2025, kind of a transition year for you guys, right? You know, you absorbed some competition to sort of your legacy generic-based business, and you've got sort of the growth opportunity in front of you, which is gonna be driven by your more, your pipeline, which is a mix of proprietary, brand and generic, and then, Baqsimi. You know, with that said, I don't know if you would add anything to, you know, investors on how to think about Amphastar, you know, as a company, as an investment opportunity, and where you kind of want the company to be in the next three to five years.
Yeah, you know, you're exactly right about it being a transition year for us with, you know, we, as we said on our first conference call of the year in February, we expect this year to have declining sales on several products, and that's unusual for us because most of our products historically have been more immune to competition. This year we are expecting to see, or have seen, competition on the epinephrine vial product, which, you know, had a couple new competitors come in last year. Glucagon had a new competitor launch in the first quarter of this year. Phytonadione, another one where we see another competitor on. At the same time, we've seen a little bit of a slowdown at the FDA, but we have four products there right now that we think we can get two to three launches later this year.
That's why, you know, you're right about the transition year, and why we've also said we expect to see sales relatively flat this year because at the beginning of the year, we're gonna see these declines, but then at the end of the year, we expect to see increases 'cause of these pickups of these new products.
Okay. A couple high-level questions on the DC front. First, with a lot of dislocation at FDA and headcount reduction, you know, usually when there's a lot of facility supply, facility supplier inspections, that tends to be what drives a lot of shortages. Shortages have been things that you guys historically have been nimble in being able to respond to and drive value in certain products. What is your sense, lay of the land, you know, in terms of FDA and that dynamic for you? I mean, 'cause you feel FDA on two fronts, I imagine, right? Your end of portfolio, your pipeline, turning approvals around, and if you feel like you're getting the level of engagement that you've gotten historically.
And then separately, do you feel like the, on the inspections and things like that, that that's happening with the same sort of frequency?
Yeah. It's interesting 'cause intuitively with the cutbacks at FDA, you would expect to see maybe a slowdown in their timelines on inspections or action dates and such. Actually, we've seen sort of the opposite. We've had an inspection, they were there full five days, everything went well. We've had two action dates that were met. One of them was actually a week early. Our experience has been that the agency is actually in some ways maybe a little more efficient now. I have the same feelings that with cutbacks, there's gonna be some things that get lost in the shuffle and cause delays. Right now we haven't seen it.
Okay. In terms of the administration's 232 investigation, it seems much broader than when I think about your business. It seems like it's more about oral solid dosage, anti-infectious, what are called critical medicines that, where there's a heavy reliance on China. You guys play, I think of you as more of a niche company, inhalation products, injectables, things like that. When you see that and you try to conceptualize what is really the solution that the administration's after and can Amphastar play a role in any way to address that? Are you at the table discussing with the government, as this 232 investigation's ongoing?
Yeah. I think it puts us in a unique position, right? 'Cause we manufacture all our finished product in the United States. Obviously that looks like it's a good opportunity for us. However, depending on the details of this, what happens if you have components and API, and we do rely on some components and API outside the United States. If they tariff the components and API, then that puts us into kind of more of a disadvantage in some cases because if other of our competitors are manufacturing their finished product and getting their API and components outside the United States, and they do not tariff finished product and they come in, then they have an advantage over us because we still need to get certain API and components outside the United States.
However, if the tariffs target finished product, that's great for us because we manufacture all our finished product in the United States. I think the uncertainty, and we'll have to see how these things play out. We are at the table, we do discuss these things with our trade groups and such, and the best we can do is just watch and see how they roll these things out.
Yep. Okay. So yeah, pipeline's key for you guys. You had a few updates on the one key call. Maybe I think it feels like you guys offered more detail than you've historically offered on two programs in particular, which are the two products we kind of see as like your most near-term interesting value opportunities, which would be AMP-002 and AMP-007.
Mm-hmm.
Maybe just the high points on each of these and where you think you add, and I know that you've mentioned that, sort of I think to revenue guide, sort of soft guide, if you will, 'cause I know you have like an official guide, but like your outlook for revenue for the full year assumes, I guess, one of three potential pipeline approvals.
