Q2 2021 Amphastar Pharmaceuticals Inc Earnings Call
Greetings and welcome to the amphitheater Pharmaceuticals second quarter earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
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Please note that this conference call is being recorded.
Our speakers today are Mr. Bill Peters CFO, Mr. Dan Fisher, Vice President of corporate Communications and Mr. Tony Marrs Senior Vice President of regulatory Affairs, and clinical operations I will now turn the conference over to your host Mr. Dan Dishner VP of corporate communications.
And then you may begin.
Thank you operator, and thank you all for joining US this afternoon earlier and <unk> reported our financial results with strong growth and that's where our pipeline I'd like to characterize the second quarter as another period and further seeing our pipeline progress with me today is bill Peters <unk> CFO and executive.
And <unk> Vice President of Finance, who will provide an update on the company's financials. After Bill's update we'll move to our Q&A portion of the call with Tony Marrs Senior Vice President of regulatory Affairs, and clinical operations Bill and myself.
Starting with our financial and commercial results. The second quarter saw net revenues of $101.6 million and 18% year over year increase the company's net income remained strong and increased to $7.8 million seeing a 56% increase from last quarter as our onetime legal.
Saw considerable savings.
While some of our products Enoxaparin and naloxone and saw some downward pressure. This quarter. We were we remain committed to these products and the long term as we believe that <unk> being 1 of the few U S. Based manufacturers of these products will play in our favor due to our strength in terms of quality.
And we believe our vertically integrated platform meets the needs, which call for the quality that emphasizes reliable API sourcing supply chain and resilience and the ability to continuously meet market demands.
Looking at our newest growth driver glucagon and based on equivalent sales grew to $12.1 million for the second quarter in line with our expectation and the expectations of achieving a reasonable market share at a reasonable price. This represents a 51% increase and sales compared to last quarter and given that sales growth remained strong we.
Believed glucagon and sales are well positioned to be durable for the remaining half of the year.
And regarding private teen missed in store weekly sales continued an upward trend and seeing a 9% increase from last quarter and a 40% increase from the same period of the previous year, thus highlighting that priority and this success is independent of COVID-19 impact we remain our guidance for prime and team.
Seeing annualized sales of $65 million by the end of this year, we believe that our increased distribution channels and our digital TV and radio marketing efforts have provided a stronger base of weekly sales to build upon each other and Moreover, our marketing efforts have been complemented with our physician sampling program.
Launched last quarter.
And all the sampling program results are challenging to quantify we believe the program will be a crucial component to provide further support for prime and <unk> to grow and the future.
And moving toward our pipeline the company saw some upward momentum the second quarter can be best characterized as a quarter of FDA inspections amounting to 3 and total 1 at each of our U S manufacturing facilities.
2 of those inspections were routine and saw zero 43 items, highlighting the strength of our quality systems and the third was a preapproval inspection for <unk> 015, which was revealed to be generic tariff maritime 10 for injection.
As a result, Terra paratype continues to be on track for a good <unk> date and the fourth quarter. This year. Moreover, we have taken a conservative approach from a legal perspective, giving us the best path to commercialization as soon as we receive approval again. This product has no approved generics and has a plus 600.
And $50 million annual market based on equivalents.
With respect to our other filed Andas for A&P 002, we announced in June that the Anda received the CRM to which it has now been fully responded to.
We are awaiting the F per F D. A to make final determination on the <unk> day as a reminder, this product is a complex product with no generics and no other filers that we're aware of.
As for A&P, Zero-zero, fix a plus $50 million annual market based on equivalents.
Anda is still anticipated to have a good <unk> date, and the first quarter of next year.
On the subject of our proprietary products and inter nasal epinephrine remains on track for a filing in 2022 at the product's clinical program continues to progress.
And to our other proprietary product intranasal naloxone the price.
And just progressing further and its stability studies with an expectation to re file and the fourth quarter of this year well, we understand that and 8 milligram version was recently approved we believe our product differentiates from others on the market.
Regarding our other paragraph 4 filings, we believe A&P zero and zero 8 and our generic ragga denniston holds strong non infringement positions and P..008 is still on track to be filed later this year too.
To close I'd like to remark that while the first interchangeable Biosimilar insulin was recently approved this does not change ample stars plans regarding our insulin program. It validates our strategy. There is a pathway for interchangeable biosimilar insulin <unk>, we continue to believe that the insulin market will reach.
