Greetings, and welcome to Amphastar Pharmaceuticals' Q4 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, this conference is being recorded. All statements on this conference call 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, product development and the timing of FDA filings or approvals, including the DMFs of ANP; the timing of product launches, acquisitions of 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 the 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, 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 the annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 15, 2021. 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 and 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 ir.amphastar.com and on the SEC website at www.sec.gov. 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 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 will now turn the conference over to your host, Mr. Dan Dischner, Vice President, Human Resources and Corporate Communications. Thank you. You may begin.

Thank you, operator. Good afternoon, and thanks for joining Amphastar Pharmaceuticals' fourth quarter earnings call. My name is Dan Dischner, VP of Corporate Communications. Joining me on the call are Bill Peters, CFO; and Tony Marrs, Senior Vice President of Regulatory Affairs and clinical operations. We appreciate you joining us today, and we look forward to announcing some very exciting updates. While 2020 was quite an exhilarating year to say the least, and for obvious reasons, on the positive, I'd like to say it was an exceptional year for the company. To start it off, we reported net revenues of $349.8 million for the fiscal year while the fourth quarter saw a net revenue of $95.9 million, making it the best quarter in terms of our sales history. Primatene Mist saw a 3% increase in sales compared to Q3, attributing this mainly to our nationwide TV, radio and digital advertising, along with unit volume increases in our online sales and our recent launch with Kroger. As a result, we are still confident in reaching our $65 million in annualized sales for the product. Furthermore, putting the company on the path towards reaching our sales goals with more ease, we are excited to announce Primatene's launch into Target stores later this month. To add momentum to that launch, we will coincide it with a new television commercial ad campaign. As we have said in the past, we may increase our marketing spend, where we expect our marketing expense to be a lower percentage of sales. However, we're more interested in spending smarter as we plan to expand our reach to the younger 18 to 34-year-old demographic through the use of digital marketing. In other words, as the time-tested and proven marketing saying goes, it's all about reaching the right person with…

Thank you, Dan. Sales for the fourth quarter of 2020 increased 15% to $95.9 million from $83.4 million in the previous year's period. Importantly, Primatene Mist achieved very strong sales growth of nearly 50% to $13.4 million from $9 million as we continue to see the benefits of our national advertising program. Enoxaparin sales doubled to $17.6 million in the fourth quarter from $8.8 million in the prior year's fourth quarter as we were able to pick up some new business. Additionally, epinephrine sales increased to $7.5 million in 2020 from $4.3 million in the fourth quarter of 2019 due to the launch of epinephrine multi-dose vials. Gross margins declined slightly to 38% of revenues in the fourth quarter of 2020 from 40% of revenues in the fourth quarter of 2019, as significantly higher sales of negative margin enoxaparin offset increases in Primatene Mist and epinephrine multi-dose vials. Selling, distribution and marketing expenses increased slightly to $3.8 million from $3.5 million due to television, radio and digital expenses from marketing Primatene Mist. General and administrative spending increased 15% to $12 million from $10.5 million, primarily due to increased legal expenses, including the cost of settling some employment litigation. Research and development expenditures decreased 8% to $18.1 million from $19.6 million due to decreased clinical trial expenses. Other expenses included a $12.8 million reserve for our litigation with Aventis, which was partially offset by currency gains. The company reported a net loss of $6.3 million or $0.13 per share compared with last year's fourth quarter net loss of $1 million or $0.02 per share. On an adjusted basis, the company reported net income of $8 million or $0.16 per share compared to an adjusted net income of approximately $3.6 million or $0.07 per share in the fourth quarter of last year.…

[Operator Instructions] Our first question comes from the line of Tim Chiang with Northland Securities.

I had a financial question. It really just ties to gross margins. I mean, what would have your gross margins been if you had excluded enoxaparin? I'm just curious where your steady state gross margins are where you -- I know you're targeting higher gross margins in 2021. I'm just wondering where did you sort of exit if you excluded enoxaparin?

Yes. Well, I haven't done that calculation, but I'll tell you, if you take a look at the enoxaparin sales for the quarter, we had $17.6 million in sales. And basically, what we have to do, we have to reduce the inventory price levels to the point which our assumed future sales are zero. So if you just take out $17.6 million in sales and $17.6 million in cost, you're not going to be too far off. There will be any inventory purchase adjustments if we purchase some new inventory or had commitments for it. So that's what takes it to negative over time. But if you just do that calculation at zero and weight that out then that's a good way to look at it.

Okay. Got it. And then just one follow-up on AMP-002, have you guys responded to the CRL? Or is that response coming in the next 2 weeks?

Yes. Tim, as Dan had mentioned in part of the script, we have already responded to that CRL.

