Q2 2023 Amphastar Pharmaceuticals Inc Earnings Call
Greetings and welcome to the amphitheater pharmaceutical second quarter earnings call. At this time all participants are in a listen only about a question and answer session will follow the formal presentation. If anyone should acquire 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 I'll look or predictions for future periods are forward looking statements. These statements are based solely on information that is now available to us.
Encourage you to review the section entitled forward looking statements in the press.
Released issue today in the presentation on the company's web site.
Please refer to our S E C filings, which can be found on our web site and the S. A t's website for discussion of numerous factors that may impact our future performance.
We will also discuss certain non-cash measures important information on how to use of these measures measures and reconciliation C. U S gap may be found in our earnings release.
Please note this call is being recorded.
Our speakers today are Mister Bill Peters CFO , Mister Dan Dishner Senior Vice President of corporate Communications and Mister Tony Martin.
Vice President of regulatory Affairs, and clinic operations I will now turn the conference over to your House Mister Dan Dishner Senior Vice President of Corporate Communications, then you may begin.
Thank you Paul good afternoon, and thanks for joining us for our second quarter earnings call. It's 2023.
Joining me today will be billed Peter CFO , and executive Vice President of Finance and Tony Martin Executive Vice President of regulatory Affairs and clinical operations.
Start I'm pleased to highlight the successful completion of our acquisition of vaccine me, which has advanced or diabetes portfolio and added to Empathise strategy to focus on proprietary products Biosimilars and complex products.
We are excited about this acquisitions opportunities and had experienced a smooth transition to date and.
In terms of sales we ended the quarter with $145.7 million in revenue, representing an impressive 18% increase compared to the same period last year.
This quarter stand out performer hasn't been art glucagon injection product, which has achieved an exceptional sales milestone, reaching 27.3 million. This remarkable achievement can be attributed to our expanded market share in this space gaining market share in the diagnostic market and are carefully planned capacity increase.
Resulting in an impressive 131% growth on an annualized basis.
We anticipate the glucagon injection demand to remain durable.
Concerning our other key high margin products that have been usual contributors to our quarterly success primate teen missed an epinephrine sales for the quarter reached $16.5 million and $16.7 million, respectively. We note that our retail in store private teen missed weekly sales maintain a positive growth trend.
At a 5% increase from Q2 of last year, however, retailers have it readjusted their inventory levels, leading to a decline in sales at the factory level.
Sort of epinephrine total sales. We note that this shift was attributable to competitors returning to their normal distribution levels.
Shifting our focus to our other finished pharmaceutical products, especially regarding our products and our portfolio benefiting from competitive your shortages, we have seen a significant increase in sales ending the quarter with a 47% increase.
While we are aware of the recent natural disaster that affected in large sterile injectable facility, we anticipate that hamper star will play a significant role in addressing the nationwide drug shortage, especially regarding products used in the hospital setting.
We are pleased to announce that the F. D. A has recently approved the brand named Toby far Internasal naloxone product. After careful assessment, we plan to delay the launch of this product to the fourth quarter of this year because it utilizes the same manufacturing sweet as products needed to supply the critical emergency products. During this drug shortage.
This will allow us to maximize our current capacity and augment our revenue opportunities with the impacted products.
Having covered our revenue.
Drivers for the quarter I would like to turn our attention to our pipeline and regulatory activities concerning our proprietary biosimilar and complex products.
And a recent development for M. P 002, the action date was not achieved due to unresolved regulatory matters. However, the F. D. A has assured us of their commitment to progress with this application swiftly and remain in positive dialogue and are hopeful of a successful response this product continues to be with.
Put a generic with a plus 600 million dollar market opportunity based on annualized equivalent fails.
For our terror paratype tie tide Anda R. A M. P. 015, we were we responded to the C. R. L and have a good day in the first quarter of 2024 with the standard subsequent quarter could do for date, if an inspection is needed.
With regard to R. M. P 008, inhalation Anda, which is classified under priority review the filing recently received a minor C. R. L. We plan to respond in the third quarter of this year, which we would expect to lead to a late twenties twenty-three action date.
While our second inhalation Anda ANP 007, we plan to file in the fourth quarter.
