Amphastar Pharmaceuticals, Inc. (AMPH) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us at the Barclays Healthcare Conference and continuing our sessions for the day. We have the management team from Amphastar with us, Bill Peters, the CFO; and Tony Marrs, the EVP, Regulatory Affairs. Bill and Tony, thanks for joining us today.

Thank you.

I wish you have a great lineup of meetings and productive conference. Before we go into the Q&A, I would love to invite you to provide some opening remarks around the company, and we can then pass through some of the questions.

Yes. So Amphastar is a company that was founded back in the late 1990s by Jack Zhang and Dr. Mary Luo. And we've always been focused on working on the more complex side of the generic business, so the complex injectables, and we're kind of famous for being one of the first to get enoxaparin approved. We've used those learnings to then develop more complex generics such as glucagon. We were the first and only one for 4 years on the glucagon generic injection kit. Now we're taking those learnings and moving into biosimilars and proprietary products as well. Right now, working on 3 different insulin biosimilars as being one of the key initiatives that we're working on today.

Got it. And you recently reported your Q4 earnings. Can you walk us through some of the key points there, and then, maybe use that as a segue to also discuss the outlook for 2025?

Sure. So right now, we had a really strong quarter for BAQSIMI and for Primatene MIST. Both those products are showing growth. Primatene MIST was particularly strong in the quarter. And also, we had a long-term goal of getting to $100 million in sales for that product, and we surpassed it this year, hitting $102 million. So we're really happy with the progress and the trajectory for that product. Also, BAQSIMI is performing well. And while we have some setbacks in the quarter, we have more competition on our epinephrine vial product. So remember, we sell epinephrine in both prefilled syringes and vials. So the competition is on the vial side of that. We've had 2 new competitors launch over the last several months. So we did see some price and unit volume erosion in the fourth quarter.

Got it. And as it relates to your outlook for 2025, we would love to dig into some of the key priorities that you have there.

Yes. So the key priority is really growing BAQSIMI further. And to that end, we actually have signed a co-promote agreement with MannKind. So they're going to be using their sales force to promote our product as well. That's a fee-for-service arrangement, and I think it works well for both of us. We're really happy with it. And as you probably know, we've had a long-term partnership with MannKind. We supply them the insulin API for their Afrezza product. So we have a good relationship with them going back. So it's a really -- I think it's a win-win scenario for us. So we really want to make sure that we get this BAQSIMI moving on a faster growth path than it had last year. So that's why for this year, we've also given guidance that we expect high-single-digit unit growth, which is a little higher than it was last year. And we've also taken a price increase in the United States of about 3%. So we've had some price upside and some unit upside this year. So we're really excited about the opportunity for that product to continue the growth pattern and accelerate the growth pattern this year. Additionally, Primatene MIST, we see this as a high single-digit growth rate type of product again as we've surpassed that $100 million point. I know some people saw that $100 million point as like a peak sales kind of target, but we've never said it's a peak sales target. We just set it as a growth target out there for last year to give analysts something to see how far we thought it could grow. And it grew so nicely that we expect it to continue growing this year. We're increasing our physician sampling program, still continuing to do our DTC marketing on that one. So we definitely see that one as being a good grower. But then on the negative side, for the coming year, we have more competition on glucagon. We've had a new competitor into that. So on the glucagon injection kit, so we see both price and units declining there. And then on epi we have, as I mentioned, as we saw in the fourth quarter, there's some new competition there, too. So we do see some price and unit erosion there.

Got it. And as we -- maybe digging through BAQSIMI again, starting with just -- you had this asset for more than a year now. And help us understand how has this product performed relative to your own expectations? And...

Yes, so far, it's actually outperformed our expectations. So when we bought this product, it was going to be one of our -- we saw this as being a really key product for us. It was -- it fit very well into the strategic initiatives that we were working on. So first of all, we were the only ones at the time selling the glucagon generic. And so this was a branded glucagon. So we really liked that market. We're working on other products in the endocrinology space, the insulin products that I mentioned earlier and also GLP-1s. So it fit well into that. Also, we took a look at the formulation and thought it was really novel, very unique, very difficult to replicate. So one of the things that we really liked about BAQSIMI was the fact that it has, we think, a very long life ahead of it. And we also saw a very underserved market. So we saw that only 10% of people who were getting insulin were getting a glucagon script filled. And the Diabetes Association recommends that everyone who's on insulin gets a glucagon script filled. So we saw that it's a significantly underserved market there. And actually, over the 1.5 years, almost 2 years that we've owned it, that increase -- that rate has now increased from 10% to 12%. So we've definitely seen an upward trend there. So that's led to some of the growth in BAQSIMI. So it's performed -- it's actually exceeded what we thought we would do when we bought the product 2 years ago or signed an agreement 2 years ago. So we're happy with that, but we have to keep on the gas pedal there, and that's why we've signed that agreement with MannKind for the co-promote to accelerate the growth this year.

