Q3 2021 Amphastar Pharmaceuticals Inc Earnings Call
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Greetings and welcome to the <unk> Pharmaceuticals incorporated third quarter earnings call.
This time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
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Please note that certain statements made during the call regarding matters that are not historical facts.
But not limited to management's outlook or predictions for future periods are forward looking statements.
These statements are based solely on information that is now available to US. We encourage you to review the section entitled forward looking statements in the press release issued today and the presentation on the Companys website.
Also please refer to our SEC filings, which can be found on our website and the SEC's website for a discussion of numerous factors that may impact our future performance.
Also discuss certain non-GAAP measures important information on our use of these measures and reconciliations to U S. GAAP may be found on our earnings release. Please note that this conference call is being recorded.
Today are Mr. Bill Peters CFO, Mr. Dan touched and Vice President of corporate Communications and Mr. Tony Marrs, Senior Vice President of regulatory affairs and clinical operations.
Now I'll turn the conference over to your host Mr. Dan Fisher, Vice President of corporate Communications, Dan you may begin.
Thank you Paul I'd like to thank everybody for joining us. This afternoon as you have seen ample star recently reported our financial results and I am pleased to announce that the upward momentum from last quarter strong execution, what's sustainable and carried over into the third quarter with that said, we saw another great quarter of <unk>.
Line and bottom line growth as we remain generally insulated from the typical challenges facing our sector in the pharmaceutical space again. This is another validating quarter highlighting the importance of <unk> core strengths as our vision strategy and vertical integrated platforms continue to deliver on our growing commercial.
Proficiencies.
After my portion I will turn the call over to our CFO and executive Vice President of Finance, Bill Peters, who will provide an update on the company's financials.
After Bill's remarks, well move on to the Q&A portion of the call or Tony Marrs, Senior Vice President of regulatory Affairs, and clinical operations, Bill and myself will answer any questions.
Wanted to begin with our commercial results, whereas the third quarter saw net revenues just over $112 million, which is a 10% increase from last quarter and an impressive 34% increase on an annualized basis.
<unk> has seen remarkable growth on a quarterly basis and annualized in revenue gross profit net income and earnings per share I want to emphasize that amp has started the bright 2022 I had based on this trajectory.
R&D expenses enhance our base business and setting up a foundation for more successful future quarters' performances from an operations perspective equally important is our vision with specific regards to our pipeline strategy, coupled with our vertical integrated platform continues to be a proven.
But by our more recently launched products since the beginning of 'twenty 'twenty. One we have observed that our glucagon prime a teen mist and epinephrine products have been key revenue drivers. We continue to believe that these three products will be significant growth drivers for the remainder of the year due to their recent performance regarding our glue.
On product sales of the product were $12 1 million in the third quarter. We're very pleased with the performance of this product and the ability to capture market share since its launch in February of this year.
With that said, we believe glucagon is still positioned to have a positive trajectory for the remainder of the year.
On the topic of privacy and mist sales maintain a positive trend being up 38% increase compared to Q3 in 2020 as trends continue primaquine mist annualized sales will likely exceed our goal of $65 million. This year as our continued nationwide TV digital and radio marketing efforts, coupled with our position.
Sampling program have proven effective.
On epinephrine sales of both the pre filled syringe and the multi dose vial presentations grew to $13 9 million due to our ability to capitalize on opportunities. When they are presented as we have said before ample star can't consistently supply the product when our competitors cannot this is mainly due to our investment and our recently added.
State of the art production line, we anticipate similar opportunities continuing into 2022.
On another note our careful planning and supply management has allowed our commercial portfolio sales to remain strong regardless of the impact felt from COVID-19. However, the impact from Covid was not without its limitations, especially in regards to the clinical site impact on the clinical front, our clinical and other third party.
The vendors continue to face various COVID-19 related restraints or out of our control. Therefore, we anticipate refiling for intranasal naloxone in Q1 of 2022. The same can be said for our international epinephrine, which is now expected a filing in 2023.
