Good morning, everyone. Continuing on with the Spec Pharma track for the day, delighted to present the management team from Amphastar with us today. We have William Peters, CFO and EVP Finance, and Tony Marrs, EVP Regulatory Affairs and Clinical Operations. William and Tony, thank you so much for taking the time to join us today.
Thank you.
Thanks for having us.
Yeah. So maybe just to kick-start the proceedings, could I request you to provide a brief overview of the business and the outlook that you're seeing to 2024, and if we could drill down into it?
Yeah. So Amphastar is a biopharmaceutical company which is focused historically on complex injectables and really hard-to-do products like inhalation products. We also have Primatene Mist, which is one of our core products as well. We're a company that's growing and also moving into biosimilar products such as the insulin products that we're working on and also proprietary products.
Great. Thank you. Again, as we think about your priorities for 2024, I would want to drill a bit more on your focus on or in your strategic shift from proprietary and biosimilars and what drives the underlying reasons for this and how you would see this playing out?
Yeah. So for 2024, our key priorities are launching four new products. We already have approval for Rextovy, which is our intranasal naloxone product, which we hope to be launching in the next few weeks. Additionally, we're working on teriparatide generic, which we hope we have a good PDUFA date in the second quarter now. And AMP-002, which is an undisclosed, potentially first generic approval of a large branded product. And AMP-008, which is our first ANDA for inhalation products. Additionally, this year, we're really looking to grow our Baqsimi market. We purchased BaqsimiI last year from Eli Lilly, and it's a glucagon product that is, we think, the best product out there for antihypoglycemic. It's an intranasal product, so we really like that delivery system. We're also very big on the generic glucagon side, so it's a market we know very well. One of our goals this year is to really continue to grow that product as much as possible.
Got it. Let's start with the last one, William. I think Baqsimi, recent transaction for you, and you had some time now with the company or with this asset. How is this trending related to your expectations? How is integration progressing along? And speak to us a bit more about the sales for these assets.
Sure. So it's trending just above our expectations, so we're very happy with that. We've begun the transition from Lilly to Amphastar. We transitioned the sales force in the fourth quarter of last year to an Amphastar contract sales force. This quarter, we've already begun transitioning the distribution of the product, which changes the accounting for the product as well. So that's one thing that people have been focused on.
Historically, when we first bought the product from Lilly, they did all the work, and they just gave us what we call a net economic benefit. So it's basically a check for all of the profits that they made off of the product. So right now, we've begun shipping the two-pack in the United States in February, and we plan to distribute the one-pack in the United States later this month. So it's gone very well. Maybe Tony could talk about some of the other regulatory things that we've been doing around the world.
Basically.
Yeah. In the U.S., we've transferred the NDA and gone through the process of that. The U.S. regulatory arena is much simpler than, obviously, the European one. But we did do in Europe, we transferred the market application. So we successfully did that, and we'll start to transition the product after that's done as well. We're going through the renewal process. Every five years, we have to do a renewal.
The timing of it, unfortunately, was almost exactly the same time as we did the MAT, so we had to deal with that. But we're slowly going into some of these other markets. We have Japan, United Arab Emirates. Recently, we went and transferred the application in Canada as well. So it's going good from that perspective. From a global pharmacovigilance perspective, we're also transitioning and have that responsibility. We're partnering with experts in that area to have that PV responsibility.
Got it. Great. And as you continue this transferring and repackaging process, how are you thinking about the overall spend on this during the course of the year?
Yeah. So what we've been guiding for is that the spending on sales efforts and also the G&A spend that we have to do should be about 17% of the sales of BAQSIMI. So that's our goal. That's about what Lilly was doing when they had the product. So that was kind of how we targeted it. And we're going to continue to look at our sales force, and as the product grows, we can grow the sales force as well.
Got it. And so could you also now speak a bit more about the market itself, the market opportunity itself, the broader dynamics within this market, especially with some competitors exiting? And also, the next couple of years, how do you see this market progressing on the glucagon side?
Yeah. So in the glucagon market, we're going to divide it up into really two pieces. And the first is the antihypoglycemic market where Baqsimi competes. And we see Baqsimi growing unitwise at the high single-digit range this year, and we think that can continue for some time. On the other side of the market, which includes the diagnostic, where we sell our current glucagon product, we see the diagnostic market being relatively flat.
