Greetings and welcome to the Amphastar Pharmaceuticals' First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to, management's outlook or predictions for future periods are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the section entitled forward-looking statements in the press release issued today and the presentation on the company's website. Also, please refer to our SEC filings which can be found on our website and the SEC's website for a discussion of numerous factors that may impact our future performance. We will also discuss certain non-GAAP measures. Important information are on our use of these measures and reconciliations to U.S. GAAP may be found in our earnings release. Please note, this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO; Mr. Dan Dischner, Senior Vice President of Corporate Communications; and Mr. Tony Marrs, Executive Vice President of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dischner, Senior Vice President of Corporate Communications. Dan, you may begin.

Thank you, Paul. Good day, everyone and welcome to Amphastar Pharmaceuticals Q1 earnings call for the year 2024. We're thrilled to have you all join us today as we reflect on the company's performance over the past quarter. Amidst the dynamic landscape of the pharmaceutical industry, we are eager to share our progress, milestones, and strategic insights with you. Thank you for your ongoing support and interest in Amphastar. Joining me on the call today are 2 key members of our leadership team. Bill Peters, our Chief Financial Officer and Executive Vice President of Finance; and Tony Marrs, our Executive Vice President of Regulatory Affairs and Clinical Operations. Let's get started. Amphastar's performance remains robust, evidenced by our impressive financial results. We are pleased to report a notable year-over-year increase in net revenue, soaring to $171.8 million, making a substantial increase of 23% over the same time last year. This achievement underscores our product portfolio's enduring strength and adaptability amidst an ever-changing environment. As expected, our products such as glucagon injection, BAQSIMI, Primatene MIST, and our hospital and clinical use offerings continue to experience steady growth. This reflects their ongoing importance and relevance in the market. Of particular note is the consistent demand trend for our hospital products, which we anticipate will remain robust throughout the year. Our glucagon injection saw changes in demand, specifically in the diagnostics sector due to another manufacturer's product availability. However, our recent entry into the Canadian market underscores our ability to adapt and mitigate market fluctuations effectively. Regarding Primatene MIST, although there have been fluctuations in distribution orders from stores, the product has maintained a steadily positive growth trajectory with consistent weekly in-store sales. Furthermore, we remain committed to achieving the $100 million sales milestone for this product in 2024. Shifting our focus, I'd like to highlight our proprietary prescription product, BAQSIMI, our intranasal glucagon. The transition from Eli Lilly continues as expected, which is evident in the 22% year-over-year sales increase compared to the first quarter of 2023. This achievement underscores our proficiency in integrating acquired products into our portfolio and driving growth. At the same time, the sales also benefited from initial stocking as we started BAQSIMI distribution in the United States. BAQSIMI has swiftly become a cornerstone of our diabetes portfolio, offering patients a convenient and effective solution to severe hypoglycemia. We believe the glucagon market remains underserved with significant growth potential as BAQSIMI continues to be underutilized among diabetic patients. Similarly, our global transition of BAQSIMI has continued to make progress. Our dedication to broadening our capabilities to provide BAQSIMI's accessibility for patients worldwide remains steadfast. Furthermore, we persist in prioritizing investments in sales and marketing endeavors to bolster BAQSIMI's market standing, seizing upon the existing underutilization of glucagon. Looking forward, BAQSIMI remains a primary focal point for Amphastar and we eagerly anticipate its significant impact on individuals navigating diabetes management. Turning our focus to our pipeline products. Our efforts are directed towards potentially launching four to five products this year. We are pleased to announce the recent launch of REXTOVY, our intranasal naloxone product. In terms of teriparatide, we have received a minor complete response letter and we anticipate responding to this in the second quarter. Additionally, we anticipate a GDUFA date in the third quarter for this filing, noting that it is still in its second review cycle. Moving on to AMP-008, our first inhalation ANDA has a GDUFA goal date in the second quarter. While our other inhalation ANDA filing, AMP-007 has a GDUFA goal date in the fourth quarter. The FDA has designated this application as a competitive generic therapy. With regard to AMP-002, we are actively engaging in a positive routinely scheduled dialogue with the regulatory agency, with the FDA affirming its commitment to prioritizing the review of this application. In our diabetes portfolio, we are on track to refile insulin aspart or AMP-004 in the second quarter. Additionally, we plan to file AMP-018, a GLP-1 abbreviated new drug application, in the coming months. In conclusion, it's vital to highlight our remarkable performance during the first quarter. The transition and year-over-year growth of BAQSIMI showcase our ability to foster expansion. This achievement underscores our adeptness in integrating acquired products efficiently and reaffirms our commitment to growth. Beyond BAQSIMI, our diverse portfolio and strategic initiatives position us well for sustained success amidst market fluctuations. With BAQSIMI meeting our expectations and as we anticipate upcoming product launches and continue constructive dialogue with regulatory agencies, we are optimistic about our growth prospects. Now I'd like to hand the call over to our CFO and Executive Vice President of Finance, Bill Peters, to further discuss the financial results for the first quarter.

