Amphastar Pharmaceuticals, Inc.: Form 10-Q for the period ended Mar 31, 2026

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, 2025, particularly in Item 1A. “Risk Factors”.

Overview

We are a biopharmaceutical company focusing on developing, manufacturing, and commercializing technically challenging generic and proprietary injectable, inhalation, and intranasal products, as well as active pharmaceutical ingredient, or API products. We currently manufacture and sell over 25 prescription pharmaceutical products, and one over-the-counter product, Primatene MIST®.

Our largest products by net revenues currently include BAQSIMI®, Primatene MIST®, epinephrine, glucagon, and lidocaine.

We are currently developing a portfolio of generic abbreviated new drug applications, or ANDAs, biologics license applications, or BLAs, including biosimilar insulin product candidates, and proprietary product candidates, which are in various stages of development and target a variety of indications. One ANDA and one biosimilar insulin candidate are currently on file with the FDA.

To complement our internal growth and expertise, we have in-licensed several early-stage proprietary products and have made several strategic acquisitions of companies, products and technologies. These acquisitions collectively have strengthened our core injectable and inhalation product technology infrastructure by providing additional manufacturing, marketing, and research and development capabilities, including the ability to manufacture raw materials, APIs, and other components for our products.

Macroeconomic Trends and Uncertainties

Recent worldwide events and macroeconomic factors, such as international trade relations, tariffs, new legislation and regulations, changes in administration, taxation or monetary policy changes, public sector budgetary cycles and funding authorization in the United States, political and civil unrest, global conflicts, supply chain disruptions, heightened inflationary pressures, and fluctuating interest rates, as well as rising healthcare costs among other factors, also increase volatility in the global economy and continue to pose challenges to our business. For example, there is significant uncertainty relating to tariffs. While all of our finished products and four of our APIs are manufactured in the United States, we import APIs, starting materials for APIs, and components from various countries.

See the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, 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

In January 2026, we entered into a License Agreement with Nanjing Hanxin Pharmaceutical Technology Co., Ltd., or Hanxin, pursuant to which Hanxin has granted an exclusive license to a fully synthetic corticotropin (ACTH) analog, now designated AMP-110, in the United States and Canada. AMP-110 is designed to address inflammatory and autoimmune conditions with a potentially improved safety profile compared to porcine-derived ACTH products. In January 2026, we made an upfront payment of $2.0 million to Hanxin upon signing the License Agreement. The agreement is also subject to potential development milestone payments, as well as sales milestone and royalty payments.

For more information regarding the Hanxin license agreement, see “Part I – Item 1. Financial Statements (unaudited) – Notes to Condensed Consolidated Financial Statements – Note 17. Commitments and Contingencies.”

In February 2026, the FDA approved our Ipratropium Bromide HFA inhalation aerosol, 17 mcg/actuation, which we launched in April 2026.

Business Segments

Our performance is assessed and resources are allocated based on one reportable segment, pharmaceutical products.

For more information regarding our segments, see “Part I – Item 1. Financial Statements (unaudited) – Notes to Condensed Consolidated Financial Statements – Note 5. Segment Reporting.”

Results of Operations

Three Months Ended March 31, 2026 compared to Three Months Ended March 31, 2025

Net revenues

(in thousands)

The following table summarizes our revenue by product for the three months ended March 31, 2026 and 2025:

(in thousands)

The decrease in sales of BAQSIMI® was primarily due to a lower average selling price, as a result of a change in gross-to-net discounts due to changes in chargebacks and rebates and changes to the customer mix, impacting sales of approximately $8.0 million. This decrease was partially offset by an increase in unit volumes, contributing $2.0 million in sales driven by our continued marketing efforts. Primatene MIST® sales increased primarily due to an increase in unit volumes. The increase in sales of epinephrine was due to an increase in demand for our epinephrine pre-filled syringe, as a result of other supplier shortages, contributing $4.1 million in sales. This increase was partially offset by a decrease in our epinephrine multi-dose vial product, as a result increased competition, impacting sales by $3.5 million. The decrease in sales of glucagon was due to a decrease in unit volumes, impacting sales by $6.1 million, as well as a lower average selling price, which impacted sales by $5.6 million, as a result of increased competition and the continued shift to ready to use glucagon products such as BAQSIMI®. The increase in other products was primarily due to recently launched products including an increase in albuterol sales of $2.8 million, iron sucrose sales of $1.4 million and teriparatide sales of $2.2 million, which were launched in August 2024, August 2025, and December 2025, respectively. An increase in API sales and an increase in dextrose sales as a result of an increase in demand caused by other supplier shortages, also positively impacted sales.

We anticipate that sales of glucagon will continue to decline in the future due to competitive dynamics. We also anticipate that sales of epinephrine and other products will continue to fluctuate depending on the ability of our competitors to supply market demands.

