Greetings, and welcome to the Amphastar Pharmaceuticals Second Quarter Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. All statements in this press release and in the conference call referenced above that are not historical are forward looking statements, including, among other things, statements relating to our expectations regarding future financial performance, backlog, sales and marketing of our products, market size and growth, product development, the timing of FDA filings or approvals, including the DMF of AMP, the timing of product launches, acquisitions, and other matters related to our pipeline of product candidates, our share buyback program, and other future events, such as the impact of COVID nineteen pandemic, including its variants and related responses of business and governments to the pandemic on our operations and personnel, and on commercial activity and demand across our business operations and results of operations. These statements are not facts, but rather are based on Amphastar's historical performance and our current expectations, estimates, and projections regarding our business operations and other similar related factors.
Words such as may, might, will, could, would, should, anticipate, predict, potential, continue, expect, intend, plan, plan, project, believe, estimate, and other similar or related expressions are used to identify these forward looking statements, although not all forward looking statements contain these words. You should not place undue reliance on forward looking statements because they involve known and unknown risks, uncertainties and assumptions that are difficult or impossible to predict and, in some cases, beyond Amphastar's control. Actual results may differ materially from those in the forward looking statement of factors, including those described in Amphastar's filings with the Securities and Exchange Commission, including our annual report on Form 10 k for the year ended 12/31/2020 filed with the SEC on 03/15/2021. In particular, the extent of COVID nineteen's impact on our business will depend on several factors, including the severity, duration, and extent of the pandemic, including its variants, as well as actions taken by governments, businesses, and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time. You can locate these reports through our website at httpcolon//ir.amphastar.com and on the SEC's website at www.sec.gov.
The forward looking statements in this release speak only as the date of these of the release. Amphastar undertakes no obligation to revise or update information or any forward looking statements in this press release or the conference call referenced above to reflect events or circumstances in the future, even if new information becomes available or subsequent events cause our expectations to change. Please note that this conference call is being recorded. Our speakers today are mister Bill Peters, CFO mister Dan Dishner, vice president of corporate communications and mister Tony Mars, senior vice president of regulatory affairs and clinical operations. I will now turn the conference over to your host, Mr.
Dan Dishner, VP of Corporate Communications. Dan, you may begin.
Thank you, operator, and thank you all for joining us this afternoon. Earlier, Amphastar reported our financial results with strong growth. As for our pipeline, I'd like to characterize the second quarter as another period in further seeing our pipeline progress. With me today is Bill Peters, Amphastar's CFO and Executive Vice President of Finance. He will provide an update on the company's financials.
After Bill's update, we'll move to our Q and A portion of the call with Tony Mars, Senior Vice President of Regulatory Affairs and Clinical Operations, Bill and myself. Starting with our financial and commercial results. The second quarter saw net revenues of $101,600,000 an 18% year over year increase. The company's net income remained strong and increased to $7,800,000 seeing a 56% increase from last quarter as our onetime legal expense saw considerable savings. While some of our products, enoxaparin and naloxone, saw some downward pressure this quarter, we remain committed to these products in the long term as we believe that Amphastar, being one of the few U.
S.-based manufacturers of these products, will play in our favor due to our strengths in terms of quality. To that end, we believe our vertically integrated platform meets the needs which call for the quality that emphasizes reliable API sourcing, supply chain resilience, and the ability to continuously meet market demands. Looking at our newest growth driver, glucagon, based on Equivia, sales grew to $12,100,000 for the second quarter, in line with our expectations of achieving a reasonable market share at a reasonable price. This represents a 51% increase in sales compared to last quarter. And given that sales growth remains strong, we believe glucagon sales are well positioned to be durable for the remaining half of the year.
Regarding Primatene Mist, in store weekly sales continued an upward trend, seeing a 9% increase from last quarter and a 40% increase from the same period of the previous year, thus highlighting that success is independent of COVID-nineteen's impact. We remain our guidance for Primatene Mist seeing annualized sales of $65,000,000 by the end of this year. We believe that our increased distribution channels and our digital TV and radio marketing efforts have provided a stronger base of weekly sales to build upon each other. Moreover, our marketing efforts have been complemented with our physician sampling program launched last quarter. While the sampling program results are challenging to quantify, we believe the program will be a crucial component to provide further support for Primatene to grow in the future.
Moving toward our pipeline. The company saw some upward momentum. The second quarter can be best characterized as a quarter of FDA inspections, amounting to three in total: one at each of our US manufacturing facilities. Two of those inspections were routine and saw zero four eighty three items, highlighting the strength of our quality systems. The third was a preapproval inspection for AMP fifteen, which was revealed to be generic teriparatide pen for injection.