Thank you, Dan. Revenues for the first quarter increased 23% to $171.8 million from $140 million in the previous year's period. Glucagon injection sales increased 11% to $28.5 million from $25.7 million as we had our first full quarter of sales in Canada during the quarter. Primatene MIST sales grew to $24.2 million in the first quarter, representing a sales growth of 3% from $23.5 million in the first quarter of last year. Epinephrine and phytonadione sales increased 30% and 29%, respectively, due to other supplier shortages for part of the quarter, with epinephrine sales increasing to $26.1 million from $20.1 million and phytonadione sales increasing to $10 million from $7.7 million. Other finished pharmaceutical product sales decreased by $1.4 million to $29.2 million due to the API shortage for MPA, which caused us to temporarily stop selling the finished product. This was partially offset by increased sales of other products such as dextrose and sodium bicarbonate as well as newer launches such as regadenoson. BAQSIMI revenues now fall into two categories as we began shipping the product in the United States and a few European countries. The first category relates to products we ship directly to our customers for which we recorded net revenues of $13.8 million. These revenues are recorded in our product revenues net line on the income statement. The second category relates to products sold by Lilly on our behalf under the TSA agreement, totaling $24.6 million, which had a cost of sales and expenses of $10.4 million. This resulted in net revenues of $14.2 million in our other revenues category, which corresponds to Amphastar's net economic benefit from BAQSIMI. Total worldwide BAQSIMI sales were $38.4 million in the quarter, up 22% from $31.4 million in sales reported by Lilly in the first quarter of 2023. We will continue to book revenue on a net basis for those countries where Lilly continues to distribute the product on our behalf. Our own distribution of BAQSIMI will increase throughout 2024 on a country-by-country basis once Lilly has finished their inventory and we have Amphastar labeled inventory available. This will result in an increase in product sales and a decline in the net economic benefit recognized in our other revenues. Our insulin API business had sales of $1.7 million, down from $4 million last year as MannKind cut purchases while they qualify the API produced on our new production line. Cost of revenues increased to $81.7 million from $66.4 million. Gross margins were essentially unchanged at 52.4% of revenues in the first quarter of 2024 and 52.7% of revenue the previous year. Changes include increased amortization and depreciation of BAQSIMI assets and an increase in labor and certain component costs. These changes were partially offset by BAQSIMI sales as well as increased sales of glucagon, Primatene MIST, and epinephrine, all of which are higher-margin products. Selling, distribution, and marketing expenses increased 32% to $9.4 million from $7.1 million in the previous year's period due to the salesforce expansion and marketing expenses related to BAQSIMI. General and administrative spending increased 16% to $15.7 million from $13.5 million due to increased expenses related to BAQSIMI. Research and development expenditures decreased 14% to $17 million from $19.8 million due to the timing of clinical trials and lower material expenses related to our insulin and inhalation pipeline products as a result of a ramp-up in 2023. Our nonoperating expenses of $100,000 compared to a nonoperating income last year of $100,000 as a $5.2 million gain on our interest rate swap associated with our term loan offset higher net interest expense. Net income increased over 66% to $43.2 million or $0.81 per share in the first quarter from $26 million or $0.50 per share in the first quarter of 2023. Adjusted net income increased to $55.3 million or $1.04 per share compared to an adjusted net income of $32.1 million or $0.62 per share in the first quarter of last year. Adjusted earnings exclude amortization, equity compensation, impairments of long-lived assets, and one-time events. In the first quarter, we had cash flows from operations of approximately $55.3 million. I will now turn the call back over to Dan.

Thank you, Bill, for the updates. With that, we will now take your questions. Operator, please open the line for Q&A.

Our first question is from Ekaterina Knyazkova with JPMorgan.

Just two for me, if I may. So first, on BAQSIMI, can you talk about any of the feedback and discussions you've had with payers post the Lilly transition? And any implications as we think about price over the next few quarters? And any changes in that market from a competitive standpoint, anything different you're seeing from Gvoke? And then second question is just on AMP-002. Can you just elaborate a bit on the interactions you've had with the FDA? I think you mentioned in your prepared remarks, just have they asked for any additional data or anything else? And kind of what's your latest confidence in getting that product approved later this year?

