美國
證券交易委員會
華盛頓特區20549
表格
⌧ | 根據1934年證券交易所法案第13或15(d)條的規定 |
爲
or
◻ | 根據1934年證券交易所法案第13或15(d)條規定 |
對於從 到 的過渡期
佣金文件號
(根據其章程規定的準確名稱)
| ||
(國家或其他管轄區的 公司成立或組織) |
| (IRS僱主 |
| ||
| ||
,(主要行政辦公地址) | (郵政編碼) |
(
(註冊人電話號碼,包括區號)
請用複選標記表示,報告人(1)在前12個月內是否已提交證券交易法1934年第13或第15(d)條規定需要提交的所有報告(或對於要求報告的較短期間,是否已提交這些報告),以及(2)在過去90天內是否一直受到這些報告要求的約束。
請用複選標記指示,公司是否在過去12個月內(或公司被要求提交這些文件的較短期間內)根據S-t規則(本章第232.405條)已經以電子方式提交了每份交互式數據文件。 ⌧ 沒有◻
請勾選標記以說明註冊人是大型快速申報人、加速申報人、非加速申報人、較小的報告公司還是新興成長型公司。請查看《交易所法》第120億.2條中「大型快速申報人」、「加速申報人」、「較小的報告公司」和「新興成長型公司」的定義。
⌧ | 加速文件提交人 | ◻ | ||||
非加速文件提交人 | ◻ | ◻ | ||||
新興成長公司 | ◻ |
如果一張 如果註冊人選擇不使用根據《證券交易法》第13(a)條規定提供的有關遵守任何新的或修訂的財務會計準則的延長過渡期,請用複選標記指示。 ◻
請勾選以下內容。申報人是否是外殼公司(根據證券交易法規則12b-2定義)。 是 ◻ ⌧
在法案第12(b)條的規定下注冊的證券:
每一類的名稱 | 交易標誌 | 在其上註冊的交易所的名稱 | ||||
The | ||||||
2024年11月1日,註冊人唯一一類普通股的流通股數爲
關於前瞻性陳述的特別說明S
本Form 10-Q季度報告或季度報告包含涉及重大風險和不確定性的「前瞻性陳述」。在某些情況下,您可以通過以下字詞識別前瞻性陳述:“可能,” “可能會,” “將,” “可以,” “應該,” “預期,” “打算,” “計劃,” “預料,” “相信,” “估計,” “預測,” “投影,” “潛在,” “持續,” “進行中” 或這些術語的否定形式或其他可比較的術語,儘管並非所有前瞻性陳述都包含這些識別字詞。前瞻性陳述涉及未來事件、未來財務表現或狀況,並涉及已知和未知的風險、不確定性和其他因素,可能導致實際結果、活動水平、表現或成就與前瞻性陳述所指的內容有實質不同。這些前瞻性陳述包括但不限於有關的聲明:
● | 我們對產品的銷售和市場營銷的期望; |
● | 我們對BAQSIMI的期望®,包括我們增加營業收入的能力以及因收購BAQSIMI而獲得某些好處的能力®; |
● | 我們成功收購和整合資產的能力,包括整合BAQSIMI的能力®; |
● | 我們對製造和生產的期望以及我們產品供應鏈的完整性,包括與我們單一來源供應商相關的風險 |
● | 我們的業務和營運一般,包括:俄烏和中東衝突以及艱困的宏觀經濟環境對我們的業務、財務狀況、營運、現金流和流動性的不良影響; |
● | 我們吸引、僱用和留住高技能人員的能力; |
● | 由於自然災害等我們無法控制的原因導致的生產和製造中斷,如停電、大流行病、戰爭、恐怖襲擊或其他事件; |
● | 全球、國家和地方經濟和市場條件,特別涉及地緣政治不確定性,包括俄烏和中東衝突、通脹和高利率; |
● | 美國食品和藥物管理局(FDA)批准和規管我們產品候選藥物、製造活動和產品營銷活動的時間和可能性; |
● | 我們將產品候選藥物在我們平台上推進至成功完成的臨床試驗,以及我們隨後成功商業化我們的產品候選藥物的能力; |
● | 成本和延誤來自於我們所受的廣泛製藥監管; |
● | 我們在產品開發和營銷方面的競爭能力; |
● | 我們對於我們的中國子公司安发匠江藥業有限公司(ANP)業務的期望; |
● | 對環境、健康和安全以及其他法律法規對我們業務的不利應用的潛在影響; |
● | 我們對於我們新產品和專利藥物輸送技術以及我們的原料藥(API)客戶的市場接受度的期望; |
● | 醫藥法規改革和藥品價格、醫療費用報销和覆蓋範圍減少的影響; |
● | 我們對從第三方支付者獲得保險覆蓋和適當退款的期望; |
● | 價格優惠的金額或供應商的排除對不利影響我們的業務; |
● | 知識產權法律的變化,我們建立和維護產品的知識產權保護能力以及在涉嫌侵權案件中成功捍衛我們的知識產權; |
● | 我們業務策略、產品開發策略和科技利用的實施; |
● | 可能面臨產品責任索賠的風險; |
● | 我們成功參與合適的收購目標或許可機會,或完成並整合收購、出售或投資,包括此類收購、出售或投資的預期收益能力; |
● | 我們擴展國際業務的能力; |
● | 經濟和行業趨勢以及趨勢分析; |
● | 我們在美國和國際上業務適用或將適用的法律和法規的遵循能力; |
● | 貿易關稅、出口或進口限制或其他貿易壁壘的影響; |
● | 患者保護和平價法案(經修訂)以及我們所在國家的其他立法和監管醫療保健改革對我們的影響,包括可能的藥品價格管制; |
● | 全球和國內稅收改革的影響; |
● | 我們在我們ANP和Amphastar設施的新建築完成和驗證的時間; |
● | 股份回購的時間和程度;以及 |
● | 我們的財務運營預期,包括我們對我們的堆積,營業收入,營業成本,毛利潤或毛利率,營業費用,包括研發、銷售和市場營銷以及總務費用的變化的期望,以及我們實現和保持未來盈利能力的能力。 |
您應該完整閱讀此季度報告以及本季度報告中其他地方參考的文件,並應理解,我們的實際結果可能與我們預期的前瞻性陳述所表達或暗示的有實質不同。鑒於我們的前瞻性陳述所受的重大風險和不確定性,您不應過度依賴或將這些陳述視為我們或任何其他人將在任何特定時間範圍內完全實現我們的目標和計劃的陳述或保證。我們在本季度報告中以及在截至2023年12月31日的年度報告(Form 10-k)的第Item 1A.“風險因素”中詳細討論了許多這些風險和不確定性。這些前瞻性陳述僅代表我們對於本季度報告日期的評估和假設,不論本季度報告的交付時間,這些信息可能受到限制或不完整,我們的陳述不應被解讀為表明我們已對所有可能已獲得的相關信息進行了彻底的調查或審查。除非法律要求,我們不承諾在本季度報告日期之後根據新信息、未來事件或其他情況更新或修訂任何前瞻性陳述。
除非明示指示或情境需要,本季度報告中對“amphastar pharmaceuticals”、“該公司”、“我們”、“我們的”和“我們”等引用均指的是amphastar pharmaceuticals公司及其附屬公司。
財務報表第一部分
項目 1. 基本報表
amphastar pharmaceuticals, INC.
縮表合併資產負債表
(以千為單位,股份數據除外)
| 九月三十日 |
| 12月31日 | |||
2024 | 2023 | |||||
(未經審計) | ||||||
資產 | ||||||
流動資產: | ||||||
現金及現金等價物 | $ | | $ | | ||
限制性現金 | | | ||||
短期投資 | | | ||||
受限制的短期投資 |
| |
| | ||
應收帳款淨額 |
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存貨 |
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收入稅款退款與存款 |
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預付費用及其他資產 |
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全部流動資產 |
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不動產、廠房及設備,扣除折舊及攤銷後淨值 |
| |
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融資租賃使用權資產 | | | ||||
營運租賃權使用資產 | | | ||||
遞延所得稅資產 | — | | ||||
商譽和無形資產,淨值 |
| |
| | ||
長期投資 | — | | ||||
其他資產 |
| |
| | ||
递延税款贷项 |
| |
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資產總額 | $ | | $ | | ||
負債和股東權益 | ||||||
流動負債: | ||||||
應付款及應計費用 | $ | | $ | | ||
BAQSIMI的應付款項已計提® (見第3條注釋) | — | | ||||
應納所得稅款 |
| |
| | ||
長期債務的當期償還 |
| |
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營運租賃負債的流動部分 | | | ||||
流動負債合計 |
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長期預留所得稅負債 |
| |
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長期債務,扣除當期部分和未攤銷的債券發行成本 |
| |
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長期營運租賃負債,扣除當期部分 | | | ||||
其他長期負債 |
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總負債 |
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合約和可能負債 | ||||||
股東權益: | ||||||
優先股: 面額 $ |
|
| ||||
普通股: 面額 $ |
| |
| | ||
資本公積額額外增資 |
| |
| | ||
保留收益 |
| |
| | ||
累積其他全面損失 |
| ( |
| ( | ||
庫藏股 |
| ( |
| ( | ||
總股本 | | | ||||
負債和股東權益總額 | $ | | $ | |
請參閱附表的簡明綜合基本報表附註
-1-
amphastar pharmaceuticals, INC。
採計簡明綜合營運報表S
(未經審計; 以千為單位,除每股數據外)
三個月結束了 | 截至九個月 |
| |||||||||||
九月三十日 | 九月三十日 | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |||||
凈收益: | |||||||||||||
產品收入淨額 | $ | | $ | | $ | | $ | | |||||
其他收入 | | | | | |||||||||
總凈收益 | | | | | |||||||||
銷售成本 |
| | | | | ||||||||
毛利潤 |
| |
| |
| |
| | |||||
營業費用: | |||||||||||||
銷售、分銷和行銷 |
| | | | | ||||||||
總務與行政 |
| | | | | ||||||||
研發費用 |
| | | | | ||||||||
營業費用總計 |
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| |
| |
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營業收入 |
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| |
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非經營性收入(費用): | |||||||||||||
利息收入 |
| | | | | ||||||||
利息費用 |
| ( | ( | ( | ( | ||||||||
其他收入(費用),淨值 |
| ( | | | | ||||||||
非營業收入(費用),淨額 |
| ( |
| ( |
| ( |
| ( | |||||
稅前收入 |
| |
| |
| |
| | |||||
所得稅負擔 |
| | | | | ||||||||
在未經合併聯屬公司損失之前的收入 | | | | | |||||||||
未納入關聯公司損失的股權 | — | ( | ( | ( | |||||||||
凈利潤 | $ | | $ | | $ | | $ | | |||||
每股淨利潤: | |||||||||||||
基礎 | $ | | $ | | $ | | $ | | |||||
稀釋 | $ | | $ | | $ | | $ | | |||||
用於計算每股凈利潤的加權平均股份: | |||||||||||||
基礎 |
| | | | | ||||||||
稀釋 |
| | | | |
請參閱附表的簡明綜合基本報表附註
-2-
-3-
AMPHASTAR藥品公司。
股東權益簡明合併財務報表
(未經審核;以千為單位,股數除外)
普通股 | 累計 | 庫藏股 | ||||||||||||||||||||
額外的 | 其他 | |||||||||||||||||||||
實收資本 | 保留收益 | 綜合 | ||||||||||||||||||||
股份 | 金額 | 資本 | 累積盈餘 | 收入(損失) | 股份 | 金額 | 總計 | |||||||||||||||
2023年12月31日的結餘 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | ||||||
凈利潤 |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
其他全面損失 |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||
普益公司股權計劃相關之庫藏股發行 | — | — | ( | — | — | | | — | ||||||||||||||
與公司的股本計劃相關聯的普通股發行 |
| |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( | ||||||
股份報酬費用 |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
截至2024年3月31日的賬戶餘額 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | ||||||
凈利潤 |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
其他全面損失 |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||
買回庫藏股 |
| — |
| — |
| — |
| — |
| — |
| ( | ( |
| ( | |||||||
有關公司權益計劃的庫藏股發行 | — |
| — |
| ( |
| — |
| — |
| | |
| — | ||||||||
發行普通股與公司的股本計劃相關 |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
股份報酬費用 |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
2024年6月30日賬面結餘 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | ||||||
凈利潤 |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
其他綜合收益 |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| | ||||||
買回庫藏股 |
| — |
| — |
| — |
| — |
| — |
| ( | ( |
| ( | |||||||
發行普通股與公司股權計劃相關 |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
股份報酬費用 |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
2024年9月30日結餘 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
普通股 | 累計 | 庫藏股 | ||||||||||||||||||||
額外的 | 其他 | |||||||||||||||||||||
實收資本 | 保留收益 | 綜合 | ||||||||||||||||||||
股份 | 金額 | 資本 | 累積盈餘 | 收入(損失) | 股份 | 金額 | 總計 | |||||||||||||||
2022年12月31日結餘 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | ||||||
凈利潤 |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
其他綜合收益 |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| | ||||||
買回庫藏股 |
| — |
| — |
| — |
| — |
| — |
| ( | ( |
| ( | |||||||
公司股權計劃相關的普通股發行 |
| |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( | ||||||
股份報酬費用 |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
截至2023年3月31日的餘額 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | ||||||
凈利潤 |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
其他全面損失 |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||
買回庫藏股 |
| — |
| — |
| — |
| — |
| — |
| ( | ( |
| ( | |||||||
根據公司股權計劃,發行庫藏股 | — |
| — |
| ( |
| — |
| — |
| | |
| — | ||||||||
為公司的股權計劃發行普通股份 |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
股份報酬費用 |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
截至2023年6月30日的餘額 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | ||||||
凈利潤 |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
其他全面損失 |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( | ||||||
買回庫藏股 |
| — |
| — |
| — |
| — |
| — |
| ( | ( |
| ( | |||||||
與公司的股權計劃相關的普通股發行 |
| |
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股份報酬費用 |
| — |
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2023年9月30日的餘額 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
請參閱附表的簡明綜合基本報表附註
-4-
amphastar pharmaceuticals, INC.
