Third Quarter Earnings Call - AMPHASTAR PHARMACEUTICALS INC

Explicit Guidance:

• Q4 2026 Revenue: Expects sales to increase in the "high single-digit range" year-over-year.
• Q4 2026 Margins: Anticipates a modest slowdown in IMS sales due to prioritized corrective actions, with incremental manufacturing expenses at IMS estimated between $2 million and $3 million for the quarter, potentially rising slightly in the subsequent two to three quarters.
• 2027 Outlook: No formal revenue or EPS guidance provided for 2027; management expects strong growth driven by Baximi, Primatine Mist, and annualized Ipratropium bromide sales.
• Share Count: Board authorized an additional $50 million for the share buyback program.
• Tax/Other: No specific tax rate, capex, or dividend guidance issued for future periods.

Business-Segment Outlook:

• Vaccini (Vaxzevria): Record sales of $58.8M (+10% YoY); expects continued prescription growth but anticipates net pricing headwinds from duplicate 340B discounts and rebates will persist into 2027, likely preventing a return to historical pricing levels despite a 3% price increase taken in 2026.
• Primatine Mist: Record sales of $31.5M (+9% YoY); growth driven by volume and Q2 price increases; in-store unit sales up 2.5% YoY.
• Ipratropium Bromide: Launched April 2025; generated $6.6M in Q3; annualizing at ~$25M (vs. management's historical $50M opportunity potential); expects continued share growth as the sole generic competitor currently.
• Teriparatide: Launched Dec 2025; contributed $6.4M in Q3; annualizes into Q4 2026; sales expected to remain strong but may be lumpy due to batch shipping nature.
• Lidocaine: Sales up 29% to $16.6M driven by supplier shortages; demand expected to hold into 2027 but constrained by facility resource tightness and a $12.5M backlog at IMS.
• Epinephrine: Sales down 19% to $15.3M; recovery expected to be gradual as IMS remediation concludes.
• GLP-1 Generic: Projected to launch in 2027 but deemed a "limited opportunity" due to competitive market dynamics.
• Insulin Biosimilar (Aspart): On track for commercial launch in 2027; acknowledged market competition (3-4 other generics) but views the large market size as accommodating for entry; no firm launch month announced.
• Backlog: IMS backlog stands at $12.5M (up from historical norms); management aims to reduce backlog in Q4 2026 by executing on delayed shipments.

Market and Competitive Outlook:

• Pricing Dynamics: Duplicate 340B discounting remains a pricing headwind for 2027, though the impact is decreasing (Q3 headwind $2.2M vs. prior quarters); management does not expect full recovery to historical pricing levels.
• Supply/Demand: Expect sustained demand for Lidocaine in 2027 due to industry-wide supplier shortages; IMS facility remains a constraint on output for multiple products.
• Competition: Glucagon sales declined 37% due to increased competition; Ipratropium bromide has no immediate generic competition.

Macro / Industry Outlook:

• Regulatory (IMS): FDA continues close oversight; management expects IMS facility to return to full capacity by mid-2027.
• Regulatory (EPA/FDA): Propellant changes for Primatine Mist (reducing global warming potential) driven by EPA/FDA regulations; aim to maintain IP protection and compliance.
• Currency: Foreign currency fluctuations and interest rate swap adjustments impacted non-operating expenses in Q3; no specific FX guidance for 2027.

Strategic Initiatives:

• IMS Remediation: Corrective actions ongoing with FDA; impact is primarily operational/supplanting demand; goal is sustainable quality improvements and supply of essential medicines.
• Pipeline Advancement:
  • AMP101 (Intranasal Epinephrine): Phase I ongoing; design refined based on regulatory feedback; aims to address unmet need for non-injectable anaphylaxis treatment.
  • AMP109 (Peptide-coupled Docetaxel): Non-clinical studies continued; positive FDA feedback received.
  • AMP110 (Synthetic Corticotropin): Evaluating therapeutic indications and non-clinical studies.
  • AMP107 (Ophthalmic): Targeting wet AMD and diabetic macular edema; aiming for differentiated eyedrop alternative.
  • Primatine Next-Gen: Filing expected by end of 2028 to extend IP protection and ensure regulatory compliance.
• Capital Allocation: Disciplined investment in insulin and proprietary pipelines; utilization of underutilized API and finished product capacity at AMP and IMSA facilities.

Risks and Headwinds to Outlook:

• Operational: IMS remediation delays and higher manufacturing expenses ($2-3M incremental per quarter) pose risk to margin recovery and volume execution in H1 2027.
• Regulatory: Potential for FDA to require additional shutdowns or quality control checks at the IMS pre-filled syringe line.
• Pricing: Persistent duplicate 340B discounts and rebate pressures limiting gross margin recovery.
• Competition: GLP-1 and Glucagon categories face intensified competitive pressure.
• Capacity Constraints: Resource tightness at IMS limits ability to capitalize on high-demand products (e.g., Lidocaine) despite strong order books.

Management Tone on the Future:

• Confidence: Expresses confidence in the long-term pipeline (biosimilars, proprietary) and commercial platform strength, citing "record commercial performance."
• Hedges: Cautiously optimistic regarding 2027 growth but explicitly avoids specific 2027 financial guidance; frames IMS recovery as "gradual" with "easier comps" expected as the peak of pricing headwinds passes.
• Strategic Focus: Shift from pure growth to a balanced approach of "sustaining commercial performance, strengthening operations, and advancing pipeline" with "disciplined investment."

Miscellaneous:

• Q3 2026 Actuals: Revenue $207.6M (+8% YoY, +13% QoQ); Adjusted Net Income $49.3M ($1.14/share); Cash Flow from Ops $43.3M.
• Product Launches: Teriparatide (Dec 2025), Ipratropium Bromide (April 2025).