Afternoon and welcome to Day 2 of the Jefferies Global Healthcare Conference. My name is Dennis Ding, biotech analyst here. I have the great pleasure of having Amphastar Pharmaceuticals here up with me for fireside chat. We have CFO Bill Peters, as well as the EVP of Corporate Administration, Jacob Liawa tidewi, here with us. Welcome.
Thank you.
Maybe to kick things off, why do not you give a little bit of background to the company, where you are right now, and sort of what has been happening over the last one to one or two years that got you here?
Yeah, so Amphastar is an interesting company. We're a biopharmaceutical company which has a base of injectable and inhalation products and a long history of strong science. What we like to focus on are the hardest-to-do products in the generic injectable space and the inhalation space. Additionally, we've also made efforts into proprietary products as well. We sell Primatene MIST, which is the only OTC FDA-approved asthma product. We sell BAQSIMI, which we purchased from Eli Lilly about two years ago. That's a highly specialized glucagon product that's used for nasal administration, the only nasally administered glucagon product out there. What's going on recently is that last year we launched Albuterol, and we've got an exciting pipeline of multiple products that we're working on.
Okay, great. Then remind us the first quarter earnings and just what the results were and just how people should think about the rest of the year.
Yeah, so what we've said this year is that our revenues would be relatively flat, and earnings were down slightly. What we've also mentioned is that gross margins are going to be a little bit constricted by competition that we've had on a couple of our key products, such as glucagon kit and the epinephrine vial product, along with phytonadione. The price pressure on those products brings down our gross margin. Additionally, we've really increased our R&D budget as we're taking a look at more hard-to-do generic products and some proprietary products as well, along with some biosimilars. Those things lead to a lower bottom line for this year. Our goal is then to return to double-digit sales growth in the following year.
Okay. So you mentioned BAQSIMI. That's obviously a big growth driver for the company. Can you talk a little bit more about that specific product and what's been driving that growth, whether it's price, volumes, or maybe a bit of both?
Yeah, for BAQSIMI, the growth is basically based on more visibility and awareness. According to ADA, each patient that receives insulin prescriptions should have glucagon on hand or available. Based on the IQVIA data, it's only roughly about 12% of patients that prescribe insulins having glucagon. Prior to the novel glucagon approval back in 2019, prior to that, glucagon is not really being marketed out there just because it's an old product that's been around a long time. Now with the novel glucagon, which is the nasal powder, much easier administration, I think there's more awareness to have glucagon available for emergency use. It's our job to continue basically making that awareness out there.
Okay. So you're saying that ideally with every insulin prescription that a doctor would prescribe concurrently, glucagon is sort of a rescue.
Absolutely.
Yeah. Right now it's only 12%.
Yeah, roughly about 12%.
Talk about that for a little bit and just the history of that. I think you mentioned just lack of marketing and things like that. Is there kind of, are there ways to improve that, just overall disease awareness, education? What's kind of being done to kind of help that along?
Yeah. So our sales reps, we have a sales program where it's our own contract sales organization. They mark detailed endocrinologists. Earlier this year in January, we worked with Mankind, which also has sales reps that detail endocrinologists, that they also market BAQSIMI into their endocrinologists. I think it's more shares of voice out there, kind of make the endo aware that the product's available, accessible, and the costs are minimal to patients just because it's only, as you mentioned, emergency use. Hopefully the patient never needs to use one, but always good to have one when available. We internally call it insurance for insulin where you don't use it, but it's good to have it when there's emergency.
Yeah. The other thing is that historically, when we bought BAQSIMI, that rate was only 10% of scripts. Historically, the glucagon was delivered through the kit, which we also sell. That is a difficult process. The kit is significantly larger to carry around. It is a big plastic box that contains a vial with lyophilized powder and then a prefilled syringe that contains a diluent. The person has to mix the product up themselves. They have to inject the diluent into the vial, shake up the vial, withdraw the product, and then inject it into someone. Now, if this is a person who is a parent or a caregiver or a teacher or something like that, the person is unconscious, that is a very difficult proposition versus BAQSIMI. It is a ready-to-use product. You just take it out of the packaging and you spray it in the person's nose.
It is a much easier product to use and also to carry. We think that the ease of use, the ease of administration, the ease of carrying will lead to longer-term compliance with the product. We think that there is a real advantage with this ready-to-use product. As we have seen, moving from 10% to 12% in just the last two years, we think it is on a good pathway to continue that growth and continue that trajectory.
Okay. In terms of the competitive dynamics on the ground, can you talk a little bit about Gvoke and how BAQSIMI compares and just what you are hearing on the ground from doctors in terms of feedback between those two products?
