Q1 2023 Amphastar Pharmaceuticals Inc Earnings Call

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Ladies and gentlemen, thank you for your patience. Please remain on the line your conference will begin momentarily, Okay and we do appreciate your patience. Please remain on the line your conference will begin momentarily. Thank you.

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Greetings and welcome to the Alpha Star Pharmaceuticals, Inc. First 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 Looking <unk>.

<unk> in the press release issued today and the.

<unk> 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.

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 release. Please note. This conference call is being recorded.

Our speakers today are Mr. Bill Peters, CFO and Mr. Dan Dishner SVP of corporate Communications and Mr. Tony Marrs, EVP of regulatory affairs and clinical operations.

I will now turn the conference over to our host Mr. Dan Dishner SVP of corporate Communications, Dan you may begin.

Thank you Karen good afternoon, and thank you all for joining us for <unk> Pharmaceuticals, 2023 first quarter earnings call.

Joining me today on the call are Bill Peters, CFO , and executive Vice President of Finance and Tony Marrs Executive Vice President of regulatory affairs and clinical operations.

For the first quarter of 2023, I am pleased to announce that anthem has begun another year on a strong note as our continued execution on our portfolio resulted in a $140 million in revenue or a 16% increase on a year over year basis.

Equally important our gross profit for the quarter saw an impressive 32% increase on an annualized basis. Once again, we attribute this success to our key high margin Prime attainment, glucagon and epinephrine product.

Notable increases for sustained growth.

Concerning private team missed in store sales for the product had a 5% growth compared to the previous quarter.

<unk> confident that this product is on its path towards $100 million in annualized sales by the end of 2024 as we continue our strategic investment of an additional $2 million to $3 million in marketing spend in 2023. This investment is already in progress and we are increasing consumer awareness across multiple advertising platforms.

And remain committed to our physician sampling program.

Regarding glucagon, we remain optimistic that with our recently approved capacity increase to which our glucagon output is now doubled we can continue to meet strong demand.

As such glucagon sales have seen a meaningful 134% increase year over year, and a 40% increase in sales compared to our previous quarter for.

For epinephrine, we continue to see significant opportunity for this product due to our previous efforts to increase our capacity to meet the increasing demand despite competitors falling short.

To that end epinephrine sales for our Prefilled syringe and multi dose vials presentation have increased sales by 33% annually.

Again, we acknowledge that this increase is due to our ability to fill the gap left by our other suppliers.

We maintain a positive outlook on this product as a growth driver and its potential to remain durable as one of our key high margin products for the duration of the year.

After covering our key revenue drivers for the quarter I'd like to shift our focus towards our pending business development opportunity product launches pipeline and regulatory activities.

As previously communicated <unk> has signed an asset purchase agreement to buybacks being me from Lilly. This move aligns with two of our strategic goals of expanding our diabetes portfolio, which is currently being developed further this year and strengthening our proprietary products portfolio.

Filling these through strategic go through back semi comes with many advantages primarily the acquisition would add significant scale to amp istar with our future proprietary product offerings, having a solid base of support in the international space. It expands <unk> international footprint in 26 countries and strengthened our internal marker.

Adding capabilities Mauro.

Moreover, this transaction aligns with our long standing disciplined approach to business development, while fulfilling strategic goals.

Our app our assessment of the transaction is that it is progressing smoothly and we anticipate it to closure in the second or third quarter. This year with <unk> potentially being part of our portfolio. We are poised to accelerate our longstanding goals of being a leader in the diabetes therapeutic space and a strong contender in the proprietary.

<unk> market.

Moving forward I'd like to turn our attention to our recent intranasal naloxone approval and launch of a new product in our portfolio for intranasal naloxone. The product was approved in March with an anticipated launch in the third quarter, while we recognize that the market conditions for this product maybe more competitive thus potentially deliver incremental sales.

It is important to highlight that the approval included our proprietary intranasal device technology that we have developed and will be manufacturing exclusive exclusively at our facilities. This development reinforces our unique vertical integrated business model and strengthens our commitment to innovation and quality, we believe it will enhance our.

Intranasal pipeline and potentially strengthen our commercial capabilities.

