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Amphastar Pharmaceuticals Reports Financial Results for the Three Months Ended June 30, 2020

Reports Net Revenues of $85.8 Million for the Three Months Ended June 30, 2020

/EIN News/ -- RANCHO CUCAMONGA, Calif., Aug. 06, 2020 (GLOBE NEWSWIRE) -- Amphastar Pharmaceuticals, Inc. (NASDAQ: AMPH) (“Amphastar” or the “Company”) today reported results for the three months ended June 30, 2020.

Second Quarter Highlights

  • Net revenues of $85.8 million for the second quarter
  • GAAP net loss of $0.2 million, or $0.00 per share, for the second quarter
  • Adjusted non-GAAP net income of $7.6 million, or $0.16 per share, for the second quarter

Dr. Jack Zhang, Amphastar’s President and Chief Executive Officer, commented: “We are pleased with Amphastar’s second quarter and the first half of the year so far. Primatene® Mist has been a strong performer for the Company, while our epinephrine multi-dose vial launch continues to gain momentum. Despite the challenges presented by the COVID-19 pandemic, we remain confident, heading into our catalyst-rich second half of the year.”

                           
    Three Months Ended   Six Months Ended  
    June 30,    June 30,   
    2020     2019   2020   2019  
                     
                     
    (in thousands, except per share data)  
Net revenues   $  85,806     $  79,047   $  170,494   $  158,837  
GAAP net (loss) income attributable to Amphastar   $  (192 )   $  47,787   $  3,757   $  48,655  
Adjusted non-GAAP net income attributable to Amphastar*   $  7,610     $  4,117   $  15,993   $  9,002  
GAAP diluted EPS attributable to Amphastar shareholders   $  (0.00 )   $  0.96   $  0.08   $  0.97  
Adjusted non-GAAP diluted EPS attributable to Amphastar shareholders*   $  0.16     $  0.08   $  0.33   $  0.18  

_______________________________
* Adjusted non-GAAP net income attributable to Amphastar and Adjusted non-GAAP diluted EPS attributable to Amphastar shareholders are non-GAAP financial measures.  Please see the discussion in the section entitled “Non-GAAP Financial Measures” and the reconciliation of GAAP to non-GAAP financial measures in Table III of this press release.

Second Quarter Results

                         
    Three Months Ended            
    June 30,    Change  
    2020   2019   Dollars   %  
                   
                   
                   
    (in thousands)      
Net revenues:                        
Primatene® Mist   $  12,468   $  2,512   $  9,956      396   %
Phytonadione      10,689      12,441      (1,752 )    (14 ) %
Enoxaparin      10,218      9,838      380      4   %
Lidocaine      7,608      10,082      (2,474 )    (25 ) %
Naloxone      8,723      7,833      890      11   %
Epinephrine      6,957      3,139      3,818      122   %
Other finished pharmaceutical products      24,272      27,890      (3,618 )    (13 ) %
Total finished pharmaceutical products net revenues   $  80,935   $  73,735   $  7,200      10   %
API      4,871      5,312      (441 )    (8 ) %
Total net revenues   $  85,806   $  79,047   $  6,759      9   %

Changes in net revenues were primarily driven by:

  • Increased sales of Primatene® Mist primarily resulting from the continued success of our nationwide television, radio, and digital marketing campaign
  • Increased epinephrine sales due to the launch of our newly-approved epinephrine injection, USP 30mg/30mL multiple-dose vial product as well as increased sales of our epinephrine pre-filled syringes
  • Increased naloxone sales due to higher unit volumes
  • Decreased lidocaine sales due to lower demand, largely due to reductions in elective procedures, in which the jelly form of lidocaine is often used, during the COVID-19 pandemic
  • Decreases in other finished pharmaceutical products were driven by reductions in products frequently used in elective procedures including Cortrosyn®, which were partially offset by an increase in sodium bicarbonate as we were able to utilize our new production line approved earlier in the year to meet strong demand
                         