As for our proprietary product Internasal epinephrine, we continue working with the F D a and progressing with the clinical development.
Turning to our Biosimilars pipeline strategy.
R. A M P 004 product or insulin as part is progressing according to plan and we expect to submit our B L. A with interchangeable status by the end of 2023.
If nothing else this quarter shows the strength of our portfolio of products and the flexibility we have to adapt and take advantage of presented opportunities.
We remain focused on our strategies to invest for growth improve margins in cash flow and stay committed to advancing our product pipeline.
Research and development remain an integral part of our future that we believe will continue to drive growth in.
In summary, we see significant growth opportunities ahead, with new products emerging from our pipeline and we remain committed to delivering consistently strong performance I would now like to turn the call to our C. F O and executive Vice President Finance Bill Peters to discuss the second quarter's financial results.
Thank you Dan [noise].
Sales for the quarter increased 18% to $145.7 million from $123.5 million in the previous year's period glucagon sales more than doubled to $27.3 million from $11.8 million in the prior year, primarily due to continuing straw.
Long market demand has some suppliers discontinued selling glucagon.
Phytonadione sales increased to $17.9 million from $13.4 million in the second quarter of last year as a result of supplier shortages.
Prime martinmas declined to $16.5 million from $19 million in the previous year due to inventory draw down by retailers' sales of private teen Miss continues to grow at the retail level, increasing by 5% in the second quarter.
Lidocaine epinephrine saw sales declines as competitor was returned to these markets.
Our other finished pharmaceutical products category also had strong growth due to a higher unit volume sales of dextrose atropine calcium chloride sodium bicarbonate as well as sales of new products, such as Ghana relics that is oppressing and regular Denison.
Since we closed our vaccine the acquisition on June 30th 2000, twenty-three, we do not have any sales of vaccine me in the corridor. However, Lily recorded sales of $34.9 million up 20% from the second quarter of 2022.
While we usually don't talk about quarterly sales trends through a few items I would like to point out for a third and fourth quarters.
First in the third quarter, we will begin recording a net economic benefit of vaccine me, which will be Lily sales less the costs. They incur on our behalf until we take over responsibility for back see me distribution.
Once we've taken over distribution, we will begin recording salesman expenses as we would for any other product.
We have estimated the impact of vaccine me unadjusted EPS will be 12 to 18 cents in 2023.
Second we plan to launch glucagon injection in Canada in the near future, adding to this product sales.
Finally, we've had to temporarily stop selling our medroxyprogesterone one of our larger products and the other finished firm is still product category, because our API supplier has discontinued manufacturing the product.
Our ANP subsidiary has developed this API and can lead to choose to pursue and approval of the D. M F.
We hope to obtain F D. A approval in the first half of next year.
Which time, we would relaunch this product.
Our insulin API business had sales of $2.8 million down from $3.3 million in the prior year, primarily due to the timing of shipments.
As we've discussed in the past the products, we've launched in the last few years, including glucagon vasopressin, Ganoe relics and regular Dennis and have higher margins in our corporate average while these trends continued this quarter gross margins trapped slightly to 50 per cent of sales in the second quarter of 2023 from 51% of sales in the same quarter last year.
Cause we decided to impair all of our UK product writes intangible assets, which were purchased several years ago, resulting in an impairment charge of $2.7 million. These products were to be made at R. I M. S facility, but given better market opportunities in the U S. We've decided to focus on our U S products there.
Selling distribution and marketing expenses increased by two $6.7 million from $5.8 million, primarily due to increased advertising a privacy and missed.
General and administrative spending increased to $12.3 million from $10 million, primarily because of increased personnel related cos and costs related to the vaccine the acquisition.
Research and development expenditures decreased to $16.8 million in 2023 from $22.8 million last year is spending in the prior year was elevated to do purchases of raw materials and components for R. A M. P O 18, and insulin pipeline products.
Non operating expenses increased to $4.1 million from $1.7 million do do one time costs related to our credit agreement used to finance the back see me acquisition currency fluctuations and mark to market adjustments related to our interest rate swaps.