As for our filed Andas and P 002, and M. P 0066, both remain on track to have a good <unk> date for the first quarter of 2022, if a preapproval inspection is necessary for either product that can do per day may be postponed for two months.
For our care paradigm for our Terra purified Anda.
Our first 10 product we've had continued dialogue with the agency. It is still on a first cycle review, which is now anticipated to have a good <unk> date in the second quarter of 2022.
Concerning our paragraph four filings a M. P 008, our first inhalation Anda is anticipated to be filed in the fourth quarter of this year. We continue to believe we have a strong non infringement position. Likewise, we feel the same with ANP 009, another paragraph four filing that is currently being litigated.
With regard to our products and our diabetes portfolio, specifically, our insulin program, we believe that though that through the advanced technologies. We have developed we can create a more standardized process in developing these types of products. So we have a robust diabetes portfolio to accomplish this we have developed a framework.
Work based on FDA guidance, and our extensive complex molecule experience.
In closing I would like to reiterate that we continue to make significant progress in our commercial portfolios revenue growth trajectory with a further emphasis on our pipeline ever starts to use our future progress are our future progress towards interchangeable biosimilar and proprietary products. We are confident we can achieve these goals.
As our long term vision proven strategy and vertically integrated platform serve as complementary forces and building momentum towards its future as we head off into 2022 with a great start.
I'll turn the call to bill to discuss the third quarter's financial results.
Thank you Dan.
Sales for the third quarter increased 34% to $112 $2 million from $83 $4 million in the previous year's period.
Glucagon, which we launched in the first quarter. Once again led the growth with sales of $12 $2 million primacy mist saw sales growth of 28% to $16 $6 million from $13 million in the third quarter of last year with strong sales to all of our current customers.
Epinephrine sales increased to $13 $9 million on strong sales of both the multi dose vial and pre filled syringe, the latter of which saw a surge in demand due to competitor shortages, we have been consistently able to meet the demand caused by a competitor drug shortages quarter after quarter, which is why we increased the capacity at our IMS facility.
Knox the parents sales decreased to $8 million, primarily due to increased competition, which led to reduced volumes and lower average selling prices.
Other finished pharmaceutical products saw a sales increase of $5 $6 million driven by increases in medroxyprogesterone protrusion and entities.
Our insulin API business had sales of $3 $2 million up from.
$2 $1 million last year, primarily due to the timing of orders.
Cost of revenues increased to $61 million from $46 $9 million gross margins improved to 46% of revenues from 44% as newer higher margin products, such as glucagon Prime a teen mist and epinephrine multi dose vials more than offset the lower pricing for enoxaparin.
Selling distribution and marketing expenses increased 29% to $4 $7 million from $3 $7 million due to increased advertising and distribution costs, including television commercials for privacy and mess.
General and administrative spending decreased 7% to $10 $9 million from $11 $7 million due to lower legal expenses.
Research and development expenditures decreased 39% to $10 $8 million from $17 $6 million as lower clinical trial expenses and a decrease of R&D costs in China due to the restructuring of our subsidiary after starting Nanjing Pharmaceuticals, where A&P and the deconsolidation.
Of its subsidiary Hansen.
Our non operating income line includes a onetime gain on the divestiture of 80% of ANP subsidiary Hansen.
The strong results this quarter show the significant operating leverage available to the company as we grow sales faster than our expenses. The company reported net income attributable to infer star shareholders of $29 $5 million or <unk> 59 per share in the third quarter, a significant increase from three.
$9 million or <unk> <unk> per share in the third quarter of 2020.
The company reported an adjusted net income of $23 million or <unk> 46 per share compared to an adjusted net income of $7 $6 million or <unk> 15 per share in the third quarter of last year.
Adjusted earnings exclude amortization equity compensation impairments of long lived assets and one time events, including the gain on the divestiture of 80% of our interest in Hanson.
