Good day, ladies and gentlemen, and welcome to Amphastar first quarter earnings conference call. [Operator Instructions] All statements on this conference call that are not historical are forward-looking statements, including, among other things, statements relating to the company's expectation regarding future financial performance, backlog, sales and marketing of its product, market size and growth, the timing of FDA filings or approvals, including the DMF of ANP, the timing of the 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, belief, 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 for those in the forward-looking statements as a result of number of factors, including those described in Amphastar's filing with the Securities and Exchange Commission. You can locate these reports through the company's website at amphastar.com and on the SEC's website at www.sec.gov. Amphastar undertakes no obligation to revise or update information in the 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. I would now like to turn the conference over to your host, Jason Shandell, President of Amphastar. You may begin, sir.

Thank you, operator. 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. We had a very strong start to 2019 and are seeing our organic R&D strategy paying off. In addition, our current commercial portfolio continues to drive strong growth. Our first quarter performance had sales growth of approximately 37% and a gross profit increase of 82% compared to the first quarter of 2018. The margin rate also significantly increased compared to the first quarter of 2018. This growth is the result of commercial strengths driven by our technically challenging sterile injectable portfolio and our launch of Primatene Mist, which is the only FDA-approved asthma inhaler for the over-the-counter market. We're confident that our commercial products, in combination with our robust pipeline, will result in a continued trend of strong growth over the coming years. We continue to see a positive trend for the sales of Primatene Mist. As we've reported in past earnings calls, we hope to grow the brand back to its peak sales of $65 million in the next two to three years. To help achieve this goal, we will begin running national television commercials in approximately two months. Television remains a powerful medium for the sale of OTC medicines, and we believe that national commercials will increase awareness of the product and lead to a significant increase in demand. Overall, we remain very confident in Primatene Mist's benefit to consumers and the long-term growth potential given its long-established brand and the ease of OTC access for the majority of asthmatics who experience…

Thank you, Jason. Sales for the first quarter increased 37% to $79.8 million from $58.4 million in the previous year's period. Enoxaparin was again our biggest selling product with sales of $14.5 million, up from $7 million due to both higher unit volumes and higher average selling prices as we implemented a price increase to certain customers. Lidocaine, which was this quarter's second biggest-selling product, saw sales increase to $12 million from $9.8 million on higher unit volumes at higher average selling prices. Naloxone sales declined to $7.4 million from $8.9 million on lower unit volumes. Medroxyprogesterone sales increased to $7.2 million from $2.7 million as we had just begun the launch of this product in the first quarter of last year. Sales of Primatene Mist totaled $2.9 million as we began selling the product in Rite Aid. Sales of Cortrosyn also increased this quarter as there were market shortages of this product. Our insulin API business had sales of $5.3 million for the quarter, which was relatively unchanged from the first quarter of last year. Gross margins increased as we had increased sales of high-margin products like medroxyprogesterone, Primatene Mist and Cortrosyn. Selling, distribution and marketing expenses increased primarily due to marketing costs associated with the launch of Primatene Mist as well as increased freight costs. General and administration spending increased to $16.3 million from $11 million, primarily because of higher legal expenses related to the antitrust case against Momenta and Sandoz. Research and development expenditures increased to $14.6 million from $14 million due to: one, salaries and personnel-related expenses at our Chinese subsidiary, Amphastar Nanjing Pharmaceuticals, due to the expansion of both pipeline projects and the facility; and two, increased clinical trial expenses for both ANDA and NDA pipelines products for Amphastar. These increases were partially offset by…

[Operator Instructions] And our first question comes from David Maris from Wells Fargo. Your line is now open.

Hi. I have few questions. So first on the Primatene Mist, the national ads, are those - did you say TV ads? Or what part of - what percentage of the spending is going to be digital versus television? The other is did you launch to Walmart in the first quarter? Or is that going to be a second quarter or later item? The - I do have a few, by the way, today. The epinephrine multiple-dose product - how big is the current market for that? And then lastly, can you give us an update, Jason, perhaps, a little bit in-depth on what the Novartis Sandoz case - what the status is right now? What the next events are?