Yeah. On AMP- 002, we had a GDUFA date a little more than two years ago where the FDA missed that action date. Throughout the last two years, we've been having routine, normal communication with the FDA about what are their concerns, what are their issues. Honestly, it was a little frustrating on our end because we really never got an answer of what exactly was holding the application up. Recently, after we, the award, Bill was referencing this award for our, for our, the drug shortage award that we got from the FDA, it gave Bill and our CEO, Dr. Zhang, an opportunity to meet with the director of CDER.
In that meeting, they had a great conversation about AO2, and she was very much aware of it and very much engaged with and understood our frustration with it. Within two weeks, we actually got an IR, an information request, which was great from our perspective because at least now we're getting some sort of feedback from the agency. What are you looking for? The great thing is that we were able to respond to that IR within one day. It was not major. Now our level of confidence with this product becomes much higher than it was maybe prior, just because we feel like now we understand what they were thinking about and we were able to address it in a very short time.
Hey, Ken, can I stop you there for a second?
Yeah.
When you get an IR, do they tend to be isolated? Like they wanna lay out all the issues in one IR, or are there multiple IRs and ones they follow? Like, how do we interpret what an IR really means?
Yeah. I mean, that's a great question and it can mean all of the above. It can be all-inclusive or it can be.
I just put in a word. We usually don't talk about IRs because we can't always read into them.
Right. We did this time because we felt it was such an important one because we had not heard anything really in three years because we had responded to a CRL, then they missed the action date and it had been two years since they missed the action date. Because of this, we thought that we should communicate that we did have some official written communication as opposed to the oral communication that we have been having for the last year.
Absolutely. Yeah.
I'm sorry. You can.
No, no, absolutely. I mean, Bill's a hundred percent right. Sometimes the hardest thing is trying to explain to people what the issue is without, you know, really getting into the details. I think in this particular case, because we've been talking about having interactions with the FDA, we had 16 of them prior to that meeting. What did that really mean? You know, you have so many meetings, but now that we actually got an action item, it made us feel like, okay, now we're making some headway.
Going back to your question, IRs are all over the place. It could be anything that they wanna tie up before in the timeframe between your submission or your last response and the action date. It could be that they ask you five things and some of those are complicated things like, you know, do another, you know, show, show some data on this, you know, this study. Other ones can be, you know, change this, the word on this label to a bold face. You know, they run the gamut, but there are things that come in individually and are not a complete response. The complete response letter is supposed to be everything that's open at that point in time. This is, hey, this is an open item now, please address it.
Does it make sense to you that you'd be sitting for two years with like a very negligible IR on the other side of that?
I'll say it's a difficult situation. That's unusual for us. It is really hard to put a.
We've never seen a situation where the FDA's missed an action date and for two years we never.
Yeah. It is certainly unusual and I'm sure the FDA has their reasons for doing what they're doing and the timeline that they're doing it. You know, they just may not all be apparent to us.
Yeah. Now this is an injectable product, a QVA sales, greater than $500 million. Not saying much more than that. There are no generics in the market.
That's correct.
That's good. If you were approved in theory, you could have some exclusivity too.
We do have CGT designation on this. So it's possible. Again, we don't know. We'd have to be the first and only approved in order to get that exclusivity and get that designation.
What's CGT?
Competitive Generic Therapy. It's something where the FDA has put on it that this is an important product to them. It's a big enough product that it should make a difference to the market out there and that they want to encourage people to work on it. It's something that, you know, we've been given that so we could, it's similar in a lot of ways to the 180-day exclusivity for the first, you know, paragraph IV filer, but this is for things that do not have that Paragraph IV challenge. It's something that we're working on and we have that, but we could get an exclusive period. However, they could also approve five people and say, maybe not the.
That also has.
That also has
CGT designation.
Yeah.
It really becomes a race to who.
Launches first.
It is not specific to one company like a Paragraph IV. They could have multiple people doing it. You are not necessarily alone, but.
Logically, if a whole bunch of different filings were held up for this amount of time and it was not some complicated major thing that was overcome, like that, if there were some complicated major hurdle in the regulatory science, that would suggest to me that maybe the floodgates could open for multiple players. If it sounds like it is a trivial IR that was the swing factor and they are finally maybe just getting around to it because administratively they have got deep priorities.
