Amphastar Pharmaceuticals(AMPH) - 2023 Q4 - Annual Results

Financial Highlights Fourth Quarter Highlights In the fourth quarter of 2023, Amphastar reported net revenues of $178.1 million, a 32% increase year-over-year, with GAAP net income of $36.2 million ($0.68 per diluted share) and adjusted non-GAAP net income of $46.9 million ($0.88 per diluted share) Q4 2023 Key Financial Metrics | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net Revenues | $178.1 million | $135.0 million | | GAAP Net Income | $36.2 million | $33.9 million | | GAAP Diluted EPS | $0.68 | $0.66 | | Adjusted non-GAAP Net Income | $46.9 million | $37.6 million | | Adjusted non-GAAP Diluted EPS | $0.88 | $0.73 | Full-Year Highlights For the full fiscal year 2023, the company achieved net revenues of $644.4 million, up 29% from 2022, with GAAP net income of $137.5 million ($2.60 per share) and adjusted non-GAAP net income of $175.7 million ($3.32 per share) Full-Year 2023 Key Financial Metrics | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Net Revenues | $644.4 million | $499.0 million | | GAAP Net Income | $137.5 million | $91.4 million | | GAAP Diluted EPS | $2.60 | $1.74 | | Adjusted non-GAAP Net Income | $175.7 million | $103.2 million | | Adjusted non-GAAP Diluted EPS | $3.32 | $1.97 | - CEO Dr. Jack Zhang emphasized strong momentum entering 2024, driven by the performance of glucagon, Primatene MIST®, and the acquisition of BAQSIMI®, which strengthens the diabetes portfolio[2] - A key milestone was the submission of the first Biologics License Application (BLA) for Insulin Aspart (AMP-004), highlighting continued pipeline development in diabetes management[2] Financial Results Fourth Quarter 2023 Financial Results Fourth quarter net revenues grew 32% YoY to $178.1 million, primarily driven by a 70% increase in Glucagon sales and $22.5 million in revenue from the newly acquired BAQSIMI®, with gross margin improving to 54% from 53% despite an inventory reserve charge, and operating expenses increasing due to BAQSIMI® sales and marketing efforts and higher R&D spending Revenues Q4 2023 Product Revenue Breakdown (in thousands) | Product | Q4 2023 Revenue | Q4 2022 Revenue | Change % | | :--- | :--- | :--- | :--- | | Glucagon | $31,198 | $18,319 | 70% | | Epinephrine | $24,646 | $21,427 | 15% | | Primatene MIST® | $24,484 | $22,279 | 10% | | Other revenues (BAQSIMI®) | $22,456 | $0 | N/A | | Enoxaparin | $6,092 | $7,812 | (22)% | | Total Net Revenues | $178,105 | $135,023 | 32% | - Glucagon sales growth was driven by increased unit volumes after two competitors exited the market[4] - BAQSIMI® contributed $22.5 million in 'Other revenues', recognized on a net basis under a Transition Services Agreement with Eli Lilly. Amphastar expects to recognize the full revenue amount as it takes over distribution during 2024[4] Gross Profit - Gross profit increased 35% to $96.1 million, with gross margin expanding to 54% from 53% in Q4 2022[5] - Margin improvement was driven by increased sales of higher-margin products like glucagon, Primatene MIST®, and newly launched regadenoson, plus the net revenue recognition of BAQSIMI®[5][6] - Margin expansion was partially offset by a $3.6 million inventory reserve charge related to the amended Supply Agreement with MannKind Corporation[6] Operating Expenses - Selling, distribution, and marketing expenses rose 58% to $8.6 million, primarily due to the expansion of sales and marketing for BAQSIMI®[7] - Research and development expenses increased 18% to $20.4 million, mainly due to higher material and supply costs for inhalation pipeline products[7] - Non-operating expenses were $12.6 million, a significant shift from an income of $3.4 million in Q4 2022, primarily due to interest expense on debt related to the BAQSIMI® acquisition[7] Full-Year 2023 Financial Results Full-year 2023 net revenues increased 29% to $644.4 million, propelled by a 105% surge in Glucagon sales and $51.2 million from BAQSIMI®, with gross margin expanding significantly to 54% from 50% due to a richer product mix, while operating and non-operating expenses rose due to the BAQSIMI® acquisition and related financing costs Revenues Full-Year 2023 Product Revenue Breakdown (in thousands) | Product | FY 2023 Revenue | FY 2022 Revenue | Change % | | :--- | :--- | :--- | :--- | | Glucagon | $113,684 | $55,322 | 105% | | Primatene MIST® | $89,321 | $84,309 | 6% | | Epinephrine | $81,650 | $74,204 | 10% | | Other revenues (BAQSIMI®) | $51,157 | $0 | N/A | | Naloxone | $19,004 | $26,269 | (28)% | | Total Net Revenues | $644,395 | $498,987 | 29% | - Glucagon sales more than doubled due to increased unit volumes following competitor product discontinuations[8] - BAQSIMI® contributed $51.2 million in 'Other revenues' for the year, based on Lilly's reported net sales of $86.3 million[9] - Naloxone sales declined 28% due to lower unit volumes and a lower average selling price from increased competition[9] Gross Profit - Gross profit increased 41% to $351.1 million, with gross margin expanding significantly