<unk> robust.
At the same time, our pipeline matures from focusing on complex injectable generics and into products with longer product life cycles, namely Biosimilars and inhalation products.
Considering that our existing technological platforms can already support this development demonstrated by hyaluronidase Enoxaparin and most recently glucagon and we see the pathway is clear and attainable and profitable.
Now like to turn the call to Bill Peters to discuss our financial performance for the second quarter and give further details behind those results.
Thank you Dan sales for the second quarter increased 18% to $101.7 million from $85.8 million and the previous year, glucagon, which we launched and the first quarter has already achieved a reasonable market share at a reasonable price and led the growth with sales of $12.1.
Yeah.
Privacy and missed once again showed strong growth compared to the second quarter of last year with sales up 34% to $16.7 million from $12.5 million.
Epinephrine sales grew 32% to $9.2 million from $7 million with strong sales of the multi dose vials.
And ask the parents, a modest sales decline to $9.3 million as a competitive re entered the market during the second quarter.
Naloxone sales declined to $6.6 million due to increased competition.
Our insulin API business had sales of $6.9 million up from $4.9 million and the prior year, primarily due to the timing of shipments and the half a million dollars of revenues.
Related to an amendment fee received from Mannkind.
We will recognize additional revenue of $250000 per quarter related to this amendment through the end of 2022.
As we have discussed in the past our products launched and the last few years, including primacy and missed epinephrine multi dose vials and glucagon have margin margin is higher than our corporate average and we showed proof of this trend this quarter with gross margins increasing to 47% of sales and in the second quarter of 'twenty 'twenty 1.
From 39% of sales and the same quarter last year.
Selling distribution and marketing expenses increased slightly to $4.1 million from $4 million, primarily due to the marketing costs associated with our national TV and radio ads, including the cost of airing our new TV commercial.
General and administrative spending decreased to $14.6 million from $15.9 million, primarily because of 1 time expenses associated with the separation agreement with a former executive and the second quarter of last year.
Research and development expenditures increased to $18.1 million in 2020, 1 from $16.1 million last year as we continued to develop our insulin and inhalation products.
Non operating income increased to $3.6 million from $1.3 million as we recognized a gain associated with lowering the litigation accrual for our lawsuit with Aventis, which we settled at the end of the second quarter of this year.
The company reported net income attributable to <unk> shareholders of $7.8 million or <unk> 16 per share and the second quarter compared to a net loss of $200000 or zero cents per share and the second quarter of 2020.
The company reported and adjusted net income of $10.6 million or 21 per share compared to an adjusted net income of $7.6 million or <unk> 16 per cent per share and the second quarter of last year.
Adjusted earnings exclude amortization equity compensation and parents of long lived assets and 1 time events.
And the second quarter cash flow provided by operations was $32.2 million.
We repurchased $6.4 million of stock during the quarter and made $6 million and debt repayments.
Day, we announced that the board authorized an additional $20 million buyback program, which we plan to utilize and the future. We also announced that we've entered into a $140 million debt facility, consisting of a $70 million term loans and a $70 million revolving line of credit.
And we used approximately $30 million of the term loan to pay off existing debt with higher interest rates. We believe this facility will help us lower interest expense and then share financial flexibility as we grow and expand our business and.
I will now turn the call back over to the operator to begin Q&A.
Thank you well now be conducting a question and answer session.
I would like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate that your line is and the question queue.
And you May press star 2 if you'd like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
1 moment, please while we poll for questions.
Thank you. Our first question comes from Tim Chiang with Northland Capital. Please proceed with your question.
Hi, Thanks on A&P 015.
And we would expect multiple generics are to gain approval around the same time.
Later this year.
In terms of.
Market formation for that product.
Yeah.
Yeah.
Okay.
I'd say its hard to say, but I would probably side towards the answer of no. It's a complex product that's been.
And.
And challenged for a while so we anticipate not too many competitors with this product.
And you guys will have enough capacity to launch this product and the fourth quarter, assuming and get the approval is that right.
Yeah. So so actually this this product will be made on 1 of the filling lines that we.
Built and installed a couple of years ago. So this is part of the expansion and we have at our Amp and start headquarters.
And so we're ready to go with this 1.
And I guess.
A&P O 9 and that's another.
Injectable osteoporosis product.
