old demographic through the use of digital marketing in other words as the time tested and proven marketing thing goes it's all about reaching the right person with the right message at the right time and with that kind of thinking whether it's TV or digital will be poised the structure, our marketing expenses at a reasonable enough level while optimizing.
At the influence.
Turning to Enoxaparin Youll notice the product saw an increase in sales due to Teva exiting the market, while we see in the enoxaparin market ebb and flow over the years and regardless of others entering leaving or even reentering. This market I'd like to reiterate that our vertically integrated structure beginning and.
<unk> the only company that manufactures the API and finished product in the United States continues to make <unk> a long term player in this market.
In terms of our pipeline, we enter 2021 and the position of strength.
Last year, we saw for Anda approvals. In addition to our state of the art high speed fill line of approval.
Being of the four Andas, we saw one grandfathered product approved atropine mid year, we saw a supplemental choline chloride, while the remaining two for epinephrine multi dose vial and glucagon otherwise known as the A&P 001.
With respect to epinephrine multi dose vial, you'll notice some incredible movements as the product.
On the 86% sales growth compared to Q3. Meanwhile, we continue we continue to see no other generics entering the market.
As said in our last call. While we stated we expected to get our fair share of the epinephrine market, we're seeing an upward trend without disrupting the pricing as we've originally planned.
However, given.
<unk> stock that we've recently seen a tremendous upside we will continue to look at opportunities that drive our market share while balancing this effort with with maintaining optimal pricing.
Regarding our newly launched glucagon product I'd like to say the approval continues to demonstrate the strength and technical and scientific capabilities of Amp The star.
The first of all was highlighted in the Fda's office of generic drugs 2020 annual report specifically, citing it as a significant first generic approval since the launch of this price in February we're observing some keep some very positive uptake so far in the first quarter and continue to expect to see increases in sales, we're confident and glucagon.
This is a bunch of relying on our previous experience in the retail markets with products such as the Enoxaparin and medroxyprogesterone.
On the matter of our A&P zero-zero two product in development. We previously disclosed that we received the CRM for the product in late December and we have already responded to the Crs earlier this year while CRM.
The <unk> are often comment amongst complex products like A&P zero-zero too we are of good <unk> date in the fourth quarter of this year.
Moving forward with previously discussed items, we anticipate our intranasal naloxone to be re filed in the fourth quarter of this year regarding our first inhalation anda, which I'd like to announce of A&P 008.
<unk> seen very promising results with our PD and PK studies, having been completed with some good guidance and dialogue with the agency.
We anticipate <unk> 008 to be filed in the first half of this year instead of 2020, because we had some delays due to the COVID-19 pandemic. Additionally.
Additionally, as the gauge of confidence.
I can report that we've been building additional capacity at our Massachusetts facility for the inhalation product pipeline.
Continuing on the topic of previously discussed items, our insulin programs have seen some exciting development with a path towards interchangeable status with that said we are planning to disclose more about this program later this year and.
We have time to coincide with the 20th anniversary of the Companys founding.
Turning to our proprietary items are inter nasal epinephrine has produced clinical study results with a good efficacy and safety profile as reported to the FDA. Thus far there has been a positive response with the agency, where we maintain an open dialogue with moving this product forward.
Justin as evidenced by our long term experience with epinephrine, whether in the injectable form whereas in inhalation with <unk>. We believe our formulation gives us a competitive advantage with the intranasal presentation as compared against the auto injector pen form of this product.
Concerning <unk> 015.
For a new pipeline items that we announced a few weeks ago. So in other retail product with a plus $500 million opportunity with no other generics.
While the A&P 015, as a paragraph for with the agency of December of 2020, we anticipate the <unk> date in the fourth quarter of this year or the first quarter of next year if it.
<unk> approval inspection is needed thus far there has not been a 30 months stay triggered while we continue to believe we do not infringe upon the patents.
Finally, I'd like to conclude my portion by emphasizing the emphasize on the path towards transitioning from of generics and specialty based pharmaceutical company into a proprietary product and biopharmaceutical.
Masuda based company, while 2020 has been a year, where many businesses and our niche of slowdown it's been an exceptional year for amp the stock of.
