ADMA Biologics Inc (ADMA) 2022 Q2 法說會逐字稿

Good afternoon, and welcome to the ADMA Biologics Second Quarter 2022 Financial Results and Corporate Update conference call on Wednesday, August 10, 2022. (Operator Instructions) Please be advised that this call is being recorded at the company's request and will be available on the company's website approximately 2 hours following the end of the call.

At this time, I'd like to introduce Skyler Bloom, Senior Director Business Development and Corporate Strategy at ADMA Biologics. Please go ahead.

Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics' financial results for the second quarter of 2022 and recent corporate updates. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Lenz, Executive Vice President, Chief Financial Officer, and General Manager of ADMA BioCenters.

During today's call, Adam will provide some introductory comments and provide an update on corporate progress, and then Brian will provide an overview of the company's second quarter 2022 financial results. Finally Adam will then provide some brief summary remarks before opening up the call for questions.

Earlier today we issued a press release detailing the second quarter 2022 financial results and summarized certain achievements and recent corporate updates. The release is available on our website at www.admabiologics.com.

Before we begin our formal comments, I'll remind you that we will be making forward-looking assertions during today's call that represent the company's intentions, expectations or beliefs concerning future events, which constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to factors, risks and uncertainties such as those detailed in today's press release announcing this call and in our filings with the SEC, which may cause actual results to differ materially from the results expressed or implied by such statements.

In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update any such statements, except as required by the federal securities laws.

We refer you to the disclosure notice section in our earnings release we issued today in the Risk Factors section of our 2021 annual report on Form 10-K for the year ended December 31, 2021, as well as the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended June 30, 2022, for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements.

With that, I would now like to turn the call over to Adam Grossman. Adam?

Thank you, Skyler. Good afternoon, everyone, and thank you for joining us on today's call. We hope you all remain healthy and safe.

The second quarter of 2022 was another banner period of execution for our company. During the quarter we grew total revenues by 90% year-over-year, generating significant improvement of gross margin and meaningfully narrowed net losses from prior periods. The significant revenue growth, coupled with our disciplined expense management, established a strong foundation for the company to accelerate towards profitability.

Consistent with the robust year-to-date trends previously highlighted, we are particularly pleased with the continued growth for our higher-margin IG product, ASCENIV. Drawing from the strong underlying product demand trends, we are confident the product and margin mix will continue to favorably evolve over the coming periods.

In this context, we anticipate the company's pathway to profitability will become increasingly visible as the year progresses and our anticipated margin expansion unfolds, enabled by the company's strong execution during the first half of the year, we are well positioned to generate full year 2022 revenues exceeding $130 million.

The revenue increases will be driven by both IVIG end market growth as well as anticipated share grades for our product portfolio. ASCENIV adoption continues to accelerate, and we are confident the product's upside will sustain over the near and longer-term periods. Our commercial organization has successfully positioned the product, constructed and conveyed appropriate commercial messaging and mobilized targeted medical education campaigns, which are focused on expanding the brand's awareness and product's utility.

Our team has identified yet to be realized growth opportunities among both new providers as well as headroom for increased penetration within existing institutions. Importantly the problematic and at-risk primary immunodeficient patients being treated with ASCENIV are demonstrating real-world benefits and quality of life improvements.

Anecdotal market feedback has been resoundingly positive and this patient population is oftentimes fully controlled on standard IVIG products. We believe this validates and supports our company's mission to commercialize novel products for immunodeficient patients at risk for infections. It is our devotion to this underserved population that fuels us, and we are proud that the ADMA Biologics' name is now synonymous with trust and confidence with physicians, providers and patients.

Finally, on ASCENIV, ADMA's nimble manufacturing capabilities provide for time and cost-efficient production flexibility as our product demand grows. Additionally we believe we have sufficient internal and external RSV plasma supply to support the upside revenue targets with products. We are well prepared from a raw material, RSV and normal source plasma supply standpoint as well as manufacturing capacity to meet how our product's rapidly growing demand.