And right now, our current glucagon product is about two-thirds diagnostic, one-third antihypoglycemic. So we do see that antihypoglycemic market shifting to the ready-to-use products like Baqsimi because they're better for that indication, and we really think it's really the best product out there for it. So we see those products moving over. However, for our glucagon sales, we're going to pick up Canada this year as well.
So we started to distribute into Canada in the fourth quarter of last year, and we had a small amount of sales from Canada in the fourth quarter. We expect that to ramp up during the year, and that should offset any decline that we have of our core legacy glucagon as sales shift on the antihypoglycemic market in the U.S.
Got it. Thank you, William. I think almost any topic around the glucagon market or overall, it's unavoidable to speak about GLP-1s and the impact of GLP-1s on market dynamics across the board. What do you think of the impact of GLP-1s on the glucagon category over time?
Yeah. So we think that there is a large opportunity there for the GLP-1s, and we actually have a GLP-1 generic in our pipeline. So we definitely see that as a really exciting space. So it can impact the type 2 diabetes market, but we think that it's less likely to impact those who are on insulin, having them go off of insulin.
So what we see there is that only 10% of people who are on insulin are getting a glucagon script, and everybody should be. So we see that 90% as a significant, large, untapped market that we could grow Baqsimi into because those people should be getting a script. So even if that overall market declines slightly, we still see that there's a very vast opportunity for us to penetrate there. So we see this product continuing to grow. We see Baqsimi we've said sales should grow to $250 million-$275 million for peak sales.
And the other thing about GLP-1s is there's so much noise and conversation about it. You turn on the television, you see commercials on it. There's a good opportunity for synergy here, as Bill had said, just awareness of these people that are diabetic, that maybe are going untreated, that are now going to be getting more into the medical community on this and getting treatment for some of this condition.
Part of it is through the GLP-1s and having the GLP-1s help them, but that creates more opportunity for them to need other medications that may be able to help their condition. So there is a synergy that is also associated with that.
Got it. Shifting slightly towards the pipeline part of this, again, a fair amount of pipeline, which is coming with multiple data points or milestones through the course of this year. Talk to us a bit more about the pipeline evolution and how you're thinking about the focus through 2025 as you transition through the shift towards proprietary and biosimilar drugs.
When we first started, the founders of our company are true scientists. When they created this company, they looked at it from a scientific perspective. They wanted to develop injectable products because they saw that that was the opportunity to let some of their science shine. One of the first things they did was purchase a facility that currently had been producing injectable products. That was an IMS. It was called IMS in Southern California. That really taught them how to produce injectable products. It's a sterile manufacturing facility. Through the process of acquiring that knowledge and taking some of those skills, they wanted to expand further into more complex products, complex generic products. The focus shifted to more complex injectable products manufactured in sterile aseptic filling facilities.
Then from there, as they were developing these products, they would come across hurdles throughout the process. As they were developing enoxaparin, for example, the FDA wanted complete characterization of the molecule, which at the time was pretty groundbreaking. They had to do that. They solved that problem and put that into a toolbox. The next thing, the next obstacle for that product was immunogenicity. The FDA asked for immunogenicity studies. At the time, we had no technology for that. We had to learn how to do that. We put that into our toolbox. As we've gone through the process, there were legal. It was a legal case. We had to go through the paragraph IV filing and getting sued and going through the courts and battling that.
So that was another tool that we put into our toolbox. So the whole time, we've been collecting these tools and solving these issues. But having this portfolio of products has given us a strong foundation for being able to expand into some of these branded products. When we developed Primatene Mist, we had to do the full spectrum of clinical trials, phase 1 to phase 3, multicenter trials. We had to do human factor study to develop the labeling for an over-the-counter product. So another tool that we had to add to our toolbox. And at the end, when we kind of took a look at all the tools that we had, it seemed like it made sense for us to get more into branded products. We understood how to manufacture them. One of the things that's always important to us is a good quality system.
Being a U.S. sterile manufacturer, we are inspected by the FDA all the time. Every year, COVID or not, it doesn't matter. The FDA is in our facility. So quality was another thing. But we have all these attributes. It just seemed to make sense for us to go into branded products. And a number of the products like Primatene Mist are branded. And even another technology was biologics. So one of the products that we've been producing for over 10 years was converted in March 2020 during that period into a biologic product. So suddenly, we had a biologic product. So just kind of this pathway seemed to make sense. Get more technology, get more tools in the toolbox and capabilities, and suddenly, we have everything that it takes, and let's just start taking the next steps. And I think Baqsimi is a natural transition for that too.
