Good day, ladies and gentlemen, and welcome to the Amphastar's First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this call is being recorded. All statements in this conference that are not historical are forward-looking statements, including among other things statements relating to the company's expectations regarding future financial performance, sales and marketing of its products, market size and growth, the timing of the FDA filings for approvals, acquisitions and other matters related to its pipeline of product candidates, its share buyback programs 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 update these reports through the company's website at 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 the company's expectations to change. I would now like to introduce your host for today's conference, Mr. Jason Shandell, President of Amphastar Pharmaceuticals. Sir, you may begin.

Thank you. Good afternoon, and welcome to Amphastar Pharmaceuticals' first quarter earnings call. My name is Jason Shandell, President of Amphastar. I'm joined today with my colleague, Bill Peters, CFO of Amphastar. We appreciate you joining us on the call today and look forward to speaking with you and answering any questions you may have. I will now turn the call over to our CFO, Bill Peters, to discuss the first quarter financials.

Thank you, Jason. Sales for the first quarter decreased 5% to $56.7 million from $59.4 million in the previous year's period. Sales of enoxaparin declined to $10.4 million from $18.4 million due to both lower volumes and lower average selling prices. Naloxone, which for the first time is our biggest selling product this quarter, saw sales increase to $10.9 million from $10.3 million on higher unit volume at lower average selling prices due to increased discounts and rebates. Sales of our epinephrine vial totaled $8 million in the quarter and was the main reason why our total epinephrine sales increased to $9.6 million. However we will have to discontinue selling epinephrine vials by May 10 unless the FDA grants our request for an extension to sell our current inventory. Our insulin API business generated sales of $700,000. Back orders are not usually a material factor for the company. However we ended the first quarter with an $8 million back order. This resulted from our IMS plant shutdown in December and early January. We shut down the finished products manufacturing area to install new equipment to increase capacity and improve our quality systems. However the project took longer than expected. Compounding this situation, a competitor experienced a shortage of three products in the quarter, leading to a surge in order for these products. We expect to relieve the back order situation by the end of our second quarter, which should lead to an increase in sales for products from our IMS facility in this quarter. Cost of revenues declined in dollar terms to $33.8 million from $34.5 million. Gross margins declined slightly to 40% of revenues from 42% of revenues in the previous year's period, primarily due to lower margins for enoxaparin and because our reduced manufacturing at IMS facility to…

Thanks Bill. We continue to make good progress on our pipeline. Since our last earnings call, we filed one additional ANDA. That brings the total number of ANDAs on file with the Agency to six, which represents the market size of over $1.1 billion. In March 2017, the FDA performed a pre-approval inspection at Amphastar for five of the six ANDAs on file with the Agency. Four of these products have GDUFA dates in 2017 and one was filed pre-GDUFA. With respect to the pre-GDUFA ANDA, there are no outstanding questions from the FDA and we hope to be able to launch the product in the second half of the year, which would provide meaningful revenues to the company in 2017. With respect to our CRL for Primatene Mist, we had a meeting with the FDA in the first quarter, in which the Agency provided a more detailed explanation of its request for an additional human factor study. We are currently assessing this information. With respect to our CRL for intranasal naloxone, we have a meeting scheduled with the FDA in the second quarter to discuss the issues that need to be resolved in order to receive approval. We believe that the real-world data for this product demonstrates its safety and efficacy, and FDA approval is in the interest of the public health, given the ongoing opioid epidemic that is plaguing our country. As Bill discussed, we had an $8 million back order at the end of the first quarter. This back order was a result of the IMS facility shutdown, increased demand due to supply interruptions with our competitor and several stability fills for one of our high priority pipeline products. IMS is currently manufacturing commercial products as fast as it can and we expect to make up for the $8 million in sales in the second quarter. With that update, I will now turn the call over to the operator to begin Q&A.

[Operator Instructions]. And our first question comes from David Amsellem with Piper Jaffray. Your line is now open.

Thanks. Just a couple. So first on the Primatene. Can you just elaborate on your thought process on potential next steps or whether you're leaning towards abandoning the asset altogether? And then secondly, regarding the products with GDUFA, can you just say which are - how many of them are injectables versus inhalation products, and the non-GDUFA product, if that's an injectable or an inhalation product or something else? Thanks.

