Amphastar Pharmaceuticals Reports Financial Results for the Three Months and Full Year Ended December 31, 2019

March 12, 2020 |

17 min read

Reports Net Revenues of $83.4 Million for the Three Months Ended December 31, 2019

Reports Net Revenues of $83.4 Million for the Three Months Ended December 31, 2019

RANCHO CUCAMONGA, Calif., March 12, 2020 (GLOBE NEWSWIRE) -- Amphastar Pharmaceuticals, Inc. (NASDAQ: AMPH) (“Amphastar” or the “Company”) today reported results for the three months and full year ended December 31, 2019.

Fourth Quarter Highlights

Net revenues of $83.4 million for the fourth quarter
GAAP net loss of $1.0 million, or $(0.02) per share, for the fourth quarter
Adjusted non-GAAP net income of $3.6 million, or $0.07 per share, for the fourth quarter

Full Year Highlights

Net revenues of $322.4 million for the fiscal year
GAAP net income of $48.9 million, or $0.98 per share, for the fiscal year
Adjusted non-GAAP net income of $17.8 million, or $0.36 per share, for the fiscal year

Dr. Jack Zhang, Amphastar’s Chief Executive Officer, commented: “We finished 2019 with very strong sales of Primatene^® Mist, with fourth quarter sales essentially equaling sales in the previous three quarters combined. Additionally, we have made great progress with our pipeline of product candidates, as we continue to move forward with clinical trials for both our insulin and inhalation products. In addition, the FDA accepted two more of our ANDAs.”


	Three Months Ended					Year Ended
	December 31,					December 31,
	2019			2018		2019		2018

	(in thousands, except per share data)
Net revenues	$	83,383		$	89,690	$	322,357	$	294,666
GAAP net income (loss) attributable to Amphastar	$	(1,026	)	$	1,867	$	48,939	$	(5,738	)
Adjusted non-GAAP net income attributable to Amphastar*	$	3,639		$	6,231	$	17,810	$	10,399
GAAP diluted EPS attributable to Amphastar shareholders	$	(0.02	)	$	0.04	$	0.98	$	(0.12	)
Adjusted non-GAAP diluted EPS attributable to Amphastar shareholders*	$	0.07		$	0.13	$	0.36	$	0.21

_________________________________

* 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.

Fourth Quarter Results


	Three Months Ended
	December 31,				Change
	2019		2018		Dollars			%

	(in thousands)
Net revenues:
Lidocaine	$	12,282	$	13,661	$	(1,379	)	(10	)%
Phytonadione		12,309		12,942		(633	)	(5	)%
Primatene^® Mist		9,002		3,574		5,428		152	%
Naloxone		8,951		7,703		1,248		16	%
Enoxaparin		8,800		19,085		(10,285	)	(54	)%
Medroxyprogesterone		6,062		7,448		(1,386	)	(19	)%
Epinephrine		4,311		1,264		3,047		241	%
Other finished pharmaceutical products		16,280		17,257		(977	)	(6	)%
Total finished pharmaceutical products net revenues	$	77,997	$	82,934	$	(4,937	)	(6	)%
API		5,386		6,756		(1,370	)	(20	)%
Total net revenues	$	83,383	$	89,690	$	(6,307	)	(7	)%

Changes in net revenues were primarily driven by:

Increased sale of Primatene^® Mist, which launched in December 2018
Epinephrine and naloxone sales increased due to higher unit volumes
Enoxaparin sales decreased due to lower unit volumes
Medroxyprogesterone sales decreased due to lower unit volumes, which was partially offset by a higher average selling price
Lidocaine sales decreased due to lower unit volumes


	Three Months Ended
	December 31,						Change
	2019			2018			Dollars			%

	(in thousands)
Net revenues	$	83,383		$	89,690		$	(6,307	)	(7	)%
Cost of revenues		50,002			55,001			(4,999	)	(9	)%
Gross profit	$	33,381		$	34,689		$	(1,308	)	(4	)%
as % of net revenues		40	%		39	%