Okay. So let me take the first couple questions there. So the digital versus the TV, we've mentioned that we are going to be spending in the high - mid- to high single millions of dollars this year on advertising. And as we're going along, we are allocating a certain percentage of that to digital and a certain percentage of that to TV. But another portion we're going to decide later on as we see how these markets perform right now. So the initial spend is all digital, and that's kind of the baseline of our thing. Now we're just adding the layering of the TV ads on top of that. I think your second question was on Walmart.

Yes. So for Walmart, I know on the last call, we discussed that it's in process, our discussions. And so it remains in process. And hopefully, in the near term, we'll be seeing that come to fruition. Then the next one was on epi. I guess I'll give that to Bill.

Yes. So right now, that is about a $100 million market according to IQVIA. So - and as you know, we used to sell that product before. We sold it as a grandfather product previously, and then the FDA asked us to remove it after the test had gotten their approval. So it was a big contributor to us at the time and at the time was a fairly high-margin product as well. So...

And then finally, on the lawsuit, there is the patent case which is currently under appeal. And that was the case that we won the jury trial in 2017. And for the antitrust case, it's proceeding in due course. The jury trial is scheduled for September. However, settlement before the trial is always a possibility.

Okay. Thank you very much.

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

Hi guys. First on Primatene. How much of the revenue in the first quarter was related to stocking for Rite Aid? What sort of pull-through are you seeing so far from CVS and Walgreens? Has there been any reorders there? And then what are the gross to nets currently? Those were supposed to be somewhere in the 25% to 30% range.

Sure. So let me start off with Rite Aid. That was, I'll say, a reasonably significant portion of the sales in the quarter, although we're not going to break out individual sales by any specific company. But there's a couple trends that we've been seeing. We've seen positive trends in the weekly sales data we receive from retailers. And we've started to see an increasing trend in the reorders. And so to clarify that, we get weekly data on a couple week delay. And we've had week-over-week increases every week but one since we launched the product. So we're pleased about that consistent and steady growth. And not sure if you had another question at the end.

The gross to nets. They were supposed to be around 25% to 30%.

Yes. That's about what we're getting. Yes, that's correct. So - and also, I'll remind you on the phone since we're on the Primatene subject. This is a very high gross margin product.

Okay. And then just a couple more. When will we be able to resubmit intranasal naloxone? Could that be this year? Just an update there. And any comment on where consensus sales have fallen out? Last quarter, based on your comments, it's now at around $330 million. So what are you thinking about that?

This is Jason. I'll start out with the intranasal naloxone. So based on feedback from the FDA regarding the data that we submitted, they gave some advice for further analysis, which we are currently working on. We remain on track, but I do believe, in past calls, I've said that most likely the resubmission would be in early 2020. And then for the consensus...

And then consensus, previous to the last call, we had kind of indicated on the last call that we thought the sales estimates were a little high, which is why we said that in my prepared comments. If I thought that they were too high or off in some way now, I would have said something. So I'm saying we're pretty comfortable with where those estimates are at this time.

And our next question comes from David Amsellem from Piper Jaffray. Your line is now open.

Just a couple. So just so first on the ANDA pipeline. I think you had mentioned couple months back that you - the FDA completed preapproval inspections on two of the filings. So is it safe to assume that those target action dates are coming soon on those? And maybe just help us understand your views on the pace of potential approvals as the year progresses. And then secondly, can you give us an update on the mystery high-value injectable? You got a CRL on that in November. So - if I'm not mistaken. So anything new there? And is market dynamic still - are you still characterizing market dynamics for that the same way?

Sure. Yes. So in terms of the preapproval inspection, yes, you're correct. So we do have GDUFA dates this year. We typically don't provide the specific dates, and I would say two of them are spread out. But yes, we feel good about those. And then on the high-value generic that we've been talking about for quite some time, I did state on the last call that we had resubmitted that and do have a new GDUFA date now. And in terms of the market dynamics, that does remain the same.

Okay. And then one last question on the ANDAs. Just any update on the number of filings you plan to submit between now and year-end? Any changes compared to your previous commentary?

Yes. No change. We're still on track for two to three ANDAs this year to be filed.

