Executive Summary / Key Takeaways

• Amphastar Pharmaceuticals is strategically transitioning from a generic-centric model to focus on higher-value branded products and a promising biosimilar/complex injectable pipeline, aiming for sustainable long-term growth.
• First quarter 2025 results showed net revenues of $170.5 million, a modest 1% decline year-over-year, reflecting strong growth in branded products like BAQSIMI and Primatene MIST offset by increasing competitive pressures on established generic products such as Glucagon and Epinephrine.
• The company's vertically integrated structure and U.S.-based finished product manufacturing provide operational resilience and supply chain advantages, particularly relevant in the current macroeconomic and tariff environment.
• A robust pipeline, including key candidates like AMP-002, AMP-007, AMP-015, AMP-018 (GLP-1 ANDA), and the Insulin Aspart BLA (AMP-004) targeting interchangeability, represents significant future growth potential, supported by increasing R&D and capital expenditures.
• Management forecasts 2025 as a "relatively flat" revenue year, contingent on two pipeline launches in the second half, before an anticipated return to double-digit growth in 2026, highlighting the critical importance of pipeline execution to offset generic erosion.

Setting the Scene: A Specialty Pharmaceutical Company in Transition

Amphastar Pharmaceuticals, Inc. is a bio-pharmaceutical company specializing in the development, manufacturing, marketing, and sale of technically challenging injectable, inhalation, and intranasal products. Operating primarily within the hospital and urgent care clinical settings, with distribution largely managed through group purchasing organizations and drug wholesalers, Amphastar has built its business on tackling complex molecules and delivery systems. Complementing this core business, the company also markets the over-the-counter inhalation product, Primatene MIST, through drug retailers and sells insulin active pharmaceutical ingredients (API).

Amphastar's journey has been marked by strategic acquisitions aimed at bolstering its technical infrastructure and expanding capabilities, including internal API and component manufacturing. This has fostered a vertically integrated business model, a key differentiator that provides greater control over the supply chain and manufacturing processes. Notably, the company manufactures 100% of its finished products in the United States, a strategic advantage that enhances supply chain resilience and offers potential benefits in the face of evolving international trade policies and tariffs.

The company currently markets over 25 products, with key revenue drivers including BAQSIMI, Primatene MIST, Glucagon, Epinephrine, and Lidocaine. While historically successful in the generic injectable space, Amphastar is actively executing a strategic transition towards a more diversified portfolio, placing increasing emphasis on proprietary products and high-value biosimilar and complex generic pipeline candidates. This shift is designed to leverage the company's deep R&D expertise and manufacturing capabilities in technically challenging areas like immunogenicity and product characterization, positioning Amphastar for sustainable growth less susceptible to the intense price erosion often seen in commoditized generic markets.

Technological Edge and Operational Strength

Amphastar's ability to develop and manufacture technically challenging products forms a foundational competitive moat. While specific quantitative performance metrics for all technologies are not detailed, the company's focus on complex injectables, inhalation products, intranasal delivery systems, and API development underscores a high level of scientific and manufacturing expertise. This is particularly evident in its pursuit of biosimilars and complex generics, which require sophisticated development and manufacturing processes that act as significant barriers to entry for potential competitors.

The vertical integration, including API manufacturing capabilities, provides a crucial operational advantage. It enhances control over raw material sourcing, reduces reliance on external suppliers (many of which are foreign), and contributes to supply chain stability. This was implicitly recognized by the FDA in March 2025 when Amphastar's subsidiary, International Medication Systems, Ltd. (IMS), received the Drug Shortage Assistance Award for its contributions to addressing the shortage of epinephrine injection, 0.1 mg/mL syringes – a testament to the reliability and importance of Amphastar's manufacturing operations in meeting critical healthcare needs.

Furthermore, the commitment to U.S.-based finished product manufacturing not only supports supply chain resilience but also positions the company favorably amidst discussions around trade tariffs. Management noted that while they import some components and APIs (including from their China facility, which incurs a current tariff cost estimated at around $500,000 per quarter), their domestic finished product manufacturing shields them from potential tariffs on imported finished pharmaceuticals, a significant advantage over competitors relying heavily on foreign manufacturing.

The company continues to invest in its operational backbone. A significant increase in capital expenditures is planned for 2025 to expand capacity at the Rancho Cucamonga facility, specifically to support the commercialization of major insulin and complex injectable opportunities from the pipeline. This investment underscores the strategic importance of manufacturing scale and capability in realizing the potential of future high-value product launches.