Of course, we owe this thanks to our vertically integrated business model and of our original intent, which was the place quality as our first priority. This vertically integrated model coupled.
Preapproved, Boston diverse R&D portfolio of trade off in the rare to be seen in of historically generic focused company since amps amp the star towards the path of brazilin fee growth and progression of.
<unk> was able to weather through the Covid constraints, thanks to our vertically integrated structure and we were also able to weather through.
They will influence shutdowns such as elective surgeries, thanks to our diverse of our diversified portfolio adjusting and offsetting the imbalances seen and finally <unk> has been primarily focused on growing organically, while the company remains diligent in finding opportunities that could enhance our capabilities.
We remain focused on.
Sector Channel development first and foremost, thus, allowing us the transition from of generics and specialty pharma based company into a biopharma based company more focused on proprietary products.
I will now turn the call over to our CFO Bill Peters to discuss the year ended the fourth quarter's financials.
Thank you Dan.
Sales for the fourth quarter of 2020 increased 15% to $95 $9 million from each of three 4 million in the previous year's period.
Importantly, <unk> mist achieved very strong sales growth of nearly 50% to $13 $4 million from $9 million.
As we continue to see the benefits of our national advertising program.
And the parents sales doubled to $17 6 million in the fourth quarter from $8 8 million in the prior year's fourth quarter as we were able to pick up some new business.
Additionally, epinephrine sales increased to $7 $5 million in 2000.
<unk>.
From $4 3 million in the fourth quarter of 2019 due to the launch of epinephrine multi dose vials.
Gross margins declined slightly.
The 38% of revenues in the fourth quarter of 2020.
From 40% of revenues in the fourth quarter of 2019 as significantly higher.
<unk> sales of negative margin and ox the parent offset increases in price seen missed an epinephrine multi dose vials.
Selling distribution and marketing expenses increased slightly to $3 8 million from $3 5 million to.
<unk> television radio and digital expenses for marketing of privacy.
Higher.
General and administrative spending increased 15% to $12 million from $10 $5 million, primarily due to increased legal expenses, including the cost of settling some employment litigation.
Research and development expenditures decreased to 8%, 8% to 18.
$1 million from $19 6 million due.
Due to decreased clinical trial expenses.
Other expenses included a $12 $8 million reserve for our litigation with the Ventas, which was partially offset by currency gains.
The company reported a net loss of $6 3 million.
<unk> 13 per share compared with last year's fourth quarter net loss of $1 million or <unk> <unk> per share.
On an adjusted basis. The company reported net income of $8 million of <unk> 16 per share compared to an adjusted net income of approximately $3 6 million or <unk> <unk> per share in the fourth quarter.
Last 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 $16 9 million.
Also during the fourth quarter the company repurchased approximately.
<unk> of $4 million of stock to bring the total repurchases for the year to over $24 million.
Now let me review of few of the financial assumptions that we are using as we look to 2021.
First let me state that we expect <unk> to achieve our previously disclosed goal of $65 million in the sales.
For this year.
We also expect sales growth to be driven by glucagon, which was launched in February and continued growth in our epinephrine multi dose vials, which we launched in the second quarter of 2020.
Additionally, we could have sales contributions from one or two andas, which have could do for dates later this year.
<unk> when we look to our A&P subsidiary. Please remember that first and foremost this business is our critical supplier of Apis for current products and more importantly, our pipeline.
That said, we expect continued sales growth to come from A&P, which saw third party sales double in 2020 to $3 two.
<unk> dollars from $1 $5 million in 2019.
Our expectation is that third party sales from this facility will more than double again in 2021.
We expect gross margins to increase as we sell more private teen missed epinephrine multi dose vials and most importantly glucagon.
2 million of all of which are high margin products.
We also anticipate high margins from sales of any new Anda approvals that we received this year.
Our selling distribution and marketing expenses will rise as we plan to increase our advertising for pharmacy missed however, the advertising expense will decrease as a percentage of privacy in Mississippi.
John <unk> to provide earnings leverage.
This year, we expect G&A spending to increase due to litigation expenses related to paragraph four patent challenges.
Research and development spending will continue to increase in dollar terms, but we expect it to decline as a percentage of sales as we plan to commence clinical trials.