The company recorded net income of $26.1 million or 49 cents per share in the second quarter compared to net income of $17.3 million or 33 cents per share in the second quarter of 2022.
The company reported a 68% increase and adjusted net income to $34.8 million or 65 cents per share compared to an adjusted net income of $20.7 million or 39 cents per share in the second quarter of last year I.
Just it earnings excludes amortization equity compensation impairments of long lived assets and one time events.
In the second quarter Cashflows provided by operations was $54.9 million, bringing our year to date cash flow provided by operations to $95.3 million I.
I will now turned the call over to the operator to begin Q&A.
Thank you you 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.
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[laughter]. Thank you. Our first question is from Tim Chang with capital. One. Please proceed with your question.
Thanks, maybe maybe just a few questions on the branded side, obviously pack assuming you've just recently closed that product acquisition could you talk a little bit about the marketing strategy with that product when when is the switch over going to happen in the third quarter and do you expect to benefit from.
The new school year without product and then on Prime a teen Miss maybe just talk about do you expect a recovery in sales in the third quarter, given given demand trends.
Yes, so on on the branded side of vaccine me, let me start there right now. This this transition is going in phases. Currently we're in a phase where Lily is doing everything that they were doing prior to the acquisition and that will continue until the end of September [noise].
At that time, we're going to begin taking over the marketing of back see me from from Lily, We've already hired a a contract Ah sales forced to begin detailing that products for us they've begun the hiring process and they're gonna be begin training relatively shortly after that so they can hit the ground running.
[noise] on October 1st.
As far as the school year goes vaccine me is a product that does see seasonal trends with the back to school timeframe, usually resulting in higher sales. So this is our first year, but we've seen in the past that the August September time frame, usually shows an increase in sales of that of that pier.
Weird in the third quarter is usually the peak quarter of the year for that product satisfy missing Miss goes we do expect you know it's hard to say from the second quarter to the third quarter, whether sales will be down up or flat historically going from the second quarter of the third quarter, they've been flat to down slightly.
But you know this you know what we've seen in the trend is each of the last two quarters, we've seen increasing sales at the retail level, but decreased sales at the factory level. So we believe that trend can't continue forever. So at some point.
The destocking that the retailers are doing right now will have to come to an end. So eventually the sales will have to match. The factory sales will have to match the store sells so whether that takes another quarter or two quarters, it's hard for us to say right now, but at some point the sales growth we.
To continue.
And maybe it'll just squeeze it in one follow up you know obviously you were still benefiting from a lot of the supply shortages that are ongoing in the U S. On the generic side I mean are there specific products that you.
Thank you will be able to benefit from outside of the products that you're currently selling at this point.
So I'm not sure what you mean about products from around it that we're not selling at this point.
Because you know this in the shortage area you know there's a lot of products that we have benefited from the past we expect to see those benefits in the future. There's a number of products that right now are the only company selling into the hospital market for at least time being so our plan is to ramp up production of those to help help.
Out the country as best we can.
Okay.
That helps a lot.
Back in the queue and ask another question after [laughter]. Thanks, Tim.
[noise]. Thank you. Our next question is from.
David M. A felon with Piper Sandler. Please proceed with your question.
Hey, Thanks, So you've got a few on glucagon can you talk about the mix between retail and institutional in terms of your sales mix and talk about also have penetrated you are in the institutional setting I'm just trying to get a sense of.
Uh-huh how.
Big this this opportunity to be not talking to that vaccine here just the glucagon injection.
And then secondly on the Oh, so you're all Sir <unk> and can you provide a little more color on the nature of that so you are all.
You know how complex or not complex. The the issues that were raised on there just any color there would be helpful.
And then.
Then on shortage products.
As we moved to the back half of the year, how should we think about the impact of the the damage at the the Pfizer North Carolina facility and how that could how're, you could benefit from that and and and <unk>.
I guess, maybe they are they are the best way to ask it is.
Should we see even more of an impact from shortage products in the back half of the year compared to what we've seen thus far in.
And in the first half of 23.
Let me take the first one which is the glucagon question and the the retail versus the institutional market. The last we looked at was about six over 60 per cent retail for us and so we feel that we have penetrated some of the other market, but I remember our product is slightly high.
