Okay, good afternoon, everybody. Why don't we get started? Thank you for our next presentation. We're excited to be hosting Amphastar. Here with us, representing the company, to my left is Bill Peters, the CFO, and Jacob Liawatidewi, who's the EVP of Corporate Administration, but I think he does everything at the company a little bit behind the scenes. So we're happy to have them both. For those of you who don't know me, I'm Glen Santangelo. I cover the specialty pharmaceutical sector, among some other things at Jefferies, including animal health and healthcare information technology. But with that out of the way, why don't we get started? You know, why don't I kick it over to you, Bill? Well, first of all, welcome. Thank you for joining us. But why don't I kick it over to you first?
You know, with the first quarter press release, maybe only a couple of few weeks old, I still think it's probably a good place for us to start. Briefly walk us through the quarter on maybe some of the headwinds and tailwinds and how the quarter maybe played out or year to date, how things seem to be playing out relative to your initial expectations.
Yeah, right now things are going right along with expectations that we had. So glucagon and critical care products had very strong performers in the quarter, as was Baqsimi, which benefited from stocking of the Amphastar label product in the wholesalers in the United States. So overall, it was a great quarter from where we were.
Okay, all right. Well, maybe let's talk about the margins a little bit, because I think that's what surprised us a little bit when we look at those 1 Q results. I mean, revs came in, I don't know, maybe $2 million below consensus. Not really a big deal, but the EBITDA number was much bigger than I think what we saw in consensus. And so, you know, I know we have Baqsimi sort of rolling through the numbers in kind of a weird way. And so any sort of discussion around the margin in 1 Q and how we should maybe think about that, you know, as we move forward to 2 Q.
Yeah, I think the main, one of the main things there was what you just mentioned, which was the way Baqsimi rolls through. For sales that, you know, as, you know, taking a step back, with Baqsimi, we bought the product at the end of June last year. And originally we were recognizing the revenue on a net economic benefit basis, which basically means the only thing we're recognizing as revenue when Lilly is selling the product is basically their net profit. So that's at 100% margin. So that continued into this year, but in this year with the first quarter, we have a little bit of a hodgepodge, because for part of the quarter, we had sales in the United States that were under that net economic benefit in the United States for the two pack and the one pack.
And then we started cutting over in February to the two pack and the one pack in March. So we had some sales of our own. So I think when you take a look at the way the analysts as a group, you know, forecast, they I think kind of simplified some of their assumptions. And we, you know, people say, hey, you missed your revenue, but I think a lot of them forecasted as if we were selling the top line number for the whole quarter. So the way I look at it was a lot of people say, hey, you missed your revenue number, you missed your Baqsimi number. But I say, no, we didn't. We actually beat our revenue number. We beat our Baqsimi number because of the strong sales we had. And that translates down to the bottom line.
So it's one of the things that made the margin higher in the quarter was that we still had a significant amount of revenues that were booked from Lilly at 100% gross margin. So that was the first driver. Additionally, there were some, you know, single event timing things, such as the R&D spend was a little bit lower than we expected than that we were guiding to because of the timing of certain, the start of certain clinical trials was a little bit later than we expected. So that didn't happen. And then also the tax line in the first quarter with a significant number of option exercises, you know, brought the tax down to a single digit tax rate for the quarter, which, you know, as you know, you know, we guide towards more like a 24% rate for the year on a normal basis.
So that's interesting. I appreciate all the commentary on Baqsimi. I think it's very helpful because it is unfortunately a little confusing for us to sort of model with precision. But in your mind, the Baqsimi number came in a little bit better than you were expecting. And maybe, you know, now that we're sort of a year into it, roughly speaking, you know, can we talk about sort of your long-term peak sales estimates for Baqsimi? I think, you know, in one of your presentations, you've laid out $250 million-$275 million from memory. So, you know, with the benefit of three plus quarters under your belt, like how do you feel about those estimates that you've laid out?
Yeah, we're still very comfortable with those estimates. And we haven't given a timeline for when we will hit those peak sales other than to say it will take us more than five years to get to that level. But we have, you know, right now through the first nine months of owning the product, our sales, our actual sales are actually slightly above our projections for this period of time. So we're very happy with the direction that this has been going.
Can we talk about the margin contribution from that product? I think from memory, we get to a normalized basis in the third quarter. Is that a fair assessment still?
Yeah, so in the third quarter is one of the quarters where most of the countries then will transition over to having Amphastar distribute the product. Right now, we only distribute the product in four countries, but that includes the United States, which is about 80% of our sales anyway. So we're at a point where we're over 80%. So it's going to be close to normalized, but in the third quarter, we plan to cut over most of those other countries sometime during the quarter.
The third quarter, unfortunately, won't be clean. It won't be clean until the fourth quarter.
Correct.
Will the fourth quarter be clean?
