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Amphastar Pharmaceuticals Reports Financial Results for the Three Months Ended June 30, 2018

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Reports Net Revenues of $71.0 Million for the Three Months Ended June 30, 2018

RANCHO CUCAMONGA, Calif., Aug. 08, 2018 (GLOBE NEWSWIRE) -- Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) ("Amphastar" or the "Company") today reported results for the three months ended June 30, 2018.

Second Quarter Highlights

  • Net revenues of $71.0 million for the second quarter
  • GAAP net loss of $2.8 million, or $0.06 per diluted share, for the second quarter
  • Adjusted non-GAAP net income of $1.2 million, or $0.03 per diluted share, for the second quarter

Dr. Jack Zhang, Amphastar's CEO, commented: "We had an exciting three months with FDA approvals of calcium chloride, isoproterenol, and semi-purified heparin and heparin USP, the starting materials for enoxaparin. We also announced the expansion of our Amphastar Nanjing Pharmaceuticals business. ANP has been making good progress and filed three Drug Master Files in the second quarter, including one for insulin API. We consider this an important milestone for our diabetes franchise."

                           
    Three Months Ended   Six Months Ended  
    June 30,    June 30,   
    2018     2017   2018     2017  
    (in thousands, except per share data)
 
Net revenues   $  71,040     $  65,187   $  129,433     $  121,857  
GAAP net income (loss)   $  (2,790 )   $  1,972   $  (10,036 )   $  2,865  
Adjusted non-GAAP net income (loss)*   $  1,220     $  5,430   $  (1,232 )   $  9,905  
GAAP diluted EPS   $  (0.06 )   $  0.04   $  (0.22 )   $  0.06  
Adjusted non-GAAP diluted EPS*   $  0.03     $  0.11   $  (0.03 )   $  0.21  

* Adjusted non-GAAP net income and Adjusted non-GAAP diluted EPS 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.

 
Second Quarter Results
                       
    Three Months Ended          
    June 30,    Change
    2018   2017   Dollars   %
    (in thousands)
Net revenues:                      
Naloxone   $ 11,133   $ 10,261   $ 872     8 %
Phytonadione     10,806     10,003     803     8 %
Lidocaine     10,010     9,334     676     7 %
Enoxaparin     8,715     8,288     427     5 %
Medroxyprogesterone     6,365         6,365     N/A  
Epinephrine     3,687     10,648     (6,961 )   (65) %
Other finished pharmaceutical products     12,525     15,231     (2,706 )   (18) %
Total finished pharmaceutical products net revenues   $ 63,241   $ 63,765   $ (524 )   (1) %
API     7,799     1,422     6,377     448 %
Total net revenues   $ 71,040   $ 65,187   $ 5,853     9 %
                           

Changes in net revenues were primarily driven by:

  • Launch of medroxyprogesterone acetate in the first quarter of 2018
  • Discontinuation of epinephrine injection vial product in the second quarter of 2017
  • Increased sales of insulin active pharmaceutical ingredient, or API, products due to the timing of customer purchases, as MannKind began purchasing RHI API under the Company's purchase agreement
                       
    Three Months Ended          
    June 30,    Change
    2018   2017   Dollars   %
    (in thousands) 
Cost of Revenues   $ 44,884   $ 38,440   $ 6,444   17%
% of net revenues     63%     59%          
                       

Changes in cost of revenues and the resulting changes to gross margin were primarily due to:

  • Increased labor costs due to implementing new quality standards and increased hourly rates
  • Discontinuation of epinephrine injection vial product in the second quarter of 2017
  • These trends were partially offset by the launch of medroxyprogesterone, which has higher margins 
                       
    Three Months Ended          
    June 30,    Change
    2018   2017   Dollars   %
    (in thousands) 
Selling, distribution and marketing   $ 1,876   $ 1,596   $ 280     18%
General and administrative     11,669     12,234     (565 )   (5)%
Research and development     15,468     10,732     4,736     44%
                         
  • Selling, distribution and marketing expenses increased primarily due to increased expenses at the Company's Chinese subsidiary, Amphastar Nanjing Pharmaceuticals, as well as increased freight costs
  • General and administrative expenses decreased primarily due to lower legal fees
  • Research and development expenses increased primarily due to increased expenditures for the Company's pipeline products as well as an increase in pre-launch inventory relating to the production of Primatene® Mist ahead of its planned launch later this year, if we receive FDA approval

Cash flow provided by operating activities for the six months ended June 30, 2018 was $12.9 million.