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

Increased sales of Primatene^® Mist, which has higher margins and were magnified by the use of API and components which were expensed to pre-launch inventory in prior years


	Three Months Ended
	December 31,				Change
	2019		2018		Dollars			%

	(in thousands)
Selling, distribution and marketing	$	3,476	$	2,596	$	880		34	%
General and administrative		10,505		13,814		(3,309	)	(24	)%
Research and development		19,644		16,734		2,910		17	%

Marketing expenses related to Primatene^® Mist increased due to the cost of a national television and radio marketing campaign, which began in July 2019
General and administrative expenses decreased primarily due to lower legal expenses
Research and development expenses increased primarily due the increased clinical trial expenses for our generic product pipeline, largely for our inhalation abbreviated new drug applications, or ANDAs, as well as an increase in expenses at our Amphastar Nanjing Pharmaceuticals, or ANP, subsidiary.

Year-End Results


	Year Ended December 31,				Change
	2019		2018		Dollars			%

	(in thousands)
Net revenues:
Lidocaine	$	46,013	$	43,328	$	2,685		6	%
Phytonadione		45,786		41,897		3,889		9	%
Enoxaparin		42,695		53,371		(10,676	)	(20	)%
Naloxone		34,761		37,195		(2,434	)	(7	)%
Medroxyprogesterone		27,850		24,071		3,779		16	%
Primatene^® Mist		18,065		3,574		14,491		405	%
Epinephrine		13,885		10,055		3,830		38	%
Other finished pharmaceutical products		72,945		57,568		15,377		27	%
Total finished pharmaceutical products net revenues	$	302,000	$	271,059	$	30,941		11	%
API		20,357		23,607		(3,250	)	(14	)%
Total net revenues	$	322,357	$	294,666	$	27,691		9	%

Changes in net revenues were primarily driven by:

A full year of Primatene^® Mist sales, which launched in December 2018
Lidocaine sales increased due to a higher average selling price, as well as higher unit volumes
Phytonadione sales increased primarily due to a higher average selling price
Epinephrine sales increased due to higher unit volumes
A full year of Medroxyprogesterone sales, which launched in 2018
Other finished pharmaceutical products sales increased, including atropine, calcium chloride, and dextrose, which were in high demand due to market shortages
Enoxaparin sales decreased due to lower unit volumes, partially offset by an increase in average selling price due to a change in customer mix
Naloxone sales decreased due to a lower average selling price


	Year Ended December 31,						Change
	2019			2018			Dollars		%

	(in thousands)
Net revenues	$	322,357		$	294,666		$	27,691	9	%
Cost of revenues		190,434			187,681			2,753	1	%
Gross profit	$	131,923		$	106,985		$	24,938	23	%
as % of net revenues		41	%		36	%

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

Increased sales of Primatene^® Mist and phytonadione, which have higher margins than many of our other products
Gross margins for Primatene^® Mist were magnified by the use of API and components which were expensed to pre-launch inventory in prior years


	Year Ended December 31,				Change
	2019		2018		Dollars		%

	(in thousands)
Selling, distribution and marketing	$	12,830	$	8,156	$	4,674	57	%
General and administrative		50,279		49,888		391	1	%
Research and development		68,853		57,564		11,289	20	%

Marketing expenses related to Primatene^® Mist increased due to the cost of a national television and radio marketing campaign, which began in July 2019
General and administrative expenses increased primarily due to personnel costs and consulting and accounting audit fees, partially offset by lower legal expenses
Research and development expenses increased primarily due to personnel-related expenses and depreciation due to API and key component development at ANP
Clinical trial expense increased due to external studies related to our generic product pipeline, primarily for our inhalation ANDAs and our insulin biosimilar programs


	Year Ended December 31,					Change
	2019		2018			Dollars		%

	(in thousands)
Non-operating income (expense), net	$	60,267	$	(1,303	)	$	61,570	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 year ended December 31, 2019, was $41.8 million.

