Right. Yeah. Okay. All right, perfect. Yeah. Hey, good morning, everyone, and welcome again to the 35th Annual Piper Sandler Healthcare Conference. This is David Amsellem from the pharma team, and we have the team from Amphastar here. So thanks, gentlemen, for joining us. And lots to talk about, so I'm going to dive right in so we can cover as much ground as possible in 25 minutes or so. So you know, I wanted to start off at a high level. Been a pretty transformative period for the company. You acquired the rights to Baqsimi. So I guess with that in mind, how are you thinking about this brand business that you're starting to build and this focus on endocrinology, metabolic?
So how are you thinking about layering in additional assets, particularly that you will have commercial infrastructure supporting Baqsimi, and presumably that sales force can be viewed as a leverageable asset? So I'll start off there, and thanks, gentlemen, for joining us.
Yeah, well, thanks for the invitation. We're happy to be here. Good to see you again. We think the Baqsimi acquisition is transformative in several ways. One is the way you're talking about, is moving us into the branded space and, getting assets that have, we think, long lives and repeatable, consistent, growing earnings.
So that's one of the reasons why we did the transaction. And now that we have the sales force out there, which is both a contract and some internal salespeople as well, we do have a leverageable asset. And we would be interested in acquisitions that would build into that infrastructure. But like in the past, I'll say that we don't need to do an acquisition because we're happy where we are. So we have something that we believe we can leverage both with the sales force in the United States, but also with the international infrastructure that we're now building up as well. So we'll have that, so we can leverage that if the right opportunity comes along.
So you're right. We could be looking at things in the endocrinology space, specifically, that we could utilize that same sales force with, and then use that same international infrastructure with. So it is something that we are interested in, but if we do it, then that's great. But if we don't, we think we have a great company without doing any acquisitions as well, and we're very happy with Baqsimi and our current pipeline.
Yeah, that's helpful. So with the transaction, I think it would be helpful to walk through the capital structure now and how should we think about your longer term, you know, net debt- to- EBITDA targets?
Yeah. So we took on $500 million of debt to close the transaction. Then in September, we added $345 million of convertible debt as well. What we did with the convertible debt was we paid initially down $200 million of the term debt and the term debt, we had swapped $250 million of it into a five-year term and left the other $250 million floating. So we paid down $200 million of the floating.
Then subsequent to quarter end, and at the end of October, we paid down another $50 million of the floating rate debt. So now we only have the fixed rate portion of that term loan outstanding right now. So we wanted to utilize that to lower the interest rate, because the variable rate we were paying was about 7.25% versus the 5.25% that we're paying on the fixed piece. So we've been able to lower that, that piece down pretty well. And then remember, at the same time, we bought back $50 million worth of stock with the, with that transaction. So, we wanted to offset the potential dilution of the convert. And just a reminder on the convert, it's gonna be a net settlement issue, so we're not planning to issue shares for the principal, but the $345 million. So the only way we issue shares is if the, stock price climbs up into the high 60s.
Okay, that's helpful. And long-term, where do you see your net debt-to- EBITDA?
Right now, we consider the $125 million payment that we have to make to Lilly next year. We're looking at that internally as debt because we have to make that payment. So we have the cash on the balance sheet right now to take that out as well. So we're looking to be under two terms, not within about a year or two.
Okay. That's helpful. So, specifically on Baqsimi, can you talk to sales force sizing and the need down the road to expand the sales force and the physician call audience? Just help us understand how you're thinking about that.
Yeah. So we are utilizing both, an external sales force that, you know, contract sales organization, to get that up and running very well, and we have, a couple managers and a nice sales staff there. We haven't wanted to talk about the exact size of that yet, but it is, across the country right now. We wanted to start small and then be able to grow, grow that sales force as we saw opportunities and as the product revenues grew. We didn't want to. What we wanted to do was, as we had mentioned previously, we wanted to keep our selling, general administrative costs for Baqsimi in the same, kind of area where they were with Lilly in their final year.
That was about 17% of sales in 2022. So that's what we're looking to keep that. So we didn't wanna overspend on that because we wanted to make sure that Baqsimi was generating a lot of cash and a lot of earnings. So as the product grows, we have the opportunity to continue to layer on more salespeople on top of that. Additionally, we've brought in a couple new salespeople internally as well, to add to our existing internal sales force, which had previously called on hospitals and GPOs, and we're utilizing them as well to also talk to Baqsimi for those markets and promote Baqsimi that way. So we have increased that internal component as well.
Yeah. Well, what do you... Remind us what your gross margins are on Baqsimi?
Yeah, what we've said is that, we haven't said exactly what they were. But if you take a look at the audited financials, you'll see that they're probably in the 70%+ range.
