Ekaterina Knyazkova

Ekaterina Knyazkova inquired about the primary drivers behind the strong gross margins in the quarter, distinguishing between mix, one-time factors, and future expectations. She also asked for elaboration on the updated guidance, specifically what factors (Phibro Forward, mix, commercial execution) contributed to the better-than-expected EPS and EBITDA upside.

Answer

Glenn David, CFO, attributed strong gross margins to successful pricing on the Zoetis portfolio, positive product mix from nutritional specialties and vaccines, and a focus on higher-margin products. He noted a minor elevation from Tier Three market returns. For the guidance update, he cited strong revenue, outperformance of the acquired portfolio, efficient leveraging of existing infrastructure, and improved product mix as key drivers.

Ekaterina Knyazkova asked about the main drivers of Phibro's strong gross margins in Q2 2026, including the impact of mix and any one-time factors, and how to project gross margins for future quarters. She also inquired about the specific factors contributing to the updated EPS and EBITDA guidance upside, such as Phibro Forward, product mix, and commercial execution.

Answer

Glenn David, Chief Financial Officer, explained that gross margin improvements were driven by successful price increases, particularly on the Zoetis portfolio, and a positive product mix from strong performance in higher-margin nutritional specialties and vaccine products. He noted a minor, less than 100 basis points, one-time elevation from returns related to market transitions. For the guidance update, Mr. David cited strong revenue performance, better-than-expected results from the acquired portfolio, efficient leveraging of existing infrastructure, and the improved product mix as key contributors.

Ekaterina Knyazkova from JPMorgan Chase & Co. asked about the integration status of the acquired Zoetis medicated feed additives (MFA) business, potential areas for additional resource allocation, and the impact of tariffs, particularly concerning Brazil, that are embedded in the current guidance.

Answer

CFO Glenn David reported that the Zoetis integration is proceeding well, with major systems implemented and 90% of revenue operating independently; full independence is expected by calendar Q4. COO Larry Miller highlighted that the acquisition opens new markets in Asia and Western Europe and provides entry into the U.S. beef cattle segment, creating expansion opportunities. Glenn David also confirmed that current guidance includes known tariffs, but any major, unforeseen changes are not factored in.

Ekaterina Knyazkova asked for more detail on Phibro's exposure to potential pharma tariffs, mitigation strategies, and the performance of the core medicated feed additive (MFA) business, which appeared weaker after adjusting for the Zoetis acquisition.

Answer

Chief Financial Officer Glenn David explained that tariff impacts are manageable due to a diversified manufacturing footprint (US, Brazil, Israel) and mitigation efforts like building inventory, switching suppliers, and implementing price increases. Regarding the legacy MFA business, David attributed the 3% quarterly decline to the timing of large customer orders and a difficult comparison to the prior year's 16% growth, while noting the segment's year-to-date growth was a solid 7%.

Ekaterina Knyazkova asked for a breakdown of the updated EPS guidance, questioning how much of the increase is from the Zoetis acquisition versus the underlying business, and also inquired about the specific trends driving strong organic growth in the Animal Health segment.

Answer

Chief Financial Officer Glenn David explained that the majority of the approximate $0.53 EPS guidance increase comes from the Zoetis acquisition, with the remainder from strong performance in the legacy business. Chairman, President and CEO Jack Bendheim added that robust global demand is driven by favorable economic conditions for protein producers, who are focused on maximizing animal health and performance.

Ekaterina Knyazkova inquired about the primary drivers for the healthy gross margin performance in the quarter and asked about any surprises, incremental opportunities, or investment needs discovered during the closing process of the Zoetis MFA portfolio acquisition.

Answer

Glenn David, Chief Financial Officer, attributed the strong gross margin to a favorable product mix led by 22% growth in high-margin vaccines, lower input costs, and positive foreign exchange effects. Regarding the acquisition, David stated that while it was only a few days post-close, there were no initial surprises. Jack Bendheim, Chairman, President and CEO, added that the sales force remains very optimistic about the acquired portfolio's potential.