Pipeline Information

The Company currently has seven ANDAs filed with the FDA targeting products with a market size of approximately $1.9 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 December 31, 2019. The Company’s proprietary pipeline includes a new drug application for intranasal naloxone. The Company is currently developing four other proprietary products, which include injectable and intranasal dosage forms.

Amphastar’s Chinese subsidiary, ANP, currently has 14 Drug Master Files, or DMFs, on file with the FDA and is developing four 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 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, 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, March 12, 2020, at 2:00 p.m. Pacific Time.

To access the conference call, dial toll-free (877) 881-2595 or (315) 625-3083 for international callers, five minutes before the conference. The passcode for the conference call is 4863509.

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. 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. 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. 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 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						Year Ended
	December 31,						December 31,
	2019			2018			2019			2018

Net revenues	$	83,383		$	89,690		$	322,357		$	294,666
Cost of revenues		50,002			55,001			190,434			187,681
Gross profit		33,381			34,689			131,923			106,985

Operating expenses:
Selling, distribution, and marketing		3,476			2,596			12,830			8,156
General and administrative		10,505			13,814			50,279			49,888
Research and development		19,644			16,734			68,853			57,564
Total operating expenses		33,625			33,144			131,962			115,608

Income (loss) from operations		(244	)		1,545			(39	)		(8,623	)

Non-operating income (expenses), net		1,430			(956	)		60,267			(1,303	)

Income (loss) before income taxes		1,186			589			60,228			(9,926	)
Income tax provision (benefit)		431			(1,129	)		13,723			(3,266	)

Net income (loss)	$	755		$	1,718		$	46,505		$	(6,660	)

Net income (loss) attributable to non-controlling interests	$	1,781		$	(149	)	$	(2,434	)	$	(922	)

Net income (loss) attributable to Amphastar	$	(1,026	)	$	1,867		$	48,939		$	(5,738	)

Net income (loss) per share attributable to Amphastar shareholders:
Basic	$	(0.02	)	$	0.04		$	1.04		$	(0.12	)
Diluted	$	(0.02	)	$	0.04		$	0.98		$	(0.12	)

Weighted-average shares used to compute net income (loss) per share attributable to Amphastar shareholders:
Basic		46,840			46,268			46,982			46,395
Diluted		46,840			49,181			49,907			46,395

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


	December 31,			December 31,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	73,685		$	86,337
Restricted cash		1,865			1,865
Short-term investments		11,675			2,831
Restricted short-term investments		2,290			2,290
Accounts receivable, net		45,376			52,163
Inventories		110,501			69,322
Income tax refunds and deposits		311			49
Prepaid expenses and other assets		9,538			5,485
Total current assets		255,241			220,342

Property, plant, and equipment, net		233,856			210,418
Finance lease right-of-use assets		887			—
Operating lease right-of-use assets		18,805			—
Goodwill and intangible assets, net		41,153			42,267
Other assets		11,156			9,918
Deferred tax assets		25,873			30,618
Total assets	$	586,971		$	513,563

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	77,051		$	87,418
Income taxes payable		2,042			1,187
Current portion of long-term debt		7,741			18,229
Current portion of operating lease liabilities		3,175			—
Total current liabilities		90,009			106,834

Long-term reserve for income tax liabilities		3,425			415
Long-term debt, net of current portion		39,394			31,984
Long-term operating lease liabilities, net of current portion		16,315			—
Deferred tax liabilities		867			1,031
Other long-term liabilities		9,433			8,940
Total liabilities		159,443			149,204
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; 52,495,483 and 46,576,968 shares issued and outstanding as of December 31, 2019 and 51,438,675 and 46,631,118 shares issued and outstanding as of December 31, 2018, respectively		5			5
Additional paid-in capital		367,305			344,434
Retained earnings		116,370			67,485
Accumulated other comprehensive loss		(4,687	)		(4,013	)
Treasury stock		(97,627	)		(75,476	)
Total Amphastar Pharmaceuticals, Inc. stockholders’ equity		381,366			332,435
Non-controlling interests		46,162			31,924
Total equity		427,528			364,359
Total liabilities and stockholders’ equity	$	586,971		$	513,563