Turning to BIVIGAM. The product continues to penetrate and gain market share in the growing U.S. immunoglobulin market. We are pleased with growth in overall product-specific execution. The second quarter of 2022 represented the highest period of utilization and demand pull-through since the product was relaunched in 2019. Our confidence in BIVIGAM's ongoing and peak revenue potential is unwavering and fully intact.

As we have throughout the pandemic, ADMA remains committed to delivering the continuity of patient care. Our strong normal source and RSV plasma supply inventories, which are included in the total inventories of $146 million recorded at the end of the second quarter are anticipated to support all upwardly revised revenue forecast on an ongoing basis across our IG product portfolio.

This robust plasma supply position is a result of the execution by our BioCenters team and rapidly expanding our internal plasma collection center network and management's assertive efforts to secure third-party plasma supply contracts. At present, in our BioCenters segment, we have 10 plasma collection centers under our corporate umbrella. Six centers are FDA-licensed. Two additional collection centers are operational and collecting plasma and 2 centers are in various stages of construction.

We remain on track to have all 10 plasma collection centers FDA licensed by the end of next year, at which point, we anticipate having substantial plasma supply self-sufficiency. At present we are encouraged with our donor foot traffic and collection volumes, which are now considerably exceeding our organization's pre-pandemic levels.

With respect to macroeconomic conditions, in addition to the novel altruism associated with donating plasma, we believe the remuneration for plasma donations can help donors manage and offset increased pressures due to the historic consumer inflation rates. It is in this context that ADMA is proud to be a trusted partner with the local communities we serve, and we look forward to welcoming many more donors to our state-of-the-art BioCenters facilities.

These truly remarkable accomplishments across our business could not have been possible without the dedication and focus of ADMA's staff, leadership and advisers. Our organization's collected vision and dedication to establish complete end-to-end control of our operations is now our reality.

Thank you for your dedication and hard work in achieving our corporate goals and delivering on our commitments to the patients, prescribers and stockholders to whom we have made these promises. We commend the entire ADMA team, your remarkable efforts focused on improving health care for patients who we know are counting on us.

Additionally, before turning the call over to Brian, I'd like to confirm our strategic alternatives process remains a top priority and is ongoing. Our objective is to maximize stockholder value, and we will update the market as developments materialize.

With that said, I'd now like to turn the call over to Brian for a review of the second quarter 2022 financials.

Thank you, Adam. We issued a press release earlier today outlining our second quarter 2022 financial results, and I'll now discuss some of the key highlights. As Adam mentioned earlier, total revenues for the second quarter ended June 30, 2022, were $33.9 million as compared to $17.8 million during the second quarter of 2021. And this represents an increase of $16.1 million or approximately 90%.

The revenue growth for the second quarter of 2022 compared to the second quarter of 2021 was favorably impacted by the continued commercial ramp-up of our IVIG product portfolio and expansion of our customer base for BIVIGAM and ASCENIV. As a result of the encouraging first half of 2022, we are well positioned to generate full year 2022 revenues in excess of $130 million.

During the second quarter of 2022, ADMA realized a gross profit of $7.8 million compared to a gross loss of $1 million for the second quarter of 2021. Gross profit during the second quarter was driven by a favorable contribution from our higher-margin product, ASCENIV. Our consolidated net loss for the quarter ended June 30, 2022, was $13.8 million or a net loss of $0.07 per basic and diluted share compared to a consolidated net loss of $18.9 million or a net loss of $0.15 per basic and diluted share for the quarter ended June 30, 2021.

Net loss decreased by approximately $5.1 million. This is primarily attributed to higher gross margins of $8.8 million, offset by a $1.3 million increase in interest expense as a result of additional debt as well as rising interest rates, along with increased plasma center operating expenses of $1.1 million attributed to having 8 plasma centers in operation compared to 4 centers this time last year as well as increased general and administrative expenses of $1.5 million, resulting in increased headcount, commercialization and marketing expenditures.