Got it. So certainly we'll be expanding margins for the corporate. Yeah.
Yeah, another word on the margins is that, what we've said is that there's a component, you know, this is made at a contract manufacturing site, and there's a component of the cost of that that's fixed. So we pay a suite fee because we have a dedicated space just for Baqsimi at the contract manufacturer. So we pay a suite fee. So as the volume grows, that suite fee gets spread over more units, and our cost of sales should be able to come down as well.
What's your thinking about potentially bringing Baqsimi manufacturing in-house down the road?
Yeah, you know, it's something that we took a look at, but this is an extremely complicated, extremely difficult manufacturing process. It's very different from what we do as this is a dry powder. We're, you know, very good in the liquid inhalation and the liquid formulations and the injections. So because it's so specialized, we've decided to keep it at the current contract manufacturer. The thing that we have considered and may do in the future is bring the packaging in-house, because that's something that we could easily do. So we're evaluating bringing that in. Initially, we're gonna have it packaged outside of the company, but we could potentially bring that in, and it's a relatively. We believe we could have some savings there if we do bring it in eventually.
Got it. Okay, helpful. So wanted to take a step back and talk about the glucagon rescue space broadly. Where is the growth coming from? Is it more of a Type 1 diabetes population are you getting? Has Lilly been getting traction in Type 2 diabetics? Just talk about how you expect to drive Baqsimi business going forward.
Yes. So we don't have good data on Type 1 versus Type 2, but what we do have data on is where it's being sold to the rescue or the diagnostic aid. And so-
I'm talking specifically about Baqsimi.
Yeah. So, Baqsimi or glucagon, we don't really have that—
You don't have that, okay.
— that Type 1 or Type 2 data. But what we have seen on the overall, the glucagon side itself... On the glucagon side, we've seen our revenues grow significantly on the diagnostic aid side. That, that's moved away. That's a lot of the growth that we experienced this year.
Okay. And in terms of the Baqsimi side, I know you don't have the data, but what—you know, Lilly at one point thought this was gonna be a billion-dollar asset. So, I guess the question is, what is happening here that ultimately changed, you know, Lilly's view about the opportunity?
You know, there's a couple things going on with that, you know, what they thought the opportunity could be, and I think that that also includes the fact that they launched this into COVID. You know, I don't want to talk about what, what they were doing with it, but I think they had other assets in their portfolio that they saw as being potentially growing much faster and much larger. And so I think that they wanted to invest in those assets. And, you know, in talking to them, they liked this, but it was never gonna be as important as other products were to them, and it just became something of, "It's a nice to have, but we don't really need this anymore."
Whereas for Amphastar, this is our, gonna be our core asset, and it's gonna be our biggest growth, you know, our biggest selling product. So it's very important to us. It's our number one product. We're putting all of our focus, not all of our focus, we're putting a big focus on this, though.
Sure.
So, you know, we think we can, with that focus, that additional focus, we could grow this much, much larger. So Lilly, by the end, you know, last year, they were... You know, this was the, the third product in their bag for their diabetes sales force. So they weren't even talking about it unless they got a question about it. So this change with us, our focus, our salespeople are focused on this. It's their priority. They're going to the doctors to promote this. I think that focus should help that growth.
Okay. So coming back to the glucagon generic, injectable glucagon, you talked about much of the growth coming from the institutional setting. Is there more... or diagnostic setting, I should say. Is there more runway for growth in that setting? Is there more runway for growth in the retail therapeutic setting?
Yeah. I don't think there's significant growth in the diagnostic. I think the market is pretty much stable where it is right now. We're pretty comfortable with that, that stability going forward. What we do see on the anti-hypoglycemic side, the retail side, is that we assume that that's going to decline over time as more people move to the ready-to-use products like Baqsimi. So we think that Baqsimi will steal some of that glucagon, you know, kit market away. But, you know, I think Baqsimi is clearly a better product. It's easier to use, it's faster to use.
It's easier to carry, so it's easier for people that don't understand injections to use because, you know, the person who has an incident might not be able to inject it themselves. You're relying on someone else to inject, you know, to administer the dose to you. So it's just a much, much better product. So we see a lot of growth coming out of that.
So, if I'm looking at injectable glucagon in 2024, is it fair to say that it's on a more mature growth trajectory?
Yes.
Okay, that's helpful. So, competition, potential for competition in, for injectable glucagon. I know Viatris has cited a, a glucagon generic in its pipeline. So how are you thinking about the potential for other entrants here?
Yeah, so we can never tell when other entrants are gonna be approved.
There's always that possibility, and as a generic manufacturer, we have to be prepared for that.
