Q4 2021 Amphastar Pharmaceuticals Inc Earnings Call
Greetings and welcome to the emphasis our pharmaceuticals incorporated fourth quarter earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note that certain statements made during this call regarding matters that are not historical facts, including 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 forward.
Forward looking statements in the press release issued today and the presentation on the company's website also please refer to our SEC filings, which can be found on the companys on our on our website and the SEC's website for a discussion of numerous factors that may impact our future performance.
We will also discuss certain non-GAAP measures important information on our use of the measures and reconciliations to U S. GAAP maybe found in our earnings release. Please note. This conference call is being recorded.
Our speakers today are Mr. Bill Peters CFO , Mr. Dan Dishner, Vice President of corporate Communications, 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, Vice President of corporate Communications, Dan you may begin.
Thank you operator, good afternoon, everyone I want to welcome you to Apple stock Pharmaceuticals fourth quarter earnings call. After my prepared remarks, covering commentary regarding <unk> quarter and full years performance for 2021, I will turn the call over to Bill Peters, our CFO and executive Vice President of Finance, who will provide an update on.
The company's financials. After Bill concludes his remarks, we will move the call to our Q&A portion, where Tony Marrs Senior Vice President of regulatory Affairs, and clinical operations, Bill and myself will be answering your questions.
As stated in our press release and financial results published earlier net revenues were at an all time high coming in at 430 776 million for the fiscal year. This represents a 25% increase in revenue and a 39% increase in gross profit primarily due to our higher margin products like privacy.
Mist glucagon and epinephrine.
On our last earnings call. The company stated that it would file its first inhalation andas in the fourth quarter of 2021, and I am pleased to announce that ANP 008, what's filed during that time as mentioned before this is a paragraph four filing with the usual possibility of about 30 months stay being triggered normal.
We believe our strong non infringement position and have a fourth quarter <unk> date this year.
A M. P 008 represents one of multiple inhalation andas and our pipeline targeting a combined plus 6 billion market and annualized equivalent sales.
Our intranasal naloxone is anticipated to be filed in the second quarter of 2022, as we maintain a positive dialogue with the agency and receive productive guidance.
Concerning our andaz in on file 2022 can be observed as an eventful time for four products as I will provide an update on each anda in chronological order.
Concerning our first product ANP zero zero to the product remains on track with the first quarter. Good news date.
If a preapproval inspection is necessary for this product or any of the other following products. The <unk> date may be postponed by a quarter.
Our second product ANP, 006, which represents a market of $50 million in equivalent sales remains on track with our second quarter. Good do FID date.
For our third product Terra paratype or ANP 015, the product remains on track with a second quarter could do for date and finally, our fourth product is again, our first inhalation filing ANP 008, which I had previously mentioned have the fourth quarter. It could do for data this year.
Regarding bad Depression, which received tentative approval late last year, we anticipate a launch in Q3. This year the product demonstrates the strength of our vertical integration as we will produce the API and finished product in the United States.
Two main components of our long term strategy include proprietary and Biosimilar products are inter nasal epinephrine remains on schedule to be filed next year and the company continues to have a positive dialogue with the agency as we work to obtain interchangeable insulin.
A milestone was reached with our promising mist product with over $73 million in annualized sales surpassed surpassing the original $65 million and prior peak sales under private teen mist CFC.
In store weekly sales maintain a positive trend seeing a 9% increase from last quarter and a 31% increase on an annualized basis. Therefore, as promising mist sales continue to trend upward we remain confident that the product can reach 100 million by 2024.
Company anticipates investing in more frequent nationwide digital television and radio marketing campaigns, coupled with our physician sampling program.
Regarding our other two high margin products glucagon has seen an impressive 26% increase compared to the previous quarter and epinephrine and I've seen a 36% increase compared to the same period with that said, we expect glucagon to maintain its market position with the possibility for growth.
At the same time, we believe the current market conditions for epinephrine will remain and we continue to be the reliable supplier, where our competitors cannot to.
To end my prepared remarks, you can see that Amp a star is already headed into 2022 with a schedule of several pending <unk> action dates and potential launches.
<unk> current capacity has room for growth to accommodate these new product launches.
That said the current robustness and further diversification of our pipeline and scaling up our existing capacity are in line with ample star's long term strategy towards self funded investment to grow the company organically.