to 54% from 50% in 2022[10] - The margin increase was driven by higher sales of high-margin products (Glucagon, Primatene MIST®), new product launches (ganirelix, vasopressin, regadenoson), and the net revenue recognition of BAQSIMI®[10] Operating Expenses - Selling, distribution, and marketing expenses increased 34% to $28.9 million, driven by BAQSIMI® marketing efforts and increased advertising for Primatene MIST®[11] - Research and development expenses remained relatively flat, decreasing 1% to $73.7 million[11] - Non-operating expenses were $25.6 million, compared to an income of $8.5 million in 2022, primarily due to costs associated with the credit agreement to finance the BAQSIMI® acquisition[11] Business and Pipeline Update Cash Flow and Pipeline Information The company generated $183.5 million in cash flow from operating activities for the year ended December 31, 2023, maintaining a robust development pipeline with multiple ANDAs and biosimilar candidates on file with the FDA or in development, targeting markets worth several billion dollars - Cash flow provided by operating activities for the full year 2023 was $183.5 million[12] - The company has four ANDAs and one biosimilar insulin candidate currently on file with the FDA, targeting markets of over $3 billion and $4 billion, respectively[12] - There are an additional three biosimilar products and six generic products in development, targeting markets of over $10 billion and $8 billion, respectively[12] Consolidated Financial Statements (Unaudited) Condensed Consolidated Statement of Operations The statement details the company's revenues, costs, and profitability for the three and twelve months ended December 31, 2023, compared to the same periods in 2022, showing full-year net income increased to $137.5 million from $91.4 million in the prior year FY 2023 vs FY 2022 Statement of Operations (in thousands) | Line Item | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total net revenues | $644,395 | $498,987 | | Gross profit | $351,121 | $248,860 | | Income from operations | $196,987 | $107,497 | | Net income | $137,545 | $91,386 | | Diluted EPS | $2.60 | $1.74 | Condensed Consolidated Balance Sheets The balance sheet as of December 31, 2023, shows a significant increase in total assets to $1.51 billion from $742.0 million at year-end 2022, primarily driven by the addition of goodwill and intangible assets from the BAQSIMI® acquisition, which also led to a substantial increase in total liabilities, particularly long-term debt Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $1,512,912 | $741,987 | | Cash and cash equivalents | $144,296 | $156,098 | | Goodwill and intangible assets, net | $613,295 | $37,298 | | Total Liabilities | $873,491 | $213,329 | | Long-term debt, net | $589,579 | $72,839 | | Total Stockholders' Equity | $639,421 | $528,658 | Reconciliation of Non-GAAP Measures This section provides a detailed reconciliation of GAAP net income to adjusted non-GAAP net income, showing that for the full year 2023, GAAP net income of $137.5 million was adjusted for items such as intangible amortization ($12.8 million), share-based compensation ($20.2 million), and BAQSIMI® acquisition-related expenses ($5.8 million) to arrive at a non-GAAP net income of $175.7 million FY 2023 GAAP to Non-GAAP Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | GAAP net income | $137,545 | | Intangible amortization | $12,830 | | Share-based compensation | $20,242 | | Impairment of long-lived assets | $3,175 | | Expenses related to BAQSIMI® acquisition | $5,830 | | Debt issuance costs | $6,785 | | Income tax provision on adjustments | ($10,708) | | Non-GAAP net income | $175,699 | Supplementary Information Non-GAAP Financial Measures The company uses non-GAAP financial measures, such as Adjusted non-GAAP net income and Adjusted non-GAAP diluted EPS, to supplement its GAAP financial statements, excluding items like amortization, share-based compensation, impairment charges, and acquisition-related expenses to provide investors with a clearer view of ongoing operational performance - The company discloses non-GAAP measures because management uses them internally for forecasting, budgeting, and measuring operating performance[14] - Adjustments typically exclude amortization expense, share-based compensation, impairment charges, acquisition expenses, debt issuance costs, and legal settlements[14] Forward-Looking Statements This press release contains forward-looking statements regarding future financial performance, business trends, product development, and the prospective benefits of the BAQSIMI® acquisition, which are based on current expectations and subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements cover expectations on future growth, sales, product development, FDA filings, and the impact of the BAQSIMI® acquisition[15][16] - Investors are cautioned not to place undue reliance on these statements as they involve known and unknown risks, and the company undertakes no obligation to update them[16]