UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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The number of shares outstanding of the registrant’s common stock as of November 2, 2020 was
AMPHASTAR PHARMACEUTICALS, INC.
TABLE OF CONTENTS
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020
Special Note About Forward-Looking Statements
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or Quarterly Report, contains “forward-looking statements” that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the following words: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. Forward-looking statements relate to future events or future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by the forward-looking statements. These forward-looking statements include, but are not limited to, statements about:
● | our expectations regarding the sales and marketing of our products; |
● | our expectations regarding our manufacturing and production and the integrity of our supply chain for our products, including the risks associated with our single source suppliers; |
● | the impact of the COVID-19 pandemic and related responses of business and governments to the pandemic on our operations and personnel, and on commercial activity and demand across our business operations and results of operations; |
● | interruptions to our manufacturing and production as a result of natural catastrophic events or other causes beyond our control such as power disruptions or widespread disease outbreaks, such as the COVID-19 pandemic; |
● | global, national and local economic and market conditions, specifically with respect to geopolitical uncertainty, and the COVID-19 pandemic; |
● | the timing and likelihood of U.S. Food and Drug Administration, or FDA, approvals and regulatory actions on our product candidates, manufacturing activities and product marketing activities; |
● | our ability to advance product candidates in our platforms into successful and completed clinical trials and our subsequent ability to successfully commercialize our product candidates; |
● | our ability to compete in the development and marketing of our products and product candidates; |
● | our expectations regarding the business expansion plans for our Chinese subsidiary, ANP; |
● | the potential for adverse application of environmental, health and safety and other laws and regulations on our operations; |
● | our expectations for market acceptance of our new products and proprietary drug delivery technologies, as well as those of our active pharmaceutical ingredient, or API, customers; |
● | the potential for our marketed products to be withdrawn due to patient adverse events or deaths, or if we fail to secure FDA approval for products subject to the Prescription Drug Wrap-Up program; |
● | our expectations in obtaining insurance coverage and adequate reimbursement for our products from third-party payers; |
● | the amount of price concessions or exclusion of suppliers adversely affecting our business; |
● | our ability to establish and maintain intellectual property protection for our products and our ability to successfully defend our intellectual property in cases of alleged infringement; |
● | the implementation of our business strategies, product development strategies and technology utilization; |
● | the potential for exposure to product liability claims; |
● | future acquisitions, divestitures or investments, including the anticipated benefits of such acquisitions, divestitures or investments; |
● | our ability to expand internationally; |
● | economic and industry trends and trend analysis; |
● | our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally; |
● | the impact of trade tariffs, export or import restrictions, or other trade barriers; |
● | the impact of Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare reforms in the countries in which we operate including the potential for drug price controls; |
● | the impact of global and domestic tax reforms, including the Tax Cuts and Jobs Act of 2017, or the Tax Act, as amended by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act; |
● | the timing for completion and the validation of the new construction at our ANP and Amphastar facilities; |
● | the timing and extent of share buybacks; and |
● | our financial performance expectations, including our expectations regarding our backlog, revenue, cost of revenue, gross profit or gross margin, operating expenses, including changes in research and development, sales and marketing and general and administrative expenses, and our ability to achieve and maintain future profitability. |
You should read this Quarterly Report and the documents that we reference elsewhere in this Quarterly Report completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. In light of the significant risks and uncertainties to which our forward-looking statements are subject, you should not place undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. In particular, the extent of COVID-19’s impact on our business will depend on several factors, including the severity, duration and extent of the pandemic, as well as actions taken by governments, businesses,
and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time. We discuss many of these risks and uncertainties in greater detail in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2019, particularly in Item 1A. “Risk Factors.” These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report regardless of the time of delivery of this Quarterly Report, and such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report.
Unless expressly indicated or the context requires otherwise, references in this Quarterly Report to “Amphastar,” “the Company,” “we,” “our,” and “us” refer to Amphastar Pharmaceuticals, Inc. and our subsidiaries.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| September 30, |
| December 31, |
| |||
2020 | 2019 |
| |||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Restricted cash | | | |||||
Short-term investments | | | |||||
Restricted short-term investments |
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Accounts receivable, net |
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Inventories |
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Income tax refunds and deposits |
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Prepaid expenses and other assets |
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Total current assets |
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Property, plant, and equipment, net |
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Finance lease right-of-use assets | | | |||||
Operating lease right-of-use assets | | | |||||
Goodwill and intangible assets, net |
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Other assets |
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Deferred tax assets |
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Total assets | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | | $ | | |||
Income taxes payable |
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Current portion of long-term debt |
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Current portion of operating lease liabilities | | | |||||
Total current liabilities |
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Long-term reserve for income tax liabilities |
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Long-term debt, net of current portion |
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Long-term operating lease liabilities, net of current portion | | | |||||
Deferred tax liabilities |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock: par value $0.0001; |
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Common stock: par value $0.0001; |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
| ( |
| ( | |||
Treasury stock |
| ( |
| ( | |||
Total Amphastar Pharmaceuticals, Inc. stockholders’ equity |
| |
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Non-controlling interests | | | |||||
Total equity | | | |||||
Total liabilities and stockholders’ equity | $ | | $ | |
See Accompanying Notes to Condensed Consolidated Financial Statements.
