Greetings and welcome to the Amphastar Pharmaceuticals Second 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 on 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 on our use of these measures and reconciliations to US GAAP may be found in the earnings release. Please note that this conference call is being recorded. Our speakers today are Mr. Bill Peters, CFO; Mr. Dan Dischner, VP of Corporate Communications; and Mr. I will now turn the conference over to your host, Mr. Dan Dischner, Vice President of Corporate Communications. Dan, you may begin.

Thank you, Paul. I'd like to thank everyone for joining us for our second quarter earnings call for 2022. We believe we made great strides in the first half of 2022 towards portfolio diversification with approvals, while driving our existing portfolio revenue growth. We look forward to discussing the specifics behind the quarter's commercial success and our regulatory developments. On the call with me today is Bill Peters, CFO and Executive Vice President of Finance, and Senior Vice President of Regulatory Affairs and Clinical Operations, Tony Marrs. Following the prepared remarks from management, we'll open up for Q&A. I will first discuss our financial and commercial strength supported by our portfolio that remains strongly committed to changing volatile market landscape. The second quarter saw net revenues of $123.5 million, representing a solid 21% increase compared to Q2 2021, with a significant increase in net income. Our existing products have again provided a solid baseline [Technical Difficulty] strength. Primatene Mist sales recorded solid revenues, representing a 14% increase over the same period in 2021. Our existing IMS product sales recorded strong revenues, validating our planned increase capacity designed to meet the increased market demand our competitors [Technical Difficulty] in supporting. We remain confident that our current capacity will meet the increased demand for our products even if competitor shortages remain for an extended period. We believe that demand for our IMS products will remain robust into the second half of 2022. Glucagon remains a valued asset in our portfolio as the only FDA approved generic as the product continues to have strong sales. Looking to Q3, we look forward to our ganirelix product, which will see a full quarter of sales as the product was launched late in June. And we are excited about the imminent launch of our [Technical Difficulty]…

Thanks, Dan. We're just going to pause here a second because I think there's some beeping around. Let's see if we can solve this a second.

Thank you, everyone, for your patience. One moment as we deal with this technical difficulty.

Thank you very much. Sorry about that annoying beeping that was going on before. I'm not sure exactly what happened there. But turning back to our planned call. Sales for the second quarter increased 21% to $123.5 million from $101.7 million in the previous year's period. Primatene Mist continues to show strong growth compared to the second quarter of last year with sales up 14% to $19 million from $16.7 million due to increased marketing efforts. Strong sales of epinephrine marked the biggest increase, totaling $18.1 million, nearly double the prior year's $9.2 million due to strong unit volume. Lidocaine sales increased to $16 million from $11.6 million on strong unit growth. Phytonadione sales increased to $13.4 million from $10.4 million in the second quarter of last year due to increased volumes at higher average selling prices. Our other finished pharmaceutical product category also had strong growth due to products such as dextrose and sodium bicarbonate, which benefited from market shortages as well as the launch of our ganirelix prefilled syringe in late June. Our insulin API business had sales of $3.3 million, down from $6.9 million in the prior year, primarily due to the timing of shipments. As we've discussed in the past, the products we've launched in the last few years, including Primatene Mist, epinephrine multi-dose vials, and glucagon, have higher margins than our corporate average. That trend continued this quarter with gross margin increasing to 51% of sales in the second quarter of 2022 from 47% of sales in the same quarter last year. We also had the benefit of fewer purchase commitments for heparin and enoxaparin components, which are reserved at the lower of cost or net realizable value at the time of commitment. Selling, distribution, and marketing expenses increased $5.8 million from $4.1 million, primarily…

[Operator Instructions]. Our first question is from Tim Chiang with Capital One.

Bill, could you just comment on the high gross margins this quarter? I know you talked about it, but do you think a 51% gross margin is sustainable in the back half of this year? And my follow-up question is on AMP-002. I think you said that your plan is to try to refile that in the first quarter of next year. When do you think you could get a response from the FDA? Would that be sometime in the back half of 2023?

I think the better way to look at the gross margins is not just taking a look at this one quarter, but rather taking a look at the six-month number instead. And so, our six-month gross margin was 49%. So, I think that's a better way to look at it because there were certain one-time events or certain events related to the commitments that we mentioned on the heparin and the enoxaparin components, which hit higher in the first quarter than in the second quarter. So, those skewed results a little lower in the first and a little higher in the second. So, that six-month number is, I think, the right way to look at it. And as far as your second question goes…

AMP-002, we're going to respond this quarter with an action date. We anticipate an action date in Q1 of next year 2023.

It should be a pretty quick response and, I guess, it wasn't a major – or it wasn't major items in the CRL, is that right?

Tony, do you want to handle that?

Yes. It's not something that's going to take us a long time to respond to. So, we don't view it as a complex issue that [Technical Difficulty] quite a long time to respond to.