Unless the product continues to address to address a strong community need to address the opioid crisis in.

In terms of new product added to our portfolio I am pleased to announce that our ragged Denison was recently launched in April <unk>.

Likewise, we acknowledged this product will be enter a more competitive market. Therefore, we expect annualized sales for this product will be incremental compared to our other key revenue drivers.

Having covered our business development opportunity with vaccine product approval and launches I want to turn our attention to our pipeline and regulatory activity for.

For our diabetes portfolio, we are on track to file a BLA for insulin as part of our a M. P 004 by the end of 2023 with our goal of achieving interchangeable status.

Through our carrier paratype Anda or A&P 015, we are on track to respond to the CRM and the second quarter <unk> date, or A&P zero-zero too it remains in the second quarter of this year.

As for AMC, 007 product, which is our second inhalation Anda, we expect filing in the third quarter of this year.

As for our proprietary product in our pipeline <unk> 019, or intranasal epinephrine, we continue to work with the agency on this product as it continues to actively be developed and.

And finally, our A&P 008, Anda product remains on track for a third quarter could do per date.

As a final point wed like to reiterate how excited we are about the upcoming opportunities ahead of us as 2023 has been off to a great start in terms of sales performance pending <unk> filings and our diabetes and proprietary products portfolio or possibly gaining momentum with vaccine and our first interchangeable biosimilar insulin <unk>.

L. A being filed at the end of this year I will now turn the call over to our CFO and executive Vice President of Finance Bill Peters to discuss the first quarter's financial results and provide further details regarding the vaccine <unk>.

Thank you Dan sales for the first quarter increased 16% to $140 million from $124 million in the previous year's period, glucagon sales increased 134% to $25 $7 million from $11 million to do.

Our kit demand.

Epinephrine sales grew to $20 1 million from $15 $2 million, while lidocaine sales grew 29% to $13 6 million from $10 6 million.

In the first quarter of.

2020 on both strong unit demand.

Privacy Mis saw sales declined 5% to $23 5 million from $24 7 million.

What we saw in store growth of 5% in the quarter. So we believe this is a timing issue.

Diane sales dropped to $7 7 million from $10 5 million as a new supplier entered the market.

Sales of other products in our finished pharmaceutical product portfolio grew 13% due to higher unit volumes of textures and a full quarter of sales of <unk> and vasopressin, which were both launched in 2022.

Insulin API sales grew to $4 million from $3 8 million in the prior year, primarily due to the timing of shipments.

Margins increased to 53% of sales from 46% due to increased sales of high margin products, such as glucagon on epinephrine as well as sales of <unk> and vasopressin. These trends were partially offset by higher labor and material costs.

Selling distribution and marketing expenses increased to $7 1 million from $5 $5 million, primarily due to increased advertising costs.

General and administrative spending increased to $13 5 million from $12 $5 million due to.

<unk> cost related to our planned acquisition of vaccine me.

Research and development expenditures increased to $19 8 million from $16 $2 million.

Due to increased labor costs increased expenses related to clinical trials for insulin and inhalation programs and purchases of materials and components for our pipeline.

We anticipate these expenditures will continue this upward trend in the coming quarters.

Non operating income was $100000 for the quarter compared to $7 $4 million in the prior year's first quarter, when we booked a $5 $4 million gain for legal avoidance cost in relation to our ruggedness and patent litigation.

The company reported net income of $26 million or <unk> 50 per share in the first quarter compared to net income of $24 3 million or <unk> 47 per share in the first quarter of 2020 to.

The company reported an adjusted net income of $32 1 million or <unk> 62 per share compared to an adjusted net income of $24 6 million or <unk> 47 per share in the first quarter of last year a growth of 31%.

Adjusted earnings exclude amortization equity compensation impairments of long lived assets and one time events.

In the first quarter cash flow provided by operations was a very strong $44 million. We used a portion of this cash to repurchase $8 million of treasury stock during the quarter.

As you know, we had signed an asset purchase agreement to buyback Simi from Eli Lilly.

At this time I would like you to give you an update on the progress of this transaction.

We completed our FTC filing on April 28th. Additionally, we are working to finalize the financing for the loan and a revolving line of credit.