In the third quarter, we had cash flow from operations of approximately $2 $6 million and we used a portion of our cash to buy back approximately $6 $1 million of stock as.
As mentioned on the last conference call, we completed a syndicated debt offering in the third quarter borrowing $70 million and increasing our lines of credit to $70 million.
In the process, we lowered our interest rates significantly and have paid off approximately $36 million of higher interest rate debt.
I will now turn the call back over to Dan.
Thanks, Bill if we can now turn to the Q&A section of our presentation.
Thank you well now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
Press Star two if he would like to remove your question from the queue for participants using speaker equipment, we asked it and may be necessary to pick up your handset before pressing the star Kids one moment, please while we poll for questions.
Thank you. Our first question comes from Jacob Hughes with Wells Fargo Securities. Please proceed with your question.
Hey, guys. Thanks for taking my questions I have just a couple on prime.
Prime Mateen mess I think the sales in the quarter were flattish quarter over quarter.
Is there anything to call the core and how should we think about the for the fourth quarter and will you be providing a new target since we're basically already at a greater than $65 million.
Yeah. So the sales were just up a little bit or pretty relatively flat from the second quarter, but we did see you know strong growth year over year, which we took as a very good sign and we started off I'll say, the fourth quarter pretty strong as well so while we're not going.
Going to give any formal guidance at this time about a different sales target at this point, we do feel very confident that we will be above the $65 million Mark this year and we might address further targets probably on our March call.
Okay got it and then I'm a the shortages that you called out or epinephrine and no.
Other finished pharmaceutical products.
Is that going to be a similar benefit in the fourth quarter or have those been resolved now.
So the epinephrine, specifically, we see that trend continuing into next year that has not been resolved and we still see very strong demand for that product today. So our competition doesn't seem like they're going to get it from what they've indicated to trunk shortage at F. D. A it doesn't look like they will be back on track until next year.
The other products that they've been.
They've been.
Some of them resolve some haven't been but I think the real important point here is what Dan and I, both mentioned, which as you know we increased and we spent a lot of money to increase the capacity of our facility at IMS and by doing that we're now able to capture them and take take care of the demand for those things when they do occur and you know and how honest.
I've been here at this company for over seven years, and I think pretty much every quarter theres been some sort of supply issue from from one competitor or another and now we have the ability to take advantage of that so I think we really delivered on that this quarter.
And then lastly, just on the pipeline.
I saw the the new disclosure in the slide deck is for a M. T. 018 is there anything you can say about that program.
That that's the that's the new one we've just recently added to the deck and where it's one that has been in development here for a little while we've just added it to the deck just as further disclosure and as time moves along we will give further development.
Further information about that one but that.
Today, we're just indicating that that's one of the products that's out there in development and part of that on filed injectable $6 $5 billion of IQ of yourselves.
Got it thanks very much.
Yeah.
Thank you. Our next question comes from Elliot Wilbur with Raymond James. Please proceed with your question.
Thanks. Good afternoon, just a follow up question on private team mist trends.
And just looking at the chart in the deck I mean, it looks like unit sales continue to trend higher even though you saw flattish sequential performance in terms of revenue I'm. Just wondering what the impact may have been on basically not pricing, but I don't know if there was an.
The increase in couponing or or sampling and then I wanted to get a sense from you in terms of your your sampling program just a sense of how effective you believe that's been and whether there's any anecdotes you can share in terms of whether or not you've been able to initiate.
Start on the product in patients that are that are new to the asteroid havent really utilized it before.
Yeah. So first of all I will say that.
While we don't have a hard data on the sampling program. We think it's a really effective way to get some people who have mild cases of asthma on the product when they when they go to their doctor their doctor can give them.
There's a free sample of the product and they can go out and try it afterwards.
As far as coupons go we actually are not doing any couponing. So none of none of the sales growth was led by that or the unit growth and thanks for mentioning the updated slide on the deck you know as you know that that trend. There shows continued steady growth in sales of the product. So we're very happy about about that trend.