We look forward to expanding on these trends in the quarters ahead as we expect to continue to grow revenues and grow gross profits and narrow net losses as 2022 progresses. In doing so, we anticipate our pathway to profitability will become increasingly clear. We have significantly strengthened our balance sheet and funding position over recent periods. On a pro forma basis, the company's total liquidity stands at greater than $96 million, and this includes current cash on hand at the end of the second quarter of $52 million, accounts receivable of $19 million and access to an additional $25 million in nondilutive funds from Hayfin, which is now accessible at our discretion.

In the context of expected improvements in net losses moving forward, ADMA is in the best financial position the company has been in since inception. As of June 30, 2022, ADMA's total asset value was $297 million, notably including $146 million of total inventory recorded in the company's cost, cash and cash equivalents of $52 million as well as accounts receivable of $19 million.

Lastly, we're very pleased with the expansion progress at our BioCenters with 8 centers now in operation and collecting plasma compared to 4 this time last year. During the first half of this year, we received FDA approvals for 3 of our centers, and this brings the total FDA-approved centers to now 6. We also have 2 additional centers presently under FDA licensing preparation and another 2 under construction. We are well positioned to achieve our stated goal of having all 10 centers collecting and FDA licensed by year-end 2023.

With that, I will now turn the call back over to Adam for closing remarks.

Thank you, Brian. In summary, we have successfully implemented all requisite measures to enable our company's collective advancement toward profitability. We comprehensively reiterate all previously provided longer-term financial guidance. We believe that ADMA is on track to generate $250 million or more in top line revenue in 2024 and $300 million or more annually thereafter. At this level, we continue to anticipate generating potential annual gross profit and net income of $100 million to $150 million and $50 million to $90 million, respectively, during the 2024, 2025 time period and beyond.

While guided profitability is reiterated for no later than the first quarter of 2024, accelerating profitability timelines are possible should the demand trend for our IP portfolio previously characterized and current margin dynamics sustain. As the timing to profitability becomes clearer, we will formally revisit this guidance.

In closing, I'd like to thank you, our stockholders, for your continued support as your investment in ADMA helps to advance our mission to save lives and make high-quality, safe and efficacious products that help our friends, family and neighbors. Please donate plasma and help save lives.

And with that, we will now open up the call for your questions. Operator?

Our first question comes from Elliot Wilbur with Raymond James.

Congrats on a strong quarter. Just wanted to ask a couple of questions. Maybe first, but actually for Brian and just thinking about given expectations for sequential top line increase over the balance of the year, how should we be thinking about gross margin, both in dollar terms and percentages progressing as well, given that I think the last quarter you sort of called out a couple of moving parts or onetime items that could impact 2Q margins, specifically the effects of the shutdown and then I think some of the longer-dated inventory was expected to have a favorable impact? So just trying to get a sense of how this represented this quarter may be in terms of margin levels over the balance of the year?

Sure. Thank you for the compliments and thank you for the question, Elliot. The way we're looking at the remaining balance of the year is continued gross profit expansion as well as narrowing net losses and continued revenue growth. Thinking about the impact of the recognition of the longer-dated inventory, this was incremental in nature. What we've mentioned on previous calls, and we continue to see our revenues being generated from our higher-margin product, ASCENIV and Nabi, where historically we were looking at our forecast and thinking about a BIVIGAM high standard IVIG mix compared to our higher margin mix of 90% 10%, maybe 80% 20%. We're seeing a 70% 30% higher margin mix BIVIGAM and ASCENIV.

So with 4 consecutive quarters of positive gross margin, less this current quarter being at 23%, we do -- we're hopeful that we're going to continue to see positive gross margins trend in that direction and then 8 consecutive quarters of top line revenue growth and recently certainly narrowing net losses, we feel that this was a very, very clean quarter, and we look forward to continuing to produce increased revenues and improved gross margins and narrowing net losses as the quarter has progressed.