現金流量表簡明綜合報表S
(未經審核;以千為單位)
截至九個月 | ||||||
九月三十日 | ||||||
| 2024 |
| 2023 | |||
營運活動之現金流量: | ||||||
凈利潤 | $ | | $ | | ||
調整為運營活動提供的凈現金: | ||||||
不可重複的資產處置損失 |
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| | ||
長壽資產的損耗 | — | | ||||
利率掉期和外匯交易的損益,淨額 | | ( | ||||
固定資產(包括土地、廠房及設備)折舊 |
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產品權利、商標和專利攤銷 |
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營業租賃使用權資產攤銷 | | | ||||
折扣、溢價和債務發行成本的攤銷 | | | ||||
未納入關聯公司損失的股權 | | | ||||
股份報酬費用 |
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營運資產和負債的變化: | ||||||
應收帳款淨額 |
| ( |
| ( | ||
存貨 |
| ( |
| ( | ||
預付費用及其他資產 |
| ( |
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所得稅退稅、存款及應付款、淨額 |
| ( |
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營業租賃負債 | ( | ( | ||||
應付款及應計費用 |
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經營活動產生的淨現金流量 |
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投資活動現金流量: | ||||||
BAQSIMI® 併購(見註3) |
| ( |
| ( | ||
物業、廠房及設備的購買和施工 |
| ( |
| ( | ||
購買投資 | ( | ( | ||||
到期投資 | | | ||||
存款及其他資產 |
| ( |
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投資活動中使用的淨現金 |
| ( |
| ( | ||
來自融資活動的現金流量: | ||||||
股權計劃的款項,扣除預扣稅款後的淨額 |
| ( |
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買回庫藏股 |
| ( |
| ( | ||
債務發行成本 | ( | ( | ||||
來自授信額度借款的收入 |
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| — | ||
發行長期債務證券所得 |
| — |
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長期債務本金償還 |
| ( |
| ( | ||
籌資活動提供的淨現金 |
| ( |
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匯率變動對現金的影響 |
| ( | ( | |||
現金、現金等價物和受限制現金的淨增加額 |
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期初現金、現金等價物及限制性現金餘額 |
| | | |||
期末現金、現金等價物及限制性現金餘額 | $ | | $ | | ||
非現金投資和融資活動: | ||||||
BAQSIMI的递延付款® acquisition | $ | — | $ | | ||
包括應付帳款的資本支出 | $ | | $ | | ||
以營業租賃之租賃權作為交換之營業租賃負債 | $ | | $ | | ||
增補現金流量資訊: | ||||||
支付的利息,抵銷資本化的利息 | $ | | $ | | ||
所得稅已支付金額 | $ | | $ | |
請參閱附表的簡明綜合基本報表附註
-5-
備註1。 一般事項。
Amphastar Pharmaceuticals, Inc.,一家德州公司(以下簡稱「公司」)是一家專注於開發、製造、銷售技術挑戰性的仿製和專有注射、吸入和鼻腔產品的生物製藥公司。其中包括具有很高技術壁壘的產品。此外,該公司還銷售胰島素原料藥品(API)產品。公司的大多數產品用於醫院或急診臨床環境,主要通過集團採購組織和藥品批發商進行合約採購和分銷。公司的胰島素API產品銷售給其他製藥公司,供其自家產品使用,同時也由公司用於開發注射成品藥品。公司的吸入產品Primatene MIST,®主要通過藥品零售商分銷。
請閱讀隨附的未經審核簡明合併基本報表,以及2023年12月31日年度已提交給證券交易委員會(SEC)的公司綜合業務報告Form 10-k的經已審核的合併基本報表及相關附註。相應簡明合併基本報表未包含或簡化了正常收錄在依據美國公認會計原則(GAAP)編製的年度財務報表中的某些信息及腳註。年終簡明合併資產負債表係從經審核的財務報表衍生出來。隨附的中期未經審核的財務報表中反映出所有管理層認為必需進行的為了公允呈現公司綜合財務狀況、營業結果、綜合收益、股東權益和現金流量所必需的調整。除非另有說明,所有此類調整屬正常、週期性。公司中期營業結果、綜合收益和現金流量不一定反映出公司未來期間可能實現的營業結果和現金流量。
附註2。 重要會計政策摘要
報告基礎
未經審核的簡明綜合財務報表包括公司及其子公司的帳戶,並按照GAAP準備。 在準備簡明綜合財務報表時,所有公司內部活動均已予以消除。 據管理層意見,附隨的未經審核的簡明綜合財務報表包括所有調整,這些調整屬於正常循環性質,並且需要合理呈現公司的綜合財務狀況,營運結果和現金流量。
公司的子公司包括:(1) International Medication Systems, Limited,縮寫為IMS;(2) Armstrong Pharmaceuticals, Inc.,縮寫為Armstrong;(3) Amphastar Nanjing Pharmaceuticals Inc.,縮寫為ANP;(4) Amphastar France Pharmaceuticals, S.A.S.,縮寫為AFP;(5) Amphastar Uk Ltd.,縮寫為AUk;(6) International Medication Systems (UK) Limited,縮寫為IMS Uk;和(7) Amphastar Medication Co., LLC,縮寫為Amphastar Medication。
對未合併聯營公司的投資
當公司在投資者身上具有重大影響力,但對被投資者沒有控股權時,公司採用權益法會計。這些投資所得的收益或虧損按公司在附表中的營運簡明合併報表報告為「未合併聯營公司權益中的虧損」。使用權益法核算的投資,如果被投資者的財務報表未能及時提供給投資者在當前報告日期應用權益法,則可以滯後報告長達三個月。
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權益法投資的攜帶金額在附帶的簡明合併資產負債表中報告為「對非合併聯營的投資」。公司的權益法投資按成本報告,每個期間調整為公司投資者的收益或損失和支付的分紅派息,如果有的話。
估計的使用
根據GAAP製備的縮短的合並基本報表要求管理層進行估計和假設,從而影響縮短的合並基本報表和隨附註的金額報告。實際結果可能會與這些估計有所不同。主要的會計估計包括:收購資產的公允價值,金融工具的公允價值,折扣準備金,退款和回扣準備金,產品退貨準備金,庫存調整為淨實現價值,投資損耗,長期和無形資產及商譽,訴訟準備金,基於股份報酬費用的股價波動性,推遲稅負資產的評價備抵,以及不確定所得稅位置的負債。
外國貨幣
公司、其國內子公司、其中國子公司ANP和其英國子公司AUk的功能貨幣為美元,或USD。ANP將其記錄簿記在人民幣中。這些記錄會根據當前或歷史匯率折合為美元的功能貨幣。由此產生的貨幣折合調整和其他交易性外幣兌換匯盈虧將反映在公司的縮短的合並損益表中。
The Company’s French subsidiary, AFP, maintains its books of record in euros. AUK’s subsidiary, IMS Uk, maintains its books of record in British pounds. These local currencies have been determined to be the subsidiaries’ respective functional currencies. Activities in the statements of operations are translated to USD using average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transactions. Translation adjustments are reflected in stockholders’ equity and are included as a component of other comprehensive income (loss). The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other accumulated comprehensive income (loss).
The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature were a $
綜合收益
公司的綜合收益包括外幣兌換的盈利和損失,以及來自股權法下投資的其他綜合收益的份額。
收購s
公司評估收購和其他類似交易,以判斷該交易應該作為企業合併還是資產收購來核算,首先應用篩選測試來確定所收購的全部淨資產的公允價值是否集中在一個可識別的單一資產或類似可識別資產的群組中。如果符合篩選條件,則將該交易視為資產收購。如果不符合篩選條件,則需要進一步判定公司是否已收購具備創建輸出能力的輸入和實質性過程,這樣才符合企業定義。
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符合業務組合定義的併購需使用會計併購方法進行核算,該方法要求將購買價格分配給各自公允價值的取得資產。在業務組合中,若購買價格超出取得資產預估公允價值,則被記錄為商譽。
對於資產收購,使用成本積累模型來確定資產收購的成本。直接交易成本被視為資產收購成本的一部分。資產收購的成本,包括交易成本,根據相對公平值基礎分配給已獲得的可識別資產和承擔的負債,除了非符合條件的資產。在資產收購中不承認商譽。當作為資產收購的交易包含進程研究和開發,或者IPR&D資產時,只有在具有替代未來用途而不僅僅用於特定研究和開發項目時,才能對IPR&D資產進行資本化。資產收購可能包括涵蓋對未來支付義務的條件考慮安排,這些支付對賣家而言取決於未來財務目標的實現。條件考慮,包括承擔的條件考慮,在所有條件都解決且考慮金額已支付或變為應支付之前(除非條件考慮符合衍生品的定義,在這種情況下該金額成為所收購資產的基礎的一部分),在這一點上,該金額根據其資產收購日的相對公平值分配給獲得資產,除了非符合條件的資產。
在確定長壽命資產有用壽命的估計中使用判斷。有用壽命估計是基於預期未來淨現金流量的估計,評估每項資產生命周期,以及競爭趨勢對每項資產生命周期和其他因素的影響等因素。這些判斷可能會對用於將購買考慮金額分配給已獲得的資產和承擔的負債的估計,以及對於或認可的現在和未來運營結果的計時和金額產生重大影響。出於這些原因等,實際結果可能會與估計結果顯著不同。
预资金认购权证发行价为每股9.185美元,不具实质性且高度可预期,因此在基本和摊薄普通股每股净损失的计算中包含预资金认购权证。
主要與Primatene MIST相關的廣告費用已在發生時記錄。®除了與重大商業或媒體活動開發有關的費用,這些費用則在首次展示相應商業活動或媒體活動的期間予以支出,並納入公司簡明綜合營運報表中的銷售、分銷和行銷組件。截至2024年9月30日三個月和九個月結束時,廣告費用分別為$
金融工具
公司附屬的簡明綜合資產負債表包括以下金融工具:現金及現金等價物、受限現金、應收賬款、應付賬款、應計費用、短期借款和長期負債。由於這些項目的短期性,公司認為簡明綜合資產負債表中流動資產和負債的帳面金額近似該等金融工具的公平價值。公司的長期負債的帳面價值(參見附註14中可轉換債務)近似於其公平價值,因為所載借款利率與目前為類似到期日的工具提供給公司的利率相當。根據公開的市場交易所報價和其他方法,投資和短期投資以公平價值記錄(見附註9)。公司有時會進入利率互換合約,以管理其對利率變動的風險和長期債務的整體成本。公司的利率互換合約將可變利率換成固定利率。
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現金及現金等價物
現金及現金等價物包括現金、貨幣市場帳戶、存款證明和具有三個月或更短原始到期日的高流動性投資。
投資
截至2024年9月30日和2023年12月31日,投資包括存款證明和具有三個至十五個月原始到期日的投資級別企業、機構和市政債券。
限制現金
限制性現金是公司為了保證其在法國支付給某些供應商的款項所需要提供的抵押品。截至2024年9月30日和2023年12月31日,限制性現金餘額為$
受限短期投資
受限短期投資包括作為擔保函授信的存款證明,以符合工傷保險自我保險的要求。這些存款證明的原始到期期限超過三個月,但不超過一年。截至2024年9月30日和2023年12月31日,受限短期投資餘額為$
递延所得税
公司採用負債法會計方法處理所得稅,根據會計基礎和資產負債表之間的暫時性差異,使用通過的稅率判斷遞延稅金。當推斷遞延所得稅資產不會實現的可能性大於實現時,會記錄一筆評價準備。
債務發行成本
與非輪借債務相關的債務發行成本將被認定為相關債務餘額的減少,並按照有效利率法削減至相關債務的合同期限內的利息費用。與循環借款相關的債務發行成本將資本化到簡明合併資產負債表的其他長期資產中,並按相關循環債務的期限分期攤銷至利息費用。
可轉換債券
公司將其可轉換債務工具視為單一計量單位,作為負債,因為公司判斷轉換條款不需要根據《會計標準統一編碼》或ASC 815-15進行作為衍生金融工具的細分。 衍生品和避險 而且公司沒有以實質溢價發行其可轉換債務工具。公司將債務發行成本記錄為其簡明綜合資產負債表上的相對負債,並根據可轉換債務工具的合約期間使用有效利率攤銷。
根據會計準則更新,或ASU,2020-06, 債務─具轉換權及其他選擇權(子題470-20)以及衍生工具和避險—實體內之合約’股權(主題815-40):對實體中的可轉換工具和合同進行會計處理’自有權益,公司評估可轉換債務工具,以判斷轉換功能是獨立存在還是內嵌。如果轉換功能是內嵌的,
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
feature is not bifurcated from the host instrument. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20, “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. If no beneficial conversion features exist that require separate recognition, convertible debt instruments are accounted for as a single liability measured at its amortized cost as long as no other features require separation and recognition as derivatives.
