ADMA Biologics, Inc. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
ADMA Biologics is a commercial biopharmaceutical company manufacturing, marketing and developing plasma-derived biologics. Its marketed products are BIVIGAM and ASCENIV, both IVIG products for primary immunodeficiency, and Nabi-HB for hepatitis B exposure. The company also operates ten U.S. plasma collection centers, provides contract manufacturing and laboratory services, and sells plasma-derived intermediates.
This report covers the three months ended March 31, 2023, compared with the three months ended March 31, 2022. The financial statements are unaudited and prepared under U.S. GAAP.
Financial Performance and Position
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $56.9 million | $29.1 million | +96% |
| Gross profit | $16.5 million | $3.7 million | +$12.9 million |
| Gross margin | 29.0% | 12.6% | +16.4 percentage points |
| Loss from operations | $0.8 million | $14.8 million | Improved by $14.0 million |
| Net loss | $6.8 million | $25.0 million | Improved by $18.2 million |
| Loss per share | $0.03 | $0.13 | Improved |
| Adjusted EBITDA | $2.5 million | $(11.7) million | Improved by $14.2 million |
- Revenue growth was primarily driven by increased BIVIGAM and ASCENIV sales, which increased manufacturing-segment revenue by approximately $23.8 million, and higher plasma sales of approximately $4.0 million.
- Three customers represented 76% of consolidated revenue. Five customers represented 98% of accounts receivable at March 31, 2023.
- Operating expenses were $17.3 million, including $14.5 million of selling, general and administrative expense, $1.8 million of plasma-center operating expense and $0.9 million of research and development expense.
- Interest expense increased to $6.1 million from $3.4 million, primarily because of higher debt levels and higher interest rates. The company did not record the $6.7 million debt-extinguishment loss recognized in Q1 2022.
- Cash and cash equivalents were $69.2 million at March 31, 2023, compared with $86.5 million at December 31, 2022. Working capital was $227.4 million.
- Inventories were $164.0 million, including $55.7 million of raw materials, $62.1 million of work-in-process and $46.1 million of finished goods.
- Net cash used in operating activities was $14.7 million; investing cash outflow was $1.9 million, primarily for property and equipment; and financing cash outflow was $0.7 million. Cash decreased by $17.3 million during the quarter.
- Senior notes had a gross principal balance of $155.7 million and a carrying value of $144.3 million, net of discount. The stated interest rate was 14.4% at March 31, 2023, with approximately $1.0 million of interest paid in kind during the quarter.
Material Changes Versus the Prior Comparable Period
- Revenue nearly doubled, reflecting stronger demand and broader customer adoption of ASCENIV and BIVIGAM.
- Gross margin improved substantially because of higher production and sales volumes and lower manufacturing costs associated with a shorter Boca Facility shutdown than in Q1 2022.
- Plasma-center operating expense declined by $2.2 million. However, the company capitalized more plasma-center costs into inventory as plasma collections increased.
- SG&A increased by $0.8 million due to commercialization, professional-service, insurance, recruiting and software costs, partly offset by lower Morgan Stanley strategic-alternatives fees.
- R&D expense increased by $0.2 million, primarily due to required BIVIGAM and ASCENIV post-marketing studies.
- Cash used in operations improved by $11.3 million, but accounts receivable increased by $11.0 million and continued inventory investment consumed cash.
- The company fulfilled its entire 2023 commitment to supply normal source plasma to a third-party customer during Q1. It does not expect comparable plasma-sale revenue during the remainder of 2023 because collected plasma is expected to support internal IVIG production.
Guidance, Outlook, Risks and Unusual Items
- Management expects current cash, cash equivalents, projected revenue and accounts receivable to fund operations, as currently conducted, through the end of Q2 2024. Management expects positive operating cash flow beginning around the beginning of 2024, but states that additional financing may be required if this target is not achieved.
- Management projects potential 2023 revenue of at least $220 million from immune-globulin products, potential 2024 revenue exceeding $250 million and potential longer-term revenue exceeding $300 million. These are management estimates, not contractual guidance.
- Management forecasts achieving profitability during Q1 2024 and, at targeted revenue levels, potential consolidated gross margins of 40%–50% and net income margins of 20%–30%. The filing does not establish that these targets will be achieved.
- The Boca Facility has stated peak annual source-plasma processing capability of up to 600,000 liters. ADMA expects to have ten FDA-licensed plasma collection centers by the end of 2023; eight of ten centers were FDA licensed as of March 31, 2023.
- The Hayfin senior secured facility matures March 23, 2027, is secured by substantially all company assets and includes a $6.0 million minimum-cash covenant and trailing twelve-month revenue covenants. The company was in compliance as of March 31, 2023.
- A May 1, 2023 amendment, disclosed as a subsequent event, reduced the applicable SOFR margin from 9.5% to 8.5%, extended the delayed-draw commitment through December 31, 2023 and added warrants to purchase 2.4 million shares at $3.2619 per share.
- The company expects $7.0 million–$9.0 million of capital expenditures for the remainder of 2023, primarily for Boca Facility upgrades and related systems.
- Required post-marketing studies for BIVIGAM and ASCENIV were expected to require approximately $1.5 million–$2.0 million and approximately $1.5 million, respectively. The company requested an extension for the ASCENIV study.
- Key risks include continued operating losses and cash burn, reliance on additional financing, high interest expense, customer concentration, dependence on third-party plasma suppliers and testing or fill-finish providers, FDA compliance and licensing, product quality, plasma availability, reimbursement, inflation, supply-chain disruptions and potential future pandemic effects.
- ADMA continues to evaluate strategic alternatives with Morgan Stanley. No transaction or definitive outcome is disclosed.
Most Important Facts for Investors to Verify
- Whether ASCENIV and BIVIGAM demand and production growth can sustain the reported revenue trajectory and improve gross margins.
- Whether the company achieves positive operating cash flow and profitability around the beginning of 2024 without requiring dilutive equity or additional debt financing.
- The company’s liquidity after recurring cash interest of approximately $1.5 million per month, capital expenditures, plasma purchases and inventory requirements.
- Compliance with Hayfin’s revenue and minimum-cash covenants, the availability and conditions of the delayed-draw loan, and the consequences of a default.
- Progress toward ten FDA-licensed plasma centers and the company’s ability to secure sufficient normal, RSV and hepatitis B plasma.
- Completion of required post-marketing studies and continued FDA compliance for the Boca Facility, plasma centers, products and third-party vendors.
- Customer concentration, accounts-receivable collection and the effect of reduced plasma-sale revenue expected after Q1 2023.
- The terms and potential dilution from outstanding options, restricted stock units and warrants, including the additional May 2023 Hayfin warrants.