Going here with our next company presenter at the BofA Annual Healthcare Conference. I'm pleased to be introducing Amphastar Pharmaceuticals, and Bill Peters, Executive Vice President and CFO, and Dan Dischner, SVP Corporate Communications. My name is Jason Gerberry. I cover mid-cap biotech and specialty pharma. And, gentlemen, thanks for joining us.
Thank you.
Thank you.
I guess coming off of the Q1 update, I guess, how do you feel like the business is performing, kind relative to expectations? I know you don't guide per se, but, just kind curious how you're seeing things come along with, like, the base business and, maybe interactions with FDA is probably the best way to gauge how you're feeling about sort of pipeline developments.
It's still early in the year, but we have quite a few opportunities we look at this year, four to five products that we think we could get across the finish line. Y ou know, we launched our Rextovy product, which is an intranasal naloxone. We launched that a few weeks ago.
We have a goal date for our AMP-008, our first inhalation product. We have that in Q2 this year. Our teriparatide product, we have a Q3, and then our second inhalation, we have one in the Q4. W e're just focused on executing on that pipeline and getting them across the finish line.
How are you thinking about the mix of internal R&D efforts versus BD? When you think about complex generic business model, the one thing in my history is, like, the timing's never very predictable.
And a lot of times you're dealing with areas of maybe novel regulatory science, and there can be, you know, one or two kind CRL-type delays. That's very common, and sometimes the market opportunities can run away from you in these scenarios. And this is a general statement, right?
I guess, you know, as you, with the Baqsimi acquisition, have added a little more predictability to your P&L cadence. I'm just kind curious at a high level before we jump into like, nitty-gritty questions.
It's a good question because it's one way to think about, who Amphastar is, and the great thing about Amphastar is we've got great R&D capabilities. The difficult thing is that you can't always judge exactly when those products will come through, given the complexity of the products that we're working on, whether it be the glucagon product, where it took, you know, people were saying: "Look, you've, you know, you've had four CRLs," or whatever it was.
They were saying: "Are you still working on this?" "Of course, we're still working on this. We're gonna get it to the finish line," and we did. And not only did we do that, but now, three and a half years later, we're still the only generic company that was able to do that, and we were able to do that because of our great R&D capabilities.
Our main reliance is going to be, in the future, on those R&D capabilities. However, we are pushing some of those skill sets that we have into more proprietary products to get the more certainty that we see out of products such as Baqsimi. W e'd really like to build on the success of Baqsimi in that area, so we are going to be looking at acquisitions as well. However, the great thing is that we don't need an acquisition to grow like we plan to grow, so, it's a nice to have rather than a have to have.
I'd like to add that, though it takes longer sometimes with the different review cycles, the payoff is pretty good too, 'cause your life cycle of your product lasts a little bit longer. You know, as Bill brought up, the glucagon product, you know, it's three and a half years ago, we got it approved, and there's still no other generic. So we have a really nice, you know, longer life cycle with these type of complex products.
How would you I realize it's probably very idiosyncratic, but, like, how would you characterize a range of product life cycles in sort of the niches that you play with some of your base business products? Maybe a kind of a tricky question to answer, but versus, say, the typical generic, right, where, you know, the oral small molecule Paragraph IV exclusives are a dying breed. T here are some tough-to-manufacture type of products that maybe have a little bit longer tail.
I think the products that we've brought to market over the last decade show a good variety of those things, such as the glucagon, which we just mentioned, which has been off patent for a long time, and we're the only generic for over three years. I think that that's one end of the spectrum. vasopressin is another one where it's we've got to market with six or seven other players. I t's a much smaller market than we might have hoped for.
We thought it was complex, and so we, you know, we and I think some people were disappointed with the number of competitors there at market formation, but, those things happen. T here's products like enoxaparin, where it was great for a few years, and then it just sank pretty quickly with competition.
W e have the wide range of possibilities, and that does make our business more difficult to forecast than most, which is also why we're also leaning more toward the proprietary products as we go forward. W e have it in our presentation, how we plan to make proprietary products and biosimilars a majority of our pipeline by next year.
I think about a few products like the intranasal naloxone and teriparatide, right? Where maybe the opportunities have shrunken somewhat. And thinking about the glucagon example, like, is there a benefit to just having an ANDA that you could spring to life in a category if something happens, disruption, maybe it's option value, that maybe the value may not be apparent today, but maybe there's going to be. Because there's such few suppliers, and if there's any dislocation, these become future opportunities, or is that maybe too convoluted of a way to think about it?
