Amphastar Pharmaceuticals, Inc. ($AMPH)

All right. Well, thank you. Good afternoon, everybody. Thank you for joining us. We're very excited to be hosting Amphastar Pharmaceuticals. To my right is Bill Peters, the CFO; and to his right is Dan Dischner, who's in charge of the Corporate Communications and some other things at Amphastar. For those of you who don't know me, I'll introduce myself. I'm Glen Santangelo. I'm the analyst at Barclays that covers the spec pharma and animal health space, among some other things. And we're excited to have you both here today. So thank you for joining us.

Thank you for having us.

thanks for having us.

All right. Well, why don't we just sort of dive right into it. Bill, I think a great place to start is going to be talking about some of the highlights from the fourth quarter and really fiscal '25, maybe more broadly. Obviously, there were some positives in the year that I think we can discuss. But to be balanced, I think maybe even in the fourth quarter, there are a couple of products that maybe fell a little bit short of your expectations. And so why don't you maybe to level set us, just put all that in perspective and then we can sort of dive right in. And as part of that, I don't know there, you can emphasize maybe some of the things that surprised you on the upside and the downside, and then we can just sort of dive right in. Sorry, there's a lot there.

Yes. That's okay. I'll try to do, and then we'll turn it over to him if I missed something. But yes, I think last year was sort of in line with our expectations, fell a little short, mostly around some timing issues and some additional competition in some of the products that we didn't fully anticipate. But overall, I think we were guiding towards being flat last year. Primatene MIST and BAQSIMI, our 2 branded anchors. They're just our growth drivers. They did great. They had a 12% increase for BAQSIMI over the year. And I think Primatene Mist had about 7% increase for the year. So still growing and performing the way we anticipate.

Okay. All right. So why don't we sort of turn to your sort of informal guidance? You don't formally guide, and I want to be clear about that. But when we look last year, in the middle of last year, I think we were sort of targeting as we looked out to this year, maybe high single to low double-digit revenues. And then earlier this year at a competitor conference site, maybe we were talking about mid-single digit to low double digit. And now maybe more recently, we're talking mid-single to sort of high single. Talk about the last 6 months and the progression of that informal guidance and maybe what shaped those expectations along the way. And I'm sure it's a combination of a bunch of different things, maybe tempering some expectations on some different products or maybe reevaluating some of your pipeline expectations or a combination of all that, but help us think through the last sort of 6 months and how your thoughts around guiding people evolved.

Yes. So part of that was a delay from the FDA pushing back the approval time for Ipratropium. So that was something that we thought we were originally going to have on the market earlier than it is. Right now, we did get it approved, and we are looking at an early April launch. So we're happy about that. Also, there was a little bit more competition than we expected on iron sucrose. So we expected 1 competitor to get approved and there were 2. So that changed the market dynamics for that market as well. Additionally, we've had some changes in our BAQSIMI assumption more along the pricing, and that's not -- we haven't changed the price, but what we've seen is a payer mix. So the people that are actually getting the scripts, it's tended towards some of the lower payers. So it's more of that Medicare, Medicaid mix that ends up having a slightly lower price. So we adjusted our pricing assumption for the upcoming year as well.

Okay. All right. Well, why don't we sort of dive right into the portfolio, and we'll sort of take it product by product because I think it's helpful as these are all obviously very individualized discussions? But let's start with BAQSIMI. You posted another quarter here recently of double-digit growth, but I think in your words, maybe the quarter was a little bit softer relative to sort of your original expectation. You were just sort of talking about that a little bit. But how should we think about the growth going forward? Appreciating the comments that I think you made on the conference call that you plan to exit certain international markets that may not be as profitable for you, fully appreciating that. I think the U.S. is roughly 80% of your business there. So put maybe all that into context for us and talk about the decision on the international business and how we should think about 2026 here?

Yes. So to start off, the U.S. is currently 80% of our business, international is 20%. You got that right. And what we've seen is that we've had a really strong execution in the United States. So we do see strong growth in units in that market. And -- but we have said that we do see that slight pricing decline in our expectations, and that's not our pricing. It is just a customer mix. So what we're seeing there is that in the U.S., we do expect to have some high single-digit unit growth this year with slightly declining pricing. So that puts us in a mid-single-digit kind of growth range. But then in the international markets, in the second half of the year, we do plan to pull out of approximately 5 or 6 countries. And those are countries where we're losing money. So the plan would be that we would have a higher-margin business after that. And I think we would exit the year with BAQSIMI sales being about 85% in the United States and 15% international, which also puts the overall mix at a higher margin mix entering the following year. So -- and like I said, we're very happy with the execution in the United States and the script growth that we've seen there.

