Q3 2022 Amphastar Pharmaceuticals Inc Earnings Call

Thank you for standing by the ample Star Conference call will begin momentarily. Please remain on the line. Thank you.

[music].

Yeah.

Greetings and welcome to the <unk> Pharmaceuticals, Inc. Third quarter earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If 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 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 discussion of numerous factors that may impact our future performance. We will also discuss certain non-GAAP measures important information on our use of these measures and reconciliations to U S. GAAP maybe found in our earnings.

Please note that this conference call is being recorded our speakers today are Mr. Bill Peters CFO , Mr. Dan Teschner, 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 <unk>, Vice president of corporate communicate.

Dan you may begin.

Thank you Paul I'd like to thank everyone for joining us today on the call with me will be Bill Peters, CFO and executive Vice President of Finance and Tony Marrs, Senior Vice President of regulatory affairs and clinical operations.

Following my prepared remarks, and build financial update we'll open up for Q&A with the management team.

I want to start by highlighting our third quarter's financials at a high level and then provide some remarks regarding our products and our pipeline with further discussion on glucagon is evolving market dynamics, we remain encouraged by our progress with net revenues of $120 1 million up 7% from the same period last year or.

Balance sheet is stronger than ever and provides us the flexibility to continue investing in our robust pipeline. Therefore, R&D investments as seen in the third quarter continued to be a priority for us as we remain committed to advancing our pipeline toward approval and launch of special regard to our inhalation intranasal and insulin products.

As stated in previous calls our existing products private teen mist, glucagon and epinephrine I've. Once again provided a solid base line of support private teen mist continues to perform as projected with some seasonality in demand.

<unk> and epinephrine have grown at 21% and 8% respectively compared to the previous quarter.

While we remain confident that the demand for these products will remain robust for the remainder of the year and into 2023.

Regarding our pipeline and regulatory activities I'd like to bring our discussion towards our ANP 008, inhalation filing which received a C are all last month during its first cycle review, we believe the issues raised are relatively simple and addressable and are within the scope of our pipeline is focused on developing complex products.

With innovative delivery systems as such we intend to respond to the stat that see our all in the fourth quarter of this year Likewise with our Terra paratype application. We believe the issues are clear and we plan to re file in the first quarter of 2023.

Turning to our generic pipeline products ANP zero zero to the CRM received in July has been fully responded to with the new good do put option date scheduled in the second quarter of 2023.

I want to note that our a M. P 002, and Tara paratype Anda filings offer products that remain without a generic due to the product complexity.

As stated previously if a preapproval inspection is needed for any of our filings. The goal date is typically extend it to the following quarter.

Our second inhalation generic pipeline product disclosed on our last call a M. P 007 remains on track for filing in the first quarter of 2023.

As for ANP 004 are interchangeable generic insulin as part product and development. We continue to maintain a positive dialogue with the agency as we finalize the details of our application and remain on track for a filing in 2023.

As we turn to our proprietary pipeline products, our intranasal naloxone Refiling in September that's been issued a goal date in the first quarter of 2023.

Our intranasal epinephrine product remains on track for filing in 2023, and we anticipate further discussion with the agency on this product in the fourth quarter of this year.

Before I turn the call over to Bill I want to speak in more detail with glucagon as you may be well as as you may be well aware the glucagon market dynamics have increasingly evolved towards a strong position for the company due to Eli Lilly's planned discontinuation of their product by the end of this year and.

And nobody can order desk or Boehringer Ingelheim has planned discontinuation of their glucagon product. These changing market dynamics in the retail and diagnostic spaces equate to significant potential growth for our glucagon product.

With this evolving glucagon market, we are working closely with the F. D. A to increase our production capacity for glucagon and remain and fruitful dialogue with the agency to provide a reliable supply to accommodate this changing market.

We are committed to maximizing our opportunity to supply glucagon projected increase in demand.

I'd like to turn the call over to our CFO and executive Vice President of Finance Bill Peters to discuss the third quarter's financial results.

Thank you Dan sales for the third quarter increased 7% to $121 million from $112 $2 million in the previous year's period privacy mist saw sales growth of 11% to $18 $4 million from $16 $6 million in the third quarter of last year with strong sale.

<unk>, an all to all of our current customers.

<unk> sales increased 17% to $14 $2 million from $12 $2 million on strong back to school sales.