And our next question comes from Elliot Wilbur from Raymond James. Your line is now open.

Hello. Can you hear me?

Yes.

So this is Lucas Lee on for Elliot Wilbur. First on medroxyprogesterone product. It appears that Sun Pharma recently received the approval in vials as well as in prefilled syringe form. Could you share your view on how this could impact Amphastar if they decide to enter the market? And secondly, could you comment on the recent 483 that were issued to your facilities and where it currently stands?

Sure. So yes. With regard to the generic Depo-Provera, yes, Sun Pharma did get approval, both the vial and prefilled syringe. Of course, in our industry, we expect competition to enter. And given our market share, we don't see it as being a major impact to Amphastar specifically. And we think that we'll continue to maintain a fair share of the market. With respect to the 483s, we consider those minor, and they were fully responded to.

And our next question comes from David Steinberg from Jefferies.

First question. I know you bought back $25 million in stock last year. I think you just got a new authorization you planned on using the full $20 million. And then in terms of the launch of Primatene, I know it's early, but any additional thoughts on how quickly you think this will ramp and how many years it might take to get to peak?

Sure. So on the buyback, we authorized $20 million. We do that mostly to offset the equity plans that are given as part of our compensation packages to a wide level of people here. We don't have a specific plan over the timing of that. We did authorize the plan of the last $20 million plan in May of last year, and we finished in April of this year. So it was really there for almost a full 12 months. It's just - part of it's going to depend on the stock price and other things. And as far as Primatene getting back to the peak from before, we've consistently said that we think it's going to take two to three years to get there. And we still believe that's the case.

And then a final question just on M&A. I know you haven't done anything at all. What are you - what's your current thinking? Are you seeing reasonable valuations out there? Would you say you're active or less active, and what's the probability of, perhaps, doing something this year?

Yes. I think we are seeing some attractive value out there. As you know, we have been disciplined for many years where we thought things were overvalued. We have seen some value recently. And for instance, if we were to settle the litigation and have some excess cash that can be used for organic growth, for our clinical trials. But it also - if there isn't an attractive asset or an opportunity, we would be willing to move on that.

And our next question comes from Gregg Gilbert from SunTrust.

On the epi product, can you talk about whether there are any differences in the product you filed versus the product that you removed from the market? And can you also talk about when you filed, and whether there's been any FDA interaction since then on the filing?

Yes. We don't typically discuss the details of the timing. But of course, we did state that we were not sued by the deadline, which was fourth quarter of 2018. So that can give you some general understanding of when we may have filed. But in terms of the details of the formulation, we would prefer not to get into that for competitive reasons.

And our last question comes from Serge Belanger from Needham. Your line is now open.

This is Chad on for Serge. I just had a question on the advertising for Primatene. The spring season is coming. Allergy season is coming. Do you expect to be increasing you spend on advertising anytime soon? And another question is, since the Primatene was taken off the market in 2011, I think a lot of patients were switched to the prescription ProAir inhaling to treat their asthmas. So are you seeing or hearing some of these asthma patients coming back to Primatene Mist now that it's available?

Jason?

So yes. So in terms of the advertising, as I said in my prepared remarks, in approximately two months, we expect the national TV advertising to begin. So that should jive well in terms of timing. And we think it will increase demand, and that will be a good time to begin running the commercial. So we're excited about that. And then with respect to ProAir, I don't have any specific examples to point to. But we do know generally - and we've had a lot of comments that we've seen on social media as well as former users of Primatene who contacted the company directly. And many of them who have intermittent asthma and so really just occasionally get mild symptoms in times like allergy season, they are excited by the fact that this product is back. And really, it goes to accessibility and the ease of being able to get such a product without a prescription and quickly when you need that temporary relief. So we're excited to be the only FDA approved asthma inhaler on the over-the-counter market. And we do think that there is an unmet need that while it was off the market, there was an unmet need, and now we're addressing that.

And there are no further questions at this time. I would now like to turn the call back to Jason Shandell, President of Amphastar, for any further remarks.

Thank you, operator. We really appreciated all of the good questions and happy to have such a strong quarter. Just want to thank everybody for their time, and have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.