Q2 2025 Amphastar Pharmaceuticals Inc Earnings Call
Speaker #4: Greetings and welcome to the Amphastar Pharmaceuticals second quarter earnings participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Speaker #4: If one 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.
Speaker #4: These statements are based solely on information that is now available to us. We encourage you to review the session call. entitled, "Forward-looking statements in the press release issued today and the At this time, all presentation on the company's website." Also, please refer to our SEC filings, which can be found on our website and the SEC's website for a discussion numerous factors that may impact our future performance.
Speaker #4: We will also discuss certain non-GAAP measures. Important information on our use of these measures and reconciliations to US GAAP may be found in our earnings release.
Speaker #4: Please note this conference is being recorded. Our speakers today are Mr. Bill Peters, CFO; Mr. Dan Dischner, Senior Vice President of Corporate Communications; and Mr. Tony Mars, Executive Vice President of Regulatory Affairs and Clinical Operations.
Speaker #4: I will now turn the conference over to your host, Mr. Dan Dischner, Senior Vice President of Corporate Communications. Dan, you may begin.
Speaker #5: Thank you, Paul. Good afternoon, and thank you for joining our second quarter 2025 earnings call. I'm ased to share that Amphastar delivered a solid performance in the second quarter of 2025.
Speaker #5: Highlighting the continued strength of our commercial execution, the resilience of our diversified portfolio, and our strategic focus on long-term growth. For the second quarter, we reported net revenues of $174.4 million and a GAAP net income of $31 million, or $64.00 per diluted share.
Speaker #5: On a non-GAAP basis, adjusted net income was $40.9 million, or $85.00 per diluted share. The performance was primarily driven by the strong momentum of Vaccini, which has quickly established itself as a reliable top performer for Amphastar.
Speaker #5: Total revenue for Vaccini increased by 21% year-over-year, the growth reflects our successful integration of global commercialization at the start of 2025. As well as the increase in unit volume and higher average selling prices.
Speaker #5: Additionally, we observed stable performance for Primatine Mist. Indicating consistent consumer demand, turning to our capital investment strategy, we recently announced a significant expansion at our California headquarters aimed at quadrupling domestic manufacturing capacity at that facility.
Speaker #5: In today's geopolitical environment, expanding our US manufacturing footprint is essential to mitigate risks associated with international supply chains. This investment not only strengthens our operational resilience but also supports the advancement of our R&D pipeline.
Speaker #5: Our vertical integrated infrastructure backed by US-based production has long been a cornerstone of our operational excellence. As we focus on maintaining control of quality and upholding high standards, shifting our discussion to our regulatory initiatives, our product candidate AMP002 has been under FDA review for an extended period.
Speaker #5: We have engaged in productive and ongoing dialogue with the agency and value the collaborative nature of these interactions. Based on the progress of our discussions and the feedback received to date, we remain optimistic for a near-term approval and look forward to the opportunity to deliver this important product to patients as soon as possible.
Speaker #5: We continue to advance several additional key regulatory programs. For our AMP007 inhalation filing, we have received additional feedback from the FDA and now inspect and now expect a GADUFA date in first half of 2026.
Speaker #5: We're pleased to report that our teriparatide product AMP015 remains on track and is expected to meet our previously communicated guidance with a GADUFA action date in the fourth quarter of this year.
Speaker #5: As for our GLP-1 ANDA, or AMP018, we are on track to respond to the complete response letter in the second half of this year.
Speaker #5: Additionally, we're incredibly excited about the long-term potential of our insulin aspart BLA, AMP004. As we continue to advance this program with interchangeability as our ultimate goal, while the recent approval of the first interchangeable insulin aspart product triggers a marketing exclusivity period, we view this as a meaningful milestone the entire category.
Speaker #5: The FDA's decision to grant interchangeability not only validates the regulatory pathway but sets a strong precedent that supports the potential for future competing interchangeable biosimilars in the United States insulin market.