I think the last couple of quarters were in that 10% to 13%, 15% range. This quarter we did 23%. From a quantifiable standpoint, I would say somewhere continuing to rise modestly as we progress through the rest of the year. BIVIGAM peak gross margins, we think we're going to be in that 25% to 35% range. And then ASCENIV will be in that 80% to 85% range. Nabi is in the 70% to 75% range on a blended basis. As we look to exit 2022, going into 2023, and certainly by peak, we'll have a blended 50% gross margin towards the end of 2023 and then going into 2024.

So it will be a modest continued increase in gross margins is how we're forecasting our continued success out of the remaining balance out of the rest of this year.

And if I can, maybe I'll just add, Elliot, that we're really pleased with the 90% year-over-year growth. The business is firing on all cylinders. We've been producing a lot of drug and it's coming off the line. Inventory turns are happening a little bit faster. Things are really falling into favor these days. And I think it's important for me to just point out, we've always been conservative in our estimates. We've always been -- I like to say we're a management team that sets achievable expectations and we certainly love beating them.

So we're looking at this. We've, I guess, reiterated our guidance. We've enhanced it to the point where we're saying we expect to exceed $130 million. But we want to be cautious that with the macroeconomic uncertainties that are plaguing pharmaceutical manufacturers with the supply chain, inflationary pressures. We just want to be conservative here, but we're very pleased with the execution, very pleased with the execution during the quarter. We've been able to really manage expenses well. And certainly the demand for our product continues to grow, and we expect to see continued quarter-over-quarter growth all the way through profitability.

And just following up on some of your comments there. Could you just talk about the current macro environment on the collection side? What you're seeing in terms of foot traffic, collection volumes? You mentioned remuneration in your prepared commentary, but what you're seeing in terms of overall inflationary pressures there in terms of being able to get donors into centers. But maybe just kind of high-level commentary on the collection side.

Sure, absolutely. I think that I'm one of the last people to say this publicly, but some of the other plasma companies have stated that collection volumes are increasing, centers are operating very well. It's the same for ADMA. I can let Brian speak to the actual numbers here. But foot traffic is up. I'll just say, for those who have been following the company for a while, and we've been public since 2013, those can recall some of the headlines from the 2008 to 2012 time line.

Inflation rates and pressures to the general population certainly are positives for plasma donation. It's a way for folks to sort of offset some of these increasing costs that they're experiencing at the grocery store and at the pump and in their regular daily lives. So government programs are sun-setting. Inflation is at extremely high levels. We think that donor foot traffic should continue to accelerate. We work very closely and we're really a big part of the communities where our centers are located.

As we said during the prepared remarks, we've got 10 centers under our corporate umbrella. We've got 8 centers that are currently operating and collecting plasma, and we're ramping up. We're staffing and we're seeing collection volumes month-over-month that are improving across the board in all of our geographies. So we feel very confident that -- we feel very confident that we're going to be able to get to self-sufficiency sometime next year. And we're really pleased with the opportunities ahead of us from a collection standpoint.

So just to elaborate a little bit more on that. Our donor foot traffic and collections are certainly much higher today than they were pre-pandemic as a result of opening up more centers, running special donor programs. But I think having the centers remain open throughout the pandemic, that's one of the things that ADMA was able to do. We didn't shut down our centers, so we were able to roll out programs. We were able to keep the donors still coming in even with some social distancing that was previously enacted. But obviously now that's gone away. We're extremely excited geographically where we're located as well.

So we think that even though inflation is increasing, we think that there's an opportunity for donors to earn additional income to augment their income based on rising prices, gas and groceries. So we're certainly happy to add to the local economies in the 10 centers that we're located throughout the United States.

Okay. Maybe just one final question for me, and I'll get back in the queue here. But another more of a macro subject. And wondering if you have any visibility into the legislation coming out of Washington with respect to good price negotiation. I know the original legislation had a carve-out for plasma therapies such that they would not be subject to the provisions of that legislation, but a lot of kind of last-moving or fast-moving changes in addition to deletions to legislation as it's come through both chambers here. I'm just wondering if you have any perspective in terms of whether or not that exemption still exists in the latest iteration of that bill.