Litigation, Commitments and Contingencies
Litigation, commitments and contingencies are accrued when management, after considering the facts and circumstances of each matter as then known to management, has determined it is probable a liability will be found to have been incurred and the amount of the loss can be reasonably estimated. When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is recorded. Legal fees are expensed as incurred. Due to the inherent uncertainties surrounding gain contingencies, the Company generally does not recognize potential gains until they are realized.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which is intended to improve reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the disclosure requirements related to the new standard.
In December 2023, the FASB issued Accounting Standard Update 2023-09, Income taxes (Topic 740): Improvements to Income Tax Disclosures which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the disclosure requirements related to the new standard.
Note 3. BAQSIMI® Asset Acquisition
On June 30, 2023, the Company completed its acquisition of BAQSIMI® glucagon nasal powder, or BAQSIMI®, pursuant to an asset purchase agreement, or the Purchase Agreement, with Eli Lilly & Company, or Lilly, dated April 21, 2023.
The Company accounted for the BAQSIMI® acquisition as an asset acquisition in accordance with ASC 805, Business Combinations, as substantially all the fair value of the assets acquired was concentrated in a single identifiable asset, BAQSIMI® product rights. The BAQSIMI® product rights include the license for the BAQSIMI® intellectual property, regulatory documentation, marketing authorizations, and domain names, which are considered a single asset as they are inextricably linked.
-10-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The total purchase price was allocated to the acquired assets based on their relative fair values, as follows:
Fair Value | |||
(in thousands) | |||
Property, plant, and equipment |
| $ | |
BAQSIMI® product rights |
| | |
Deferred tax assets | | ||
Total assets acquired | $ | |
The Company amortizes the acquired intangible asset to cost of revenues on a straight line basis over its estimated useful life of 24 years (see Note 10 for additional information).
A portion of the consideration for the asset acquisition was a deferred cash payment. The fair value of the deferred cash payment was accreted to its full $
The Company may also be required to pay additional contingent consideration of up to an aggregate of $
Manufacturing Services Agreement
In connection with the closing of the acquisition, the Company entered into a Manufacturing Services Agreement, or the MSA, with Lilly, pursuant to which Lilly has agreed, for a period of time not to exceed
Transition Services Agreement
In connection with the closing of the acquisition, the Company also entered into a Transition Services Agreement, or the TSA, with Lilly pursuant to which Lilly has agreed, for a period of time not to exceed
Throughout 2024, the Company assumed distribution responsibilities, from Lilly, to its customers in the United States, and certain other countries. As a result, the Company has recorded the sales and related cost of BAQSIMI® in these countries as product revenue, net and cost of revenues, respectively. The Company will continue to assume distribution of BAQSIMI® for the remaining territories on a country by country basis throughout 2024.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4. Revenue Recognition
Product revenues, net
In accordance with ASC 606 Revenue from Contracts with Customers, revenue is recognized at the time that the Company’s customers obtain control of the promised goods.
Generally, revenue is recognized at the time of product delivery to the Company’s customers. In some cases, revenue is recognized at the time of shipment when stipulated by the terms of the sale agreements.
The consideration to which the Company expects to be entitled includes a stated list price, less various forms of variable consideration including provision for chargebacks and rebates, accrual for product returns, prompt pay discounts, distributor fees, patient co-pay assistance, and other related deductions. These deductions to product sales are referred to as gross-to-net deductions and are estimated and recorded in the period in which the related product sales occur. Payment terms offered to customers generally range from to
Provision for Chargebacks and Rebates: The provision for chargebacks and rebates is a significant estimate used in the recognition of revenue. Wholesaler chargebacks relate to sales terms under which the Company agrees to reimburse wholesalers for differences between the gross sales prices at which the Company sells its products to wholesalers and the actual prices of such products that wholesalers resell under the Company’s various contractual arrangements with third parties such as hospitals and group purchasing organizations in the United States. Rebates include primarily amounts paid to retailers, payers, and providers in the United States, including those paid to state Medicaid programs, and are based on contractual arrangements or statutory requirements. The Company estimates chargebacks and rebates using the expected value method at the time of sale to wholesalers based on wholesaler inventory stocking levels, historical chargeback and rebate rates, and current contract pricing.
The provision for chargebacks and rebates is reflected as a component of product revenues, net. The following table is an analysis of the chargeback and rebate provision:
Nine Months Ended | ||||||
September 30, | ||||||
2024 | 2023 | |||||
(in thousands) | ||||||
Beginning balance |
| $ | |
| $ | |
Provision for chargebacks and rebates |
| |
| | ||
Credits and payments issued to third parties |
| ( |
| ( | ||
Ending balance | $ | | $ | |
Changes in the chargeback provision from period to period are primarily dependent on the Company’s sales to its wholesalers, the level of inventory held by wholesalers, and the wholesalers’ customer mix. Changes in the rebate provision from period to period are primarily dependent on retailers’ and other indirect customers’ purchases. The approach that the Company uses to estimate chargebacks and rebates has been consistently applied for all periods
-12-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
presented. Variations in estimates have been historically small. The Company continually monitors the provision for chargebacks and rebates and makes adjustments when it believes that the actual chargebacks and rebates may differ from the estimates. The settlement of chargebacks and rebates generally occurs within
The provision for chargebacks and rebates is included in the following balance sheet accounts:
September 30, | December 31, | ||||
2024 | 2023 | ||||
(in thousands) | |||||
Reduction to accounts receivable, net | $ | |
| $ | |
Accounts payable and accrued liabilities |
| |
| | |
Total | $ | | $ | |
Accrual for Product Returns: The Company offers certain customers the right to return qualified excess or expired inventory for partial credit; however, API product sales are generally non-returnable. The Company’s product returns primarily consist of the returns of expired products from sales made in prior periods. Returned products cannot be resold. At the time product revenue is recognized, the Company records an accrual for product returns estimated using the expected value method. The accrual is based, in part, upon the historical relationship of product returns to sales and customer contract terms. The Company also assesses other factors that could affect product returns including market conditions, product obsolescence, and new competition.
Prompt Pay Discounts: The Company provides its customers with a percentage discount on their invoice if the customers pay within the agreed upon timeframe. The Company expects that its customers will earn prompt pay discounts. The Company estimates the probability of customers paying promptly based on the percentage of discount outlined in the purchase agreement between the two parties, and deducts the full amount of these discounts from gross product sales and accounts receivable at the time revenue is recognized.
Distributor Fees: The Company engages with wholesalers to distribute its products to end customers. The Company pays the wholesalers a fee for services such as: inventory management, chargeback administration, and service level commitments. The Company estimates the amount of distribution services fees to be paid and adjusts the transaction price with the amount of such estimate at the time of sale to the customer. An accrued liability is recorded for unpaid distribution service fees.
Patient Co-Pay Assistance: Co-pay assistance represents financial assistance to qualified patients, assisting them with prescription drug co-payments required by insurance. The accrual for co-pay is based on an estimate of claims and the cost per claim that the Company expects to receive associated with inventory that exists in the distribution channel at period end.
Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers. The Company’s accounting policy is to review each agreement involving contract development and manufacturing services to determine if there are multiple revenue-generating activities that constitute more than one unit of accounting. Revenues are recognized for each unit of accounting based on revenue recognition criteria relevant to that unit.
Service revenues derived from research and development contracts are recognized over time based on progress toward satisfaction of the performance obligation. For each performance obligation satisfied over time, the Company assesses the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation. For the three and
-13-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
nine months ended September 30, 2024, revenues from research and development services were $
Other revenues
Revenues related to sales of BAQSIMI®, which was supplied and sold by Lilly under the TSA during the three and nine months ended September 30, 2024 and 2023, or BAQSIMI® NEB, were recorded on a net basis, similar to a royalty arrangement. This includes revenues in the United States and certain other countries for a portion of the period.
Note 5. Net Income per Share
Basic net income per share is calculated based upon the weighted-average number of shares outstanding during the period. Diluted net income per share gives effect to all potentially dilutive shares outstanding during the period, such as stock options, non-vested restricted stock units and shares issuable under the Company’s Employee Stock Purchase Plan, or ESPP, and potential shares of common stock issuable upon conversion of Convertible Notes of the Company, due March 2029, or the 2029 Convertible Notes.
For the three and nine months ended September 30, 2024, options to purchase
For the three months ended September 30, 2023, of the Company’s options were excluded from the computation of diluted net income per share. For the nine months ended September 30, 2023, options to purchase
The following table provides the calculation of basic and diluted net income per share for each of the periods presented:
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||
(in thousands, except per share data) | |||||||||||||
Basic and dilutive numerator: |
|
|
|
|
|
|
|
|
| ||||
Net income | $ | | $ | | $ | | $ | | |||||
Denominator: | |||||||||||||
Weighted-average shares outstanding — basic |
| | | | | ||||||||
Net effect of dilutive securities: | |||||||||||||
Incremental shares from equity awards |
| | | | | ||||||||
Weighted-average shares outstanding — diluted |
| |
| |
| |
| | |||||
Net income per share — basic | $ | | $ | | $ | | $ | | |||||
Net income per share — diluted | $ | | $ | | $ | | $ | |
-14-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6. Segment Reporting
The Company’s business is the development, manufacture, and marketing of pharmaceutical products. The Company has identified
● | Finished pharmaceutical products |
● | APIs |
The finished pharmaceutical products segment manufactures, markets and distributes BAQSIMI®, Primatene MIST®, glucagon, enoxaparin, naloxone, phytonadione, lidocaine, epinephrine, various critical and non-critical care drugs, as well as certain contract manufacturing and contract research revenues. The API segment manufactures and distributes recombinant human insulin API and porcine insulin API for external customers and internal product development.
Other revenues includes the portion of BAQSIMI® sales by Lilly on the Company’s behalf under the TSA and is accounted for as a component of the finished pharmaceutical product segment.
Selected financial information by reporting segment is presented below:
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||
(in thousands) | |||||||||||||
Net revenues: |
|
|
|
|
|
|
|
|
| ||||
Finished pharmaceutical products | $ | | $ | | $ | | $ | | |||||
API |
| | | | | ||||||||
Total net revenues |
| |
| |
| |
| | |||||
Gross profit (loss): | |||||||||||||
Finished pharmaceutical products |
| |
| |
| |
| | |||||
API |
| ( | ( | ( | ( | ||||||||
Total gross profit |
| |
| |
| |
| | |||||
Operating expenses |
| |
| |
| |
| | |||||
Income from operations |
| |
| |
| |
| | |||||
Non-operating (expenses) income |
| ( |
| ( |
| ( |
| ( | |||||
Income before income taxes | $ | | $ | | $ | | $ | |
The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis. The Company does not identify total assets by segment for internal purposes, as the Company’s CODM does not assess performance, make strategic decisions, or allocate resources based on assets.
-15-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The amount of net revenues in the finished pharmaceutical product segment is presented below:
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||
(in thousands) | |||||||||||||
Finished pharmaceutical products segment net revenues: |
|
|
|
|
|
|
| ||||||
BAQSIMI® | $ | | $ | — | $ | | $ | — | |||||
Glucagon | | | | | |||||||||
Epinephrine | | | | | |||||||||
Primatene MIST® | | | | | |||||||||
Lidocaine | | | | | |||||||||
Phytonadione | | | | | |||||||||
Enoxaparin |
| |
| |
| | | ||||||
Naloxone | | | | | |||||||||
Other finished pharmaceutical products |
| |
| |
| |
| | |||||
Total finished pharmaceutical products net revenues | | | | | |||||||||
BAQSIMI® NEB | | | | | |||||||||
Total finished pharmaceutical products segment net revenues | $ | | $ | | $ | | $ | |
The amount of depreciation and amortization expense included in cost of revenues by reporting segment is presented below:
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||
(in thousands) | |||||||||||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
| ||||
Finished pharmaceutical products | $ | | $ | | $ | | $ | | |||||
API |
| |
| |
| | | ||||||
Total depreciation and amortization expense | $ | | $ | | $ | | $ | |
Net revenues and carrying values of long-lived assets, which includes property, plant and equipment, as well as finance and operating lease right-of-use assets, by geographic regions, based on where the Company conducts its operations are as follows:
Net Revenues | Long-Lived Assets | |||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | December 31, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||
(in thousands) | ||||||||||||||||||
United States(1) |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
China |
| | | | |
| |
| | |||||||||
France |
| | | | |
| |
| | |||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | |
(1) Includes Other revenues from the sales of BAQSIMI®.
