ADMA Biologics, Inc. — Q3 2021 Form 10-Q Summary
Business context and reporting period
ADMA is a commercial biopharmaceutical company manufacturing, marketing and developing plasma-derived biologics for immunodeficient patients and patients at risk for infectious diseases. Its marketed products are BIVIGAM, ASCENIV and Nabi-HB. Operations include the Boca Raton, Florida manufacturing facility and the ADMA BioCenters plasma-collection business.
This Form 10-Q covers the three and nine months ended September 30, 2021, compared with the corresponding 2020 periods. The financial statements are unaudited and prepared under U.S. GAAP.
Financial performance and key metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $20.7 million | $10.3 million | $54.6 million | $28.3 million |
| Product revenue | $20.6 million | $10.2 million | $54.5 million | $28.2 million |
| Gross profit (loss) | $0.4 million | $(1.6) million | $(2.3) million | $(13.9) million |
| Gross margin | Approximately 1.9% | Approximately (15.4)% | Approximately (4.3)% | Approximately (49.3)% |
| Operating loss | $(14.4) million | $(13.8) million | $(45.2) million | $(47.7) million |
| Net loss | $(17.7) million | $(16.9) million | $(55.0) million | $(56.3) million |
| Loss per share | $(0.13) | $(0.19) | $(0.44) | $(0.68) |
| Cash used in operating activities | Not provided for the quarter | Not provided for the quarter | $(78.9) million | $(69.8) million |
| Capital expenditures | Not provided for the quarter | Not provided for the quarter | $9.8 million | $9.1 million |
Revenue increased approximately 101% in the third quarter and 93% for the first nine months, driven by higher BIVIGAM and ASCENIV sales, broader customer adoption, plasma sales and intermediate-fraction revenue. The nine-month gross loss narrowed substantially, primarily because 2020 included approximately $7.3 million of conformance-batch production expenses that did not recur in 2021.
Despite improved revenue and gross margin, operating expenses remained significant. Nine-month research and development expense declined to $2.9 million from $4.9 million, while plasma-center operating expense increased to $8.2 million from $2.6 million and SG&A increased to $31.2 million from $25.8 million.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $34.4 million at September 30, 2021, down from $55.9 million at December 31, 2020.
- Working capital was $142.4 million; total current assets were $174.8 million and current liabilities were $32.3 million.
- Inventory increased to $114.1 million from $81.5 million, reflecting substantial investment in plasma, work-in-process and finished goods needed for the seven-to-12-month production cycle.
- Senior notes had a $100.0 million principal balance and a $94.4 million carrying value net of discount. The notes mature March 1, 2024, bear interest at 11.0% as of September 30, 2021, and are secured by substantially all company assets.
- The effective interest rate on the senior secured notes was approximately 13.7%. Interest expense was $9.7 million for the first nine months, compared with $8.9 million in 2020.
- The company was in compliance with its debt covenants at September 30, 2021, including the $3.0 million minimum cash requirement and revenue covenant.
- Stockholders’ equity was $102.8 million, compared with $88.2 million at year-end 2020. Common shares outstanding increased to 138.3 million from 104.9 million, primarily because of equity offerings.
Material changes versus the prior comparable period
- Revenue growth was broad-based, with ADMA BioManufacturing revenue increasing to $48.8 million for the first nine months from $23.3 million, and Plasma Collection Centers revenue increasing to $5.6 million from $4.9 million.
- Gross loss improved by $11.6 million for the first nine months, but the company remained loss-making because of commercialization, plasma-center expansion and corporate expenses.
- Operating cash use increased by $9.1 million to $78.9 million. Inventory absorbed $32.6 million of cash and accounts receivable absorbed $7.2 million.
- During the first nine months, ADMA raised $67.3 million net from common-stock issuances, including $60.4 million under its prior sales agreement and $6.9 million under a new Raymond James distribution agreement.
- The company opened or developed additional plasma centers; nine facilities were in various stages of approval and development, five were operational and collecting plasma, and three held FDA licenses at September 30.
- FDA approval was received in September 2021 for the Vanrx SA25 aseptic fill-finish machine and related in-house processes. Management expects this to improve gross margins, production cycle times and supply consistency.
- On September 28, 2021, the company implemented a retention program involving approximately $2.6 million of cash payments and 3.78 million restricted stock units, including time-based and milestone-based awards.
Guidance, outlook, commentary and risks
- Management expects to exit 2021 with an annualized revenue run rate approaching $100 million or more.
- The Boca Facility is expected to have potential annual revenue capacity of more than $250 million beginning in 2024 and potentially more than $300 million thereafter, subject to production yields, supply and commercialization success.
- Management expects operations to become cash-flow positive in the first quarter of 2024, but expects continued operating losses and negative operating cash flow until then.
- Based on the company’s projections and the October 2021 equity offering, management believed available liquidity would fund operations through the first half of 2022. Additional capital, including a planned debt refinancing or expansion, is expected to be required in the second half of 2022.
- The filing states that substantial doubt exists regarding the company’s ability to continue as a going concern because of recurring losses, negative operating cash flow, substantial capital needs and the absence of firm commitments for additional financing.
- On October 25, 2021, after quarter-end, ADMA issued 57.5 million shares and received approximately $53.9 million of net proceeds. The proceeds are intended for raw materials, plasma-center expansion, Boca Facility capacity and cGMP improvements, business development and general corporate purposes.
- COVID-19 caused lower donor collections, supply-chain delays and reduced direct engagement with physicians, although management stated that the pandemic had not materially affected financial results or production through the filing date.
- Key operational risks include plasma availability and pricing, reliance on Grifols and other suppliers, third-party testing and fill-finish providers, FDA inspections and cGMP compliance, manufacturing yields, reimbursement and market acceptance of BIVIGAM and ASCENIV, customer concentration and future financing availability.
Important facts for investors to verify
- Whether revenue growth and the new in-house fill-finish capability translate into sustained positive gross margins and reduced inventory-related cash consumption.
- Actual cash burn and liquidity after the October 2021 equity offering, including the timing and terms of any required 2022 refinancing or additional capital raise.
- Progress toward the stated first-quarter 2024 cash-flow-positive target and the projected $100 million-plus 2021 annualized revenue run rate.
- FDA licensing and operating progress for the plasma-center network, including the target of at least 10 FDA-licensed centers by year-end 2023.
- Compliance with the $100 million secured debt facility, its March 2024 maturity, interest burden and covenant requirements.
- Customer concentration, reimbursement trends and demand for BIVIGAM, ASCENIV and Nabi-HB.
- Whether plasma supply, third-party testing, product release timing or COVID-19-related disruptions affect production and commercialization.
- The potential dilution from the 57.5 million shares issued after quarter-end, outstanding warrants and equity awards.