Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) Q3 2023 Earnings Call Transcript
Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) Q3 2023 Earnings Call Transcript November 8, 2023
Operator: Greetings and welcome to the Amphastar Pharmaceuticals Third Quarter Earnings Conference Call. [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 company - 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 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, Ex-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 afternoon and thank you all for joining us today on our third quarter earnings call of 2023. Joining me today will be Bill Peters, CFO and Executive Vice President of Finance; and Tony Marrs, Executive Vice President of Regulatory Affairs and Clinical Operations. 2023 has been characterized by maintaining the momentum of our key high margin products by fulfilling our commitment by advancing our portfolio's proprietary biosimilar and complex product segments. In terms of sales, the third quarter ended with a $180.5 million in revenue, representing a 50% increase on an annualized basis with the added net sales of our recently acquired proprietary products BAQSIMI. And the continued strength of our core products specifically glucagon, Primatene Mist, and epinephrine.
Since we closed the BAQSIMI acquisition on June 30, we've been working hard transferring operations in 27 countries worldwide. On October 1, we began marketing the product in the United States using a contract sales force combined with our internal sales team. Around the world, we have signed agreements with third-party logistics and local companies to help us set up the needed distribution networks. We have already transferred the NDA in the United States to Amphastar and we are working on transferring the marketing authorizations in other countries as quickly as possible. We plan to transfer distribution in the United States in the first quarter of next year and other countries as soon as possible after that. BAQSIMI recorded its highest sales ever this quarter, continuing a growth trend we expected.
Due to the seasonality of the product, the third quarter represents approximately 31% of the annual sales. In addition to the commentary on our glucagon and Primatene MIST offerings, the sustained performance of these products from the previous financial quarters is notable, specifically glucagon which generated $29.5 million in revenue, marking a substantial 107% increase over the same period last year. However, we note that glucagon sales peak in the third quarter was due to the increased back-to-school demand and will typically normalize after the seasonal period. As Primatene MIST, the product realized an impressive $24.8 million in sales in the third quarter. This represents a noteworthy 35% increase compared to the corresponding period in the previous year, primarily due to restocking by retailers.
We continue to see unit retail growth in the 5% to 6% range and still project that Primatene MIST will reach the milestone of $100 million in sales by the end of 2024. Regarding our epinephrine and other finished pharmaceutical products, once again, we have been able to capitalize on competitive supply shortages, specifically epinephrine, which achieved a notable 19% increase in sales over the prior quarter and a 4% increase annually amounting to $20.2 million in sales. Our lidocaine product also saw sales growth within our injectable products and shortage registering a 10% increase over the last quarter. This performance reflects our agile response to market dynamics and the strategic positioning of our products to serve unmet market needs effectively.
Our commitment to providing continuity of supply during periods of competitor shortage exemplifies our role as a reliable provider in the pharmaceutical landscape and supports our projection for sustained performance. As we address our adaptive response to evolving market conditions, the launch of [Rexcovit] our proprietary naloxone nasal spray is now scheduled for release in the first quarter of 2024 due to production needs for shortages projects - products. Furthermore, due to the API supplier for our MPA injection having discontinued manufacturing this API, we will have minimal to no sales of MPA over the incurring quarters. We plan to resume manufacturing MPA following the anticipated FDA approval for qualification of the new API, which will be reduced at our A&P facility.
The FDA on authorization will enable us to leverage our in-house production capabilities ensuring a steady supply to meet market demand. I would now like to shift our dialog on the progress within our pipeline and the regulatory endeavors related to our proprietary biosimilar and complex generic products. Regarding the regulatory progress of AMP-002, we acknowledge the delay beyond its initial GDUFA goal date. We are currently engaged in discussions with the agency. The agency remains committed to moving the application forward in the regulatory review process as quickly as possible. There remains a significant market demand for this product, which would represent itself as the first generic in the market niche exceeding $600 million, according to Equivia.
Recognizing the need for generic options, we are dedicated to advancing our dialog with the FDA. For our teriparatide ANDA referenced as AMP-015, as previously stated, we have responded to the CRL. We have a goal date in the first quarter of 2024. This date adheres to the conventional schedule allowing for an additional quarter's extension should a pre-approval inspection be necessary. In reference to our AMP-008 inhalation ANDA which received priority review status. We believe we have addressed the issues identified in the minor CRL. As a result, we have a GDUFA goal date set for the fourth quarter of this year. Concurrently our AMP-007 application is progressing as planned and is scheduled for submission by the end of this year. Regarding our proprietary product intranasal epinephrine identified as AMP-019, we are diligently advancing through the clinical development phases in collaboration with the FDA.