Sure. So your first question about Primatene. No, we're not looking to abandon the product. We still believe it's approvable. I think we had a good conversation with the FDA. We got into some details regarding the human factor study they requested and some of the specifics around the protocol. At this time, we're discussing this with our third-party consultants to determine the next steps with this application. With respect to the GDUFA, at this time, all six products that are on file, all the six ANDAs on file with the Agency, they are all injectable, so that includes the non-GDUFA as well. And the non-GDUFA is the one we've talked about in previous calls, where it's been on file for quite some time. So we've got more transparency with respect to that product, so we feel good. There is no outstanding questions so we're still hopeful for approval of that product, although there is no GDUFA date.

Thanks.

Sure.

Our next question comes from David Maris of Wells Fargo Securities. Your line is now open.

Hi. This is Katie Brennan on for David. Can you let us know when will you know if the FDA grants that extension to sell the epinephrine vials? Do they typically give more than two days' notice of a decision like that? And do you intend to eventually get this product approved for manufacturing and distribution in the future?

Yes, so first of all, we had requested for more time and that was denied but we're appealing that request to some higher level people there, so we're in that process right now. So that's why we're down just a couple of days left. And as far as - we do want to get that product approved eventually. We've been selling it for a very long time, and we are working on that process. As we've mentioned, we have seven unapproved products that we sell. This is one of the seven. And of those seven, we filed four of those products, and then three - the other three we're working on filings.

Okay, great. Also can you speak to the timelines for ultimately your internal timelines for hopefully getting your two NDAs that were recently you received to [indiscernible] refilled. So I know you gave an update where they stand but do you have a goal for when you will re-file those NDAs?

So with respect to naloxone, we do have a meeting with the FDA this quarter, so that will give us - probably by the next call, we'll have a better idea with respect to that application. And then on Primatene, we did have our meeting. It was helpful. So right now we are talking with our third-party consultants in terms of what we should do. So I can't say we have an exact timeline on re-filing. Once we have further discussions with the consultants, we'll figure out our next step.

Great. Thank you.

Our next question comes from Elliot Wilbur with Raymond James. Your line is now open.

Thanks. Good afternoon. Gentlemen, could you just provide us with an update on enoxaparin market dynamics, and then specifically just thinking about your presence in the retail market, basically where you think you are in terms of current share dynamics and how you're thinking about that opportunity going forward whether or not potential distribution partnership is still on the table or basically you've thoroughly vetted explored that just not really getting what you want and you're prepared to go alone but, maybe a little bit just more color on the current dynamics there.

Sure. So right now, as you know, at the end of December, we began shipping into the retail channel as we took over for activists in that area. We did lose some share on the retail side, unfortunately because activist had lost some before their agreement with us had ended and we were not able to get that back. The dynamics right now are that the pricing is very low, which is why we took that inventory write-down at the end of the year last year. So it's difficult to gain any kind of market share from where we are right now. So that's why that combination of price decline and market share decline led to the decline in the sales that we had this quarter. I will say that the beginning of the quarter, the sales were even a little slower than we had thought, I think, because there was still some activist inventory making its way through the inventory channel, so that could pick up a little bit. But we're definitely significantly below our run rate from a year ago.

Okay. So, I guess, that's what I'm ultimately trying to get at. So if we look at the weekly Rx share out there, I mean, there hasn't been that much of degradation for the IMS product, but assuming some of that still represents legacy activists inventory. Is that fair?

Yes, so right now there is still some legacy activists share out there but the reality is the customer that they did lose, they've lost I think in November. So I don't think that that customer really has - there shouldn't be any more of the inventory out there flowing from that customer. So I think that as far as this quarter sales, they might be a little light of January. I think there was still some inventory flowing through the channel but we are down significantly from a year ago.

Okay. And then just a follow-up question on some of your earlier pipeline commentary, Jason. I apologize I may have missed this in your prepared commentary. But the ANDAs, the four with GDUFA dates that were part of the pre-approval inspection, all of those are calendar '17 GDUFA dates I assume?

Yes, that's right. We actually - the one that we just filed recently, we got a 2018 on that. But the four that we filed over the last two quarters have 2017 GDUFA dates.

Okay. And those were all - but those were all included as Form-D [ph], the PAI - the most recent PAI?