-16-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7. Customer and Supplier Concentration
Customer Concentrations
% of Total Accounts | % of Net | ||||||||||||
Receivable | Revenues | ||||||||||||
Three Months Ended | Nine Months Ended |
| |||||||||||
September 30, | December 31, | September 30, | September 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |
McKesson |
| | % | | % | | % | | % | | % | | % |
Cencora |
| | % | | % | | % | | % | | % | | % |
Cardinal Health |
| | % | | % | | % | | % | | % | | % |
Lilly | | % | | % | | % | | % | | % | | % |
Supplier Concentrations
The Company depends on suppliers for raw materials, APIs, and other components that are subject to stringent FDA requirements. Some of these materials may only be available from one or a limited number of sources. Establishing additional or replacement suppliers for these materials may take a substantial period of time, as suppliers must be approved by the FDA. Furthermore, a significant portion of raw materials may only be available from foreign sources. If the Company is unable to secure, on a timely basis, sufficient quantities of the materials it depends on to manufacture and market its products, it could have a materially adverse effect on the Company’s business, financial condition, and results of operations.
Note 8. Fair Value Measurements
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the measurement date (an exit price). These standards also establish a hierarchy that prioritizes observable and unobservable inputs used in measuring fair value of an asset or liability, as described below:
● | Level 1 – Inputs to measure fair value are based on quoted prices (unadjusted) in active markets on identical assets or liabilities; |
● | Level 2 – Inputs to measure fair value are based on the following: (a) quoted prices in active markets on similar assets or liabilities, (b) quoted prices for identical or similar instruments in inactive markets, or (c) observable (other than quoted prices) or collaborated observable market data used in a pricing model from which the fair value is derived; and |
● | Level 3 – Inputs to measure fair value are unobservable and the assets or liabilities have little, if any, market activity; these inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities based on best information available in the circumstances. |
-17-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of September 30, 2024 and December 31, 2023, cash equivalents include money market accounts and corporate and municipal bonds with original maturities of less than three months. Investments consist of certificates of deposit as well as investment-grade corporate, agency and municipal bonds with original maturity dates between three and fifteen months. The certificates of deposit are carried at amortized cost in the Company’s condensed consolidated balance sheets, which approximates their fair value determined based on Level 2 inputs. The corporate, agency and municipal bonds are classified as held-to-maturity and are carried at amortized cost net of allowance for credit losses. The fair value of such bonds is disclosed in Note 9 and was determined based on Level 2 inputs. The restrictions on restricted cash and investments have an immaterial effect on the fair value of these financial assets.
The fair values of the Company’s financial assets and liabilities measured on a recurring basis as of September 30, 2024 and December 31, 2023, are as follows:
| Total |
| (Level 1) |
| (Level 2) |
| (Level 3) |
| |||||
(in thousands) |
| ||||||||||||
Cash equivalents | $ | | $ | | $ | — | $ | — | |||||
Restricted cash | | | — | — | |||||||||
Short-term investments | | — | | — | |||||||||
Restricted short-term investments |
| |
| — |
| |
| — | |||||
Interest rate swaps related to variable rate loans | ( | — | ( | — | |||||||||
Total assets and liabilities measured at fair value as of September 30, 2024 | $ | | $ | | $ | | $ | — |
| Total |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
(in thousands) | ||||||||||||
Cash equivalents | $ | | $ | | $ | — | $ | — | ||||
Restricted cash | | | — | — | ||||||||
Short-term investments | | — | | — | ||||||||
Restricted short-term investments |
| |
| — |
| |
| — | ||||
Interest rate swaps related to variable rate loans | ( | — | ( | — | ||||||||
Total assets and liabilities measured at fair value as of December 31, 2023 | $ | | $ | | $ | | $ | — |
The Company does not hold any Level 3 instruments that are measured at fair value on a recurring basis.
Nonfinancial assets and liabilities are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances. These items primarily include investments in unconsolidated affiliates, long-lived assets, goodwill, and intangible assets for which the fair value is determined as part of an impairment test. As of September 30, 2024, and December 31, 2023, there were no significant adjustments to fair value for nonfinancial assets or liabilities.
The Company’s deferred compensation plan assets are valued using the cash surrender value of the life insurance policies and are not included in the table above.
-18-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9. Investments
The following is a summary of the Company’s investments that are classified as held-to-maturity:
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
| Cost |
| Gains |
| Losses |
| Value | |||||
(in thousands) | ||||||||||||
Corporate and agency bonds (due within 1 year) | $ | | $ | | $ | ( | $ | | ||||
Total investments as of September 30, 2024 | $ | | $ | | $ | ( | $ | | ||||
Corporate and agency bonds (due within 1 year) | $ | | $ | | $ | ( | $ | | ||||
Corporate and agency bonds (due within 1 to 3 years) | | | ( | | ||||||||
Municipal bonds (due within 1 year) | | | — | | ||||||||
Total investments as of December 31, 2023 | $ | | $ | | $ | ( | $ | |
At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, identifying neither a significant deterioration since purchase nor any other factors that would indicate a material credit loss.
The Company measures expected credit losses on held-to-maturity investments on a collective basis. All the Company’s held-to-maturity investments were considered to be one pool. The estimate for credit losses considers historical loss information that is adjusted for current conditions and reasonable and supportable forecasts. Expected credit losses on held-to-maturity investments were not material to the condensed consolidated financial statements.
Note 10. Goodwill and Intangible Assets
The table below shows the weighted-average life, original cost, accumulated amortization, and net book value by major intangible asset classification:
Weighted-Average | Accumulated |
| ||||||||||
| Life (Years) |
| Original Cost |
| Amortization |
| Net Book Value |
| ||||
(in thousands) |
| |||||||||||
Definite-lived intangible assets | ||||||||||||
BAQSIMI® product rights(1) | $ | | $ | | $ | | ||||||
Patents |
|
| | |
| | ||||||
Land-use rights |
|
| | |
| | ||||||
Subtotal |
|
| |
| |
| | |||||
Indefinite-lived intangible assets | ||||||||||||
Trademark |
| * |
| |
| — |
| | ||||
Goodwill - Finished pharmaceutical products |
| * |
| |
| — |
| | ||||
Subtotal |
| * |
| |
| — |
| | ||||
As of September 30, 2024 |
| * | $ | | $ | | $ | |
-19-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Weighted-Average | Accumulated |
| ||||||||||
| Life (Years) |
| Original Cost |
| Amortization |
| Net Book Value |
| ||||
(in thousands) |
| |||||||||||
Definite-lived intangible assets | ||||||||||||
BAQSIMI® product rights(1) | $ | | $ | | $ | | ||||||
Patents |
|
| | |
| | ||||||
Land-use rights |
|
| | |
| | ||||||
Subtotal |
|
| |
| |
| | |||||
Indefinite-lived intangible assets | ||||||||||||
Trademark |
| * |
| |
| — |
| | ||||
Goodwill - Finished pharmaceutical products |
| * |
| |
| — |
| | ||||
Subtotal |
| * |
| |
| — |
| | ||||
As of December 31, 2023 |
| * | $ | | $ | | $ | |
* Intangible assets with indefinite lives have an indeterminable average life.
(1) | See Note 3. |
Goodwill
The changes in the carrying amounts of goodwill are as follows:
September 30, | December 31, |
| |||||
2024 | 2023 |
| |||||
(in thousands) |
| ||||||
Beginning balance |
| $ | |
| $ | | |
Currency translation |
| |
| | |||
Ending balance | $ | | $ | |
Note 11. Inventories
Inventories consist of the following:
September 30, | December 31, |
| |||||
2024 | 2023 |
| |||||
(in thousands) |
| ||||||
Raw materials and supplies |
| $ | |
| $ | | |
Work in process |
| |
| | |||
Finished goods |
| |
| | |||
Total inventories | $ | | $ | |
Charges of $
-20-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 12. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
September 30, | December 31, |
| |||||
2024 | 2023 |
| |||||
(in thousands) |
| ||||||
Buildings |
| $ | |
| $ | | |
Leasehold improvements |
| |
| | |||
Land |
| |
| | |||
Machinery and equipment |
| |
| | |||
Furniture, fixtures, and automobiles |
| |
| | |||
Construction in progress |
| |
| | |||
Total property, plant, and equipment |
| |
| | |||
Less accumulated depreciation |
| ( |
| ( | |||
Total property, plant, and equipment, net | $ | | $ | |
Note 13. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following:
September 30, | December 31, | ||||
2024 | 2023 | ||||
(in thousands) | |||||
Accrued customer fees and rebates | $ | | $ | | |
Accrued payroll and related benefits | | | |||
Accrued product returns, current portion | | | |||
Accrued loss on firm purchase commitments | | | |||
Other accrued liabilities | | | |||
Total accrued liabilities |
| |
| | |
Accounts payable |
| |
| | |
Total accounts payable and accrued liabilities | $ | | $ | |
-21-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 14. Debt
Debt consists of the following:
September 30, | December 31, | |||||
2024 | 2023 | |||||
(in thousands) | ||||||
Convertible Debt | ||||||
2029 Convertible Notes | $ | | $ | | ||
Term Loan | ||||||
Wells Fargo Term Loan due June 2028 | | | ||||
Mortgage Loans | ||||||
Mortgage payable with East West Bank paid off June 2024 | — | | ||||
Other Loans and Payment Obligations | ||||||
French government loans due December 2026 | | | ||||
Line of Credit Facilities |
|
|
| |||
Line of credit facility with China Merchant Bank due October 2026 |
|
| ||||
Wells Fargo Revolving line of credit facility due June 2028 | — | — | ||||
Line of credit facility with ICBC Bank due November 2033 | ||||||
| |
| | |||
Total debt |
| |
| | ||
Less current portion of long-term debt |
| |
| | ||
Less: Loan issuance costs | | | ||||
Long-term debt, net of current portion and unamortized debt issuance costs | $ | | $ | |
Credit Agreement
2029 Convertible Notes
In September 2023, the Company issued the 2029 Convertible Notes, in the aggregate principal amount of $
In connection with the issuance of the 2029 Convertible Notes, the Company incurred approximately $
The 2029 Convertible Notes are general senior, unsecured obligations and bear an interest rate of
-22-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2029 Convertible Notes were issued pursuant to an indenture, dated September 15, 2023, or the Indenture, between the Company and U.S. Bank Trust Company, National Association, as trustee.
The 2029 Convertible Notes will rank senior in right of payment to all of the Company’s indebtedness that is expressly subordinated in right of payment to the 2029 Convertible Notes; equal in right of payment to all of the Company’s unsecured indebtedness that is not so subordinated; effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, including any amount outstanding under the Company’s credit facilities; and structurally junior to all indebtedness and other liabilities of the Company’s current or future subsidiaries, including trade payables.
Interest is payable semi-annually in arrears on March 15 and September 15 of each year. The 2029 Convertible Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the 2029 Convertible Notes are not freely tradeable as required by the Indenture.
The 2029 Convertible Notes will mature on March 15, 2029, unless earlier converted, repurchased or redeemed.
Conversions of the 2029 Convertible Notes will be settled in cash up to the aggregate principal amount of the 2029 Convertible Notes to be converted, and cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, with respect to the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount.
Holders may convert their 2029 Convertible Notes at their option prior to the close of business on the business day immediately preceding December 15, 2028, in multiples of $
On or after December 15, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2029 Convertible Notes, in multiples of $
The Company may redeem the 2029 Convertible Notes, at its option, in whole or in part (subject to certain limitations), on or after September 20, 2026 and prior to the 41st scheduled trading day preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least
The initial conversion rate is
-23-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Company’s common stock on Nasdaq Global Select Market on September 12, 2023. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.
If a fundamental change, as defined in the Indenture, occurs at any time prior to the maturity date, then, subject to certain conditions, holders of the 2029 Convertible Notes may require the Company to repurchase for cash all or any portion of their 2029 Convertible Notes at a repurchase price equal to
Syndicated Line of Credit Facility with ICBC Bank – Due November 2033
In January 2024, the Company entered into a credit agreement with Industrial and Commercial Bank of China Limited, or ICBC Bank, acting as a lender and as agent for other lenders. The credit agreement allows the Company to borrow up to $
As of September 30, 2024, the Company borrowed approximately $
Interest Rate Swap Contract
As of September 30, 2024, the fair value of the loans listed above approximated their carrying amount based on Level 2 inputs, with the exception of the 2029 Convertible Notes. For the Wells Fargo Term Loan, the Company has entered into a fixed interest rate swap contract to exchange the variable interest rates for fixed interest rates. The interest rate swap contract is recorded at fair value in the other assets line in the condensed consolidated balance sheets. Changes in the fair values of interest rate swaps were $
Covenants
At September 30, 2024 and December 31, 2023, the Company was in compliance with all of its debt covenants.