It'll be relatively clean. We'll still probably have three countries that are still not being distributed by Amphastar at that time. But generally, I'll say two of those countries are very small. And the third one is Japan, which we're still working on as well. Those probably will not cut over till 2011.
Okay. All right. Maybe let's shift gears and talk about Glucagon. You know, 2023 was a big year. I mean, revenues have doubled in the last year. And so the big question m ark, is sort of the growth outlook from here. You know, low double-digit growth in the first quarter, very good. And so I was wondering if you can sort of, I don't know, basically just give us some high-level thoughts and then we can dig in.
Yeah, so as you mentioned, so last year we were able to ramp up very quickly to basically take the opportunity of Glucagon injection in the diagnostic market. And so right now the dynamic is we always see that the retail Glucagon for antihypoglycemia will slowly convert over to the Novo Glucagon. So we are seeing that basically replaced by Baqsimi or other ready-to-use Glucagon. But then at the same time, we have launched our Canadian distribution. Basically, we started in Q4, but start ramping up in Q1. So we think those will normalize that erosion on the other part. And also in the diagnostic market, we see the other supplier having more supplies for the diagnostic market. So we see some slowdown in there. So overall, I think it will be a flat year for Glucagon injection for 2024.
A flat year for 2024 in terms of Glucagon?
Yeah.
Okay. That's just due to some of the competitive pressures?
Yes, yes. Mainly volume. We don't expect price erosion, but mainly just volume.
Okay. Primatene, I feel like we've been talking about this $100 million number in 2024 for some time. You know, when we look in the first quarter, you know, call it +$24 million, seems like we're relatively on track. You know, there is obviously some level of seasonality around that. And, you know, there's volume and pricing components. So could you maybe unpack that $100 million sort of assumption for 2024 and give us your assessment a quarter and change through?
Yeah, for Primatene in 2024, the growth, basically we are still confident that we'll reach $100 million. And those are mainly through volume growth. So it's not a price increase. The last price increase we took is Q1 2023. And so we are seeing still a good uptake from in-store sales that are reported by our retail pharmacies. And the seasonality of it, these products usually during springtime, which is Q1, and also during cough and cold season, which is Q4. So those are usually the high season where the products demand because that's shipment from manufacturer to the retailers.
Right. So you ship more heavily in one Q, right, ahead of the spring. And you talked about later in the year. So if 1 Q is a big quarter and you're only at $24 million, you still expect, you know, you're comfortable with that $100 million number?
Yes, that's correct. Because last year, I think in Q2, we have some destocking that.
Oh.
Yes. That's an anomaly that we think from overall market.
All right. Maybe just sort of going down the line here, epinephrine, right? This is another one that's very difficult for us to model. You know, you all have benefited from supplier shortages, you know, significant growth, 30% in the first quarter. You know, how do we think about, I mean, the durability of that growth relative to the product shortages in the marketplace? And, you know, I don't know, is there a way for us to frame what's a more normalized growth rate for that through the balance of the year?
Yeah, so if it wasn't for the shortages, we'd have, I'll say, relatively flat growth because it's not a market that's growing. So we have to unpack that in the two different products that we have there. We have the prefilled syringe, which is sold to the hospital market, and then we have the multidose vial. For the prefilled syringe, that's where a lot of the growth came in because we were only competing with one company and then they had a very large supply disruption. So right now, since July of last year, we're the only company that's selling the epinephrine prefilled syringe into the U.S. market. So we expect that to continue into the fall and potentially to a certain extent into 2025.
I'm sorry, that'll extend into 2025?
We believe it will. As of right now, it seems like that one competitor has estimated that they may be able to begin some shipments later in the year, but will not be on a normalized shipment basis until next year.
All right. So, I mean, I guess that's a fairly durable trend this year that when we should see normalization next year is kind of how you characterize it.
That's our expectation. Although on the multidose vial, it is possible that there will be another competitor for that SKU at some point. So we'll remain, you know, we'll watch that one.
Just sort of, you know, rounding out your top five products, let's talk about Lidocaine because it feels like, you know, that's a situation where we had incremental supply return to the market and we saw, you know, we saw negative growth on a year-over-year basis in 1 Q. Any changes in that market?
Yeah, so that's another thing about the lidocaine market is that we saw multiple versions of that. So we're selling the prefilled syringe that's used in the emergency room. We're selling lidocaine jellies, which are used for procedures. We're selling what's called an LOJ. It's a tube that goes down your throat and it's used before an endoscopy to numb the throat. So with all of those different SKUs, there's a lot of give and take one quarter to the next. So there can be some variability and there has been at times shortages of the prefilled syringe. So that's what we've seen from time to time. But right now, that market seems fairly consistent. And I'll say I would expect sales to be relatively flat on a go-forward basis.
