Welcome to the Amphastar Pharmaceuticals Inc. First Quarter 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] All statements on this conference call that are not historical are forward-looking statements, including, among other things, statements relating to our expectations regarding future financial performance, backlog, sales and marketing of our products, market size and growth, product development, the timing of FDA filings or approvals, including the DMF of AMP, the timing of product launches, acquisitions and other matters related to our pipeline of product candidates, our 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 facts, but rather are based on Amphastar's historical performance and our current expectations, estimates and projections regarding our 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 and, 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 our 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, 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 our website at ir.amphastar.com, and on the SEC's 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 our expectations to change. Please note, this conference is being recorded. Our speakers are Bill Peters, CFO; Dan Dischner, VP Corporate Communications; and Tony Marrs, Senior VP of Regulatory Affairs and Clinical Operations. I will now turn the conference over to your host, Dan Dischner, VP of Corporate Communications. You may begin.

Thank you, operator, and good afternoon everyone. Earlier this afternoon Amphastar reported a very strong start to the year, and executing our growth strategy, with another quarter of solid revenue growth. We look forward to sharing details behind the quarter's growth and provide a company's update regarding our pipeline. Following my prepared remarks, Bill Peters, CFO, will provide an update on the company's financials, and we'll open up for Q&A, with Tony Marrs, Senior Vice President of Regulatory Affairs and Clinical Operations, Bill and myself. To begin, we've ended the first quarter with the continuing trend of our diverse portfolio, materializing to drive top line and bottom line growth, with the first quarter seeing $103 million in top line net revenue and our bottom line increasing substantially to $5 million. This represents a back-to-back period of record net revenues. Against the backdrop of a 7% increase in revenues versus the fourth quarter, we saw the successful execution of glucagon's launch, growth with Primatene MIST sales and our epinephrine products, continuing to gain momentum. Regarding glucagon, while the product saw its launch in mid-February, we've seen tremendous progress with its intake in the retail pharmacy space, as we've executed on the same launch platforms, as our enoxaparin and medroxyprogesterone products, and expect this trend to be durable into the year. Likewise, the same trend can be observed with our epinephrine products, as growth in this area was driven organically by higher unit volumes, prompted by a competitor shortage. Seeing a 52% increase in total sales compared to previous quarter. Though competitor shortages tend to resolve themselves, we can consistently supply the product when our competitors cannot. Turning back to glucagon, while its launch and its initial loading can be seen to offset a mid-quarter launch, we're keeping an eye on important…

Thank you, Dan. Sales for the first quarter increased 22% to $103 million to $84.7 million in the previous year's period. The launch of Glucagon in February was the biggest driver of this increase with sales of $8 million, including an inventory buildup by most major retailers. Primatene Mist once again showed strong growth with sales up 43% to $18.4 million from $12.9 million in the prior year. Epinephrine sales nearly quadrupled to $15.6 million from $4 million in the prior year as we increased the market penetration of multi-dose vials and had strong demand for our prefilled syringe product as it was in a shortage situation with competitors unable to fill orders. Enoxaparin saw sales increase to $10.7 million from $9.2 million in the prior year, primarily due to a pickup of a new customer after Teva left the market in 2020. Naloxone sales declined to $6.3 million from $8.9 million on increased competitive pressures while lidocaine products in phytonadione saw sales declines due to weaker market demand. Our insulin API business had sales of $5.1 million, up from $3.4 million in the prior year primarily due to the timing of shipments. Gross margins increased to 44% of sales from 43% as increased sales from high-margin products such as Glucagon, Primatene Mist and epinephrine more than offset lower prices and higher costs related to enoxaparin. Selling, distribution and marketing expenses increased to $4.5 million from $3.3 million primarily due to marketing costs as we implemented a second commercial campaign for Primatene Mist. General and administrative spending increased to $15.3 million from $10.7 million due to increased legal costs for Paragraph IV cases and employment-related lawsuits. Subsequent to the quarter, we settled various employment lawsuits and arbitrations for $1.3 million, which was booked to G&A expense. On a related note, we booked a $4.4 million charge to other expenses for additional reserve for our litigation with Aventis after the court order increased the fees interest and costs. We intend to appeal this case. Research and development expenditures increased to $14.8 million from $15.3 million due to the timing of clinical trials. We anticipate that these expenditures will increase in the upcoming quarters. The company reported net income attributable to Amphastar shareholders of $5 million or $0.10 per share in the first quarter compared to a net income of $3.9 million or $0.08 per share in the first quarter of 2020. The company reported an adjusted net income of $13.6 million or $0.27 per share compared to an adjusted net income of $8.4 million or $0.17 per share in the first quarter of last year. Adjusted earnings excludes amortization, equity compensation, impairment of long-lived assets and onetime events. In the first quarter, cash flow from operations was $22.8 million. We used a portion of this cash flow to repurchase $3.8 million of treasury stock during the quarter leaving $13.6 million remaining on our buyback authorization. I will now turn the call back over to the operator to begin Q&A.

We will take our first question from Gary Nachman from BMO Capital Markets. Your line is open.