I don't think that's what it is. I don't think that's what it is at all, but it's really hard to say what it is at this point in time. It's not a trivial administrative thing. I think it's more of something where they have a difficulty in either making a decision for one reason or another. It's like, how do you make a decision? You know, I really can't say too much more about.
Yeah. Yeah. I guess like we've just given everybody a tutorial as to why you don't tell the street about these things, 'cause this line of questions that ensue, and you probably just wanna avoid that entirely.
There's a lot of nuances to it. That's true. Sorry.
In theory, this could, I mean, maybe be as large as some of your disclosed generic products if you have single source exclusivity.
Here's the thing though. We have also stated that we do have a limited manufacturing capacity for this product because the manufacturing process is very difficult and it's more complicated than some of the other manufacturing processes. Therefore, what we have said is that even if we are the only generic, we can't get to a level of market share that you would normally expect a first and only generic to get to. We haven't really quantified that much more other than to say that at some point, some of the high ends of the ranges of potential sales were too high.
Is that something that over time, if you got through the regulatory hurdle, you may look to solve for with cash and investment or in the manufacturing side? Or do you think that.
This product is so specific that I don't see us potentially putting in the money that we would need to do for this product 'cause it's not something that we could then replicate and use for a different product.
Best case is pricing remains healthy, but share is niche.
Yes. Yes.
Yeah. How niche just in percentage terms are we talking in terms of market share?
You know, we haven't said, but I'll say it's, it's probably less than 25% market share.
Okay. That's still pretty meaningful if that's your threshold. Okay. And then, 007.
Yeah. 007, we received a CRL earlier this year. We'll be responding to it within the next couple weeks. We've classified it as a sort of a minor CRL. We do expect an action date to be in the third quarter of this year. This is a product that there is no other generic, that we, there was a Paragraph IV, but we did not get sued on that filing. There's a possibility as well for 180-day exclusivity once we get that approved.
I think you said on the call, if it ends up being a minor issue, it could be like a 90-day turnaround on the regulatory review time.
Typically that's the way it works. Yeah.
In theory, it could be a 2025 contributor. How should we think about like the supply dynamics with something like that? Like would you be, you're clearly ready, ready to spring to action in one of these products or maybe multiple?
Yeah. Going back to your original question about the, you know, the guidance for the year of getting to flat and what that contribution was, we'd originally said that we would get contributions from two products. Our expectation was product contribution from two products later in the year. At the time we had different probabilities, you know, we had four products that had potential to be launched this year. Since then, 018 has gotten a CRL that's put us out of that launch. With 002, our probability of launching that this year, we think has gone up just because given the ease that we were able to respond to the single IR, it makes us more comfortable that the next step is more likely to be an approval.
We thought previously the most likely next step was a CRL and now it still could be a CRL, but, you know, it could be an approval as well. What we've done with this guidance to get the flat is we've probability weighted the different products. If we have like a 70% chance of one product and a 60% chance of another and a 50% chance of another, you know, none of those things could happen or all of them could happen, but we need to get contributions from two of those products to make our flat number.
Okay. Maybe to, you know, getting to your, your back to your base business, right? You have two, what I'd characterize as more higher visibility, stable growth drivers in Primatene Mist and Vexim. What are the barriers to entry for any competition directly to Primatene Mist? Like does anyone try to develop a generic? What is the patent situation like there? Or is it just maybe not big enough given sort of the cost of a development program to go after?
With Primatene Mist, because it's an OTC product, it has a different market dynamic than it would from a normal prescription product. While it's a $100 million product, the way we see it is that it's unlikely that someone would want to try to genericize it. We know there's been no Paragraph IV filings to date because we have patent protection out until next year. The way we see it is, if half of the market is likely to stay with the brand anyway, let's say it's a $50 million total addressable market for the generic, and of that, they'd probably have to offer a 50% price reduction to get the market share. You're saying about $25 million, and we would then launch our own authorized generic for that.
You're talking maybe a $12.5 million sales market and now your market margins are getting lower. It just doesn't seem like the amount of money that you have to spend on a generic inhalation product to get to that market, it just doesn't seem like it would be worth it to us.
Yeah, that would be like a generic store brand, right?
Yeah. Exactly. Exactly. We just don't see that as being, it's a possible scenario, but we don't see it as being a likely scenario.
Yep. Okay. Vexim, pretty straightforward situation with the IP that you have.