Flat. Okay. I'm sorry, maybe just one more question on product categories. Let's talk about the other finished products category. I mean, it was a huge contributor in 2023. Geez, growing 30, wait, let me find the number, 29%. I was going to say 30, 29% in 2023, down 5% in the first quarter. This is 15%-20% of your sales. Could you maybe unpack that category a little bit and talk about why we saw the trend change that we saw?
Yeah, so that category comprises about a dozen different products that are generally our smaller selling products. So there can be a lot of variability within those different products. It also contains some new launches last year when we had regadenoson and ganirelix that had been launched not before that. So, but the big driver of the recent decrease has been the lack of availability of the API for MPA. So we had to scale down our manufacturing of that given the fact that our API supplier discontinued selling that. So we're in the process of converting that API into a facility in China so that we'll make the API there. However, we're not at a point where we can begin making the finished product for that yet. Now that product accounted for over $20 million a year in sales.
What we did when we started running short on API was we consolidated the number of customers that we were shipping to. We cut significantly back in the third and fourth quarter last year to just keep one customer supplying. Eventually we did run out of API and we were unable to ship any more of that in the first quarter. We will not be able to sell that until we can get that supply issue corrected.
Okay. Maybe why don't we shift gears and let's talk about the pipeline. I mean, a number of conversations I feel like have been sort of ongoing. And maybe the first one that kind of comes to mind is AMP-015 teriparatide. You know, there was a minor CRL not too long ago. I think we, you know, why don't I sort of turn it over to you because I think there was a hope at one point that you could have been first to the market here. There have been some generic entrants to the, you know, approved in the U.S. And so where does that stand? And how do you think about the competitive landscape, you know, given that you're no longer going to be first to the market? Do you feel like things have dramatically changed there?
Yeah. So for the market landscape, there are two ANDAs approved and I believe they are in the market. And then there's one authorized generic. So our plan is to continue to get this through the approval and get our fair market share. I think the selling price for these products, it's the contract price is pretty high. So we believe it still provides meaningful returns for the company. Obviously, it's not going to be as good as when we were to be the first generic.
Anything in terms of timing?
We're still on schedule to respond to the CRL in Q2. Because FDA classified this as a minor CRL, so we believe the GDUFA date will be three months after that. We are looking at Q3, Q4 approval.
2Q plus three months. Okay, perfect. All right. Why don't we talk about '02? I feel like this one is also one we've been waiting on with limited information for a while. And, you know, to our knowledge, I mean, I think when we've spoken before, there's been no other generic approved. I don't know if that's still a fair assessment. You know, anything you can tell us about this situation and the impact, for example, this could have on the margins at the company?
Yeah. So, yeah, it's still correct that as of today, there's no generic supplier or either approved or in the market for this product. So we are still very excited about this opportunity. Unfortunately, there's no update on the FDA front other than we still have our regularly scheduled meeting or call with FDA to discuss about this approval.
All right. On a bit of good news, AMP-008 sort of came off the board in a positive way, right? The albuterol sulfate. You know, can you help us understand the competitive landscape here? You know, how many generics have been approved? What's the sales opportunity here? And, you know, how do we better appreciate how meaningful this could be?
Yes. So for Albuterol Sulfate, the market, there are three brand products. And one of them is ProAir, the other two Ventolin and Proventil. Our products are approved as generic to ProAir. From IQVIA data, ProAir has about 50% of albuterol volume. So it's about 35 million units annually. And in that market, there's the authorized generic. And then there's one true generic. And then we'll be the second generic in that market. So, yeah, we are excited with this opportunity because this will be our first generic inhalation products, which is not easy to get approval of. And so we see a meaningful opportunity for us.
One of the opportunities about this product is that, as Jacob said, it's our first ANDA for an inhalation, but it's only the second product that we make that's an inhalation, the other being Primatene Mist. So not only will this product be, we believe, better than our corporate gross average margin, but it's also going to bring down the cost of goods for Primatene Mist as well because of the utilization of the factory that will, because we'll be able to get so much more, so many more units produced at that facility than in the past.
You also have a GDUFA date on '07 in the fourth quarter, right? I don't know, can you tie all this together? I mean, it feels like, you know, we had four potential shots on goal this year and one has already, you know, landed. And, you know, when we sit here and we talk about '02, '01, '05 and teriparatide and '07, I mean, is it hopeful that we could get a second, third, or possibly all four in 2024?
Well, that's certainly our hope. And, you know, with our expectation is with teriparatide based on the CRL that we got, we think we've answered it and it's sufficiently relatively straightforward that we should be able to get approved for that. '02 is a little bit of a mystery, but '07 is one that we, you know, think we got a good first filing with complex generics with inhalation products. It's frequently difficult to get them approved on a first cycle. So I wouldn't, you know, I wouldn't say that it's a sure thing, but we're pretty happy with our submission and we still think that there's a good possibility that we have multiple other approvals this year.