As a result, teriparatide continues to be on track for a GDUFA date in the fourth quarter this year. Moreover, we have taken a conservative approach from a legal perspective, giving us the best path to commercialization as soon as we receive approval. Again, this product has no approved generics and has a plus $650,000,000 annual market based on Equivia. With respect to our other filed ANDAs, for A and P two, we announced in June that the ANDA received a CRL, to which it has now been fully responded to. We are awaiting the f for FDA to make final determination on the GDUFA date.
As a reminder, this product is a complex product with no generics and no other filers that we are aware of. As for a m p zero zero six, a plus $50,000,000 annual market based on Equivia, the ANDA is still anticipated to have a GDUFA date in the first quarter of next year. On the subject of our proprietary products, intranasal epinephrine remains on track for a filing in 2022 as the product's clinical program continues to progress. To our other proprietary product, intranasal naloxone, the product is progressing further in its stability studies with an expectation to refile in the fourth quarter of this year. While we understand that an eight milligram version was recently approved, we believe our product differentiates from others on the market.
Regarding our other Paragraph IV filings, we believe AMP008 and our generic ragadenoson holds strong non infringement positions. AMP008 is still on track to be filed later this year. To close, I'd like to remark that while the first interchangeable biosimilar insulin was recently approved, this has not changed Amphastar's plans regarding our insulin program. It validates our strategy. There is a pathway for interchangeable biosimilar insulins.
We continue to believe that the insulin market will remain robust. At the same time, our pipeline matures from focusing on complex injectable generics and into products with longer product life cycles, namely biosimilars and inhalation products. Considering that our existing technological platforms can already support this development demonstrated by hyaluronidase, enoxaparin and most recently glucagon, we see the pathway as clear, attainable and profitable. I would now like to turn the call to Bill Peters to discuss our financial performance for the second quarter and give further details behind those results. Thank you, Dan.
Sales for the second quarter increased 18% to $101,700,000 from $85,800,000 in the previous year. Glucagon, which we launched in the first quarter, has already achieved a reasonable market share at a reasonable price and led the growth with sales of $12,100,000 Primatene Mist once again showed strong growth compared to the second quarter of last year, with sales up 34% to $16,700,000 from $12,500,000 Epinephrine sales grew 32 to $9,200,000 from $7,000,000 with strong sales of the multidose vials. Enoxaparin saw modest sales decline to $9,300,000 as a competitor reentered the market during the second quarter. Naloxone sales declined to $6,600,000 due to increased competition. Our insulin API business had sales of $6,900,000 up from $4,900,000 in the prior year, primarily due to the timing of shipments and a half million dollars of revenues related to an amendment fee received from MannKind.
We will recognize additional revenue of $250,000 per quarter related to this amendment through the end of twenty twenty two. As we have discussed in the past, our products launched in the last few years, including Primatene Mist, epinephrine multi dose vials, and glucagon have margins higher than our corporate average. We showed proof of this trend this quarter with gross margins increasing to 47% of sales in the second quarter of twenty twenty one from 39% of sales in the same quarter last year. Selling, distribution and marketing expenses increased slightly to $4,100,000 from $4,000,000 primarily due to the marketing costs associated with our national television and radio ads, including the cost of airing our new TV commercial. General and administrative spending decreased to $14,600,000 from $15,900,000 primarily because of onetime expenses associated with the separation agreement with the former executive in the second quarter of last year.
Research and development expenditures increased to $18,100,000 in 2021 from $16,100,000 last year as we continue to develop our insulin and inhalation products. Nonoperating income increased to $3,600,000 from $1,300,000 as we recognized a gain associated with lowering the litigation accrual for our lawsuit with Aventis, which we settled at the end of the second quarter this year. The company reported net income attributable to Amphastar shareholders of $7,800,000 or $0.16 per share in the second quarter compared to a net loss of $200,000 or $0.00 per share in the second quarter of twenty twenty. The company reported an adjusted net income of $10,600,000 or $0.21 per share compared to an adjusted net income of $7,600,000 or $0.16 per share in the second quarter of last year. Adjusted earnings exclude amortization, equity compensation, impairments of long lived assets and onetime events.
In the second quarter, cash flow provided by operations was $32,200,000 We repurchased $6,400,000 of stock during the quarter and made $6,000,000 in debt repayments. Today, we announced that the Board authorized an additional $20,000,000 buyback program, which we plan to utilize in the future. We also announced that we've entered into a $140,000,000 debt facility consisting of a $70,000,000 term loan and a $70,000,000 revolving line of credit. We used approximately $30,000,000 of the term loan to pay off existing debt with higher interest rates. We believe this facility will help us lower interest expense and ensure financial flexibility as we grow and expand our business.