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


	Three Months Ended					Year Ended
	December 31,					December 31,
	2019		2018			2019			2018

GAAP net income (loss)	$	755	$	1,718		$	46,505		$	(6,660	)
Adjusted for:
Intangible amortization		260		265			1,037			1,987
Share-based compensation		4,296		3,910			17,296			16,680
Impairment of long-lived assets		171		1,257			365			1,647
Gain on litigation settlement		—		—			(59,900	)		—
Income tax provision (benefit) on pre-tax adjustments		72		(1,004	)		10,494			(4,044	)
Non-GAAP net income	$	5,554	$	6,146		$	15,797		$	9,610

Non-GAAP net income (loss) attributable to non-controlling interests	$	1,915	$	(85	)	$	(2,013	)	$	(789	)

Non-GAAP net income attributable to Amphastar	$	3,639	$	6,231		$	17,810		$	10,399

Non-GAAP net income per share attributable to Amphastar shareholders:
Basic	$	0.08	$	0.13		$	0.38		$	0.22
Diluted	$	0.07	$	0.13		$	0.36		$	0.21

Weighted-average shares used to compute non-GAAP net income per share attributable to Amphastar shareholders:
Basic		46,840		46,268			46,982			46,395
Diluted		49,242		49,181			49,907			48,830


	Three Months Ended December 31, 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	$	50,002		$	3,476		$	10,505		$	19,644		$	1,430	$	431		$	1,781
Intangible amortization		(226	)		—			(34	)		—			—		—			11
Share-based compensation		(880	)		(103	)		(2,961	)		(352	)		—		—			98
Impairment of long-lived assets		(30	)		—			(141	)		—			—		—			58
Income tax provision (benefit) on pre-tax adjustments		—			—			—			—			—		(72	)		(33	)
Non-GAAP	$	48,866		$	3,373		$	7,369		$	19,292		$	1,430	$	359		$	1,915

Reconciliation of Non-GAAP Measures (continued)


	Three Months Ended December 31, 2018

				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	$	55,001		$	2,596		$	13,814		$	16,734		$	(956	)	$	(1,129	)	$	(149	)
Intangible amortization		(224	)		—			(41	)		—			—			—			11
Share-based compensation		(898	)		(86	)		(2,602	)		(324	)		—			—			62
Impairment of long-lived assets		(1,010	)		—			(5	)		(242	)		—			—			1
Income tax provision (benefit) on pre-tax adjustments		—			—			—			—			—			1,004			(10	)
Non-GAAP	$	52,869		$	2,510		$	11,166		$	16,168		$	(956	)	$	(125	)	$	(85	)


	Year Ended December 31, 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	$	190,434		$	12,830		$	50,279		$	68,853		$	60,267		$	13,723		$	(2,434	)
Intangible amortization		(895	)		—			(142	)		—			—			—			45
Share-based compensation		(3,819	)		(388	)		(11,538	)		(1,551	)		—			—			355
Impairment of long-lived assets		(99	)		—			(164	)		(102	)		—			—			113
Gain on litigation settlement		—			—			—			—			(59,900	)		—			—
Income tax provision (benefit) on pre-tax adjustments		—			—			—			—			—			(10,494	)		(92	)
Non-GAAP	$	185,621		$	12,442		$	38,435		$	67,200		$	367		$	3,229		$	(2,013	)


	Year Ended December 31, 2018

				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	$	187,681		$	8,156		$	49,888		$	57,564		$	(1,303	)	$	(3,266	)	$	(922	)
Intangible amortization		(1,826	)		—			(161	)		—			—			—			22
Share-based compensation		(3,923	)		(383	)		(10,853	)		(1,521	)		—			—			130
Impairment of long-lived assets		(1,087	)		—			(9	)		(551	)		—			—			2
Income tax provision (benefit) on pre-tax adjustments		—			—			—			—			—			4,044			(21	)
Non-GAAP	$	180,845		$	7,773		$	38,865		$	55,492		$	(1,303	)	$	778		$	(789	)

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