Greetings and welcome to the Amphastar Pharmaceuticals Incorporated Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that certain statements made during the 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 we issued today and the presentation on the company’s website. Also, please refer to our SEC filings, which can be found on the company's -- 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 on our earnings release. Please note, that this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO; Mr. Dan Dischner, Vice President of Corporate Communications; and Mr. Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Mr. Dan Dischner, Vice President of Corporate Communications. Dan, you may begin.

Thank you operator. Good afternoon everyone. I want to welcome you to Amphastar Pharmaceuticals' fourth quarter earnings call. After my prepared remarks covering commentary regarding Amphastar's quarter and full year's performance for 2021, I'll turn the call over to Bill Peters, our CFO and Executive Vice President of Finance, who will provide an update on the company's financials. After Bill concludes his remarks, we will move the call to our Q&A portion where Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations, Bill and myself will be answering your questions. As stated in our press release and financial results published earlier, net revenues were at an all-time high, coming in at $437.76 million for the fiscal year. This represents a 25% increase in revenue and a 39% increase in gross profit, primarily due to our high-margin products like Primatene Mist, Glucagon, and epinephrine. On our last earnings call, the company stated that it would file its first inhalation ANDA in the fourth quarter of 2021. And I'm pleased to announce that AMP-008 was filed during that time. As mentioned before, this is a Paragraph IV filing with the usual possibility of a 30-month stay being triggered. Nonetheless, we believe in our strong non-infringement position and have a four-quarter GDUFA date this year. AMP-008 represents one of multiple inhalation ANDAs in our pipeline targeting a combined plus $6 billion market in annualized IQVIA sales. Our intranasal naloxone is anticipated to be refiled in the second quarter of 2022 as we maintain a positive dialogue with the agency and receive productive guidance. Concerning our ANDAs and on file, 2022 can be observed as an eventful time for four products as I will provide an update on each ANDA in chronological order. Concerning our first product, AMP-002, the product remains on…

Thank you, Dan. Sales for the fourth quarter of 2021 increased 26% to $120.9 million from $95.9 million in the previous year's period. Importantly, Primatene Mist surpassed our long-term annual sales target of $65 million, with sales growth of 60% in the fourth quarter of -- to $21.5 million from $13.4 million for the same period in 2020 as we continue to see the benefits of our national advertising program. Glucagon also had strong sales during the quarter of $15.3 million. Epinephrine showed strong sales amid continued shortages by our competitors, growing to $18.9 million from $7.5 million in 2020. Enoxaparin sales dropped to $7.9 million in the fourth quarter from $17.6 million amid continued competition in that market. API sales decreased to $2.9 million due to the timing of orders from MannKind and other customers. Gross margin significantly increased to 47% of revenues in the fourth quarter of 2021 from 38% of revenues in the fourth quarter of 2020 due to strong sales of higher-margin products like Primatene Mist, Glucagon, and epinephrine. Selling, distribution and marketing expenses increased at a rate lower than our sales, rising to $4.1 million from $3.8 million due to television, radio and digital expenses for marketing Primatene Mist. General and administrative spending decreased 12% to $10.6 million from $12 million, primarily due to a decrease in legal expenses as we settled several ongoing lawsuits. Research and development expenditures decreased 5% to $17.3 million from $18.1 million due to decreased expenses in China as a result of our restructuring there. Other income included a $2.7 million gain on the settlement of a legal dispute, net of contingent legal fees. The company reported net income of $19.8 million or $0.39 per share compared to previous year's fourth quarter net loss of $6.3 million or $0.13 per…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from David Amsellem with Piper Sandler. Please proceed with your question.