Therefore, we anticipate investment in capital expenditures to increase in order to meet future pipeline demands as the company continues to execute on our vision and strategy and to start becomes well positioned to continue transforming into a significant U S biopharmaceutical company.
<unk> towards novel treatments and Biosimilars I will now turn the call over to bill to discuss our fourth quarter and year end financial results.
Thank you Dan sales for the fourth quarter of 2021 increased 26% to $129 million from $95 $9 million from the previous year's period importantly, premature mist surpassed our long term annual sales target of $65 million with sales growth of 60% in the fourth.
To $21 $5 million from $13 $4 million for the same period in 2020, as we continue to see the benefits of our national advertising for them.
Glucagon also had strong sales during the quarter of $15 $3 million epinephrine showed strong sales amid continued shortages by our competitors growing to $18 $9 million from $7 $5 million in 2020.
And are the parents sales dropped to $7.9 million in the fourth quarter from $17 $6 million amid continued competition in that market.
API sales decreased to $2 $9 million due to the timing of orders from Mannkind and other customers.
Gross margin significantly increased to 47% of revenues in the fourth quarter of 2021 from 38% of revenues in the fourth quarter of 2020 due to strong sales of higher margin products like privacy mist glucagon and epinephrine.
Selling distribution and marketing expenses increased at a rate lower than ourselves rising to $4 1 million from $3 $8 million due to television radio and digital expenses for marketing privacy mess.
General and administrative spending decreased 12% to $10 $6 million from $12 million, primarily due to decreased legal expenses as we settled several ongoing lawsuits.
Search and development expenditures decreased 5% to $17 $3 million from $18 $1 million due to decreased expenses in China as a result of our restructuring there.
Other income included a $2 $7 million gain on the settlement of a legal dispute net of contingent legal fees.
The company reported net income of $19 $8 million or 39 cents per share compared to previous years fourth quarter net loss of $6 $3 million or 13 cents per share. The company reported an adjusted net income of $28 million or 42 cents per share compared to an adjusted net income of approximately 8 million.
Dollars or 16 cents per share in the fourth quarter of the previous year.
Adjusted earnings excludes 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 $44 million and for the full year cash flow from operations were $98 million.
During the quarter the company repurchased approximately $13 $4 million of stock to bring the total repurchases for the year to over $28 $9 million.
Let me review a few of the financial assumptions that we're using as we look to 2022 and beyond.
First let me state that private seen mist with sales of $73 million far exceeded our long discussed goal of $65 million in sales this year.
We now forecast that sales of this core product will continue to grow and hit $100 million by 2024.
Glucagon sales will continue to grow in 2020 two as we have a full year of sales compared to last year.
We could have sales contributions from three andas, which have <unk> dates in the first and second quarter. This year plus sales from the launch of vasopressin in the second half of 'twenty 'twenty. Two these trends could lead to significant sales increases in the second half of the year.
We expect gross margins to increase once we are able to launch the andas currently pending approval.
As with most companies. These days, we have been challenged with higher costs for labor and both higher costs and longer lead times for certain inputs.
Our selling distribution and marketing expenses rise as we plan to increase our advertising for privacy and mist. However, the advertising expense will decrease as a percentage of privacy and myself to provide earnings leverage.
We expect G&A spending to increase but remain a similar percentage of sales.
Turning to research and development, we plan to ramp up spending on clinical trials. This year as we adjust the timing for trials delayed in 2021 due to COVID-19 .
This includes trials for our insulin candidates to emulation candidates and our intranasal epinephrine product.
I would also like to note that we recently settled our litigation with Astellas and Gilead for rugged Denison and we received a one time litigation avoidance payment of $5 $4 million, which will be booked to other income in the first quarter of 'twenty to 'twenty two.
We also anticipate a significant increase in capital spending this year as we continue to double our capacity for inhalation products in order to be aligned with our pipeline development.
We are also expanding the capacity of insulin API production at our a M P facility in China.
At our <unk> facility, we are beginning an expansion project that will ultimately quadruple our capacity in Rancho Cucamonga as we look to major in Swan and complex injectable opportunities.
We plan to finance this expansion with cash flow from operations.
At the same time, we will utilize our strong cash position that can continue to buy our stock and our stock buyback program.
I will now turn the call over to the operator for Q&A.