Speaker #5: This development underscores the growing importance of accessible and affordable insulin options. A trend we expect will accelerate beyond 2026. Amphastar is exceptionally well-positioned to benefit from this shift, with all US-based finished product manufacturing and a deep expertise in developing and manufacturing complex injectables, we are confident in our ability to be a major contributor in this evolving market.
Speaker #5: We believe the long-term implications of this program could be transformative, both for Amphastar and for the millions of patients who depend on high-quality insulin therapies.
Speaker #5: As we look beyond our core pipeline and diabetes portfolio, we are actively driving Amphastar's evolution into a more diversified, innovation-led company with a growing emphasis on branded and proprietary products.
Speaker #5: Operationally, we continue to balance fiscal discipline with strategic investment. Ensuring our resources are allocated to high-impact opportunities. Our R&D expense rose 14% year-over-year, driven primarily by increased material and clinical trial costs, reflecting our deliberate investment in future growth.
Speaker #5: We view R&D as a critical engine of long-term value creation. That enhances the and extends our commercial capabilities. Looking ahead, our strategy remains firmly anchored in sustainable growth, with a strong focus on advancing our pipeline, both through internal innovation and carefully selected external opportunities that align with our vision and expertise.
Speaker #5: In summary, Amphastar's unique blend of scientific innovation and developing high-quality complex products operational excellence and deep commercial expertise positions us as a standout leader in the pharmaceutical industry.
Speaker #5: We believe that our strategic shift towards proprietary product development supported by an all-US-based finished product manufacturing that bolsters supply chain resilience, and our strong commercial franchise focused on sustainable shareholder value, collectively form the foundation of Amphastar's growth.
Speaker #5: Driven by these unique strengths and disciplined execution, we are well-positioned to confidently accelerate into the next phase of long-term transformative growth. Thank you again for joining us today.
Speaker #5: With that, I'll turn the call over to Bill Peters, our CFO and Executive Vice President of Finance, to walk through the financials in more detail.
Speaker #6: Thank you, Dan. Revenues for the second quarter decreased 4% to $174.4 million, from $182.4 million in the previous year's period. We're proud to share that while revenue was impacted by increased competition in our legacy products, this was largely offset by Vaccini, which recorded its highest quarterly sales since the product's acquisition.
Speaker #6: Vaccini sales grew to $46.7 million compared to the prior year period of $30.9 million. As Amphastar assumed full commercialization responsibilities globally at the beginning of 2025, keep in mind that during the same period last year, Lilly had Vaccini sales of $7.6 million, therefore total Vaccini sales for the period grew by 21%.
Speaker #6: Primatine Mist's sales held steady at $22.9 million in the second quarter, and we are pleased to report that our year-to-date sales have grown by 10%.
Speaker #6: Glucagon injection sales declined 25% to $20.6 million, from $27.4 million. Primarily due to increased competition and a move to ready-to-use glucagon products such as Vaccini, epinephrine sales decreased 42% to $16.2 million, from $27.9 million.
Speaker #6: Due to increased competition on the multi-dose vial and the sales of the prefilled syringe drops due to another supplier returning the market, sales of lidocaine increased 17% to $15 million, from $12.8 million.
Speaker #6: Primarily due to an increase in unit volumes, as a result of an increase in demand caused by shortages from other suppliers during the quarter.
Speaker #6: Other pharmaceutical product sales decreased to $53.1 million, from $57.6 million. Primarily due to a decrease in sales of enoxaparin, dextrose, and sodium bicarbonate. As a result of increased competition, this trend was partially offset by sales of albuterol, which we launched in August 2024.
Speaker #6: Cost of revenues increased to $87.9 million, from $87.2 million. With gross margins declining to $49.6% from $52.2% in the previous year's period, Vaccini sales in the prior year period were recorded under a transition service agreement with Lilly and were booked at 100% gross margin.
Speaker #6: So now that the transition to Amphastar has been completed, cost of revenues for all products shift are included in this line, which negatively impacts margin rates.
Speaker #6: Additionally, pricing declines due to competition for glucagon and our epinephrine multi-dose vial product negatively impact the margins. Because of these trends, management focused on cost control efforts across the business, which mitigated the impact of these pricing declines.