As a reminder, we have fully committed financing from a group of seven strong banks.

We are also involved.

Transition planning with Lilly, where we're aligned to take over operations as soon as possible. After closing with a goal of enabling people on insulin to be prepared with a glucose glucagon rescue treatment.

At this point, we believe that we can close the deal either in the second or third quarter of this year.

I will now turn the call back over to the operator to begin Q&A.

Thank you ladies and gentlemen, the floor is now open for questions.

Do I have a question. Please press star one on your telephone keypad at this time again, if you do have a question or comment. Please press star one on your telephone keypad at this time, please hold as we poll for questions.

And we will take our first question from Tim Chiang from capital One. Please go ahead Kim.

Alright. Thanks.

Maybe you could talk a little bit about glucagon, obviously, you did really well in the quarter with that product.

Sustainable do you think to go work on sales run rate.

We will be this year could you make some comments about that I mean is this a 25% to $30 million a quarter type product.

Yes, we believe that this is going to be the run rate for the rest of the year and just keep in mind that we were able to build up inventory of the product going into the quarter, knowing that we're going to have increased demand this quarter, but we did not have the doubling of the capacity online till the end of the quarter. So our operations did a great job of it.

Getting getting the inventory builds in writing.

<unk> for the quarter and now that we have that additional capacity, we're able to meet that demand on an ongoing basis.

And maybe just one follow up $53, 54% gross margins you guys did this quarter is that sort of also.

Adequate run rate.

Going forward for gross margins.

So for the year, we had said that we'd be relatively flat from last year, but it's going to be I think close to that range like in the 50% to 53% range is a good number to look at for the for the year for the rest of the year.

Okay great.

Great quarter.

Thanks, Tim.

Yeah.

Thank you and we will take our next question from David <unk> from Piper Sandler. Please go ahead David.

Hey, Thanks, So just a couple.

For me one on <unk>.

<unk> can you just talked about.

The weakness there at least on the on the volume side.

And then secondly on.

Shortages I know this is something that will be recurring feature where youre benefiting from from shortages. It looked like it was.

Maybe perhaps larger this quarter than others. So how are you thinking about contribution.

Some products are benefiting from market shortages.

External says as the year.

Progresses can you quantify that.

That.

And then sorry, if I missed this but glucagon.

Yes.

Can you say, what the mixes between institutional and non institutional.

As I noted that the institutional setting as a diagnostic with something you were prioritizing and.

In the context of the expanded capacity so just talk about.

Where youre getting your.

Your orders from regarding glucagon. Thank you.

I'll take the first one on the private team and.

What what I had mentioned was that while our sales our unit sales were down in the quarter. We saw the in store data from the retailers actually was up 5%. So I think it's primarily a timing issue just when when orders went out and maybe they got a little bit more in the fourth quarter then.

Than they normally would have or just lowered their inventory levels during the quarter, but while we keep an eye on is really that in store volume to make sure that that's trending upwards and it did continue to trend upwards, even with the price increase that we instituted during the year. So.

Maybe it's possible that some some of the retailers bought a little bit more in December knowing that we were increasing the price.

In January .

The shortages side, yes, I think there might be some we did spike up a little bit in FTE, and lidocaine and and there is definitely a possibility that some of those numbers come down in the second half of the year, but probably.

They'll keep that level for at least some time also seeing we're still seeing strong demand for the dextrose as well so.

And as we've always said here you know we increased our capacity a few years back to be able to take advantage of these shortages and demand and we have the ability to move production to different different products, depending on where that demand is coming from at any time.

Like I said this quarter it was epinephrine lidocaine and dextrous I'm not sure where it will be next quarter, but.

It is almost certainly coming from somewhere.

And Luke.

I don't have the data here on the institutional versus non institutional banana.

Get me an email I'll see if I could follow up with Jacob on that.

Okay. Thank you.

As a reminder, that star one if you do have a question or comment.

Okay.

Okay.

And there appear to be no further questions at this time I would like to turn the floor back over to management for closing remarks.

Yes, I want to thank everyone for joining us today, we look forward to updating you on our next call and we remain excited about this year's upcoming opportunities. So thank you again and have a great day.

Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.

Thank you.

Yeah.

Okay.