The <unk> inhalation products to insulin products and continued trials on our intranasal epinephrine I.
I will now turn the call back over to the operator for Q&A.
At this time, we will be conducting a question and answer session. If you would like to ask the question. Please press star one on your telephone keypad the cost.
<unk> for us and so indicate your line is in the question queue as.
As a reminder, we ask that you limit yourself to one main question and one follow up question.
If you elect to remove yourself from the queue. Please for SAR, two new telephone keypad for.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Tim.
For me with Northland Securities. Please proceed with your question.
Thanks.
And the financial question is really just kind of gross margins.
What of your gross margin has been.
If you had excluded Enoxaparin I'm just curious for your steady state gross margins are.
<unk>.
I know you are true.
Targeting higher gross margins.
2021, I'm just wondering.
Where did you sort of exit if you excluded in OXXO parent well.
Well I haven't done that calculation, but I will tell you. If you take a look at the knocks the parents sales for the quarter, we had $17 6 million.
Cheng sales.
And basically what we have to do when we have to reduce the inventory price levels to the point, which are assumed future sales of our zero. So if you just take out the $17 $6 million of sales and $17 6 million and costs youre not going to be too far off there will be of any inventory.
And the suggests if we purchase from new inventory of our had commitments for it. So that's what takes it to negative over time, but.
If you just do that calculation of zero and wait that out then and that's a good way to look at it.
Okay got it and then just one follow up on.
A&P or two.
Purchase of you guys responded.
To the to the CIO or is that response coming in the next two weeks.
Yes, Hi, Tim.
And as Dan had mentioned and part of the script, we have already responded to that Sierra.
Okay.
Do.
Any sort of notification from the FDA once they receive.
The response or is it basically you just wait.
To get the <unk> date.
Some point.
No.
They will respond to us with the updated <unk> day, which they have done.
You get it which is the fourth quarter of this year.
Okay.
Okay.
Our next question comes from the line of Gary Nachman with BMO Capital. Please proceed with your question.
Hey, guys. Good afternoon first just on 2021.
On the patients I appreciate some of the color there, but if you pull it all together consensus revenue of $428 million implies 22% growth.
Incentive Cps for the Buck 90, 70% growth are.
Are you comfortable with those levels.
And I know you talked about.
Some of the key drivers.
Behind that but maybe just.
Just get us a little bit more comfortable with how you think you can get to those kinds of of growth.
Targets for this year, if you do feel comfortable with them and then I have one follow up.
Yes, so to get to those levels, we would have to have the sales growth.
We'd have to get to the the primacy and Miss number that we had there we have to have very strong sales of glucagon, which is the high margin product. We'd have to have continued strong sales from the epinephrine vials, we'd have to more than double our sales at A&P, which which I mentioned in there and in order to get there we'd really have to have contributions from at least one other.
Other anda.
Not approved at this point of.
Otherwise we would not.
It takes something that I'm not sure about to get to those levels.
Okay, so you're sort of saying, though that the.
That could be a little bit of of stretch like everything would have to go perfectly in order to get to those numbers.
I don't want to say everything would have to go perfectly, but I would say that perfectly would be we'd get the right on time and we'd be ready to launch and we get some understanding of the firm.
First cycle. So so the things that we're looking at getting would be second cycle. So I wouldn't say that we're not assuming any first cycle approval. So.
I would say that we do need contributions from products like A&P 002, and if we got that early enough.
Then and we did have sales contributions from that being a high margin product and then that could be doable.
Okay, Alright thats helpful.
Just.
Climate team, you know getting to the $65 million of serving Telcel.
And the little bit over the last few quarters.
So just talk about how durable are the benefits that you got from Covid.
Is there more of a headwind now with more patients going back to see there of doctors.
And getting the prescription product as opposed to retail.
It sounds like you'd be more aggressive with DTC. This year, just maybe talk about how much more aggressive youre going to be with that and how much of the benefit you think you could get from going into the target and then if there are any other pharmacy chains.
Or retail change that you guys are looking at at this point.
Yes, so word of.
We're excited about target launch.