    Three Months Ended            
    June 30,    Change  
    2020     2019     Dollars   %  
                       
                       
                       
    (in thousands)      
Net revenues   $  85,806     $  79,047     $  6,759    9 %
Cost of revenues      52,629        46,660        5,969    13 %
Gross profit   $  33,177     $  32,387     $  790    2 %
as % of net revenues     39 %     41 %            

Changes in cost of revenues and the resulting decrease to gross margin were primarily driven by:

  • Increase in inventory reserves including a $3.6 million reserve for crude heparin purchases and commitments at our Chinese subsidiary, Amphastar Nanjing Pharmaceuticals, Inc.
  • Increased sales of Primatene® Mist and the launch of epinephrine injection multiple-dose vial, both of which have higher margins, partially offset the inventory reserves
                         
    Three Months Ended            
    June 30,    Change  
    2020   2019   Dollars   %  
                   
                   
                   
    (in thousands)      
Selling, distribution and marketing   $  4,026   $  2,992   $  1,034    35 %
General and administrative      15,924      12,426      3,498    28 %
Research and development      16,149      15,996      153    1 %
  • Marketing and distribution expenses increased primarily related to Primatene® Mist, including the cost of a national digital, television, radio and digital marketing campaign, which began in July 2019
  • General and administrative expenses increased primarily due to the separation agreement entered into with a former executive, in which we incurred an expense of $4.9 million relating to cash compensation and share-based compensation expense
  • Research and development expenses increased primarily at our ANP subsidiary
                         
    Three Months Ended            
    June 30,    Change  
    2020   2019   Dollars   %  
                   
                   
    (in thousands)      
Non-operating income (expense), net   $  1,418   $  60,120   $  (58,702 )   NM  
  • In June 2019, we recognized a gain of $59.9 million relating to the settlement of our patent and antitrust litigation with Momenta Pharmaceuticals, Inc. and Sandoz Inc.

Cash flow provided by operating activities for the six months ended June 30, 2020, was $31.6 million.

Impact of COVID-19

The increase in sales of Primatene® Mist and certain hospital products as a result of the COVID-19 pandemic experienced towards the end of the first quarter continued into the early part of the second quarter of 2020. We also noticed a decline in demand for certain products such as Cortrosyn® and lidocaine, which are frequently used in elective procedures. The Company has not experienced any significant negative impacts on its cash flows or operations as a result of the COVID-19 pandemic. All of the Company’s production facilities continued to operate during the quarter as they had prior to the COVID-19 pandemic with very little change, other than for enhanced safety measures intended to prevent the spread of the virus. It is not possible at this time to estimate the complete impact that the COVID-19 pandemic could have on our business, as the impact will depend on future developments of the pandemic, which are highly uncertain and cannot be predicted.

Share Buyback Program

On August 4, 2020, the Company’s Board of Directors authorized an increase of $20 million to the Company’s share buyback program, which is expected to continue for an indefinite period of time. The primary goal of the program is to offset dilution created by the Company’s equity compensation programs.

Purchases may be made through the open market and private block transactions pursuant to Rule 10b5-1 plans, privately negotiated transactions, or other means, as determined by the Company’s management and in accordance with the requirements of the Securities and Exchange Commission and applicable laws.

The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, and other conditions.

Pipeline Information

The Company currently has five ANDAs filed with the FDA targeting products with a market size of approximately $1.7 billion, three biosimilar products in development targeting products with a market size of approximately $13 billion, and nine generic products in development targeting products with a market size of approximately $12 billion. This market information is based on IQVIA data for the 12 months ended June 30, 2020. The Company is currently developing four proprietary products, including a new drug application for intranasal naloxone.

Amphastar’s Chinese subsidiary, ANP, currently has 14 Drug Master Files, or DMFs, on file with the FDA and is developing several additional DMFs.

