Welcome to the Amphastar's second quarter earnings call. My name is Anna, and I will be your operator for today's call. [Operator Instructions] All statements in the conference call that are not historical are forward-looking statements, including, among other things, statements relating to the company's expectations regarding future financial performance; backlog; sales and marketing of its products; market size and growth; the timing of FDA filings or approvals, including the DMF of ANP; the timing of product launches; acquisitions and other matters related to its pipeline of product candidates; its share buyback program and other future events, such as the impact of COVID-19 pandemic and related responses of business and governments to the pandemic on our operations and personnel and on our commercial activity and demand across our business operations and results of operations. These statements are not historical facts, but rather are based on Amphastar's historical performance and its current expectations, estimates and projections regarding Amphastar's business operations and other similar or related factors. Words such as may, might, will, could, would, should, anticipate, predict, potential, continue, expect, intend, plan, project, believe, estimate and other similar or related expressions are used to identify these forward-looking statements, although not all forward-looking statements contain these words. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and assumptions that are difficult or impossible to predict and in, some cases, beyond Amphastar's control. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in Amphastar's filings with the Securities and Exchange Commission, including in the annual report on Form 10-K for the year 2020 for the year ended December 31, 2019, filed with the SEC on March 16, 2020. In particular, the extent of COVID-19's impact on our business will depend on several factors, including the severity, duration and extent of the pandemic as well as actions taken by governments, businesses and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time. You can locate these reports through the company's website at http//ir.amphastar.com and on the SEC's website at www.sec.gov. The forward-looking statements in this release speak only as of the date of the release. Amphastar undertakes no obligation to revise or update information in this press release or the conference call referenced above to reflect events or circumstances in the future, even if the new information becomes available or if subsequent events cause Amphastar's expectations to change. I will now turn the call over to Dan Dischner, Vice President of Human Resources and Corporate Communications. Dan, you may begin.

Thank you, Anna. Good afternoon, everyone, and thank you for taking the time to join in on Amphastar Pharmaceuticals' second quarter earnings call. My name is Dan Dischner, VP of Corporate Communications. Joining me on the call are Bill Peters, CFO; and Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations. We appreciate you joining us today, and we look forward to sharing our latest updates. I first want to take some time to personally recognize and thank everyone at Amphastar as we continue to maintain our safety and well-being amidst the pandemic. We strive to ensure that each employee can work safely and confidently to supply our nation's critical care injectable products so that these products remain in a reliable and safe supply. Our management team has worked very hard on creating and implementing measures to maintain a safe work environment. And thanks to the help of our employees, we believe we have been successful. As a result of this, I'm happy to report that there have been minimal impact on our workforce or operations as a result of COVID-19. Moving on to business. As per our guidance, based on previous calls, I'd like to characterize the second quarter at Amphastar as reaching closer to our catalyst-rich second half of 2020. Amphastar continues to demonstrate resiliency and growth. Our second quarter saw sales growth of 9% compared to the same period in 2019. Net revenues in Q2 compared to the prior quarter saw a marginal increase of 1%. We are attributing this to COVID-19's impact on patient access to health care providers resulting in a decrease in demand for our products, such as lidocaine and Cortrosyn, primarily used in elective procedures. Regarding Primatene Mist, we continue to see growth as a result of the success of our…