Speaker #6: Selling distribution and marketing expenses increased 14% to $10.2 million, from $9 million. In the previous year's period, due to the sales and marketing efforts related to Vaccini, including the co-promotion agreement with Mankind, as well as sales efforts related to Primatine Mist.
Speaker #6: General and administrative spending increased 5% to 14 million, from $13.3 million. Primarily due to increased personnel-related expenses, research and development expenditures increased 14% to $20.1 million, from $17.7 million.
Speaker #6: Due to an increase in material and supply expenses for inhalation pipeline products, and expenses related to our proprietary projects, non-operating expenses decreased to $2.8 million, from $5 million.
Speaker #6: Due to a decrease in interest expense and currency fluctuations, net income decreased to $31 million, or $64.00 per share in the second quarter, from $37.9 million or $73.00 per share in the second quarter of 2024.
Speaker #6: Adjusted net income decreased to $40.9 million, or $85.00 per share compared to an adjusted net income of $48.7 million or $94.00 per share in the second quarter of last year.
Speaker #6: Adjusted earnings exclude amortization, equity compensation, impairments of long-lived assets, and certain one-time events. In the second quarter, we had cash flow from operations of approximately $35.6 million.
Speaker #6: We used a portion of our cash on hand to buy back $39.2 million worth of shares. These purchases finished our previous authorization, so our board of directors approved an additional $50 million stock buyback program.
Speaker #6: I will now turn the call back over to Dan.
Speaker #7: Thank you, Bill, for the updates. We'll now turn the call over to questions. Operator?
Speaker #8: Well, now we conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Speaker #8: A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset keys.
Speaker #8: One moment, please, while we pull for questions. Thank you. Our first question is from Serge Belinger, with Native and Company.
Speaker #9: Hi, good afternoon. Thanks picking my questions. I guess the first one's for for Bill. I think in the past you've indicated, you expected to be the top line to be flat year over year.
Speaker #9: just curious if those expectations have changed. now that we're, we're halfway through
Speaker #9: what we should expect from Vaccini over the second half of the before pressing the star year, and are you starting to see some of the demand kind collaboration impacts on on those sales?
Speaker #9: Thanks.
Speaker #8: Sure. Yeah. We we still are guiding to flat sales year over year. and we still anticipate that, two products could be approved and contribute to that, to that level.
Speaker #8: So, we're still comfortable with that that flat sales. and secondly, Vaccini, you know, we're still consistently saying that, we, the the guidance that we gave at the beginning of the year, which was high single-digit unit growth and a 3% price increase in the United States, we're right on track for that.
Speaker #8: And, we're really pleased with the strong growth we had in the the second quarter.
Speaker #9: Yeah. And then I guess in terms of potential approvals, AMP02, okay, to ask again, but as your level of confidence, increased or or or changed at all from, the last quarterly update?
Speaker #10: We still remain optimistic about the approval of it. We continue to engage with high-level officials at the FDA and it keeps us optimistic about an approval.
Speaker #9: All right. Thank you.
Speaker #8: Our next question is from Serena Chen with Wells Fargo.
Speaker #11: Hi. Thanks for taking my question. I wanted to ask about AMP018, the GLUP1. I saw that the IQVIA trailing 12-month sales used to be $1.1 billion at the start of the year, and now that's moved down to $400 million.
Speaker #11: So I was wondering how you're thinking about this opportunity especially with the recent CRL delaying approval timelines. Thank ou.
Speaker #10: Yeah. This is one where we think there's going to be a very crowded generic market. So, we expect it to be a relatively small contributor to our sales.
Speaker #11: Okay. Helpful.
Speaker #8: Our next question is from Jason Gerbery with Bank of America.
Speaker #12: Hey, guys. This is Bob and Patel on for Jason. Gerbery, just two questions from us maybe first. If you could walk us through the expected margin trajectory for the second half of the year, and then second on epinephrine PFS, competition.