Thank you we will 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.
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One moment, please while we poll for questions.
Oh.
Thank you. Our first question is from David <unk> with Piper Sandler. Please proceed with your question.
Hey, Thanks, So just have a few more.
Mostly pipeline related so on vasopressin.
Yeah, obviously there is.
Fluid competitive dynamics here, but I wanted to get a sense of you know.
How are you thinking about competitive dynamics when you guys answer the market mid year how.
How much more crowded do you think the market will become and what's the extent to which you think this is gonna be a significant contributor not just in 2022 but perhaps longer term. So so that's number one.
Number two is on terror paratype, you just remind us.
I just wanted to confirm that this is a first cycle review.
And then.
And Relatedly can you talk about dynamics in that market and your level of confidence that you can be on the market ahead of Teva.
Just how are you thinking about that.
That product and then just switching gears on prime a teen.
I know the product's done better than you had initially expected can you talk about what.
What you think it's a function of is it a function of just advertising and promotion.
Is there something else that you're you're sort of seeing that sort of driving greater than expected demand, maybe just give us some more guaranteed granularity on what you think is happening there. Thanks.
Thanks, David and look at our vasopressin burst in and we think you know thinking about the market with vasopressin, we're aware of the little Mike.
Market dynamics there.
Already.
Basically two generics on the market. So the way we look at it is probably the same as you would look at any typical market with multiple generics on it.
We feel we can compete we have like I said, we make the API and the finished product in the United States and we think that that'll help us a little bit but overall, we think it's what you would typically see in a generic market.
On T O. Two you want <unk> sure yeah for for T. Four our tariff parity. It it is a first cycle review.
Recall the agency had extended the action date of the gold data on that one and thats encouraging for US gave them a little bit more time to look at this this is a complex product.
So of course on.
The uncertainty around that is always there, but we remain very optimistic about it we know Teva has a product.
Anda and also we can't really speak to theirs as far as where they are in the process, but we do know it's been a significant amount of years that they've been in that process and we believe that our legal strategy will enable us to meet the market before even if we are if.
If we get our approval first we believe we can market it right away.
And with privacy and mist I think Theres a couple of things you know we increased our spending and added another commercial we see a lot of positive.
Resolves around increasing the the the amount of commercials that were that were putting out there we're focused on.
E G.
Changing demographics are focusing on the different demographics that may have not been exposed to private team before and so that's sort of where we're getting our confidence I mean, we see the in store sales continue to rise we don't see any any drop there and so we're not sure.
But so far that's positive trends going for privacy mist.
Yes.
Okay, great. Thank you.
Yeah.
Thank you. Our next question comes from Elliot Wilbur with Raymond James. Please proceed with your question.
Thanks. Good afternoon first question with respect to 008, maybe just a couple of questions around that.
Can you confirm whether or not the.
45 day window in which the innovator has to potentially commence litigation.
Yes, you are filing has passed or are we still in that period.
And if you could give us any indication as to what they.
The sale is on that product within sort of the larger she couldn't have go in they can target even an inhalation product.
And is this a.
Already janiero sized product or is this potentially first to market and then I've got a couple of follow ups as well.
Well I can say that we're still within that window to be soon so that has not stopped passed yet.
And as far as the market size, rather keep that to ourselves right now right. So if we get a little closer until we get more from me as well as the competitive landscape, we want to we want to protect our target our competitive position if possible.
Yeah.
Okay.
And then.
Want to ask a couple of questions around some of the better performing stronger forming based products as well, specifically glucagon and epinephrine. It sounds like you have a reasonably high degree of confidence that youre not going to see incremental competition at least in terms of new generics there just wondering.
How good do you think your line of sight is in terms of trying to be able to sort of gauge incremental competition and the epinephrine market. Both the pre filled syringe and vial market. Obviously you saw the news on his spear are likely to be.
Out of the market for for some time, but just curious if there's other dynamics out there that might give you a pretty good read into potential additional players that could come in into that market and similar question on the glucagon.
If theres anything that I'm.
Sure.
You can get in terms of Covid competitive intelligence that give you a reasonably high degree of confidence that you may not see incremental competition. In fact sales may grow in 'twenty two versus 21.
Yeah, I think I think you answered a lot of the questions for us on epinephrine, specifically you know we feel confident that that market won't change too much. We don't have any reason to expect anything else to happen in that market at this time.