I will now turn the call back over to the operator to begin Q and A.
Thank you. We'll now be conducting a question and answer session. A confirmation tone will indicate that your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question comes from Tim Chang with Northland Capital. Please proceed with your question.
Hi. Thanks. On a m p o one five, do you guys expect multiple generics, to gain approval around the same time, later this year in terms of market formation for that product?
I'd it's hard to say, but I would probably side towards the answer of no. It's a complex product that's been
unchallenged for a while. So we anticipate not too many competitors with this product. And you guys will have enough capacity to launch this product in the fourth quarter assuming you get the approval. Is that right?
Yeah. So so actually, this this product will be made on one of the filling lines that we built and installed a couple years ago. So this is part of the expansion that we have at our Amphastar headquarters. So we're we're ready
to go with this one. And I guess a m p o o nine, that's another injectable osteoporosis product, but that's
at paragraph
four. Have you have you I mean, do you already have a a court date set for that or or no?
I believe we do have a court date set for that. And the reason that we don't list we don't list the GDUFA dates on the paragraph ones that are constrained by paragraph fours is because we don't want to change the you know, make the impression that the the GDUFA date is the gating item. So, you know, we do have a court date, and it's set for January of twenty twenty two.
Okay. Okay. Good. Maybe maybe just one last question. It's a financial question.
I mean, obviously, you took this bigger term loan and revolver. Is I mean, I guess you have more financial flexibility, but would you have any interest in potentially pursuing some business development to bring in some additional products with, you know, with some of the debt that you've now taken on?
Well well, part of the reason that we did the debt is to refinance the existing debt. So during the quarter, we paid down $6,000,000 of debt, and $30,000,000 of the new term loan went directly to pay off some of the existing debt. So that reduction over the past three months has been, you know, $36,000,000, so a little bit more than half of that. Additionally, we had spent $30,000,000 buying back a portion of a and p, so we wanted to keep that put that cash back on the balance sheet for that. And we're also funding our buyback program and, some large capital expenditures in the next couple of years.
The debt agreement, which will be filed with our 10 q in November, does allow for acquisitions, some permitted acquisitions, but those have to do within a certain framework. But we think that having this this line in place and this revolver in place will add some flexibility and make it easier to borrow if we do need to if we do see some acquisitions that we we find attractive and fit well with the company. I wouldn't say that this debt this debt will change our attitude or towards acquisitions, though.
Right. Okay. Great. Thanks thanks for the answers.
Thanks, Tim. Thank you. For the interest of time, we ask the participants limit themselves to one question and one follow-up. Our next question will be from David Amsellem with Piper Sandler. Please proceed with your question.
Hey. This is Zach on for David. Thanks for taking my questions, and congrats on another strong quarter. So just for Primatene Mist, obviously, you've done well at getting the product into the large retail chain so far. So just wondering if there are any other large retail chains that you're targeting at this point, or are you focusing more on just smaller retail channels now?
And then just in terms of marketing and d DTC, what other investments do you plan to make for this product?
Yes. With Primatene, I think we've hit most of the major retail distribution points. We're analyzing and looking at different smaller retail stores, maybe partnerships there. But I think right now, we've hit most of the major retail. And what was the second
part of the Yes.
So the second part of the question dealt, I think, more with the marketing of it. And and I think what we would say is that our focus right now is just making sure that the consumers who have mild asthma are aware of the products. We're making we're spending money to make sure that everyone is aware because we're in all the retail outlets that we need to be in to have this product be successful and to grow. But I think the there are still people that don't know the product that well out there. So that that's what our main focus is.
Okay. Great. Thanks. And then if I could just squeeze in one follow-up on epinephrine. Just wondering what kind of role you think this this could have in turn like, is this going to
be mainly a retail market product, or do
you envision some sort of institutional footprint for it as well? The nasal spray? Intranasal? Yep. The, yep, the nasal the epinephrine nasal product.
Well, I think it it adds a different presentation to the product than what's currently there. So we'd be looking at that that market, the Penn market, you know, as as a as as a potential for this product.
So this primarily we do it'll primarily be a retail oriented product just like the EpiPen itself. Yeah. And I I think the the key takeaway is I don't think there'll be any new channel created for it. Maybe it'll just use the opportunity for the ease of use for it. I think that's primarily the key to that.
Okay. Great. Thanks.