Turning to diodes saw stronger demand this quarter as sales increased 21% to $40 million from $11 $6 million epinephrine sales increased to $19 5 million from $13 $9 million on strong sales of both the multi dose vial and pre filled syringe, the latter of which saw strong.

Demand due to competitor shortages.

Other finished pharmaceutical products saw a sales decrease of $3 $4 million to $23 $6 million as lower sales of atropine calcium chloride were partially offset by increased sales of dexterous and the recent launches of kind of relics and vasopressin.

Our insulin API business had sales of $3 million down from $3 $2 million last year, primarily due to the timing of orders.

Cost of revenues increased slightly to $61 $6 million from <unk>.

$61 million.

Gross margins improved to 49% of revenues from 46% as increased sales of higher margin products, such as glucagon Prime mid teen mist, but tend to die on epinephrine as well as sales of newly launched Gander relics and vasopressin more than offset higher labor costs.

Selling distribution and marketing expenses were relatively unchanged at $4 $8 million.

General and administrative spending increased 10% to $12 million from $10 $9 million due to increased legal and compensation expenses.

Research and development expenditures increased 7% to 2% to $18 5 million from $10 $8 million as we had significant clinical trial and material expenses related to our insulin and inhalation products.

Our non operating expense of $400000 compares to a non operating income last year of $12 $9 million.

The 2021 amount included a onetime gain on the divestiture of 80% of ANP subsidiary Hansen.

The company reported net income attributable to star shareholders of $15 $9 million or <unk> 30 per share in the third quarter, a decrease from the $29 $5 million or 59 cents per share in the third quarter of 2021, which benefited from the one time gain on the divestiture of Hanson.

The company reported an adjusted net income of $20 $2 million or <unk> 38 per share compared to adjusted net income of $23 million or <unk> 46 per share in the third quarter of last year, primarily due to increased R&D spending.

Adjusted earnings exclude amortization equity compensation and impairment of long lived assets and one time events, including the gain on the divestiture of the 80% of our interest in Hansen in 2020 one.

In the third quarter, we had cash flow from operations of approximately $24 million and we used a portion of our cash to buy back approximately $14 $5 million of stock.

We also announced today that our board has authorized an additional buyback program of $50 million.

I will now turn the call back over to Dan.

Thanks, Bill for the update with that we will now take any questions. You will have Paul Please open the line for Q&A.

Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.

For participants using speaker equipment it may.

Be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Yeah.

Thank you. Our first question is from David <unk> with Piper Sandler. Please proceed with your question.

Hey, Thanks, So just had a few so wanted to come back to your comments on <unk>.

We'll keep you on market dynamics I'm, just wondering out loud I mean, wouldnt the discontinuation of the kids by Lilly and Novo ultimately benefit the ready to use formulations.

That.

Our available like <unk>.

Or the.

The intranasal product rather than the generics or the kids I'm just trying to understand your thought process. There. So so that's number one number two on O O two with the with.

With a complete response.

Can you just talk about whether there was any human factor work.

That needs to be done and I guess the question here is with a quick turnaround do you do you anticipate.

And an FDA action target action.

Sooner rather than later in 2020. So you can just help us understand what might be any issues there.

Thanks.

Sure Let me, let me start with the glucagon question and you're right. We think that some of that market will very likely shift to some of the newer entrants. However, right now we're in a position where our prices lower than those other entrants and that we believe that some people have more costs cost conscious effort.

It's hard for us to say exactly what percentage will move over to our our product and what percentage of the new Scripps will go to the other products, but we believe that this provides a significant opportunity for the company to potentially increase sales next year.

As of as for the second question is I'd like to turn that over to Tony Marrs, Yeah to answer that one.

Yeah, Hi, as far as the ANP 002 goes.

It is not related to a human factor study or any device related issue I'd say more so.

So it would be a label type issue and as far as the Fda's.

Turn on when their action date is it's difficult for us for Derik. So of course, we always want to have a speedy turn time, but.

But we're not really.

I can't really predict when it might be for them.

Okay. That's helpful.

Via trusts disclosed that they have a glucagon product that's in the queue.

At the FDA. So you know, let's suppose there is competition there how does that play.

Playing through your long term thinking about.

Youre glucagon opportunity.

Well I think I think we're in a good position because we're there now and you know we have an opportunity as the.

