Jason Shandell - President and Director Bill Peters - CFO, Treasurer, and SVP, Finance.

Elliot Wilbur - Raymond James David Amsellem - Piper Jaffray David Steinberg - Jefferies.

Good day, ladies and gentlemen, and welcome to the Amphastar Pharmaceuticals’ Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded.

This conference call may contain forward-looking statements, including statements relating to Amphastar Pharmaceuticals.

These statements are not historical facts but rather based on Amphastar Pharmaceuticals’ current expectations, estimates and other projections regarding Amphastar Pharmaceuticals’ business, operations and other similar or related factors.

Words such as, will, may, could, would, should, anticipate, predict, potential, continue, expects, intends, plans, projects, believes, estimates, and other similar or related expressions are used to identify these forward-looking statements.

These statements are only predictions and are such not guarantees of future performance and they involve risks, uncertainties and assumptions that are difficult or impossible to predict.

Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time-to-time in Amphastar Pharmaceuticals’ filings with the SEC. I would now like to introduce your host, Jason Shandell, President of Amphastar Pharmaceuticals. Please proceed..

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

I will now turn the call over to Bill, to discuss the third quarter financials..

Thank you, Jason. Sales for the third quarter increased 7% to $63.9 million from $59.7 million in the previous year's period. Sequentially, this represents a 19% increase from our second quarter of 2015. Sales of enoxaparin declined to $21.3 million from $32 million, due to a lower average selling price, particularly on the retail side of the business.

However, unit sales of enoxaparin were up for the quarter as we continue to maintain market share. Our Insulin API business generated sales of $6 million which was the same amount as we sold in the third quarter of 2014. Other finished pharmaceutical product sales increased 69% to $36.6 million.

This increase was spread across multiple products and was primarily due to pricing. We increased the prices of seven products in July which had a modest impact to sales in the third quarter as we also incurred standard wholesaler fees associated with raising prices. The full impact of this pricing increase will be seen in our fourth quarter.

Cost of revenues decreased in dollar terms to $46.3 million from $47.9 million in the previous year's period. More importantly we saw a gross margin improvement to 28% of revenues from 20% of revenues in the previous year.

Improving pricing was the main drive, but we've also lowered the cost of goods on enoxaparin which partially offsets the pricing declines there. Selling, distribution and marketing expenses decreased slightly to $1.2 million from $1.5 million in the previous year’s period.

General and administrative spending also decreased slightly to $9 million from $9.6 million primarily due to reduced legal expenditures.

Research and development expenditures increased to $11.1 million from $8.6 million primarily due to clinical trial expenses related to our intranasal naloxone product and external spending on our generic development portfolio.

The Company reported a net loss for the quarter of $3 million or $0.07 per share compared to last year’s third quarter’s net loss of $5.4 million or $0.12 per share.

The Company reported an adjusted net loss of approximately $300,000 or $0.01 per share compared to an adjusted net loss of approximately $3.3 million or $0.07 per share in the third quarter of last year. Adjusted earnings exclude amortization, non-cash equity compensation and impairments.

On September 30, 2015, the Company had approximately $72 million in cash and cash equivalents and restricted cash. In the third quarter, cash flow from operations was approximately $3.6 million and was positive for the fifth quarter in a row. We also announced today that the Company had increased its share buyback program by another $10 million.

The primary reason for the buyback program is to partially offset to dilution from the Company's equity compensation program, but this increase also represents the Company's long-term phase in the fundamentals of the Company.

The timing of the increase is because the Company significantly increased its purchases after the recent pullback in stock price. I will now turn the call back over Jason..

Thanks, Bill. As Bill reported, our sales increased 19% from our second quarter of 2015 and we had another quarter of positive cash flow which now marks five quarters in a row. As a result, our cash position is now at $72 million. We continue to make good progress on our pipeline and we remain on-track to file two ANDAs this quarter.

We had a pre-ANDA meeting with FDA last week to discuss our intranasal naloxone application, the meeting was very collaborative and FDA agreed to allow us to begin a rolling NDA submission. Therefore, we're planning on filing the NDA soon. With respect the Primatene, we remain in active communication with the FDA.

However, we continue to await certain review comments from the agency as we discussed on our last call. We have completed our Phase 1/2 report for our Albuterol dry powder inhaler candidate and have requested a meeting with FDA regarding our plan and protocol for the Phase 3 study. We expect to have this meeting with FDA in the first quarter 2016.

In terms of new product offerings, we launched our Amphadase product last month, which will help out to the bottom-line in the fourth quarter. We plan to file more API DMS for our China facility in 2016 which will continue to support our pipeline and increase our vertical integration. Two more new API DMS were filed last week.

On the legal front, the Federal Circuit issued a decision on November 10th in which it affirmed the District Court’s holding the Momenta patent does not make enoxaparin. However, the court vacated the Safe Harbor element of the holding and remanded the case to the District Court for further proceedings.

We are currently assessing our appeal options, but in any event are fully prepared to litigate the case on the merits to the District Court and have numerous strong defenses which should dispose of the case. Additionally on September 17th, we filed a complaint in the Central District of California against Momenta and Sandoz.

Our complaint generally asserts that Momenta and Sandoz have engaged in certain types of illegal, monopolistic and anticompetitive conduct, giving rise to various causes of action against them. A follow-on class-action lawsuit was filed in Tennessee which was based on the same underlying factual allegations as in our complaint.

On our false claims case, we're working on the appeal brief which is currently scheduled to be filed at the end of December. With that update, I will now turn the call over the operator to begin Q&A..