Okay and then a question for you Bill could you just walk us through the change.
In the R&D line.
Obviously, a significant number I'm trying to figure out is is.
The run rate this quarter sort of a good reputation of new baseline spend how things change in terms of.
Cash flow implications or your rights to.
Products in development by some of the subs that have been consolidated now just not sure I understand.
Fully the implications of the change in that line.
Yeah. Good question. So we did.
Back when we announced this reorganization we had mentioned that we'd get about a three cents a year savings. This year and then I think it was 10 12 cent next year savings on the on the income line and a big part of that was the lower R&D cost as we move some of the projects that we weren't that werent really for us out of our R&D.
Your line so that that's a part of the trend.
The other trend is we did lower the head count at our A&P facilities slightly as well.
So there's a little bit less expense out of that and part of it. The third thing is really timing and that that goes back to what Dan had mentioned in his part of the script, which was the timing of certain clinical trials. We've had some delays there on some of the R&D projects. So the clinical trial expenses, one that can be variable on large at times.
So that that number you see this quarter is more of a floor and you should only expect up you know increased expenses from that line as more of a clinical trials move forward.
Thank you. Our next question comes from Serge Belanger with Needham <unk> Company. Please proceed with your question.
Hi, Good afternoon, a couple for me on plan and she also.
First do you expect any winters season seasonality.
And then secondly.
Product is now in all the major big box stores, So where do you foresee the next leg of growth here.
Just more penetration within these <unk>.
These segments or Theres additional segments two to penetrate.
Yeah.
Private T mist.
Seasonality is still a little hard to determine you typically Q4 is a good year. It was a good quarter for it and so.
We'll be monitoring that situation as far as growth for private team. Yeah. We hit we were all of them were in all the major retail commercial I think the next big growth is as we develop our marketing strategy and and and and brand recognition and getting the product and letting people know that the <unk>.
<unk> is back on the market and we expand into maybe a younger demographic.
Demographic with some of the more concentrated our marketing efforts that our team has plan. So I think that where we could see some growth moving forward.
And then similarly on glucagon, you expect that product to continue growing.
Is this a question of expanding that.
The market size of.
The product or just continuing to grow your market share.
Yeah.
Yeah. So we don't see the market share or changing much for this because we already have significant market share. When you take a look at the <unk> data, we already have a large majority of that market for the this this injectable version, we see the overall glucagon market growing for a couple of reasons and one is.
That we believe with the generic alternative out there, which we now provide we think that there'll be more people that are likely to get a script filled given the fact that it was an expensive product in the past. So we see this as a growing market, but we see our market share probably remaining about where it is.
Thank you. Our next question is from Tim Chiang with Northland Capital. Please proceed with your question.
Alright. Thanks.
Bill could you just talk about the.
Just you sort of highlighted the financial leverage and seem to be pretty apparent.
Given the affected your operating margins for north of 20% this quarter.
Do you see that.
Sustaining into the fourth quarter as well these type of operating margins.
Yes, so right now we do see sales sales kind of trending.
The same way they were in the third quarter. So again another quarter of very strong sales. We think our gross margins will be pretty similar in our S. SG&A lines will be relatively similar the R&D line is the one line that can be a little bit more variable as I mentioned, we had a little bit of delays in some of the clinical trials. So that's.
Clinical trial expense was a little bit low in the third quarter. So in all likelihood that goes up a little bit in the fourth quarter from where we are today.
I see.
And maybe just a follow up on the pipeline I think you guys did update.
That pipeline slide.
<unk> five I think that's one of your bigger ticket items, because you've set a <unk> date of what the second quarter of 2022 is that right.
Correct, Yes, yes, that's correct.
They haven't this is not a serology suggest as a complex product that we work on this is just.
Interesting name, which is the agency through our communication and as we.
Progress with them they've extended that.
Action date until that corner.
Yeah.
Can you comment a little bit just on capacity for that product I mean, do you think you'll have ample capacity to meet supply.