Yeah. So we've gotten multiple patents there and, and beyond the patents though, you know, 'cause we've gotten, we've got a formulation patent, we've got a device patent, a combination, you know, the formulation with the device patent. So we've got three different patents that go out there, you know, more than 10 years. More importantly, when we took a look at Vexim, we thought that this would be an extremely difficult product to genericize. And that's coming from the company that was the first company to genericize the glucagon kit. Not only that, but, you know, that was off patent for 20 years before we could get it. Then it took four years for another company to get a generic of that approved.
We think this is so much harder to do than that would be, that there would be a limited number of people that could do it. It would probably take them a very long time. We also have signed an exclusivity agreement with the device manufacturer where we are the only company that can put glucagon into that device for a long period of time. A company who's gonna try to genericize this would have to come up with a device that was similar, but did not, you know, violate their patents. That would be extremely difficult as well. We think that this is something that has a very long life to it.
That is one of the things that we really liked about it because we think this is not only a good cash flower now, but we see this as something that is going to have a very long life to it.
Okay. Maybe the MannKind partnership, how did that come about? Did you, did you feel like you were sort of maybe didn't have enough sales push, you know, on your own end internally after you had the product, you know, within your portfolio?
We have a really good relationship with MannKind 'cause we sell them the insulin for their Afrezza products. We've been dealing with them for a very long time. You know, we've talked to them since we got bought back, Steven, we've had conversations with them about how we could work together on it. In the end, we decided for ourselves that what made the most sense was just a co-promote arrangement where we're paying them to promote Vexim in the second position. I think it's a real win-win because we more than double our sales force and we do so on a very economic basis. Then MannKind wins because they've got another product to talk about and they're getting paid to do that.
Yeah.
It's a real win-win. We've seen the results starting to pay off already with some of the anecdotal data we're getting and some of the script data we're getting in the areas that they're covering where we didn't have that footprint. We're very happy with the way that this has started off.
Where specifically are you seeing that benefit from MannKind?
We're seeing it in the script data in areas where we didn't have people, 'cause we have a limited number of reps. They have more reps, and then they have reps in places where we didn't. We also have anecdotally seen some targets of some high-writing, high glucagon-writing doctors that they've been able to move to our product that they've had a good relationship with.
Is this doctor types you weren't reaching or geographies that you weren't reaching?
They're both really 'cause they're covering, their coverage is in certain, has certain geographic coverage where we didn't have. Also, they were able to get into certain doctors' offices in geographies where we were and we hadn't been able to get into those offices and they were able to do that.
Is this really like key in your mind to unlocking the type 2 diabetic patient, and higher, treatment rates there?
I don't know if I'd call it key, but I think it's, like I said before, it's a real win-win for us because we expand our sales force and we're doing so, I think in a way that's, you know, we're spending money on it, but we're not breaking the bank either to get this done. I think it's a very economical way to significantly increase our footprints.
Yep. And you've got peak product sales guidance out there, but have you specified when you think you might get to that level?
The only thing we've said about the timing of that was that it would be after the five-year period where, we owe, Lilly payments for this 'cause we have, four potential milestones that we would pay to Lilly. So we just wanted to be clear, when people took a look at that sales guidance of $250 million-$275 million that they didn't think that it was happening, during the first five years that we owned the product.
After the first five years, then those Lilly payments sunset and then some point of time after that.
At some, yeah, we haven't said how much longer after that.
Yeah. Okay. And then overall, like just thinking about, you know, the puts and takes in your margin profile, as you said, you know, this is a bit of a reset year for the company, then, are product opportunities like 002, 007, is that enough coupled with maybe the incremental growth you get in Vexim to drive, you know, back to kind of some of the historical peak operating margins?
Going back to those, you know, last year was, we had some one-time events really because of the structure of the deal that we had with Lilly. When we booked revenues, when Lilly was selling Vexim, all of the revenues that we booked were net of all of Lilly's expenses. We had a 100% gross margin on those sales. We will not get back to a product that has 100% gross margins again. To do that, you know, we would need multiple products that are above the corporate average. Now, while we think that the next four launches will be above the corporate average, I do not think that gets us to where we were last year, but it gets us above where we were in the first quarter of this year.