We had all the infrastructure, and now let's just expand it. Let's go international with it. Let's get a product that we have to develop or contract a sales force for. And all of these are just tools that we keep adding and capabilities. It seemed very natural for us.
Got it. Shifting slightly to the generic side of things, maybe let's drill a bit more into the pipeline. Clearly, I think this is a business which will keep contracting for you as a portion of your revenues as you make this transition. But there are a few select opportunities that we still need to discuss. So maybe starting with AMP-002, how confident are you of resolving this year? And have you had any latest updates from the FDA on this? Where's this at?
Our area of focus on generic injectable products has always been difficult to manufacture products. The difficulty thing in that is the uncertainty of the approval process. We've worked through with the FDA on this product a number of CRLs, and the last CRL action date that they had is nearly a year old. The FDA's allowed not allowed, but congressionally, they've been established that 90% of their applications have to be acted upon within the action date period. They're allowed 10% that miss that date. The FDA's missed their action date, and that happened in April of last year. Really now, with that action date missed, the FDA has not come to us to ask for any new information. They've not asked us to do any new studies or make any rationale for any technical issues.
We are just virtually a limbo with that from that perspective. Now, we keep engaging them. We have conversation with the agency about it. We're trying to see if there's anything we could do to help. But essentially, it's a crystal ball trying to understand when the FDA could act on this. It could be any day. It could be any unknown amount of time.
If there are no requirements that the FDA is asking from you, is it more a question of bandwidth from the FDA side? Would you have an insight there?
Yeah. I wouldn't characterize it as just the FDA not making an effort on it. We're engaging them, and we're having conversations with them. The conversations aren't, "We'll get to it when we can." The conversations are, "Yes, we know you have this date, and we're working on it, and we're doing everything we can do, and we'll let you know." We routinely ask for updates in this. But unfortunately, it's just one of those things where because they've missed the date already and there are no statutory requirements, when the FDA fails to make a decision on a product, that there's any next step for that.
Got it. Maybe I have a similar question on AMP-008, your intra-nasal inhalation product. I have added a CRL, and now in terms of what updates you have, what is the latest visibility into approval? Yeah.
What was that one?
AMP008.
So for AMP-008, we've had the CRL. The action date, and we responded to it. The action date is next quarter. So we remain very confident on this product. The last CRL we received kind of surprised us a little bit. It seems to me it's more of a bookkeeping thing that they had asked for. We responded to it very quickly, gave them what we think is a satisfactory response. And hopefully, we're very encouraged by it. We would expect to see in the next quarter, they would meet their action date in a positive way.
Got it. So the last one that I want to touch upon is AMP-015 teriparatide. Unlike the first two, where it's either a first market or it's a limited product area, there's already some existing generics in the market. So how would the dynamics pan out for you in terms of the market opportunity?
Yeah. So the market opportunity is not as large as we thought it would be a few months ago. But we still see it as a very good opportunity for us, and we believe that we can get a nice market share on this product as well. It's going to be our first pen syringe product that we have approved. So we already have the capacity right there, waiting for this product. So the other thing that it does as we get these other products approved is it adds more throughput through the factories. Therefore, they operate more efficiently. If we have machines that are sitting there unused, being depreciated, they're just cost without any revenue. So this will also help our overall profitability.
Got it. So maybe shifting towards the biosimilar side, help us understand a bit more about the biosimilar insulin opportunities and where they stand right now in terms of regulatory process?
Yeah. The story of our biosimilar entry here kind of goes back a ways. When we were first developing products and going back to the enoxaparin example, when we were sourcing the raw material for it, we went to China to get the raw material. And when we did and we looked at some of the manufacturing facilities for API, we noticed that there were issues with some of the quality. A lot of the facilities that we met with didn't quite have what we wanted. And so we had in our minds at that time to develop our own API facility in China, which is what we've done. So we greenfielded a facility in Nanjing, China. We built it. We brought in our quality system from the U.S. and our quality folks from the U.S. to set that system up.
It turns out, as we were developing these insulin products, having that facility that we could have total control of was very critical to us. The reason is because we could control the quality from that side of it. The finished product manufacturing of the insulin products is not that difficult relative to the development of the API molecule. It turns out the FDA encourages sponsors to have great control of that API manufacturing. So we're able to really start early with engaging the FDA for discussions on the development of these insulin products. We have been for years having conversation with the agency. The agency has encouraged it. There are a lot of guidance documents that the FDA put out encouraging these conversations. We've submitted our first application for the insulin.
