ADMA BIOLOGICS, INC. annual report, FY2023

ADMA Biologics, Inc. — FY2023 Form 10-K Summary

Business context and reporting period

ADMA Biologics is an end-to-end biopharmaceutical company that manufactures and markets plasma-derived therapies for immunodeficient and infection-risk patients. Its commercial products are ASCENIV and BIVIGAM, both intravenous immune globulin products, and Nabi-HB, a hepatitis B immune globulin. The company also operates ten FDA-licensed plasma collection centers and sells plasma, intermediates, and related services.

This filing covers the fiscal year ended December 31, 2023. The filing was dated February 28, 2024. ADMA reported 624 full-time employees and 226.1 million common shares outstanding at year-end; 228.2 million shares were outstanding as of February 23, 2024.

Key financial metrics

Metric	2023	2022	Change
Revenue	$258.2 million	$154.1 million	Up 68%
Gross profit	$88.9 million	$35.3 million	Up $53.7 million
Gross margin	34.4%	22.9%	Up 11.5 percentage points
Operating income (loss)	$21.6 million	$(39.4) million	Improved $61.0 million
Net loss	$(28.2) million	$(65.9) million	Improved $37.7 million
Adjusted EBITDA	$40.3 million	$(27.6) million	Improved $67.9 million
Adjusted net income	$0.7 million	$(59.2) million	Improved $59.9 million
Cash flow from operations	$8.8 million	$(59.5) million	Improved $68.3 million

Revenue growth was primarily driven by higher ASCENIV and BIVIGAM sales from the Boca Raton manufacturing operations, which increased by approximately $105.8 million. Plasma collection center revenue declined by approximately $1.5 million as more collected plasma was used internally for IVIG production rather than sold to third parties.

Year-end cash and cash equivalents were $51.4 million, compared with $86.5 million in 2022. Accounts receivable increased to $27.4 million from $15.5 million, while inventory increased to $172.9 million from $163.3 million. Working capital was $207.2 million, compared with $231.1 million.

Debt and liquidity

On December 18, 2023, ADMA refinanced its Hayfin facility with a fully drawn $135.0 million Ares senior secured credit facility consisting of a $62.5 million term loan and a $72.5 million revolving facility.
Debt principal was reduced from approximately $158.6 million under Hayfin to $135.0 million under Ares. Senior notes payable, net of discount, were $130.6 million at December 31, 2023.
The Ares facility matures December 20, 2027, has no scheduled principal amortization before maturity, and requires quarterly interest payments of approximately $3.7 million.
The weighted-average initial interest rate was approximately 10.4%; the effective rate was approximately 11.39% at year-end. A 100-basis-point increase in variable rates would have an estimated $1.4 million annualized adverse effect on earnings and cash flow.
The Ares facility is secured by substantially all company assets, including intellectual property, and includes a $15.0 million minimum liquidity covenant. ADMA was in compliance with its covenants at December 31, 2023.
Management expects existing cash, accounts receivable, and projected operating cash flow to fund current operations through the end of the first quarter of fiscal 2025, but states that additional financing may be required if cash flow or profitability do not develop as expected.

Material changes versus the prior comparable period

Revenue increased 68%, reflecting continued acceptance and utilization of ASCENIV and BIVIGAM.
Gross margin expanded to 34.4%, aided by 4,400-liter production scale, manufacturing and supply-chain improvements, a more favorable product mix, and late-2022 price increases.
ADMA began manufacturing ASCENIV at the 4,400-liter scale in 2023 and began realizing related margin and capacity benefits in the fourth quarter.
Plasma center operating expenses declined to $4.3 million from $17.8 million, partly because higher plasma collections enabled greater capitalization of production-related costs into inventory.
Operating results shifted from a $39.4 million loss to $21.6 million of operating income.
Net loss remained negative primarily because of $25.0 million of interest expense and a $26.2 million loss on extinguishment of debt related to the Ares refinancing.
ADMA generated positive operating cash flow for the first time, although cash declined by $35.2 million during the year due primarily to debt refinancing payments and related fees.
A June 2023 IT systems disruption caused a $2.1 million write-off of two in-process BIVIGAM batches and approximately $0.7 million of additional plasma-center costs. The company reported no original financial systems data loss or evidence of data exfiltration.
On December 12, 2023, the FDA expanded BIVIGAM’s U.S. label to include patients two years of age and older.

Guidance, outlook, commentary, risks, and unusual items

Management estimates that the Boca Facility could support approximately $330 million of annual revenue in 2024 and potentially $380 million in 2025. At those revenue levels, management forecasts consolidated gross margins of 40% to 50%, net income margins of 20% to 30%, 2024 net income of approximately $65 million, 2025 net income of $115 million or more, 2024 adjusted EBITDA of approximately $90 million, and 2025 adjusted EBITDA of $140 million or more. These are management forecasts, not guarantees.

ADMA expects continued rapid growth in ASCENIV demand and plans further commercial expansion for ASCENIV, BIVIGAM, and Nabi-HB.
The company expects 2024 capital expenditures of approximately $8 million to $12 million.
ADMA plans additional production-yield improvements, supply-chain initiatives, expanded in-house fill-finish activity, and broader implementation of its AI and machine-learning program, ADMAlytics.
The company expects to spend approximately $1.5 million to complete the ASCENIV pediatric post-marketing study, scheduled for completion by June 2026. BIVIGAM pediatric and safety post-marketing studies were completed and submitted to the FDA.
Key risks include continued losses and uncertain sustainable profitability, substantial secured variable-rate debt, reliance on a limited number of customers, third-party suppliers and testing or fill-finish providers, FDA and cGMP compliance, plasma availability and quality, inventory valuation, reimbursement pressure, competition, cybersecurity, inflation, and potential supply-chain or geopolitical disruptions.
Two customers represented 72% of 2023 revenue, and five customers represented approximately 98% of year-end accounts receivable.
The company continues to maintain a full valuation allowance against deferred tax assets. Federal and state NOLs were $315.6 million and $216.4 million, respectively, subject to potential limitations under Section 382.
The company has never paid cash dividends and does not expect to do so in the foreseeable future; the Ares agreement restricts dividends without lender consent.

Most important facts for investors to verify

Whether ASCENIV and BIVIGAM revenue growth and the projected 2024–2025 margins and EBITDA are being achieved.
Whether positive operating cash flow is sustained after funding plasma collection, inventory growth, capital expenditures, interest, and post-marketing studies.
Compliance with Ares leverage, liquidity, and other covenants, and the company’s ability to refinance or repay the $135.0 million facility at maturity.
The quality, realizable value, and turnover of the $172.9 million inventory balance.
Customer concentration, payer reimbursement, rebates, chargebacks, and the potential effect of the removal of the Medicaid rebate cap beginning January 1, 2024.
FDA inspections, cGMP compliance, product releases, post-marketing commitments, and the status of any ASCENIV label-expansion efforts.
Availability and cost of normal-source and high-titer plasma, including the company’s transition away from its expired Grifols normal-source plasma agreement.
Resolution and insurance reimbursement related to the June 2023 IT systems disruption.