Amphastar Pharmaceuticals(US:AMPH)2023-02-28 16:00Part I Item 1. Business Amphastar Pharmaceuticals develops, manufactures, and markets complex generic and proprietary injectable, inhalation, intranasal, and insulin API products - Amphastar Pharmaceuticals, Inc. is a bio-pharmaceutical company focused on technically challenging generic and proprietary injectable, inhalation, intranasal, and insulin API products14 Net Revenues and Net Income (2020-2022) | Metric | 2022 ($M) | 2021 ($M) | 2020 ($M) | | :---------- | :-------- | :-------- | :-------- | | Net Revenues| 499.0 | 437.8 | 349.8 | | Net Income | 91.4 | 62.1 | 1.4 | - The company's primary strategic focus is developing and commercializing products with high technical barriers to market entry, leveraging proprietary R&D, competitive API sourcing/manufacturing, and improved drug formulations17 - The company has over 20 commercial products and more than 20 product candidates in various stages of development, including generic ANDAs, biosimilar insulin, and proprietary candidates2551 Overview Our Markets Our Strengths Our Strategy Our Technical Capabilities Finished Pharmaceutical Products APIs Supply Agreement with MannKind Corporation Research and Development Backlog Manufacturing and Facilities Raw Material and Other Suppliers Sales and Marketing Competition Government Regulation Intellectual Property Human Capital Corporate Information Item 1A. Risk Factors Amphastar faces significant risks including new product development, revenue concentration, supply chain, competition, regulatory complexities, international operations, and intellectual property - The company's success is highly dependent on its ability to develop, acquire, and commercialize new pharmaceutical products, with significant investment in R&D and no guarantee of regulatory clearance or commercial success190191201 Key Product Revenue Contribution (2020-2022) | Product | 2022 (% of Net Rev) | 2021 (% of Net Rev) | 2020 (% of Net Rev) | | :--------------- | :------------------ | :------------------ | :------------------ | | Primatene MIST® | 17% | 17% | 15% | | Glucagon | 11% | 11% | - | | Epinephrine | 15% | 13% | 7% | | Lidocaine | 11% | 10% | 12% | | Phytonadione | 10% | 10% | 12% | | Enoxaparin | 7% | 8% | 14% | - The company faces significant competition from both generic and branded pharmaceutical companies, many of which have greater financial and operational resources, potentially limiting growth and market share210211216 - International operations, particularly manufacturing in China, expose the company to risks such as political unrest, tariffs, health epidemics (e.g., COVID-19, African swine flu), and changes in trade policies, which could disrupt supply chains and operations187395396 Summary of Risk Factors Risks Relating to our Business and Industry Risks Relating to Regulatory Matters Risks Relating to our International Business Risks Relating to our Intellectual Property Risks Related to Ownership of our Common Stock General Risk Factors Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments510 Item 2. Properties Amphastar operates 56 owned/leased buildings across six global locations for manufacturing, R&D, and administration, with all facilities FDA-compliant - The company owns or leases 56 buildings across six locations (U.S., France, China), totaling 1.8 million square feet for manufacturing, R&D, distribution, packaging, laboratory, office, and warehouse space70 - All facilities are regularly inspected by the FDA and are believed to be in material compliance with cGMP regulations70 - The company continues to expand its Nanjing, China facility and believes current manufacturing capacity is adequate for the near term70511513 Item 3. Legal Proceedings Legal proceedings information is incorporated by reference from Note 20 of the Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 20 of the Consolidated Financial Statements514 Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable514 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Amphastar's common stock trades on Nasdaq (AMPH); no dividends paid since IPO, with 47.9 million shares outstanding and a $39.9 million share repurchase in 2022 - Amphastar's common stock is listed on the Nasdaq Global Select Market under the symbol 'AMPH'515 - The company has not declared or paid any dividends on its common stock since its initial public offering and anticipates retaining future earnings for business development516 Common Stock Outstanding and Repurchases | Metric | Value | | :----------------------------------- | :-------------- | | Shares Outstanding (Feb 22, 2023) | 47,896,820 | | Shares Repurchased (2022) | 1,335,528 | | Cost of Repurchases (2022) | $39.9 million | | Remaining Buyback Authorization | $43.6 million | Dividend Policy Holders of Record Stock Performance Graph Issuer Purchases of Equity Securities During the Quarter Ended December 31, 2022 Recent Sales of Unregistered Securities Item 6. [Reserved] This item is reserved and contains no information - This item is reserved524 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Amphastar's consolidated operating results, financial condition, liquidity, and cash flows for 2022, highlighting revenue growth, macroeconomic impacts, and accounting policies - Net revenues increased by 14% to $499.0 million in 2022 from $437.8 million in 2021, primarily driven by finished pharmaceutical products15539 Net Revenues by Segment (2021-2022) | Segment | 2022 ($M) | 2021 ($M) | Change ($M) | Change (%) | | :--------------------------- | :-------- | :-------- | :---------- | :--------- | | Finished Pharmaceutical Products | 486.5 | 419.6 | 66.9 | 16% | | API Products | 12.5 | 18.2 | (5.7) | (31)% | | Total Net Revenues | 499.0 | 437.8 | 61.2 | 14% | Key Finished Pharmaceutical Product Sales (2021-2022) | Product | 2022 ($M) | 2021 ($M) | Change ($M) | Change (%) | | :--------------- | :-------- | :-------- | :---------- | :--------- | | Primatene MIST® | 84.3 | 73.1 | 11.2 | 15% | | Epinephrine | 74.2 | 57.5 | 16.7 | 29% | | Glucagon | 55.3 | 47.6 | 7.7 | 16% | | Lidocaine | 52.5 | 44.4 | 8.1 | 18% | | Phytonadione | 49.5 | 45.5 | 4.0 | 9% | | Naloxone | 26.3 | 27.5 | (1.2) | (5)% | | Enoxaparin | 35.0 | 36.0 | (1.0) | (3)% | - Gross margin increased to 50% in 2022 from 46% in 2021, driven by higher-margin products like Primatene MIST®, epinephrine, and