Company Information

Amphastar is a specialty pharmaceutical company that focuses primarily on developing, manufacturing, marketing, and selling technically-challenging generic and proprietary injectable, inhalation, and intranasal products. Additionally, the Company sells insulin API products.  Most of the Company’s finished products are used in hospital or urgent care clinical settings and are primarily contracted and distributed through group purchasing organizations and drug wholesalers.  More information and resources are available at www.amphastar.com.

Amphastar’s logo and other trademarks or service marks of Amphastar, including, but not limited to Amphastar®, Primatene®, Amphadase® and Cortrosyn®, are the property of Amphastar.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company is disclosing non-GAAP financial measures when providing financial results. The Company believes that an evaluation of its ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results were limited to financial measures prepared only in accordance with GAAP. As a result, the Company is disclosing certain non-GAAP results, including (i) Adjusted non-GAAP net income (loss) attributed to Amphastar and (ii) Adjusted non-GAAP diluted EPS attributed to Amphastar’s shareholders, which exclude amortization expense, share-based compensation, impairment charges, executive severance expense, and legal settlements, in order to supplement investors’ and other readers’ understanding and assessment of the Company’s financial performance because the Company’s management uses these measures internally for forecasting, budgeting, and measuring its operating performance. Whenever the Company uses such non-GAAP measures, it will provide a reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures. Investors and other readers are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP measures to their most directly comparable GAAP measures set forth below and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP.

Conference Call Information

The Company will hold a conference call to discuss its financial results today, August 6, 2020, at 2:00 p.m. Pacific Time.

To access the conference call, dial toll-free (800) 708-4540 five minutes before the conference. The passcode for the conference call is 49844225.

The call can also be accessed on the Investors page on the Company’s website at www.amphastar.com

Forward-Looking Statements

All statements in this press release and in the conference call referenced above 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 DMFs 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 the COVID-19 pandemic and related responses of business and governments to the pandemic on our operations and personnel, and on 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 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 or any forward-looking statements in this press release or the conference call referenced above to reflect events or circumstances in the future, even if new information becomes available or if subsequent events cause Amphastar’s expectations to change.

Contact Information: 

Amphastar Pharmaceuticals, Inc.
Bill Peters
Chief Financial Officer
(909) 980-9484


Table I
Amphastar Pharmaceuticals, Inc.
Condensed Consolidated Statement of Operations
(Unaudited; in thousands, except per share data)

                           
    Three Months Ended   Six Months Ended  
    June 30,    June 30,   
    2020     2019     2020     2019    
                           
Net revenues   $  85,806     $  79,047     $  170,494     $  158,837    
Cost of revenues      52,629        46,660        100,494        95,547    
Gross profit      33,177        32,387        70,000        63,290    
                           
Operating expenses:                          
Selling, distribution, and marketing      4,026        2,992        7,320        6,133    
General and administrative      15,924        12,426        26,670        28,753    
Research and development      16,149        15,996        31,452        30,603    
Total operating expenses      36,099        31,414        65,442        65,489    
                           
(Loss) income from operations      (2,922 )      973        4,558        (2,199 )  
                           
Non-operating income (expenses), net      1,418        60,120        (257 )      59,659    
                           
(Loss) income before income taxes      (1,504 )      61,093        4,301        57,460    
Income tax (benefit) provision      (75 )      14,173        2,205        12,694    
                           
Net (loss) income   $  (1,429 )   $  46,920     $  2,096     $  44,766    
                           
Net loss attributable to non-controlling interests   $  (1,237 )   $  (867 )   $  (1,661 )   $  (3,889 )  
                           
Net (loss) income attributable to Amphastar   $  (192 )   $  47,787     $  3,757     $  48,655    
                           
Net (loss) income per share attributable to Amphastar shareholders:                          
Basic   $  (0.00 )   $  1.01     $  0.08     $  1.04    
Diluted   $  (0.00 )   $  0.96     $  0.08     $  0.97    
                           
Weighted-average shares used to compute net (loss) income per share attributable to Amphastar shareholders:                          
Basic      46,753        47,107        46,581        46,925    
Diluted      46,753        49,894        48,458        50,155    
                                   