We're in a full chain launched there at the end of this at the end of this month and so we're excited about that we think thats going to help US we're also expanding into.
Two.
In a different demographic as well and really targeting on the digital the digital marketing towards the younger demographic, which we feel like.
It's kind of an untapped market because they weren't really aware of private team from the past and so.
We really think that thats going to debt.
The kind of the the marketing knowledge, we have the that's going to help us we're pretty we're still pretty confident because we believe this product will even grow beyond the 65 million Mark So we're pretty confident right now with that.
Okay, and do you have other retail chains line debt.
The on target of the reality is that we've gotten all the big ones at this point and we do have a program where we're launching we are all.
The last year of launch in the all of the wholesalers and some of it.
A smaller program targeted debt and the.
Dependent change, but thats, none of I think there's not really many of the remaining change that would have a meaningful boost to sales.
Yeah.
Alright got it great. Thank you.
Our next question comes from the line of David <unk> with Piper Sandler. Please proceed with your question.
Thanks, So on Oh eight the the emulation.
The product.
Can you discuss.
Close.
What's the underlying brand sales.
The product is in is of your expectation that that's going to be a litigated filing that's number one.
And then.
And then secondly on.
I believe it is.
The school.
015, the other the injectable product that you see as over half of $1 billion just.
Just wanted to make sure that I have this that of product that you do not expect to be Sudan or have not been Sudan.
Is that.
Is that an asset where you think.
That could be the.
It's going to have reasonable competition or any competition at all thanks.
Yes, so the first of all.
Let me start the second question A&P zero that is one that is of paragraph for challenge so.
The.
And the time to be sued us up in April so as of today, we have not been sued but that timeframe has not and going back to <unk>.
We don't want to disclose what the potential sale of what the idea of your sales are at this time because given the fact that we have.
Limited number of these.
Of the insulation products and we will disclose its installation.
We don't want to kind of tip.
Tip, our hand as to what it is especially since it's the paragraph for challenge.
Okay, and then just if I may sneak in a follow up on the emulation pipeline.
Is your expectation regarding the pace of filings.
The next year, you said, you're expanding capacity.
These index to accommodate.
The pipeline at the Massachusetts facility, So how should we think about that.
As we as we go into 2022 in terms of the pace of filings.
Yes, we hope to have one to two filings per year, and then going into the subsequent years.
<unk>.
That two to three.
Okay helpful. Thank you.
Yeah.
Our next question comes from the line of Elliot Wilbur with Raymond James. Please proceed with your question.
Thanks, Good afternoon of couple of follow up questions on 015. So this is a.
P for filing Youre still within the 45 day.
The statutory window with which the innovator has to commence the litigation against you.
But I'm curious if you believe that this is the.
The would be a first for filing the NDA.
Or are there already.
Pending applications or at least one application.
We're not aware of any other filings at this time.
Okay.
And then with respect to.
Glucagon strong performance based on the the way.
<unk> weekly data seen any competitive response here from Lilly.
And I know, it's a little bit early in the launch, but any anecdotes given kind of the volume trends and what youre seeing in terms of future orders.
Debt you may be drawing.
Units away from.
Other glucagon products.
Yes, it's really hard to say, if we're drawing from other glucagon products.
Clearly the substance suitable for most of these glucagon, but.
We don't know if they're going to have any response or not but I will say that initial sales are strong.
We're happy with the way of the pace of the rollout of at this time.
Well once again I just wonder if you would like to ask the question. Please press star one on your telephone keypad. Once again, if you would like to ask the question. Please press star one on your telephone keypad.
Our next question comes from the line.
Bellinger with Needham <unk> Company. Please go with your question.
Since you are disconnected. So our next question comes from the line of David Steinberg with Jefferies. Please proceed with your question.
Thanks very much my first question is just the tagging on to Elliott's question.
With regard to glucagon, it looks like and the fourth.
The fifth week of launch at the end of February the prescriptions really started heating up it looks like you've captured.
Just about 25 per cent share.
Of the market already.
Given that trajectory would it be reasonable to think the peak sales of this product could be of in the range of $40 million to $50 million or so.
So in that you would hit that probably mid year or so and then.
With regards to capital allocation I know you said bill that you [noise].