glucagon, despite increased labor and input costs539546 Operating Expenses (2021-2022) | Expense Category | 2022 ($M) | 2021 ($M) | Change ($M) | Change (%) | | :------------------------------- | :-------- | :-------- | :---------- | :--------- | | Selling, Distribution, & Marketing | 21.5 | 17.5 | 4.0 | 23% | | General & Administrative | 45.1 | 51.4 | (6.4) | (12)% | | Research & Development | 74.8 | 60.9 | 13.8 | 23% | - Net cash provided by operating activities was $89.2 million in 2022, down from $98.0 million in 2021, primarily due to increased accounts receivables and inventories560564565 Overview COVID-19 Pandemic Macroeconomic Trends and Uncertainties Business Segments Results of Operations Liquidity and Capital Resources Critical Accounting Policies Recent Accounting Pronouncements Off Balance Sheet Arrangements Government Regulation Item 7A. Quantitative and Qualitative Disclosures about Market Risk Amphastar's market risk exposures include investment, interest rate, and foreign currency exchange risks, impacting its debt and international API business - The company's primary market risk exposures are investment risk, interest rate risk, and foreign currency exchange risk606 Cash and Investments (2021-2022) | Asset Category | 2022 ($M) | 2021 ($M) | | :----------------------------- | :-------- | :-------- | | Cash & Cash Equivalents | 156.1 | 126.4 | | Short-term Investments | 19.7 | 10.3 | | Restricted Cash & Investments | 2.4 | 2.4 | - As of December 31, 2022, $13.3 million of the company's $75.9 million long-term debt had variable interest rates, with a 1% increase in rates potentially raising annual interest expense by $0.1 million610 - Foreign currency exchange risk primarily affects the API manufacturing business in France (euro-denominated sales) and the Chinese subsidiary ANP (Chinese yuan remeasurement) A 10% unfavorable change in USD strengthening against foreign currencies would reduce foreign currency gains by approximately $2.6 million and other comprehensive income by $1.6 million as of December 31, 2022612615 Investment Risk Interest Rate Risk Foreign Currency Exchange Risk Item 8. Financial Statements and Supplementary Data This section presents Amphastar's audited consolidated financial statements for 2020-2022, including balance sheets, income statements, cash flows, and detailed notes, with the independent auditor's report - The consolidated financial statements for the periods ended December 31, 2022, 2021, and 2020 are presented in conformity with U.S. GAAP622653 - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022623835836 - Critical audit matters included the provision for chargebacks estimate and the enoxaparin inventory lower of cost or net realizable value estimate, both requiring significant judgment due to market conditions and complex estimations626627632 Consolidated Balance Sheet Highlights (2021-2022) | Metric (in thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--------------------------- | :----------- | :----------- | | Total Assets | $741,987 | $671,529 | | Total Liabilities | $213,329 | $226,007 | | Total Stockholders' Equity | $528,658 | $445,522 | Consolidated Statements of Operations Highlights (2020-2022) | Metric (in thousands) | 2022 | 2021 | 2020 | | :--------------------------- | :----------- | :----------- | :----------- | | Net Revenues | $498,987 | $437,768 | $349,846 | | Gross Profit | $248,860 | $199,739 | $143,340 | | Income from Operations | $107,497 | $69,887 | $10,954 | | Net Income | $91,386 | $63,301 | $1,097 | | Basic EPS | $1.88 | $1.30 | $0.03 | | Diluted EPS | $1.74 | $1.25 | $0.03 | Consolidated Statements of Cash Flows Highlights (2020-2022) | Metric (in thousands) | 2022 | 2021 | 2020 | | :--------------------------- | :----------- | :----------- | :----------- | | Net Cash from Operating Activities | $89,181 | $97,994 | $57,266 | | Net Cash from Investing Activities | $(32,777) | $(28,672) | $(36,415) | | Net Cash from Financing Activities | $(26,439) | $(37,018) | $(2,246) | | Net Increase in Cash | $29,745 | $32,081 | $18,957 | Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure827 Item 9A. Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with Ernst & Young LLP concurring - Management concluded that disclosure controls and procedures were effective as of December 31, 2022828 - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework829 - Ernst & Young LLP provided an unqualified opinion on the effectiveness of internal control over financial reporting830835 - There were no changes in internal control over financial reporting during the quarter ended December 31, 2022, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting831 Item 9B. Other Information The company reported no other information for this item - There is no other information to report841 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reported no disclosures regarding foreign jurisdictions that prevent inspections - There are no disclosures regarding foreign jurisdictions that prevent inspections841 Part III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement843 Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2023 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement844 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters are incorporated by reference from the company's 2023 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement844 Item 13. Relationships and Related Transactions, and Director Independence Information regarding relationships, related transactions, and director independence is incorporated by reference from the company's 2023 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement844 Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 Annual Meeting of Stockholders Proxy Statement - Information for this item is incorporated by reference from the 2023 Proxy Statement845 Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed or incorporated by reference into the Annual Report on Form 10-K - Financial statements filed as part of this report are listed in Part II, Item 8847 - The section provides a comprehensive list of exhibits, including corporate governance documents, equity incentive plans, and various supply and loan agreements848849850 Item 16. Form 10-K Summary This item indicates that there is no Form 10-K Summary provided - No Form 10-K Summary is provided850