All right. Give me five minutes. I want to shift gears. I want to talk about the manufacturing capacity for the GLP-1 sector. I mean, you know, I know, you know, you have talked about this generic market as a potential opportunity. Wanted to just sort of get your high-level thoughts on the capacity relative to the services that you offer and the manufacturing capabilities you have.
Yeah. So, you know, we have multiple capabilities in this area. The first of all is in our China facility, we have the ability to make GLP APIs and we have the ability to do that. Additionally, we also have the capacity and the ability to make the finished product here in the United States. So we have the ability and the capacity to do both.
Okay. I mean, maybe this is off base, but, you know, I feel compelled to ask, right? We look at the Novo-Catalent deal and the multiple paid on that deal. We look at Eli Lilly spending an additional $5 billion to expand their campus in Indianapolis. You know, they acquired another sterile injectable facility, I think from Nexus Pharmaceuticals, which I think was 85,000 sq ft. And, you know, I look at sort of your capabilities and I look at the multiple sort of being paid for some of these other assets relative to your capabilities and something doesn't completely line up unless I'm not thinking about it correctly.
Yeah, you know, we see the same thing. But right now we have the ability to do these projects soon and we do have the capabilities. I'm not really sure how those other companies got to the multiples or that they were willing to pay. But, you know, we have the capabilities, we have the capacity and, you know, we're ready to use it when we can.
You know, in your slide deck, you talk about capacity expansion at facilities to support these future approvals. I mean, can you talk about, you know, what that means, how big you expect the capacity increase to be? You know, and the other question I get, and not to be labor this M&A point, right, but we get a lot of questions about Jack and Mary, their longer-term intentions, just given sort of the ages that they're at. And I don't, like I'm guessing it's not lost on you when you look at these deals, but the company seems to be focused on expanding its own capacity at this point.
So we're very long-term focused and Jack and Mary are, you know, the drivers of that. They're very long-term focused. So what we've talked about with our plant expansion at Rancho Cucamonga and our Amphastar facility is that we'd eventually quadruple our capacity there. We're going to be putting in a new facility there, an entirely new sterile suite that's going to have eventually five filling suites. Right now, the $120 million that we referenced in our earnings call earlier this year is going to be for building that sterile suite out, building some areas for packaging as well, building offices, building lab space. So a very large renovation to our facility there. And it's also going to attain the equipment for the first three filling suites. So right now that's what's part of that.
Additionally, at the same time, we're also working on incremental ways to increase the capacity and the economics of our other facilities by having more equipment that will be labor-saving and also increase the capacity in incremental ways for packaging and other things. So we're working on those projects at the same time. As far as Jack and Mary go.
Yeah, no, you put it right there. So basically they are very long-term. There are so many projects in their mind and there's really no slowdown inside. And we are very, as a company, culturally, I think we are very excited for the long-term. I think there's no intention to sell.
Okay. All right. Bill, can we just finish up with a couple of numbers because, you know, given you don't give guidance and I want to respect that, but I just look at a couple of things like, for example, based on the commentary we talked about with 5 or 6 of the biggest products and some of the things in the pipeline. When I look at 2Q, which is less relevant for the pipeline, you know, the street has essentially revenues sort of modeled flat. But when I look, you know, longer-term, you know, for the full year, I mean, the company did, I think, 23% revenue growth in the first quarter and the street is sort of modeling 17% for the year, but only 10% operating income growth, which I think is influenced by vaccine to some extent.
I don't know if there's any sort of high-level commentary you want to make about, you know, what you see out there in 2Q in the full year and, you know, the revenue versus operating income growth?
Yeah, I think part of that is because we do have a big plan to increase the R&D spend this year on both inhalation and on some of the insulin projects. So there is definitely, you know, there could be some, you know, lower margins, lower operating margins as we increase some of those expenses potentially faster than we increase revenues, especially in the second quarter because those expenses will increase before we have the ability to launch some of the new products like albuterol and some of the other ones that might come later in the year. So I think that's more of a 2Q issue.
But when I look at it, I look at the entire year and I see that we certainly have the ability to meet or beat those expectations that are on the consensus this year at this time, especially if we can get one more approval to be launched this year.
Okay. Last question was the, because we're essentially out of time, the $50 million share buyback, I mean, probably makes a lot of sense sort of given your valuation. I mean, what was the logic sort of behind that?
Yeah, we just have, we have a lot of excess cash, even though we have to make $125 million payment to Lilly in the next couple of weeks. We have excess cash. We're generating a lot of cash. And we just thought that the share price where it is today represented a meaningful value.
Okay. Well, we're pretty much out of time. So I want to give you the last word if there's anything else you want to leave or we can leave it there.
I think we're good. Thanks.
Okay. Bill and Jacob, thank you guys very much. We appreciate the comments.
Thanks for coming.
Thank you, everyone, for joining us.