-24-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 15. Income Taxes
The following table sets forth the Company’s income tax provision for the periods indicated:
Three Months Ended | Nine Months Ended |
| |||||||||||
September 30, | September 30, |
| |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |||||
(in thousands) |
| ||||||||||||
Income before taxes | $ | | $ | | $ | | $ | | |||||
Income tax provision | |
| | |
| | |||||||
Income before equity in losses of unconsolidated affiliate | $ | | $ | | $ | | $ | | |||||
Income tax provision as a percentage of income before income taxes | | % |
| | % | | % |
| | % |
Valuation Allowance
In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. Ultimately, realization depends on the existence of future taxable income. Management considers sources of taxable income such as income in prior carryback periods, future reversal of existing deferred taxable temporary differences, tax-planning strategies, and projected future taxable income.
The Company continues to record a full valuation allowance on the net deferred income tax assets of its France subsidiary, AFP, and its U.K. subsidiaries, AUK and IMS UK. The Company will continue to do so until the subsidiaries generate sufficient taxable income to realize their respective deferred income tax assets.
The Company records a valuation allowance on net deferred income tax assets in states where it files separately and will continue to do so until sufficient taxable income is generated to realize these state deferred income tax assets.
Note 16. Stockholders' Equity
Share Buyback Program
Pursuant to the Company’s existing share buyback program, the Company purchased
The Company’s Board of Directors authorized a $
Purchases are made through open market and private block transactions pursuant to Rule 10b5-1 plans, privately negotiated transactions or other means as determined by the Company’s management and in accordance with the requirements of the SEC and applicable laws. The timing and actual number of treasury share purchases will depend on a variety of factors including price, corporate and regulatory requirements, and other conditions. These treasury share purchases are accounted for under the cost method and are included as a component of treasury stock in the Company’s condensed consolidated balance sheets.
-25-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amended and Restated 2015 Equity Incentive Plan
In February 2024, the Board of Directors approved the Company’s amended and restated 2015 Equity Incentive Plan, or the Amended 2015 Plan, which was subsequently approved by the Company’s stockholders, and accordingly, adopted by the Company in June 2024. The Amended 2015 Plan extends the terms of the 2015 Equity Incentive Plan, or the Original 2015 Plan, and makes certain other changes. The term of the Amended 2015 Plan will be extended indefinitely, however, the Company’s ability to grant incentive stock options thereunder will continue through February 2034.
As of September 30, 2024, the Company reserved an aggregate of
2014 Employee Stock Purchase Plan
As of September 30, 2024, the Company has issued
In May 2024, the Company issued
Share-Based Award Activity and Balances
The Company accounts for share-based compensation payments in accordance with ASC 718, which requires measurement and recognition of compensation expense at fair value for all share-based payment awards made to employees and directors. Under these standards, the fair value of option awards and the option components of the ESPP awards are estimated at the grant date using the Black-Scholes option-pricing model. The fair value of RSUs is estimated at the grant date using the Company’s common share price. Compensation cost for all share-based payments granted with service-based graded vesting schedules is recognized using the straight-line method over the requisite service period.
The weighted-averages for key assumptions used in determining the fair value of options granted are as follows:
Three Months Ended | Nine Months Ended |
| ||||||||
September 30, | September 30, | |||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| ||
Average volatility |
| — | % | | % | | % | | % | |
Average risk-free interest rate |
| — | % | | % | | % | | % | |
Weighted-average expected life in years |
| |||||||||
Dividend yield rate |
| | % | | % | | % | | % |
-26-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of option activity under all plans for the nine months ended September 30, 2024, is presented below:
Weighted-Average |
| ||||||||||
Weighted-Average | Remaining | Aggregate |
| ||||||||
Exercise | Contractual | Intrinsic |
| ||||||||
Options | Price | Term (Years) | Value(1) |
| |||||||
(in thousands) |
| ||||||||||
Outstanding as of December 31, 2023 | | $ | |
|
|
|
| ||||
Options granted |
| | | ||||||||
Options exercised |
| ( | | ||||||||
Options forfeited |
| ( | | ||||||||
Options expired |
| — | — | ||||||||
Outstanding as of September 30, 2024 |
| | $ | | $ | | |||||
Exercisable as of September 30, 2024 |
| | | $ | | ||||||
Vested and expected to vest as of September 30, 2024 | | | $ | |
(1) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the estimated fair value of the Company’s stock for those awards that have an exercise price below the estimated fair value at September 30, 2024. |
For the three and nine months ended September 30, 2024, the Company recorded expense of $
Information relating to option grants and exercises is as follows:
Three Months Ended | Nine Months Ended |
| |||||||||||
September 30, | September 30, | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| |||||
(in thousands, except per share data) |
| ||||||||||||
Weighted-average grant date fair value per share | $ | — | $ | | $ | | $ | | |||||
Intrinsic value of options exercised |
| |
| |
| |
| | |||||
Cash received from options exercised |
| |
| |
| |
| | |||||
Total fair value of the options vested during the period |
| |
| |
| |
| |
A summary of the status of the Company’s non-vested options as of September 30, 2024, and changes during the nine months ended September 30, 2024, are presented below:
|
| Weighted-Average |
| |||
Grant Date |
| |||||
Options | Fair Value |
| ||||
Non-vested as of December 31, 2023 | | $ | | |||
Options granted |
| | | |||
Options vested |
| ( | | |||
Options forfeited |
| ( | | |||
Non-vested as of September 30, 2024 |
| |
| |
As of September 30 2024, there was $
-27-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Restricted Stock Units
The Company grants restricted stock units, or RSUs, to certain employees and members of the Board of Directors with a vesting period of up to
As of September 30, 2024, there was $
Information relating to RSU grants and deliveries is as follows:
Total Fair Market |
| |||||
Total RSUs | Value of RSUs |
| ||||
| Issued |
| Issued(1) |
| ||
(in thousands) |
| |||||
RSUs outstanding at December 31, 2023 |
| | ||||
RSUs granted |
| | $ | | ||
RSUs forfeited |
| ( | ||||
RSUs vested(2) |
| ( | ||||
RSUs outstanding at September 30, 2024 |
| |
(1) | The total fair market value is derived from the number of RSUs granted times the current stock price on the date of grant. |
(2) | Of the vested RSUs, |
Share-based Compensation Expense
The Company recorded share-based compensation expense, which is included in the Company’s condensed consolidated statement of operations as follows:
Three Months Ended | Nine Months Ended |
| |||||||||||
September 30, | September 30, | ||||||||||||
2024 | 2023 | 2024 |
| 2023 |
| ||||||||
(in thousands) |
| ||||||||||||
Cost of revenues |
| $ | |
| $ | |
| $ | |
| $ | | |
Operating expenses: | |||||||||||||
Selling, distribution, and marketing |
| |
| |
| |
| | |||||
General and administrative |
| |
| |
| |
| | |||||
Research and development |
| |
| |
| |
| | |||||
Total share-based compensation | $ | | $ | | $ | | $ | |
-28-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 17. Employee Benefits
401(k) Plan
The Company has a defined contribution 401(k) plan, or the Plan, whereby eligible employees voluntarily contribute up to a defined percentage of their annual compensation. The Company matches contributions at a rate of
Defined Benefit Pension Plan
The Company’s subsidiary, AFP, has an obligation associated with a defined-benefit plan for its eligible employees. This plan provides benefits to the employees from the date of retirement and is based on the employee’s length of time employed by the Company. The calculation is based on a statistical calculation combining a number of factors that include the employee’s age, length of service, and AFP employee turnover rate.
The liability under the plan is based on a discount rate of
Non-qualified Deferred Compensation Plan
In December 2019, the Company established a non-qualified deferred compensation plan. The plan allows certain eligible participants to defer a portion of their cash compensation and provides a matching contribution at the discretion of the Company. The plan obligations are payable upon retirement, termination of employment and/or certain other times in a lump-sum distribution or in installments, as elected by the participant in accordance with the plan. Participants can allocate their deferred compensation amongst various investment options with earnings accruing to the participant. The Company has established a Rabbi Trust to fund the plan obligations and to hold the plan assets. Eligible participants began contributing to the plan in January 2020. The plan assets were valued at approximately $
Note 18. Commitments and Contingencies
Purchase Commitments
As of September 30, 2024, the Company has entered into commitments to purchase equipment and raw materials for an aggregate amount of approximately $
Note 19. Related Party Transactions
Investment in Hanxin Pharmaceutical Technology, Co., Ltd.
The Company has an
-29-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
son of Dr. Jack Zhang, is an equity holder, the general manager, and the chairman of the board of directors of Hanxin. Additionally, Dr. Mary Luo and Dr. Jack Zhang, have an ownership interest in Hanxin through an affiliated entity. As a result, Hanxin is a related party.
Contract manufacturing agreement with Hanxin
The Company, has various contract manufacturing agreements with Hanxin and its subsidiaries, whereby Hanxin will develop several active pharmaceutical ingredients and finished products for the Chinese market and will engage the Company to manufacture the products on a cost-plus basis.
During the three and nine months ended September 30, 2024, the Company recognized $
Contract Research Agreement with Hanxin
In July 2022, the Company entered into a three-year contract research agreement with Hanxin, a related party, whereby Hanxin will develop Recombinant Human Insulin Research Cell Banks, or RCBs, for the Company and license the RCBs to the Company subject to a fully paid, exclusive, perpetual, transferable, sub-licensable worldwide license. Hanxin will also perform scale-up manufacturing process development using the RCBs for the Company.
During the three months ended September 30, 2024, the Company did
Supply Agreement with Letop
In November 2022, the Company, entered into a supply agreement with Nanjing Letop Biotechnology Co., Ltd., or Letop, which is considered a related-party due to an ownership stake of Henry Zhang. Under the terms of the supply agreement Letop will manufacture and deliver chemical intermediates to the Company on a cost-plus basis. The agreement is effective for three years and the total cost of the agreement shall not exceed $
During the three and nine months ended September 30, 2024, the Company paid an
Primatene MIST® Distribution agreement with Hong Kong Genreach Limited
In August 2024, the Company entered into a distribution agreement with Hong Kong Genreach Limited, or Genreach, a wholly owned subsidiary of Hanxin, a related party. Per the terms of the agreement, the Company has appointed Genrearch as the exclusive distributor to market and sell Primatene MIST® in Mainland China, Taiwan, Hong Kong, and Macau in the Greater China region. Genreach will be responsible for obtaining any and all regulatory approvals in the region for Primatene MIST®.
The term of the agreement is ten years, with both parties having termination rights without cause after the completion of the second contract year.
-30-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 20. Litigation
Employment Litigation
On April 15, 2024, a former employee (“Plaintiff”) initiated an employment litigation against Amphastar and IMS by filing a complaint, as amended, having individual and class action claims for alleged violations of the California Labor Code pertaining to wage and hour, and other state laws. This complaint was filed in the Superior Court of California for the County of Los Angeles. In the complaint, the Plaintiff is seeking damages and related remedies under California Law, as well as various penalty payments under the California Labor Code. The Company intends to vigorously defend itself against the class action complaint.
On June 20, 2024, a former employee (“Plaintiff”) initiated an employment litigation against Amphastar, IMS and Roth Staffing Companies L.P. by filing a complaint having individual and class action claims for alleged violations of the California Labor Code pertaining to wage and hour, and other state laws. This complaint was filed in the Superior Court of California for the County of Los Angeles. In the complaint, the Plaintiff is seeking damages and related remedies under California Law, as well as various penalty payments under the California Labor Code. The Company intends to vigorously defend itself against the complaint.
Albuterol sulfate Inhalation Aerosol Patent Litigation
On July 25, 2024, Teva Branded Pharmaceutical Products R&D, Inc. (“Teva Branded”), Norton (Waterford) Ltd. (“Norton”), and Teva Pharmaceuticals USA, Inc. (“Teva USA”), collectively referred to as (“Plaintiff”) filed a Complaint in the United States District Court for the District of Delaware (“Delaware Court”) against the Company for infringement of U.S. Patent No. 9,463,289, with regard to Amphastar’s ANDA No. 212447, for approval to manufacture and sell generic version of ProAir® HFA (albuterol sulfate) Inhalation Aerosol. On October 21, 2024, Plaintiff amended its complaint against the Company to include additional claims for infringement of U.S. Patent No. 9,808,587 and 10,561,808, with regard to Amphastar’s ANDA No. 212447, for approval to manufacture and sell generic version of ProAir® HFA (albuterol sulfate) Inhalation Aerosol. The Company intends to vigorously defend this patent lawsuit.