The way I'd look at it is that's a really hard one 'cause it takes time to get these things approved. You know, you gotta keep on top of your ANDAs. Even if you get approved, you don't launch it, you still gotta... There's administrative work to it.
I just, you know, I think you wanna launch it if you can.
That, you know, we don't when we were getting the R&D, we don't know what the market's going to look like in terms of number of generics. vasopressin, there was more than we expected. regadenoson, there was more than we expected. glucagon, we've been happy with the way it's turned out, and us being the only ones. Then you get a product like ganirelix, which we began selling a little over a year ago.
T hat one is one where there's not that many players. It's not that big a market, but could fall into the type of thing you're talking about, where, hey, if one supplier pulls out, then there's a much more meaningful market for us. Because, you know, going from three suppliers to two suppliers is much different than going from seven to six.
You do bring up a good point about Rextovy, for instance. You know, right now, the market's not too good on Rextovy, but as part of our approval, we got our device approved, which is an all... You know, it's a, it's a unique device. Possibly, that device could be used someplace else, some other way. You know, as you brought that up, that got me thinking, yeah, that, that might be part of your question.
Okay. It wasn't, but I appreciate that.
Oh, sorry.
You know, look, the aggregate glucagon business, inclusive of Baqsimi, probably a good place to start, 'cause as a share of revenue and a share of future growth in most models, it's very important business for you guys. H ow do you see the interplay of the generic part of your business and then the branded part evolving over time?
W ith respect to the generic part, I guess it's a two-part question. Players have exited, and I think you're of the view that the non-diagnostic part is going to shrink. So it doesn't seem like a market that people are gonna wanna come into on the generic side in the future.
You can offer your own speculation at that point. It's a big enough market that would attract other people, especially given the high margin for the product. that we have right now. Y ou're right. R ight now, of the glucagon market, we had over $100 million in glucagon sales last year. We're at the point now where about two-thirds of those are going towards the diagnostic, and about one-third is going to the anti-hypoglycemic market, where we have a better, better market share on that segment.
However, that anti-hypoglycemic market is moving toward these ready-to-use products, such as Baqsimi. We think it's a much, it's a much better product for the person that needs to have an emergency rescue medicine, to have something that's available right away and rather than having to reconstitute, the glucagon kit that we have.
We think it just makes sense to move in that direction, so we continue to see that moving that way. And Baqsimi, we think, is the ideal product for that, since it's the only nasal spray that's approved for that indication. W e think it's natural to have that Baqsimi.
The other thing that's great about Baqsimi in that market is that now we're still only 11% penetrated into the people who are getting an insulin script, getting a glucagon script. W hen we purchased Baqsimi, we were at about 10%. We've moved that to 11%, so that's moving along in that direction. Y our current Baqsimi revenues are how much? $100 right now?
Last year, the total Baqsimi sales were about $153 million.
Including the Lilly sales and our sales, Albuterol at the factory level. Remember, we have the accounting issue where we only recognize the net economic benefit that we're getting from Lilly. But if we take the real net sales of the product, whether for Lilly and Amphastar together, it was about $153 million.
To get to your peak aspirational numbers, you basically roughly double that market share of the insulin treated patients. I s that predominantly Type 1, as you kinda like have a peak outlook as you envision kinda what it's gonna take to get there? W ho are the types of patients that you know where that share is gonna come from? How much of it is like maybe patients stockpiling more versus just a more unique patients?
There's two things there. The first thing is that while the younger Type one are relatively well-penetrated already, there is still room to penetrate that further and also to make sure that they continue their compliance as they move into adulthood. What we've seen happen is that sometimes people don't refill those glucagon scripts when they get older 'cause they haven't needed it in a few years or it's because it's a difficult product to carry around.
Currently, the glucagon kit that we sell for that, you know, it's a pretty big size, you know, the size of a large pencil case that you'd have to carry around with you. It's not convenient. It's not easy to use. So if you have a product that's easy to use, easy to transport, so we think that's gonna drive some of the, the long-term compliance of it. Additionally, we think that the Type 2 diabetic market is significantly under-penetrated and that we, we plan to in, in, get further penetration into that Type 2 market.
Type two is kind of bigger, the bigger share of growth, or so to speak? Competitive dynamics with Gvoke, as you think about sort of the branded space You know, do you think we're at kind of a state of equilibrium? Do you feel like there's much fluctuation, you know, in the out years?