Our next question is from Elliot Wilbur with Raymond James.

First question for Bill. Just looking at a couple of the individual products and performance of the quarter, specifically lidocaine, epinephrine, I know you mentioned strong unit sales, but the numbers are just kind of so far above historical levels and baseline. Maybe you could just elaborate a little bit more in terms of what is driving the strength, just an expansion in overall utilization of the molecule itself or you're gaining share vis-à-vis competitor. Was their pricing involved there at all? Second question is, with respect to your intranasal epinephrine program, company recently emerged from, I guess, semi-stealth mode, ARS, or has a competing product, a potentially competing product that they're looking to file this year. Just wondering if you have any thoughts on that as a competitive product looking to do essentially the same thing. I'm assuming you're not thinking that the competitive profile of that product is so superior that would stop you from developing your own asset, but just anything that you could share with respect to view on that potential competitor would be helpful.

I'll start with the question about epinephrine and lidocaine. Epinephrine was just volume. And a lot of that is because of shortages from the competitors that we have on that product. Lidocaine was almost all volumes. A little bit of pricing. We did take up price on one of the SKUs there, but there's a half a dozen different SKUs that we sell in that area. And also, lidocaine also got a little bit of a boost this quarter too as we had been back-ordering some of the lidocaine products in the previous quarter due to some supplier issues. But we got that out of the way during the quarter. And then, as far as the epi product, we're very confident in that product and we're very excited about that product. I think we have an excellent product that works very well. And we're aware of ARS' product, and I'm not really sure we want to say much else about their product this time.

No. We just continue to execute our strategy because we do believe we have a great product that is targeting a large market. And, yes, we're very confident with ours and we're continuing to develop it regardless of what ARS is doing.

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

A couple of questions on AMP-008. I know you haven't provided much details around this program, probably by design. But as we get closer to this 4Q GDUFA, can you maybe talk a little more about the market opportunity it could address? And secondly, since it's your first inhalation product in front of the FDA, what is your confidence for a first-round approval? I guess if you can talk maybe about the complexity of it and whether that will play a role around the PDUFA decision.

I think as we get closer to it, I think we are going to play our cards a little closer to our vest on the market opportunity because this is when we think it could really affect the marketing prospects of the product. So, we're probably not going to discuss too much on the market opportunity. On your second part of your question, Tony, do you want to give a little more detail around that?

For us, it's an exciting product. The agency has been very, very positive [Technical Difficulty] when we look at all the aspects and all of the interaction that we've had with the agency from a mid-cycle review meeting, from them putting a priority review of products and the number of inspections, timing of the inspections for our clinical site, all of it has been very positive. Of course, first cycle approvals are always something that we strive for and we're prepared for. And for a product that is combination product of this nature, it provides a little more complexity, but we're very, very positive about it and all of our interaction with the agency seems to be aligned with that as well.

[Operator instructions]. Our next question is from David Amsellem with Piper Sandler.

Just had a few. So, first on vasopressin, just given the competitive dynamics, it's a fairly crowded market, can you just talk about the extent to which you think that's going to be a meaningful driver in the back half of the year? That's number one. Number two, I apologize if I missed this, but on 007, which you're planning to file in the first quarter, can you say if that is going to be a Paragraph IV or something else? And are you willing to identify how large the underlying brand sales are for that product? Just back to 002, this is a multi-cycle review, no surprise, complex product, all that, but are you still expecting it to be first-to-market and limited competition or no competition opportunity? I just wanted to get an update on your latest thoughts there.

David, on vasopressin, I think as you know, it wasn't a product that we really targeted, though it is a peptide and we are making our own API along with this product. So, it's a good product for us, but it doesn't necessarily 100% fit into our business model. Yes, I think, as you know, the market is crowded and it could get even more crowded, but I think we'll fit ourselves in and do the best we can with that product, and it will have some revenue for us. On AMP-007, that was your next question about whether – yes, at this time, we haven't disclosed whether it's a Paragraph IV filing or any of the market data behind it for competitive reasons. And I think we're going to keep it at that at this time. As for AMP-002, yes, as I mentioned in my prepared remarks, it still remains without any generic competition. So, we're still very excited about it. We think it still has a great opportunity for us. As I said, the CRL wasn't the outcome we were looking for, but it's understandable as a complex generic. There are different questions that come up and we feel we can address them, and we'll do it in the fourth quarter of this year – in the next month, I guess. And then, we're anticipating an action date in the first quarter of next year 2023.

It's not just a complex product. I think the other issue is that it's the first approval of a complex product. And I think sometimes there's extra work that the FDA has to do around that when there's not a clear pathway going into the approval process. So I think that that has a lot to do with it.

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

Great. Thanks again, Paul, and thank you all very much for joining us today. We appreciate it, and we look forward to updating you on our progress next quarter. As always, if you have any questions, please don't hesitate to contact us as those questions arrive. 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.