Yes. So for the first question on the pricing for BAQSIMI, we have had conversations with payers. And in general, most of those contracts are lining up with exactly the same price that Lilly had for those. So we've been able to do that. What we did mention on the last conference call, though, was when we're paying fees to the wholesalers out there, we're paying a higher fee than Lilly paid because they have much better bargaining power. So that's why we said this year for BAQSIMI, we were guiding towards high single-digit unit growth but low single-digit pricing declines. And so those pricing declines are based on that net difference in pricing that we have to pay to the wholesalers. And for your second question regarding AMP-002, we have scheduled routinely scheduled meetings with the agency. They have not asked us for anything new regarding this application. And we remain cautiously optimistic as we typically have for it. But I think just routinely having these meetings with the agency is giving us and they're sharing with us their desire for moving this application forward.

Our next question is from David Amsellem with Piper Sandler.

This is Skyler on for David. First, could you give us the latest update on the BAQSIMI sales force in terms of sizing and whether you plan to only use a contract sales organization going forward? And just how the overall transition is going from Lilly and also any thoughts on eventually bringing manufacturing of BAQSIMI in-house? And then second, on injectable glucagon, could you talk about the mix between diagnostic usage and hypoglycemia usage? And how much room there is for more penetration in both of those settings?

So I would say we haven't really disclosed the BAQSIMI, the size of our BAQSIMI sales force. We are continuing to use an outside sales force on that. We will continually monitor if there is a need for us to bring it in-house. We will continually monitor to do that. But right now, I think we're satisfied with the progress they're making at this time.

And as far as the manufacturing goes, because of the complexity in the machinery and the setup, bringing that in-house would take several years at best-case scenario, so I don't see that as happening or being very likely. And then the other question was related to the split on the glucagon injection. And right now, it's about 1/3 anti-hypoglycemic and about 2/3 for diagnostics. And what we've seen though is that on the anti-hypoglycemic, the change that we've seen there is more towards the ready-to-use products, such as vaccines. So that's what we've seen the growth in and why we said this year that we did expect to see our glucagon injection product to decline in units overall this year. While we did have growth in the first quarter, we're still saying that our total units in the United States will decline and that decline will be offset by revenue growth in Canada.

Got it. And if I could just sneak in one more. Could you just talk to the extent to which you think you're going to benefit from shortages in 2024 compared to 2023?

Yes. So with the shortages, what we've said in the past is we frequently said we've given the number of $20 million-plus of benefit from those products. And as of right now, there are a few products that have continued to be on shortage such as dextrose, sodium bicarbonate and epinephrine and those are still on shortage, have been on shortage since July of last year. And then, there are a couple of other products like phytonadione that had a short-lived shortage during the quarter this quarter. So some of those other products, they come and go quickly. But what we have said though is that every quarter since I've been here and I've been here for 10 years now, we've benefited from other companies' inability to buy product for one product or another. So we've been able to have that benefit every quarter for the last 40-plus quarters.

Our next question is from Tim Chiang with Capital One.

Bill, maybe you could talk a little bit about the BAQSIMI rollout in the U.S. What sort of feedback has your contract sales force given you in terms of, just, demand for the product, one? And two, is there really any change with your customers? Obviously, this is a market where you're only getting a small sliver of the potential market. Could you talk a little bit about how you can penetrate more of the market in 2024?

Yes. So the feedback has been very good and sales have been growing very nicely, particularly in the United States and we've seen that transition happening. And we have seen growth of the ready-to-use products in the United States. We think that those are definitely the better solution for glucagon. Yes.

And again, I mean, the U.S. market is about 80%. This is going back to BAQSIMI, so the other 20% is going to basically flip to your responsibility this year, is that right?

Yes. Currently, out of the 25 countries where we distribute BAQSIMI, we have initiated operations in 3 of them in Europe. We aim to expand into the remaining 21 countries once Lilly's labeled inventory is depleted and we have our Amphastar labeled inventory ready. We anticipate that many of these countries will make the transition, likely in the third quarter, primarily between June and August. However, a few countries may not transition until the end of the fourth quarter.

Okay. And just one last question, if I may. Epinephrine, I mean, this product has had its best quarter to date with sales in the first quarter. Do you expect this type of continued year-over-year growth figures for the next couple of quarters going forward?