The FDA has asked us to refile it, and they've asked us to make some modifications to it. To us, it's very encouraging that they've done this because a lot of the items that they've asked for are ones that we would have seen later on in a CRL. It's essentially them coming to us and deflecting that later CRL and asking us to do a few things. We plan to resubmit that next quarter. Once we have that, because we're manufacturing the API, we've got a number of other insulin products that are in our development program. glargine and human insulin are two others that we have in there that we're developing. We expect that we'll be having those come a new application for those with the agency every year to 18 months. We want to have somewhat of that type of cadence.
Got it. Apart from insulins and insulin analogs, do you see any other biosimilar adjacencies that you think you would like to add to the pipeline on the biosimilar side over the medium term?
Yeah. We don't have any others in mind. But as a company, we're always looking out for these opportunities. We've got the technology to develop these biosimilar type biologic products. And so any opportunities that we see, we would be able to incorporate those.
Got it. It's always been clear that one of your dual growth strategies, of course, is M&A. And so you had Baqsimi now. Do you see or do you have the bandwidth or appetite for M&A in the near future, or is it now in the near term all about Baqsimi and integrating it well? How does your appetite stand?
Yeah. So first of all, our first priority would be growing BAQSIMI and making sure that we have that one solidly on the footing throughout the world first. But at the same time, we do think we have the bandwidth to add something else, especially if it fit well into BAQSIMI. So if it was, say, another product that could be detailed to endocrinologists, we would consider that sort of product. As far as the debt or leverage, our leverage was about two and a half times just at EBITDA when we took on this. And we're moving it closer to almost two right now. And by the time the second quarter ends, we'll have made a payment to Lilly. And we include the payment that we have to make to them as debt, even though it's not officially debt on the balance sheet.
So we include that in our leverage calculation. So once we get that paid, we should be under 2x EBITDA. So I think it's a very comfortable ratio to be at. So I think we could certainly borrow more money if there was the right opportunity. But Amphastar's history is we only want to do something that fits in very well and is very strategic. So we're not out there trying to become the next company that's going to be a serial acquirer. We will do an acquisition if we see the right opportunity at the right price.
Got it. Can I maybe get in a quick couple of questions around the generics industry, though it's a significantly smaller portion for you? Some quick thoughts around the broader industry trends, be it on the pricing side or drug shortages and opportunities for you within that.
Yeah. So on the pricing side, we didn't go through the pricing problems that most of the industry had. Our portfolio is very stable and very broad. And it's very hospital-focused where there were fewer of those issues. So the pricing for our products has been relatively flat, and we see relatively flat going forward with maybe a couple of products where we could increase price and a couple more we might have to reduce price. And as far as the shortage products goes, we've always had shortages for the last 10 years since I've been here. Every quarter, we've had some shortage product or another. A little bit more in this past year with some natural disasters occurring to one of our competitors. Right now, we're the only manufacturer of the prefilled syringe form of epinephrine, sodium bicarbonate, and dextrose.
In the United States, we're the only one making those products. So we're going to keep making those as best we can and try to fill in all the opportunity that we can. But we doubled the capacity for that facility's prefilled syringe unit about five years ago to take advantage of this sort of thing. And I think it turned out very well for us.
Got it. Thank you. We're just out of time, but I'd want to still get one quick question in, a fairly comfortable position as far as leverage is concerned. And BD is a focus, as I said. What are the other capital allocation priorities that you have, and how would you prioritize within this?
Yeah. So we definitely want to return cash to shareholders. So we'll definitely take a look at our buyback program this year. To date, we haven't picked that back up since we did a $50 million buyback in September of last year. But we already have $35 million authorized. And my expectation is that we'll utilize that this year with some of the excess cash. And we also have a very large CapEx program that we have ongoing right now that is going to significantly increase the capacity for the company as we see multiple growth opportunities in the future. So we're definitely long-term focused. We want to make sure that that capital is spent in the right way. And then once we have the excess cash, we will return that to shareholders.
All right. Great. We can leave it here at that note. Tony and William, thanks so much for taking your time to participate in the conference today. I wish you a very productive day at the conference.
Great. Thanks a lot.
Thank you.