Yeah, absolutely. For ready-to-use glucagon, there is BAQSIMI, there is Gvoke, and there is a smaller glucagon analog called ZEGALOGUE. Those are the market dynamic. For Gvoke, it is ready-to-use but still injectable versus intranasal. BAQSIMI is still the number one prescribed glucagon in the U.S., and we still lead in that category. While some doctors say, "Oh, my patients do injection of insulin all the time, so they have no fear of injection," a lot of times people forget that for hypoglycemia situation, it is not the patient injecting themselves. As Bill mentioned, it will be their coach, their parents, their caregiver. Those individuals will be basically comfortable to dispense intranasal versus try to figure out how to do injection. I think especially for pediatrics age, parents are much more comfortable with BAQSIMI as intranasal versus injection.
I think that's the feedback that we see that parents much more prefer intranasal.
Okay. Thanks. In Q1, I believe, or maybe just remind us how BAQSIMI did in Q1 because you guys are guiding to the street that it would be like BAQSIMI for the year, I believe, would be high single-digit growth.
Yeah.
Can you clarify that a little bit?
The first quarter, the accounting gets a little tricky because when we purchased the product from Lilly a year, the accounting a year ago is a little tricky because all of the they were originally selling the product. For the sales that they made, the accounting treatment was that we could only book the revenue based on the net of what we would get from them. If they sold $100 worth of product but had $40 worth of expenses, then we would only recognize that $60. That was last year. As we changed the distribution on a country-by-country basis, over the course of the year, we took on the distribution ourselves. It goes to a normal model where we're recognizing 100% of the revenue.
This year, when you take a look at the BAQSIMI line, it shows great growth, but the reality is that was mostly an accounting issue. It was relatively flat year over year in the first quarter. What we've seen in the second quarter is that the scripts are growing at a much higher rate. The guidance that we've given for the year is that these scripts will grow at a high single-digit rate and that we took a price increase of 3% in the United States. The United States makes up about 80% of that market. You get to a sales growth that's closer to the 10% range.
Okay. And then as you go through the year, there's going to be some acceleration that would happen. Is that fair?
First of all, yeah, that's fair. And we've seen acceleration in the second quarter from on a script basis, taking what the script data from IQVIA. But what we really will see is we believe a big jump in the third quarter. The third quarter is the big quarter for BAQSIMI because it's back to school. When we take a look at the sales last year, they peak in the month of August, and it's a significant jump up in that month. Right now, our factory sales really jump up in the June and July timeframe to get prepared for that back-to-school season. We expect to see that jump this month, and we expect to see that in the next couple of months. The seasonal trend, we believe, will continue. We expect a very strong third quarter.
Okay. And then as you think about BAQSIMI beyond 2025, what sort of growth profile are you expecting?
Yeah, we expect a similar growth profile going forward for several years. The guidance that we've given remains that we expect to see peak sales in the $250 million-$275 million range. Now, we haven't given a timeframe as to when that will be, but we have said it's going to take us several years to get to that level. We're happy with the trajectory we've seen. We're happy with the product, and we're really excited about it.
Okay. So then from a revenue perspective, if you are getting around high single-digit volume growth this year and then price is an incremental couple percent, so that gets you to, I think you said, around 10%- 11%, you're kind of expecting continued double-digit growth in 2026 and plus, or would it moderate a little bit just because of larger base?
Right now, we haven't given guidance beyond this year. Other than that, we will get to that $250 million-$275 million. We don't really see any reason why it would slow down from where we are right now, at least in the current rate. We expect, as we mentioned before, with the uptake rate from going from 10% of insulin users to 12%, that's a pretty big growth actually for that timeframe. We think that we can continue to move this product along at an above-average growth.
Right. Because even though it's an extra 200 basis points, the volume is so big because so many people are on insulin.
Exactly.
Okay. Okay. Got it. Switching to Primatene MIST, that is another growth driver for the company. Explain a little bit what that product is, how it's positioned in the market, and how you're thinking about the growth profile.
Yeah. Primatene MIST is the only over-the-counter FDA-approved asthma medication. We launched that back in late 2018, full year 2019. Since then, we continue to grow year over year. This year, we project it will grow by basically high single-digit . We are continuing to support that product from national media coverage such as TV advertisement. Also this year, we expand the marketing effort to expand our physician sampling program to the PCP because we believe PCP also will be helpful to provide information to patients that there are over-the-counter products available. We are very excited. I think that brand will continue to grow being the only over-the-counter available.
Yeah. Yeah. I think I've seen one of those at those commercials. That's great. Can you remind us of your sales force for each of these products? Or how is the sales organization structured?