Yes, exactly. So the most recent PAI was for five products, and so the four that have GDUFA dates this year, as well as the one pre-GDUFA. The one that we just filed recently that makes number six, that has not received the pre-approval inspection yet.

Right. Okay. And then just one final question. You previously talked about potentially submitting a respiratory asset for - or by the end of this - potentially by the end of this year or possibly early '18. Just wanted to see if you had a little bit more clarity in terms of the time there? I can recall previously I think you disclosed whether or not that's a 505(j) or a 505(b)2. But any additional color there would be helpful. Thanks.

Sure. So yes, we're still aiming for the end of the year to file two more ANDAs. So we wanted to do two to three this year. We just did one recently, an injectable ANDA We've got two more ANDAs, so 505(j). One is an inhalation and one is an injectable, and we're hoping for the end of 2017 but it could slip to early '18.

And our next question comes from Gary Nachman of BMO Capital. Your line is now open.

Hi. This is Nicole [ph] on for Gary. Just a quick question on the gross margins. So gross margins were around 40% in 1Q. Is that a good level for the rest of the year?

Yes, it's a pretty good level until we get any new approvals.

Okay. And just one more quick question going back to noxaparin. Could you talk about the difference in the economics to you for the portion of the volume that flows through retail? I'm just trying to get a sense of what the runway should look like going forward for the noxaparin over the next few quarters?

Yes. So the way it used to work for our activists is that we sold them product at a transfer price and then split the profit, although over the last year the profit was pretty close to zero. The transfer price - our cost of goods had come down slightly by the end of that contract, so we were making a small margin on that. So right now this is a product where on average we're not making any money on, so our margins are zero or below zero. And as we - we potentially have to reserve inventory for lower cost of market situation there.

Okay, great. Thanks so much.

Our next question comes from David Steinberg of Jefferies. Your line is now open.

Thanks very much and good afternoon. Just an additional question on Primatene. On your last quarterly call, you indicated you could probably do another study relatively easily in a short period of time but that was for your FDA meeting. I was curious, do you still think post that meeting that you could have a relatively short time line? And secondly, you got a CRL and ask for another human factor study but they already asked for human factor studies. Did you ask them during the meeting why all of a sudden they're asking you to do additional studies in the same realm? And how can you be sure if they ask - once you finish this human factor, say, they are not going to ask you for another one next time?

Sure. That's a good question. And this is what we're assessing right now. So with respect to the first question to do another study, that does remain the same. It would be a very short timeline. The real issue is getting on the same page with them with respect to the protocol. So we did have a discussion regarding what they were looking for and of course we asked, look, we feel that the human factor studies that we did had good results and that's what it came down to was actually the protocol in terms of the participants, their interaction with the moderator and exactly how to refer back to the label. So we got into a lot of specific protocol questions. And also it has been collaborative and that they do try to emphasize that it could be another study. They had some suggestions on some of the label, some of the wording. Some of the suggestions we agree with. So they feel if we modify the label another time to further improve it, they'd like to see one more study with the endpoints that we had agreed to.

Okay. And then on M&A, obviously generic pricing is cyclical and we're clearly in a bad, bad period of time during that cycle. Yet at the same time, there are still acquisitions going on. Just curious are you looking - are you pretty active on the M&A front? If so, are you seeing a lot of products available? And secondly, if you're looking at private companies, have valuation expectations come down in line with the publicly traded comparables?

Yes, so we've looked at a couple of things this year so far and I would say the evaluations have not come down from what - for the assets that we've been looking at.

Okay. Thanks.

Sure.

And our next question comes from David Maris with Wells Fargo Securities. Your line is open.

Hi. I am not sure if my colleague asked this already. But number of the setbacks. Has there been any changes in personnel or addition to consultants that may make the probabilities higher of approvals going forward?

Yes. Thanks for the question. Actually in terms of consultants, we have added some consultants on regulatory that could be very helpful and have added some value already. So I would say that we have engaged some very good consultants to help us with some of these products.

Okay, great. Thank you.

Thank you.

At this time, I'm showing no further questions. I would like to turn the floor back over to Mr. Jason Shandell for closing remarks.

Thank you very much operator. This concludes our call for today. Thanks again for participating. Have a great day.