ADMA Biologics, Inc. — FY2021 Form 10-K Summary
Business context and reporting period
ADMA is an end-to-end biopharmaceutical company focused on manufacturing, marketing and developing plasma-derived biologics for immunocompromised patients and patients at risk of infectious disease. The filing covers the fiscal year ended December 31, 2021, with comparison to fiscal 2020.
- Commercial products: BIVIGAM and ASCENIV, both IVIG products indicated for primary immunodeficiency, and Nabi-HB, a hepatitis B immune globulin.
- Manufacturing is conducted at the FDA-licensed Boca Raton, Florida facility. ADMA also operates the ADMA BioCenters plasma-collection business.
- At year-end, ten plasma centers were in various stages of development, six were operational and collecting plasma, and five operational centers held FDA licenses.
- The Company had 527 full-time employees as of December 31, 2021.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $80.9 million | $42.2 million | Up 92% |
| Product revenue | $80.8 million | $42.1 million | Up approximately 92% |
| Gross profit (loss) | $1.2 million | $(19.1) million | Improved $20.2 million |
| Gross margin | Approximately 1.4% | Approximately (45.2)% | Improved |
| Operating loss | $(58.4) million | $(64.9) million | Improved $6.5 million |
| Net loss | $(71.6) million | $(75.7) million | Improved $4.1 million |
| Loss per share | $(0.51) | $(0.88) | Improved |
| Net cash used in operations | $(112.4) million | $(102.0) million | Use increased $10.4 million |
| Net cash used in investing | $(13.5) million | $(12.7) million | Use increased $0.8 million |
| Net cash from financing | $121.0 million | $143.9 million | Down $22.8 million |
| Cash and equivalents at year-end | $51.1 million | $55.9 million | Down $4.8 million |
- Revenue growth was driven primarily by increased BIVIGAM and ASCENIV sales, intermediate-fraction sales and expanded customer acceptance. Plasma-center revenue increased approximately $0.5 million.
- Cost of product revenue rose to $79.8 million from $61.3 million, but 2020 included approximately $7.5 million of non-recurring production charges related to BIVIGAM conformance lots and capacity initiatives.
- Operating expenses were $59.5 million, including $42.9 million of selling, general and administrative expense, $12.3 million of plasma-center operating expense and $3.6 million of research and development expense.
- Inventory increased to $124.7 million from $81.5 million, primarily reflecting increased raw-material procurement and production scale-up. Accounts receivable increased to $28.6 million from $13.2 million.
- Working capital was $178.4 million at year-end, compared with $133.8 million at December 31, 2020. The Company had an accumulated deficit of $412.1 million.
- Capital expenditures were $13.5 million, including $8.6 million for plasma-center buildouts and $4.9 million for Boca Facility equipment and fill-finish capabilities.
Material changes versus the prior comparable period
- Revenue nearly doubled as the Company entered its second full year of commercial sales for BIVIGAM and ASCENIV.
- Gross profitability improved materially, aided by higher volumes, the absence of the 2020 non-recurring production charges and the FDA-approved 4,400-liter BIVIGAM plasma-pool process, which began benefiting margins in the third quarter of 2021.
- Research and development expense declined by $2.3 million because several 2020 projects did not recur, partly offset by higher post-marketing study costs.
- Plasma-center operating expense increased by $8.1 million as the operational network expanded from three centers at year-end 2020 to six at year-end 2021.
- SG&A increased by $7.8 million due largely to higher compensation, insurance, commercialization and personnel costs.
- The Company issued 90.8 million common shares during 2021 and received $121.1 million of net equity proceeds, materially increasing shares outstanding to 195.8 million at year-end from 104.9 million.
- Four customers represented 81% of 2021 revenue, compared with three customers representing 82% in 2020. Three customers represented 94% of year-end accounts receivable.
- Grifols supplied approximately $42.0 million, or 69%, of 2021 inventory purchases, indicating substantial supplier concentration.
Guidance, outlook, commentary, risks and unusual items
- Management expects the Boca Facility to have potential to support more than $250 million of annual IG revenue beginning in 2024 and potentially more than $300 million thereafter, subject to production yields, capacity expansion and supply-chain execution.
- Management expects profitability and positive operating cash flow beginning in the first quarter of 2024, but acknowledges that timing depends on commercial execution, product acceptance and expense assumptions.
- Management expects 2022 capital expenditures of approximately $12 million to $18 million, primarily for plasma-center expansion and manufacturing capacity.
- The Company expects additional plasma-center operating expenses as it works toward ten FDA-licensed centers by the end of 2023.
- COVID-19 caused lower donor collections, supplier and testing delays, increased inventory requirements and reduced direct customer engagement. Management stated that the pandemic had not materially affected 2021 financial condition or results of operations, but its future impact remains uncertain.
- The Company remains dependent on third-party plasma suppliers, fill-finish providers, testing laboratories and other vendors. The 2017 plasma purchase agreement with Grifols was extended through December 31, 2022, while additional suppliers and internal collection capacity are being developed.
- Post-marketing commitments include pediatric and safety studies for BIVIGAM and a pediatric study for ASCENIV. Estimated remaining costs are approximately $3 million to $4 million for the BIVIGAM studies and approximately $2 million for the ASCENIV study, with expected completion by June 2023.
- On March 23, 2022, after year-end, the Company refinanced its Perceptive senior debt with a Hayfin senior secured facility of up to $175 million. It drew $150 million, used $100 million to repay Perceptive and paid a $2 million redemption premium. The Hayfin facility matures in 2027, bears high variable interest, includes a $25 million delayed-draw tranche subject to conditions, and is secured by substantially all Company assets.
- The Hayfin facility requires a minimum $6 million cash balance and quarterly trailing-twelve-month IVIG and related revenue thresholds beginning at $75 million for the quarter ending June 30, 2022. The refinancing is expected to increase annual cash interest expense to approximately $16 million to $19 million, excluding debt-discount amortization.
- The Company expects to record an approximately $6.7 million loss on extinguishment of debt related to the Perceptive refinancing. Hayfin also received warrants for 9.1 million common shares.
- Principal risks include continued operating losses and cash burn, potential need for additional financing, debt acceleration, regulatory and cGMP compliance, plasma supply and quality, customer concentration, reimbursement and pricing pressure, COVID-19 and supply-chain disruptions, product liability, intellectual-property challenges and dilution from equity issuance.
Most important facts for investors to verify
- Whether revenue growth and the new BIVIGAM production scale translate into sustained positive gross margins and lower cash burn.
- Progress toward management’s targets of ten FDA-licensed plasma centers by the end of 2023 and profitability or positive operating cash flow in the first quarter of 2024.
- Compliance with Hayfin’s minimum-cash and quarterly revenue covenants, interest obligations and delayed-draw conditions.
- Availability and cost of plasma, including the post-2022 supply arrangements with Grifols and other suppliers.
- Completion, cost and regulatory status of the BIVIGAM and ASCENIV post-marketing commitments.
- Customer concentration, particularly the impact of any change in orders from BioCare, Reliance, AmerisourceBergen or Curascript.
- Potential dilution from the 2021 equity offerings, the remaining $42.8 million capacity under the Raymond James distribution agreement and Hayfin warrants.
- Inventory recoverability and sales-rebate estimates, which were identified as significant audit areas.