Okay. I mean it looks like the U.S. volumes, they continue to look very strong. Growth at your primary competitor was also strong, and it seems like they were able to take some -- maybe a little bit more aggressive pricing than maybe what you're sort of describing. Could you maybe just discuss the competitive landscape for this product? And I know you also have a commercial partnership with MannKind. Could you maybe talk about how that's going? And is that sort of helping driving some of the strength here?

Yes. So we do have that partnership with MannKind. We pay them to co-promote the product for us, and we think that's going very well. I think a win-win situation for both of us. The U.S. demand remains very strong. The sales strategy will continue. We have renewed the contract with MannKind. So that will go on for another year. And that's a year-to-year contract, so we can make a decision to exit or keep going with that. But so far, we've been very happy with the results. And you can see the trajectory go up a little higher after we...

So no shift in the competitive landscape worth sort of calling out?

Not in the U.S., not on the ready-to-use products.

Okay. Well, let's maybe segue then to glucagon. Obviously, the growth was not as robust, and we're clearly seeing some share shift to the ready-to-use products as you would expect. But is there also some competition for traditional glucagon that may be is sort of impacting your business maybe a little bit more than you thought?

Yes. So we have seen another competitor come into the glucagon market. And so that does also impact the 2026 guidance. So we have -- that product will decline further. And if you take a look at what declines this year, that's the biggest decliner. And that hurts us because that was one of our higher-margin products. So with more competition on that product and also just the shift to ready-to-use products as well, that overall market will decline this year.

I mean when we think about the fourth quarter, I mean, not to harp on this, but the 45% decline in the fourth quarter, is that representative of the magnitude of the competition that we're seeing and the shift to ready-to-use or is there something unique about...

It's more of the competition. There was another competitor that entered the market. So when that happens, the price drops and our market share drops. So we had that happened, and we have to offset that with growth on our strong brands, strong growth on BAQSIMI and strong growth on Primatene Mist. So that's where we're going to focus our efforts there. But yes, we will see the year-over-year, especially in the first quarter, we'll see a significant decline in glucagon.

Dan, you talked about the continued progress in Primatene. The company sort of hit that long-standing sort of $100 million target that you guys had out there for a while. I mean, I think, growth in the fourth quarter maybe was a little bit softer than people thought, but still a very healthy number, right, annualizing well north of $100 million now. As we look out to 2026, I think you have a planned 5% price increase coming this year. Is that later this year that should benefit the second half so we can maybe talk about the timing? But as we think about the trajectory towards double-digit growth, if the pricing sort of gets us halfway there with a little bit of extra sort of marketing emphasis around, you feel like double digits is sort of an attainable goal for 2026?

Yes. As you mentioned, Primatene MIST is such a great product for us. It's a product with just amazing brand recognition. It's been on the market for over 60 years. And so has a really good brand recognition, and it continues to grow. We keep seeing the same type of growth. We are looking at probably high single-digit volume growth in Primatene this year. And then with the 5% price increase probably towards the second half of this year when it really takes place, then we're guiding to probably low double-digit growth for Primatene MIST.

And at this stage, what drives that high single-digit volume growth?

Just continuing execution on the marketing plan. We're launching a new commercial this year. We've seen that be very effective. The physician sampling program that we implemented a few years ago has really been positive for us, too. So just continued marketing the product and getting the word out about Primatene MIST. It is still today the only FDA-approved inhaler that's over-the-counter for asthma treatment. So it's a good product.

Okay. All right. Maybe one that also -- let's shift gears and talk to another -- about another product, epinephrine, which is also based from incremental competition. Could we maybe sort of talk about the weakness we saw there -- not obviously, not nearly as bad as glucagon, but maybe we can just sort of talk about that landscape and sort of how it's changed? And I think on the conference call, you also talked about maybe some product shortages that might have impacted your sales as well. Is it fair for us to assume that the competition will still be a headwind in '26? And how should we think about the shortages as that sort of evolves into 2026?

Yes. So we have to think about the epinephrine market in the 2 segments where we compete. The first is the multi-dose vial, and that's the product where we had multiple new entrants over the last 2 years. So we have seen most of that competition play out, but there is still some year-over-year decline that we'll see, particularly early in the year. But I think that was pretty much played out by the fourth quarter. So I don't think we see a downturn from that point. On the prefilled syringe side, that was a little bit of a volatile year last year because we began the year as the only supplier in the U.S. and then one other player came back to the market early on in the year. So we did see year-over-year declines in our unit volume for that product as well because of that competition. However, price was relatively stable. So we didn't really see a change in price there. But what we have seen is at the end of the fourth quarter, that other player was not shipping. So it's currently...

The other player was what, I'm sorry?

Other player was not shipping anymore.

We're not shipping anymore.