Hey thanks. So, just have a few mostly pipeline related. So, on vasopressin, obviously, there is sort of fluid competitive dynamics here. But I wanted to get a sense of how you're thinking about competitive dynamics when you guys enter the market midyear? How much more crowded do you think the market will become? And what's the extent to which you think this is going to be a significant contributor, not just in 2022, but perhaps longer term? So, that's number one. Number two is on teriparatide. Can you just remind us -- I just wanted to confirm that this is a first cycle review. And then -- and relatedly, can you talk about dynamics in that market and your level of confidence that you can be on the market ahead of Teva. Just how you're thinking about that product? And then just switching gears on Primatene. I know the product has done better than you had initially expected. Can you talk about what you think it's a function of? Is it a function of just advertising and promotion? Is there something else that you're sort of seeing that's sort of driving the greater-than-expected demand? Maybe just give us some more granularity on what you think is happening there. Thanks.

Thanks David. I'm looking at vasopressin first. And we think -- thinking about the market with vasopressin we're aware of the market dynamics there already, basically two generics on the market. So, the way we look at it is probably the same as you would look at any typical market with multiple generics on it. We feel we can compete. We have -- like I said, we make the API and the finished product in the United States. And we think that will help us a little bit. But overall, we think it's what you would typically see in a generic market. On TO2, you want to--

Sure. Yes. For our teriparatide, it is a first cycle review Recall the agency had extended the action date or the goal data on that one. And that's encouraging for us, give them a little bit more time to look at this. This is a complex product. So, of course, the uncertainty around that is always there, but we remain very optimistic about it. We know Teva has a product an ANDA. And also we can't really speak to their as far as where they are in the process, but we do know it's been a significant amount of years that they've been in that process.

And we believe that our legal strategy will enable us to be to market before even if we are -- if we get our approval first, we believe we can market it right away, I should say.

And with Primatene Mist, I think there's a couple of things. We increased our spending and added another commercial. We see a lot of positive results around increasing the amount of commercials that we're putting out there. We're focused on changing demographics or focusing on different demographics that may have not been exposed to Primatene before. And so that's sort of where we're getting our confidence. I mean we see the in-store sales continue to rise. We don't see any drop there. And so we're not sure. But so far, there's positive trends going for Primatene Mist.

Great. Thank you.

Thank you. Our next question comes from Elliot Wilbur with Raymond James. Please proceed with your question.

Thanks. Good afternoon. First question, with respect to 008, maybe just a couple of questions around that. Can you confirm whether or not the 45-day window in which the innovator has to potentially commence litigation. I guess our filing has passed? Or are we still within that period? And if you could give us any indication as to what the sales base is on that product within sort of the larger $6.5 billion that you're targeting in inhalation products? And is this a already genericized product or is this potentially first-to-market? And then I've got a couple of follow-ups as well.

Well, I can say that we're still within that window to be sure. So, that has not passed yet. And as far as the market size, we'd rather keep that to ourselves right now, so we get a little closer. So, we get more information as well--

As the competitive landscape. We want to protect our competitive position, if possible.

Okay. And then I want to have a couple of questions around some of the better performing -- or the stronger performing base products as well, specifically Glucagon and epinephrine. It sounds like you have a reasonably high degree of confidence that you're not going to see incremental competition, at least in terms of new generics there. Just wondering how good do you think your line of sight is in terms of trying to be able to sort of gauge incremental competition in the epinephrine market, both the prefilled syringe and the bio market? Obviously, you saw the news on Hospira likely to be out of the market for some time, but just curious if there's other dynamics out there that might give you a pretty good read into potential additional players that could come into market. And a similar question on Glucagon. If there's anything that sort of you can gather in terms of competitive intelligence that give you a reasonably high degree of confidence that you may not see incremental competition. In fact, sales may grow in 2022 versus 2021?

Yes, I think you answered a lot of the questions for us on epinephrine specifically, we feel confident that, that market won't change too much. We don't have any reason to expect anything else to happen in that market at this time. And with Glucagon, yes, we think that the market is continuing to grow possibly. We've seen where -- because of the generic being there now that the market has expanded a little bit. So, we haven't seen that slow down. So, we expect it to continue to kind of move that direction. And yes, we don't have any insight at all into other competition with either of those products.