Hi. This is Evan Hua filling in for Gary. Thanks for the update and thanks for taking my question. So first for Primatene, how much stocking was there in the quarter for target launch in March? And do you expect any sort of step down in 2Q or 3Q? And secondly, is there any seasonality component with asthma or allergy? And should we be considering that for the next few quarters as well? Thanks.

So for the first question, there was some stocking for target because they had to load the product into all of their stores across the country. And we would say that this is between $0.5 million and $1 million of impact for the quarter.

I think the next question was around seasonality. Is that correct?

Yes.

It's still hard to say. On seasonality, we do see a little bit of seasonality, but nothing definitive.

One thing, I'll point to is the -- we've updated the presentation on our corporate website. So you can see that the Primatene uptrend there has been very strong right now. So, I advise you all to take a look at that.

Yes. And I also have another follow-up. Can you provide some more color on the strength of epinephrine and where exactly that revenue came from? Was it more volume of price? And were you able to take more share?

Yes. It was all volume not price. And the issue was -- two things. First of all, we picked up -- we're up to our -- what we consider a good volume now for the multi-dose vials. But the prefilled syringe was an assurance situation. So, some of our competitors weren't shipping this quarter. And subsequent to the quarter that trend has ended, but we had a very strong quarter because of that.

Thanks for taking my question.

Sure.

We will take our next question from Elliot Wilbur from Raymond James. Your line is open.

Hi good afternoon. This is Lucas Lee on for Elliot and thanks for taking the questions. the first question I have is regarding Glucagon. Are there any news on competitive entries or response from Lilly? And where do you expect your share to ultimately settle? And I have a follow-up.

Right now, we haven't seen any other entries. As we've talked about many times this is a very complex product. It was off-patent for 20-plus years and there was no other generic and we haven't seen any other generic at this time. We think that it's fairly sustainable. The market share that we're seeing right now we feel that it's sustainable and not much else there. It's doing really well for us.

Thank you. That's very helpful. Next question is regarding AMP-015. Is this a 505 (J) or 505(b)(2) filing? And are there any other filers ahead of you with potentially blocking exclusivity? Thank you.

Yes, this is an ANDA product. It's not a 505 (b)(2). So, this is a generic product. And we don't have -- when they had an opportunity for the Paragraph IV, we did not see any litigation coming from that. We weren't provided notice and that time has expired. We do know that there is another product that has an application in, but it's been in for quite some time and so there's a potential for that.

[Operator Instruction] We will take our next question from David Amsellem from Piper Sandler. Your line is open.

Hey thanks. I have a few pipeline questions. So -- and I apologize if I missed this because I joined late. But number one is on the inhalation pipeline just remind us what we should expect in terms of the pace of filings not just this year but also next year as well? And then secondly on the -- on epi on that program. Can you just talk about the -- how you're envisioning clinical development? Is it just a PK path forward or something else? And update us on filing timeline for that? Thanks.

Yes. For the first one, for the inhalation, we anticipate one to two this year and then two to three and three or more in subsequent years. So, it is a focus and an emphasis of us. For your second question around the intranasal epinephrine, it is more of a PK type of clinical program. That is -- we're not specifically measuring efficacy directly. And a lot of the trials are around special population special circumstances with the use of the product. We've got a clinical plan that we've presented to the agency and we've discussed it with them in multiple occasions. And so they're aware of what our strategy is. And we think we have a pretty good grasp on it. Most of the sites and the physicians that are in this arena. We have great relationships with. We're consulting and we've been working with people that are highly knowledgeable in it. So, we feel pretty confident in what our clinical plan looks like.

We'll take our next question from David Steinberg from Jefferies. Your line is open.

Thanks, and good afternoon. I have a couple of questions. First is on Primatene Mist. So, even when you adjust, I think you said it was about $0.5 million to $1 million in stocking through target. So, even when you adjust for that it looks like it's annualizing at around $70 million or slightly more. And I think your -- the expectations for the year around $65 million. So, given that what do you think sales could be achieved for this year? In addition are there any other major chains besides target that you're planning on entering this year, or have the big chain entries pretty much played out? And then also on 002 we've lived through three cycle reviews for Primatene and Glucagon and you got them both across the goal line. Definitely less cycles with this product. What's your conviction that you'll get approval on the GDUFA date? And then secondly since you would be the first generic can you remind us what the current peak sales of that product are? And then how many years has it actually been generic or off patent? Thanks.

Yes sales -- the first one Primatene Mist sales yes while we -- the first quarter was very strong. We got off the year to a rate to start. We're still -- our target for the year is still $65 million. Not sure how much of that first quarter had some -- may have some seasonality involved in that as well. So, our target remains $65 million $65 million. And we've said that we do think it can grow due to three major factors being that the price point on it's higher than it used to be. There's more asthmatics and there's less doses in the canister as before. So, we do believe there's still room to grow.

The next question -- remind me again you asked several questions.

Dan there's a -- we have all of the major chains now with the target out there, and we even have availability into the smaller retailers through our program through the major wholesalers. Yes, I think there's room for online sales to grow a little bit there.