For Primatene MIST, because it is over-the-counter, so we have a limited small sales force. We actually use contract sales organization. Prior to that, we did not have sales force, mainly just through, what you mentioned, TV ad because that's direct-to-consumer. But this year, that's when we start having a small, kind of like a pilot sales force to see if we could continue incrementally growing the brand.
How big is that pilot sales force?
We haven't disclosed, but it's small compared to the number of PCP. We want to see how successful that program is. In 2026, we'll decide if we're going to add on or whether we see the ROI or not.
Have you talked about which geographies? I mean, presumably some of the high density population areas.
Oh yeah. We haven't disclosed that, but pretty much just the high population, metropolitan areas where we see bang for the bucks.
What do you need to see from, I guess, on a revenue perspective from that pilot group to decide whether or not to expand?
I think it's more into because part of that sales force will be providing physicians with samples. The physician basically provides those samples to patients that they see the benefit using those. I think we'll see from that because it is difficult to quantify because it's such a large distribution versus small sales force. We'll just continue monitoring the feedback and how often the samples go out.
Okay. Now, those are two of the growth drivers. Can you just remind us the other parts of the business, the base business and the growth profile there?
Yeah. At the core of the base business is a portfolio of injectable products. A lot of them are used in the emergency room crash cart situation. They're products that have been steady contributors for decades to the company. Additionally, we sell enoxaparin and phytonadione, which are both more on the decline right now. What we've said this year to get to that flat sales that I mentioned earlier is that we would need contributions from two new approvals. Our expectation is that we have four NDAs at the FDA today. Our expectation is that we would get approvals on two of those products and get sales from two of those products.
Yeah. Okay. Taking a step back, you have growth drivers in Primatene MIST and BAQSIMI, those are growing. The base business is kind of declining. Outside of the expected approvals of two products by the end of the year, revenue should be declining. The delta is made up by the two pipeline or two approved products by the end of the year.
Yes.
Okay. So can you talk a little bit about those four pipeline products that are under review, just the markets and the mechanism and just kind of the history of those products with the FDA?
Yeah. We could start with the AMP-002. So that product, we disclosed it is a generic injectable and that at this time, there's no other generic approved. It's very complex products. That's one of the reasons why it takes so long to get the approval. There's no patent. We have a good due validate that is two years ago, Q2 2023. Between Q2 2023 till today, we have regular meetings and discussions with FDA on these products with their senior officials. They always tell us that they are working on it. This is a must-have product for them to get approval. We disclose, we typically do not talk about information requests because those happen all the time for an application. We disclosed this quarter, we did receive an IR just because of the unusual of this product's application process.
We received an FDA IR for the first time for the past two years on this application. The IR was very simple, which makes us optimistic that we hope the next communication will be FDA approval. The IR was very simple that we responded within one day. The type of IR is not something that vague, like provide data for this or that for that. It is very straightforward that we basically provided returned data to FDA within one day. That is why we are hopeful that we will get approval.
Do you see some of the recent turnover and changes at the FDA as a potential kind of risk going into whatever decision process that the FDA is going through right now?
Fortunately, no. FDA keeps meeting the time that we have agreed to. Basically, with this product, we have a regular meeting schedule with them for them to provide updates on this. Throughout this time, there's no action from our side. It's just from their side. Basically, they're working internally. Fortunately, no. We're excited with that.
Have you talked more about what mechanism or what indication or just any kind of more details around AMP-002?
No. We have not disclosed that.
Okay. And then there are three others. Can you just remind us the other three?
Yeah. So we also have teriparatide at the FDA right now. And that's one that we've had a couple of CRLs on. It's a complex generic, in some ways similar to glucagon in structure. But it's one where there's already a couple of generics on the market. So while we're still looking forward to getting that product approved, it's not as big a market opportunity as it might have been at one point. Additionally, we have.
Sorry, teriparatide is for what?
It's osteoporosis.
Osteoporosis. Okay. Yeah. Thank you.
We have AMP-018, which is a GLP-1. That's one where we think it's going to be a pretty crowded market, so it's not as exciting. It's also the only one of the four that we do not believe could get approved this year. It's probably going to be an approval next year. The final one is AMP-007, which is an inhalation product. To us, it's a pretty exciting one because there's no generics on the market right now. We just recently were about to respond to a CRL, and we think we're likely to get a good due for date that's late in the third quarter. We think that this one has a good chance to be on the market in the fourth quarter.