Sure, Elliot. I think the short answer to your question is, yes, the exemption exists in the latest draft of the bill. I have to commend ADMA's policy team as well as the work that we do with the Plasma Protein Therapeutics Association and our brethren companies in the plasma-derived product space.

Historically under Obamacare, plasma products were excluded. We felt confident that plasma products will continue to be excluded. There -- we -- I believe that there's a plasma caucus that has been formed now on Capitol Hill. That's due to the combined efforts, I think, of the industry. And I think that the folks that are really trying to get their arms around drug pricing reform, understand that the world that we play in and the arena that we're in is different than now the small molecules and some of the other generic products that are out there.

You cannot grow what we make in laboratories. We need human beings to be altruistic and come in and donate plasma. And the costs continue to rise. And I think things like dealing with global pandemics and infectious diseases and all of the additional testing and good manufacturing, good laboratory practices that we have to implement. I think that some of the regulators understand that there are additional costs and that there are additional pressures.

And quite frankly when you look at the margin profile of plasma companies, it's different than that of pharma. So we're very, very pleased. Every once in a while, our government does some good stuff. And we think excluding plasma from the Medicare, Medicaid price negotiations is the right thing to do, and it's going to help keep product into the veins of patients where it's most needed.

Thanks for the question, Elliot.

Our next question comes from Kristen Kluska with Cantor.

Congrats on another strong quarter. So I appreciate your conservative approach that you give as it relates to your forecasting. But could you talk about what you would need to see in these next few months or quarters to adjust some of your profitability guidance? And for example, does your current internal forecast assume the lower end of the revenue guidance that you've provided and similar growth trends on these individual product basis?

Sure. Maybe I'll start off and as we say, Brian, what it would take me to adjust profitability guidance. We alluded to it, Kristen, and thanks again for the great question. We alluded to it, we're performing very well. We are unlocking

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And even when we're faced with some of the supply chain and macroeconomic challenges, if we continue to see the growth in BIVIGAM utilization, the growth and utilization of ASCENIV continues to accelerate the way that we've seen.

Are we surprised by our results? No, we're not surprised. Are we pleased? We're certainly very, very pleased. But I think that our commercial team is well oiled at this point, the medical messaging and the medical education campaigns are really doing their job. And I think word of mouth and our grassroots approach to the sales and market penetration is proving to be successful.

So I think if we could see another kind of blimps into the third quarter, we continue to see strong demand trends into the third quarter. I think as this continues, as we get closer to the end of the year, we certainly believe that there is a potential to accelerate profitability timeline. And we will formally revisit that guidance in due course as the year unfolds.

One of the things I said in the prepared statement is that the more we operate, the more visible profitability is becoming. And we really -- we don't want to set expectations and then have something fall from the sky because of the macroeconomic pressures that we really just don't see yet. We're trying our best to see around corners. We feel very confident that we're certainly on track for profitability on or before the end of Q1 '24.

And I think if we continue to do our jobs well, we certainly have the inventory in the working process channel to meet the growing demand trends. And even if those demand trends accelerate even faster than our internal expectations, we've substantially increased the production of ASCENIV this year. That's one thing I love about our plant here. It doesn't matter what plasma we bring into the plant that day, it's pretty much the same process for whatever we make.

So if we want to make a batch of ASCENIV, all we do is bring over the RSV plasma pool. If we want to make BIVIGAM, we bring over the BIVIGAM plasma pool. So we've been able to swap out some BIVIGAM batches this year for additional ASCENIV. And I think coupled to Brian mentioned earlier, Brian mentioned the 36-month shelf life extension, producing more drugs, having it on hand to meet the growing demand trends that we don't want to be caught short, like ensure our investors that in that $146 million worth of inventory, there's a solid amount of ASCENIV product in there that we think will meet the expectations of the street and we have inventories that will allow us to be.