That's a paragraph 4.
Have you have you I mean.
Do you already have a court date set for that or no.
I believe we do have a court date set for that and the reason that we don't list. We don't list that could do for dates on the paragraph ones that are constrained by paragraph force is because we don't want to.
And.
And for the.
And make the impression that they could do for data is the gating item. So.
We do have a court date and that's set for January of 2022.
Okay.
Okay. Good maybe and maybe just 1 last question. It's a financial question I mean, obviously you took this bigger term loan and.
And revolver.
I mean, I guess, you have more financial flexibility.
Would you have any interest and potentially pursuing some business development to bring in some additional products with.
And what.
Some of the.
Debt that you've now taken on.
Well part of the reason that we did the debt is to refinance the existing debt. So during the quarter, we paid down $6 million of debt and $30 million of the <unk>.
New term loans went directly to pay off from the existing debt so that production over the past.
3 months has been $36 million, so a little bit more than half of that Additionally, we had spent $30 million buying back a portion of A&P. So we wanted to keep that put that cash back on the balance sheet for that and.
And we're also funding our buyback program and some large capital expenditures and the next couple of years, our debt agreement and which will be filed with our 10-Q in November.
It does allow for acquisitions for permitted acquisitions, but those have to be within a certain framework, but we think that having this this line in place and this revolver in place, we'll add some flexibility and make it easier to borrow if we do need to if we do see some acquisitions that we are we find attractive and fit well with the cash.
And I wouldn't say that this debt.
This debt will change our attitude or towards acquisitions, though.
Alright, okay, great. Thanks.
Thanks, and thanks for the answers.
Thanks, Tim.
Yeah.
Thank you for the interest of time, we ask that participants limit themselves to 1 question and 1 follow up.
Our next question will be from David <unk> with Piper Sandler. Please proceed with your question.
Hey, this is zack on for David Thanks for taking my questions and congrats on another strong quarter. So just for premature mis and obviously, you've done well and getting that product into the large retail change. So far. So just wondering if there are any other large retail chains that you're targeting at this point or are you focusing more on just smaller retail channels. It now.
And now and then just in terms of marketing and DTC, what other investments do you plan to make for a for this product.
Yeah, and with Prime and team I think we've hit most of the major retail distribution points.
You know, we're analyzing and looking at different smaller retail stores, maybe partnerships there, but I think right now we've hit most of the major retail.
And what was the second part of the question, yes. So the second part of the question dealt with I think more with the marketing of it and and I think what we would say is that our focus right. Now is just making sure that the consumers who have a mild asthma are aware of the products, who are making sure we're spending money to make sure that everyone is aware.
And because we're in all of the retail outlets that we need to be and that this product will be successful and to grow but I think.
There are still people that don't know the product that well out there.
So that's what our main focuses.
Okay, great. Thanks, and then if I could just squeeze and 1 follow up on epinephrine and I'm just wondering what kind of role you think this could have and like is this going to be mainly a retail market product or do you envision some sort of institutional footprint for it as well.
The nasal spray Internasal Yep Yep.
And after nasal product.
Well I think.
Uh huh.
And it adds a different presentation to the product than what's currently there so we'd be looking at.
That's that market.
The <unk> market.
I'll add.
And the potential for this product.
So it is primarily we do it'll primarily be a retail oriented product just like the epipen itself yes.
I think the key takeaway is I don't think there'll be any new channel created for it maybe it'll just and.
He is the opportunity for <unk>.
The ease of use for it and I think that's primarily the key to that.
Okay, great. Thanks.
Thank you. Thank you.
Thank you. Our next question comes from Elliot Wilbur with Raymond James. Please proceed with your question.
Yeah.
Thanks, and good afternoon.
Questions on net.
015, so in your prepared commentary Dan you mentioned 8 a <unk> inspection.
Inspection for that wasn't clear to me whether or not debt.
And there were there or there were there was a 483 issued in connection with debt free.
Preapproval inspection, so just if you could clarify that.
Net.
And then as a follow up question on 015.
Can you confirm that this is in fact, a filing and that contains and.
Auto injector.
Device and <unk>.
And to the day.
Active and then.
Just a quick question for Bill on gross margin trends, obviously favorable mix benefited numbers this period, but outside of just pure mix anything to think about and the second half of the year that might.
The debt number to kind of move naturally lower thanks.