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. We had no significant backlog as of March 31, 2026. 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 was impacted by lower average selling prices for our higher margin products, such as BAQSIMI®, glucagon, phytonadione, and epinephrine multi-dose vials. Additionally, our manufacturing expenses increased due to the expansion of our manufacturing facilities in Rancho Cucamonga, CA.

Selling, distribution, and marketing, and general and administrative

(in thousands)

The increase in general and administrative expenses was primarily due to an increase in legal expense, expenses associated with implementing a new ERP system and salary and personnel-related expenses.

Legal fees may fluctuate from period to period due to the timing of patent challenges and other litigation matters.

Research and development

(in thousands)

(1) Includes the upfront payment of $2.0 million relating to the licensing agreement with Hanxin.

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.

Research and development expenses increased primarily due to spending for our insulin, inhalation, and proprietary pipeline products. Additionally, we made a $2.0 million upfront payment for the licensing agreement that we entered into with Hanxin during the quarter.

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 proprietary, insulin and inhalation product candidates. These expenditures will include costs of APIs developed internally as well as APIs purchased externally for use in research and development, 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 expenses, net

(in thousands)

The change in non-operating expenses, net is primarily a result of foreign currency fluctuation, as well as mark-to-market adjustments relating to our interest rate swap contract during the three months ended March 31, 2026.

Income tax provision

(in thousands)

Our effective tax rate for the three months ended March 31, 2026 increased in comparison to the three months ended March 31, 2025, primarily due to timing of discrete tax items. For more information regarding our income taxes, see “Part I – Item 1. Financial Statements (unaudited) – Notes to Condensed Consolidated Financial Statements – Note 14. Income Taxes.”

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 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 with cash flows from operations.

Our cash obligations include the principal and interest payments due on our existing loans, and finance and operating lease payments. In addition, upon the achievement of various development, regulatory and commercial milestones for agreements, we have entered into with third parties, we are contractually obligated to pay additional amounts that, in the aggregate, are significant. These payments are contingent upon the occurrence of various future events, substantially all of which have a high degree of uncertainty of occurring, and any resulting cash requirements are managed through our operating budgeting processes. These obligations are not recorded on our condensed consolidated balance sheets. As of March 31, 2026, the maximum amount that may be payable in the future for agreements we have entered into with third parties is approximately $1.1 billion. These obligations are described further throughout this Quarterly Report.

As of March 31, 2026, our foreign subsidiaries collectively held $12.3 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 filing of this Quarterly Report on Form 10-Q. We expect additional cash flows to be generated in the longer term from future product launches, 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 launches, which could be lengthy or ultimately unsuccessful.

Working capital decreased $8.7 million to $469.2 million at March 31, 2026, compared to $477.9 million at December 31, 2025.

Cash Flows from Operations

The following table summarizes our cash flows provided by and used in operating, investing, and financing activities for the three months ended March 31, 2026 and 2025:

(in thousands)

Sources and Use of Cash

Operating Activities

Net cash provided by operating activities was $47.8 million for the three months ended March 31, 2026, which included net income of $6.4 million. Non-cash items comprised primarily of $17.3 million of depreciation and amortization, which includes $8.1 million related to depreciation of property, plant and equipment; $6.3 million related to amortization of intangible assets; $2.1 million related to amortization of operating lease right-of-use assets; $0.8 million related to amortization of discounts, premiums, and debt issuance costs; and share-based compensation expense of $9.3 million.

Additionally, for the three months ended March 31, 2026, there was a net cash inflow from changes in operating assets and liabilities of $15.3 million, which resulted primarily from increases in accounts payable and accrued liabilities, as well as a decrease in inventories, which was partially offset by an increase in accounts receivable. 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 sales.

Net cash provided by operating activities was $35.1 million for the three months ended March 31, 2025, which included net income of $25.3 million. Non-cash items comprised primarily of $16.0 million of depreciation and amortization, which includes $7.4 million related to depreciation of property, plant and equipment; $6.2 million related to amortization of intangible assets; $1.6 million related to amortization of operating lease right-of-use assets; $0.8 million related to amortization of discounts, premiums, and debt issuance costs; and share-based compensation expense of $8.4 million. Additionally, for the three months ended March 31, 2025, there was a net cash outflow from changes in operating assets and liabilities of $16.7 million, which resulted primarily from an increase in accounts receivables and an increase in inventories, which was partially offset by an increase in accounts payable and accrued liabilities. The increase in accounts receivables was primarily due to the timing of sales in the quarter. The increase in inventories was primarily due to the increased purchases of finished product, raw materials and components for BAQSIMI®, as we assumed full responsibility for the supply chain from Lilly. Accounts payable and accrued liabilities increased primarily due to the increase in accrued customer fees and rebates associated with BAQSIMI® sales.

