Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) Q1 2024 Earnings Call Transcript May 8, 2024

Amphastar Pharmaceuticals, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings and welcome to the Amphastar Pharmaceuticals' 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. [Operator Instructions] 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 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 of numerous factors that may impact our future performance.

We will also discuss certain non-GAAP measures. Important information are on our use of these measures and reconciliations to U.S. GAAP may be found in our earnings release. Please note, 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 Marrs, Executive 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.

Dan Dischner: Thank you, Paul. Good day, everyone and welcome to Amphastar Pharmaceuticals Q1 earnings call for the year 2024. We're thrilled to have you all join us today as we reflect on the company's performance over the past quarter. Amidst the dynamic landscape of the pharmaceutical industry, we are eager to share our progress, milestones and strategic insights with you. Thank you for your ongoing support and interest in Amphastar. Joining me on the call today are 2 key members of our leadership team. Bill Peters, our Chief Financial Officer and Executive Vice President of Finance; and Tony Marrs, our Executive Vice President of Regulatory Affairs and Clinical Operations. Let's get started. Amphastar's performance remains robust, evidenced by our impressive financial results.

We are pleased to report a notable year-over-year increase in net revenue, soaring to $171.8 million, making a substantial increase of 23% over the same time last year. This achievement underscores our product portfolios' enduring strength and adaptability amidst an ever-changing environment. As expected, our products such as glucagon injection, BAQSIMI, Primatene MIST and our hospital and clinical use offerings continue to experience steady growth. This reflects their ongoing importance and relevance in the market. Of particular note is the consistent demand trend for our hospital products which we anticipate will remain robust throughout the year. Our glucagon injection saw changes in demand, specifically in the diagnostics sector due to another manufacturer's product availability.

However, our recent entry into the Canadian market underscores our ability to adapt and mitigate market fluctuations effectively. Regarding Primatene MIST, although there have been fluctuations in distribution orders from stores, the product has maintained a steadily positive growth trajectory with consistent weekly in-store sales. Furthermore, we remain committed to achieving the $100 million sales milestone for this product in 2024. Shifting our focus, I'd like to highlight our proprietary prescription product, BAQSIMI, our intranasal glucagon. The transition from Eli Lilly continues as expected which is evident in the 22% year-over-year sales increase compared to the first quarter of 2023. This achievement underscores our proficiency in integrating acquired products into our portfolio and driving growth.

At the same time, the sales also benefited from initial stocking as we started BAQSIMI distribution in the United States. BAQSIMI has swiftly become a cornerstone of our diabetes portfolio, offering patients a convenient and effective solution to severe hypoglycemia. We believe the glucagon market remains underserved with significant growth potential as BAQSIMI continues to be underutilized among diabetic patients. Similarly, our global transition of BAQSIMI has continued to make progress. Our dedication to broadening our capabilities to provide BAQSIMI's accessibility for patients worldwide remains steadfast. Furthermore, we persist in prioritizing investments in sales and marketing endeavors to bolster BAQSIMI's market standing, seizing upon the existing underutilization of glucagon.

Looking forward, BAQSIMI remains a primary focal point for Amphastar and we eagerly anticipate its significant impact on individuals navigating diabetes management. Turning our focus to our pipeline products. Our efforts are directed towards potentially launching 4 to 5 products this year. We are pleased to announce the recent launch of REXTOVY, our intranasal naloxone product. In terms of teriparatide, we have received a minor complete response letter and we anticipate responding to this in the second quarter. Additionally, we anticipate a GDUFA date in the third quarter for this filing, noting that it is still in its second review cycle. Moving on to AMP-008, our first inhalation ANDA has a GDUFA goal date in the second quarter. While our other inhalation ANDA filing, AMP-007 has a GDUFA goal date in the fourth quarter.

FDA has designated this application as a competitive generic therapy. With regard to AMP-002, we are actively engaging in a positive routinely scheduled dialogue with the regulatory agency, with the FDA affirming its commitment to prioritizing the review of this application. In our diabetes portfolio, we are on track to refile insulin aspart or AMP-004 in the second quarter. Additionally, we plan to file AMP-018, a GLP-1 abbreviated new drug application, in the coming months. In conclusion, it's vital to highlight our remarkable performance during the first quarter. The transition and year-over-year growth of BAQSIMI showcase our ability to foster expansion. This achievement underscores our adeptness in integrating acquired products efficiently and reaffirms our commitment to growth.