And especially with glucagon given the fact that it's such a hard product to do and was so complicated, it'd be very difficult for other players to get into that.

Okay. And then last question, just on the Primatene trend within 2022. Obviously, very strong results in the fourth quarter. Historically, that product has not actually declined in the first quarter. And I'm just wondering kind of given the performance in 2Q 2021, if it would still be reasonable to expect sequential growth in the first quarter of 2022?

Yes. So, right now, we did have some very strong sales in the fourth quarter. And I don't think the product's really been on the market long enough to really see quarter-by-quarter trends, but we do see a little bit of seasonal trends in the March, April timeframe and also the December timeframe. So, we did see a pickup there. So -- but that's not as big as the long-term trend. So, I think we have to have it on the market a little bit more to see if there's other trends other than those two pickup times. And basically, wire sales are buying ahead of those times. So we're shipping to the drug stores ahead of those times. But I will say that when we did update the graph in the presentation, today. So, it's on the website, and you can just see a continued upward momentum with -- I think there's a little bit of seasonality with the blips in the chart there. But overall, it's still a nice upward trend.

Okay. Thank you for taking the questions.

Thank you. Our next question is from Jacob Hughes with Wells Fargo. Please proceed with your question.

Hey, thanks guys for taking my question. I just had a couple of follow-ups on teriparatide and the gross margins. For 015, does -- just a clarification, does Teva still have first filer exclusivity here? And why do you believe you could launch immediately? And then what is -- I know I think Lilly consented, so maybe that's part of it. But maybe you can just clarify that. And then on the launch curve for that product, could you speak to that? And do you expect more than one generic to be on the market?

So, for teriparatide, the whole legal strategy of getting the confirmation from Lilly enabled us to make sure that Teva was not the first filer. So -- anymore that they had lost that status. So, we believe that they have lost that status, which will enable us to launch upon approval. So, that's the first part of that question. The second part was -- I think the competitive landscape, I mean, obviously, we know that Teva filed a long time ago, and we don't really know where their application is at this time. And we're really not aware of any other filers. It has been on patent for a while, and you would expect someone else possibly. But right now, we're not aware of anybody else.

Okay. And then, Bill, on the gross margins, they are up approximately 400 basis points versus 2020. I think some of that there was an easy comp in 4Q 2020. But you talked about some offsets from labor and cost inputs, but is there any way you can quantify that? And how we should think about the gross margin expansion for 2022?

Yes, as far as expansion goes, we're not expecting any expansion until we launch new products. So, that would be in the second half of the year. We will be a little cost-constrained at -- maybe the first couple of quarters, but overall, gross margins could go up or will go up once we have new products.

Thank you. Our next question comes from Serge Belanger with Needham & Company. Please proceed with your question.

Hi good afternoon. Thanks for taking my questions. First one, I think Bill or Jacob mentioned the potential for pre-approval inspection. Just curious when do you expect to hear about the -- from the FDA about that? And if one is needed, does it affect all the products or just specific ANDAs [ph]?

Yes, we don't anticipate there to be any pre-approval inspections for any of the products that we've had applications or for some time with the exception of the one that we just filed, the inhaled product that we just filed. And if we did have one, it would not trigger -- it would not necessarily trigger any others. They wouldn't necessarily be linked.

Got it. Okay. And then secondly, in the past, you've been able to capitalize on various market shortages of products. Just curious if what you were able to capitalize on in the fourth quarter and whether that will continue in 2022?

The primary beneficiary of that, that was the epinephrine prefilled syringe. So, that's something that one of our competitors was not able to supply. So, we -- that's why one of the reasons why our epinephrine was up so much year-over-year. And we've previously said that the overall market shortage opportunity is about $20 million a year, and that's about what we had for the year, we believe. And making up for those shortages. We expect that the epinephrine shortage to continue for some time as Hospira has publicly said that they're not expecting a resolution in the near future. So, we expect that to go on at least the first and second quarters of this year.