Ekaterina Knyazkova asked for perspective on how quickly the overall ACTH category could return to its 2017 peak of $1.2 billion and how large the market could ultimately become. She also questioned if there has been a change in physician perception, such as using the product earlier or in different cases.

Answer

President, Director & CEO Nikhil Lalwani expressed confidence that the market can grow well past its previous peak, driven by a large addressable patient population, the addition of new indications like gout, and success in converting physicians new to ACTH therapy. SVP & Head of Rare Disease, Christoper Mutz, added that in rheumatology, the gout indication has been a key driver for bringing new physicians to the class, which then opens the door for use in other rheumatology indications.

Ekaterina Knyazkova asked for details on which indications are driving the most growth for Cortrophin and if there are any changes in competitive dynamics. She also inquired about ANI's ability to leverage its U.S. manufacturing footprint and its available spare capacity in the event of new pharmaceutical tariffs.

Answer

President and CEO Nikhil Lalwani responded that Cortrophin's growth is broad-based across its core specialties and new areas like gout and ophthalmology, with the latter seeing 50% volume growth versus Q4. On tariffs, he confirmed ANI is well-positioned, with over 90% of revenue from U.S.-manufactured goods and available spare capacity at its New Jersey and Minnesota facilities to address potential supply disruptions.

Ekaterina Knyazkova of JPMorgan Chase & Co. inquired about the future revenue outlook for glucagon and the strategic rationale behind the company's decision to expand its U.S. manufacturing capacity.

Answer

CFO Bill Peters clarified that glucagon sales have not yet reached a stable run-rate and are expected to decline further due to new competition and a market shift to ready-to-use products. He also explained the manufacturing expansion is a long-term plan to support the future pipeline, particularly proprietary products, and to enhance supply chain resilience.

Ekaterina Knyazkova asked about the impact of FDA administration changes on review timelines for complex generics and whether Amphastar could leverage its U.S. manufacturing footprint to gain share amid tariff discussions.

Answer

CFO William Peters stated they have not seen a significant impact on approval timelines from FDA changes, only minor communication delays. On tariffs, he confirmed their U.S. manufacturing provides a significant advantage. The current financial impact is minimal and related to API imported from their China facility. Peters expressed hope that policy will focus on finished goods, which would benefit Amphastar, and noted their diversified sourcing and U.S. API production mitigate risk.

Ekaterina Knyazkova from JPMorgan Chase & Co. inquired about the early impact of the MannKind sales force collaboration on BAQSIMI and also asked for an update on the potential market size and launch timing for AMP-004.

Answer

Dan Dischner, an executive, explained that while it's early, the MannKind partnership significantly increases the sales force size with experienced endocrinology representatives, creating optimism for future growth. An unnamed executive clarified that AMP-004 is not expected to receive approval in 2025, with a launch more likely in late 2026.

Ekaterina Knyazkova inquired about the performance of BAQSIMI since its acquisition, asking about any surprises in market uptake or competitive dynamics and for an update on its peak sales potential. She also asked about Amphastar's long-term strategy in the growing GLP-1 category.

Answer

CFO William Peters reported that the BAQSIMI transition is proceeding smoothly, despite a minor European supply disruption that impacted sales by $2-3 million. He reaffirmed the peak sales forecast of $250-$275 million, stating current performance is on track. Regarding GLP-1s, Executive Dan Dischner noted the market is crowded and it is too early to detail a specific strategy, but promised future updates.

Ekaterina Knyazkova asked about the medium-term strategy for mitigating tariff impacts, specifically the potential for price increases. She also asked about the Zenrelia launch plan in Europe, including investment levels and potential label differences.

Answer

CFO Todd Young confirmed Elanco is already using tactical pricing to offset tariffs in some markets and is considering it for the U.S. CEO Jeff Simmons explained that for Zenrelia in Europe, teams are trained and ready for a launch in the second half of the year, with confidence in a less restrictive label, and that variable launch costs will increase.