The Portfolio Today: Growth Drivers and Headwinds

Amphastar's first quarter 2025 financial results illustrate the current dynamics of its portfolio. Net revenues were $170.5 million, a slight decrease from $171.8 million in the prior-year period. This modest decline reflects a mix of strong performance in key branded assets counterbalanced by increasing competition in established generic lines.

Branded products are emerging as significant growth engines. BAQSIMI, the intranasal glucagon product, saw product revenues (shipped directly by Amphastar) surge to $38.355 million in Q1 2025, a 177% increase from $13.843 million in Q1 2024. This dramatic growth is primarily attributed to the company assuming full global distribution responsibilities for the product at the beginning of 2025, leading to increased unit volumes. The transition from Lilly's (LLY) distribution, which previously resulted in a net economic benefit reported in "other revenues" ($14.207 million in Q1 2024), is now complete, with all BAQSIMI revenue recognized as product sales. To further drive BAQSIMI growth, Amphastar launched a strategic co-promotion partnership with MannKind (MNKD) in January 2025, leveraging their experienced sales force to enhance promotional reach, particularly among endocrinologists. Management expects the majority of benefits from these initiatives to materialize in the second half of 2025 and forecasts high single-digit unit growth for BAQSIMI in 2025, supported by a 3% price increase in the U.S.

Primatene MIST also continued its strong performance, with sales reaching $29.051 million in Q1 2025, a 20% increase from $24.166 million in Q1 2024. This growth is driven by increased unit volumes and sustained demand. The company is expanding its physician sampling program for Primatene MIST, including a pilot initiative targeting primary care physicians, to further bolster its market position. Both BAQSIMI and Primatene MIST are anticipated to be key drivers of revenue growth throughout 2025.

However, several established generic products faced significant competitive headwinds in Q1 2025. Glucagon injection sales declined 27% to $20.843 million from $28.535 million, primarily due to increased competition and a market shift towards ready-to-use glucagon products like BAQSIMI. Management anticipates Glucagon sales will continue to fluctuate and potentially decline faster going forward due to the full impact of recent competitor launches. Epinephrine sales decreased 29% to $18.587 million from $26.110 million, impacted by both lower unit volumes and a lower average selling price for the multi-dose vial product due to increased competition. Sales of other products, including Enoxaparin, Dextrose, and Naloxone, also decreased due to increased competition, partially offset by the launch of Albuterol MDI (August 2024) and higher sales of Phytonadione. The company expects sales of Epinephrine and other generics to continue fluctuating based on competitor supply dynamics.

Gross margins in Q1 2025 were 50%, down from 52.4% in Q1 2024. This decline was primarily driven by the accounting change for BAQSIMI revenue recognition (now including cost of sales) and lower pricing for the Epinephrine multi-dose vial, partially offset by increased sales of higher-margin products like Primatene MIST and Phytonadione.

Competitive Landscape

Amphastar operates in a competitive biopharmaceutical landscape, facing both large, diversified generic players and smaller, niche-focused companies. Key competitors include global generics leaders like Viatris (VTRS) and Sandoz (SDZ), as well as smaller players such as Adamis Pharmaceuticals (ADMP) in specific injectable segments.

Compared to large players like Viatris and Sandoz, Amphastar is significantly smaller in terms of overall revenue and market share. Viatris, for instance, reported 2024 revenue of approximately $14.2 billion, vastly exceeding Amphastar's $712.81 million (TTM). These larger competitors benefit from immense economies of scale, extensive global distribution networks, and broad portfolios. Viatris's TTM gross margin is around 38%, operating margin near 0%, and net margin negative, reflecting challenges from patent cliffs and integration costs, but its scale allows for significant cash flow generation. Sandoz, with 2024 revenue around $10 billion, exhibits stronger profitability with a TTM gross margin around 58% and operating margin around 25%, benefiting from its focused generics and biosimilar strategy.

Amphastar's competitive edge against these giants lies in its agility, focus on technically challenging products, vertical integration, and U.S.-based manufacturing. While Viatris and Sandoz compete directly in generic injectables like Enoxaparin, Amphastar's expertise allows it to target complex niches and potentially achieve faster regulatory approvals or introduce products with differentiated features (e.g., the Epinephrine prefilled syringe, where it is currently the sole U.S. hospital supplier). Amphastar's TTM gross margin of 50.24% and operating margin of 26.74% demonstrate solid profitability, particularly the operating margin, which is competitive with or exceeds that of larger, more diversified players facing broader market pressures.