Table II
Amphastar Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except share data)

             
    June 30,    December 31, 
    2020     2019  
    (unaudited)      
ASSETS            
Current assets:            
Cash and cash equivalents   $  87,388     $  73,685  
Restricted cash      1,865        1,865  
Short-term investments      11,101        11,675  
Restricted short-term investments      2,200        2,290  
Accounts receivable, net      49,862        45,376  
Inventories      104,726        110,501  
Income tax refunds and deposits      682        311  
Prepaid expenses and other assets      8,997        9,538  
Total current assets      266,821        255,241  
             
Property, plant, and equipment, net      238,236        233,856  
Finance lease right-of-use assets      774        887  
Operating lease right-of-use assets      17,086        18,805  
Goodwill and intangible assets, net      40,271        41,153  
Other assets      12,635        11,156  
Deferred tax assets      24,235        25,873  
Total assets   $  600,058     $  586,971  
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities:            
Accounts payable and accrued liabilities   $  75,385     $  77,051  
Income taxes payable      2,345        2,042  
Current portion of long-term debt      12,075        7,741  
Current portion of operating lease liabilities      3,481        3,175  
Total current liabilities      93,286        90,009  
             
Long-term reserve for income tax liabilities      3,425        3,425  
Long-term debt, net of current portion      34,622        39,394  
Long-term operating lease liabilities, net of current portion      14,530        16,315  
Deferred tax liabilities      760        867  
Other long-term liabilities      10,998        9,433  
Total liabilities      157,621        159,443  
Commitments and contingencies            
Stockholders’ equity:            
Preferred stock: par value $0.0001; 20,000,000 shares authorized; no shares issued and outstanding            
Common stock: par value $0.0001; 300,000,000 shares authorized; 54,372,275 and 47,494,909 shares issued and outstanding as of June 30, 2020 and 52,495,483 and 46,576,968 shares issued and outstanding as of December 31, 2019, respectively      5        5  
Additional paid-in capital      396,841        367,305  
Retained earnings      120,127        116,370  
Accumulated other comprehensive loss      (5,173 )      (4,687 )
Treasury stock      (114,119 )      (97,627 )
Total Amphastar Pharmaceuticals, Inc. stockholders’ equity      397,681        381,366  
Non-controlling interests      44,756        46,162  
Total equity      442,437        427,528  
Total liabilities and stockholders’ equity   $  600,058     $  586,971  
                 

Table III
Amphastar Pharmaceuticals, Inc.
Reconciliation of Non-GAAP Measures
(Unaudited; in thousands, except per share data)

                         
    Three Months Ended   Six Months Ended
    June 30,    June 30, 
    2020     2019     2020     2019  
                         
GAAP net (loss) income   $  (1,429 )   $  46,920     $  2,096     $  44,766  
Adjusted for:                        
Intangible amortization      251        256        509        526  
Share-based compensation      4,194        4,032        9,476        8,706  
Impairment of long-lived assets      16        46        30        183  
Expense related to executive separation agreement      4,869        —        4,869        —  
Gain on litigation settlement      —        (59,900 )      —        (59,900 )
Income tax (benefit) provision on pre-tax adjustments      (1,445 )      11,955        (2,449 )      11,020  
Non-GAAP net income   $  6,456     $  3,309     $  14,531     $  5,301  
                         
Non-GAAP net loss attributable to non-controlling interests   $  (1,154 )   $  (808 )   $  (1,462 )   $  (3,701 )
                         
Non-GAAP net income attributable to Amphastar   $  7,610     $  4,117     $  15,993     $  9,002  
                         
Non-GAAP net income per share attributable to Amphastar shareholders:                        
Basic   $  0.16     $  0.09     $  0.34     $  0.19  
Diluted   $  0.16     $  0.08     $  0.33     $  0.18  
                         
Weighted-average shares used to compute non-GAAP net income per share attributable to Amphastar shareholders:                        
Basic      46,753        47,107        46,581        46,925  
Diluted      48,668        49,894        48,458        50,155  


