ADMA Biologics, Inc. (NASDAQ:ADMA) Q1 2023 Earnings Call Transcript May 10, 2023

ADMA Biologics, Inc. beats earnings expectations. Reported EPS is $-0.03, expectations were $-0.04.

Operator: Good afternoon. And welcome to the ADMA Biologics First Quarter 2023 Financial Results and Corporate Update Conference Call on Wednesday, May 10, 2023. At this time, all participants are in a listen only mode. There will be a question-and-answer session to follow. Please be advised that this call is being recorded at the Company’s request and will be available on the Company’s Web site approximately two hours following the end of the call. At this time, I would like to introduce Skyler Bloom, Senior Director, Business Development and Corporate Strategy at ADMA Biologics. Please go ahead.

Skyler Bloom: Welcome, everyone. And thank you for joining us this afternoon to discuss ADMA Biologics’ financial results for the first quarter 2023 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 first quarter 2023 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 first quarter 2023 financial results and summarized certain achievements and recent corporate updates.

This release is available on our Web site 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 obligation to update any such statements, except as required by the federal securities laws. We refer you to the disclosures notice section in our earnings release we issued today, in the Risk Factor sections of our 2022 annual report on Form 10-K for the year ended December 31, 2022, and our quarterly report on Form 10-Q for the quarter ended March 31, 2023, for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. Please note that today’s discussion includes certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of non-GAAP financial measures to the nearest comparable GAAP metric is available in our earnings release.

With that said, I would now like to turn the call over to Adam Grossman. Adam, go ahead.

Adam Grossman: Thank you, Skyler. During the first quarter of 2023, ADMA generated first time adjusted EBITDA profitability, totaling $2.5 million. This milestone achievement was enabled by an impressive 96% year-over-year increase in total revenues, which reached $57 million in the first quarter. The robust revenue growth translated to meaningful operating leverage, which was a result of continued gross profit growth and disciplined management of our operating expenditures. Based on these trends, we have increased our 2023 total revenue guidance now expected to exceed $220 million, and we anticipate continuing to grow adjusted EBITDA from the newly established baseline throughout the remainder of 2023. Although, it’s still early for our forecasted revenue growth and profitability cycle, we believe ADMA is now entering a new echelon alongside some of our high quality industry peers.

Based on the year-to-date financial results and considering our newly increased financial guidance, ADMA is among only a few standalone biopharma companies in the United States that are expected to generate total revenues of more than $220 million for the full year of 2023, while maintaining a substantial revenue growth rate and also generating continued adjusted EBITDA profitability. We are proud to now be included in this exclusive set of high quality biopharma companies. Within the $10 billion plasma space specifically, ADMA advanced its position as the fastest growing provider of immune globulin in the United States market, which we attribute to our organization’s exclusive focus on the immune deficient patient segment, the immune globulin market’s fastest growing cohort.

During the first quarter, we treated a record number of patients and gained strong market share among what we anticipate will prove to be sticky books of business. We believe our innovative business model, unique immune globulin portfolio and targeted medical education efforts position us well for future success. We believe the milestones we’ve achieved to date validate our core mission, to commercialize novel products for immune compromised patients at risk of infection. It is treating this underserved patient population that fuels our organization and drives our company’s unified commitment to overachieve and deliver on our operational and financial objectives. Over the past two years, we’ve communicated an unwavering message about our favorably evolving product mix, and we’re happy to confirm that these trends are continuing to strengthen in 2023.

ASCENIV growth continues to be driven by its uniqueness amongst immune globulin product offerings and the real world impact and improvements the drug is having on outcomes for problematic immune deficient patients. Furthermore, we’re seeing encouraging signs of patient and prescriber persistence among those who have been using the drug for as long as three years in. This dynamic is being compounded by record expansion of new accounts and reorder velocity among existing customers. We believe that the product will continue to account for a greater share of our overall product mix going forward. We are pleased to announce that during the first quarter and into the second, ADMA made progress advancing it’s recently identified growth opportunities.

To reiterate the incremental investment required to pursue these opportunities is not significant and is not expected to compromise ADMA’s robust profitability outlook. First, among these opportunities, ADMA successfully commenced manufacturing of ASCENIV at the 4,400 liter production scale for the first time in our corporate history. We expect the expansion will meaningfully improve the product’s margin profile and increase our plant production capacity as fewer batches will be needed to support our revenue goals. The expanded scale provides for uninterrupted production to support our forecasted rapid growth trajectory. We believe these benefits could be realized as early as the second half of 2023. The second growth opportunity we’ve identified pertains to yield enhancement with our manufacturing and production processes.