Okay. Let's see. Going down the list, a couple products that you've seen a little bit of a competitive headwind to would be epinephrine and the glucagon kit. With glucagon kit, is that primarily Viatris as like a single new competitive entrant that's weighing on that business for you specifically?
Yeah. So they're, you know, they launched in the first quarter. And, you know, what we've said about that is that because their launch wasn't at the beginning of the first quarter, their impact is not fully baked into the first quarter in terms of units or in terms of pricing decline.
Okay.
We have, further erosion in both of those, as we move forward into the second quarter.
2Q, 3Q will be like a better kind of approximation of like the new reset runway, right? And then what about with epinephrine, right? I mean, 'cause the impact was on, a subsegment of that business, right? Which is, makes up, call it directionally half of the volume.
Last year, half of our sales were in the multidose vial form of it. And half of our epinephrine sales were in the multidose vial form. That's where we had a few new competitors last year. We've seen both the units and the margin come down on that with the pricing coming down. We haven't broken out the first quarter. We haven't said what that breakout is, but it is now to the point where the prefilled syringe is larger than the multidose vial.
Okay. You do get a fair amount of questions about, when Pfizer had its issues at Rocky Mount and exited or temporarily exited some markets. I think you've mentioned maybe they came back in dextrose over the quarter and kind of where is, you know, normalization, if you will, on competitive supply dynamics across the portfolio?
Yeah. So with those shortage products and, you know, we won the shortage award from the FDA for the epinephrine prefilled syringe because we were able to supply 100% of the market for that product over the last, more than a year. So, we have the ability to supply all the things. We have the capacity to supply all of them. If, you know, but many of these things are dual source products. And so if there are two players in the market, the hospital chains will buy, want to buy from both. They do not want anything where there is just a single source for this. So, you know, they will, you know, give sales to both companies when they are available.
Yep. Okay. In terms of capital allocation priorities for you guys, you guys have shown a willingness to go out, do meaningful size BD for your company. Where do you stand with respect to that? And is there an appetite to maybe wanna bring in an additional complimentary product to Vexim? You know, as you think about kind of the, I guess, the rollout of new, new product opportunities, you do have some biosimilars, insulin, and, you know, a stated strategy around GLP-1. You know, do you see kind of like the footprint migrating to endocrinology and diabetologists?
Yeah. We really do like the endocrinology space. Our first choice would probably be to expand in that space. We've looked at multiple assets in that space over the last year, and we really would like to move toward the proprietary product space. That's where we're looking the most right now. If we find the right endocrinology product, then we'd be very happy about that. We're also interested in some of the spaces outside of endocrinology where we think we might either have a manufacturing expertise or have some other kind of expertise that would help us with the development of those products. We are looking at multiple things on the proprietary side outside of that space.
Yep. Okay. You know, I ask this question a lot, but like, for insulin, right? You know, we've seen a lot of companies try it and not have much success. How do you view success? And is there a certain amount of supply share you need to be producing a capacity? I guess there's a notion that, you know, the investment, the CapEx investment to get in there and be able to make product at a competitive volume maybe isn't worth it given how prices have deteriorated. What would be the pushback onto those points?
Yeah. I think the most important part for us anyway is, is the pathway that we're, we're going is an interchangeable pathway, meaning that at the pharmacy level, they could, you know, they prescribe our product just along as they would, it would be a generic form of insulin.
Yeah.
It wouldn't have to be a separate script. That convert to the patient is key, that the interchangeable is very key. That's why that's the pathway we say. We believe our past kind of gives us the tools to get there. As far as capacity levels, I'm gonna let Phil take that one.
Yeah. In the investment levels, we've already made significant investments into insulin production. I mean, we bought the API facility from Merck in France that started it. I mean, we built the API manufacturing for insulin in China as well. We can do the recombinant human insulin in France and we do the analogs in China. We've built that API capacity. We've also built the high-speed finished product lines in the United States as well now. We have that capacity and that's underutilized right now. For us, we've made most of the investments. Everything right now is more R&D related and incremental investments. There's not a significant amount of CapEx that we would need to go to the next point. Yeah, we started making these investments when the price was higher.
Even with the price where it is now, we believe we can sell insulin at a rate and at a margin that's above our current 50% margin rate.
Okay. We're out of time, gentlemen. Thanks so much for joining us in the discussion.
All right. Thanks, Jason.
All right.