ADMA BIOLOGICS, INC. annual report, FY2022

ADMA Biologics, Inc. — FY2022 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2022. The filing is an annual Form 10-K, not a quarterly filing. ADMA is a commercial biopharmaceutical company producing plasma-derived biologics, including BIVIGAM, ASCENIV and Nabi-HB. Operations include manufacturing at the Boca Raton facility and plasma collection through ten U.S. centers, eight of which were FDA licensed at year-end.

Financial Performance and Position

Metric	2022	2021	Change
Revenue	$154.1 million	$80.9 million	Up 90%
Gross profit	$35.3 million	$1.2 million	Up $34.1 million
Gross margin	22.9%	1.4%	Improved 21.5 percentage points
Operating loss	$39.4 million	$58.4 million	Improved $19.0 million
Net loss	$65.9 million	$71.6 million	Improved $5.7 million
Loss per share	$0.33	$0.51	Improved
Cash flow from operations	$(59.5) million	$(112.4) million	Improved $52.9 million
Capital expenditures	$13.9 million	$13.5 million	Increased $0.4 million

Revenue growth was primarily driven by higher sales of BIVIGAM, ASCENIV, intermediate fractions and other manufacturing activity, plus a $4.0 million increase in plasma revenue.
Product revenue was $153.9 million; license revenue was $0.1 million.
Higher BIVIGAM production scale and increased ASCENIV contribution materially improved gross margin. Inflation increased labor, materials, freight, fuel and third-party service costs.
Research and development expense was $3.6 million, essentially unchanged from 2021. Plasma center operating expense increased to $17.8 million from $12.3 million, and SG&A increased to $52.5 million from $42.9 million.
Interest expense rose to $19.3 million from $13.1 million. The company also recorded a $6.7 million loss on extinguishment of debt associated with the March 2022 refinancing.
Year-end cash and cash equivalents were $86.5 million, compared with $51.1 million in 2021. Working capital was $231.1 million, including $163.3 million of inventory and $15.5 million of accounts receivable.
Inventory increased from $124.7 million to $163.3 million, reflecting the long seven-to-twelve-month production cycle and efforts to maintain raw-material availability.

Debt, Liquidity and Capital Raising

At December 31, 2022, senior notes payable were $154.7 million gross and $142.8 million net of discount.
The Hayfin senior secured facility permits borrowings of up to $175.0 million, including a $150.0 million initial term loan and a $25.0 million delayed-draw facility. The facility matures March 23, 2027 and is secured by substantially all company assets, including intellectual property.
Hayfin borrowings bear variable interest. The stated rate was approximately 13.9% at December 31, 2022; a portion of interest may be paid in kind, increasing principal. The company reported approximately $3.0 million of interest paid in kind through year-end.
The company must maintain at least $6.0 million of cash and satisfy quarterly revenue covenants. It was in compliance with its debt covenants at December 31, 2022.
On December 9, 2022, ADMA issued 24.1 million shares for approximately $64.6 million of net proceeds. The proceeds are intended for commercialization, production, plasma-center buildouts, research and development, capital expenditures and working capital.
Management states that cash, cash equivalents, projected revenue and accounts receivable are expected to fund operations as currently conducted through the end of the first quarter of 2024. The company expects positive operating cash flow and profitability beginning in early 2024, but warns that additional capital may be required if these expectations are not achieved.

Material Changes Versus 2021

Revenue nearly doubled, while gross margin expanded from 1.4% to 22.9% as commercial production scaled.
Operating and net losses narrowed despite higher SG&A, plasma-center costs, interest expense and the debt-extinguishment charge.
Operating cash burn decreased substantially, but remained negative. Inventory and cash increased materially.
The company refinanced its prior Perceptive facility with Hayfin, increasing secured debt and variable-rate exposure.
The Grifols normal source plasma purchase agreement expired on December 31, 2022 and was not renewed. ADMA entered into additional third-party supply arrangements and plans to rely more heavily on its own plasma centers.
ADMA opened three plasma collection facilities during 2022 and received FDA approvals for four centers during the year. It targeted ten FDA-licensed centers by the end of 2023.
ASCENIV prescriber and patient adoption expanded during the fourth quarter, producing record utilization and pull-through according to management.

Guidance, Outlook, Risks and Unusual Items

Management projects potential IG-product revenue of at least $210 million in 2023, more than $250 million in 2024 and potentially more than $300 million thereafter. These are company forecasts, not guaranteed results.
Management targets consolidated gross margins of 40%–50% and net income margins of 20%–30% at projected future revenue levels, with potential annual gross profit of $100 million–$150 million and net income of $50 million–$100 million during 2024–2025 and beyond.
ASCENIV manufacturing at the expanded 4,400-liter scale began in 2023, which management expects to improve margins and capacity, potentially beginning in the second half of 2023.
Key risks include continued operating losses and cash burn, dependence on additional financing, high variable-rate secured debt, customer concentration, plasma supply availability and cost, FDA and cGMP compliance, third-party testing and fill-finish providers, product quality and recalls, reimbursement and pricing pressure, competition, cybersecurity, and execution of manufacturing and plasma-center expansion.
Two customers represented 74% of 2022 revenue, while two customers represented 92% of year-end accounts receivable.
Grifols supplied approximately 65% of inventory purchases in 2022. The expiration of the normal source plasma agreement may increase raw-material costs and pressure future gross margins.
Required post-marketing studies for BIVIGAM and ASCENIV were expected to require approximately $3.5 million of additional spending and were targeted for completion by June 2023.
The company continues to evaluate strategic alternatives with Morgan Stanley. The filing does not provide a specific transaction or definitive outcome.
COVID-19 had not materially affected 2022 financial results according to management, but supply-chain, donor-collection, regulatory and macroeconomic effects remain potential risks.

Most Important Facts to Verify

Whether revenue growth and ASCENIV demand continue at the pace assumed in management’s 2023–2024 forecasts.
Whether ADMA achieves ten FDA-licensed plasma centers and sufficient internal plasma supply without materially increasing production costs.
Whether the company generates positive operating cash flow by early 2024 and avoids additional dilutive equity or higher-cost debt financing.
Compliance with Hayfin’s minimum-cash and revenue covenants, including the status and availability of the $25.0 million delayed-draw facility.
Impact of variable interest rates, in-kind interest capitalization and the March 2027 Hayfin maturity on liquidity.
Inventory realizability, production yields, product release timing and potential write-offs given inventory of $163.3 million and the long production cycle.
Customer concentration, accounts-receivable collections and the durability of distributor and specialty-pharmacy relationships.
Completion of required BIVIGAM and ASCENIV post-marketing studies and any resulting regulatory or labeling developments.