ADMA Biologics, Inc. — Q1 2021 Form 10-Q Summary
Business context and reporting period
ADMA is an end-to-end biopharmaceutical company that manufactures, markets and develops plasma-derived biologics for immunodeficient patients and patients at risk for infectious diseases. Its marketed products are BIVIGAM, ASCENIV and Nabi-HB. The company also operates plasma collection centers, sells plasma and manufacturing intermediates, and provides contract manufacturing and laboratory services.
This unaudited Form 10-Q covers the three months ended March 31, 2021, compared with the three months ended March 31, 2020. As of March 31, 2021, ADMA had three FDA-approved products, two FDA-licensed plasma collection centers, an additional center with a BLA pending, and other centers under development.
Financial performance and key metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $16.0 million | $10.2 million | Up $5.8 million, or 57% |
| Product revenue | $16.0 million | $10.2 million | Up approximately 58% |
| Cost of product revenue | $17.8 million | $16.8 million | Up $0.9 million |
| Gross loss | $1.7 million | $6.6 million | Improved $4.9 million |
| Gross margin | (10.7%) | (65.0%) | Improved |
| Operating loss | $15.2 million | $16.8 million | Improved $1.6 million |
| Operating margin | (94.5%) | (164.4%) | Improved |
| Net loss | $18.4 million | $19.2 million | Improved $0.9 million |
| Basic and diluted loss per share | $0.16 | $0.26 | Improved |
| Cash used in operations | $33.2 million | $24.6 million | Use increased $8.6 million |
| Capital expenditures | $2.6 million | $2.1 million | Up $0.5 million |
Revenue growth was driven primarily by increased sales of BIVIGAM and ASCENIV as commercial adoption expanded, together with continued sales of intermediates and plasma. The gross loss narrowed because of higher revenue, the absence of certain conformance-batch expenses recorded in 2020, and lower unabsorbed manufacturing costs.
Operating expenses included research and development of $1.0 million, plasma center operating expenses of $2.2 million, amortization of $0.2 million and selling, general and administrative expense of $10.0 million. Interest expense increased to $3.2 million from $2.7 million, reflecting the additional debt outstanding and refinancing activity.
At March 31, 2021, cash and cash equivalents were $62.0 million, accounts receivable were $15.4 million, inventories were $94.1 million and working capital was $156.1 million. Total assets were $235.7 million and stockholders’ equity was $112.5 million. Inventory increased from $81.5 million at December 31, 2020, reflecting investment in plasma and other materials for future production.
Senior notes had a principal balance of $100.0 million and a carrying value of $93.4 million after debt discount. The notes mature March 1, 2024, bear interest at 11.0% as of March 31, 2021, and are secured by substantially all company assets. ADMA was in compliance with its debt covenants at quarter-end.
Material changes versus the prior comparable period
- Revenue increased 57%, primarily from higher immunoglobulin product sales following the commercial ramp-up of BIVIGAM and ASCENIV.
- Gross loss improved substantially, although product costs still exceeded product revenue.
- Operating loss and net loss declined despite higher commercial, plasma center and corporate spending.
- Plasma center operating expenses increased by $1.7 million as the company expanded staffing, travel and its collection-center network.
- SG&A increased by $2.1 million because of higher employee compensation, commercialization and marketing costs, consulting fees and insurance expense.
- Research and development expense declined by $0.5 million, partly because of study costs incurred in Q1 2020.
- Operating cash use increased to $33.2 million, primarily because inventory consumed $12.6 million of cash compared with a $0.8 million source in Q1 2020.
- ADMA raised $41.9 million of net proceeds through its open-market equity sale agreement and issued approximately 18.1 million shares during the quarter, increasing dilution.
Guidance, outlook, commentary and risks
Management expects the Boca Facility to ramp production over the next three to five years and believes it could support more than $250 million of annual immunoglobulin revenue beginning in 2024 and potentially more than $300 million thereafter. Management expects profitability to begin in the first quarter of 2024, but these are forward-looking estimates and are subject to substantial execution and financing risks.
ADMA stated that its cash, cash equivalents, projected revenue and accounts receivable were expected to fund operations into the fourth quarter of 2021. The company expects to raise additional capital before the end of that quarter and had no firm commitment for such financing. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern.
As of March 31, approximately $19.0 million of gross capacity remained under the equity sale agreement. Between April 1 and May 7, 2021, ADMA sold an additional 5.1 million shares for $10.9 million of net proceeds, leaving approximately $7.9 million of gross capacity.
On April 28, 2021, the FDA approved an expanded 4,400-liter plasma pool process for BIVIGAM. Management expects the change could favorably affect gross margins and operating results beginning potentially in the fourth quarter of 2021. The company also received a permanent ASCENIV product-specific J-code effective April 1, 2021.
ADMA expects capital expenditures of approximately $12.0 million to $18.0 million during the remainder of fiscal 2021. Its normal production cycle can require seven to twelve months or longer, creating significant working-capital requirements.
Key risks include continued losses and negative operating cash flow, dependence on additional financing, high secured debt and interest obligations, dilution from equity issuance, reliance on Grifols and other suppliers for plasma, customer concentration, regulatory inspections and approvals, third-party fill-finish and testing, manufacturing yields, reimbursement and market acceptance, and potential COVID-19-related disruptions. Five customers represented 86% of Q1 revenue and 90% of accounts receivable at March 31, 2021.
COVID-19 caused lower donor collections, supply and testing delays, and reduced physician-engagement opportunities, although management reported no material impact on financial condition or operations to date. FDA inspection of the company’s in-house fill-finish process was expected potentially before the end of Q4 2021, but timing was uncertain.
ADMA extended its normal source plasma purchase agreement with Grifols through December 31, 2022. The company was in late-stage discussions with additional suppliers and planned to expand its plasma collection network to more than 10 centers by 2024.
Most important facts for investors to verify
- Whether additional financing is secured before the company’s projected cash runway ends in Q4 2021 and on what terms.
- Progress toward profitability, including whether the projected 2024 profitability timeline remains achievable.
- Growth and gross-margin impact from BIVIGAM’s expanded production scale and ASCENIV’s new J-code.
- Production yields, inventory utilization and the risk of inventory write-offs or product-release delays.
- FDA inspection and approval timing for the in-house fill-finish process and pending plasma-center BLAs.
- Availability, pricing and diversification of plasma supply beyond the Grifols agreement.
- Customer concentration, product reimbursement and sustained physician, payer and patient adoption.
- Debt covenant compliance, the $100.0 million secured senior notes due in 2024, and the company’s ability to refinance or repay them.
- Future equity issuance, share dilution and the remaining capacity under the open-market sale agreement.