Q4 2022 Amphastar Pharmaceuticals Inc Earnings Call

Speaker 1: The conference will begin momentarily. Please remain on the line.

Speaker 2: Greetings and welcome to the Amphis Star Pharmaceuticals 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. 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.

Speaker 2: 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.

Speaker 2: We will also discuss certain non-GAAP measures. Important information on our use of these measures and reconciliations to the U.S. GAAP may be found an hour early.

Speaker 2: Please note that this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO , Mr. Dan Dischner, Senior Vice President of Corporate Communications, and Mr. Tony Mars.

Speaker 2: Vice President of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dischner, Senior Vice President of Corporate Communications. Dan, you may begin.

Speaker 2: Thank you, Paul. Good afternoon and thank you all for joining us today. On the call with me will be Bill Peters, CFO and Executive Vice President of Finance, and Tony Mars, Executive Vice President of Regulatory Affairs and Clinical Operations. Following Bill's financial updates, we will move the call to Q&A where the team will answer your questions. As announced on our press release and financial results published earlier today, we are going to take a short break.

Speaker 2: Our net revenues for the fiscal year have reached a new high at $499 million, reflecting a significant 14% increase with a corresponding 25% increase in gross profit. In the fourth quarter alone, our net revenues hit $135 million. Again, we attribute this success to our high margin products.

Speaker 2: with primatine mist, glucagon, and epinephrine maintaining a solid market share and having demonstrated impressive growth throughout the year.

Speaker 2: On a brief note about Primateen Mist, we still anticipate its sales trending towards $100 million in annualized sales by the end of 2024. We plan to increase our marketing spend by an additional $2 to $3 million, thus bringing our total to the low double-digit millions for the year. We have adjusted the retail price to accommodate higher cost inputs.

Speaker 2: Shifting our focus to glucagon, we have seen a notable 29% increase in sales compared to the previous quarter and a 20% increase compared to the same period. As mentioned in our last call, the changing market dynamics of the glucagon market, both in the retail and diagnostic aid market, have presented a growth opportunity for our generic glucagon.

Speaker 2: Additionally, I am pleased to announce that the FDA has approved our significantly increased glucagon manufacturing capacity, allowing us to double our output and meet the additional market demand. Moving on to the topic of other revenue drivers for the quarter, we are pleased to report that our other finished pharmaceutical products experienced a notable 52% increase in sales compared to the same period.

Speaker 2: This significant growth further validates our ability to meet the increasing demand for these products due to competitor shortfalls. We anticipate that this portion of our portfolio will continue to have residual strength throughout 2023. see you back on the page.

Speaker 2: However, at the same time, we could expect fluctuation as these products are influenced by competitor capacity and unpredictable demand. Nonetheless, we remain optimistic about our growth drivers and their potential growth trajectory.

Speaker 2: Having covered our revenue drivers for the quarter, we can now discuss our pipeline and regulatory activities. To start, I'll briefly overview our proprietary products and biosimilars in the pipeline.

Speaker 2: Our inter-nasal Naloxone NDA received a pre-approval inspection in the first quarter ahead of the PDUFA date. While we acknowledge that public demand persists for this product in a crowded market, we are now in a crowded market.

Speaker 2: We remain encouraged as the potential approval will serve as an innovative platform for our inter-nasal pipeline with our proprietary device. This innovative approach coincides with our time-tested strategy of utilizing our vertically integrated business model.

Speaker 2: Turning to another proprietary product, our inter-nasal epinephrine, we now anticipate filing in 2024 following changes we are making to the product. Regarding our first interchangeable biosimilar insulin filing for insulin ASPART or AMP004, progress for filing is on track and we expect it to occur this year.

Speaker 2: As for our generic pipeline, our AMP008 product, our first inhalation filing, I'm pleased to announce that we have responded to the CRL. With the FDA's granting priority review, we have the new Gadouba Action Date in the third quarter of this year, with a pre-approval inspection extending the gold date to the following quarter. Regarding our second inhalation product in the pipeline, AMP007,

Speaker 2: We now anticipate this filing to occur in the second quarter. Likewise, we now anticipate AMP-027 to be filed in the second quarter. Pivoting to our pending refile and refiled ANDAs, AMP-015 are our generic teraparatide.