Investing Activities

Net cash used in investing activities was $16.7 million for the three months ended March 31, 2026, primarily as a result of $9.5 million in purchases of property, plant, and equipment, which included $4.5 million incurred in the United States, $0.8 million in France, and $4.2 million in China, as well as a net cash outflow of $7.3 million from sales and purchases of investments during the period.

Net cash provided by investing activities was $10.5 million for the three months ended March 31, 2025, primarily as a result of $21.2 million from sales and purchases of investments during the quarter. This was partially offset by $10.7 million in purchases of property, plant, and equipment, which included $7.8 million incurred in the United States, $0.6 million in France, and $2.3 million in China.

Financing Activities

Net cash used in financing activities was $30.2 million for the three months ended March 31, 2026, primarily as a result of $29.5 million used to purchase treasury stock and a net of $0.7 million used to settle share-based compensation awards under our equity plan.

Net cash used in financing activities was $14.5 million for the three months ended March 31, 2025, primarily as a result of $11.0 million used to purchase treasury stock and a net of $4.7 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. This was partially offset by $1.6 million of net proceeds from borrowings on our line of credit in China.

Indebtedness

For more information regarding our outstanding indebtedness, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 13. Debt”.

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, 2025. 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, 2025.

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.

Our manufacturing facilities as well as our CMOs are subject to periodic inspection by the FDA to ensure that they are operating in compliance with cGMP requirements.

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, 2025. 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 rate changes (Foreign Currency Exchange Risk).

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 Securities Exchange Act of 1934, as amended, or 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 March 31, 2026, 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.

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, 2025, filed with the SEC on February 26, 2026.

We must manufacture our drug products at our facilities in conformity with cGMP regulations; failure to maintain compliance with cGMP regulations may prevent or delay the manufacture or marketing of our products or product candidates and may prevent us from gaining approval of our products.

All of our products and product candidates for use in clinical studies must be manufactured, packaged, labeled and stored in accordance with cGMP. For our approved products, modifications, enhancements, or changes in manufacturing processes and sites may require supplemental FDA approval, which may be subject to a lengthy application process or which we may be unable to obtain.

All facilities of Amphastar, our subsidiaries and our CMOs and suppliers are periodically subject to inspection by the FDA and other governmental entities, and operations at these facilities could be interrupted or halted if the FDA or another governmental entity deems such inspections as unsatisfactory. For example, our facilities in Rancho Cucamonga, CA, South El Monte, CA, Canton, MA, Éragny Sur Epte, France, and Nanjing, China are subject to FDA cGMP inspections as well as pre-approval, routine and other inspections by the FDA, state, and other regulatory authorities and may be again in the future per applicable law. Our facility in South El Monte, CA was inspected by the FDA in December 2025, and we responded to the Form 483 observations in January 2026. Subsequently, in April 2026, the FDA notified us that the facility would be classified as “Official Action Indicated.” We have undertaken corrective actions to address the observations noted in the Form FDA 483 and do not anticipate any interruption that could have a material adverse effect on Amphastar and its operations.

Compliance with cGMP standards requires substantial expenditures of time, money and effort in such areas as production and quality control to ensure full technical compliance. Failure to comply with cGMP or with other state, federal, or foreign requirements may result in unanticipated compliance expenditures, total or partial suspension of production or distribution, suspension of review of applications submitted for approval of our product candidates, termination of ongoing research, disqualification of data derived from studies on our products and/or enforcement actions such as recall or seizure of products, injunctions, civil penalties and criminal prosecutions of the company and company officials. There can be no assurance that we will be able to remedy any deficiencies cited by FDA or other regulatory agencies in their inspections.

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.

Jack Y. Zhang and Mary Z. Luo have each pledged shares of our common stock to secure funds borrowed under existing credit lines by UBS Group and its affiliates, or UBS, East West Bank, or East West, and Cathay Bank. As of March 31, 2026, UBS had extended combined credit lines of $15.0 million to Applied Physics & Chemistry Laboratories, Inc., or APCL, which is controlled by Dr. Zhang and Dr. Luo, East West had agreed to a loan of up to $12.0 million to Drs. Zhang and Luo, and Cathay Bank had agreed to a loan of up to $30.0 million to APCL and Dr. Luo. The UBS credit lines are secured by a pledge of 1,500,000 shares of our common stock currently held by APCL, the East West loan is secured by a pledge of 1,200,000 shares of our common stock held by APCL and Dr. Zhang, and the Cathay Bank loan is secured by a pledge of 3,000,000 shares of our common stock held by APCL and Dr. Luo. Interest on each of these loans accrues at market rates. UBS has an unlimited and unilateral right to call each of the credit lines for any reason whatsoever, and each of East West and Cathay Bank has acceleration rights to protect itself in the event of a default.

We have a pledging policy to restrict the pledging of shares by our executive officers and directors, which was created in 2021 and most recently amended in 2026. 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 sixty (60) percent of shares of common stock held by the individual or more than fifteen (15) 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.

While 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, 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.