Her priced than some of the alternatives and while we think it's more convenient package. The kid is more convenient there are some people that would be annoying to pay that little bit extra for that.
For the Crlf's turned up Tony sure Hey, David four M. P. 008 am is Dan said, it's a minor see around and I think the most notable item on that is we've we've said that our response is going to be in the third quarter. This year so from a.
Laxity perspective in Canada funnel analogy that I use them I think just the the timeliness of our response you should get it I'm indication on the complexity of the Hob Ciara.
And in regards to the shortage products, David Yeah, we actually are anticipating Ah having to pick up some of the yeah. The the work there. So we do think especially in in the products in the hospital setting and the C. D D Biotics well, we should see an increase.
There and that's why we decided to postpone the launch of our Ah Internasal naloxone product.
And while we are gonna see an increase it it won't be too material, because we were already running the Swedes pretty much full out on this so there there is a little bit of room, and we are looking for ways to increase the capacity that we can put pushed through there by doing some small steps to increase things here and there but this is.
Isn't going to be something where we can boost sales by 20 per cent out of that factory. It's it's gotta be incremental because we were already running you know.
Actively full full shifts on on the two lines at that I mess factory that produced product for that and as Dan mentioned. Unfortunately, you know we were playing to to start manufacturing the internet's little locks on Rex Tovia. This this quarter, but we've postponed that because because of the shortage.
That are out there and so we've we've had to stop Ah you know stop that process.
Okay, there's just not glucagon just going back there.
On the institutional piece of the glucagon business.
Can can you say you know how.
Or or quantify what the opportunity is there just on the on the institutional side.
I I think a significant portion of the pick up that we've had there has been on the institutional side. So okay.
So from compared to a year ago cause I remember a year ago. We already had 80 per cent are pretty much the retail market. So you know, let's say, we you know just you know and if.
If you say that we've you know more than doubled so a big portion of that Devlin was picking up some of the retail.
The official site.
That's helpful Alright. Thanks.
It makes it thank you.
As a reminder, if you'd like to ask you a question. Please press star one on your telephone keypad.
Thank you. Our next question is from Tim Chang with capital. One. Please proceed with your question.
Hey, thank some [noise].
Thank you mentioned on a M. P O two there's.
Ah slight regulatory a question that the F. D. A had asked you know is it still possible that you could respond and then.
Get that product onto the market at the end of this year.
Yeah T. I mean, it's not that the F. D. A is waiting for us to respond to anything we haven't had Ah Ah Ah response that we provided to them.
In in some time for that so it it's not that that that that the F. D. A is waiting for us to to do anything the way we have had our conversation with the agency is there assuring us that that they are working diligently on the application.
And we view that as is seeing a path forward with this and we do see this as something that we're very optimistic that we will have a path forward for this and we do anticipate having positive news for for this and it's just based upon.
Dialogue that we're having with the agency and we are hopeful of that.
[noise] I see Oh.
Okay.
And then I guess just back on back Sammy.
I.
I mean, obviously, you're inheriting a lot of the plumbing.
Formulary access Vila Lily is already established for the product I mean is there anything else.
Do you think you'll need to do once the handover occurs around what October .
Yeah. So they they do have you know they they they basically following their playbook and following the actions that they did and plan to keep marketing very similar to the way they did.
We're also working with different groups throughout the country like the juvenile diabetes Foundation and other groups that that are working with them.
Patients with diabetes. So you know where you know you think they've set up a good playbook, we have a lot to learn from them and we're in the process of taking taking what they've done in implementing it here. So we don't expect anything significantly different from what they did.
Got it okay great.
Thank you there are no more <unk> there are no further questions at this time I would like to have the floor back over to dad dishner for any closing comments.
I want to thank everyone for joining us today. The second half of 2023 remains to be a highly anticipated period in terms of our filings I progression of our recent acquisition of vaccine me.
A role in helping address the nationwide drove shortage. In addition to our upcoming launch Fallbrook Sylvie in the fourth quarter.
We look forward to updating you all again and again, thank you have a great day.
This concludes today's conference disconnect your lines at this time, thank you for your participation.
[noise].