Thank you. Our next question comes from Tim Chiang with Northland Securities. Please proceed with your question.

Hi thanks. With this diabetes portfolio, I know you guys are talking about interchangeability with your insulin pipeline. Has there been any sort of update on that and -- from the FDA side? And what sort of progress are you guys making on your insulin products?

Yes, we continue to have very good dialogue with the agency. I think from the interchangeability situation. We have a good handle through those conversations on what the expectations are from the agency as well as our ability to meet those. We have one product that is going to be the trailblazer, if you will, and the other products in our diabetes portfolio will be following shortly behind those. So, if you have a spectrum of development, we have the first one that's pretty far along and then the other two that are not far behind it. So, all three of those are in relatively advanced stages with one further ahead than the others.

And maybe just a follow-up to that. Interchangeability, I guess, I'm starting to see some biosimilars get it on their labels with that interchangeability definition. And I'm sort of wondering how important will that be for your biosimilar insulin? Does that mean that basically pharmacists can switch to your product without any sort of physician approval. Is that right?

Yes, that's correct, physician or pharmacist approval. So, if they were to write a script for a certain type of insulin, it could be substitutable, if you will, for the interchangeable. Whereas with the biosimilar, that likely is not the case.

Thank you. Our next question comes from David Steinberg with Jefferies. Please proceed with your question.

Thanks a lot. Good afternoon. I have a couple of questions. So, back to Primatene, I think you said in your prepared remarks that you thought sales could reach or approach $100 million by 2024. On the other hand, you did $73 million this past year and Q4 annualized is around $85 million. So, if you look at those trends, couldn't you reach that $100 million in 2023 and not in 2024? And if not, what -- I know you've maxed out at most of the change, but I know you've also taken some new initiatives. I'm just trying to understand why the growth would slow down so much based on that 2024 baseline you threw out. And then just on gross margin, you grew the gross margin to about 400 basis points, give or take, last year, and they've increased about 900 basis points over the last three years. If you get all these new approvals that are lining up for you, say, two or three years down the road, where could gross margins be theoretically? Could they be in the mid-50s for example, by say, 2024 or something like that? Thanks.

It's a bit aggressive for that timeframe, while we do expect them to be higher in 2023 and 2024 than they are today. I think that, that confuses a bit over -- probably above where we believe that there will be by that time. However, if we look further out, and it's possible to hit those numbers, but I think we have to be -- have more of our biosimilars launch, have more of our -- and maybe sort of some of the proprietary products that we're now working on as well. So, I think those -- that's a doable number, but I just don't think that by that year.

And with Primatene, I'm not sure how to answer this question. This is -- our guidance is for 2024 to get to that $100 million mark. We -- as you mentioned, we have pretty much got it in all the big box chains and all the different retail elements. We need to kind of expand the market for that. And we think that strategy we have in place will help us get there for that and achieve that $100 million by 2024.

Fair enough. And just on your biosimilar strategy, particularly as it relates to the insulin market where you'd be leveraging your French insulin API facility. The FDA's recent guidelines in immunogenicity, how could that or would that help accelerate the process for approval?

Yes. While they've made it clear from a technical perspective what the expectations are through that guidance, they've given some statutory references to that, that will give them a very open policy on what the expectations are. And what it's allowed us to do is use that as a foundation for our conversations with the agency. Of course, it doesn't tell you specifically everything that you need to do on a very detailed level, but it broadly talks about those in different categories. And what we're able to do was leverage that guidance as a foundation for the conversations and fill in all of the gaps based on our current technical knowledge and some of the characterization work that we've done historically for some of our other products.

Thank you. There are no further questions at this time. I'd like to turn the floor back to management for any closing remarks.

Great. Thank you, Paul, and thank you all very much for joining us here today. We appreciate it, and we look forward to updating you on our progress on many fronts as we move forward. As always, if you have any additional questions, please do not hesitate to contact us when those questions arise. And again, thank you for your time today.

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