ADMA Biologics, Inc. — Form 10-Q Summary
Business context and reporting period
ADMA Biologics is a late-stage biopharmaceutical company developing plasma-derived biologics, including RI-002 for primary immune deficiency disease, and operating source-plasma collection centers in Georgia. This unaudited Form 10-Q covers the three and six months ended June 30, 2015, with comparisons to the corresponding 2014 periods. The company had 10,705,573 shares outstanding as of August 10, 2015.
Key financial metrics
| Metric | Three months ended June 30, 2015 | Three months ended June 30, 2014 | Six months ended June 30, 2015 | Six months ended June 30, 2014 |
|---|---|---|---|---|
| Total revenue | $1.3 million | $1.5 million | $2.8 million | $3.1 million |
| Gross profit | $0.5 million | $0.6 million | $1.1 million | $1.1 million |
| Gross margin | 40.0% | 37.3% | 39.7% | 37.3% |
| Loss from operations | $(3.5) million | $(3.6) million | $(6.7) million | $(9.3) million |
| Net loss | $(4.7) million | $(4.0) million | $(8.3) million | $(9.9) million |
| Basic and diluted loss per share | $(0.44) | $(0.43) | $(0.81) | $(1.06) |
| Net cash used in operating activities | Not separately provided | Not separately provided | $(8.7) million | $(9.3) million |
Revenue consisted primarily of plasma sales, with license revenue of $18,889 in the quarter and $37,778 year to date. The company has not generated revenue from its therapeutics research and development business. Quarterly operating and net margins were approximately negative 268% and negative 357%, respectively; year-to-date operating and net margins were approximately negative 239% and negative 295%.
At June 30, 2015, cash and cash equivalents were $7.8 million, short-term investments were $15.9 million, and working capital was $23.9 million. Total assets were $29.8 million, total liabilities were $20.3 million, and stockholders’ equity was $9.5 million. The company reported an accumulated deficit of $77.7 million.
Debt included $14.0 million of Oxford notes, net of debt discount, and a $1.4 million end-of-term liability. The Oxford facility provides up to $21.0 million, with $5.0 million available at the company’s option if RI-002 receives FDA BLA approval by January 31, 2017. The notes bear interest at the greater of 7.80% or three-month LIBOR plus 7.54%, with principal repayment scheduled to begin February 1, 2017.
Material changes versus the prior comparable period
- Quarterly revenue declined 13% to $1.3 million; year-to-date revenue declined 8% to $2.8 million. Management attributed the decline primarily to retaining additional plasma inventory for anticipated commercial manufacturing.
- Quarterly R&D expense decreased 16%, and year-to-date R&D expense decreased 52%, primarily because the Phase III RI-002 study was completed in the fourth quarter of 2014 and most drug-product manufacturing occurred in the first half of 2014.
- Plasma-center operating expense increased 34% for the quarter and 32% year to date because of the second Georgia collection facility opened in late 2014.
- Quarterly net loss increased 18% despite lower operating expenses, primarily because of higher interest expense and a $719,097 loss on extinguishment of debt associated with the June 2015 refinancing.
- In March 2015, the company issued 1,408,750 common shares at $8.00 per share, generating approximately $10.2 million in net proceeds. Shares outstanding increased from 9.3 million at December 31, 2014 to 10.7 million at June 30, 2015.
- In June 2015, the company refinanced its Hercules debt with a $16.0 million initial Oxford term loan. Approximately $15.7 million was used to repay the prior facility, including interest, prepayment premium, and other fees.
- Net cash used in investing activities increased to $11.3 million, primarily because of purchases of short-term investments, while net cash provided by financing activities increased to $10.6 million.
Guidance, outlook, risks, and unusual items
- Management believed available cash, cash equivalents, and short-term investments would fund operations into the first half of 2016. The company expects to require additional capital and has no existing commitment for future external funding.
- Management did not expect FDA approval for RI-002 before the second half of 2016, if at all, and did not expect commercialization revenue before the second half of 2016, if at all.
- After the quarter, on July 31, 2015, the company submitted the RI-002 BLA to the FDA. The filing states that the FDA has a 60-day period to determine whether the application is acceptable for filing.
- Management expected R&D expense to remain lower during 2015, but expected general and administrative expense to increase because of pre-launch planning, market research, and hiring for commercialization activities. Plasma-center expenses were also expected to increase as collection activity grows.
- Key risks include FDA acceptance or approval of the BLA, clinical and manufacturing execution, regulatory licensure of the Marietta plasma center, dependence on substantially one plasma customer, continued operating losses, limited liquidity, and the need to raise additional capital on acceptable terms.
- The Oxford loan is secured by company assets, subject to a negative pledge on intellectual property, and contains financial and operating covenants and customary events of default that could permit acceleration and seizure or sale of collateral.
- The company had approximately $3.1 million of minimum rent obligations under its Norcross and Marietta facility leases through the end of their terms. Management reported no legal claims expected to have a material adverse effect.
- The company early adopted ASU 2015-03, presenting debt issuance costs as a deduction from related debt and recasting prior-period presentation.
Important facts for investors to verify
- Whether the FDA accepted the RI-002 BLA for filing and the subsequent review or approval status.
- Whether the company obtained the additional $5.0 million Oxford tranche and complied with all loan covenants.
- Actual cash burn and financing needs relative to the stated funding runway into the first half of 2016.
- Progress toward FDA licensure of the Marietta plasma center and the commercial usability of its accumulated plasma inventory.
- Customer concentration and the stability of the Biotest-related plasma supply and licensing arrangements.
- Changes in share count, stock-option dilution, and the potential dilution associated with approximately 1.5 million potentially dilutive warrants and options.
- Whether RI-002 achieves regulatory approval, commercial launch, and revenue generation within management’s anticipated timeline.