Thank you, Dan. Sales for the second quarter increased 9% to $85.8 million from $79 million in the previous year's period. Primatene Mist once again showed strong growth compared to second quarter last year with sales up nearly 400% to $12.5 million from $2.5 million. Epinephrine sales grew 122% to $7 million from $3.1 million as we launched the multidose vials in May and had strong demand for our prefilled syringe product. Enoxaparin saw sales increase to $10.2 million from $9.8 million in the prior year primarily due to a change in customer mix. Naloxone sales increased to $8.7 million from $7.8 million on higher unit volumes. Sodium bicarbonate also saw sales increases as we were able to utilize our new capacity to satisfy market demands. As Dan mentioned, we saw a trend this quarter of lower sales for products which are frequently used in elective surgery, including certain lidocaine products and Cortrosyn. Phytonadione also saw sales declines from $12.4 to $10.7 million. Our insulin API business had sales of $4.9 million, down from $5.3 million in the prior year primarily due to the timing of shipments. Gross margins declined to 39% of sales from 41% of sales due to reserves for commitments and purchases of raw materials used in enoxaparin, which are made to help strengthen our supply chain. Selling, distribution and marketing expenses increased to $4 million from $3 million primarily due to marketing costs associated with our national television and radio ads, which began airing last July. General and administrative spending increased to $15.9 million from $12.4 million primarily because of onetime expenses associated with the separation agreement with a former executive. Research and development expenditures increased slightly to $16.1 million from $16 million due to the expansion of our R&D program at our Chinese subsidiary, Amphastar…

[Operator Instructions] And we have Tim Chiang, [Northland Capital Markets] on the line with a question. Please go ahead. Q – Tim Chiang: Hi, thanks. Maybe you guys could talk a little bit about just how the epinephrine vials, how the uptake of that product is doing. Obviously, you guys are the first generic in that market. And how are the GPOs sort of receiving the multidose vial at this point? A – Dan Dischner: Yes. Thanks for the question. We've kind of all along said that we're not out to destroy the market. We're looking to get a reasonable share of the market. We are working with the GPOs. We do feel like this will take some time to – we stated that on the last call that it would take some time to penetrate and gain market share. But we feel like we're making traction, and we're progressing in that front today. Q – Tim Chiang: And maybe just one follow-up. AMP 001, I guess that's a FDA approval decision that could be coming sometime in the second half of the year. I mean is there a hard date in terms of when you expect an FDA decision? A – Tony Marrs: Yes. We've said the third quarter of this year. And it is – we're waiting for the agency. That's the action date that they've provided to us. Q – Tim Chiang: I see. Okay. And then just maybe one last question, which is Primatene Mist. I mean obviously, you guys are still doing well with that product. It seems like the sales was around $12.5 to $13 million a quarter. But you do expect that product to get to around $65 million on an annualized basis next year. What sort of are the drivers to get you from what your annualized run rate is currently to the $65 million annual target? A – Dan Dischner: Sure. So as we said, we're going to increase our advertising spend. We feel like our advertising and our digital advertising with TV and radio has been really successful and also launching into the Kroger family, which is a large, like I said, 2,700 outlets. We still have other opportunities that we think are catalysts that will help expand this – the market as well. But the first phase of our marketing strategy is building brand awareness. We feel like we're really making headway there. And we continue to expand it into more outlets so we're really comfortable with that $65 million. We actually really believe that we can push it even further than that over time. Q – Tim Chiang: Okay, great. Thanks.

And we have David Amsellem, [Piper Sandler] on the line with a question. Please go ahead. Q – David Amsellem: Thanks. So you had alluded to in the past some impact from shortage products, and that was tied into your expanded capacity. And I think sodium bicarb is one of those products where you stood to benefit. Can you just remind us what the dollar impact of that is going to be this year in terms of the expanded capacity/benefit from taking advantage of these market shortage products? A – Bill Peters: Sure, David. What we had said previously was that having this additional capacity was a $20 million opportunity just for the products that we currently sell on the market and could sell in the future now that we had this higher level of capacity. So we did take advantage of that opportunity this quarter. Sodium bicarbonate sales were up by several million dollars in particular this quarter. And some of the other prefilled syringes that we make out of that facility in South El Monte were also up. Unfortunately, at the same time, we did have the offsetting things that both Dan and I had mentioned about those products that are used for more elective surgeries were down, which caused some of the weakness in that area. Q – David Amsellem: Sure. Okay. That's helpful. And then just toggling back to epinephrine, and I'm sorry if I missed any color here. But what's your take over the long term of how much of that market you can capture? Maybe put it differently, how much of that market can you supply with your existing capacity? A – Bill Peters: Yes. So let me take the second half of that question first. So when we were in this market previously, we had about 80% market share, and we were not at our full capacity. So we have the capacity to take 100% of the market. But we're clearly not going to be – we're not going to do that. What we've been describing is what we say a reasonable share and a reasonable share for second entrants should be. And I think that's all we really want to say publicly at this time on that. Q – David Amsellem: Okay. And then last question is on the rest of the inhalation pipeline. Can you just give us some more color on expected filings over the next sort of 12 to 18 months? A – Tony Marrs: Yes. David, this is Tony Marrs. We've disclosed that we have one filing that we'll be submitting at the end of this year. And moving forward, we have several other products that are in our pipeline that will be coming shortly thereafter.