Speaker 2: we are seeing progress towards refiling as we anticipate it to occur in the second quarter of this year. For our AMP002 refiling that occurred in the third quarter of last year, our planned GDUFA action date remains in the second or third quarter, depending on a pre-approval inspection, if needed.

Speaker 2: Before I turn the call to bill, I would like to reiterate that 2022 saw sustained year-over-year growth. While we may experience some fluctuations, we can ultimately expect annualized growth from our total portfolio to continue.

Speaker 2: Sustaining and building upon those achievements will require an increase in our investment in R&D, from which we remain on track to increasing our capacity at all of our facilities as we progress closer to filing and approval. I would like to turn our call over now to the CFO .

Speaker 2: and Executive Vice President of Finance, Bill Peters, to discuss the fourth quarter and year-end financial results. Thank you, Dan. Sales for the fourth quarter of 2022 increased 12% to $135 million from $120.9 million in the previous year's period.

Speaker 2: Glucagon led the sales growth with an increase of 19% to $18.3 million from $15.3 million as the discontinuation of the other Glucagon products at the end of 2022 positively impacted demand. Primatine Miss continues to show strong sales growth during the quarter with sales up to

Speaker 2: of $22.3 million up from $21.5 million in the prior year.

Speaker 2: Epinephrine shows strong sales in the fourth quarter amid continued shortages by our competitors, growing to $21.4 million from $18.9 million in the previous year's period.

Speaker 2: Other finished pharmaceutical product sales totaled $33.1 million, up 52% from 2021, as the company recorded stronger sales of sodium bicarbonate, dextrose, and isoproterenol, while benefiting from the 2022 launches of vasopressin and Generelix. API sales decreased to $2.3 million from $2.9 million,

Speaker 2: Pyrimetine mist, glucagon and epinephrine. Selling distribution and marketing expenses increased to $5.5 million from $4.1 million due to increased television, radio and digital expenses for marketing pyrimetine mist and increased freight costs.

Speaker 2: General and administrative expenses were essentially unchanged at $10.6 million. Research and development expenditures were also essentially unchanged at $17.2 million. As an increase in clinical trial expenses for our insulin and inhalation product pipelines was offset by decreasing spending on materials and supplies.

Speaker 2: Non-operating income in the fourth quarter of 2022 was $3.4 million, primarily related to the remittance gain on foreign currency compared to the prior quarter's non-operating income of $2.9 million, which is primarily related to illegal settlement. The company recorded net income of $33.9 million or $66 cents for share, which was up 72 percent and 66 percent respectively compared to the previous years fourth quarter net income of $19.8 million or $39 cents for share.

Speaker 2: The company reported an adjusted net income of $37.6 million or $73 cents per share compared to an adjusted net income of approximately $20.8 million or $42 cents per share on the fourth quarter of the previous year.

Speaker 2: Adjusting earnings excludes amortization, equity compensation, impairments of long-lived assets, and one-time events. In the fourth quarter, we had positive cash flow provided by operations of approximately $15.2 million, and for the full year, cash flow from operations was $89.2 million. In the quarter, the company repurchased approximately $18.1 million in 2018.

Speaker 2: this will continue to grow and benefit from our first price increase.

Speaker 2: We could also have sales contributions from two to four new product launches.

Speaker 2: We expect gross margins to remain flat year over year as a mix of higher margin products will be offset by increased labor and input costs.

Speaker 2: Our selling distribution and marketing expenses will rise as we plan to increase our advertising for Prime 18 Mist, but will remain a constant percentage of Prime 18 Mist sales.

Speaker 2: We expect general and administrative spending to increase but remain a similar percentage of sales. Turning to research and development, we plan to ramp up spending on clinical trials and purchases of material and supplies this year as we increase spending on our insulin portfolio, two inhalation candidates, and our intranasal epinephrine product.

Speaker 2: We also anticipate a significant increase in capital spending this year as we continue our project to double capacity for inhalation products to align with our pipeline development. We plan to finish our Insulin API production capacity expansion at our ANP facility in China this year as well.

Speaker 2: At our Infostar facility, we are in the process of an expansion project that will ultimately quadruple our capacity in Rancho Cucamonga as we look to major insulin and complex injectable opportunities.

Speaker 2: We plan to finance this expansion with cash flows from operations.

Speaker 2: At the same time, we will utilize our strong cash position to continue our stock buyback program.