Okay. And do you get any sort of notification from the FDA once they receive your response? Or is it basically you just wait to get the GDUFA date at some point?

No. They will respond to us with an updated GDUFA date, which they have done, which is the fourth quarter of this year.

Our next question comes from the line of Gary Nachman with BMO Capital.

First, just on 2021 expectations. I appreciate some of the color there. But if you pull it all together, consensus revenue of $428 million implies 22% growth. Consensus EPS of $1.09, 70% growth. Are you comfortable with those levels? And I know you talked about some of the key drivers behind it, but maybe just get us a little bit more comfortable with how you think you could get to those kinds of growth targets for this year, if you do feel comfortable with them? And then I have one follow-up.

Yes. So to get to those levels, we would have to have the sales growth. We'd have to get to the Primatene Mist number that we had there. We have to have very strong sales of glucagon, which is a high-margin product. We have to have continued strong sales from the epinephrine vials. We have to more than double our sales at ANP, which I mentioned in there. And in order to get there, we'd really have to have contributions from at least one other ANDA that is not approved at this point. Otherwise, we would not -- it would take something that I'm not sure about to get to those levels.

Okay. So you're sort of saying, though, that, that could be a little bit of a stretch. Like everything would have to go perfectly in order to get to those numbers?

I don't want to say everything would have to go perfectly, but I would say that perfectly would be -- we'd get the right on time and we'd be ready to launch and we get the most on the first cycle. So the things that we're looking at getting would be second cycle. So I wouldn't say that we're not assuming any first-cycle approval. So I'd say that we do need contributions from products like AMP-002. And if we got that early enough, then and we did have sales contributions from that being a high-margin product then that could be doable.

Okay. That's helpful. And then just on Primatene, getting to the $65 million this year, I mean, sales have flattened a little bit over the last few quarters. So just talk about how durable are the benefits that you got from COVID? Is there more of a headwind now with more patients going back to see their doctors and getting the prescription products as opposed to retail? It sounds like you'd be more aggressive with DTC this year, just maybe talk about how much more aggressive you're going to be with that? And how much of a benefit do you think you could get from going into Target? And then if there are any other pharmacy chains or retail chains that you guys are looking at this point?

Yes. So we're excited about Target launch. We're in a full chain launch there at the end of this month. And so we're excited about that. We think that's going to help us. We're also expanding into a different demographic as well and really targeting on the digital marketing towards the younger demographic, which we feel like well, it's kind of an untapped market because they weren't really aware of Primatene from the past. And so we really think that, that's going to -- that the kind of the marketing knowledge we have, that's going to help us. We're still pretty confident because we believe this product will even grow beyond the $65 million mark. So we're pretty confident right now with that.

Okay. And do you have other retail chains lined up that you think beyond Target?

The reality is we've gotten all the big ones at this point.

And we do have a program where we're launching. We've already, last year, launched into all the wholesalers, and so we have a smaller program targeted at independent chains. But that's -- none of -- I think there's not really many remaining chains that would have a meaningful boost to sales.

Our next question comes from the line of David Amsellem with Piper Sandler.

So on 08, the inhalation, product, can you disclose what the underlying brand sales of that product is? And is your expectation that, that's going to be a litigated filing? That's number one. And then secondly, on -- I believe it is 015, the other injectable product, which you say is over $500 million. Just I wanted to make sure that I have this. That's a product that you do not expect to be sued on or have not been sued on? And is that -- is that an asset where you think that can be -- that's going to have reasonable competition or any competition at all.

Yes. So first of all, let me start the second question, AMP 05. That is one that is a Paragraph or challenge. So the time to be sued is up in April. So as of today, we have not been sued, but that time frame is not. And going back to A08, we don't want to disclose what the potential sale or what the IQVIA sales are at this time because given the fact that we have a limited number of these inhalation products, we've disclosed its inhalation, we don't want to kind of tip our hand as to what it is, especially since it's a Paragraph IV challenge.

Okay. And then just if I may sneak in a follow-up on the inhalation pipeline. What's your expectation regarding the pace of filings next year? You said you're expanding capacity to accommodate the pipeline to Massachusetts facility. So how should we think about that as we go into 2022 in terms of the pace of filings?

Yes. We hope to have 1 to 2 filings per year and then going into the subsequent years, expand that to 2 to 3.

Our next question comes from the line of Elliot Wilbur with Raymond James.

A couple of follow-up questions on 015. So this is a P IV filing, you're still within the 45-day statutory window, which the innovator has to commence litigation against you. But I'm curious if you believe that this would be a first to file, ANDA? Or are there already pending applications or at least one application?