Yes. So right now, we are the only player in the prefilled syringe. So we're ramping back up production of that product in the first quarter. And so this is something that's in a backorder situation now, and there's a shortage in the market, but our goal is to address that shortage as soon as possible.

So if this player has left the market, does that make you the only player in the prefilled syringe market? And if that's the case, does that give you a pricing benefit that maybe we should consider?

Yes. So we are the only one in the prefilled syringe space right now. And just to be clear, that's the prefilled syringe that's used in the hospital. So it's not like the auto-injector. So it's a regular prefilled syringe. So we're the only player in that prefilled syringe that's in the hospital market right now. But unfortunately, we really can't -- we don't have a pricing -- too much pricing power on that. We were already selling our product at a higher price than the competition because we have been a stable supplier over the last several years. So we've been able to take that pricing. However, these are products where they could go to other products if we raised our price too much. So there really is not a lot of power there. Like I said, we had raised it a few times over the past several years. So we went from being a lower price to a higher price.

So is it fair to characterize epinephrine into 2026 flipping from being a headwind to a tailwind?

The prefilled syringe will have tailwinds. The vial still has a little bit of headwind year-over-year because we haven't had that full decline play out at the beginning of the year last year.

Okay. Well, that's mostly all the major products. Two other ones I just wanted to quickly touch on before we shift to the pipeline. Iron sucrose and Albuterol, you want to talk about those launches, the timing, when you launch them, how things are going thus far, how meaningful they are or incremental they are, maybe a better way to sort of characterize it. But yes, why don't we take iron sucrose.

So iron sucrose is a product -- after the first quarter sales were $2.4 million, we've kind of guided that, that's a good run rate per quarter. So this is a product that we do think that $10 million a year is the contribution we expect from that. So it's going to be a steady, small product for us. So clearly, was not what we thought it would be a few years back, when we thought we could be the first and only, but it is still a difficult product. We don't see significant and the probability of significant more competition coming into that player -- product. So -- but for Albuterol, that's another one where we had -- it took us a little while to get some market share because we were a little bit later to get to that market. But over the course of the year last year, we were able to get that. And you can see that by the fourth quarter, we had a little higher sales level. I think we probably peaked and so we will see a little growth from that product, especially as the sales trend last year annualizes. But I think the sales level we exited year is probably a pretty good indicator of where we'll end up there.

One of the things that's always difficult for us sitting in the analyst seat, I'm sure for investors is to sort of figure out how to model your pipeline, but let's talk about that pipeline for a second. You clearly just got approval for 007 Ipratropium, and I think you're expecting to launch that in the second quarter by the middle of this.

Early second quarter.

Early second quarter. Okay. Great. And so how should we think about that product sort of layering into that mid-single to high single-digit forecast that you gave?

Yes. So Ipratropium is a good product for us. So we're the first generic and where we also have 180 days of market exclusivity. So we -- obviously, when we launch, we'll have -- we'll focus on capturing a reasonable share of the market. There is the risk, as you know, that the brand could launch an AG. And so some of the variability in our guidance this year plans for with or without an AG.

All right. So if we don't see an AG, then we'll have some upside, hopefully, is the expectation.

We still see this as being our top growth driver this year, though.

Yes. Okay. We heard some pushback on the market opportunity. I mean can you characterize or frame the market opportunity for us?

Yes. Some of the pushback, I guess, there was about a 40% decline in IQVIA data from the year prior. Most of that was due to a reduced pricing. Only about 10% of it was due to volume. So it's still a good opportunity for us. Obviously, it would have been better if the pricing had been a little higher, but it's still good for us.

All right. Maybe, Bill, if you could sort of help us think maybe even beyond 2026 as we think about the approval cadence. I mean, if we go back to sort of marketing deck, I think you sort of flagged 018 and the insulin product, 004 as potentially being 2027 approval/launches. I mean are those 2 the next products on deck that we should be thinking about. And I was just sort of going back through your transcript before the conference call, and I think you sort of talked about 004 and the GLP ANDA for 018 sort of moving steadily through regulatory proceedings with anticipated commercialization expected each for 2027. And I don't want to misquote you on that.

No, you didn't. That's correct. Obviously, the Ipratropium was the first one, and we got that approved this year. And then 018 and 004, we have planned a commercial launch in 2027. So that's sort of the cadence for that.

Are you asking about first half versus second half of 2027?

No, probably a little -- yes, no, we haven't guided that yet.

It's still premature.

Maybe so.

And of those 2, I mean, how should we think about those market opportunities relative to some of the other recent launches?

004, obviously, because of just the sheer size of the market opportunity is probably the bigger one. We've been saying all along that our GLP-1 candidate probably will enter into a very competitive space and won't be a large opportunity. So 004 definitely is the bigger opportunity in those two.