This product is the other competitors discontinue other product we have we have an opportunity to.

Gather market share yeah, and even you know other companies may get approval and you know we can't control what happens in the market, but you know as far as taking advantage of the opportunities we have.

We're we're expanding our capacity to meet the.

Our projected what we think the demand might be and take advantage of the opportunity we have now.

Alright, thanks, guys.

Yeah.

Thank you. Our next question is from Serge Belanger with Needham <unk> Company. Please proceed with your question.

Hey, good afternoon, a couple questions first on <unk>.

Can you talk about recent trends I think you mentioned there was some seasonality in the third quarter.

Does that mean, we should expect a significant rebound in the fourth quarter.

And then secondly, maybe just talk about the recent launches of <unk> and based on impressions and what kind of competitive.

Look you're seeing for both these products now that youre on the market.

Yes.

Oh yeah.

So with private <unk> yeah, yeah.

Looking at the seasonal trend has been sort of difficult since we launched it you know we had where we had COVID-19.

Situation. So we were trying to read some tea leaves as we progressed through that situation, but now we are seeing a little more seasonality with that project are more clear clearly seeing seasonality with that product and as we move into the fourth quarters are always tend to be pretty good on <unk>.

<unk>, So I think we're sort of expecting a little bit of a rebound there yeah.

Yeah, just to kind of if you take a look at the seasonality on the private team last year. The third quarter was the lowest quarter and the fourth quarter was the highest in so we're expecting something that'll probably follow that.

That trend again and as far as the recent launches go.

Watch both of those products into competitive markets haven't gained as much market share as we thought but we do see some opportunity for growth.

And both of those products going forward.

Okay.

Yeah.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question too.

Our next question is from Elliot Wilbur with Raymond James. Please proceed with your question.

Yeah.

Just want to go back to your earlier commentary around glucagon. It looks like the company currently has around 65% share of injectable units. So as you think about the balance not being able to be supplied or.

Chosen that'd be supplied by some of your competitors.

What are some of the supply chain limitations that would prohibit.

Prohibit you from capturing a significant portion of that.

Balances at API or finished capabilities or do you not really see.

Any limitations on that.

Couple of the products, where you had over performance at least versus.

External estimates.

Some of it seems to me.

Primarily due to price epinephrine and <unk>.

If I turn a diode.

Just wondering if you think that with the recent price increases or pricing levels.

Levels on those products that.

Run rate in the quarter for both is relatively sustainable going forward.

Okay. So let me take.

Take the glucagon question first so.

ATI is definitely not an issue we have plenty of that right now there is an issue though of our capacity so.

So we have to in order to take on much more volume.

Volume, we will need to increase our capacity, but we already had been planning for that from earlier in the year and so we believe that by the end of the first quarter, we will have the ability to have the capacity.

Take as much of that share of that market is as needed. So so yes, so not in the fourth quarter not really in the first quarter, but after that we think we will have.

A very large capacity increase and on the second thing the over performance.

The IP and the Phytonadione generally the phytonadione is not to seasonal and we're.

I don't see any pricing more of a price increase there we have taken some in the past on that product epinephrine is one where there have been shortages.

From our competitors and there continue to be shortages for our competitors and we see those shortage is continuing well into 2023 at this point.

One additional question on 008 can you just talk about regulatory hurdles there.

With respect to potential.

<unk> inspection.

Is there already.

Tony do you want to handle that one.

Yeah sure from a regulatory hurdle, it's just a it's a sciarra with first year I'll refer to Steve for the products.

It's something that we view as relatively simple, but it's kind of.

Part of the complexity of the product that is.

Something that we don't think will take us very long so we're anticipating to have.

In this quarter our resubmission.

To respond to that sciarra on as far as the inspections go we're not anticipating those.

Any additional inspections, we've gone through a number of inspections already for.

On our for example, our clinical trial.

Besides that we did our clinical trials and we've had a recent GMP inspection that the manufacturing facility and when we went through the initial stages of the application and they chose not to do an additional inspection there. So we don't anticipate an additional one.

Yeah.

Okay.

Yeah.

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.

Again, I want to thank everybody for joining us today, we have an exciting ended the year end 2023 ahead of us with the glucagon market development. In addition to our upcoming.

<unk> date, we look forward to updating you all in the next call.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Okay.

Yeah.

Yeah.