Understood. And you commented about your collaboration with MannKind. So can you give us a little more color on what this means in terms of sales force and also maybe towards the profitability dynamics of this collaboration?

Yes. So right now, this is -- it's a fee-for-service arrangement. We haven't disclosed how much it is. We haven't disclosed their sales force size. But what we have said is that their sales force is larger than our existing sales force. So this more than doubles the number of representatives out there who are going and calling on doctors, endocrinologists to promote the product. And we think that, that will really help with the growth trajectory this year.

Got it. Thinking longer term, how should we think about the peak sales potential for this asset?

Yes. So we've been looking at $250 million to $275 million long-term peak sales for the product. And if you take a look at what gets us there, it's really only that -- I had mentioned that we've gotten to about 12% penetration on the number of people with glucagon. It really only takes us getting above that 15% threshold of like 17%, 18% kind of range to get to that target. So we think that, that's a very achievable goal. And we haven't said when we're going to get to that, but we think it will take several years to get there, but we do think that it's an achievable goal. And as I mentioned earlier, we think this is a really long-life product. So we think that this is something that's going to keep generating and keep our cash flow for the company going for many years.

Got it. For your stakeholders, as we look at this collaboration, what could be the data points or key milestones that we could look at to see that this collaboration is progressing as it should and that it's delivering the results?

Yes. So one of the things that we're going to be taking a look at is the IQVIA sales level, the unit level in the United States and watching that growth trend. So we're going to be monitoring that throughout the year and working with them to make sure that this -- we're getting the right targets and the right doctors. So we think -- as I said, we think that this has high single-digit growth rate this year. So what we're going to be looking for is that growth rate to grow and accelerate over the course of the year. So they just started promoting it in the first quarter. So we haven't had a lot of time to get out there to all the different endocrinologists that they'd want to yet, but we think that -- so the way we look at it is that we're expecting a certain level of growth in the first quarter. And by the third or fourth quarter, we expect that to significantly increase.

Understood. Maybe you could use that as a segue to discuss the broader dynamics within the glucagon market itself. While Novo, Lilly exited this late '23, and then, Viatris launched in 1Q '25. How is the market overall evolving? And walk us through the market dynamics here overall?

Yes. So right now, you have to remember that it's not really 1 market, it's 2 markets for the glucagon injection kit. So right now, there's the core market or the historic market, which is the bigger side, which is the anti-hypoglycemic market, which is the individual patient population, the person who's on insulin getting this. And we've seen that shrink over time as people are moving towards the ready-to-use products, which we think are much better for the patients, such as BAQSIMI. So we see that trend continuing. And right now, it's -- our sales are only about 30% for that product to the anti-hypoglycemic market. The other 70% is the diagnostic side. And we see that to be a relatively flat market, and that's probably where some of the competition will be. So there's already us and one other player in that market, and then, now a new entrant coming into the market. So there'll be 3 players. But we have a strong market share in that, and we see that continuing to be a good market for us, but a flat market. So the market size will be flat.

Understood. Primatene MIST, again, commented around -- outlook around high-single-digit growth. So what is driving this? And as you think about the various efforts that you're involving in with DTC or sampling, so how should we think about the near-term dynamics for the market?

Yes. So we've increased the physician sampling program some more. We're continuing to advertise. We've been seeing strong growth across all the different chains that we've been selling this through. So we've really been happy with it. The chains have been happy with this. So this is a good product for us. And it's one where we've only taken one price increase in the 7 years that we've had the product on the market or almost it will be 7 years this fall. So I also think there's room for price increases in the future, but that's not baked into this year's sales forecast, which is the high single unit -- high-digit single unit growth rate. So we think that there's -- it's just a really good product. It has a very low market share still when you take a look at all the different products that are out there for asthma. We have a relatively low market share, even though about 60% of the people who have asthma have mild asthma, and this is a product that's aimed at that market. So we have a lot of room to grow there.