Other litigation
The Company is subject to various claims, arbitrations, investigations, and lawsuits from time to time arising in the ordinary course of business. In addition, third parties may, from time to time, assert claims against the Company in the forms of letters and other communications. Currently, the Company is subject to a lawsuit for a property and casualty claim, for which it has recorded an estimated liability of $
The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the opinion of management, the ultimate resolution of any such matters is not expected to have a material adverse effect on its financial position, results of operations, or cash flows; however, the results of litigation and claims are inherently unpredictable and the Company’s view of these matters may change in the future. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
-31-
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the “Condensed Consolidated Financial Statements” and the related notes thereto included in this Quarterly Report on Form 10-Q, or Quarterly Report. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements. These risks, uncertainties, and other factors include, among others, those identified under the “Special Note About Forward-Looking Statements,” above and described in greater detail elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2023, particularly in Item 1A. “Risk Factors”.
Overview
We are a bio-pharmaceutical company focusing primarily on developing, manufacturing, marketing and selling technically challenging generic and proprietary injectable, inhalation, and intranasal products, as well as insulin API products. We currently manufacture and sell over 25 products.
Our largest products by net revenues currently include BAQSIMI®, Primatene MIST®, glucagon, epinephrine, lidocaine, enoxaparin sodium, and phytonadione.
We are currently developing a portfolio of generic abbreviated new drug applications, or ANDAs, biosimilar insulin product candidates and proprietary product candidates, which are in various stages of development and target a variety of indications. Four of the ANDAs are currently on file with the FDA.
To complement our internal growth and expertise, we have made several strategic acquisitions of companies, products and technologies. These acquisitions collectively have strengthened our injectable, inhalation, and intra-nasal product technology infrastructure by providing additional manufacturing, marketing, and research and development capabilities, including the ability to manufacture raw materials, API, and other components for our products.
Macroeconomic Trends and Uncertainties
Recent uncertain macroeconomic conditions and worldwide events, including extended periods of heightened inflation, fluctuating interest rates and instability in the financial systems, ongoing geopolitical conflicts such as the Russia-Ukraine and Middle East conflicts, as well as rising healthcare costs continue to pose challenges to our business.
See the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion of the potential adverse impact of unfavorable global and geopolitical economic conditions on our business, results of operations and financial conditions.
Recent Developments
BAQSIMI® Acquisition
In connection with the acquisition of BAQSIMI® in June 2023, we entered into a Transition Service Agreement, or the TSA, with Eli Lilly & Company, or Lilly, pursuant to which Lilly agreed, for a period of time not to exceed 18 months to provide certain services to us to support the transition of the BAQSIMI® operations, including with respect to the conduct of certain clinical, regulatory, medical affairs, and commercial sales channel activities. Revenues from the sales of BAQSIMI® under the TSA with Lilly during the transition period were recognized on a net basis, similar to a royalty arrangement. The impact of this revenue recognition method resulted in lower reported revenues relative to the revenue that would have been reported had we recognized gross revenues from sales of BAQSIMI®.
-32-
Throughout 2024, we assumed distribution responsibilities from Lilly to our customers in the United States, which comprises approximately 80% of BAQSIMI® worldwide revenues, as well as certain other countries. As a result, we started recognizing gross revenues and cost of revenues from the sales of BAQSIMI® in these countries, which is classified as product revenue, net and cost of revenue, respectively on the condensed consolidated statement of operations. The assumption of distribution in countries outside the United States will occur on a country-by-country basis once the marketing authorizations for each territory have been transferred to us, we have set up distribution agreements, and we have obtained sufficient inventory.
For more information regarding our acquisition of BAQSIMI®, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 3. BAQSIMI® Acquisition.”
Business Segments
As of September 30, 2024, our performance is assessed and resources are allocated based on the following two reportable segments: (1) finished pharmaceutical products and (2) Active Pharmaceutical Ingredient, or API, products. The finished pharmaceutical products segment manufactures, markets and distributes BAQSIMI®, Primatene MIST®, epinephrine, glucagon, phytonadione, lidocaine, enoxaparin, naloxone, as well as various other critical and non-critical care drugs. The API segment manufactures and distributes Recombinant Human Insulin, or RHI API, and porcine insulin API for external customers and internal product development. Information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker. Factors used to identify our segments include markets, customers and products.
For more information regarding our segments, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 6. Segment Reporting.”
Results of Operations
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
Net revenues
Three Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Net revenues | |||||||||||||
Finished pharmaceutical products | $ | 187,357 | $ | 147,665 | $ | 39,692 | 27 | % | |||||
API |
| 1,462 |
| 4,190 |
| (2,728) |
| (65) | % | ||||
Total product revenues, net | 188,819 | 151,855 | 36,964 |
| 24 | % | |||||||
Other revenues | 2,395 | 28,701 | (26,306) | (92) | % | ||||||||
Total net revenues | $ | 191,214 | $ | 180,556 | $ | 10,658 |
| 6 | % | ||||
Cost of revenues | |||||||||||||
Finished pharmaceutical products | $ | 84,208 | $ | 66,867 | $ | 17,341 |
| 26 | % | ||||
API |
| 5,065 |
| 5,286 |
| (221) |
| (4) | % | ||||
Total cost of revenues | $ | 89,273 | $ | 72,153 | $ | 17,120 |
| 24 | % | ||||
Gross profit | $ | 101,941 | $ | 108,403 | $ | (6,462) | (6) | % | |||||
as % of net revenues |
| 53 | % |
| 60 | % |
-33-
The increase in net revenues of the finished pharmaceutical products for the three months ended September 30, 2024 was due to the following changes:
Three Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Finished pharmaceutical products net revenues | |||||||||||||
BAQSIMI® | $ | 40,409 | $ | — | $ | 40,409 | N/A | ||||||
Glucagon | 26,792 | 29,514 | (2,722) | (9) | % | ||||||||
Primatene MIST® | 26,055 | 24,834 | 1,221 | 5 | % | ||||||||
Epinephrine | 21,341 | 20,199 | 1,142 | 6 | % | ||||||||
Lidocaine | 15,884 | 15,522 | 362 | 2 | % | ||||||||
Phytonadione | 11,721 | 7,449 | 4,272 | 57 | % | ||||||||
Enoxaparin | 5,615 | 7,702 | (2,087) | (27) | % | ||||||||
Naloxone | 4,037 | 4,715 | (678) | (14) | % | ||||||||
Other finished pharmaceutical products |
| 35,503 |
| 37,730 |
| (2,227) |
| (6) | % | ||||
Total finished pharmaceutical products net revenues | $ | 187,357 | $ | 147,665 | $ | 39,692 |
| 27 | % |
Product Revenues, net
Throughout 2024, we assumed distribution responsibilities for BAQSIMI® from Lilly to our customers in the United States, and certain other countries. As a result, $40.4 million of our third quarter BAQSIMI® sales were recognized separate from the cost of revenues, similar to our other products. During the third quarter of 2024, while the Company was transitioning from Lilly labeled product to Amphastar labeled product, our supplier was unable to supply Amphastar labeled product in 14 European countries on a timely basis, which limited sales by approximately $2.0 million to $3.0 million.
For more information, see “Part I – Item 1. Financial Statements – Notes to the Condensed Consolidated Financial Statements – Note 4. Revenue Recognition.”
Primatene MIST® sales increased primarily due to an increase in unit volumes. The increase in sales of epinephrine was primarily due to sales of epinephrine pre-filled syringes in Canada, which we began this quarter. The increase in sales of phytonadione was primarily driven by an increase in unit volume, as a result of an increase in demand. The decrease in sales of glucagon was due to a decrease in unit volumes as a result of a move to ready to use glucagon products such as BAQSIMI®, as well as a decrease in average selling price. The decrease in sales of enoxaparin and naloxone was primarily due to a decrease in unit volumes. The decrease in other finished pharmaceutical products was primarily due to lower unit sales of atropine and calcium chloride, as a result of other suppliers returning to their historical distribution levels. This decrease was partially offset by higher unit volumes of sodium bicarbonate due to an increase in capacity at our subsidiary, International Medication Systems, Limited, as well as the launch of albuterol in August 2024. Between $2.0 million and $4.0 million in sales expected to be recognized in the third quarter were not recognized due to delayed shipments caused by the aftermath of Hurricane Helene. Revenues for these shipments are expected to be recognized in the fourth quarter.
We anticipate that sales of naloxone and enoxaparin will continue to fluctuate in the future due to competitive dynamics. We also anticipate that sales of epinephrine and other finished pharmaceutical products will continue to fluctuate depending on the ability of our competitors to supply market demands.
Sales of API primarily depend on the timing of customer purchases, and will be lower for the next two years because MannKind, our largest RHI customer, is in the process of qualifying our upgraded RHI, which uses our internally produced inclusion bodies made at AFP. Until they complete this process, we anticipate sales of RHI will be at levels lower than historical.
-34-
Other Revenues
Other revenues include the portion of BAQSIMI® sales made by Lilly on our behalf under the TSA which amounted to $2.4 million and $28.7 million during the three months ended September 30, 2024 and 2023, respectively, based on total BAQSIMI® sales of $6.4 million and $48.7 million, respectively, as reported to us by Lilly, which was recognized on a net basis, similar to a royalty arrangement. The BAQSIMI® sales made by Lilly on our behalf under the TSA have decreased throughout 2024, due to our assumption of distribution responsibilities for BAQSIMI® from Lilly to our customers in the United States, and certain other countries. We recognized these sales within product net revenues.
Backlog
A significant portion of our customer shipments in any period relate to orders received and shipped in the same period, generally resulting in low product backlog relative to total shipments at any time. As of September 30, 2024, we experienced an immaterial amount of backlog for various products, primarily as a result of competitor shortages and supplier constraints. Historically, our backlog has not been a meaningful indicator in any given period of our ability to achieve any particular level of overall revenue or financial performance.
Gross margins
The decrease in gross margins during the three months ended September 30, 2024, is primarily due to an increase in labor costs and certain component costs, as well as charges included in cost of revenues to adjust our inventory and related purchase commitments to their net realizable value. As a result of the TSA with Lilly, the portion of revenues relating to BAQSIMI® sales made by Lilly on our behalf are reported on a net basis, similar to a royalty arrangement with no amount reported as cost of revenues. Therefore, in the prior year, BAQSIMI® sales did not have any associated cost of revenues, which increased the gross margins.
The decrease in gross margins was partially offset by an increase in sales of Primatene MIST® and epinephrine, which are higher-margin products.
We are currently experiencing increased costs for labor as well as certain APIs and purchased components. However, we believe that this trend will be offset longer term by increased sales of our higher-margin products, including BAQSIMI®, Primatene MIST®, vasopressin, ganirelix, and albuterol, and new products we anticipate launching.
Selling, distribution and marketing, and general and administrative
Three Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
2024 | 2023 | Dollars | % |
| |||||||||
(in thousands) |
| ||||||||||||
Selling, distribution, and marketing |
| $ | 8,995 |
| $ | 6,407 |
| $ | 2,588 |
| 40 | % | |
General and administrative | $ | 14,821 | $ | 12,654 | $ | 2,167 |
| 17 | % |
The increase in selling, distribution and marketing expenses was primarily due to expenses related to the expansion of our sales and marketing efforts related to BAQSIMI®. The increase in general and administrative expense was primarily due to an increase in salary and personnel-related expenses and expenses related to BAQSIMI®.
We expect that selling, distribution and marketing expenses will continue to increase due to the increase in marketing expenditures for BAQSIMI® and Primatene MIST®. Legal fees may fluctuate from period to period due to the timing of patent challenges and other litigation matters.
-35-
Research and development
Three Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Salaries and personnel-related expenses | $ | 7,768 | $ | 7,007 | $ | 761 |
| 11 | % | ||||
Pre-launch inventory |
| 222 |
| 460 |
| (238) |
| (52) | % | ||||
Clinical trials |
| 9 |
| 673 |
| (664) |
| (99) | % | ||||
FDA fees |
| 34 |
| 45 |
| (11) |
| (24) | % | ||||
Materials and supplies |
| 5,852 |
| 3,664 |
| 2,188 |
| 60 | % | ||||
Depreciation |
| 3,278 |
| 2,452 |
| 826 |
| 34 | % | ||||
Other expenses |
| 3,914 |
| 2,363 |
| 1,551 |
| 66 | % | ||||
Total research and development expenses | $ | 21,077 | $ | 16,664 | $ | 4,413 | 26 | % |
The increase in research and development expenses is primarily due to an increase in expenditure on raw materials and components for our insulin pipeline products, as well as an increase in salary and personnel-related expenses. This was partially offset by a decrease in clinical trial expense, due to the timing of clinical trials.
Research and development expenses consist primarily of costs associated with the research and development of our product candidates including the cost of developing APIs. We expense research and development costs as incurred.
We have made, and expect to continue to make, substantial investments in research and development to expand our product portfolio and grow our business. We expect that research and development expenses will increase on an annual basis due to increased clinical trials costs related to our insulin and inhalation product candidates. These expenditures will include costs of APIs developed internally as well as APIs purchased externally, the cost of purchasing reference listed drugs and the costs of performing the clinical trials. As we undertake new and challenging research and development projects, we anticipate that the associated costs will increase significantly over the next several quarters and years.