We're not aware of any other filings at this time.

Okay. And then with respect to glucagon, strong performance-based on the latest weekly data, seeing any competitive response here from Lilly. And I know it's a little bit early in the launch, but any anecdotes, given kind of the volume trends and what you're seeing in terms of future orders that you may be drawing away from other glucagon products?

Yes. It's really hard to say where we're drawing from other glucagon products because we're clearly substitutable for Lilly's Glucagon. But we don't know if they're going to have any response or not, but I will say that initial sales are strong. So we're happy with the way -- at the pace of the rollout at this time.

[Operator Instructions] So our next question comes from the line of David Steinberg with Jefferies.

My first question is just tagging on to Elliot's question. With regard to glucagon, it looks like in the fourth or fifth week of launch at the end of February, the prescriptions really started heating up. Looks like you've captured just about 25% share of the market already. Given that trajectory, would it be reasonable to think that peak sales of this product could be in the range of $40 million to $50 million or so and that you would hit that probably mid-year or so. And then with regards to capital allocation, I know you said, Bill, that you repurchased about $24 million worth of stock for the year. And traditionally, you have made acquisitions, but they've been sporadic, and you've always used cash. Does the pretty significant share repurchase, but a lot of the fact that you just can't find any assets to purchase even though generic drug divestitures or acquisitions of late have been for pretty low multiples. Where are you with business development?

So the first one, the $40 million to $50 million is, we think, a good range to think about as a peak. So I think that, that's a doable range for us. And as far as the acquisitions go, we've looked at multiple things, but us, the main thing hasn't been the multiple. It's been the right fit and the right acquisition target for us. We've looked at a few things over the last 1.5 years, not as many things, I'd say, in the last 6 months as we did probably in the year before that. But we looked very carefully at a couple of things and ended up not doing those more for strategic fit than anything else because that to us is the most important thing is, where does this fit and where we want to be in the future? And does it help us get there?

[Operator Instructions]. Our next question comes from the line of Serge Belanger with Needham & Company.

A couple of questions on Primatene. First, can you just talk about what side of the business that Target distribution represents? Is it something closer to Walmart or Kroger? And then do you expect any seasonality to drive Primatene sales, especially this spring?

So first of all, on the size, Target has significantly fewer locations than Walmart. And so when we looked at where we were with our old formulation of Primatene, Walmart was the biggest customer. Today, really, we kind of see Walmart CVs and Walgreens as really the big 3 for us in sales, and that's the way it's lining up right now. So we expect Target to be an important customer and a large customer, but not to the same level as what we think our biggest 3 are today. And I'd like to -- I think our fastest-growing segment is on the online, though. So we're making headway online sales.

And on seasonality?

Yes. On seasonality, it's one that -- since we've been selling it again, we haven't been able to see a seasonal pattern and we actually just updated our graph and put it up online today around 2:00 o’clock our time. So it just came up right before the call started. If you take a look at that, you can still see that we've got an upward trend. There's some weeks are higher and some weeks are lower, but overall, sales are moving in the right direction. And it's hard to discern a seasonal trend in that. The only trend that I got was -- last year was COVID, and that was a huge spike that kind of obscured everything else. So -- but we'll -- we're hitting up on the anniversary of that right now. And so maybe at this point, we'll be able to discern better trends this year.

And we've already almost captured that peak. So we're not too far off of that peak from when the pantry loading occurred.

And then in terms of CapEx projects, are there any significant expansions ongoing in any of your U.S. facilities? And it's -- the Chinese facility is still undergoing some manufacturing expansions?

Yes. The Chinese facility is still going -- undergoing a significant expansion there with a significant CapEx requirement. But also in the U.S., we have some big projects as well. I think it was alluded to earlier, we're increasing the capacity for our metered dose inhalers out of our Armstrong facility outside of Boston, so that we can ramp up demand for the ANDAs that we have in our pipeline. And we've also added capacity here at Amphastar for our pen syringes. So that's going to be part of -- important part of our insulin program that we're working on. And we also are looking forward to the future as we have other approvals coming in the future, we're going to add some significant capacity to Amphastar as well to meet that long-term capacity in both vials and prefilled syringes.

So that number is increasing from 2020?

I don't want to say it's increasing from 2020, but I'll say that we're maintaining a relatively high level of CapEx spend as we look for future expansion.

And with that, we’ve reached the end of our question-and-answer session. And I would like to turn the call back over to Mr. Dischner for any closing remarks.

Alright. I want to thank everybody for joining us today and sharing in the exciting advancement that Amphastar saw in 2020 and look forward to 2021. I want to wish everybody to stay safe, and we'll catch you next time.

And this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.