I think back to what Bill said, the market is underserved. You know, only about 10% or 11% of people getting insulin are getting a script for glucagon. I think it's still a big market for both of us. Obviously, we think our product is better because it's
It's intranasal. It's not an injection. So obviously, we think ours is better. Our marketing efforts are gonna be focused on, you know, educating and bringing awareness to the need for glucagon.
So focused on growing the category, less about share battles. Okay.
And then this FTC patent issue, maybe if you can just frame next steps, relevance to the extent you think it is?
Relevant at all to the business?
Just taking a step back, we are one of many companies that received a letter from the FTC, questioning the inclusion of a patent in the Orange Book. Subsequent to our earnings call, when we mentioned we had not heard or gotten a letter from the FDA, we have gotten a letter from the FDA now. O nce we get that letter, they've asked us to respond in 30 days.
S hat clock is currently ticking. T he first thing that we did here was we contacted the Eli Lilly attorneys and asked them their opinion on it, and they were confident that the patent was submitted to the Orange Book, and that it was correct and the appropriate and appropriate at the time. T hey're confident in that decision.
However, we've decided to contact our outside patent counsel as well, and they're currently analyzing that for us so that we can see if, see if that decision was correct. The good thing about this whole thing is that, we have a different patent that goes to 2036, which is the formulation patent for- Baqsimi. And to us, that's a very important patent.
This second patent, the one in question, goes to 2038. However, we have a third patent that goes to 2039 that's in the Orange Book. I f we were to remove this patent from the Orange Book, it wouldn't really matter because we have the 2039 patent, which is a combination drug and device patent, as opposed to this 2038 patent, which is in question, which is purely a device patent. W e think that that's. You know, it's, it's- I don't wanna say it's irrelevant, it's just, it's not really the most important thing- to think about because, the other patents are covering us.
Got it. Okay. Maybe last Baqsimi question for me. Just, like, can you talk about how the, the gross margin on a product like Baqsimi stacks up relative to the rest of your portfolio? A s we think about this as, like, a big mix shift towards Baqsimi in the future, how accretive to margin that could be?
This is, the gross margin is significantly higher than our corporate average. However, we do have selling expense in the United States associated with that, so that brings it down to an operating margin that's not too different, maybe a little better than, the corporate average.
The other way to think about it, though.
Well, I guess, is there operating leverage as you grow, though?
There is. T here are two things to do. One, the sales force, while we're expecting to expand it, we think that there's going to be operating leverage as we go forward. I think the sales will grow faster than the sales force.
The sales will grow faster than the G&A expenses that we have associated with this as well. O n the cost of goods side, remember, we have a fixed fee that we have to pay to the contract manufacturer every year as a suite fee to have the equipment and take the use of an entire suite, the filling suite that they have.
As we sell more units of Baqsimi, that suite fee is going to drop on a per unit basis. T hat's fixed over the next several years, that fee. T he cost of goods will come down as we increase the number of units that go through there.
As you grow as a company, I don't know if the increase in distributor fees are material from a gross to net perspective and, you know, as you grow as a company, are there, were there ways to maybe get some added negotiating leverage to drive those down?
That, that's certainly a possibility, but I think that that's a longer term than a scale issue. Because, you know, right now, when we've mentioned this year that we were going to have, a decrease in average price for Baqsimi versus last year because of the increased gross to net challenges, because we're gonna have higher fees than Lilly had.
I f you compare Amphastar to Lilly, that's a huge size difference, with the wholesalers. So can we narrow that gap? Yes, we can over time with continued scale. However, that's not a 2- or 3-year issue, that's a lot of growth, to get to that, to narrow that gap.
Okay. Maybe, shifting gears to your kind of GLP-1 and insulin, strategy. You know, is this a multi-year plan ultimately, with sights and ambitions on the once-weekly GLP-1s, which are much bigger? What's sort of the end game here? J ust wondering, like, how long will it take for this to be potentially like a material contributor to Amphastar as a company? Because obviously, it's massive, right? But I think executing in this space is the big question.
Our initial spot in the GLP space is to do generic for an existing product right now. We do have that capability right now, and we plan to file our first ANDA for a GLP-1 later this year. We're definitely... You know, we have those capabilities.
We have both the scientific capabilities to do the R&D, and also we have the capacity to do that from a factory standpoint. We also have capabilities to make API in our China facility for GLP-1s, and so we plan to do that as part of our growth plan in the future.
Got it. And I guess, you know, when I was phrasing it, maybe it was a little bit overly broad, thinking about insulins. And so with insulins.
I know you have the Humalog program. The goal is to have both short and long-acting insulins over time?