But right now, we have, you know, the capacity to take the market that we have right now and keep that at a steady pace and build some inventory and keep things going. So, we'll be prepared for that, but right now, it's a very difficult product to get approved.
Yep.
One of the most difficult. We're still, you know, three years into our being a generic. There's still no other generics approved, so I think that that shows how difficult it is. We were. You know, I think the product was generic, was off patent for a number of years before we even got approved. It's so... You know, we formed the pathway to get there with our, you know, our good relationship, the good work that we had with the FDA, and now we have the only generic, and I wouldn't be surprised if it stays that way, given the complexity. But, you're right, it's always possible that somebody else comes along.
So, switching gears, wanted to talk about Primatene, which, you know, had a, I guess a, I don't wanna call it an air pocket, but, you know, there was some period earlier this year where volumes were a little soft. It seems like that's recovered. So, you know, looking at where things are now, how are you envisioning growth for Primatene as we move through 2024?
Yeah. You know, Primatene continues to be one of our main products. It's one of our top three products. And so, we stay focused on. And we're still confident that we can achieve the $100 million annual sales in 2024 that we've talked about. Yeah, there was some fluctuation there, but it, you saw it last quarter, it kinda returned back to what we expected, and so, it has some seasonality to it, and we're seeing that more and more as we only have longer data. But, we're still confident with the $100 million next year.
Okay.
Yeah.
Is that your view on, is that peak or, or do you think it could grow beyond that $100 million?
We think it can. We're not ready to project the next milestone, I guess, at this point, but we do think that, and we're still focused on growing that product. Yeah.
Okay. So-
If you take a look at the growth this year, we're in the, you know, 5%-6% growth rate of units at the retail level. So that's down from where we were a couple of years ago when we were growing at double-digit levels. So we think that the growth rate has come down, but we do think this is gonna continue to grow unit-wise. We did take a price increase this year. We don't have any current plans for a price increase, but there's always price increase possibilities as well in the future.
Got it. It's an interesting product in the context of the rest of the portfolio, an OTC consumer health product. Is this an asset that you could be opportunistic on if a consumer health company came knocking on your door?
Well, as we said, it's, it is an important product to us.
Yep.
It also fits that brand portfolio that we're trying to build. It is unique, because it does provide, and it, it is the only FDA-approved over-the-counter asthma medication. So, we're focused on growing it, but... keeping it in-house. But that doesn't mean if there wasn't an opportunity, we, you know, looking at the whole business overall, that is our main goal of growing the business overall. So if an opportunity did come up, we would take a look at it.
Okay. So let's switch gears to talk about injectables and particularly the products on shortage. This has been a recurring theme in the business. Can you talk to the sales impact of shortage products in 3Q? And then looking at the fourth quarter and next year, how should we think about the impact to your business from products that continue to be on shortage?
Yeah. So first of all, you know, I've been at the company over 9.5 years, and every single quarter I've been there, there's been some shortage product that we're not short on, but one of our competitors is.
Sure.
And that we've had to ramp up production or ramp up, sales of for that. In 2019, 2020, we added more capacity. We doubled the prefilled syringe line capacity at our IMS facility, where a lot of these shortage products are made.
We took advantage of that because we had more pipeline coming in, and we wanted to be able to take advantage of those shortages. We have, you know, we've taken advantage of that, and right now it's been great for us because this year the shortage products have probably been a little bit higher than in the past. Right now, we're the only company making three of the SKUs that we produce. Dextrose, sodium bicarbonate, and e pinephrine.
So those first two are in the finished pharmaceutical product line that we show breakout, and the epinephrine is one of the two epinephrines that is in that epinephrine line. So those lines have both been affected or impacted upward because of that. Now, we know that these shortages are supposed to be going on for at least two more quarters. We don't know how much they'll go on beyond that, and beyond that, we don't know if something else will be on shortage because of that. So I think it's unlikely that a 10-year trend just stops immediately.
Yep.
So, we think this is gonna be something that we're gonna benefit from a long time, and that we had the foresight to increase our capacity to take advantage of it.
Yep. Now, you have said previously that you delayed production and the launch of the intranasal naloxone product due to the exacerbation of shortages. When do you think you might start producing intranasal naloxone?
Yeah. We're actually starting to produce some batches now so that we can launch it in the first quarter.
Okay.
Yeah, we're mixing those in. We don't wanna take away too much of the capacity, but our plan is to launch in the first quarter of next year.
Is that gonna be primarily a first responder-type call point?
That's going to be our initial focus.
Okay. Okay.
However, you know, we are looking to do an OTC switch.
Okay. What's your timing on that?
Well, they've been... I'd say our regulatory team has been in conversation with the FDA now, and so, then timing is difficult with the FDA, but it is something we're pursuing.