And not only a bigger opportunity, but also even though the pricing for insulin has dropped, it's something where we have significant -- we've invested a lot of money into, and we have significant capacity to make that product, both -- we make both the API in China and we make the finished products in the United States. And so we have lines right now that are not being used for both of those -- both the API and the finished product that are just ready to go and currently being depreciated without any revenue associated with them. So it will help our overall gross margins to get that factory space utilized.

Any other pipeline assets you think it's worth sort of talking about? I mean I know there's a handful of earlier-stage assets. I mean you've done that deal with Nanjing to bring in a few assets. I mean outside of 004 and 018, do you think there's anything that's sort of worth spending 30 seconds on just to sort of emphasize with the investment community?

You bring up a good point with the in-licensed assets that we acquired last year. There's the 2 oncology ones and 1 ophthalmology product and then the corticotropin product that we're also working on. So there's a giant shift for us in growing our branded assets. As you can see, our biggest anchors are these branded products, and I think we do them well. So focusing on expanding our proprietary pipeline is a big part of our strategy as we move forward.

All right. A couple of financial questions, Bill, before we sort of wrap up. Can we talk about the gross margin expectations this year? I mean, clearly, there's some mix shift going on within the portfolio. How should we think about that flowing through the margin line? And help us think about the cadence for that for the year?

Yes. So the glucagon decline, both in pricing and unit volume certainly hits us on that level. Additionally, as I mentioned earlier, the BAQSIMI pricing is a little bit lower than it was before. And at the same time, we've had some input costs go up with some of our suppliers taking, I'll say, price increases that are higher than inflationary as well as having inflationary labor changes in our own thing. So we're seeing a small decline in the overall gross margin that will be partially offset by Ipratropium launch this year. But even with that, we still see a decline. And one of our -- one of management's focuses this year is going to be how can we offset that? Are there ways that we can make the operation run a little bit more smoothly and efficiently over the course of the year? And one of the things we're doing is actually implementing a new computer system. So a lot of people spending a lot of time this year on that. Hopefully, that will help bring the costs down in future years. So we do see some cost efficiencies associated with that coming out.

And in terms of the balance sheet, I mean, pretty low leverage, but different competition for the capital. You talked about sort of quadrupling your manufacturing capacity, which seems like a very big step relative to the size of your pipeline. Help us sort of reconcile that sort of commentary. Yes. So first of all...

It's quadrupling the capacity at the Amphastar facility. So that's just one of our facilities. So it's the facility right now that makes enoxaparin and teriparatide, glucagon, a few other products. So it's that facility, not the overall facility. So -- and it's really to meet many of the pipeline products, but also to have capacity to expand beyond that. So right now, when we take a look at how long it's going to take us to implement that, it's going to take us 5 years to get that facility up and running. So what we're looking at is what do we need to be 5 to 10 years from now. So that's what that is.

Okay. Anything else in terms of capital allocation? You bought back $75 million worth of stock. last year. I mean should we think about that as sort of like a normal year? I know you have a modest amount sort of remaining on your authorization. Anything else for us to be thinking about?

Yes. So my expectation is that once that current authorization runs out, the Board will authorize another one. So I would consider the stock buyback to be an important part of our capital authorization, our capital usage right now, particularly with the current stock price, it's very low. We increased our buybacks as the price drops. We think that the stock is an incredibly cheap stock right now. And so our expectation is that we would actually increase it.

Yes. Maybe we're essentially out of time, and maybe that's a good place for us to sort of wrap up. I want to flip it back to you and sort of give yourself and Dan the last word. I mean, given the volatility in the stock, I'd be curious to sort of get your take on what you think the biggest dislocation is between your view and maybe what the market is currently discounting in the stock. And I also want to give you the opportunity if there's anything else that's important that we didn't touch on that you think is sort of worth leaving with investors here today. And so I want to give you the last word to sort of close this out and tie everything together.

Well, I think to me, one of the biggest things is that we're very long-term focused as you could see from the CapEx plan. And what we see is that, yes, we've had some short-term earnings decreases last year and maybe going into this year as well, but the magnitude of those, I don't think is correct. The magnitude of the price drop is nowhere near, I think, the impact of what we've seen in the earnings drop. So I think it's been way overdone. And so we see that the cash flows that we're going to be generating from items, particularly on the branded side, BAQSIMI, Primatene and then the in-licensed proprietary portfolio, we see those things have a very, very long lives to them. And I don't think we're really getting credit for that -- the long lives of those cash flows. And I think they're taking some short-term small hits and extrapolating those to the long term.

Okay. All right. Well, we'll leave it there. Bill Peters, CFO; Dan Dischner from Amphastar. Thank you both for joining us. Really appreciate it. Great to have you here.

Thanks, Glen. Appreciate it.