ADMA Biologics, Inc. — Form 10-Q Summary
Business Context and Reporting Period
ADMA is a commercial biopharmaceutical company that manufactures, markets and develops plasma-derived biologics. Its marketed products are BIVIGAM, ASCENIV and Nabi-HB. Operations include the Boca Raton manufacturing facility and the ADMA BioCenters plasma-collection business. This filing covers the quarter and six months ended June 30, 2022; financial statements are unaudited.
- ADMA had 10 plasma collection facilities in various stages of approval and development as of June 30, 2022; six were FDA-licensed, two were operating pending licensing review and two were under construction.
- 196.4 million common shares were outstanding as of June 30, 2022.
Financial Performance and Position
| Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 |
|---|---|---|---|---|
| Total revenue | $33.9 million | $17.8 million | $63.0 million | $33.9 million |
| Gross profit (loss) | $7.8 million | $(1.0) million | $11.4 million | $(2.7) million |
| Gross margin | 22.9% | (5.6%) | 18.1% | (8.0%) |
| Loss from operations | $(9.2) million | $(15.6) million | $(24.0) million | $(30.7) million |
| Net loss | $(13.8) million | $(18.9) million | $(38.8) million | $(37.3) million |
| Loss per share | $(0.07) | $(0.15) | $(0.20) | $(0.31) |
| Operating cash flow | Not separately provided | Not separately provided | $(38.8) million | $(65.5) million |
- Q2 revenue increased approximately 90%, primarily from higher BIVIGAM and ASCENIV sales. Six-month revenue increased approximately 86%.
- Six-month product revenue was $62.9 million; license revenue was $71,417.
- Q2 operating expenses were $16.9 million, including $12.0 million of SG&A and $3.9 million of plasma-center operating expenses. Six-month operating expenses were $35.4 million.
- Cash and cash equivalents were $52.4 million at June 30, 2022, compared with $51.1 million at December 31, 2021. Reported working capital was $194.7 million.
- Total assets were $296.9 million, including $146.1 million of inventory and $18.9 million of accounts receivable. Accumulated deficit was $450.9 million.
- Inventory increased from $124.7 million at year-end 2021 to $146.1 million, reflecting the long production cycle and increased plasma and raw-material requirements.
Debt, Liquidity and Cash Flow
- Senior notes payable, net of discount, were $139.8 million at June 30, 2022, compared with $94.9 million at December 31, 2021. Total liabilities were $182.5 million.
- On March 23, 2022, ADMA refinanced its prior facility with a Hayfin senior secured term loan. The facility permits up to $175.0 million, consisting of a $150.0 million drawn term loan and a potential $25.0 million delayed draw subject to conditions and revenue targets.
- The Hayfin facility matures March 23, 2027, bears variable interest, and carried a 10.75% rate through June 30, 2022. Management disclosed rates of approximately 11.125% in July and 11.95% expected in August 2022.
- ADMA may pay 2.5% of annual interest in kind, increasing principal. Approximately $1.0 million of interest was paid in kind through June 30, 2022. The effective interest rate was approximately 13.0% as of June 30, 2022.
- The debt is secured by substantially all company assets, including intellectual property and subsidiary equity. ADMA was in compliance with its debt covenants at June 30, 2022, including a $6.0 million minimum cash requirement and trailing revenue requirements.
- Six-month cash used in operations was $38.8 million, capital expenditures were $6.8 million and financing activities provided $47.0 million. Capital expenditures of $5 million to $10 million were expected for the remainder of 2022.
- Approximately $42.8 million remained available under the company’s $50 million equity distribution agreement; no shares were sold under that agreement during the first six months of 2022.
Material Changes Versus the Prior Comparable Period
- Revenue growth and improved manufacturing scale moved gross profit from a loss to positive territory. Management attributed the improvement to increased ASCENIV and BIVIGAM sales, a more favorable product mix and the expanded 4,400-liter BIVIGAM plasma-pool process.
- Q2 operating loss narrowed by $6.4 million, while six-month operating loss narrowed by $6.8 million.
- Interest expense increased by $1.3 million in Q2 and $1.5 million for the first six months because of higher debt and rising variable rates.
- The six-month net loss increased by $1.5 million because operating improvement was more than offset by a $6.7 million loss on extinguishment of the former Perceptive debt facility and higher interest expense.
- Plasma-center operating expenses increased as ADMA opened additional facilities, although higher collections caused more costs to be capitalized into inventory.
- Warrants issued to Hayfin increased outstanding warrants to 13.6 million shares, compared with 4.5 million at December 31, 2021, creating potential future dilution.
Guidance, Outlook, Risks and Unusual Items
- Management increased its fiscal 2022 revenue target to greater than $130 million.
- Management expects the Boca Facility to have potential annual revenue capacity exceeding $250 million beginning in 2024 and potentially exceeding $300 million thereafter, subject to production, yield, supply and commercial assumptions.
- Management expects profitability and positive operating cash flow beginning in the first quarter of 2024 and believes current resources can fund operations into that period. This expectation is expressly dependent on revenue growth, expense assumptions, product acceptance and access to financing.
- ADMA is required to complete BIVIGAM and ASCENIV pediatric and post-marketing studies. Expected remaining costs were approximately $3 million to $4 million for the BIVIGAM studies and approximately $2 million for the ASCENIV study, with completion targeted by June 2023.
- Key risks include continued operating losses, potential need for additional capital, high and rising variable-rate debt, debt acceleration and collateral enforcement, customer concentration, dependence on third-party plasma and fill-finish/testing providers, FDA and cGMP compliance, product quality, plasma availability, supply-chain disruptions, inflation and COVID-19-related effects.
- Two customers represented 73% of six-month revenue, and three customers represented 84% of accounts receivable at June 30, 2022.
- Grifols supplied approximately 66% of inventory purchases in the first six months of 2022. The normal-source-plasma supply agreement with Grifols expires December 31, 2022, creating a supply and cost risk.
- The company is evaluating strategic alternatives with Morgan Stanley as financial advisor; the filing does not provide a clear outcome or timetable.
- No material pending legal proceedings, defaults upon senior securities or off-balance-sheet arrangements were reported. Disclosure controls were assessed as effective.
Facts Investors Should Verify
- Whether revenue growth and gross-margin improvement continue, particularly for BIVIGAM and ASCENIV.
- Whether ADMA achieves the greater-than-$130 million 2022 revenue target and remains on track for profitability and positive cash flow in early 2024.
- Cash burn, inventory growth, capital expenditures and the availability or necessity of additional equity or debt financing.
- Compliance with Hayfin’s minimum-cash and trailing-revenue covenants as interest rates and debt principal increase.
- Progress in licensing the remaining plasma centers and securing plasma after the Grifols agreement expires.
- Customer concentration, product reimbursement and market acceptance, including the sustainability of major customer demand.
- Completion and cost of required post-marketing studies and the status of FDA inspections, testing and third-party manufacturing arrangements.