Our first target, though, is insulin aspart. That's our first our, you know, we plan to resubmit our application this year. And to your question about capacity, we, we've already penciled in the capacity for this. You know, it's a big, it's a big unit, I think 40 million units a year or something like that. So we've already. We have the capacity for that.
That do you feel like has been the biggest challenge with other entities that have tried to break into the, you know, fast-acting insulin space, you know, that's not named Novo Nordisk or Eli Lilly?
From a generic standpoint?
From a generic standpoint.
Interchangeability, I suppose. That would be the biggest, the biggest hurdle, because-
Beatrice had interchangeability on, was it Humalog, I think, or, or it was the long-acting, right?
But they struggled to get. That, that wasn't necessarily a guarantee that they got share.
Right. Their initial approval, I think they eventually did get interchangeability, and I'm not sure how that's doing. But interchangeability, you know, the pathway that we're going is a little different than theirs.
They went through using clinical trials, and it was a very expensive pathway, where we're using a more analytical approach using a high purified API approach to show that ours is, you know, the interchangeability is there, it's the same
We believe that is the best way to go about this.
No dual whack pricing strategies. You just go straight fastball, interchangeable, let the payers pull through. You're gonna have to put forward big supply commitments, I imagine, to have a seat at the table.
Absolutely.
That's the plan.
Remind me, timing on that.
Refiling is this year. I think we said second, third quarter. M ost likely, with a product like this, there'll be at least one review cycle, two, two review cycles.
Okay. Let's, let's see, going through, over to, other pipeline programs of interest. We, Forteo is one that, you know, we talked about, I remember about a year ago, and, and things were a little bit different, right? Maybe more generics got approved, we were expecting. I don't even think Teva's launched theirs.
Do you still see that as an opportunity that could be attractive at this point? Or if you secure approval, would it be worth launching?
We do think it's still an opportunity for us. Like, you know, the pricing is good, the margins are pretty good on this product still. Even though there'll be two other generic competitors, yeah, we still think it's valuable, just not as good as it was six months ago. O ur expectation is that, you know, we'll probably be the third generic that's actually launching the product.
I t's not as big a product as it was a year ago, as we talked about at that time, but now it's still a good product for us with a good margin. I t's, you know, definitely worth launching, and we have the capacity. We have two pre-filled pen lines at our facility in Amphastar and Rancho Cucamonga, and right now, neither of them is being used.
We have one that's set aside for the generic Forteo and the other that's set aside for the GLPs and the insulin products.
No challenges manufacturing this product,
Got it. All right, and you mentioned generic naloxone. You had some comments about sort of the market. I believe that this is. Where is this market in terms of migrating to OTC versus traditional, I guess, the more, how the market was structured before in terms of channel, and how you're thinking about playing in this space? You want me to go with that?
Okay. You know, we are applying for over-the-counter this year. I'm not sure what really how the over-the-counter market currently works or how it will work. It seems to be what the other players are targeting as well.
The way we look at it is, our market, where we've been involved in for a long time, is in the first responders and really targeting the first responders. You know, we used to, or we still do, make the injection form of naloxone and supply it to first responders and hospitals.
You know, we, the whole reason we got into the intranasal naloxone was because of the interaction we had with them. W e developed our own intranasal naloxone. We're just, I guess, late to the game because other people have got there, and I think there's, like, 10 or 12 other players already. T here's obviously a lot of price erosion, and it's.
We don't look at it as a real attractive market for us at this time. Although, as I mentioned, you know, we have our own device, which is different than all the other people that are on the market now. So there is some differentiation for us.
Okay. All right, and you mentioned, so with AMP-008, this is a product that you do have an action date on. It's inhalation and undisclosed, I f I recall.
You're not commenting or you are commenting on competitive dynamics of this?
We're not commenting on competitive dynamics of it. We're just, we feel like it's a second quarter action date. Hopefully, we get this across the finish line, and then, we can disclose it at that time.
It does seem like, though, you are calling out AMP-002 as having maybe more attractive current competitive market dynamics and that this could be the first generic in category. If I... Correct me if I'm wrong.
This, AMP-008 is our-
He's saying.
Pivoting.
Sorry, yeah, on equator.
My mistake. 02 is an interesting product. It's been off patent for a long time, and there's no other generic on that, on this product. Our GDUFA date was a year ago. The target date expired a year ago. And so we're still haven't received approval.
We also haven't received a CRL, and we haven't been asked to do anything new on this product. We recently established a new channel of communication within the agency, where we have regularly scheduled meetings with them, kind giving us as much insight as they can give us. We're not 100% certain we understand what the issue is at this time, but they are assuring us that they do wanna get this approve or at least get this application reviewed. I know it's hard to understand.