Okay, great, thanks.

Thank you

And we have a question from Gary Nachman, [BMO Capital Markets]. Please go ahead. Q – Rafay Sardar: Great, thanks. It's Rafay on for Gary. So for Primatene, could you comment on the most recent weekly trends that you're observing? And then I think you had previously talked about mid- to high single-digit marketing spend this year behind the product. Is that still the right level to think about? Or are you planning to exceed that with the step-up in the third quarter? A – Dan Dischner: Sure. So the trend is still – the trajectory that we see with the trend in the in-store sales is still on a similar path of increasing. As we said, we do plan to increase our advertising spend in the second half of this year, probably around 20% or so. So that's kind of what you can see there. Q – Rafay Sardar: And then given some of the strong demand that you're seeing for sodium bicarbonate and certain other products from your IMS facility, how are you thinking about the potential to expand capacity even further, especially given your strong balance sheet? A – Bill Peters: Yes. So it's certainly something that we are considering. Right now, we believe we have enough capacity at that facility to handle the market that we see for all of those products. But as we look to the future, we are considering adding more capacity at our Amphastar facility for future products. So when we take a look at our CapEx in the long term, maybe medium term, three to five years, definitely, we'll have a spend here in this facility for increased capacity for our – both prefilled syringes, vials. And as we've mentioned recently, we've also already spent the money to do the pen syringes here for the insulin products in the future. So we've already spent the money to get the first machine in for those lines. So we do have a long-term plan to add capacity, but probably not as much on the IMS side as at the Amphastar side. Q – Rafay Sardar: Thanks so much.

And we have a question from Elliot Wilbur, [Raymond James]. Please go ahead. Q – Elliot Wilbur: Thanks, good afternoon. First question, just want to confirm the time line for 002. Is that still a late-2020 potential approval? A – Dan Dischner: Yes, that's correct. Our action date is the fourth quarter of this year or the first quarter depending on whether an inspection would be required, which we don't anticipate but is a possibility. Nothing's changed from that perspective. Q – Elliot Wilbur: Okay. And then with respect to Primatene, obviously, upward momentum continues. You launched into Walmart late last year, Amazon earlier in the year. Maybe just kind of a quick update in terms of how the products performing in some of the newer outlets. And then I don't know if you have the stats in front of you, but if you could give us a sense in terms of how many stores of your total number of targets you're actually on the shelves at? A – Bill Peters: Sure. So just – I will say we did update the slide in our investor presentation. It's available on the IR section of our website. So there's a chart that I think a lot of investors have found very helpful that shows the weekly sales at the total aggregate from each store that includes Walgreens, CVS, Rite Aid, Walmart and now includes Amazon.com as well. And to your question, what we've seen on the more recent ads, like Amazon in particular, we've seen faster growth from those outlets, but they were starting at a lower base. So we're happy with the performance in all the areas. They're – really, all of the stores have been performing well. And we are in all of the locations for all of those…

Our next question is from Jacob Hughes, [Wells Fargo]. Please go ahead. Q – Unidentified Analyst: Hi, good afternoon. This is Nick Hucha[ph] on for Jacob. On your intranasal naloxone program, how does the Teva decision affect your thinking there? A – Tony Marrs: Yes. Jacob, this is Tony. We're aware of the decision, and it really hasn't affected how we plan to do the development of our product. We've – we're already invested and we have a clear path and a clear channel with the agency on what we're doing and how we want to do it. And we feel essentially that it does not have a change to our plans at all.