Non-operating income (expenses), net
Three Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
2024 | 2023 | Dollars | % |
| |||||||||
(in thousands) |
| ||||||||||||
Non-operating income (expenses) | |||||||||||||
Interest income | $ | 2,427 | $ | 1,202 | $ | 1,225 | 102 | % | |||||
Interest expense | (6,698) | (13,702) | 7,004 | (51) | % | ||||||||
Other income (expenses), net |
| (5,094) |
| 3,459 |
| (8,553) |
| (247) | % | ||||
Total non-operating income (expenses), net | $ | (9,365) | $ | (9,041) | $ | (324) | 4 | % |
The change in non-operating income (expenses), net is primarily a result of:
● | An increase in interest income resulting from an increase in cash and investments. |
● | A decrease in interest expense was primarily due to the $250.0 million repayment of the principal balance of the Wells Fargo Term Loan in September 2023, along with the write-off of the associated unamortized debt issuance costs related to the Term Loan in 2023. |
● | A change to Other income (expenses), net primarily as a result of foreign currency fluctuation, as well as mark-to-market adjustments relating to our interest rate swap contracts during the three months ended September 30, 2024. |
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Income tax provision
Three Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Income tax provision | $ | 7,254 | $ | 14,025 | $ | (6,771) | (48) | % | |||||
Effective tax rate | 15 | % |
| 22 | % |
Our effective tax rate for the three months ended September 30, 2024 decreased in comparison to the three months ended September 30, 2023, primarily due to differences in pre-tax income positions and timing of discrete tax items. For more information regarding our income taxes, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 15. Income Taxes.”
Beginning in 2024, many countries are implementing some or all of the Organization for Economic Co-operation and Development’s Inclusive Framework on Base Erosion and Profit Shifting Two-Pillar in response to tax challenges arising from the digitalization of the global economy. While we continue to evaluate those countries’ implementations, we do not expect those implementations to have a material impact on our consolidated financial statements in 2024.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Net revenues
Nine Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Net revenues | |||||||||||||
Finished pharmaceutical products | $ | 519,147 | $ | 426,541 | $ | 92,606 |
| 22 | % | ||||
API |
| 6,689 |
| 11,048 |
| (4,359) |
| (39) | % | ||||
Total product revenues, net | 525,836 | 437,589 | 88,247 |
| 20 | % | |||||||
Other revenues | 19,608 | 28,701 | (9,093) |
| (32) | % | |||||||
Total net revenues | $ | 545,444 | $ | 466,290 | $ | 79,154 |
| 17 | % | ||||
Cost of revenues | |||||||||||||
Finished pharmaceutical products | $ | 236,433 | $ | 192,500 | $ | 43,933 |
| 23 | % | ||||
API |
| 21,804 |
| 18,809 |
| 2,995 |
| 16 | % | ||||
Total cost of revenues | $ | 258,237 | $ | 211,309 | $ | 46,928 |
| 22 | % | ||||
Gross profit | $ | 287,207 | $ | 254,981 | $ | 32,226 | 13 | % | |||||
as % of net revenues |
| 53 | % |
| 55 | % |
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The increase in net revenues of the finished pharmaceutical products for the nine months ended September 30, 2024, was due to the following changes:
Nine Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Finished pharmaceutical products net revenues | |||||||||||||
BAQSIMI® | $ | 85,106 | $ | — | $ | 85,106 | N/A | ||||||
Glucagon | 82,700 | 82,486 | 214 | 0 | % | ||||||||
Epinephrine | 75,392 | 57,004 | 18,388 | 32 | % | ||||||||
Primatene MIST® | 73,077 | 64,837 | 8,240 | 13 | % | ||||||||
Lidocaine | 41,457 | 43,174 | (1,717) | (4) | % | ||||||||
Phytonadione | 31,998 | 33,017 | (1,019) | (3) | % | ||||||||
Enoxaparin | 17,984 | 25,441 | (7,457) | (29) | % | ||||||||
Naloxone | 12,124 | 14,774 | (2,650) | (18) | % | ||||||||
Other finished pharmaceutical products |
| 99,309 |
| 105,808 |
| (6,499) |
| (6) | % | ||||
Total finished pharmaceutical products net revenues | $ | 519,147 | $ | 426,541 | $ | 92,606 |
| 22 | % |
Product Revenues, net
Throughout 2024, we assumed distribution responsibilities for BAQSIMI ® from Lilly to our customers in the United States, and certain other countries. As a result, $85.1 million of our BAQSIMI® sales for the nine months ended September 30, 2024, are recognized separate from the cost of revenues, similar to our other products.
For more information, see “Part I – Item 1. Financial Statements – Notes to the Condensed Consolidated Financial Statements – Note 4. Revenue Recognition.”
The increase in sales of epinephrine was primarily due to an increase in unit volumes, as a result of an increase in demand caused by other supplier shortages. Primatene MIST® sales increased primarily due to an increase in unit volumes. The decrease in sales of enoxaparin and naloxone was primarily due to a decrease in unit volumes. The decrease in other finished pharmaceutical products was primarily due to lower unit sales of atropine and calcium chloride, as a result of other suppliers returning to their historical distribution levels, as well as lower unit sales of medroxyprogesterone, as our API supplier discontinued making the active ingredient, which resulted in a halt of sales of medroxyprogesterone after the third quarter of 2023. Subsequently, we qualified our subsidiary, ANP, to manufacture this API, and in September 2024, we re-launched the product. This decrease was partially offset by higher unit volumes of dextrose and sodium bicarbonate due to an increase in demand caused by other supplier shortages, as well as the launch of albuterol in August 2024.
We anticipate that sales of naloxone and enoxaparin will continue to fluctuate in the future due to competitive dynamics. We also anticipate that sales of epinephrine and other finished pharmaceutical products will continue to fluctuate depending on the ability of our competitors to supply market demands.
Sales of API primarily depend on the timing of customer purchases, and will be lower for the next two years because MannKind, our largest RHI customer, is in the process of qualifying our upgraded Recombinant Human Insulin, or RHI, which uses our internally produced inclusion bodies made at AFP. Until they complete this process, we anticipate sales of RHI will be at levels lower than historical.
Other Revenues
Other revenues include the portion of BAQSIMI® sales made by Lilly on our behalf under the TSA which amounted to $19.6 million and $28.7 million during the nine months ended September 30, 2024 and 2023, respectively, based on total BAQSIMI® sales of $38.6 million and $48.7 million, respectively, as reported to us by Lilly, which was recognized on a net basis, similar to a royalty arrangement. The BAQSIMI® sales made by Lilly on our behalf under the TSA have
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decreased throughout 2024, due to our assumption of distribution responsibilities for BAQSIMI® from Lilly to our customers in the United States, and certain other countries. We recognized these sales within product net revenues.
Gross margins
The decrease in gross margins during the nine months ended September 30, 2024, is primarily due to an increase in depreciation and amortization expenses related to the acquired BAQSIMI® assets, an increase in labor costs and certain component costs, as well as charges included in cost of revenues to adjust our inventory and related purchase commitments to their net realizable value. As a result of the TSA with Lilly, the portion of revenues relating to BAQSIMI® sales made by Lilly on our behalf are reported on a net basis, similar to a royalty arrangement with no amount reported as cost of revenues. Therefore, in the prior year, BAQSIMI® sales did not have any associated cost of revenues, which increased the gross margins.
The decrease in gross margins was partially offset by the increase in sales of Primatene MIST® and epinephrine, which are higher-margin products.
We are currently experiencing increased costs for labor as well as certain APIs and purchased components. However, we believe that this trend will be offset longer term by increased sales of our higher-margin products, including BAQSIMI®, Primatene MIST®, vasopressin, ganirelix, albuterol, and new products we anticipate launching.
Selling, distribution and marketing, and general and administrative
Nine Months Ended |
|
| |||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Selling, distribution, and marketing | $ | 27,378 | $ | 20,234 | $ | 7,144 |
| 35 | % | ||||
General and administrative | $ | 43,782 | $ | 38,418 | $ | 5,364 |
| 14 | % |
The increase in selling, distribution and marketing expenses was primarily due to expenses related to the expansion of our sales and marketing efforts related to BAQSIMI®. The increase in general and administrative expense was primarily due to an increase in salary and personnel-related expenses and expenses related to BAQSIMI®.
We expect that selling, distribution and marketing expenses will continue to increase due to the increase in marketing expenditures for BAQSIMI® and Primatene MIST®. Legal fees may fluctuate from period to period due to the timing of patent challenges and other litigation matters.
Research and development
Nine Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Salaries and personnel-related expenses | $ | 23,898 | $ | 21,653 | $ | 2,245 |
| 10 | % | ||||
Pre-launch inventory |
| 222 |
| 460 |
| (238) |
| (52) | % | ||||
Clinical trials |
| 292 |
| 3,430 |
| (3,138) |
| (91) | % | ||||
FDA fees |
| 1,333 |
| 142 |
| 1,191 |
| NM | |||||
Materials and supplies |
| 12,334 |
| 13,556 |
| (1,222) |
| (9) | % | ||||
Depreciation |
| 9,206 |
| 7,282 |
| 1,924 |
| 26 | % | ||||
Other expenses |
| 8,487 |
| 6,799 |
| 1,688 |
| 25 | % | ||||
Total research and development expenses | $ | 55,772 | $ | 53,322 | $ | 2,450 | 5 | % |
The increase in research and development expenses is primarily due to an increase in salary and personnel-related expenses, as well as an increase in FDA filing fees as we filed the ANDA for AMP-018 in the second quarter of 2024.
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This was partially offset by a decrease in clinical trials expense, as well as a decrease in materials and supply expense, as a result of a ramp-up of expenses in 2023 for our insulin and inhalation pipeline products.
Research and development expenses consist primarily of costs associated with the research and development of our product candidates including the cost of developing APIs. We expense research and development costs as incurred.
We have made, and expect to continue to make, substantial investments in research and development to expand our product portfolio and grow our business. We expect that research and development expenses will increase on an annual basis due to increased clinical trials costs related to our insulin and inhalation product candidates. These expenditures will include costs of APIs developed internally as well as APIs purchased externally, the cost of purchasing reference listed drugs and the costs of performing the clinical trials. As we undertake new and challenging research and development projects, we anticipate that the associated costs will increase significantly over the next several quarters and years.
Non-operating income (expenses), net
Nine Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Non-operating income (expenses) | |||||||||||||
Interest income | $ | 8,320 | $ | 3,156 | $ | 5,164 | 164 | % | |||||
Interest expense | (23,918) | (17,702) | (6,216) | 35 | % | ||||||||
Other income (expenses), net | 1,125 | 1,553 | (428) |
| (28) | % | |||||||
Total non-operating income (expense), net | $ | (14,473) | $ | (12,993) | $ | (1,480) | 11 | % |
The change in non-operating income (expenses), net is primarily a result of:
● | An increase in interest income resulting from an increase in cash and investments. |
● | An increase in interest expense resulting from the Term Loan used to finance the acquisition of BAQSIMI®, as well as the 2029 Convertible Notes, which we entered into in the second half of 2023. For more information regarding our debt, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 14. Debt.” |
● | A change to Other income (expenses), net primarily as a result of foreign currency fluctuation, as well as mark-to-market adjustments relating to our interest rate swap contracts during the nine months ended September 30, 2024. |
Income tax provision
Nine Months Ended |
| ||||||||||||
September 30, | Change | ||||||||||||
| 2024 |
| 2023 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Income tax provision | $ | 23,674 | $ | 27,160 | $ | (3,486) | (13) | % | |||||
Effective tax rate |
| 16 | % |
| 21 | % |
Our effective tax rate for the nine months ended September 30, 2024 decreased in comparison to the nine months ended September 30, 2023, primarily due to the timing of discrete tax items partially offset by differences in pre-tax income positions. For more information regarding our income taxes, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 15. Income Taxes.”
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Liquidity and Capital Resources
Cash Requirements and Sources
We need capital resources to maintain and expand our business. We expect our cash requirements to increase significantly in the foreseeable future as we sponsor clinical trials for, seek regulatory approvals of, and develop, manufacture and market our current development stage product candidates and pursue strategic acquisitions of businesses or assets. Our future capital expenditures include projects to upgrade, expand, and improve our manufacturing facilities in the United States and China, including a significant increase in capital expenditures over the next few years. We plan to fund this facility expansion primarily with cash flows from operations. We may also become subject to cash obligations of up to an aggregate of $575.0 million that are contingent upon certain net sales milestones related to the BAQSIMI® acquisition. No milestone payments have been made through the date of this filing. Our cash obligations include the principal and interest payments due on our existing loans and lease payments, as described below and throughout this Quarterly Report.
As of September 30, 2024, our foreign subsidiaries collectively held $9.5 million in cash and cash equivalents. Cash or cash equivalents held at foreign subsidiaries are not available to fund the parent company’s operations in the United States. We believe that our cash reserves, operating cash flows, and borrowing availability under our credit facilities will be sufficient to fund our operations for at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q. We expect additional cash flows to be generated in the longer term from future product introductions, although there can be no assurance as to the receipt of regulatory approval for any product candidates that we are developing or the timing of any product introductions, which could be lengthy or ultimately unsuccessful.