Against smaller, niche competitors like Adamis Pharmaceuticals, Amphastar's scale, established manufacturing infrastructure, and broader portfolio provide a significant advantage. Adamis Pharmaceuticals, with much smaller revenue (around $30-40 million in 2024) and negative profitability margins, faces challenges in scaling and navigating regulatory hurdles. Amphastar's ability to consistently bring products to market and manage a diverse portfolio positions it favorably against such smaller, less resourced players.

The competitive environment is dynamic, with ongoing price erosion in generics, market shifts (like the move to ready-to-use glucagon), and the cyclical nature of drug shortages. Amphastar's strategy of diversifying into branded products (BAQSIMI, Primatene MIST) and pursuing a high-value pipeline is a direct response to these pressures, aiming to reduce reliance on products facing intense generic competition. The company's vertical integration and domestic manufacturing also serve as strategic defenses, mitigating supply chain risks and potentially offering a cost advantage or supply reliability edge over competitors with more complex global manufacturing footprints, particularly in the context of increasing geopolitical and trade tensions.

The Pipeline: Fueling Future Growth

The long-term growth story for Amphastar is heavily reliant on its pipeline of generic ANDAs, biosimilars, and proprietary candidates. The company has made substantial investments in R&D, with expenses increasing 18% in Q1 2025 to $20.096 million, driven by higher personnel costs, clinical trial expenses, and FDA filing fees. Management expects R&D spending to continue increasing annually as they advance complex projects, including insulin and inhalation candidates.

The pipeline includes several key candidates with near-term potential:

• AMP-002: An ANDA filing for which the company is encouraged by recent FDA communication and maintains a positive outlook. It is currently without a generic competitor.
• AMP-007: An inhalation product ANDA that received a Complete Response Letter (CRL), with the company on track to submit its response in Q2 2025. The GDUFA goal date is in Q2 2025.
• AMP-015: A Teriparatide product ANDA that received a CRL in Q4 2024, with the response submitted by January 2025. The GDUFA goal date is in Q4 2025. This would be the third generic in the market.
• AMP-018: A GLP-1 ANDA filed in Q2 2024, granted competitive generic therapy designation and priority review, with a GDUFA goal date in Q2 2025. The company anticipates submitting its response to a recently received CRL in the second half of 2025.
• AMP-004: An Insulin Aspart BLA that the FDA has accepted, setting a BsUFA goal date in Q1 2026. Amphastar's goal is to become the first interchangeable biosimilar product in this market, which has IQVIA sales over $1.4 billion. Management sees significant value in interchangeability for ease of patient access and believes their technical capabilities position them well, although approval is unlikely until late 2026.
• AMP-028: A new biosimilar addition to the pipeline, targeting a product with IQVIA sales over $2 billion and no current biosimilars. This marks Amphastar's first BLA target outside of insulin and highlights the strategic shift towards high-value therapeutic areas.

The successful approval and launch of these pipeline products are critical to offsetting expected declines in the generic portfolio and driving future growth.

Financial Performance and Health

Amphastar's financial performance in Q1 2025 reflects the dynamics discussed. Net revenues were $170.5 million, a slight dip from the prior year. Gross profit decreased to $85.251 million (50% margin) from $90.100 million (52.4% margin), primarily due to the BAQSIMI accounting change and generic pricing pressures.

Operating expenses increased, driven by higher R&D ($20.096 million vs. $17.043 million) and selling, distribution, and marketing ($11.866 million vs. $9.371 million), reflecting the planned investments in pipeline development and BAQSIMI promotion. General and administrative expenses remained relatively stable ($15.996 million vs. $15.676 million). Total operating expenses rose to $47.958 million from $42.090 million.

Income from operations decreased to $37.293 million from $48.010 million. Non-operating expenses, net, increased significantly to $6.431 million from $0.134 million, primarily due to foreign currency fluctuations and mark-to-market adjustments on interest rate swaps, partially offset by lower interest expense following debt repayments.

Income before income taxes was $30.862 million, down from $47.876 million. The income tax provision was $5.577 million, resulting in an effective tax rate of 18.1% compared to 8.6% in Q1 2024, primarily due to the timing of discrete tax items. Net income for the quarter was $25.285 million, or $0.51 per diluted share, compared to $43.177 million, or $0.81 per diluted share, in Q1 2024.

