AMPH — Q2 2026 Financial Report Analysis

Amphastar Pharmaceuticals makes hard-to-produce injectable, inhaled and nasal medicines, mostly generics sold to hospitals, plus a few branded products. The biggest is BAQSIMI, a nasal glucagon spray for severe low blood sugar that it bought from Eli Lilly. In the second quarter of 2026, revenue rose 5% to $183.9 million. Newly launched generics more than made up for falling prices on older products. Operating profit still fell 6%, because spending on legal work, a new IT system and insulin clinical trials grew faster than sales. Diluted EPS rose to $0.67 from $0.64 only because the company bought back about 8% of its shares.

At a glance

• New launches added about $16.4 million of sales (ipratropium bromide $8.4 million, teriparatide +$4.5 million, iron sucrose +$3.5 million), more than the $9.5 million total increase. Without them, revenue from the existing product line would have fallen.
• Gross margin recovered to 50.8% (49.6% a year ago) after a weak first quarter of about 41%. Gross margin is the share of revenue left after the cost of making the products.
• BAQSIMI crossed its first $175 million annual sales milestone, so Amphastar owes Lilly $100 million in Q3 2026. That is roughly a third of its $290 million in cash and short-term investments at June 30.

Results at a glance

Operating margin is the share of revenue left after running the business, before interest and tax.

Where the revenue came from

The products split into two groups:

• Older products are losing price. BAQSIMI's average selling price fell, which the company attributes to "a change in gross-to-net discounts due to changes in chargebacks and rebates and changes to the customer mix". Gross-to-net discounts are the rebates and fees that separate the list price from what Amphastar actually collects. The lower price cost about $8.1 million of sales, and higher unit volume added back $6.9 million. Injectable glucagon fell 42%: lower prices cost $7.5 million and lower volume $1.2 million, which the company puts down to competition and patients moving to ready-to-use products like its own BAQSIMI. Part of the glucagon decline is therefore Amphastar's own product replacing an older one. In epinephrine, competition cut multi-dose vial sales by $2.2 million, and other suppliers' shortages raised pre-filled syringe sales by $1.9 million.
• New products are growing. Ipratropium bromide, an inhaler for COPD approved by the FDA in February 2026, brought in $8.4 million in its first quarter on sale (launched April 2026). The "other" line grew 25%, helped by teriparatide (an osteoporosis injection launched December 2025, +$4.5 million) and iron sucrose (an IV iron launched August 2025, +$3.5 million), plus higher albuterol, phytonadione and sodium bicarbonate volumes and more API sales from its ANP subsidiary. API is the active ingredient sold in bulk to other drugmakers.

The 8% drop in Primatene MIST, an over-the-counter asthma inhaler, was due to "the timing of customer purchases rather than changes in the underlying consumer demand", according to the company, which says in-store demand kept growing. That is plausible but can't be checked from the filing. Next quarter's number will show whether it was only timing.

Why profit fell while sales rose

The gross margin gain came from launches: the MD&A credits iron sucrose, teriparatide, ipratropium and phytonadione, "all of which are higher-margin products". Lower BAQSIMI, glucagon and epinephrine vial prices and higher costs from expanding the Rancho Cucamonga plant partly offset it. Gross profit therefore rose $7.0 million.

Operating expenses rose $9.4 million, more than the gross profit gain:

• General and administrative +30% ($14.0M to $18.2M): higher legal costs, the rollout of a new ERP system (the software that runs ordering, inventory and accounting) and higher salaries.
• Selling and marketing +30% ($10.2M to $13.3M): higher freight costs and more BAQSIMI marketing.
• R&D +10% ($20.1M to $22.2M): more clinical-trial spending, mainly on the insulin pipeline. For the half year, clinical-trial costs rose from $1.1 million to $5.1 million.

