Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) Q2 2018 Earnings Conference Call - Final Transcript

Aug 08, 2018 • 05:00 pm ET

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Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Amphastar Pharmaceuticals' Second Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

(Forward-Looking Cautionary Statements)

I would now like to turn the conference over to Mr. Jason Shandell, President for Amphastar.

Executive
Jason Shandell

Thank you, operator. Good afternoon, and welcome to Amphastar Pharmaceuticals' Second Quarter Earnings Call. My name is Jason Shandell, President of Amphastar. I'm joined today with my colleague, Bill Peters, CFO of Amphastar. We appreciate you joining us on the call today, and look forward to speaking with you and answering any questions you may have.

I will now turn the call over to our CFO, Bill Peters, to discuss the second quarter financials.

Executive
Bill Peters

Thank you, Jason. Sales for the second quarter increased 9% to $71 million from $65.2 million in the previous year's period. The biggest driver of the increase in the finished pharmaceutical product segment was medroxyprogesterone acetate, which was launched in the first quarter of 2018 and recorded sales of $6.4 million. Naloxone, which was this quarter's biggest selling product saw a sales increase to $11.1 million from $10.3 million on higher unit volumes. Sales of enoxaparin increased to $8.7 million from $8.3 million due to a higher unit volumes as we were able to fill most of the backorder, which had led to lower sales of this product in the first quarter of 2018.

Sales of our epinephrine declined to $3.7 million from $10.6 million, due to the discontinuation of our epinephrine vial in the second quarter of 2017, after the FDA requested that we discontinue selling the product under a grandfather exception. Our insulin API business had sales of $7.8 million, which were up from $1.4 million last year, as MannKind began placing orders under our amended 2016 supply agreement.

Cost of revenues increased to $44.9 million from $38.4 million and gross margin decreased to 37% of revenues from 41% of revenues in the second quarter of last year. The contraction of gross margins was related to increased cost for heparin, which is used to make an enoxaparin API and increased labor costs due to the implementation of new quality standards recently required by USP and higher minimum rates requirements in California. Also the decline in sales of high-margin products like the epinephrine vials, was only partially offset by new product launches of higher margin products such as medroxyprogesterone acetate.

Selling distribution and marketing expenses increased due to expenses at our Amphastar Nanjing Pharmaceuticals subsidiary, as well as higher freight costs. General and administrative spending decreased primarily because of lower legal expenses. Research and development expenditures increased 44% to $15.5 million from $10.7 million and we increased expenditures on materials needed for our pipeline, including the purchase of reference-listed drugs ahead of planned clinical trials for later this year.

Additionally, we made several batches of Primatene Mist, which were expensed to R&D as pre-launch inventory