Despite the lower net income, the company generated $35.1 million in cash flow from operations in Q1 2025. Working capital increased to $388.9 million at March 31, 2025, from $360.3 million at December 31, 2024, driven by increases in accounts receivable and inventories (related to BAQSIMI transition) partially offset by higher accounts payable. The company ended the quarter with $182.782 million in cash and cash equivalents.

Amphastar's balance sheet includes significant long-term debt ($603.858 million net as of March 31, 2025), primarily from the 2029 Convertible Notes ($345 million principal) and the Wells Fargo (WFC) Term Loan ($250 million). The company was in compliance with all debt covenants as of March 31, 2025. Liquidity is deemed sufficient to fund operations for at least the next 12 months, supported by cash reserves, operating cash flows, and credit facilities.

Outlook and Investment for Growth

Management maintains its guidance for "relatively flat" revenue in 2025, anticipating a return to double-digit growth in 2026. The 2025 outlook is predicated on receiving sales contributions from two pipeline products launching in the second half of the year (on a risk-adjusted basis), which are expected to offset declines from increased competition in the generic portfolio.

Key growth drivers for 2025 are expected to be BAQSIMI (high single-digit unit growth, plus U.S. price increase) and Primatene MIST (high single-digit sales growth). These gains are expected to be counterbalanced by sales declines in Glucagon, Epinephrine, Phytonadione, and Enoxaparin due to competitive pressures.

Operating expenses are expected to increase, particularly R&D (driven by insulin and inhalation clinical trials) and selling/marketing (driven by BAQSIMI and Primatene MIST promotion). Gross margins are expected to be lower in 2025 due to generic pricing pressures and the BAQSIMI accounting change.

Significant capital spending is planned for 2025 to support the Rancho Cucamonga facility expansion, which will increase capacity for future major product launches. This investment, along with continued R&D, underscores the company's commitment to funding its long-term growth strategy through internal cash flows. The company also plans to continue utilizing its cash position for share buybacks, having purchased $11 million in Q1 2025 and authorized an additional $50 million program in November 2024.

Risks and Challenges

Despite the strategic focus on higher-value products and pipeline development, Amphastar faces several risks. Increased competition in the generic market remains a persistent challenge, directly impacting sales and margins of key products like Glucagon and Epinephrine. Regulatory risks are inherent in the pharmaceutical industry, with potential delays or unfavorable outcomes for pipeline candidates (as seen with CRLs for AMP-007, AMP-015, and AMP-018) impacting the timing and realization of future revenue.

Supply chain dependencies, particularly for APIs and components sourced from foreign countries, pose risks, although the company's vertical integration and U.S. manufacturing mitigate some of these. Macroeconomic factors, including inflation, interest rates, and global conflicts, can affect operations and market demand. Evolving trade policies and tariffs, while currently estimated to have a limited impact, remain a potential risk, especially concerning imported materials.

Furthermore, the pledging of executive shares to secure personal loans introduces a potential risk of forced sales if the stock price declines, which could negatively impact the share price. Litigation risks, while assessed as not having a material adverse effect currently, are inherent in the business and can incur significant costs and management distraction.

Conclusion

Amphastar Pharmaceuticals is navigating a pivotal transition, strategically shifting its focus towards a higher-value portfolio of branded products and complex pipeline candidates to drive future growth. While the first quarter of 2025 reflects the current reality of competitive pressures eroding sales in established generic lines, it also highlights the significant growth momentum in branded assets like BAQSIMI and Primatene MIST.

The company's core strengths – its expertise in technically challenging products, vertical integration, and U.S.-based manufacturing – provide a solid foundation and operational resilience. The robust pipeline, particularly the biosimilar insulin program targeting interchangeability and the GLP-1 ANDA, represents substantial long-term potential, albeit with inherent regulatory uncertainties and timelines.

The forecast for a flat 2025 revenue year underscores the transitional nature of the current period, heavily reliant on the successful approval and launch of key pipeline assets in the latter half. However, the anticipated return to double-digit growth in 2026 signals management's confidence in the long-term strategy and the potential of the pipeline to overcome generic headwinds. For investors, the story of Amphastar is one of execution – successfully leveraging its technical capabilities and operational strengths to bring high-value products to market, thereby transforming its revenue mix and unlocking future growth potential, even as it contends with the persistent challenges of a competitive landscape. The significant investments in R&D and manufacturing capacity signal a clear commitment to this future, positioning Amphastar for a potentially more profitable and less volatile growth trajectory beyond 2025.