What the headline numbers hide

• All of the EPS growth came from buybacks. Net income fell 2.2%, while the diluted share count dropped 8.1%, from 48.1 million to 44.2 million. Amphastar bought back 2.28 million shares for $44.7 million in Q2, and 3.66 million shares for $74.2 million in the first half. Calculated on last year's share count, EPS would have fallen. The tax rate did not help: about 21.3% against 21.1% a year ago.
• The first half was much weaker than Q2 alone. First-half revenue rose 2.9% to $355.1 million, but net income fell 35% to $36.8 million and diluted EPS dropped to $0.81 from $1.15. That implies a first quarter with net income of about $6.4 million and gross margin of about 41%. The MD&A blames the first-half margin drop on lower prices for its higher-margin products: BAQSIMI, glucagon, phytonadione and epinephrine vials.
• What "adjusted" EPS leaves out. The $0.91 adjusted EPS excludes $6.3 million of amortization of acquired intangibles (mostly the BAQSIMI purchase) and $7.1 million of share-based pay, minus their tax effect. Share-based pay is a real, recurring cost, so GAAP's $0.67 is the more conservative measure. On the adjusted basis, net income was flat ($40.8M against $40.9M).
• Cash flow is strong but includes timing effects. First-half operating cash flow was $99.2 million against $36.8 million of net income. Non-cash costs explain most of the gap (depreciation and amortization of $34.5 million, share-based pay of $16.4 million). The remaining $12.7 million came from working capital, mainly accounts payable rising "due to the timing of payments", which can reverse. Capital spending was $18.1 million.
• Receivables and inventory look normal. At June 30 they were up only 0.9% and 1.7% from December. Inventory write-downs charged to cost of revenues were $2.7 million in Q2, the same as a year ago.
• A new regulatory risk after quarter-end. In July 2026 the FDA sent a warning letter to the South El Monte, California plant of the IMS subsidiary, citing violations of good manufacturing rules. The letter doesn't stop distribution. The company says it has paused production of "one immaterial product" and doesn't expect a material effect on sales. It also warns that "manufacturing expenses are expected to increase" during the fix, which is a direct headwind for the gross margin that just recovered.

Takeaway: Amphastar is relying on new launches to offset steady price erosion on its older products, and in Q2 they did that at the gross-profit line. Operating profit still fell, and EPS rose only because the share count shrank 8%. The next few quarters depend on whether launches keep beating price declines while the company pays Lilly $100 million and absorbs plant remediation costs.

Balance sheet and the BAQSIMI milestone

At June 30, Amphastar held $223.6 million in cash and $66.5 million in short-term investments, against about $612 million of long-term debt, mostly 2029 convertible notes. Hitting $175 million of BAQSIMI net sales in the contract year triggered a $100 million payment to Lilly. It is recorded as a liability and added to BAQSIMI's intangible asset and plant value, and it is due in Q3 2026. Amphastar has paid Lilly $629 million under the deal so far. It may owe up to $350 million more: two more $100 million payments if annual BAQSIMI sales reach $200 million, and $150 million if cumulative five-year sales reach $950 million. Further milestones are owed on licensed pipeline products from Anji and Hanxin. If BAQSIMI keeps growing, more cash will go to Lilly.

Outlook

Management did not give numerical revenue or earnings guidance in the release or the 10-Q. The things to watch, all taken from the filing:

• Pipeline: one generic application (ANDA) and one biosimilar insulin are under FDA review, targeting markets the company sizes at more than $1.6 billion combined, based on IQVIA data. A biosimilar is a near-copy of a biologic drug. Two more biosimilars and three generics are in development. The company has also licensed four proprietary candidates, including peptides for cancer and eye disease and a synthetic corticotropin.
• Margins: the Q2 gross-margin recovery depends on launches staying high-margin while plant expansion and IMS remediation push costs up.
• Cash: the $100 million Lilly payment in Q3 and continued buybacks will reduce the cash balance.

Our view: on the evidence of Q2, revenue growth in the mid-single digits is achievable, led by ipratropium's first full quarters and the 2025 launches. Operating profit growth depends on spending: G&A is growing at 30%, and that rate would have to slow for profit to grow. Until it does, buybacks will be the main source of per-share growth, and the cash they use competes with the BAQSIMI milestone payments.

Source: Amphastar Form 10-Q for the quarter ended June 30, 2026 (filed August 6, 2026) and the accompanying earnings release (Exhibit 99.1).