Assuming you get approval sometime in the second quarter next year.
Okay.
I think it's part of our planning so we have invested in the capacity. So I think it's you know bill do you want to say anything else. Yeah. Yeah. We do have to say, it's not a very big unit volume item, it's a relatively high priced off item. So the capacity we have the capacity here at our emphasis star headquarter.
Hers to make that product and fill.
The market share that we believe that we will be able to get to so we don't see that as being an issue and Tim to reiterate that it's a it's a.
The separate line, it's a dedicated because it is a pen product so from encroaching in some of our other products. It would be just this product on that line.
Yeah.
Thank you our next question.
Steinberg with Jefferies. Please proceed with your question.
Thanks, and good afternoon, and I apologize if you've already addressed this or a couple of calls going on simultaneously. The first one is on <unk>.
Do you could you could you remind us of the potential size of this project how long the brand has been off patent without any.
Generic competition and when you do get out on the market you know do you foresee any competition near term and then Chuck.
Secondly in M&A.
It seems like in the last few quarterly calls.
Your interest level is has waned you obviously have a lot on your plate.
Pipeline wise are you actively looking at any cash.
Candidates or just you have so much going on and there's no need to buy anything and if you are looking at.
If prices come in at all or are they still relatively high in your view. Thanks.
Sure about the size of the O two market, it's about a 300 million dollar acute via sales market and has been off patent for a very long time. So it's not something that we would expect anybody else to get approval on in the near future and and just reiterate we do have that could do for them.
Uh Huh early next year, so we're looking forward to that.
And your second question was on M&A, Oh, Yeah, so on the M&A Danny.
Dan you want to take that yeah, I mean, it's fine we are very fast.
Mentioned before we're very focused on what we have going on here, we have a very robust pipeline.
And.
We're very focused on <unk>.
Executing on our pipeline, but that said I think theres always you know.
We have a very solid balance sheet and if the right opportunity presented itself to us.
That we would pay attention to so.
That in that regards it really hasnt changed much.
Yeah.
And just to follow up on <unk>. Two Bill you indicated that sales were over 300 million spin off patent for years, you expect no competition.
So if you work out the math on that that should become your biggest product over time is that a reasonable way to think about it.
I think I would hold off on making that a stat that extrapolation of IC I see how your math gets you there I'm not really sure that we do it does become our biggest product over time.
Right now I think that's going to remain a priority in mist.
So I'll just leave it at that for now.
Thank you. Our next question comes from Elliot Wilbur with Raymond James. Please proceed with your question.
Hey, just a couple of quick follow ups I guess with respect to the shortage products did any of those benefit from off contract pricing terms.
In the quarter.
And then.
Just a quick follow up on naloxone.
And just how are you guys seeing that market today I'm, obviously there've been a couple of recent approvals of Injectables in the.
High strength cat.
Category, just sort of wondering how you're now thinking about that opportunity in light of.
Incremental competition in the market.
Let's see so I'll start I'll start with Naloxone and then we can go to the shortage on the contract pricing term Bill can answer that one on naloxone.
Keep staying that that that that program.
Or the market for that growing so we believe that there still room for us we have experience in this market.
You know I think I think there is it is getting crowded you're right, but I do think as the market continues to grow there there is still room for our product.
That is then with the shortage off contract pricing or on the drug shortage the off contract pricing.
Yes, so the off off contract most of the products that were on shortage and related insurance that we had sales did not have that benefit so they're straight normal pricing.
'cause they were multi source our.
Products. So there wasn't really any any issue with that.
Thank you there are no further questions at this time I would like to turn the floor back over to management for any closing comments.
Okay, well, thank you Paul and thank you everybody for joining US today, we were very pleased to be able to have a great quarter. This quarter and we look forward to the momentum carrying on for the remainder of the year and we look forward to talking with you all again very shortly.
This concludes today's conference.
You may now disconnect your lines. Thank you for your participation.
Thank you.