ADMA Biologics, Inc. — Q1 2022 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, plasma collection centers and contract manufacturing, laboratory and intermediate-product activities.
This unaudited Form 10-Q covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021. ADMA had ten plasma collection facilities in various stages of approval and development as of March 31, 2022; five held FDA licenses and seven were operational and collecting plasma.
Key Financial Metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $29.1 million | $16.0 million | +$13.1 million, approximately 81% |
| Product revenue | $29.1 million | $16.0 million | +$13.1 million |
| Gross profit (loss) | $3.7 million | $(1.7) million | +$5.4 million |
| Gross margin | Approximately 12.6% | Approximately (10.7)% | Improved |
| Operating loss | $(14.8) million | $(15.2) million | Improved by $0.4 million |
| Net loss | $(25.0) million | $(18.4) million | Loss increased by $6.6 million |
| Loss per share | $(0.13) | $(0.16) | Improved per share |
| Cash flow from operations | $(26.0) million | $(33.2) million | Use decreased by $7.2 million |
| Capital expenditures | $2.8 million | $2.6 million | +$0.3 million |
| Cash and cash equivalents at period end | $69.5 million | $62.0 million | +$7.5 million |
Revenue growth was primarily driven by a $12.3 million increase in immunoglobulin product sales, particularly ASCENIV and BIVIGAM, and a $0.7 million increase in normal source plasma sales. Gross profit benefited from a more favorable product mix and the expanded BIVIGAM plasma-pool production process.
Operating expenses were $18.5 million, compared with $13.4 million in the prior-year period. SG&A increased to $13.7 million, including $1.3 million of strategic-alternatives professional fees and higher commercialization-related personnel costs. Plasma center operating expenses increased to $4.0 million as the collection network expanded. Research and development expense declined to $0.6 million.
Liquidity, Debt and Balance Sheet
- Working capital was $208.2 million at March 31, 2022, compared with $178.4 million at December 31, 2021.
- Inventory increased to $139.1 million from $124.7 million, reflecting raw-material and production-cycle requirements. The company’s production cycle can take seven to 12 months or longer.
- Total assets were $308.0 million and stockholders’ equity was $126.9 million at March 31, 2022. Accumulated deficit was $437.1 million.
- Senior notes payable, net of discount, were $138.4 million, compared with $94.9 million at December 31, 2021.
- On March 23, 2022, ADMA refinanced its prior Perceptive facility with a Hayfin senior secured term loan facility of up to $175.0 million. The company drew $150.0 million, used $100.0 million to repay Perceptive debt and recorded a $6.7 million loss on extinguishment.
- The Hayfin facility matures March 23, 2027, bears interest at 10.75% as of March 31, 2022, and includes 2.5% annual paid-in-kind interest. The effective interest rate was approximately 13.0%.
- The Hayfin debt is secured by substantially all company assets and includes a $6.0 million minimum-cash covenant and quarterly trailing-12-month IVIG revenue covenants beginning June 30, 2022. ADMA reported compliance with all covenants at March 31, 2022.
- ADMA issued Hayfin warrants to purchase 9.1 million shares at $1.6478 per share. Total outstanding warrants were 13.6 million shares at March 31, 2022.
- Management estimates existing cash, receivables, projected revenue, financing proceeds and remaining availability under its equity distribution agreement will fund operations into the first quarter of 2024.
Material Changes Versus the Prior Comparable Period
- Revenue increased approximately 81%, reflecting stronger commercial sales of ASCENIV and BIVIGAM and higher plasma sales.
- Gross margin turned positive, principally due to product mix and the expanded BIVIGAM production scale.
- Operating loss improved modestly despite higher commercialization, plasma-center and corporate costs.
- Net loss increased because the quarter included a $6.7 million debt-extinguishment loss related to the Hayfin refinancing.
- Operating cash use declined, but the company continued to consume substantial cash and remained dependent on financing.
- The company expanded its plasma collection network, with a seventh center opening on March 29, 2022, and increased its planned capacity investments.
- Shares outstanding increased to approximately 196.3 million from 195.8 million at year-end 2021. Dilution risk also increased through newly issued warrants and equity awards.
Guidance, Outlook, Commentary and Risks
- Management increased its fiscal 2022 revenue target to $130 million or more based on early-2022 revenue growth and gross-margin trends.
- Management expects the Boca Facility could support more than $250 million of annual revenue beginning in 2024 and potentially more than $300 million thereafter, subject to production, supply-chain and commercial execution.
- Management expects profitability and positive operating cash flow beginning in the first quarter of 2024, but warns that this timing depends on product acceptance, revenue growth, expense assumptions and access to capital.
- Remaining capital expenditures for fiscal 2022 were expected to be $8 million to $12 million, primarily for plasma collection-center expansion.
- ADMA targets ten FDA-licensed plasma collection centers by the end of 2023.
- Key risks include continued operating losses and cash burn, the need for additional financing, high-cost secured debt, revenue and covenant requirements under Hayfin, reliance on third-party plasma and testing suppliers, FDA and cGMP compliance, product quality, reimbursement and customer concentration.
- Three customers represented 83% of Q1 2022 revenue, while four customers represented 92% of accounts receivable at March 31, 2022.
- Grifols supplied approximately 75% of inventory purchases in Q1 2022. The normal-source-plasma agreement with Grifols extends through December 31, 2022, creating renewal and supply-cost risk.
- COVID-19 had not materially affected reported financial results through the quarter, but continued risks included donor-collection levels, supply-chain delays, third-party testing, clinical development and regulatory interactions.
- Required post-marketing studies for BIVIGAM and ASCENIV are expected to require approximately $5 million to $6 million in additional costs and are targeted for completion by June 2023.
- ADMA continued evaluating strategic alternatives with Morgan Stanley as financial advisor; the filing does not provide a clear outcome or expected transaction.
Most Important Facts for Investors to Verify
- Whether revenue growth and positive gross margin are sustained as production scales and product mix evolves.
- Whether ADMA meets Hayfin’s quarterly IVIG revenue covenants and maintains the required minimum cash balance.
- Whether cash resources and available equity capacity are sufficient through the projected first-quarter 2024 cash-flow inflection point.
- The availability, price and quality of source plasma, particularly after the Grifols supply arrangement expires or changes.
- Progress toward FDA licensing of additional plasma centers and expansion and validation of Boca Facility capacity.
- Customer concentration, receivables collection and the effect of rebates, chargebacks and reimbursement changes on net revenue.
- Potential dilution from the 13.6 million outstanding warrants, stock options, restricted stock units and future equity offerings.
- Completion and cost of required post-marketing studies and continued compliance with FDA, cGMP and third-party testing requirements.