In alignment with our strategic objectives for our biosimilars, I am pleased to report today steady progress with AMP-004, our insulin aspart biosimilar candidate. We are on track to submit the BLA for this product by the end of this year with the intent of securing interchangeable status. In summary, the solid performance and strategic advancement detailed today underscore the strength and adaptability of our product portfolio in response to the competitive and regulatory environments we operate within. Our strong sales growth strategic pipeline advancements and regulatory foresight aligned with our company's sustained growth and value creation vision. We remain dedicated to advancing unmet medical needs as we continue to invest in our high margin products and innovate in proprietary biosimilar and complex products.
We are confident in our ability to capitalize on market opportunities and navigate industry challenges strategically. I would now like to turn the call over to our CFO and Executive Vice President of Finance, Bill Peters to discuss the third quarter's financial results.
Bill Peters: Thank you, Dan. Revenues for the third quarter increased 50% to $180.6 million from $120.1 million in the previous year's period. Glucagon sales increased 107% to $29.5 million from $14.2 million as two suppliers left the market and we experienced seasonally strong back-to-school sales. Primatene MIST sales grew to a new record of $24.8 million in the third quarter, which represents a sales growth of 35% from sales of $18.4 million in the third quarter of last year As retailers replenished their inventories. Lidocaine sales increased to $15.5 million from $12.6 million due to higher unit volumes As a result of continued supplier shortages during the quarter. Phytonadione saw increased competition as sales decreased 47% to $7.4 million from $14 million.
Other finished pharmaceutical product sales increased $14.1 million to $37.7 million on increased sales of legacy products such as dextrose, atropine, calcium chloride, and sodium bicarbonate. And on sales of newer launches including regadenoson, ganirelix and vasopressin. This marks the first quarter revenues from BAQSIMI. We recorded net revenues of $28.7 million, which corresponds to Amphastar's net economic benefit from BAQSIMI. This net economic benefit was calculated based on a Eli Lilly sales of $48.7 million less their expenses of $20 million which included cost of goods, selling expenses, and research and development expenses. We will continue to book revenues on a net basis until we begin distributing BAQSIMI in 2024. This change will occur on a country-by-country basis.
Our insulin API business had sales of $4.2 million, up from $1.2 million last year, primarily due to the timing of orders. Cost of revenues increased to $72.2 million from $61.6 million. Gross margins improved to 60% of revenues from 49% on increased sales of higher margin products such as Glucagon, Primatene Mist, ganirelix, and vasopressin. Additionally, revenues from BAQSIMI reported net of related expenses. Selling, distribution, and marketing expenses increased 34% to $6.4 million from $4.8 million in the previous year's period due to sales force expansion expenses related to BAQSIMI and increased advertising expenses for Primatene Mist. General and administrative spending increased 6% to $12.7 million from $12 million due to increased compensation and expenses related to BAQSIMI, which were partially offset by lower legal expenses.
Research and development expenditures decreased 10% to $16.7 million from $18.5 million due to the timing of clinical trials and material expenses related to our insulin and inhalation pipeline products. Our nonoperating expense of $9 million compared to a nonoperating expense last year of $600,000, primarily due to interest expense and costs incurred for the term loan we entered into to complete the BAQSIMI acquisition and convertible debt issued this quarter. These expenses were partially offset by mark-to-market adjustments related to our interest rate swaps. Net income increased over 200% to $49.2 million or $0.91 per share in the third quarter from $15.9 million or $0.30 per share in the third quarter of 2022. Adjusted net income also increased significantly to $61.9 million or $1.15 per share compared to an adjusted net income of $20.2 million or $0.38 per share in the third quarter of last year.
Adjusted earnings excludes amortization, equity compensation, impairment of long-lived assets and onetime events. In the quarter, we had cash flow from operations of approximately $64.3 million. We issued $345 million of convertible notes in September and used $200 million of the proceeds to concurrently pay down our term loan and $50 million to buy back approximately 1.1 million shares of our common stock. Subsequent to the end of the quarter, we paid down an additional $50 million of our term loan. When we entered into the term loan, we hedged $250 million of the loan by swapping into a fixed rate for five years. At this point, we do not have any more floating rate debt, which will enable us to lower our interest expense in the coming years.
I'll now turn the call back over to Dan.
Dan Dischner: Thank you, Bill, for the update. With that, we'll now take your questions. Operator, please open the line for Q&A.
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