Earnings Call Transcript - AMPH Q3 2025

Operator, Operator

Greetings, and welcome to the Amphastar Pharmaceuticals, Inc. Third Quarter Earnings Call. 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 session 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 on our use of these measures and reconciliations to U.S. GAAP may be found in our earnings release. Please note that this conference 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. Please go ahead, sir.

Dan Dischner, Senior Vice President of Corporate Communications

Thank you, operator. Good afternoon, and thank you for joining Amphastar's Third Quarter 2025 Earnings Call. I'm pleased to share that the company delivered another strong quarter, underscoring the continued success of our vertically integrated strategy and steadfast commitment to science-driven innovation. Our performance this quarter was anchored by 3 core pillars: strong commercial execution, the strategic expansion of our pipeline, and focused regulatory progress, all reinforcing our long-term growth trajectory. For the third quarter, Amphastar achieved net revenues of $191.8 million with GAAP net income of $17.4 million or $0.37 per diluted share. On a non-GAAP basis, adjusted net income was $44.7 million or $0.93 per diluted share. This performance was primarily driven by sustained momentum in our core products, BAQSIMI and Primatene MIST. BAQSIMI delivered $53.6 million in total sales, up 14% year-over-year. This growth was driven by seasonal demand and expanded sales execution through our partnership with MannKind sales force. Additionally, total revenue from Primatene MIST increased by 11% year-over-year, validating persistent consumer engagement in the OTC respiratory space as the product consistently sees a positive growth trend. Turning to our proprietary pipeline. I'm excited to highlight a significant expansion this quarter, fueled by an exclusive in-licensing agreement with Nanjing Anji Biotechnology, securing U.S. and Canadian rights to 3 early-stage novel peptide candidates targeting high-growth markets across oncology and ophthalmology. The first candidate, AMP-105, is a first-in-class oncology peptide targeting tumor proliferation and metastasis, representing a novel mechanism of action with broad clinical potential. Early studies have shown anti-tumor activity across multiple cancer types. The second candidate, AMP-109, is a peptide-coupled docetaxel with improved selectivity and bioavailability, targeting lung, colorectal, gastric, and pancreatic cancers. It is designed to reduce docetaxel-induced toxicity and has the potential to improve the efficacy and safety of current Taxane therapies. Lastly, the third candidate is AMP-107, which is a noninvasive eye-drop therapy for wet age-related macular degeneration and diabetic macular edema, offering a patient-friendly alternative to injectable treatments and the potential to improve treatment adherence and quality of life. AMP-107 has the potential to be the first non-injectable endothelial growth factor receptor or anti-VEGFR eye drop in a $9.4 billion market. These newly added assets broaden our pipeline beyond diabetes and complex generics, unlocking a combined market opportunity of over $60 billion. To capitalize on this growth, our U.S. manufacturing expansion will quadruple production capacity at our Rancho Cucamonga headquarters, strengthening operational agility and positioning us to capture greater value across our portfolio. Our investment in domestic capacity reflects a strategic commitment to resilience and scalability as we navigate an increasingly dynamic landscape. We are delighted to share that we are well positioned to reach our target of proprietary products comprising 50% of our pipeline by 2026. Shifting our discussion to our regulatory initiatives. We made meaningful progress this quarter, highlighted by FDA approval of iron sucrose injection or AMP-002, which is now commercially available as one of the generic options in the United States. This milestone expands patient access to affordable therapies while contributing to our revenue growth. During this quarter, iron sucrose injection generated total sales of $2.4 million. Beyond these launches, we continue to advance several high-impact regulatory programs across our portfolio. For our AMP-007 inhalation filing, we are on track for a launch in mid-2026, with the potential to be the first-to-market generic in a $1.5 billion addressable market. We're also pleased to report that our generic teriparatide product, AMP-015, is also on track for a launch in the first half of 2026. Additionally, our GLP-1 ANDA, AMP-018, is on schedule for a 2027 launch. The obesity and diabetes markets continue to attract significant competition. And as a result, we expect the commercial opportunity to be limited, and we will focus on maintaining cost and quality leadership in this space. And finally, our insulin aspart BLA or AMP-004, is moving steadily towards a launch in 2027. The recent approval of biosimilars in this space helps de-risk the opportunity by establishing a proven pathway for market acceptance and adoption. Collectively, these programs position us to expand patient access and deliver sustainable growth across multiple high-demand therapeutic areas in the coming years. I will now turn the call over to Bill Peters, our CFO and Executive Vice President of Finance, for a more detailed financial review of the third quarter.