Okay. And then out of those four, I mean, it seems like the GLP-1 is more 2026. The other three, one of them has had a good due for update two years ago that's passed. And then the other two, one of them is a kind of crowded market. You mentioned the inhalation one, that's kind of the most promising, right? Do you think that is the one that investors should kind of pay the most attention to?
Yeah. I think that and the 002. For the 007, the generic inhalation, we know at this time there's no generic available. We know that MDI and HFA products are challenging to get generic approval. That's why we are excited that we may be the only generic to be approved by FDA for some time, similar to our glucagon story in the past. Yeah. That one has Paragraph IV. We did certify Paragraph IV challenge, and the RLD or the innovator never filed any patent claim against us. That's why we are very excited with that.
Okay. Did that product get a CRL? Remind me again.
Yes.
You responded to it.
We're about to respond.
About to respond. Talk to me a little bit about the CRL, the details of it, and just overall lift.
We do not really give much of the details about it other than to say that the CRL was minor. Therefore, we were able to respond to it relatively quickly. We are going to respond to it in the next couple of weeks. Because it was also characterized as minor by the FDA, we should have a good due for date that is about three months after we respond to it. That is just in the late third quarter for a good due for date. We believe that we could then prepare for launch and launch this in the fourth quarter.
Okay. How should we think about pricing in that market?
Yeah. As what we think is likely a first generic, generally, you have to price, say, 30% below the brand. It's pretty typical, more generic. That's the type of pricing we would look to see. With that level of pricing, it would be a very profitable product for us and also one that gives us meaningful sales. Yeah, we're very excited about it. Additionally, it will be the third inhalation product that we're making at our facility in Massachusetts. Because of that, as we add more products to that facility, the facility gets to run more efficiently and absorb more overhead over more products. The existing product line from that facility, including Primatene MIST and Albuterol, ends up lowering the cost of goods for those products and making those margins better as well.
Really looking forward to the operating contributions from bringing that product to market.
Sure. Let's take a step back. Everybody these days are talking about tariffs and things like that. Can you just remind us of your manufacturing and just overall exposure there?
Yeah. Right now, we make all of our finished product in the United States. We think that from that standpoint, we should be better off than most companies. We do make some of our active ingredients in China and in France. Right now, from China, there's only five either APIs or starting materials that we make in China for the existing products. Of those, we would only have to import two of those this year because we have enough API on hand already for the other three products. We would be subject to a tariff on those APIs the way we've interpreted the laws right now. What we've said is that the likely impact to us, the way we calculate it, is about $500,000 of extra expense to cost of goods on a quarterly basis.
It's definitely noticeable, but it's not really material to the company. Additionally, as these laws keep changing, we do source components from other countries, whether that be glass vials or some of the pieces for the inhalation devices that we have. Depending on the way these tariffs are implemented, there's always the potential that those could have a tariff on them. For us, the way we see it is that we're making finished product in the United States. Additionally, we're actually making several APIs in the United States as well. There are not that many biopharmaceutical companies that are smaller like we are that have the capabilities to do that. We think that really puts us in a good position.
Okay. Just ahead of the tariffs, you see a lot of companies kind of talking about, "Oh, they have enough API. They have enough finished product through 2025, sometimes even through 2026." Have you done a similar mitigation strategy or just not yet given the lack of clarity right now?
Like I said, we have enough API for three of those products that we make the API in China for more than this year. In some cases, it is two to three or four years' worth of API. In general, on APIs, we generally keep at least a year on hand just because of any other kind of logistical problems that have come up from time to time and headaches that we saw during COVID. We want to keep, and we plan to keep, those amounts in inventory. Anything else?
Yeah. No, absolutely. We have multiple discussions with our suppliers, whether we have things on hand here, then we'll still honor our PO, but they retain it in Europe, let's say, until we figure out what's the best way until things settle down just because tariffs just kept changing.
Okay. In the last minute or two, just talk about the company's PD strategy.
Yeah. Our main strategy is built around the internal R&D of the company. Our founders are strong scientists, brilliant scientists who bring that knowledge and that mindset to the company. Our main thing is that we focus on R&D. However, when we look at products and we find products like BAQSIMI, we just think it fits so well with our company. We're really interested in making deals like that in the future as well. We are looking at other opportunities that might be in the endocrinology space that would fit in with BAQSIMI or with products that would fit well with our manufacturing expertise in the injectable, inhalation, and intranasal space. Those are the type of things that we would be looking at. In general, we're pretty selective on what we do.
We really think it has to fit in well with the long-term goals of the company.
Okay. Very good. I think that's all the time that we have. Thank you so much for the fireside. It's nice to see you both in person. Best of luck.
Thanks for having us.
Thank you, guys.