ADMA BIOLOGICS, INC. quarterly report, Q1 FY2024

ADMA Biologics, Inc. — Form 10-Q Summary

Reporting period: Three months ended March 31, 2024; filed May 9, 2024. ADMA is an end-to-end commercial biopharmaceutical company focused on plasma-derived biologics. Its marketed products are ASCENIV, BIVIGAM and Nabi-HB, supported by ten FDA-licensed plasma collection facilities and a manufacturing facility in Boca Raton, Florida.

Financial performance and position

Metric	Q1 2024	Q1 2023	Change
Revenue	$81.9 million	$56.9 million	+$25.0 million, approximately 44%
Gross profit	$39.1 million	$16.5 million	+$22.6 million
Gross margin	47.8%	29.0%	+18.8 percentage points
Operating income	$21.8 million	$(0.8) million	+$22.6 million
Net income	$17.8 million	$(6.8) million	+$24.6 million
Diluted earnings per share	$0.08	$(0.03)	Improved
Adjusted EBITDA	$26.4 million	$2.5 million	+$24.0 million
Net cash used in operating activities	$(2.2) million	$(14.7) million	Improved by $12.5 million

Revenue growth was primarily driven by a $30.5 million increase in ASCENIV, BIVIGAM and Nabi-HB sales, partly offset by a $5.6 million decline in third-party plasma sales.
Gross-margin expansion reflected a greater mix of higher-margin immunoglobulin sales, increased scale and coverage of fixed manufacturing costs.
Operating expenses were broadly stable at $17.3 million. SG&A increased to $15.6 million from $14.5 million, while research and development and plasma-center operating expenses declined.
Interest expense declined to $3.8 million from $6.1 million following the December 2023 refinancing and lower debt principal and interest rates. Income-tax expense was $0.6 million, representing a 3.2% effective tax rate.
Cash and cash equivalents were $45.3 million at March 31, 2024, down from $51.4 million at December 31, 2023. Working capital was $223.3 million, including $177.7 million of inventory and $49.6 million of accounts receivable.
Operating cash flow remained negative despite profitability, primarily because accounts receivable increased by $22.2 million and inventories increased by $4.8 million. Capital expenditures were $2.3 million.
Total assets were $350.9 million and stockholders’ equity was $153.7 million at quarter-end. The accumulated deficit was $488.5 million.

Debt, liquidity and capital resources

Senior secured debt consisted of a fully drawn $62.5 million term loan and $72.5 million revolving facility under the Ares Credit Facility. Principal outstanding was $135.0 million, or $130.8 million net of discount.
The Ares facility matures on December 20, 2027, with no scheduled principal amortization before maturity and quarterly interest payments of approximately $3.6 million. Interest rates at March 31, 2024 were approximately 11.83% on the term loan and 9.08% on the revolver.
The debt is secured by substantially all tangible and intangible assets, including intellectual property and subsidiary equity. The facility includes financial covenants, a $15.0 million minimum-liquidity covenant and restrictions on additional debt, liens, investments, dividends and other activities. ADMA reported compliance with all covenants.
Management expects existing cash, accounts receivable and projected operating cash flow to fund operations through the end of the second quarter of fiscal 2025 and beyond. The company does not currently anticipate needing additional capital, but this outlook depends on product demand, profitability and cash-flow assumptions.
ADMA expects $7.0 million to $12.0 million of additional capital expenditures during the remainder of 2024, primarily for Boca Facility upgrades and related systems.

Material changes versus the prior comparable period

Immunoglobulin sales increased substantially, reflecting higher ASCENIV demand, broader BIVIGAM customer adoption and increased utilization and acceptance by physicians, payers and patients.
Plasma collection increased 38%, but third-party plasma revenue declined because the prior-year customer commitment was fulfilled earlier in the year, whereas the 2024 commitment is expected to be fulfilled over the full year.
The gross margin increased from 29.0% to 47.8%, and ADMA moved from an operating loss and net loss to significant operating and net income.
The December 2023 refinancing reduced the stated interest rate from approximately 14.10% in Q1 2023 to approximately 10.38% in Q1 2024, according to management, and reduced interest expense.
ADMA issued 5.7 million shares during the quarter through cashless warrant exercises and stock-option activity. Outstanding warrants declined to 4.9 million from 12.5 million at year-end 2023.
ADMA recorded $2.1 million of stock-based compensation in Q1 2024, compared with $1.1 million in Q1 2023.

Guidance, outlook, risks and unusual items

Based on current production yields, supply-chain enhancements and capacity initiatives, management believes the Boca Facility has potential to support more than $355 million of 2024 revenue and $410 million of 2025 revenue, with potential fiscal-year 2024 net income exceeding $85 million and 2025 net income exceeding $135 million. Management also cited potential adjusted EBITDA exceeding $110 million in 2024 and $160 million in 2025. These are forward-looking targets, not guarantees.
Management expects ASCENIV’s rapid growth to continue through 2024 and beyond and expects continued demand for its immunoglobulin products.
ADMA continues to evaluate strategic alternatives and states that value-creating opportunities remain a corporate priority.
Key risks include dependence on a limited number of customers, third-party fill-finish and testing providers, availability and quality of source and high-titer plasma, FDA and cGMP compliance, product quality and potential recalls, reimbursement pressure, competition, supply-chain disruption, inflation, cybersecurity and geopolitical events.
Two customers represented approximately 70% of Q1 2024 revenue, and three customers represented approximately 87% of accounts receivable at March 31, 2024.
The company must complete an ASCENIV pediatric post-marketing study by June 2026 and expects approximately $1.2 million of remaining costs.
A 100-basis-point adverse change in interest rates would have an estimated $1.4 million annualized negative impact on earnings and cash flows. The company does not use interest-rate derivatives.
Management reported no material pending legal proceedings, no off-balance-sheet arrangements and effective disclosure controls as of March 31, 2024.

Most important facts for investors to verify

Whether Q1’s strong immunoglobulin growth, 47.8% gross margin and profitability are sustainable throughout 2024.
Whether positive earnings convert into positive operating cash flow after collections of the elevated $49.6 million receivable balance and investment in $177.7 million of inventory.
Whether production expansion and plasma supply support management’s 2024 and 2025 revenue and adjusted-EBITDA targets.
Compliance with Ares leverage and minimum-liquidity covenants, the variable-rate debt burden and the ability to refinance or repay the $135.0 million principal at maturity.
Customer concentration, reimbursement trends and the effect of pricing, rebates and chargebacks on reported revenue.
FDA, cGMP, third-party testing and fill-finish developments, including any impact on product release or supply continuity.
The effect of future stock-based compensation, warrant exercises and other equity issuance on dilution.