William Peters, CFO and Executive Vice President of Finance

Thank you, Dan. Revenues for the third quarter increased slightly to $191.8 million from $191.2 million in the previous year period. BAQSIMI recorded its highest quarterly sales ever, growing to $53.6 million compared to the prior year period of $40.4 million, and Amphastar assumed full commercialization responsibility globally at the beginning of 2025. Keep in mind that during the same period last year, Eli Lilly had BAQSIMI sales of $6.4 million. Therefore, total BAQSIMI sales for the period grew by 14%. Primatene MIST sales grew 11% to $28.8 million in the third quarter compared to $26.1 million in the prior-year period, primarily due to our increased marketing efforts. Glucagon injection sales declined 49% to $13.6 million from $26.8 million, primarily due to a decrease in unit volumes and increased competition and a shift to ready-to-use glucagon products such as BAQSIMI. Epinephrine sales decreased 12% to $18.8 million from $21.3 million in the prior-year period due to increased competition on our multi-dose vial product. This decrease was partially offset by an increase in unit volume for our epinephrine prefilled syringe as a result of increased demand caused by shortages from other suppliers during the quarter. Sales of lidocaine decreased 19% to $12.9 million from $15.9 million in the prior-year period, primarily due to a decrease in unit volumes as a result of other suppliers returning to historical distribution levels. Other pharmaceutical product sales increased to $64.1 million from $58.3 million, primarily due to a $4.7 million increase in sales of Albuterol during the period as well as $2.4 million in sales of iron sucrose injection, which we launched in August 2025. This increase was partially offset by a decrease in unit volumes of enoxaparin and dextrose, primarily due to increased competition. Cost of revenues increased to $93.2 million from $89.3 million, with gross margins declining to 51.4% from 53.3% in the previous year's period. BAQSIMI sales made by Lilly in the prior year were recorded under the transition service agreement with Lilly and were booked at a 100% gross margin. With the completion of the transition to Amphastar, cost of revenue for all products shipped are included in this line, which negatively impacts margin rate. Additionally, pricing declines as well as a decrease in unit volumes due to competition for both our glucagon kit and epinephrine multi-dose vial products negatively impacted margins. Because of these trends, management implemented cost control measures across the business, mitigating the impact of pricing pressures. Selling, distribution and marketing expenses increased 28% to $11.5 million from $9 million in the previous year's period due to the sales and marketing efforts related to BAQSIMI, including the co-promotion agreement with MannKind as well as sales and marketing efforts related to Primatene MIST. General and administrative spending increased to $39.5 million from $14.8 million, primarily driven by a litigation provision related to a recent jury verdict in a civil case against the company. While we plan to appeal the decision, accounting standards require us to book provision for the full amount, net of applicable insurance coverage. Research and development expenditures increased 6% to $22.4 million from $21.1 million in the prior year period due to the $5.25 million upfront payment we made to Nanjing Anji Biotechnology to license 3 peptide products for our proprietary product portfolio. This increase was partially offset by a decrease in material and supply expenses. Non-operating expenses decreased to $3.8 million from $9.4 million, primarily due to currency fluctuations. Net income decreased to $17.4 million or $0.37 per share in the third quarter from $40.4 million or $0.78 per share in the third quarter of 2024. Adjusted net income decreased to $44.7 million or $0.93 per share compared to an adjusted net income of $49.6 million or $0.96 per share in the third quarter of last year. Adjusted earnings exclude amortization, equity compensation, impairments of long-lived assets and certain one-time events, including the aforementioned litigation provision that was recorded this quarter. In the third quarter, we had cash flow from operations of approximately $52.6 million. We used a portion of our cash on hand to buy back $4.9 million worth of shares. I will now turn the call back over to Dan.

Dan Dischner, Senior Vice President of Corporate Communications

Thank you, Bill, for the update. In summary, Amphastar's performance this quarter reflects the power of our integrated strategy and our commitment to long-term transformative growth. We demonstrated enduring commercial momentum with strong performance from our leading proprietary products, BAQSIMI and Primatene MIST. We advanced our regulatory pipeline with the approval and launch of iron sucrose injection, alongside steady progress on our interchangeable insulin aspart BLA. Furthermore, we strategically enriched our proprietary portfolio with novel peptide candidates in high-growth indications across oncology and ophthalmology. These achievements underscore our unique combination of scientific innovation, U.S.-based manufacturing capabilities, and deep commercial expertise. With a disciplined focus on proprietary product development and a robust R&D engine powered by our advanced technology, we believe we are positioned to accelerate into the next phase of sustainable growth and value creation. Thank you for your continued support and for joining us today. With that, we will now take your questions. Operator?

Operator, Operator

First question we have comes from Serge Belanger of Needham & Co.