And with glucagon, Yeah, we think that the market is continuing to grow possibly we've seen we've seen where.
You know because of the generic being there now that are you know the market has expanded a little bit. So we haven't seen that slow down. So we expect it to continue to kind of move that direction.
Yes, we don't have any insight at all and do other competition with either of those products and especially the glucagon given the fact that such such a hard product to do and so complicated to be very difficult for other players to get into that.
Okay and then last question just on the <unk>.
On the.
Private teen trend within <unk>.
2022.
Obviously very strong results in the fourth quarter, historically that product not actually declined in the first quarter and I'm, just wondering kind of given the performance in Q2.
'twenty one if it would still be reasonable to expect sequential growth.
In the first quarter 2022.
Yes, so right now we did have some very strong sales in the fourth quarter and you know I don't think the product has really been on the market long enough to really see.
Quarter by quarter trends, but we do see a little bit of a seasonal trend in the March April timeframe and also the.
The December timeframe. So we did see a pickup there so but that's not as big as as a long term trend. So I think we have to have it on the market a little bit more to see if there's other trends other than those two pickup times.
And basically our sales are buying you know ahead of those fine. So so you know we're shipping to the drugstore is ahead of us, but I will say that when you you know we did update the the graph.
In the presentation.
Today, so it's on the on the website and you can just see a continued upward momentum with I think theres a little bit of seasonality.
The blip.
Blips in the chart, there, but overall still enough for a nice upward trend.
Great. Thank you for taking the questions.
Got it.
Thank you. Our next question is from Jacob Hughes with Wells Fargo. Please proceed with your question.
Hey, Thanks, guys for taking my question.
So is that a couple of follow ups.
To your apparel tied in the gross margin.
Or is there a one five does.
Clarification does <unk> still have first filer exclusivity here and why do you believe you could launch immediately and then what.
I know I think Lilly consented, so maybe that's part of it but maybe you could just clarify that and then.
On the the launch curve for that products could.
Could you speak to that and do you expect.
No more than one generic too to be on the market.
Okay.
So for Terra paratype, the whole legal strategy of getting the confirmation from Lilly.
But enabled us to make sure that that Teva was not the first filer. So anymore that they had lost that status. We believe that they have lost that status, which will enable us to launch upon approval.
So that's the first part of that question and the second part was.
I think the competitive landscape I mean, you know obviously, we know that the Teva filed a long time ago, and we don't really know where their application is at this time and we're really not aware of any other filers. It has been off patent for a while and you would expect.
You know someone else, possibly but right now we're not aware of anybody else.
Okay, and then bill on the gross margin.
Were up approximately 400 basis points versus boy I think some although there was an easy comp in <unk>, but.
You talked about.
You have some offsets from labor and.
Boston pause, but is there any way you can quantify that and how.
How we should think about the gross margin expansion for 'twenty two.
Yeah as far as expansion goes.
We're not expecting any expansion until we launch new products, so that that would be in the second half of the year, we will be a little cost constrained.
At maybe the first couple of quarters, but but overall.
Gross margins could go up or will go up once we have new products.
Thank you. Our next question comes from Serge Belanger with Needham <unk> Company. Please proceed with your question.
Hey, good afternoon, thanks for taking my questions.
First one I think bill or Jacob mentioned, the potential for pre approval inspection.
Just curious when do you expect to hear about these from the FDA about that and then if one is needed.
It doesn't affect all the trucks are just specifics.
Specific to Ngos.
Yeah, we don't anticipate there to be any preapproval inspections for any of the products that we've had applications for for some time.
With the exception of the one that we just filed the inhaled product that we just filed.
And if we did have one it would not trigger or not it would not necessarily trigger any others they wouldn't necessarily be linked.
Got it okay.
And then secondly.
In the past you've been able to capitalize on various market shortages of products just curious.
What you were able to capitalize on in the fourth quarter and whether that will continue.
In 2022.
The primary beneficiary of that that was the epinephrine prefilled syringe. So that's something that one of our competitors was not able to supply. So that's why one of the reasons why our epinephrine was up so.
So much year over year, and we've previously said that the.
Overall market shortage.
Opportunities about $20 million, a year and that's about what we had for the year, we believe in and making up for those shortages, we expect that epinephrine shortage to continue for some time as Hospira has publicly said that they.