Okay, thank you very much.

Our next question is from David Steinberg, [Jefferies]. Please go ahead. Q – David Steinberg: Hi, thanks. I had a couple of questions about 001 and 002. I think in the past, you've classified them as multiple hundred million-branded drugs that are off patent, and you have no competition because they're hard to copy, which is right up your alley. Just curious, are both of them still competition-free? And could you just frame the current branded sale opportunity for each? And then related to that, I believe one of them has had several CRLs, two or three. How confident are you that, for the current review of that product, that you'll actually get approval after all those CRL? A – Dan Dischner: Yes. Sure. So AMP 001, we've said is an – greater than $100 million opportunity. And just – I think our confidence comes from the fact that we've – the discussions with the CRLs that we've had have gotten smaller and smaller and smaller over time. And we still feel very confident about this product in the third quarter or the fourth quarter depending on an inspection if it's required. But I feel confident that we won't need to do that. With AMP 002, it's a plus $200 million opportunity for us and also another product that the technology, the package that we put together for this submission is – was a little more inclusive than maybe some other things. And so we feel like it really showcased our science capabilities more. So we feel comfortable. The meeting that we had with the FDA, the mid-cycle meeting was very positive. And so we don't have any reason not to feel confident about this product. And yes, both of these products still are free of any other challenge or any other generic at this time. And we don't see anybody challenging them at this time either. So it's a good opportunity. Both of them are good opportunities for us. Q – David Steinberg : Okay, thanks.

Our next question is from Serge Belanger, [Needham & Company]. Please go ahead. Q – Tian Sun: Hey, this is Tian on for Serge. I just had a few questions on Primatene Mist. I think you mentioned that it's going to be launched at Krogers. Could you just tell us about the timing, expected timing of that launch? And then historically, COVID has some pantry-loading effect. So I guess what are your expectations for the rest of 2020, especially if the impact continues for the remainder of the year? And I guess, along the same line, do you expect some kind of seasonality impacts as we head into the fall and the winter season? A – Bill Peters: Yes. So the first question on Kroger, they should be taking it in early fourth quarter, but we probably will be up shipping – we'll be shipping to them at the end of the third quarter. So they don't have as many stores as the other outlets that we're in, but – so we won't have as much of a onetime buy in the third quarter. But there will be that effect there. A – Dan Dischner: As for the COVID effect, the pantry-loading effect, we only saw that for a very short period of time and it returned back to kind of the normal trajectory that we've been seeing all along. So not sure that we can we anticipate any other pantry loading, but you don't know as COVID is kind of a moving target these days. But right now, we're kind of back to the normal trajectory that we were seeing prior to. And I think it was only about two to three weeks that we had a – four weeks maybe that we had a pantry-loading situation. But like I said, we've returned back to kind of a normal trajectory. What was the third question? A – Bill Peters: The seasonality. So the seasonality, we've seen very little bit of seasonality in the past, but it's something that we're actually – we're watching very closely and we're going to be monitoring this year. And we might make some advertising decisions around certain seasonality as well. So it's something that we're tracking, and we hope to get better data on this year. But when we used to have Primatene on the market years ago, the seasonality impact was not that large.

Got it. Thank you.

You're welcome.

And we have no further questions at this time.

Okay. So we want to thank everybody for joining us today on our second quarter 2020 earnings call. We hope that everybody stays safe, and we look forward to catching up with everyone in our next quarter. Have a good day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.