Thank you. Thank you. Thank you. Our next question comes from Elliot Wilbur with Raymond James. Please proceed with your question.
Questions on EMP 15. So in your prepared commentary, Dan, you mentioned a PAI inspection for that. Wasn't clear to me whether or not that there were or there were or there was a 483 issued in connection with that preapproval inspection. So just if you could clarify that. And then as a follow-up question on 15, can you confirm that this is in fact a filing that contains an auto injector device in addition to the active.
And then just a quick question for Bill on gross margin trends. Obviously, favorable mix benefited numbers this period, but outside of just pure mix, anything to think about in the second half of the year that might lead that number to kind of move naturally lower? Thanks.
Yeah. Hi. As far as the PAI inspection, we've characterized it as a good inspection. There were some 40 threes that were issued. They were primarily related to the timing of certain events.
It didn't have any consequence or anything that really dealt with the quality system of us, and we've fully addressed all of them. So we we believe that our response will address all of the 43 issues that they've raised. As far as the pen goes, yeah, it is an auto pen.
And I think your last question dealt with the gross margins and the trends in the second half of the year. So we think that pricing should hold relatively even for where it was in the first half. We do have maybe some we do have some potential opportunities on a couple products for some price increases that that we think will be positive for the company. But those price increases are mainly to offset some of the cost increases that we've had. Cost of labor has gone up in California pretty significantly, and we've had to raise our wages here.
Additionally, the price of crude heparin still has continued to go up. Remember, we we we cost our heparin on average cost basis based on acquisition costs, and we have a very long lead time for that and a lot of product in the channel. So while we actually have seen forward prices look like they're going to come down in the future, it the average price that is used in our cost of goods will continue to go up for the next couple quarters, have more that we can source more product out in the
if that makes sense.
Thank you. Our next question comes from Serge Belanger with Needham and Company. Please proceed with your question.
Hey. Good afternoon. Thanks for taking my questions. First one on glucagon. Can you just talk about your competitive outlook for the remainder of 2021 and 2022?
And do you still expect the product to generate 40 to 50,000,000 this year?
Yeah. I think I think with glucagon, it is a complex product that was often that hadn't been challenged for a long time. We were the first ones. We don't at this time, we haven't seen any other potential competitors with this product the way we're marketing it or the way the way it's being sold now. And the second part was the outlook into next year.
I think we see more of the same. We have no reason to believe that it would be any different than it is now.
Well yeah. That that's it. So Yeah.
We think that the current run rate is is good as far as we can tell for quite some time. Okay.
On a and p zero one five, obviously, a complex product. What's your level of confidence to get approval on the the first review cycle?
I'll let Tony answer that.
Well, like like all complex products, you know, it would be a surprise to have that. Definitely, a a pleasant surprise for it. What I can say is we're positioned for it. We've learned from the other complex products that we have filed and and also approved with the agency. So I think every time we file one of these applications, the contents of that application meet the requirements of its predecessor.
So as the requirements for the agency evolve, we're keeping up with them in our filing of those applications. So I think the more we do have these, the higher chance we have for success. But, again, it would be certainly a home run for us. But we are poised for it. I think things are moving, at the speed that is encouraging, as far as our correspondence with the agency.
And, but I I think it's just cautious optimism.
Thank you.
Thank you. Our next question comes from David Steinberg with Jefferies. Please proceed with your question.
Thanks, and and good afternoon. A couple of questions. On glucagon, you've done a really nice job in launching the product. And you made a comment that you saw the second half of the year as being, I think you said, quote, unquote, durable. Are you implying that there'll be no sequential increases from, you know, the 12,100,000.0 in q three to q four, and therefore, it should be a $48,000,000 product until there's another competitor, or do you see sequential increases?
And then secondly, on o o two, you got the CRL actually the day of our of our health care conference in early June at the time. You hadn't submitted your response. You may have had other discussions with the FDA since then. But at the time, you thought you're looking at either an October or early next year GDUFA date for o o two. That still your thinking?
Thanks.
So I'll I'll take the glucagon question first. And that is the twelve point one million. We we think that we're that's a pretty safe run rate, a pretty fair run rate.
So that that's what, we would model at this point.
As far as the a and p zero zero two, yeah. You're right. We've we've submitted that, and we're waiting for the agency to make a final determination of that. And and as you said, the the best case scenario would be based on, what we believe. The best case scenario will either be, later this year or early, in 2022.
Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for any closing comments.
I want to thank everybody for joining us today and allowing us to give you an update on our Q2. We look forward to having another good quarter for Q3 and sharing those results with you in the future. Thank you again for your time today.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.
Thank you.