Beyond BAQSIMI, our diverse portfolio and strategic initiatives position us well for sustained success amidst market fluctuations. With BAQSIMI meeting our expectations and as we anticipate upcoming product launches and continue constructive dialogue with regulatory agencies, we are optimistic about our growth prospectus. Now I'd like to hand the call over to our CFO and Executive Vice President of Finance, Bill Peters, to further discuss the financial results for the first quarter.

William Peters: Thank you, Dan. Revenues for the first quarter increased 23% to $171.8 million from $140 million in the previous year's period. Glucagon injection sales increased 11% to $28.5 million from $25.7 million as we had our first full quarter of sales in Canada during the quarter. Primatene MIST sales grew to $24.2 million in the first quarter which represents a sales growth of 3% from $23.5 million in the first quarter of last year. Epinephrine and phytonadione sales increased 30% and 29%, respectively, due to other supplier shortages for part of the quarter, with epinephrine sales increasing to $26.1 million from $20.1 million and phytonadione sales increasing to $10 million from $7.7 million. Other finished pharmaceutical product sales decreased $1.4 million to $29.2 million due to the API shortage for MPA which caused us to temporarily stop selling the finished product.

This was partially offset by increased sales of other products such as dextrose and sodium bicarbonate as well as newer launches such as regadenoson. BAQSIMI revenues now fall into 2 categories as we began shipping the product in the United States and a few European countries. The first category relates to products we ship directly to our customers for which we recorded net revenues of $13.8 million. These revenues are recorded in our product revenues net line on the income statement. The second category relates to products sold by Lilly on our behalf under the TSA agreement totaling $24.6 million which had a cost of sales and expenses of $10.4 million. This resulted in net revenues of $14.2 million in our other revenues category which corresponds to Amphastar's net economic benefit from BAQSIMI.

Total worldwide BAQSIMI sales were $38.4 million in the quarter, up 22% from $31.4 million in sales reported by Lilly in the first quarter of 2023. We will continue to book revenue on a net basis for those countries where Lilly continues to distribute the product on our behalf. Our own distribution of BAQSIMI will increase throughout 2024 on a country-by-country basis once Lilly has finished their inventory and we have Amphastar labeled inventory available. This will result in an increase in product sales and a decline in the net economic benefit recognized in our net -- in our other revenues. Our insulin API business had sales of $1.7 million, down from $4 million last year as MannKind cut purchases while they qualify the API produced on our new production line.

Cost of revenues increased to $81.7 million from $66.4 million. Gross margins were, essentially, unchanged at 52.4% of revenues in the first quarter of 2024 and 52.7% of revenue the previous year. Changes include increased amortization and depreciation of BAQSIMI assets and an increase in labor and certain component costs. These changes were partially offset by BAQSIMI sales as well as increased sales of glucagon, Primatene MIST and epinephrine, all of which are higher-margin products. Selling, distribution and marketing expenses increased 32% to $9.4 million from $7.1 million in the previous year's period due to the salesforce expansion and marketing expenses related to BAQSIMI. General and administrative spending increased 16% to $15.7 million from $13.5 million due to increased expenses related to BAQSIMI.

Research and development expenditures decreased 14% to $17 million from $19.8 million due to the timing of clinical trials and lower material expenses related to our insulin and inhalation pipeline products as a result of a ramp-up in 2023. Our nonoperating expenses of $100,000 compared to a nonoperating income last year of $100,000 as a $5.2 million gain on our interest rate swap associated with our term loan offset higher net interest expense. Net income increased over 66% to $43.2 million or $0.81 per share in the first quarter from $26 million or $0.50 per share in the first quarter of 2023. Adjusted net income increased to $55.3 million or $1.04 per share compared to an adjusted net income of $32.1 million or $0.62 per share in the first quarter of last year.

Adjusted earnings exclude amortization, equity compensation, impairments of long-lived assets and onetime events. In the first quarter, we had cash flows from operations of approximately $55.3 million. I will now turn the call back over to Dan.

Dan Dischner: Thank you, Bill, for the updates. With that, we will now take your questions. Operator, please open the line for Q&A.

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