That you repurchased about $24 million worth of stock for the year.
And traditionally you have made.
The acquisitions, but they've been sporadic and you've always use of cash does the.
Pretty significant share repurchase.
Out of the fact that you just can't find any assets to purchase even though generic drug you know acquisition.
Divestitures or acquisitions of land have been pretty for pretty low multiples where.
With business development. Thanks.
So the the first one of the four.
The $50 million is.
As we think.
A good range to think about as of peak.
So I think that that's a doable range for us.
And as far as the.
Where are your visions go yeah, we've looked at multiple things the test the the main thing hasn't been the multiple it's been the right fit and the right acquisition target for US we've looked at a few things over the last year.
The year and a half not as not as many things I'd say in the last six months as we did probably in the year before that.
<unk>, we look very carefully at a couple of things and ended up not doing those more for strategic fit than anything else because that's to US is the most important.
Thing is where does this fit in where we want to be in the future of does it help us get there.
But okay. Thanks.
Yes.
And that's the fun room Wonder if you would like to ask the question. Please press star one on your telephone keypad. Our next question comes from the line of Serge Belanger with Needham and company. Please see what's the question.
Hey, good afternoon, sorry for a previous of technical difficulties.
Questions on <unk>.
Climate Gene first can you just talk about what.
What side of the business the target distribution represents is it something closer to the Walmart or Kroger and then do you expect any seasonality to drive prime machine sales, especially.
This spring.
Yeah.
So first of all on the size target has a significantly fewer locations than Walmart.
So when we looked at where we were with our old formulation of privacy and Walmart was the biggest customer today.
Today really.
Actually as we kind of see Walmart Cvs and Walgreens is as the really the big three for us in sales and that's the way it's lining up right now so we expect target to be an important customer and a large customer but not.
Not the same level as what we think our biggest III.
Day, and I'd like to.
<unk> fastest growing segment is on the online though yes.
We're making headway online sales.
And on seasonality.
Yeah seasonality, it's one that yeah.
Since we've been selling and again, we haven't been able to see a seasonal pattern and we actually just.
I think our stated our graph and put it up online today around two o'clock our time. So it just came up for it before the call started so if you take a look at that you can still see that we've got an upward trend. There is some weeks are higher in some weeks of lower but overall sales.
Sales are moving in the right direction and.
<unk> are part of the the sirna seasonal trend in that the only trend that says that I got was last year. It was COVID-19 and that was a huge spike the kind of obscure it everything else. So, but we'll we're heading up on the anniversary of that right now and so maybe at this point, we will be able to discern.
Is that of trends this year and we've already almost captured that peak. So we're not too far off of that peak from when the the pantry loading occurred.
And then in terms of Capex projects.
Are there any significant expansions.
Ongoing in.
Any.
For the U S facilities and is because the Chinese facility is still undergoing for.
The manufacturing expansions.
Yes, the Chi.
Chinese facility of its still going on are undergoing a significant expansion there with the significant capex requirement, but also in the U S. We have.
Of your.
The projects as well I think it was alluded to earlier.
We're increasing the capacity for our.
Peter dose inhalers out of our Armstrong facility outside of Boston, So that we can ramp up demand for the Andas that we have in our pipeline and we've also added capacity here at Amtrust.
And for the Star for our.
Our Penn Penn Syringes, So that's kind of of your part of the important part of our insulin program that we're working on and we also are looking forward to the.
Future as we have other approvals coming in the future, we're going to add some significant capacity to and for star as well to meet.
Some big that long term capacity in both the vial and Prefilled syringes.
So the numbers increasing from 2020.
I don't want to say its increasing from 2020 by the I'll say that were made.
Maintaining a relatively high level of Capex spend as we look for future.
The action.
Got it.
Alright, thank you.
Alright, Thank you thanks Serge.
And with debt we've reached the end of our question and answer session and I would like to turn the call back over to Mr. <unk> for any closing remarks.
Alright, I want to thank everybody for joining us today and sharing in the exciting.
Advancement that amp of star.
For 2020 and look forward to 2021 one.
One of wish everybody to stay safe and we will catch you. The next time.
And this concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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<unk>.
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