Speaker #12: Maybe if you could speak to, you know, the the competitive environment has pricing eroded significantly, or is this primarily a market share issue? just the latest there.
Speaker #12: Thank you.
Speaker #8: Sure. So the, expected margin trajectory, we do expect that, the new products that we have will either be at or or above the, the corporate average margin that we have right .
Speaker #8: but, what we are expecting to see is increased price competition on glucagon on a go-forward basis. Therefore, we expect, margins to contract. absent the the new approval launches.
Speaker #8: and as far as epiprefilled syringe goes, that that competition is really baked into the current quarter numbers that we have there. So, you know, the pricing and the unit, drop of of both happened for that we believe.
Speaker #8: and it's been both. It's been both pricing and unit drops that have, contributed to this overall sales decline.
Speaker #12: Thank you.
Speaker #8: Our next question is from Ekaterina Nayakova with JP Morgan.
Speaker #13: Oh, thank you so much. so first question is just on glucagon. Just as you think about, you ow, the revenues for the product from here, is Q2 kind of a good runway to think going forward, or would you ect to see some sequential erosion as we think about Q3 and Q4?
Speaker #13: And then second question is just on your plans to expand your manufacturing capacity. could you talk about, ou know, what motivated the decision? 'm assuming, you know, some of that was probably tariffs.
Speaker #13: and just thoughts on, you know, you could leverage this capacity over time. Thank you.
Speaker #8: Yeah. ay.
Speaker #10: I'll take the first one. And, and no, glucagon is not at a run rate yet. So, while we did have the the, competition come in from one competitor, a second or another competitor was recently approved.
Speaker #10: So our expectation is that they'll unch in the near future. Therefore, bringing down both our units and our pricing on this. So we expect to see glucagon, drop, on a go-forward basis.
Speaker #10: And, and not to mention the fact that the, overall market on the anti-hypoglycemic side of that is shrinking as people move towards, ready-to-use products like our accini as for the expansion.
Speaker #10: It's been in our plans for quite a while to expand here at our headquarters. certainly, the, geopolitical environment is is ripe for us to do that at this time.
Speaker #10: but it is is designed more to, support our pipeline. All the all the products that are currently on file at the FDA are already supported with manufacturing here.
Speaker #10: At our facilities, that we already exist. But for our pipeline, and, specifically our pipeline as we move more into proprietary products and stuff, that's what we're looking at expanding the manufacturing, supporting that.
Speaker #10: So that's the reason behind it.
Speaker #13: Thank you.
Speaker #8: Our next question is from David Amsalon with Piper Sands.
Speaker #14: thanks. Wanted to circle back on the informal revenue guide. Does that contemplate contribution from AMP002 and as a follow-up to to the question on on revenues for for the year?
Speaker #14: How many launches or even if you can say this, how which launches are you are you actually contemplating? Before the end of the year, so that's number one.
Speaker #14: And then number two, why don't I get some more color on AMP007? The extent to which that's going to be a crowded market and how should we think about the size , that opportunity to the extent that, you ultimately get approval next year.
Speaker #14: Thanks.
Speaker #10: Yeah. So for the revenue guide, it does include, you know, we we, I'll say we wait the expectations of these products as we take a look at them.
Speaker #10: And so we, risk-adjust them. and it includes two launches on a risk-adjusted basis of, and those include, 002 and, 015. So, right now, those are the only two that we believe could be approved this year.
Speaker #10: but could we get to that, flat in other ways? We could depending on, competition on other products and also just, the Vaccini growth if that exceeds our expectations as well.
Speaker #10: So, the answer to question. And on 007, as far as the contribution, we don't know of any other, filer or anybody else working on it or close to it.
Speaker #10: We haven't seen anything about it. So as far as we know, we could be the, first approval on that. And if we're the first approval, we think that this has the ential to be a, a significant market opportunity, potentially the biggest in in the, in the near term.
Speaker #14: Okay. Thank ou.
Speaker #8: Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.
Speaker #15: Okay. Well, thank you, Paul. And thank ou, everyone, for joining us today. we look forward to sharing more updates in the near future. have a great day.