Serge Belanger, Analyst

First one for Bill. Now that we're 3 quarters in for this year, any updated thoughts on your informal guide for a flat year-over-year top line and maybe more importantly, a return to double-digit growth for next year? And then secondly, on iron sucrose, you've now been in the market for a couple of months. So maybe just highlight or give us an idea of how big the opportunity can be for you, given the competition and your manufacturing capacity for the product.

William Peters, CFO and Executive Vice President of Finance

Yes. So we still believe that we can get to flat this year based on some outperformance by BAQSIMI and Primatene MIST and some other factors. And then next year, what we're looking at is probably either high single-digit to low double-digit growth rates. So we'll talk a little bit more about that in the next call. And on iron sucrose, I think the best way to look at that is that we had $2.4 million this quarter, which is about half a quarter. And that's probably a good run rate for the time being on a go-forward basis.

Operator, Operator

The next question we have comes from Dennis Ding of Jefferies.

Unknown Analyst, Analyst

Could you provide any updates on 007? What is the status of communication with the FDA? Has the shutdown affected that process in any way? Also, can you comment on the FDA's capacity to manage these applications considering the shutdown situation?

Tony Marrs, Executive Vice President of Regulatory Affairs and Clinical Operations

Sure. This is Tony. For our AMP-007, we continue to engage with the agency. Given the nature of the combination and complex products like this, this is the usual process for these types of products. Consequently, we've refined our guidance around the expected launch date, which is reflected in our statements. We believe this provides a more meaningful and actionable reference for analysts. Regarding the agency's bandwidth, we have noticed slight delays in interactions, not necessarily linked to delays in products, just possibly taking a bit longer to respond to questions. However, this hasn't resulted in anything we've observed in terms of operational issues.

Operator, Operator

The next question we have comes from Jason Gerberry of Bank of America.

Pavan Patel, Analyst

This is Pavan Patel representing Jason Gerberry. Regarding the generic Venofer, could you discuss the competitive landscape? I'm curious about why the competitor's generic Venofer appears to have captured more market share since its launch. What are the main factors at work in collaborations with dialysis centers? I'm considering if there are strategies, like contracting, that could be utilized to boost the run rate going into 2026. Also, as you project towards 2026, it seems that you're indicating high single-digit to double-digit growth. I'm wondering if this projection includes all the pipeline assets you mentioned, such as AMP-007, generic Forteo, and generic GLP-1, with the note that insulin might be priced in 2027. Is this growth estimate on a nominal basis, or is there any risk adjustment being factored in?

William Peters, CFO and Executive Vice President of Finance

Yes. So for the iron sucrose question, our goal is to launch it with a profitable price portfolio and hit points where we can have a nice margin on this. So we may not have gone as aggressively in some areas where there's some lower margin. Also, I think while we had some supply initially, we may not have had enough supply at the beginning of the quarter, but we were by the end of the quarter. But I still think the initial guidance I gave a little while ago, which was we were in for half a quarter, that's probably the run rate to look at on a going-forward basis. I think that's the best way to look at that. As far as the guidance for next year, we do risk-adjust our guidance. But I will say that the insulin product and also the GLP-1, we've assumed that those do not launch until 2027. So they're not in the guidance for next year.

Operator, Operator

The next question we have comes from Ekaterina Knyazkova of JPMorgan.

Ekaterina Knyazkova, Analyst

So just on the licensing you did with Nanjing Anji, just elaborate a bit more on what brought you to that portfolio of assets initially and just your level of excitement, both about the science and the potential commercial opportunity. And kind of a related question, but just on business development more broadly, just level of appetite of doing more deals going forward and maybe your preference between doing something more with more clinical risk like you just did or something kind of closer to BAQSIMI that's more commercial stage.

William Peters, CFO and Executive Vice President of Finance

Yes. When we looked at this opportunity in working with Anji and these products, this has been part of our long-term plan, and that is to get more into branded products. As we've gone along over the years, we've had that toolbox that's been very effective for us, immunogenicity, preclinical animal studies, doing a lot of work in these early developments has helped us considerably. So when we looked at this opportunity, it seemed like a very good fit. All of the pieces were in place for us to be able to actually do the development of these types of products.

Dan Dischner, Senior Vice President of Corporate Communications

As we look ahead to business development, we are now focusing on acquiring early-stage assets and some commercial assets. We primarily seek assets that are either already commercialized or very late-stage in research and development.

William Peters, CFO and Executive Vice President of Finance

Now one other thing too, there is a level of excitement about these products. We're very excited about them. We've seen some early data on some of these animal models that looks very encouraging for, as Dan had mentioned, potentially broad applications for some of these cancer treatments. It seems very exciting for us to have.