Pipeline Information

The Company currently has two abbreviated new drug applications, or ANDAs, filed with the FDA targeting products with a market size of over $0.35 billion, three biosimilar products in development targeting products with a market size of over $15.0 billion, and 12 generic products in development targeting products with a market size of over $12.0 billion. This market information is based on IQVIA data for the 12 months ended June 30, 2018. The Company's proprietary pipeline includes NDAs for Primatene® Mist and intranasal naloxone. The Company is currently developing four other proprietary products, which include injectable, inhalation and intranasal dosage forms.

Amphastar Nanjing Pharmaceuticals currently has four APIs and starting materials approved by the FDA, ten Drug Master Files, or DMFs on file with the FDA and is developing eight 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 is available at the Company's website at www.amphastar.com.

Amphastar's logo and other trademarks or service marks of Amphastar Pharmaceuticals, Inc., including, but not limited to Primatene®, Amphadase® and Cortrosyn®, are the property of Amphastar Pharmaceuticals, Inc.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or 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) and (ii) Adjusted non-GAAP diluted EPS, which exclude amortization expense, share-based compensation, and impairment charges 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, August 8, 2018, 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 8783989.

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 of DMFs of ANP, 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   Six Months Ended
    June 30,    June 30, 
    2018   2017   2018   2017
                         
Net revenues   $ 71,040     $ 65,187   $ 129,433     $ 121,857  
Cost of revenues     44,884       38,440     86,216       72,282  
Gross profit     26,156       26,747     43,217       49,575  
                         
Operating (income) expenses:                        
Selling, distribution, and marketing     1,876       1,596     3,597       3,075  
General and administrative     11,669       12,234     22,667       23,572  
Research and development     15,468       10,732     29,728       21,982  
Gain on sale of intangible assets                     (2,643 )
Total operating expenses     29,013       24,562     55,992       45,986  
                         
Income (loss) from operations     (2,857 )     2,185     (12,775 )     3,589  
                         
Non-operating income (expense), net     (1,259 )     988     (371 )     1,088  
                         
Income (loss) before income taxes     (4,116 )     3,173     (13,146 )     4,677  
Income tax expense (benefit)     (1,326 )     1,201     (3,110 )     1,812  
                         
Net income (loss)   $ (2,790 )   $ 1,972   $ (10,036 )   $ 2,865  
                         
Net income (loss) per share:                        
Basic   $ (0.06 )   $ 0.04   $ (0.22 )   $ 0.06  
Diluted   $ (0.06 )   $ 0.04   $ (0.22 )   $ 0.06  
                         
Weighted-average shares used to compute net income (loss) per share:                        
Basic     46,557       46,025     46,535       46,047  
Diluted     46,557       47,866     46,535       47,962  

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

             
    June 30,    December 31, 
    2018   2017
ASSETS            
Current assets:            
Cash and cash equivalents   $  48,070     $  65,594  
Short-term investments      2,818        2,635  
Restricted cash and short-term investments      4,155        4,155  
Accounts receivable, net      41,279        35,996  
Inventories      61,678        63,609  
Income tax refunds and deposits      7,542        6,036  
Prepaid expenses and other assets      4,404        9,753  
Total current assets      169,946        187,778  
             
Property, plant, and equipment, net      198,241        185,339  
Goodwill and intangible assets, net      43,450        45,140  
Other assets      11,752        8,663  
Deferred tax assets      28,257        27,745  
             
Total assets   $  451,646     $  454,665  
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities:            
Accounts payable and accrued liabilities   $  67,092     $  57,555  
Income taxes payable      1,607        3,325  
Current portion of long-term debt and capital leases      18,891        6,312  
Total current liabilities      87,590        67,192  
             