Okay. So I wanna spend the five minutes or so we have remaining on the pipeline. I'll start generally with a question on just how many filings should we expect in 2024?
Yeah. You know, our strategy has always been try to get two or three each year.
This next year will be the same, two to three. Types of products that we work on are complex in nature or have some complexity to it. Yeah, it's kind of our cadence is two to three a year.
So I'm gonna just sort of reel off specific products, and we can talk about them. First is on the generic of Forteo or teriparatide or AMP-015. We know that Teva, at long last got their approval of their substitutable generic. I think they filed on that in 2016 or 2017. So that was a-
Long time before us.
Long, long journey.
Yeah.
Yeah, but I guess the question here is that: how do you think about the impact to your opportunity on your generic, to the extent you gain approval next year?
Yeah. So we did. You know, as you know, we got a CRL last year, and we responded to it. It was primarily focused on the device, not so much the product itself, so we had to do a device study. We just resubmit that, which we did. We have our GDUFA date, our action date in the Q1.
Hard to say what, how the market. It's a big market, as you know, and also with maybe a generic conversion. Maybe the volume might increase, might not, similar to the glucagon market that we saw. So hard to say where the pricing will shake out 'cause we haven't even got approval yet. First, we're gonna focus on that.
Well, maybe I'll ask the question a different way, because I think in the past, Bill, you've talked about, if I'm not mistaken, in our past conversations, you've talked about if you are the only substitutable generic, the margins here could be brand-like, in large part because this is a fairly expensive product. It's not a volume, high-volume product, but it's got a high price point. So how much does that change margin profile to the extent that you would be the second substitutable generic to enter the market?
So on the margin side, whenever you're the second generic, you have to come in at a lower price to go. So the margins aren't going to be what we thought they could be if we were the only generic, but this is still a very high-margin product. And that we think it's gonna be brand-like margins as a generic, even if there's two or three competitors.
Okay, that's helpful. And then, moving on to... Just, sorry, one last question. So the GDUFA is in the first quarter on teriparatide.
Right.
Remind me, was that your first or your second CRL on that product?
It was our first. But I would say that the items in that CRL were far less than what we've seen in other first cycle CRLs or, and less complex for us, so.
Okay.
Yeah.
So moving on to AMP-002, this is sort of the mystery injectable that I haven't been able to figure out what it is, and I'm not gonna ask you what it is. But any update on that product? And maybe just shed some light on why the FDA didn't take action around the GDUFA earlier this year.
Yeah. We do have. Our regulatory team does have constant contact with them. We do have an assurance from them that they're working through the regulatory process as quickly as possible. Can't give any idea right now what those issues are, but they haven't asked us for any additional data. It's something that they have to work through.
Okay. AMP-008, inhalation product, you did get a CRL earlier this year. I believe you did, respond to that. Can you characterize the CRL and the complexity of it?
I can say with the way the FDA classified it was, it was a minor CRL. But I would also say that this is our first inhalation NDA. So, you know, sometimes when you, when you file, like a, you know, an application and you're first, there might be some questions that you didn't foresee and that the agency is interested in, so we're still working through that. But we do have an action date this quarter.
Okay.
Yeah.
AMP-007, that's another inhalation product. I believe that if you haven't filed on it, you will soon.
Right.
Is that a Paragraph IV, and if so, do you expect it to be litigated?
It is a Paragraph IV. We are planning on filing it in this quarter still on schedule. But as far as litigation goes, we're not. We don't know.
Okay.
We can't.
Would it be a first-to-market opportunity?
We haven't said whether it is or not. Again...
All right, fair enough. All right, now real quick on, insulin biosimilars. Just remind us quickly the filing timeline for the three insulin biosimilars that you have in development.
Yeah. So as we've pointed out, our first one is for, you know, we're targeting interchangeability for all of them, so that's a little different. Our first one is this quarter. And then-
That's insulin aspart?
Yeah, that's correct. Our cadence going forward is probably one a year.
Okay.
Yeah.
So potentially one next year, one in 2025.
Yep.
Got it.
One next year would be, and also an insulin aspart, but that second one, the 70/30 split. Yep.
Got it.
Yep.
Okay.
Yeah.
I know we're out of time, but just very quickly, i ntranasal epinephrine. Just when do you think you're gonna be in position to file on that?
It's a good question. You know, the advisory committee was met earlier this year. There was a lot of information that we were able to, extract from that committee. So it did have us rethink some things, on how we're going to... And so we're just getting that data in. Until we can talk to the FDA about that data, we don't really have a good timeline to make public right now.
Okay. Well, we'll leave it at that. We're out of time.
Okay.
Thanks, gentlemen. Thanks, everyone in the audience.
Thanks. Thanks, David.