Speaker 2: At the same time, we will utilize our strong cash position to continue our stock buyback program. I will now turn the call back over to the operator for Q&A.

Speaker 3: Thank you. We will now be conducting a question and answer session.

Speaker 3: If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would 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 key. One moment please while we call for questions. Please press star one on your telephone keypad.

Speaker 3: driving the growth in that line. And then sort of just provide a little bit of color on AMPO2. I noticed that the target action date is in the second quarter. It's only a couple months away. You know, are you guys feeling pretty good about that product leading up to the potential approval date?

Speaker 2: because of our increased capacity that we put on at that factory a couple years ago. Additionally, we had some short-term isoproterenols pick up in sales that was actually stronger than we expected. And the vasopressin and the anorelic sales are also starting to pick up.

Speaker 2: be higher than what they have been previously. However, as we look through all of those products, none of them are reaching the sales levels of the products that we do break out. So that's why we'll continue to include those in the other finished product, other finished pharmaceutical product category.

Speaker 2: Yeah, you want to? Yeah, for AMP002, we remain optimistic about the product. As we've said before, we continue, and we continue to have engagement with the agency dialogue with the agency on the product. So with this second quarter.

Speaker 2: we remain optimistic. And maybe just one follow-up. I think you pushed out the epinephrine intranasal filing to next year. Is that right?

Speaker 2: Yes, that's correct. We engage with the agency and continue to have dialogue with them. They've come back with an additional request for us, and we plan to meet that additional request, and it did unfortunately push our submission date back until 2024. Okay, great.

Speaker 3: Solid quarter you guys. Thank you. Thanks, Dan. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from David Anzalum with Piper Sandman. Please proceed with your question. Thank you.

Speaker 4: Hey, just a few. So first on Blue Cagan, with the higher capacity, you're calling it out as a growth driver for 2020-2030. I guess can you comment on...

Speaker 4: You know, the extent to which you think it's going to grow year over year, I guess, you know, maybe not quantitatively, but just talk about where you see opportunity. There's the hospital setting. There's an added opportunity. What should say, institutional setting?

Speaker 4: and just talk about the trajectory of that product. You also highlighted that suppressant the growth driver 23. It is a crowd in market, so I'm just trying to get a sense of your thought process there. So you can talk about that. And then lastly, on a couple of these filings,

Speaker 4: Can you talk about 007, is that one where that's a P4 and you expect that to be a litigated filing if I'm not mistaken? Just give us a refresher there. And on 0027, what's the underlying grant sale there? And in terms of whether it's a P4 or something else, can you give us some color there? Thanks.

Speaker 2: So I'll start with the Glucagon Market question. As we talked about last quarter, what's really happened is that some competitors have dropped out of the market. And so it's given us the opportunity to expand.

Speaker 2: our share of the market and as long as we can meet it. That's why the expansion of the capacity was so important. The market that we were originally marketing it in and then now with the diagnostic aid market also seeing competitors drop out of it all, also it allows us that opportunity to make a difference.

Speaker 5: that we were already doing.

Speaker 2: Vazipressin. Vazipressin. You know we're just you know we've picked up a little bit of market share over the last quarter and so we're you know it's still not as big a product as we thought it might be a year ago but it's a product that is you know did grow from the third to the fourth quarter and because we only had it for half a year you know we'll have a full year of sales and every quarter should be higher than than it was this quarter.

Speaker 2: So there's definitely growth. That's why that one is a growth driver, even though it's not a large product. It's still going to have, you know, contribute to that growth.

Speaker 2: And I think the third question was on 07. Correct. Yeah, so 07, yeah, that's going to be a P4 filing hard to say about litigation, but that's always a possibility. And 027 that we have a plan filing for this quarter is a relatively small product. So of those two products, the O18 and the O27 that we've adjusted.

Speaker 6: I'm just like...

Speaker 3: Just to clarify. Yep, got it. Thank you. Thank you. There are no further questions in the queue. I'd like to hand the floor back over to management for any closing comments.

Speaker 2: I want to thank everybody for joining us today. 2023 remains on track for 2-4 approvals.

Speaker 2: We remain optimistic about our opportunity to further grow the glucagon market.

Speaker 2: thanks to an increasing capacity in addition to seeing further advancement in our pipeline. We look forward to updating you all on our next call.

Speaker 1: Thank you.

Speaker 3: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.