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Summary

  • AMPH is a specialty pharmaceutical company that focuses primarily on developing, manufacturing, marketing and selling technically-challenging generic and proprietary injectable and inhalation products.
  • Swung from a P/E of 40x for the 2013 year to a loss for Q1 '14.
  • AMPH currently manufactures and sells 15 products in the U.S. and is developing a portfolio of 13 generic and seven proprietary injectable and inhalation product candidates.

Based in Rancho Cucamonga, CA, Amphastar Pharmaceuticals (NASDAQ:AMPH) scheduled an $81 million IPO on the Nasdaq with a market capitalization of $470 million at a price range midpoint of $11 for Wednesday, June 25, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Co-Managers: Jefferies, BMO Capital Markets, Piper Jaffray

Joint Managers: Needham & Company

End of lockup (180 days): Monday, December 22, 2014

End of 25-day quiet period: Monday, July 21, 2014

Summary

AMPH is a generic pharmaceutical industry with no patent protection except for its own Primatene mist product candidate.

Based on 2013 results the P/E is 40, but AMPH swung to a loss in Q1 '14.

In general, when formerly profitable companies lose money in the quarter preceding their IPO, it's a red flag.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (MM)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Q1 '14

Amphastar Pharmaceuticals

$471

2.6

-73.6

1.6

1.9

17%

P/E based on 2013yr

.

.

40

Conclusion
The rating on AMPH is neutral.

Swung from a P/E of 40x for the 2013 year to a loss for Q1 '14.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

AMPH is a specialty pharmaceutical company that focuses primarily on developing, manufacturing, marketing and selling technically-challenging generic and proprietary injectable and inhalation products.

Products

AMPH currently manufactures and sells 15 products in the U.S. and is developing a portfolio of 13 generic and seven proprietary injectable and inhalation product candidates.

Income statement summary

AMPH has achieved profitability for each of the past three years but recorded a loss for the three months ended March 31, 2014.

For the year ended December 31, 2013 and for the three months ended March 31, 2014, AMPH recorded net revenues of $229.7 million and $45.9 million, respectively. AMPH recorded net income of $11.9 million for the year ended December 31, 2013 and a net loss of $1.6 million for the three months ended March 31, 2014.

Largest net revenue product

AMPH's largest product by net revenues is enoxaparin sodium injection, the generic equivalent of Sanofi S.A.'s Lovenox.

Enoxaparin is a difficult to manufacture injectable form of low molecular weight heparin that is used as an anticoagulant and is indicated for multiple indications, including the prevention and treatment of deep vein thrombosis.

AMPH commenced sales of its enoxaparin product in January 2012, and for the year ended December 31, 2013 and the three months ended March 31, 2014, AMPH recognized net revenues from the sale of its enoxaparin product of $145.9 million and $26.1 million, respectively.

Enoxaparin is difficult to produce because the active pharmaceutical ingredient, or API, is not easily obtained, manufactured or characterized.

AMPH manufactures both the API and finished product for its enoxaparin product in-house. AMPH believes that its enoxaparin product demonstrates its capabilities in characterizing complex molecules (which is a process that involves a determination of physiochemical properties, biological activity, immunochemical properties and purity), developing therapeutically equivalent generic versions of drugs with large, complex molecules and overcoming numerous regulatory hurdles.

Product pipeline

In addition to its currently marketed products, AMPH has a robust pipeline of 20 generic and proprietary product candidates in various stages of development which target a variety of indications.

With respect to these product candidates, AMPH has filed three abbreviated new drug applications, or ANDAs, one new drug application, or NDA, and one NDA supplement with the U.S. Food and Drug Administration, or FDA.

Dividend Policy

No dividends are planned.

Intellectual Property

AMPH owns several U.S. and foreign patents covering processes and equipment used in the manufacture of a few of its products. The expiration dates of these patents range from 2020 to 2027.

In addition, AMPH owns a United States patent covering Primatene Mist HFA: United States Patent Number 8,367,734, or the "'734 patent," which issued on February 5, 2013, and expires in January 2026.

Additionally, AMPH has several patent applications that are currently pending in the U.S. and other countries, including China, but which have not yet issued as patents.

Accordingly, other than the '734 patent covering Primatene Mist HFA, none of AMPH's significant products or product candidates are covered by any United States or foreign patents related to formulations or compositions. Indeed, many of AMPH's products and product candidates are generic products, and therefore may not be eligible for patent protection.

For example, AMPH's enoxaparin product is a generic product, and as such, it is not covered by any United States or foreign patents.

Other of AMPH's products, including Amphadase, are based on compounds for which any applicable patents have expired, or which were not patented by Amphastar in the first instance because they are older compounds.

As for the remainder of AMPH's product candidates that are not intended to be generic products, these are early stage product candidates currently under development, for which AMPH intends to seek to obtain patent rights or rely on trade secret protection (but in any case, are not currently covered by any United States or foreign patents).

In addition, with respect to such product candidates, AMPH may seek patent rights for various potential technology platforms (or rely on trade secret protection), which could apply across multiple product candidates (but again, such potential technology platforms currently are not covered by any United States or foreign patents).

Competition

AMPH faces and will face significant competition for its products and product candidates from pharmaceutical companies that focus on the generic injectable and inhalation markets such as Hospira, Inc., Akorn, Inc., Sandoz Inc., Mylan Inc. and Teva Pharmaceutical Industries Ltd.

Competition in the generic pharmaceutical industry has increased as producers of branded products have entered the business by creating generic drug subsidiaries, purchasing generic drug companies, or licensing their products to generic manufacturers prior to patent expiration and/or as their patents expire.

Therefore, AMPH's competitors also include the innovator companies of its generic drug products.

For example, enoxaparin is currently marketed by Sanofi, under the brand name Lovenox. Sanofi also markets their authorized generic enoxaparin product through their subsidiary, Winthrop.

Sandoz also markets a generic version of enoxaparin. Teva and Hospira have filed ANDAs with the FDA for approval of their generic versions of enoxaparin.

5% stockholders

Applied Physics & Chemistry Laboratories, Inc. 19.67%

Coller International Partners IV Limited 8.66%

Jack Y. Zhang 27.14%

Mary Z. Luo 27.14%

Use of proceeds

AMPH expects to net $37 million from its IPO. Proceeds are allocated as follows:

product development, working capital and other general corporate purposes.

AMPH may also use a portion of the net proceeds for potential acquisitions of technologies, assets, products or businesses that expand or complement its current business. AMPH does not have any agreements or commitments relating to any potential acquisitions for which AMPH would use any of the net proceeds.

Disclaimer: This AMPH IPO report is based on a reading and analysis of AMPH's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Amphastar Pharmaceuticals