ADMA Biologics, Inc. — Q2 2021 Form 10-Q Summary
Business context and reporting period
ADMA is a commercial biopharmaceutical company that manufactures, markets and develops plasma-derived biologics for immunodeficient patients and patients at risk for certain infectious diseases. Its marketed products are BIVIGAM, ASCENIV and Nabi-HB. Operations include the Boca Raton manufacturing facility and ADMA BioCenters plasma collection facilities.
The filing covers the three and six months ended June 30, 2021, compared with the corresponding 2020 periods. The interim financial statements are unaudited and prepared under U.S. GAAP.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $17.8 million | $7.8 million | $33.9 million | $18.0 million |
| Product revenue | $17.8 million | $7.8 million | $33.8 million | $17.9 million |
| Gross loss | $(1.0) million | $(5.7) million | $(2.7) million | $(12.3) million |
| Gross margin | Approximately (5.6%) | Approximately (73.3%) | Approximately (8.0%) | Approximately (68.6%) |
| Operating loss | $(15.6) million | $(17.1) million | $(30.7) million | $(33.9) million |
| Net loss | $(18.9) million | $(20.2) million | $(37.3) million | $(39.4) million |
| Loss per share | $(0.15) | $(0.23) | $(0.31) | $(0.49) |
| Net cash used in operations | Not separately provided | Not separately provided | $(65.5) million | $(45.9) million |
Q2 revenue increased 130%, while six-month revenue increased 88%. Revenue growth was attributed primarily to increased immunoglobulin sales, commercial scale-up, a broader customer base, plasma sales and the intermediate-fraction manufacturing agreement. Five customers represented 85% of six-month revenue, and six customers represented 94% of accounts receivable at June 30, 2021.
- Cash and cash equivalents were $42.4 million at June 30, 2021, down from $55.9 million at December 31, 2020.
- Working capital was $153.2 million, compared with $133.8 million at year-end 2020.
- Inventory increased to $99.7 million from $81.5 million, primarily reflecting higher work-in-process and raw-material investments.
- Accounts receivable increased to $23.5 million from $13.2 million.
- Senior notes had a $100.0 million principal balance and a $93.9 million carrying value, net of discount.
- The senior secured debt bears interest at 11.0% at June 30, 2021, matures March 1, 2024, and is secured by substantially all Company assets.
- Capital expenditures were $7.0 million in the first half, including plasma-center construction and Boca Facility investments.
Material changes versus the prior comparable period
- Revenue increased by $10.0 million in Q2 and $15.9 million for the first half, driven by higher immunoglobulin product sales and commercial expansion.
- The Q2 gross loss narrowed by $4.7 million and the six-month gross loss narrowed by $9.6 million, partly because 2020 included conformance-batch production expenses that did not recur in 2021.
- Operating loss improved by $1.5 million in Q2 and $3.1 million for the first half despite increased selling, general and administrative expenses and plasma-center operating costs.
- Plasma-center operating expenses increased to $2.8 million in Q2 and $5.0 million for the first half, reflecting staffing, travel and facility-expansion activities.
- SG&A increased to $10.4 million in Q2 and $20.5 million for the first half. The increases included higher commercialization-related staffing and an approximately $0.8 million separation and transition charge for the former Chief Medical Officer.
- Operating cash use increased to $65.5 million from $45.9 million, principally because of larger increases in accounts receivable and inventories.
- The Company issued 26.9 million common shares under its 2020 sale agreement during the first half and received $59.1 million of net proceeds. A further $1.5 million was raised in July 2021, exhausting that agreement.
Guidance, outlook, risks and unusual items
- Management expects the Boca Facility to approach an annualized revenue run rate of approximately $100 million or more exiting 2021.
- Management projects potential annual revenue of more than $250 million beginning in 2024 and potentially more than $300 million thereafter, subject to production yields, capacity expansion, supply and commercialization execution.
- The Company expects profitability beginning in the first quarter of 2024, but continues to anticipate substantial losses and negative operating cash flow through fiscal 2023.
- Based on current projections, cash, projected revenue and accounts receivable are expected to fund operations into the fourth quarter of 2021. Additional capital is expected to be required before the end of that quarter, and no firm financing commitment existed at the filing date.
- The filing states that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. Failure to obtain financing could require delays, reductions or discontinuation of commercialization, expansion, development activities or operations.
- The Company entered into a new $50 million at-the-market equity agreement in May 2021; no sales had occurred under it as of the filing date.
- An FDA inspection of the Boca Facility’s in-house fill-finish process was completed in July 2021 without Form 483 observations. FDA review remained ongoing, with approval anticipated in the second half of 2021 but not assured.
- FDA approval of an expanded 4,400-liter BIVIGAM plasma-pool process was received in April 2021. Management expects potential gross-margin and operating improvements beginning late in the fourth quarter of 2021.
- COVID-19 risks include lower donor collections, supply-chain and source-plasma delays, third-party testing delays, reduced clinician engagement and potential regulatory or clinical delays. The Company reported no material COVID-19 impact on financial condition or results to date.
- Plasma supply is concentrated: purchases from Grifols were $17.5 million, or approximately 67% of total inventory purchases, in the first half of 2021. The normal-source-plasma agreement was extended through December 31, 2022, while the Company sought additional suppliers and expanded collection capacity.
- Post-marketing pediatric and safety studies for BIVIGAM and a pediatric study for ASCENIV remain pending, generally targeted for completion by June 2023.
- At June 30, 2021, the Company stated that it was in compliance with all Perceptive Credit Agreement covenants, including minimum cash and revenue requirements.
Most important facts for investors to verify
- Whether revenue growth and the planned manufacturing ramp support the projected 2021 run rate and 2024 profitability target.
- Availability, pricing and concentration of source-plasma supplies, including the Company’s dependence on Grifols and the progress of new plasma centers.
- FDA approval and operational performance of the in-house fill-finish process and expanded BIVIGAM production scale.
- Timing and terms of additional financing needed after the fourth quarter of 2021, including potential equity dilution or additional secured debt.
- Cash-burn trends, inventory conversion, accounts-receivable collections and the Company’s ability to satisfy the $100 million debt maturity in 2024.
- Customer concentration, payer and physician acceptance, reimbursement levels and potential product-quality, regulatory or supply-chain disruptions.
- Completion and cost of required post-marketing studies and the impact of ongoing COVID-19 conditions on collections, manufacturing and regulatory reviews.