Thank you. [Operator Instructions] Our first question comes from Elliot Wilbur of Raymond James. Your line is open..

Thanks, good afternoon, just had a couple of questions for you.

First with respect to enoxaparin market, it still looks like pricing is coming down on a per unit basis in that market and I just wanted to see if, in fact you would agree with that assessment and obviously you've been able to offset pricing erosion with greater units or maybe you can just talk a little bit about current market dynamics with the transition from I guess from Sanofi to Fresenius whether that has shaken some market or that is kind of positive or negative from your perspective.

And then also with respect to the pending acquisition of Allergan Generics by Teva have you talked last quarter that they're having some conversations with Teva about to the product and it looks like obviously it’s a very competitive market and maybe just some updated thinking there in terms of what or when what may or may not happen with respect to the Teva, Actavis and enoxaparin products?.

Sure, yes the pricing has continued to decline although I’d say at a slower rate than it had been earlier this year. So, we saw this probably the fastest declines during the first quarter of the year and it's slower than the second slowed even further in the third.

So, while we've seen our average price dropping, it's not as severe as it was earlier on in the year and it’s somewhat steady. And we've been able to maintain our market share at those levels.

Still, we really can't comment on the Teva Actavis thing at this time, we have been in the sessions with various people about some of those things, but I really don't have anything to report at this time..

Okay.

And then I guess given that at least on a sequential basis enoxaparin appears to have stabilized and you certainly didn't benefit to the full extent from price increases in the third quarter, would it be unreasonable to expect that we would see sequential revenue gains had it been there in the 4Q?.

It certainly a possibility and there is a few things that we’ll depend on. As you know we make fairly large shipments to Actavis right now or Allergan right now, so the batch size that we send them any one time is large and so the timing of those shipments can vary between, quarter-to-quarter pricing could be down a little bit more on enoxaparin.

So, that's always a possibility but we -- and the timing of certain insulin shipments is variable and depending on other couple of different factors. But the other finished pharmaceutical product line item that we breakout now in our 10-Q disclosure and on our press release disclosure, is that that line we expect to be up in the fourth quarter.

So, that line will be up sequentially..

Okay. A question for Jason as well, with respect to Primatene, is there any timeline for the expected FDA response or is this just simply open ended and… [Multiple Speakers].

Yes. At this time it remains open ended. Yes, as I said on the last call, we expect within the time of that response that we could re-file within three month after that, but their response time is open ended at this time. And we have talked to them regarding it so they're aware that we continue to wait, but at this point it remains open ended..

Thank you. Our next question comes from David Amsellem of Piper Jaffray. Your line is open..

Thanks.

Just a couple, so on the pricing action on the seven product you cited, can you talk about the magnitude of the pricing action even qualitatively to minimum if you can and what your expectation is for the potential for new competition on these products down the road or should we think about those as your limited competition products that where there is a fair amount of inelasticity? So that's the first half topic, and then secondly on Luminox just latest thoughts on potential for new entrants in 2016 and 2017 and how are you thinking about that internally? And then lastly what the cash balance at 72 million, and having some dry powder what are your latest thoughts on the BD and M&A front and what are your priorities these days and have those changed? Thank you..

Sure, as far as the price increases go, we do rise mainly in the prices where we have minimal competition, some of those were double-digit price increases and some of them were a little bit higher than that. So, we do expect to see meaningful of revenue increases off those products in the quarters to come..

Okay. And on enoxaparin, there always is a possibility of new entrants in the market, that's why we are focused on lowering our cost structure. We're still expecting our heparin stores to be approved from our own internal company ANP as we know have heparin makes up the major cost of enoxaparin.

So, we're concentrating on keeping the cost low and obviously volume to keep the overhead to cover the overhead, and there is always that potential competition so that's why we are also focused on both the business development, at the purchase commercial products and also clearly the key focus of the Company is the pipeline to ultimately diversify the portfolio, so there is less reliance on enoxaparin..

And then finally with respect to business development, we have targeted some products and are currently in discussions and so that remains open, but we are involved in several ongoing discussions at this time..

Thank you. Our next question comes from David Steinberg of Jefferies. Your line is open..

Thanks very much, a couple of questions first just picking up on David's question previously on the M&A side, given the dislocation in equity values in last the couple of months and given the fact that you've been disciplined buyer in the past, are you seeing more opportunities or some of the seller’s getting more rational on price or are still they to the extent that you're looking at companies not products or are they sticking to kind of the old valuations out there? And then secondly, looking at your disclosures, it looks like you, in the second quarter I think you had had 12 generic products in development and now there are 11, I was just curious was there something that perhaps didn't work out in the clinic or reprioritizing and if you actually take in more than one product out in development and added others along the way over since last quarter?.

Right now, I'll start with your first question and it’s really hard to say about the valuation. We have over the past year and a half, we've seen pricing demand fairly high and the things that we've been on that have traded, have traded at valuation higher than that we were willing to pay.

But we continue to be active in looking at things and then discussions with other companies, so therefore we are -- we maintain our vigilance and our pricing valuations. We are not really active for the most part on the Company side so that's not really where we have. We have looked at some of the things that really not in any hard look at those.

But on the product side, we haven't really seen much of a change from where we're sitting right now..

That’s right and then on the ANDA pipeline, you're correct, after doing some marketing assessments some changes in some of the market dynamics we have reassessed and reprioritized and that's the reason for the change..

Thank you. I am showing no further questions. I would like to hand the call back to Jason Shandell for closing remarks..

Thank you very much operator. This concludes our call for today. Thanks again for participating. Have a great rest of the day..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day..