Long-term reserve for income tax liabilities      879        879  
Long-term debt and capital leases, net of current portion      33,695        40,844  
Deferred tax liabilities      1,325        1,361  
Other long-term liabilities      7,631        7,060  
Total liabilities      131,120        117,336  
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; 50,661,676 and
46,416,789 shares issued and outstanding as of June 30, 2018 and 50,039,212 and
46,623,581 shares issued and outstanding as of December 31, 2017, respectively
     5        5  
Additional paid-in capital      322,357        313,891  
Retained earnings      66,780        76,235  
Accumulated other comprehensive loss      (3,166 )      (2,100 )
Treasury stock      (65,450 )      (50,702 )
Total stockholders' equity      320,526        337,329  
             
Total liabilities and stockholders' equity   $  451,646     $  454,665  


Table III

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

                         
    Three Months Ended   Six Months Ended
    June 30,    June 30, 
    2018   2017   2018   2017
                         
GAAP net income (loss)   $ (2,790 )   $ 1,972     $ (10,036 )   $ 2,865  
Adjusted for:                        
Intangible amortization     722       705       1,451       1,426  
Share-based compensation     4,196       4,298       8,862       8,749  
Impairment of long-lived assets     145             743        
Income tax expense on pre-tax adjustments     (1,053 )     (1,545 )     (2,252 )     (3,135 )
Non-GAAP net income (loss)   $ 1,220     $ 5,430     $ (1,232 )   $ 9,905  
                         
Non-GAAP net income (loss) per share:                        
Basic   $ 0.03     $ 0.12     $ (0.03 )   $ 0.22  
Diluted   $ 0.03     $ 0.11     $ (0.03 )   $ 0.21  
                         
Weighted-average shares used to compute non-GAAP net income (loss) per share:                        
Basic     46,557       46,025       46,535       46,047  
Diluted     48,495       47,866       46,535       47,962  


                               
    Three Months Ended June 30, 2018
                     
    Cost of
revenue
  Selling,
distribution
and marketing
  General
and
administrative
  Research
and
development
  Income
tax expense
(benefit)
GAAP   $ 44,884     $ 1,876     $ 11,669     $ 15,468     $ (1,326 )
Intangible amortization     (683 )           (39 )            
Share-based compensation     (981 )     (104 )     (2,743 )     (368 )      
Impairment of long-lived assets     (3 )           (1 )     (141 )      
Income tax expense on pre-tax adjustments                             1,053  
Non-GAAP   $ 43,217     $ 1,772     $ 8,886     $ 14,959     $ (273 )


                               
    Three Months Ended June 30, 2017
                     
    Cost of
revenue
  Selling,
distribution
and marketing
  General
and
administrative
  Research
and
development
  Income
tax expense
(benefit)
GAAP   $  38,440     $  1,596     $  12,234     $  10,732     $  1,201
Intangible amortization      (669 )      —        (36 )      —        —
Share-based compensation      (897 )      (65 )      (2,985 )      (351 )      —
Income tax expense on pre-tax adjustments      —        —        —        —        1,545
Non-GAAP   $  36,874     $  1,531     $  9,213     $  10,381     $  2,746
                                       

Reconciliation of Non-GAAP Measures (continued)

                               
    Six Months Ended June 30, 2018
                     
    Cost of
revenue
  Selling,
distribution
and marketing
  General
and
administrative
  Research
and
development
  Income
tax expense
(benefit)
GAAP   $ 86,216     $ 3,597     $ 22,667     $ 29,728     $ (3,110 )
Intangible amortization     (1,372 )           (79 )            
Share-based compensation     (2,141 )     (211 )     (5,636 )     (874 )      
Impairment of long-lived assets     (77 )           (4 )     (662 )      
Income tax expense on pre-tax adjustments                             2,252  
Non-GAAP   $ 82,626     $ 3,386     $ 16,948     $ 28,192     $ (858 )


                               
    Six Months Ended June 30, 2017
                     
    Cost of
revenue
  Selling,
distribution
and marketing
  General
and
administrative
  Research
and
development
  Income
tax expense
(benefit)
GAAP   $  72,282     $  3,075     $  23,572     $  21,982     $  1,812
Intangible amortization      (1,354 )      —        (72 )      —        —
Share-based compensation      (2,028 )      (149 )      (5,768 )      (804 )      —
Income tax expense on pre-tax adjustments      —        —        —        —        3,135
Non-GAAP   $  68,900     $  2,926     $  17,732     $  21,178     $  4,947

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