-1-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
Three Months Ended | Nine Months Ended |
| |||||||||||
September 30, | September 30, | ||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| |||||
Net revenues | $ | | $ | | $ | | $ | | |||||
Cost of revenues |
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Gross profit |
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Operating expenses: | |||||||||||||
Selling, distribution, and marketing |
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General and administrative |
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Research and development |
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Total operating expenses |
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Income from operations |
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Non-operating income (expenses): | |||||||||||||
Interest income |
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| | | ||||||
Interest expense |
| ( |
| ( |
| ( | ( | ||||||
Other income (expenses), net |
| |
| ( |
| | | ||||||
Total non-operating income (expenses), net |
| |
| ( |
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Income before income taxes |
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Income tax provision |
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Net income | $ | | $ | | $ | | $ | | |||||
Net income (loss) attributable to non-controlling interests | $ | | $ | ( | $ | ( | $ | ( | |||||
Net income attributable to Amphastar Pharmaceuticals, Inc. | $ | | $ | | $ | | $ | | |||||
Net income per share attributable to Amphastar Pharmaceuticals, Inc. stockholders: | |||||||||||||
Basic | $ | | $ | | $ | | $ | | |||||
Diluted | $ | | $ | | $ | | $ | | |||||
Weighted-average shares used to compute net income per share attributable to Amphastar Pharmaceuticals, Inc. stockholders: | |||||||||||||
Basic |
| |
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| |
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Diluted |
| |
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| |
| |
See Accompanying Notes to Condensed Consolidated Financial Statements.
-2-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| |||||
Net income attributable to Amphastar Pharmaceuticals, Inc. | $ | | $ | | $ | | $ | | |||||
Other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc., net of income taxes | |||||||||||||
Foreign currency translation adjustment |
| |
| ( |
| |
| ( | |||||
Total other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc. |
| |
| ( |
| |
| ( | |||||
Total comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc. | $ | | $ | ( | $ | | $ | |
See Accompanying Notes to Condensed Consolidated Financial Statements.
-3-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in thousands, except share data)
Common Stock | Accumulated | Treasury Stock | Total | |||||||||||||||||||||||||
Additional | Other | Amphastar | Non- | |||||||||||||||||||||||||
Paid-in | Retained | Comprehensive | Stockholders' | controlling | ||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | loss | Shares | Amount | Equity | Interest | Total | |||||||||||||||||||
Balance as of December 31, 2019 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | $ | | $ | | ||||||||
Net income attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( |
| — |
| ( | ||||||||
Net loss attributable to non-controlling interest | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| ( | ( | ( | — |
| ( | |||||||||||
Issuance of treasury stock in connection with the Company's equity plans | — | — | ( | — | — | | | — | — | — | ||||||||||||||||||
Issuance of common stock in connection with the Company's equity plans |
| |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||||
Share-based compensation expense |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| |
| |
| | ||||||||
Balance as of March 31, 2020 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | $ | | $ | | ||||||||
Net loss attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||||
Other comprehensive income attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| |
| — |
| | ||||||||
Net loss attributable to non-controlling interest | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| ( | ( | ( | — |
| ( | |||||||||||
Issuance of treasury stock in connection with the Company's equity plans | — |
| — |
| ( |
| — |
| — |
| | | — | — |
| — | ||||||||||||
Issuance of common stock in connection with the Company's equity plans |
| |
| — |
| |
| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Share-based compensation expense |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| |
| |
| | ||||||||
Balance as of June 30, 2020 |
| | $ | | | $ | | $ | ( |
| ( | $ | ( | $ | | $ | | $ | | |||||||||
Net income attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Other comprehensive income attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| |
| — |
| | ||||||||
Acquisition of additional ownership interest in ANP | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | — | — | — | — | — | | | ||||||||||||||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| ( | ( | ( | — |
| ( | |||||||||||
Issuance of treasury stock in connection with the Company's equity plans | — |
| — |
| ( |
| — |
| — |
| | | — | — |
| — | ||||||||||||
Issuance of common stock in connection with the Company's equity plans |
| |
| — |
| |
| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Share-based compensation expense |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| |
| |
| | ||||||||
Balance as of September 30, 2020 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | $ | | $ | |
-4-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in thousands, except share data)
Common Stock | Accumulated | Treasury Stock | Total | |||||||||||||||||||||||||
Additional | Other | Amphastar | Non- | |||||||||||||||||||||||||
Paid-in | Retained | Comprehensive | Stockholders' | controlling | ||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | loss | Shares | Amount | Equity | Interest | Total | |||||||||||||||||||
Balance as of December 31, 2018 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | $ | | $ | | ||||||||
Beginning balance adjustment as a result of the adoption of new accounting standards | — | — | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||
Net income attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |
| — |
| — |
| ( |
| — |
| — |
| ( |
| — |
| ( | ||||||||
Proceeds from the private placement of ANP | — | — | | — | — | — | — | | | | ||||||||||||||||||
Net loss attributable to non-controlling interest | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| ( | ( | ( | — |
| ( | |||||||||||
Issuance of treasury stock in connection with the Company's equity plans | — | — | ( | — | — | | | — | — | — | ||||||||||||||||||
Issuance of common stock in connection with the Company's equity plans |
| |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||||
Share-based compensation expense |
| — |
| — |
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| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||
Balance as of March 31, 2019 |
| | $ | | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | $ | | $ | | ||||||||
Net income attributable to Amphastar Pharmaceuticals, Inc. |
| — |
| — |