Yeah as far as the P I and inspection, we'd characterize it as a good inspection and there were some 40 threes that were issued.
They were primarily related to the timing of certain events.
And it didn't have any consequence, or anything and it really dealt with the quality system of us.
And we fully addressed all of them. So we believe that our response will address all of the 43 issues that they raised.
As far as the pen goes yeah. It is Ed.
And auto pen.
Okay.
And I think your last question dealt with the gross margins and the trends and the second half of the year. So we.
We think that pricing should hold relatively even for where it was and the path. We do have maybe something we do have some potential opportunities on a couple of products for from price increases that.
And that we think will be positive for the company, but those price increases are mainly to offset some of the cost increases that we've had a cost of labor has gone up and California pretty significantly and we've had to raise our wages here. Additionally, the price of crude.
<unk> still has continued to go up and remember we cost per happened and the average cost basis based on the acquisition costs and we have very long lead time for that and a lot of product in the channel. So while we actually have seen forward prices look like they're going to come down and the future.
The average price that is used and our cost of goods will continue to go up for the next couple of quarters until we hit a have more that are.
We can source more product out.
That makes sense.
Yeah.
Yeah.
Okay.
Thank you. Our next question comes from Serge Belanger with Needham and company. Please proceed with your question.
Hey, good afternoon, thanks for taking my questions.
First 1 on glucagon can you just talk about your.
And competitive outlook for the remainder of 2021, and 2020.2 and.
Do you still expect the product to generate $40 million to $50 million this year.
Yeah, I think I think with glucagon and it is a complex product.
And that was awesome.
And that hadn't had been challenged for a long time, we were the first ones.
We don't at this time, we haven't seen any other potential competitors with this product.
The way, we're marketing it or the way the way, it's being sold now and and <unk>.
Second part was.
And the outlook into next year I think we see more of the same we have no reason to believe that it would be any different than it is now.
Oh, yes.
Yeah, we think that the current run rate is.
And as good as far as we can tell for quite some time.
Okay.
A&P 015.
And obviously the complex products.
What's your level of confidence.
You get approval and the first review cycle.
I'll, let Tony answer that.
Well, yeah and.
Like all complex products.
It would be a surprise to have that definitely a pleasant surprise for it what I can say is were positioned for it we've learned from.
And the other complex products that we have and.
Filed and also approved with the agency. So I think every time, we file 1 of these applications.
The contents of that application and meet the requirements of its predecessor, so as the requirements for the agency evolve, we're keeping up with them and our filing of those applications. So I think the more that we do have these and a higher chance we have for success, but again it would be certainly a home run for.
For us, but we are poised for it I think things are moving.
At the speed that is encouraging and as far as our correspondence with the agency and.
But I think it's just cautious optimism.
Thank you.
Yeah.
Thank you. Our next question comes from David Steinberg with Jefferies. Please proceed with your question.
Yes.
Thanks, and good afternoon, and a couple of questions and <unk>.
Glucagon and you've done a really nice job and watching the problem and.
And you made a comment that you saw the second half of the year has been I think he said quote unquote durable and.
Are you implying that there'll be no sequential increases from the $12.1 million to Q3, and then Q3 to Q4 and therefore, it should be at $48 million product until there's another competitor or.
Do you see sequential increases and then secondly, and owe to them.
You got the C O L actually the day of our and Health care Conference in early June and at the time.
You had.
And your response.
And then the other discussions with the FDA since then but at the time and so.
What you're looking at either in October or early next year to date for 1 or 2 is that still your thinking.
So I'll just take the glucagon question first and that is this 12 point and 1 we think that where that's a pretty safe run rate a pretty fair run rate. So that's that's what we would model at this point.
As far as the A&P zero zero to yeah, you're right, we've submitted that and we're waiting for the agency to make a final determination of that.
And then and as you said that the best case scenario would be based on what.
What we believe the best case scenario will either be.
And later this year or early in 2022.
Okay.
Yeah.
Okay.
Yeah.
Thank you there are no further questions at this time I'd like to turn the floor back over to management for any closing comments.
Okay.
Hello, and thank everybody for joining us today, and allowing us to give you an update on our Q2, we look forward to having another good quarter for.
For Q3, and sharing those results with you and the future.
Thank you again for your time today.
Yeah.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful evening.
Okay. Thank you.