For the question on IPO 002, we remain confident. This is a complex product that's been off patent. I think it's maybe longer. Yes. Quite a long time. I don't know exactly when, but it's been some time. And I think to gauge a level of confidence, if we -- I think for just having this one CRL to have approval, we would be extremely satisfied and very happy at this point. It was categorized as a minor response. So I think a minor CRL, so I think you can kind of gauge that in what that means. And to us, I think that speaks quite a lot for how the agency views this product.

And just one follow-up. On Glucagon, it looks seems like you did about $8 million in its first quarter. Was that all demand based, or was there some pipeline fill in that Glucagon number? Thanks.

I'll say there is definitely a pipeline still involved in that number. But remember, we didn't launch until about halfway through the quarter. So, even though there was a pipeline launch, there's probably a month worth of the pipeline stock in that.

[Operator Instructions] Our next question comes from Tim Chiang from Northland Securities. Your line is open.

Hi, thanks. Just on Primatene Mist, I mean, are there any other additional channels that you might be able to take advantage of on the distribution side for that product? I mean, obviously you've hit all the major retailers, you're in Amazon. I mean have you guys thought about any other avenues where Primatene Mist haven't really -- hasn't been made available?

I mean we've hit the major ones, as you know. And Amazon hasn't been very long. I think the biggest point of growth for the product is expanding the demographics as we're changing focus. Initially, it was just to kind of reintroduce the product. Our initial marketing strategy was to introduce the product kind of recapture the demographic that knew the product well. And then now, expanded into other demographics, using different mediums such as media and even the TV. The TV ads have been really working, so we added another TV ad, but really kind of branching into different demographic groups. We think that's where the growth will be most.

And then maybe just a financial question, Bill. I mean I think your gross margins this quarter were at around 44%. How do you sort of think of gross margins through the course of the rest of this year? I mean is the 44% gross profit margin? Is that sort of going to stay at that level, or do you think it has some opportunity to increase later this year?

Yes. It has some opportunity to increase. Part of the -- we do have -- with enoxaparin, there's -- whenever we buy inventory, we have to take a write-down, because we're selling at the low cost. So that process can be lumpy, because we're not buying it in exactly the same rate that we're selling it. So this quarter there's probably a little bit more of that reserve involved in that than there is on the average quarter. So there's some opportunity for that. And also, we think that as Glucagon sales go up from the rest of the year. We believe that, because that's a high margin product we'll get a benefit out of that as well. And should we get one of these other products at the FDA area now approved. All of them have higher margins than our corporate average, so that there's an opportunity to go up for that reason as well. And then also, Primatene Mist, as if that can grow further from where it is today and we believe it will grow further. That's a higher than average margin product too.

Just one last question. Just on this facility you guys have in China. I mean obviously, you have a number of DMFs filed there. I mean, when do you guys expect to actually start to generate some meaningful revenue out of the Chinese market?

Yes. So last year we had – first of all, the biggest customer of that facility is our Amphastar US and we buy some APIs from them and also we contract them to do some R&D work for us mostly around the R&D of APIs. But last year we had over $3 million in sales, which was up significantly from the prior year. And I think what we said this year was that we expect that number to double this year. And so we should have more revenues this year. It wasn't reported in the press release but we had a little over $1 million in third-party sales from that facility in the first quarter of this year. So it's already on a trend higher than the quarterly run rate from last year and we do expect continued growth out of that facility.

Okay. Great. Thanks.

We will take our last question from Serge Belanger from Needham & Company. Your line is open.

Hi, good afternoon. Thanks for squeezing in. So Bill, you received the approval for a grandfather product earlier this week. Any more of these grandfathered and does in front of the FDA right now? And then in terms of the rest of the pipeline, you've talked extensively about to 002, 015, 006 and some of the Q4 products. Maybe just give us an idea of which ones you expect could receive approval in 2021?

Well since you address that first question to me, I'll take that. So we do have one more grandfathered product out there but it is the EpiNova [ph] prefilled syringe, which is a very important product to us. However we have filed that as an NDA, not an ANDA. So that application is pending. And then I'll turn it over to Tony for the rest of that question.

Yes. We – you had mentioned AMP-015 and that one has a goal date in the fourth quarter of this year. We have a couple of other products AMP-006, which is the third quarter anticipated or action date. We have another AMP-009, which we have an action date later this year as well. And then AMP-013 that has an action date later this year. The last two of those their filings that are Paragraph IV filings and so there'll be some issues surrounding those. But from an approval perspective, those are what we are anticipating.

We also have a GDUFA date for 002. So that one is also – Q3 I think. No it's Q2. Q2 sorry. You're right. A mistake.

And then just on the biosimilar insulin program. Any new developments or FDA interactions regarding the development path for that program?

I'm sorry, can you repeat the question?

Yes. Regarding the biosimilar insulin program, any new developments or FDA interactions regarding the development tool pathway?

We're planning on providing a more color to that insulin program in the second half of this year. We want to roll out the entire program and kind of give a more complete update at that time.

All right. Thanks.

We have no further questions at this time.

Okay. Thank you Jamie and thanks everybody for joining us today on our Q1 call. It was a good year – or it was a good quarter for us. We hope to continue that success into the next quarter and look forward to sharing it to you at that time. Have a great day.