Working capital increased $122.7 million to $386.9 million at September 30, 2024, compared to $264.2 million at December 31, 2023.
Cash Flows from Operations
The following table summarizes our cash flows used in operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023:
Nine Months Ended September 30, | |||||||
| 2024 | 2023 | |||||
(in thousands) | |||||||
Statement of Cash Flow Data: | |||||||
Net cash provided by (used in) | |||||||
Operating activities | $ | 184,362 | $ | 159,639 | |||
Investing activities |
| (89,252) |
| (546,067) | |||
Financing activities |
| (47,111) |
| 501,176 | |||
Effect of exchange rate changes on cash |
| (179) |
| (44) | |||
Net increase in cash, cash equivalents, and restricted cash | $ | 47,820 | $ | 114,704 |
Sources and Use of Cash
Operating Activities
Net cash provided by operating activities was $184.4 million for the nine months ended September 30, 2024, which included net income of $121.6 million. Non-cash items comprised primarily of $47.8 million of depreciation and amortization, which includes $21.0 million related to depreciation of property, plant and equipment; $18.5 million related to amortization of product rights, trademarks and patents; $3.0 million related to amortization of operating lease right-of-use assets; $5.3 million related to amortization of discounts, premiums, and debt issuance costs; and share-based compensation expense of $18.7 million.
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Additionally, for the nine months ended September 30, 2024, there was a net cash outflow from changes in operating assets and liabilities of $6.0 million, which resulted primarily from an increase in accounts receivables, an increase in inventories, as well as an increase in prepaid expenses and other assets, which was partially offset by an increase in accounts payable and accrued liabilities. The increase in accounts receivables was primarily due to the increase in sales. The increase in inventories was primarily due to the increased purchases of certain raw materials and components. Accounts payable and accrued liabilities increased primarily due to the increase in accrued customer fees and rebates associated with BAQSIMI® sales, as we continue to assume distribution responsibilities for BAQSIMI® from Lilly to our customers in the United States and certain other countries.
Net cash provided by operating activities was $159.6 million for the nine months ended September 30, 2023, which included net income of $101.4 million. Non-cash items comprised primarily of $36.5 million of depreciation and amortization, $15.6 million of share-based compensation expense, and an impairment charge of $2.7 million relating to the impairment of the IMS (UK) international product rights. Additionally, for the nine months ended September 30, 2023, there was a net cash inflow from changes in operating assets and liabilities of $2.5 million, which resulted from an increase in accounts payable and accrued liabilities, which was partially offset by an increase in accounts receivables and inventories. Accounts payable and accrued liabilities increased primarily due to the timing of payments. The increase in accounts receivables was primarily due to the timing of the payment from Lilly for BAQSIMI® during the quarter, which was received subsequent to the quarter end.
Investing Activities
Net cash used in investing activities was $89.3 million for the nine months ended September 30, 2024, primarily due to the payment of $129.0 million relating to the BAQSIMI® acquisition, $28.6 million in purchases of property, plant, and equipment, which included $10.2 million incurred in the United States, $2.4 million in France, and $15.9 million in China. This was partially offset by a net cash inflow of $71.0 million from sales and purchases of investments during the period.
Net cash used in investing activities was $546.1 million for the nine months ended September 30, 2023, primarily as a result of $506.4 million relating to the BAQSIMI® acquisition, $28.7 million in purchases of property, plant, and equipment, which included $19.5 million incurred in the United States, $1.7 million in France, and $7.5 million in China.
Financing Activities
Net cash used in financing activities was $47.1 million for the nine months ended September 30, 2024, primarily as a result of $43.5 million used to purchase treasury stock and $8.2 million used to settle share-based compensation awards under our equity plan and for tax payments related to the net share settlement of options exercised. Additionally, we made $8.1 million in principal payments on our long-term debt, primarily as a result of paying off the mortgage loan with East West Bank. This was partially offset by $13.6 million of net proceeds from borrowings on our line of credit in China.
Net cash provided by financing activities was $501.2 million for the nine months ended September 30, 2023, primarily due to our entry into the Credit Agreement with Wells Fargo and the issuance of the 2029 Convertible Notes, which was
partially offset by $268.5 million in principal payments of our long-term debt and $24.6 million in debt issuance cost. Additionally, we received $7.4 million in net proceeds from the settlement of share-based compensation awards under our equity plan, which was partially offset by the $58.4 million used to purchase treasury stock.
Indebtedness
For more information regarding our outstanding indebtedness, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 14. Debt”.
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Critical Accounting Policies
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and notes to the financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our critical accounting policies as compared to the critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 2. Summary of Significant Accounting Policies”.
Government Regulation
Our products and facilities are subject to regulation by a number of federal and state governmental agencies. The FDA, in particular, maintains oversight of the formulation, manufacture, distribution, packaging, and labeling of all of our products. The Drug Enforcement Administration, or DEA, maintains oversight over our products that are considered controlled substances.
From February 20 through March 1, 2024, our Amphastar facility in Rancho Cucamonga, California was subject to pre-approval and cGMP inspection by the FDA. The inspection included a review of compliance with FDA regulations to support one of our pending applications as well as to compliance with Good Manufacturing Practices. The inspection resulted in several observations on Form 483. We responded to those observations. We believe that our response to the observations will satisfy the requirements of the FDA and that no significant further actions will be necessary.
From July 15 through July 19, 2024, our Armstrong facility in Canton, Massachusetts was subject to a pre-approval inspection by the FDA. The inspection included review of compliance of our analytical laboratory with FDA regulations to support one of our pending applications. The inspection resulted in several observations on Form 483. We responded to those observations. We believe that our response to the observations will satisfy the requirements of the FDA and that no significant further actions will be necessary.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Except for the broad, ongoing macroeconomic challenges facing the global economy and financial markets, there have been no material changes in market risk from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2023. We are exposed to market risk in the ordinary course of business. Market risk represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings. We are exposed to market risk for changes in the market values of our investments (Investment Risk), the impact of interest rate changes (Interest Rate Risk), and the impact of foreign currency exchange changes (Foreign Currency Exchange Risk).
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive and principal financial officers, respectively, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective (a) to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (b) to include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Inherent Limitations of Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management overriding of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding legal proceedings, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 20. Litigation.”
ITEM 1A. RISK FACTORS
Except as noted below, there were no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024.
We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
The facilities we use for our headquarters, laboratory and research and development activities are located in earthquake-prone areas of California. A significant percentage of the facilities we use for our manufacturing, packaging, warehousing, distribution and administration offices are also located in these areas. Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. Additionally, we currently rely on third parties whose operations may be disrupted by natural disasters. For example, the aftermath of Hurricane Helene caused us to experience delays in shipments of certain products.
If a natural disaster, power outage or other event occurred that prevented us or the third parties upon whom we depend from using all or a significant portion of our facilities, that damaged critical infrastructure, such as our or third parties’ manufacturing facilities, or that otherwise disrupted operations of ours or those of third parties, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans.
Jack Y. Zhang and Mary Z. Luo have each pledged shares of our common stock to secure funds borrowed under existing credit lines from three financial institutions. Each of the lenders has varying rights as a lender, including one which has the right to conduct a forced sale at its sole discretion. An action by one of the lenders could include a sale of certain shares of our common stock pledged as collateral, the sale of which could cause the price of our common stock to decline. An action to cure and cover indebtedness by any one of the lenders could also have other negative impacts on our business.
Since September 2015, UBS Bank USA, or UBS, has made extensions of credit up to the amount of $8.0 million to Applied Physics & Chemistry Laboratories, Inc., or APCL, which is controlled by Jack Y. Zhang and Mary Z. Luo. In May 2019, the credit amount was increased to $11.0 million. Since February 2017, UBS Group AG, or UBS AG, has also provided an extension of credit up to the amount of $8.0 million to APCL. In 2021, the outstanding UBS AG credit line was transferred to UBS’s Utah location due to an organizational change and in June 2024, the credit line with UBS was increased to $11.9 million. As of September 30, 2024, the total outstanding UBS combined credit lines were $11.9 million. The UBS credit lines are secured by a pledge of 400,000 shares of our common stock currently held by APCL. Interest on the loans accrues at market rates. UBS has an unlimited and unilateral right to call each of the credit lines for any reason whatsoever.
In October 2017, East West Bank, or East West, entered into an agreement with Drs. Zhang and Luo whereby East West would loan them up to $5.0 million. In March 2023, East West amended the loan to increase the loan amount to $8.0 million. As of September 30, 2024, the loan is secured by a pledge of 500,000 shares of our common stock held by Dr. Zhang. Interest on the loan accrues at market rates. East West has acceleration rights to protect itself in the event of a default.
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In June 2024, Cathay Bank entered into an agreement with APCL and Dr. Luo, whereby Cathay Bank would loan them up to $20.0 million. As of September 30, 2024, the loan is secured by a pledge of 1,000,000 shares of our common stock held by APCL and Dr. Luo. Interest on the loan accrues at market rates. Cathay Bank has acceleration rights to protect itself in the event of a default.
We are not a party to these loans, which are full recourse against APCL and each of Drs. Zhang and Luo, respectively, and are secured by pledges of a portion of the shares of our common stock currently held by APCL and each of Drs. Zhang and Luo.
In 2021, we created a pledging policy to restrict the pledging of shares by our executive officers and directors. The policy prohibits our executive officers and directors from entering into any transaction whereby the executive officer or director, directly or indirectly, pledges, hypothecates, or otherwise encumbers more than twenty (20) percent of shares of common stock held by the individual or more than five (5) percent of our total outstanding shares of common stock as of the date of the transaction, whichever is lower, as collateral for indebtedness. This restriction extends to any hedging or similar transaction designed to decrease the risks associated with holding our securities. For already existing pledges made by executive officers and directors, those existing pledges must be reduced to no more than twenty (20) percent of the shares of our common stock held by such individual as collateral for indebtedness within three (3) years of December 31, 2021. As a result of this policy, Drs. Zhang and Luo reduced their total number of pledged shares to 1,900,000 in June 2024 from 2,350,000 in May 2022, 3,182,898 in February 2022, and 8,582,898 in February 2021.
If the price of our common stock declines, Drs. Zhang and Luo may be forced by these financial institutions to provide additional collateral for the loans or to sell shares of our common stock held by them in order to remain within the margin limitations imposed under the terms of their loans. Furthermore, the pledged shares of our common stock may be acquired and sold by the lenders. These factors may limit Drs. Zhang and Luo’s ability to either pledge additional shares of our common stock or sell shares of our common stock held by them as a means to avoid or satisfy a margin call with respect to their pledged shares of our common stock in the event of a decline in our stock price that is large enough to trigger a margin call. Any significant sales of shares of our common stock by one or more of these three lenders could cause the price of our common stock to decline further.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c)Issuer Purchases of Equity Securities
The table below provides information with respect to repurchases of our common stock.
|
|
| Total Number of Shares |
| Maximum Number of |
| ||||
Average | Purchased as Part of | Shares that May Yet Be |
| |||||||
Total Number of Shares | Price Paid | Publicly Announced Plans | Purchased Under the Plans |
| ||||||
Period | Purchased (1) | per Share | or Programs | or Programs |
| |||||
July 1 - July 31, 2024 |
| 277,955 |
| $ | 39.55 | 277,955 |
| — | ||
August 1 - August 31, 2024 |
| 247,158 | 44.48 |
| 247,158 |
| — | |||
September 1 - September 30, 2024 |
| 271,925 | 47.64 | 271,925 |
| — |
(1) | On June 3, 2024, we announced that our Board of Directors authorized an increase of $50.0 million to our share buyback program. As of September 30, 2024, $42.0 million remained available for repurchase under such program. The share buyback program does not have an expiration date. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During our last fiscal quarter,
ITEM 6. EXHIBITS
Exhibit |
| Description |
10.1* | ||
31.1 | ||
31.2 | ||
32.1# | ||
32.2# | ||
|
| |
101.INS | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document | |
104 | Cover Page Interactive File (Formatted as Inline XBRL and contained in Exhibit 101) |
# | The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act (including this Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference. |
* | Certain confidential information contained in this exhibit was omitted by means of marking such portions with brackets because the identified confidential information (i) is not material and (ii) is of the type that the registrant treats as private or confidential. In addition, certain schedules (or similar attachments) have been omitted from this exhibit pursuant to Item 601(a)(5) of Regulation S-K. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMPHASTAR PHARMACEUTICALS, INC. | |
By: | /s/ JACK Y. ZHANG |
Jack Y. Zhang | |
Chief Executive Officer |
Date: November 7, 2024
AMPHASTAR PHARMACEUTICALS, INC. | |
By: | /s/ WILLIAM J. PETERS |
William J. Peters | |
Chief Financial Officer |
Date: November 7, 2024
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