Yeah. It's hard for us, too.
It's hard for us.
They're giving you feedback that things are progressing, but they're just not taking action.
At higher levels, yeah.
When you talk about new channels, it's you're going to higher levels of the agency for-
I would discussions of the application.
I think that's, that's the good way to classify it, yeah.
How common is this sort of interaction when you get to, like, maybe a cycle or two through of a review?
Well, under GDUFA, the FDA has a target of either approving or denying 95% of all their applications. There's 5% that they don't necessarily need to do, and this product happened to fall into that 5%. Unfortunately, in the statute, it doesn't really address, okay, what happens when they miss their GDUFA date? And so there's nothing statutorily that says the FDA has to do something at any time
The communication channels and opening up a routine, normal communication channel with the agency, I think is really important at this time for moving this application forward, because technically, the FDA doesn't have to do anything.
Going back to what Dan was saying about, you know, the, the 5%, what we had heard from some of the people we've worked with that know the FDA very well, they said most of the time, when they don't make that deadline, it usually means that it's about to happen.
Like, maybe there's a small labeling thing they need to change, that they're not giving you a CRL because they're about to give you an approval or a CRL in a week or two. They just need a little bit of extra time. So when we didn't get any action, our immediate reaction was, "Okay, great. We're gonna get this approved in a couple weeks.
It, you know, as it dragged on longer and longer, it just became more of a surprise to us. Y ou know, we've been trying to work different ways to get to the right people there. Maybe, more straightforward topic, Primatene Mist Can you just talk a little bit about the growth drivers here, right? You know, you don't have any OTC competitive competition from anything, right?
I guess the competition comes from prescription inhalation-type of products, other modalities. I don't know how you'd characterize those competitive alternatives versus sort of the inherent growth drivers, and what gives you confidence that this can still continue to grow?
one of the things that gives us confidence is that, that we see the growth continuing. So we see the, the in-store sales level continuing to grow in that mid, mid-single digit range, t hat we saw last year, and it hasn't really stopped. i t's slowed down from where it was two years ago, but it really hasn't slowed down from where it was a year ago. W e see continued growth at the store level.
T here's definitely a segment of the population that has mild symptoms or mild asthma or intermittent symptoms of mild asthma, that just would rather go to the store and get the product themselves, rather than going to the doctor, getting a prescription from the doctor, and then taking it to a pharmacy and getting it filled. It's just easier, it's more convenient, so that they wanna do it, do it that way.
W e're benefiting from that segment of the population, and we're trying to create awareness and grow the awareness. That's why we've been, you know, increasing our advertising spend slowly over the past, you know, five years that we've had it out there.
Yep. Okay, and then I guess elsewhere in the portfolio, you had some products, I think, that benefited from Pfizer Rocky Mount type of issues. You know, if there was sort of a single supplier that, you know, you'd have on your radar of, could they come back to, you know, full supply and could that present some, you know, maybe disruption within the base business? You know, how would you characterize that? I guess it's, you know, hospital-based epinephrine, lidocaine, these are some of the bigger products.
So, we sell about 12 products that compete with Pfizer's products that come from that facility. And while they have been. You know, right now, we're the only ones selling the epinephrine, dextrose, and sodium bicarbonate in pre-filled syringes. You know, I've been at the company for 10 years now, and every quarter I've been here, there's been one supply disruption or another at that facility.
Going back to when it was a Hospira facility. So it's something that has gone on for 10 years, every quarter, and we expect to continue in some way or another, even if they do get back to shipping some of those products again.
It's a little bit of whack-a-mole, it sounds like. You know, they, they have one issue, they may come back and be more competitive in a category, but then you-
There's something.
You benefit somewhere else All right, and then I guess just lastly, from a M&A, BD standpoint, what is the company appetite to go out. You know, I think you mentioned earlier, you know, no need to kind of rush and go out and do deals per se, but, you know, how actively are you guys scanning the landscape, and what types of assets are most interesting to you?
We're always scanning, and, and we don't have a need to do it, but we would be happy to do another deal that fit in well with Baqsimi, especially something that we could detail to the endocrinologists-
Since we have that sales force there already. I think that that space is, is very good for us to participate in. I f we were going to do something, it would most likely be in that space. You know, we'd only do it if we found the right product at the right price.
Okay. All right, great.
Great.
We're out of time, but thank you, gentlemen, for joining us.
All right. Thank you.
All right.