ADMA Biologics, Inc. — FY2020 Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2020, filed March 25, 2021. ADMA is a commercial biopharmaceutical company manufacturing, marketing and developing plasma-derived biologics. Its marketed products are BIVIGAM and ASCENIV, both indicated for primary immunodeficiency, and Nabi-HB, indicated for specified hepatitis B exposures. Operations include the Boca Raton manufacturing facility and the ADMA BioCenters plasma-collection business.
During 2020, the Company operated three plasma collection centers, opened two additional centers and had four more facilities under development. Management continued targeting at least 10 operating centers by 2024.
Financial performance and key metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $42.2 million | $29.3 million | +44% |
| Product revenue | $42.1 million | $29.2 million | +44% |
| Gross loss | $(19.1) million | $(10.2) million | Worsened by $8.9 million |
| Gross margin | (45.2%) | (34.6%) | Declined |
| Operating loss | $(64.9) million | $(41.4) million | Worsened by $23.5 million |
| Net loss | $(75.7) million | $(48.3) million | Worsened by $27.5 million |
| Net loss per share | $(0.88) | $(0.89) | Improved slightly |
| Operating cash flow | $(102.0) million | $(76.2) million | Outflow increased |
| Capital expenditures | $12.7 million | $3.8 million | Increased |
| Cash and cash equivalents | $55.9 million | $26.8 million | Increased |
| Inventory | $81.5 million | $53.1 million | Increased |
| Senior notes payable, net | $93.0 million | $68.3 million | Increased |
Revenue growth primarily reflected increased BIVIGAM and ASCENIV sales and revenue from a new intermediate-fractions manufacturing and supply agreement. Revenue from the manufacturing segment increased to $36.7 million from $22.2 million, while plasma-center revenue declined to $5.4 million from $7.0 million.
Cost of product revenue rose to $61.3 million. This included $7.5 million of non-recurring costs for BIVIGAM conformance lots produced at increased scale and continued manufacturing ramp-up costs. Selling, general and administrative expense increased to $35.1 million, research and development expense to $5.9 million, and plasma-center operating expense to $4.2 million.
Working capital was $133.8 million at year-end, including cash of $55.9 million. Financing activities provided $143.9 million, primarily from $88.7 million of net equity-offering proceeds, $42.5 million from the Jefferies at-the-market offering and $12.5 million of debt proceeds. Financing offset $102.0 million of operating cash burn and $12.7 million of investing outflows.
Material changes versus the prior comparable period
- Revenue increased 44%, but cost of product revenue increased 55%, resulting in a larger gross loss and continued negative operating leverage.
- Net loss increased from $48.3 million to $75.7 million, principally because of higher production, commercialization, research and development, and interest costs.
- Operating cash outflow increased by $25.8 million, driven by the higher net loss and investment in accounts receivable and inventory.
- Inventory increased by $28.5 million, including higher work-in-process and finished-goods balances supporting product scale-up.
- The Company drew the final $15.0 million tranche under the Perceptive facility in December 2020 and used the proceeds to retire the $15.0 million subordinated Biotest note, recording a $1.0 million gain on extinguishment.
- Common shares outstanding increased from 59.3 million at December 31, 2019 to 104.9 million at December 31, 2020, reflecting equity financing and dilution.
- The Company installed a Vanrx SA25 aseptic filling machine, produced four larger-scale BIVIGAM conformance batches and submitted related FDA applications. Capacity expansion and in-house fill-finish capabilities remained subject to FDA approval.
Guidance, outlook, risks and unusual items
- Management expects the Boca Facility could support more than $250 million of annual immune-globulin revenue beginning in 2024 and expects profitability in the first quarter of 2024. These are forward-looking estimates, not guarantees.
- Management expected cash, cash equivalents, projected revenue and accounts receivable to fund operations into the fourth quarter of 2021, requiring additional capital before then. The filing states that no firm commitment for such financing existed at filing.
- The auditor’s report and management disclosures identify substantial doubt about the Company’s ability to continue as a going concern because of recurring losses, negative operating cash flow and expected financing needs.
- The Perceptive facility had $100.0 million of principal outstanding, an interest rate of 11.0% at December 31, 2020, monthly interest of approximately $0.9 million and a March 1, 2024 maturity. It is secured by substantially all Company assets and contains revenue and minimum-cash covenants. The Company reported compliance at year-end.
- After year-end, through March 16, 2021, ADMA sold 16.3 million additional shares under the Jefferies agreement for $38.3 million of net proceeds; $22.7 million of gross capacity remained.
- COVID-19 caused lower donor collections, supply and testing delays, and reduced customer engagement. Management stated that production and financial condition had not been materially affected as of the filing date, but the ultimate impact remained uncertain.
- Three customers represented 82% of 2020 revenue and 92% of year-end accounts receivable. Grifols supplied approximately 68% of 2020 inventory purchases, creating customer and supplier concentration risk.
- Required post-marketing studies for BIVIGAM and ASCENIV were pending and generally expected to be completed by June 2023.
- No material pending legal proceedings were reported. The filing identifies inventory valuation as a critical audit matter; inventory totaled $81.5 million at year-end.
Most important facts for investors to verify
- Whether BIVIGAM and ASCENIV sales can grow rapidly enough to offset manufacturing, commercialization and plasma-center costs.
- Progress and FDA approval status for the Boca Facility capacity expansion, Vanrx fill-finish equipment and the pending plasma-center BLA.
- Actual cash runway, availability and pricing of additional equity or debt financing, and dilution from future capital raises.
- Compliance with the Perceptive facility’s minimum-cash and trailing-revenue covenants and the Company’s ability to refinance or repay the $100.0 million principal due in 2024.
- Inventory realizability, production yields, product-release timing and the effect of conformance-batch and other manufacturing costs on gross margins.
- Customer and plasma-supplier concentration, including the Company’s dependence on Grifols and third-party fill-finish and testing providers.
- COVID-19 effects on donor collections, plasma availability, supply chains, regulatory reviews, physician engagement and demand for immunoglobulin products.
- Whether management’s 2024 revenue and profitability expectations are supported by demonstrated product demand, regulatory approvals and sufficient manufacturing capacity.