We're not expecting a resolution in the near future. So we expect that to go on at least the first and second quarters of this year.
Thank you. Our next question comes from Tim Chiang with Northland Securities. Please proceed with your question.
Hi, Thanks.
With this diabetes portfolio I know you guys are.
Im talking about interchange ability whats your insulin pipeline.
Has there been any sort of update on that in from.
From the FDA side, what sort of progress are you guys, making.
On your.
Insulin products.
Yes, we continue to have very good dialogue with the agency I think from the interchange ability situation. We have a good handle through those conversations on what the expectations are from the agency as well as our ability to meet does.
We have one product that is going to be that trailblazer, if you will and the other products in our diabetes portfolio will be following shortly behind us.
So if you have a spectrum of development.
We have the first one that's pretty far along and then the other two that are not far behind it. So all three of those are in relative relatively advanced stages with.
With one further ahead than the others.
And maybe just a follow up to that interchange ability I guess.
I'm starting to see some biosimilars get it on their labels, what's that interchange ability.
Definition, and I'm sort of wondering.
How important would that be for your biosimilar.
Does that mean that basically pharmacist can switch to your product without any sort of physician approval is that right.
Yes, that's correct physician or pharmacist approval. So if they were to write a script for a certain type of insulin it.
It could be Substitutable, if you will for the interchangeable, whereas with the Biosimilars that likely is not the case.
Yeah.
Thank you. Our next question comes from David Steinberg with Jefferies. Please proceed with your question.
Thanks, a lot good afternoon, I have a couple of questions so back to prime mid teens.
I think you said in your prepared remarks that you thought sales could reach her approach $100 million by 2024.
On the other hand, you did $73 million this past year and Q4 annualized is around $85 million.
So if you look at those trends couldn't you reach that $100 million in 2000.
23, and not in 2024, and if not what what.
I know you've.
You've maxed out at most of the change but.
I know you've also taken some new initiatives. So just trying to understand why the growth would slow down so much based on that 2024 baseline you threw out and then and then just on gross margin.
You grew the gross margin to about 400 basis points give or take last year and they've increased about 900 basis points over the last three years.
If you get all these new approvals that are lining up for you.
No say two years or three years down the road.
Where could gross margin be theoretically could they be in the mid fifties for example by say 2024 or something like that.
Yes.
That's a bit aggressive for that timeframe, while we do expect them to.
The higher in 'twenty three 'twenty four than they are today I think that that is a bit.
Over a probably above where we assume that there will be by that time.
However, if.
If we look further out it is possible to hit those.
Numbers, but I think we have to be have more of our biosimilars launch have more of our and maybe start some of the proprietary products that were not working out as well. So I think that's a doable number but I just don't think that by that by that year.
I'm, a private pay and I'm not sure how to answer this question.
This is our guidance is for 2024 to get to that $100 million Mark.
You know.
You are more as you mentioned.
You know we have pretty much got it into all the all the big box chains and all the different retail elements, we need to kind of expand the market for that and we think that Ah.
The strategy, we have in place will help us get there for that and and achieve that $100 million by 2024.
Fair enough and just.
On your Biosimilar strategy, particularly as it relates to the insulin market.
Where you'd be leveraging your your French insulin API facility.
The Fda's recent guidelines and Immunogenicity, you know, how how could that or would that help accelerate the process for for approval.
Yeah, well they've made it clear from a technical perspective, what the expectations are through that guidance they've given some stature.
The statutory.
References to that that'll that'll give Dan a very open policy on what to expect say expectations are.
And what it's allowed us to do is use that as a foundation for our conversations with the agency of course, it doesn't tell you specifically everything that you need to do.
On a very detailed level, but it broadly talks about those in different categories and what we're able to do with the leverage that guidance.
As a foundation for the conversations and fill in all of the gaps based.
Based on our current technical knowledge and some of the characterization work that we've done historically for some of our other products.
Thank you there are no further questions at this time I'd like to turn the floor back to management for any closing remarks.
Great. Thank you Paul and thank you all very much for joining us here today, we appreciate it and we look forward to updating you on our progress on many fronts as we move forward as always if you have any additional questions. Please do not hesitate to contact us with when those questions arise and again. Thank you for your time today.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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