Sure. Can we spend a few minutes on the pipeline side of things? Talk to us a bit more about your pipeline evolution. And what will your focus be like through 2025 as it -- as you shift towards more of proprietary and biosimilar drugs?

Yes. It seems to be a natural evolution for us to go towards branded products and biosimilar products. And this is where our focus is shifting towards. And the evolution, I guess, started indirectly with us with a product that -- one of the early products that we developed was hyaluronidase, which at the time was categorized by the FDA as a drug, but it's an animal-derived product. And so, as part of that, we needed to properly characterize it. We needed to work out all the issues with it being animal-derived. And so, early on, this is one of the areas that we focused on. The FDA later categorized it in 2020 as a biologic. And so, doing all the work for getting the approval of that product took a lot of innovation on our part. We also have developed a generic version of enoxaparin, which is another complex molecule. Most of the rest of the world considers it a biologic. It's a large molecule. And for this one, we had to characterize the product and spent quite a long amount of years characterizing it. Towards the end process of that application, we needed to do some immunogenicity studies. And so we had to develop a method for doing that. Additionally, on the branded side, one of the products we developed was Primatene MIST. And for this, we had to do clinical trials, Phase I to Phase III. So we had to do large-scale trial, hundreds of patients, daily dosing multiple times for quite a long period of time. We also had to do human factors label studies. So as part of the brand-new narrative, we needed to learn from the molecule, we had to learn from the clinical trial and the label studies what it took to do that. Most recently, with the acquisition of BAQSIMI, we've also got the sales force portion of the branded product. So selling a product, a commercially branded product, is something that now is in our capabilities. Also with BAQSIMI, we have the international footprint from a logistical perspective, not only from the sales and contracts, but the distribution, the releases of these batches for international use is quite an endeavor. So when you combine all of these, it seems kind of a natural evolution. I mean, you could see, as we look at our history of the products that we've developed, we've always taken a position of going after more complex products, complex injectable products, combination products. And it seems just very well to fit. Other companies now are starting to be more adept at being able to develop some of those that we've been developing for many, many years or decades. And so it makes sense for us to evolve into something getting more complex.

Thanks, Tony. That was very helpful. Maybe just drilling through some of the select assets that you have in the pipeline. Could we maybe start with speaking about AMP-018. And talk to us more about this ANDA and the upcoming GDUFA? What should we expect from this area overall?

Yes, sure. So GLP-1 product, we've mentioned before, this is a first cycle approval. But GLP-1s, we're excited. It's very much aligned with our portfolio for some of our other insulin and glucagon products. So this endocrine space, it's very much aligned with it. From a chemical molecule perspective, it's a peptide, so again, very much in our wheelhouse. So as a first cycle, we're excited about it. We've been working with responding to any information request with the agency. And now we're just waiting for the action date.

And did you not expect to hear anymore -- with any more request for information?

Well, they're past that stage. So now we're just kind of sitting and waiting for them to make an action for it. Again, it's a first cycle in this area of these complex products, combination products as well as the peptide. We'd be very optimistically happy to get a first cycle approval. But I think historically, companies that are in this area would be extremely surprised to have that.

Got it. And maybe can you also just speak about your ability or preparation to be able to launch these products as and when they get approved?

Yes. Any time we have a looming or a pending action date, we're always prepared for launch. So we have components in inventory for those largely. And so, depending on the type of product, we will have the chemical raw material for the formulation and then the components necessary. We'll maintain a supply of that. Now granted, a first cycle versus a multi cycle, as we've seen, will depend how much risk we'll take on that. But generally, the last stage of that is the labeling. The agency generally reviews the label last, and any label changes obviously would affect that. And so, generally, the label is the part that takes us the longest lead time. But we're always ready for launching after we have an approval of any of our products.

However, we rarely will make product at risk, the finished final product at risk. So we'll have all the components, as Tony mentioned. But it would take -- if we're extremely confident, we might start making batches before the GDUFA date. But that would be more of a rare instance just because of the uncertainty given...

Got it. Thanks for the context. Shifting to the second asset, that's the 007 on the inhalation side, again, you have another GDUFA coming up in 2Q. So help us understand this opportunity a bit more.