So we feel very good about it. But I can't commit today, Kristen, but I certainly am committing to continued quarterly growth and delivering on the promises to the patients, the prescribers and our stockholders.

And I think just a couple of things to add to that. As we continue to ramp up production at the plant, presently, we're about 50%, 60% at production. We've said historically, we've got a 600,000 liter plant and produce close to 2 million grams, and that would be in that 2024, 2025 timeframe.

So as we continue to realize efficiencies at the plant, improved inventory turns, perhaps increasing or expediting testing results, all of that will lead to improved working capital and improve gross margins. So we're going to continue to obviously monitor these things very closely and improve inventory returns and other things, efficiencies in the business to continue to improve margins and narrow net losses.

Appreciate that. So now that you've had a couple of successful quarters with ASCENIV and you've highlighted the momentum is ongoing. Are you seeing that the average number of doses per year has increased? Or is a lot of the growth also just attributed to new patient starts? Or is it really just a combination of these 2 factors?

The answer is yes. We are seeing patients -- most patients are going on ASCENIV therapy, Kristen, because they've had complications and they have other comorbidities and their success on standard IG is less than optimized. So clinicians are switching these primary immune deficient patients, secondary immune deficient patients off of their standard IG on to ASCENIV therapy, which is labeled indicated use. And we're seeing patients remaining on therapy for a long period of time.

A couple of patients that we have on therapy are in their second year. Typically in this patient population, if you do well on a drug, you tend to stay on that drug. And we're starting to see that, and we believe that the business that we're building is certainly sticky. We're seeing very, very consistent utilization amongst existing prescribers and existing patients, and we are seeing growth again at the same institutions. And we're adding new institutions all the time. We feel very, very proud of what we're doing here.

Again I was just traveling around a little bit now that the world is opening up, at a couple of regional medical meetings and meeting with some of our KOLs. And I can tell you that the message out there is one of that we're making a product that's truly differentiated in the eyes of a number of prescribers and that it's making a difference in the quality of life and outcomes for patients.

So while I can't quantify that specifically today, I can tell you that docs that have a problem with their PI patient on another IVIG, they now have something where they can try that's not just increasing the amount of IG or increasing the frequency. They now have a product that's manufactured with a plasma pool that's derived from donors that are tested to have sufficient levels of RSV antibodies. And we've shown in the public domain, in our papers and in our patents that these donors have high titers to a panel of other respiratory viral pathogens.

And we feel that we're offering a differentiated opportunity for the doctors to provide to their patients. And we feel very, very good that the demand trends are going to continue to hold and that we're going to see accelerating pull-through as the battery of publications on patient outcomes continue to enter into the scientific domain.

And do you have a general sense of ballpark what percent of the IVIG market kind of fits into this bucket of either having complications with IG or they have these other comorbidities or they simply just don't respond well?

Yes. So in the primary immune deficient, immunodeficient population, we figure about 30% of the market for immunoglobulin is in that market. So call it 100 million grams are typically used annually, so say 30 million grams of product are used in the primary and secondary immunodeficient patient population.

Based on our internal models, there are probably about 150,000 primary immunodeficiency patients. We say roughly 10% to 20% of these patients are higher risk, so they have comorbidities, they have underlying chronic lung conditions. They have chronic persistent infections. They're on antibiotics for a long period of time. So when we really look at that subset and if you look at the asceniv.com website, we try to call out the types of risk factors that this patient population would be projected to and some of the comorbidities.

It's -- call it, it's in that 15,000 to 30,000 patients are really our target market. And when you look at the dosing of IG and you look at the utilization of ASCENIV and you see this, a modest penetration into this marketplace will deliver substantial top line revenues to the company, helping to drive profitability.

There are no further questions. I'd like to turn the call back over to Adam Grossman for any closing remarks.

Sure. Thank you, everybody, for your attention and time. Sorry for the technical difficulties, and we appreciate your continued support in allowing us to make good products to help these immunocompromised patients. Have a great afternoon.

This concludes the program. Have a great day.