Operator, Operator

The next question we have comes from David Amsellem of Piper Sandler.

David Amsellem, Analyst

Two for me. One on insulin aspart, what's the competitive landscape going to look like in your view, once you're in a position to launch in '27? And how are you thinking about just the size of that opportunity and how impactful that could be to your portfolio? That's number one. And then secondly, on Primatene MIST, I noticed that your one Orange Book patent expires in '26. Are you expecting competition there? How are you thinking about exclusivity for that product?

William Peters, CFO and Executive Vice President of Finance

Regarding insulin aspart, we initially aimed to be among the first or second entrants, but it's now likely that there will be three or more competitors in that space. However, this is a significant market with substantial volume. We have advantages since we produce both the active pharmaceutical ingredient and the final product ourselves. In a high-volume market like this, launching another product will benefit our overall cost structure. We still believe this market offers strong sales potential and can significantly impact our company, making it more than just another product launch. Concerning Primatene MIST, the current product's patent is set to expire next year. We're not aware of any forthcoming generic competition, though it's always a possibility. We believe early competition is unlikely since it’s an OTC product, and a considerable portion of sales will remain with the brand. If a generic does emerge, we anticipate the brand retaining half the market. From the remaining market, if we launch our generic version, we could capture around half of that, limiting any competitor to a quarter of the market, which would necessitate pricing significantly lower to gain any share. We're looking at a sales market of approximately $10 million or $12 million, which is not a high-margin product. Hence, investing over $10 million to enter this low-margin market may not be attractive for most players. We don’t see it as a significant opportunity for generics and doubt it will be a prime target for them. Additionally, we are developing a follow-on product that uses a lower global warming propellant. We are currently in discussions with the FDA and have filed one patent for that, with more in the works as we move forward with development. We expect to provide more details about the timing next year.

Operator, Operator

The final question we have comes from Ben Burnett of Wells Fargo.

Benjamin Burnett, Analyst

I would like to ask a follow-up question about the in-licensed products you just acquired. Could you outline the market, regulatory, and development path for us? Is it possible for one of these products to be developed before the other or have a shorter time to market? What is your perspective on the timing for them?

William Peters, CFO and Executive Vice President of Finance

Yes. These will be new chemical products going through the standard new product pathway from the agency. We have some that we believe may be easier to progress than others, but it's too early for us to provide specific prioritization guidance. Some will require animal studies followed by human studies, which is part of the usual process. The level of prioritization the agency offers is still uncertain. However, we are optimistic about some of the initial data, which we believe might also encourage the agency and expedite the approval process. We are still in the early stages and are evaluating the preclinical data we have, and we remain very encouraged by it.

Dan Dischner, Senior Vice President of Corporate Communications

And one thing I'd like to add to that is that this has been a plan of ours for a while. As we've illustrated in our presentation, our intent was always to get our pipeline to be 50% proprietary. So we've staffed up. We have the resources to work on all of these independently at the same time. And as we start hitting our stride with them, and we'll have a better outlook on how we'll report it and when we'll report it and what we'll report going forward.

Benjamin Burnett, Analyst

Okay. Great. If I could just maybe follow up with a BAQSIMI question, I guess what is your estimate for kind of the share of the ready-to-use market that you have? I feel like in the past, you've talked about the glucagon market as potentially expanding. Curious if you're still seeing that? And if so, kind of what are sort of the drivers of that?

William Peters, CFO and Executive Vice President of Finance

Currently, depending on the month, we typically hold between 55% and 60% of the ready-to-use market, which is how we define that segment. We've indicated that the glucagon market is growing. When we acquired BAQSIMI, only 10% of insulin users were filling glucagon prescriptions. At that time, the Diabetes Association recommended that everyone on insulin should have a glucagon script. We have observed a steady increase, with the current figure at 12% of individuals filling a glucagon script. Although this is a significant rise, we believe there is substantial room for further growth. Thus, we are very optimistic about the long-term cash flows and growth potential for this product. We maintain our projection of peak sales between $250 million and $275 million, which we consider very attainable. We remain enthusiastic about BAQSIMI, which is our leading growth product for the upcoming year.

Operator, Operator

There are no further questions at this time. I would now like to turn the floor back over to Dan Dischner for closing comments. Please go ahead, sir.

Dan Dischner, Senior Vice President of Corporate Communications

Thank you, operator. Thank you all for joining us today. We remain excited about closing 2025 on a positive trajectory and remain focused on delivering innovation and value as we enter 2026. I look forward to sharing updates next year. Have a great day.

Operator, Operator

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.