It's challenging to maintain that level of growth because we have reached our production limits this quarter. Currently, for the prefilled syringe presentation of that product, we are the only company in the country supplying it for the hospital market. We are producing as much as we can and have hit our capacity for that product. Therefore, I don't anticipate any increase beyond the current levels. I expect it to remain at this level for at least another quarter, if not longer.

Our next question is from Jason Gerberry with Bank of America.

This is Pavan Patel on for Jason. Two questions from us. The first is to what extent is mix driving growth in terms of the market moving from single-use generic kits to brands offering two units? Like, what's the product shelf life? And does that create a risk that patients might take longer than expected to work down their inventory? And then my second question is that insulin use in type 2 diabetes has declined. And we generally hear from physicians that these glucagon rescues make more sense for type 1 diabetics versus type 2, who can manage their blood sugar. Do you see type 2 diabetes as a meaningful area to expand BAQSIMI? And is that embedded in your peak sales outlook for BAQSIMI?

Yes. So as far as the expiration goes, most of these products have a two-year shelf life from the date of manufacturing. So that usually takes a little while to get released and then into the wholesale channels, then to the retail, then to the customers. So generally, the customer, depending on when they get it, has 12 to 20 months of shelf life from when they buy the product. And I'll let Dan tell us a little bit about type 1.

Yes. I think as far as type 2 diabetic patients, I think that's true and I would agree that the bulk of the percentage of people with type 1 that are needing these glucagon products is higher for type 1 as compared to type 2. Just partially, it's a compliance issue. Type 1 diabetics, because they're dependent on the insulins, are more compliant than type 2. And so with type 2, there'll be less utilization, as a percentage of that population for the use of these glucagon products. But I think with that population getting more educated and getting more into the healthcare system with some of the GLP type products, I think that should increase as they get more into the healthcare system.

And then as far as our forecasting goes, yes, we knew about the GLP-2 when we bought the product. And we ran multiple scenarios on this. And our base case scenario, I think, is relatively conservative, the one that we forecast and we keep in our presentation. So I think we're very comfortable in getting to that even with the marketing changes that people have seen over the last year.

Our next question is from Serge Belanger with Needham & Company.

This is John on for Serge. Just a couple of quick questions. First, regarding the insulin biosimilar AMP-004. You mentioned you're going to be refiling it in the second quarter. Do you guys have any context for any feedback that you've gotten from the FDA thus far regarding how many rounds of review you might expect for this product? And then generally speaking, can you give a little color on the overall market opportunity that 004 might enter into? And then just on the side, regarding the patent listing challenges from the FTC reported about a week ago now. I believe you have, if I'm correct, you have inside, 30 days to either dispute the letter or amend your patents. Can you give a little color on the process that you guys are going through and what you might expect over the coming weeks?

Yes. Regarding your question about the insulin product, the agency hasn’t indicated how many rounds of feedback we should anticipate. This is our initial biosimilar biologic product application. I can say that our interactions with the agency and the documents they provided, where they requested a resubmission, showed that the feedback we received was significantly more extensive than we expected. It was not just a matter of meeting minimum requirements; they offered substantial insights into what they would like to see in our application. This makes me think we might avoid an additional review cycle. Given the FDA’s interest, I believe they will be supportive and clear in their feedback if more is necessary. This product seems to align with our discussions over the years, and it appears they recognize our capabilities and technology, which suggests they are invested in aiding us with this application. As for the sales potential of OOI, it represents over a $4 billion opportunity, with more than 41 million units sold annually. We view this as a significant long-term opportunity. Our pricing will be lower than current market levels, and we have our manufacturing equipment ready, so we feel confident about capturing a reasonable market share. As for the FTC letter, yes, we did receive it. We are among several companies that received a second round of letters regarding Orange Book-listed patents. Since then, we have taken two steps. First, we spoke with the Lilly attorneys who submitted the patents to the Orange Book, and they assured us that their actions were lawful and appropriate. Second, we are consulting with outside counsel for further analysis. Regarding the timeline you mentioned, we have 30 days to respond after receiving a letter from the FDA, which we have not yet received. So once we get that letter, we will have 30 days to address it. If our outside counsel cannot complete their analysis in that timeframe, we will handle it ourselves. Additionally, we own three Orange Book patents for this product: one expires in 2036, another in 2038, and a third in 2039. Therefore, this is not the last patent and is not the most critical one. I don’t believe any developments here will significantly alter our trajectory or forecast for this product.

There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

I want to extend a heartfelt appreciation to everyone who joined us today for Amphastar's Q1 earnings call and for your continued support. We look forward to sharing our progress with you in the quarters ahead. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.