Initial Public Offering of Amphastar Pharmaceuticals - Assignment Example

Initial Public Offering of Amphastar Pharmaceuticals The company’s business The business of Amphastar Pharmaceuticals is the development, production and them marketing of both generic and proprietary inhalable and injectable chemicals in the USA (AMPH, 2014). Currently, the company is selling fifteen products, while at the same time in the process of developing thirteen more proprietary as well as seven generic product portfolios, which will feature in the market in the near future. The company prides more in its high technical and technological capability that is the main business strength that enables the company overcome competition in its field, through the introduction of innovative technologies such as the production of a variety of pre-filled syringes, and metered-dose inhalation technology (Yahoo Finance, 2014). What are the terms of the offering? The terms of the Initial Public Offering of the Amphastar Pharmaceuticals shares is through the use of prospectus, which acts as the registration statement for the shares, and the copies of the prospectus were being offered by the underwriters of the company shares, Jefferies LLC, from their offices (AMPH, 2014). Thus, the press statements and advertisements of the IPO did not constitute an offer for sale, until the prospective buyer of the shares had obtained the copy of the prospectus and filled it. Therefore, the shares had been divided into various categories, comprising of 4,640,000 common stock shares that were directly offered by Amphastar Pharmaceuticals and common stock 3,360,000 shares that were being offered by the company’s stockholders (AMPH, 2014). Additionally, the underwriters of the company, Jefferies LLC, are reserved 1,200,000 additional shares which were available for over-allotment, offered as an option for the prospective buyers to buy more shares (Yahoo Finance, 2014). How much funding did the company and selling shareholders receive? The company is offered 5,800,000 shares at an initial price of $7 per share, which constituted $40,900,000, but the Pharmaceutical Company paid a total of $6,200,000 in brokerage commissions and underwriting discounts, thus remaining with a total of $34,700,000 (Yahoo Finance, 2014). 4. What is the commission percent to the broker-dealers? The percentage of the commission to the brokers-dealers, as well as the underwriters discounts and other IPO issuing expenses amounted to $6,200,000 of the total 40,900,000, which is approximately 15.2% (Yahoo Finance, 2014). 5. What is the use of proceeds? The proceeds of the IPO were first applied towards the development of the pharmaceutical products, as well as financing the working capital of the company (AMPH, 2014). In addition, some of the proceeds were also applied for the company expansion purposes, through the acquisition of the necessary assets, products and businesses that are compatible to the primary operations, where the company acquired Merck Sharpe & Dohme, a pharmaceutical manufacturing company operating in France in April 2014 (Yahoo Finance, 2014). Finally, some portion of the proceeds was also dedicated for unspecified general purposes. 6. What are the major risk factors of the company? The major risk factors of the business include the decreasing sales prices of the company’s product in the market, which has in turn seen the company earn losses in the first quarter of the year 2014 (Yahoo Finance, 2014). Additionally, the fact that the products being newly developed by the company are at a very novice stage means that it may take long before such products are availed into the market, which in turn means that the streak of losses that has started with the first quarter of 2014 may continue for much longer (AMPH, 2014). The entrance of new competitors in the new market as well as the development of proprietary products that are more effective than those of the company is yet another major risk factor. The future changes in the relationship with suppliers or end-consumers as well as the possible and unanticipated interruptions in manufacturing or supply may also affect the business of the company adversely (AMPH, 2014). 7. What is the percent of the company sold to the public? The percent of the company sold to the public is 72.5%, owing to the fact that the company sold a total of 5,800,000 of the total 8,000,000 shares that the company holds (Yahoo Finance, 2014). 8. What is the percent of the company held by insiders? The percentage of the shares held by the insiders is 46% of the company’s value worth. 9. What is the value of the company at the IPO? The value of the company at the IPO is 29,000,000, at $9.4 per share for 5,800,000 shares. 10. Using current data, how does the value compare to similar companies measured by EPS? The EPS of Amphastar Pharmaceuticals currently stands at $0.02, and compared to other competitors such as GlaxoSmithKline which has an EPS of 2.77 and Hospira Inc., with an EPS of 1.04, Amphastar Pharmaceuticals EPS still appears to be lower (Yahoo Finance, 2014). 11. Why did the company go public? The company went public because it needed to raise capital for its continued operation, owing to the fact that the proceeds of the sale from the company’s products was declining gradually, due to the loss of market for the company’s old products (AMPH, 2014). In this respect, the company needed to seek for sources of investment into the business of the company that would give the company the required capital to leverage its business, through financing the development of its new candidate products, while at the same time seeking to acquire the essential assets, products, technologies and businesses that would support the company’s leveraging objectives (AMPH, 2014). 12. What is an emerging growth company? Does this help Amphastar and investors? How? The status of the emerging growth company is of great help to Amphastar Pharmaceuticals and also to the investors. This is because, the company is exempted from certain reporting requirements that must be met by other public companies, which in turn means less expense on reporting functions such as accounting and external auditing, thus increasing the profit margins of the company and thus the dividends of the investors (Yahoo Finance, 2014). Further, there will be reduced disclosures on the management compensation for the period the company remains in this status, meaning that it can formulate the executive compensation scheme in a way that will favor both the company and the investors during this period. 13. What is the company’s financial status in the IPO? The company’s financial status in the IPO is promising, owing o the fact that the price of the Amphastar Pharmaceuticals shares on the stock market as at august 2014 was $9.4 which is an increase from the initial price of $7 that the shares were sold at the IPO (Yahoo Finance, 2014). 14. Considering the information above, would you have invested in the IPO? Why or why not? I would have invested in the IPO, because the stocks of the company have already shown a positive trend in stock value appreciation, through increasing by a $2.4 margin for the last three months, from an initial share price of $7 to the current $9.4 (Yahoo Finance, 2014). 15. How has the company performed since the IPO? The company has registered mixed results in performance, with the value of the company’s share rising and the sales rising gradually, but the sales revenue have not reached the desired levels, such that the company is overall registering losses in 2014 (Yahoo Finance, 2014). References AMPH. (2014, June 24). Amphastar Pharmaceuticals, Inc.: Common Stock. Web. October 31, 2014. < http://www.sec.gov/Archives/edgar/data/1297184/000104746914005868/a2220616z424b4.htm> Yahoo Finance. (2014, August 13). Form 10-Q for Amphastar Pharmaceuticals, Inc. Web. October 31, 2014. < http://biz.yahoo.com/e/140813/amph10-q.html> Read More