Yes. This is -- as we said, this is a first cycle again, a first cycle. This action date coming up would be our first action date for the product. It's an inhalation product, as you mentioned, so a combination product. And there are currently no generic products for this product. So we would be the first generic if we were to get approval there. So we obviously like that position. The other thing about it is it's manufactured at our U.S. facility in Boston. And so, we have 2 other products that are manufactured there, our Primatene MIST and our generic albuterol. So this would be the third product there. And from an operation cost, being able to share some of those expenses would be great for us. So we're very excited about that product.

Got it. In teriparatide, I mean, received the -- you received a CRL there, and you also submitted your response to the FDA. So what are the next steps that we need to look forward here? And has the FDA given you any particular timelines in terms of their response and clearance of this?

They have, and they've given a fourth quarter of this year as an action date. And so, we've responded to their CRL in a relatively short amount of time, what we believe is, address their concerns.

Got it. And how much does the CRL or this delay to market impact your view on the opportunity that you saw with this?

As we've disclosed, there are 2 other generic products that have been approved. And so, it's not necessarily the timing of our CRL or the CRL itself, but just the other entrants into the generic market for that, that would cause us to have less positivity on that product revenue.

Shifting from there, maybe just let's touch upon the biosimilar side of the pipeline with AMP-004, your biosimilar Insulin Aspart. Help us understand, again, how big of an opportunity could this be and the potential timing around this. When could we expect a launch?

Yes. So from the size of the market, we're working on the 3 different biosimilar insulin products, and they total about $6 billion in IQVIA sales. Now we know that IQVIA tends to overstate because it doesn't get all the discounts and the rebates, but still, it's a very large opportunity for us. And it's also a very large unit opportunity for us, which would significantly help increase the productivity of our current factory where we make some other products. So it's a really interesting and large opportunity for us. So the 004 is the biggest of the 3, so it's one that we're the most excited about.

And within this, could you break down the market opportunity further between these assets?

So right now, like I said, that the total one is $6 billion. I think this one is closer to $3 billion, so it's the biggest of them. And so, there is one other company that has a biosimilar, but it's not interchangeable yet. And so, our goal is to get that interchangeability. So we think that we can get -- our goal is to get that as soon as possible. So...

Understood. I want to focus on your second pillar of your strategy, on the inorganic side. So help us understand where the balance sheet is currently, your comfort level with leverage and your appetite and desire to do BD now to further, further the company.

Yes. So right now, we have $345 million converted, it's $250 million term loan, it's the debt on the balance sheet, and we have $250 million of cash and short-term investments. So we're not highly levered from a net basis. On a net basis, we're just over 1x EBITDA leverage. So for us, we see significant opportunities for us to be able to leverage that strong balance sheet to buy new things. So we're actively looking at things, particularly things in the endocrinology space that would fit well with BAQSIMI, other proprietary products, looking at a wide variety of things. So far, nothing has met the criteria that we'd like the product enough, and it's at a price that we're willing to pay for it. So we've seen some things we really like, but the price is very high, more than we wanted to pay, or there's been other things where in the end, we've decided they just -- we just didn't like them enough, they didn't fit well. So when you go back to our BAQSIMI acquisition, it really checked all the boxes for us again. So it was in the glucagon space, in the endocrinology space, it was a proprietary product, it was an intranasal product. We really like the intranasal delivery form. It was a unique formulation that we thought would be extremely difficult to genericize. So we thought it would have a very long life for it. So it really was something that met all of the things that we were looking for. So those assets don't come around every day. But I think we have the opportunity and the balance sheet to take advantage of those opportunities if one was to come along again.

Got it. Last minute remaining. Maybe just provide us your thoughts around the generics industry and where you see Amphastar generics and biosimilars industry and where you see Amphastar within this and probably a longer-term outlook.

Yes. So -- yes, we're definitely, I'll say, a niche player in that industry because we're really only looking at the complex side of it. So we're not really interested in being everything to everyone. We want to be someone that can develop the most difficult products, the ones that are hardest to develop, hardest to manufacture and focus on those opportunities that will hopefully have fewer other entrants. And I think our skillset allows us to do that really well.

Anything to add, Tony?

Fairly well summed up. Thanks.

Bill and Tony, thank you so much for your time and your thoughts. I also wish you a very productive day at the conference. Thank you for joining us.

Thanks for having us. Great. Thank you.