                                           
    Three Months Ended June 30, 2020
                                 
        Selling,   General   Research   Non-operating   Income   Non-controlling
    Cost of   distribution   and   and   income   tax provision   interest
    revenue   and marketing   administrative   development   (expense), net   (benefit)   adjustment
GAAP   $  52,629     $  4,026     $  15,924     $  16,149     $  1,418   $  (75 )   $  (1,237 )
Intangible amortization      (217 )      —        (34 )      —        —      —        11  
Share-based compensation      (970 )      (123 )      (2,733 )      (368 )      —      —        86  
Impairment of long-lived assets      (3 )      —        (13 )      —        —      —        6  
Expense related to executive separation agreement      —        —        (4,869 )      —        —      —        —  
Income tax provision (benefit) on pre-tax adjustments      —        —        —        —        —      1,445        (20 )
Non-GAAP   $  51,439     $  3,903     $  8,275     $  15,781     $  1,418   $  1,370     $  (1,154 )

Reconciliation of Non-GAAP Measures (continued)

                                           
    Three Months Ended June 30, 2019
                                 
        Selling,   General   Research   Non-operating   Income   Non-controlling
    Cost of   distribution   and   and   income   tax provision   interest
    revenue   and marketing   administrative   development   (expense), net   (benefit)   adjustment
GAAP   $  46,660     $  2,992     $  12,426     $  15,996     $  60,120     $  14,173     $  (867 )
Intangible amortization      (223 )      —        (33 )      —        —        —        11  
Share-based compensation      (959 )      (95 )      (2,648 )      (330 )      —        —        56  
Impairment of long-lived assets      (43 )      —        (3 )      —        —        —        1  
Gain on litigation settlement      —        —        —        —        (59,900 )      —        —  
Income tax (benefit) provision on pre-tax adjustments      —        —        —        —        —        (11,955 )      (9 )
Non-GAAP   $  45,435     $  2,897     $  9,742     $  15,666     $  220     $  2,218     $  (808 )


                                           
    Six Months Ended June 30, 2020
                                 
        Selling,   General   Research   Non-operating   Income   Non-controlling
    Cost of   distribution   and   and   income   tax provision   interest
    revenue   and marketing   administrative   development   (expense), net   (benefit)   adjustment
GAAP   $  100,494     $  7,320     $  26,670     $  31,452     $  (257 )   $  2,205   $  (1,661 )
Intangible amortization      (441 )      —        (68 )      —        —        —      22  
Share-based compensation      (2,329 )      (230 )      (5,952 )      (965 )      —        —      213  
Impairment of long-lived assets      (13 )      —        (17 )      —        —        —      7  
Expense related to executive separation agreement      —        —        (4,869 )      —        —        —      —  
Income tax provision (benefit) on pre-tax adjustments      —        —        —        —        —        2,449      (43 )
Non-GAAP   $  97,711     $  7,090     $  15,764     $  30,487     $  (257 )   $  4,654   $  (1,462 )


                                           
    Six Months Ended June 30, 2019
                                 
        Selling,   General   Research   Non-operating   Income   Non-controlling
    Cost of   distribution   and   and   income   tax provision   interest
    revenue   and marketing   administrative   development   (expense), net   (benefit)   adjustment
GAAP   $  95,547     $  6,133     $  28,753     $  30,603     $  59,659     $  12,694     $  (3,889 )
Intangible amortization      (453 )      —        (73 )      —        —        —        22  
Share-based compensation      (2,238 )      (189 )      (5,439 )      (840 )      —        —        150  
Impairment of long-lived assets      (65 )      —        (12 )      (106 )      —        —        49  
Gain on litigation settlement      —        —        —        —        (59,900 )      —        —  
Income tax (benefit) provision on pre-tax adjustments      —        —        —        —        —        (11,020 )      (33 )
Non-GAAP   $  92,791     $  5,944     $  23,229     $  29,657     $  (241 )   $  1,674     $  (3,701 )
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