Recently, the company progressed with development scale and laboratory analysis, advancing ADMA’s initiative to capture additional immunoglobulin production yields. Pending further evaluation, validation of commercial scale production and ultimately regulatory approvals, these yield enhancement initiatives could meaningfully increase both peak revenues as well as margin potential if successful. Finally, our ongoing post-marketing clinical studies progressed as planned during the quarter. And if successful, may provide for label expansion opportunities for both BIVIGAM and ASCENIV to include pediatric aged primary humoral immunodeficiency patients, as well as additional publications supporting the product safety. The potential label expansion we believe would put ADMA’s immune globulin portfolio on a level playing field compared to peer immune globulin offerings.

Again, these opportunities represent potential upside to currently provided financial guidance. We look forward to updating the market as developments unfold. On the plasma supply front, our strong RSV hyperimmune plasma and normal source plasma inventories presently on hand are expected to support all upwardly revised revenue forecasts for our immune globulin portfolio. We believe that the rapid expansion of our internal collection network coupled with our existing contractually secured third party supply contracts provide financial and supply chain flexibility. Currently, all 10 plasma collection centers in our network are operational and of those eight are now FDA licensed. We continue to anticipate achieving complete FDA licensure of our BioCenters’ network as well as plasma supply self-sufficiency prior to year end 2023.

In a moment, Brian will describe in more detail the credit agreement we announced last week. But from my perspective, we are pleased to have reduced our interest expense by 1% and we believe the restructuring of the prepayment mechanism provides for additional strategic and financial flexibility. Considered in conjunction with the increased operating forecast we have announced today, we believe an opportunity exists to accelerate net income profitability earlier than previously provided in our timelines. We sincerely appreciate Hayfin’s continued and collaborative support. Our employee’s commitment, passion and diligence drive our success. We have prioritize the human connection in all engagements through cooperation and teamwork among staff, leadership and our advisors.

Our team’s unwavering connectivity has enabled us to assume complete end-to-end control of operations, fulfilling our core vision and providing the foundation for continued success moving forward. We thank our staff for rising to the challenge daily, delivering on our pledge to patients, the medical community, prescribers, advocacy groups and our stockholders. Your efforts make a meaningful difference in the lives of those counting on us. Before turning the call over to Brian, I’d like to confirm that our strategic alternatives process remains ongoing and exploring value creating opportunities remains a top priority for our company. The strategic alternatives process is separate and running in parallel to our pursuit of new growth opportunities.

As developments occur, we will keep the market updated. With that said, I’d now like to turn the call over to Brian for a review of our first quarter 2023 financials.

Brian Lenz: Thank you, Adam. We issued a press release earlier today outlining our first quarter 2023 results and we will be issuing our first quarter 10-Q later this evening, which we would encourage you to read in conjunction with our comments and discussion points we will make during today’s call. I’ll now discuss some of the key highlights from the quarter. As Adam mentioned earlier, total revenues for the three months ended March 31, 2023 were approximately $56.9 million as compared to $29.1 million dollars during the three months ended March 31, 2022 and this represents an increase of $27.8 million or approximately 96%. The increase is attributed to higher sales of our immune globulin products, driven by increased physician, payer and patient acceptance and utilization, as well as the expansion of our customer base.

During the quarter, we also benefited from an increase of $4 million in sales of normal source plasma through our ADMA BioCenters segment, as we fulfilled our long term plasma supply commitment for 2023 with our third party customer. Throughout the remainder of 2023, we anticipate using all of the plasma collected from our BioCenters network to support our IVIG production operations. Our gross profit for the first quarter of 2023 was $16.5 million. This translates into a 29% gross margin as compared to $3.7 million or a 12% gross margin for the same period of a year ago. This gross profit improvement of approximately $13 million was primarily driven by the revenue increases and the reduction in other manufacturing costs related to an extended otherwise routine plant shutdown in the first quarter of 2022.

Partially offsetting the favorably evolving product mix, ADMA sold the substantial majority of the remaining lower margin 2,200 liter scale BIVIGAM product during the first quarter of 2023. As we move forward, production throughput and sales recognition is anticipated to be substantially confined to the higher margin 4,400 liter BIVIGAM product along with ASCENIV. Our consolidated net loss for the quarter ended March 31, 2023 was $6.8 million compared to $25 million for the first quarter of 2022. The $18.2 million decrease in net loss was mainly due to the narrowed operating loss of $14 million period-over-period and the loss on extinguishment of debt of $6.7 million we recorded in the first quarter of 2022, and this is in connection with the refinancing of our senior secured credit facility, partially offset by the increase in interest expense.

Our adjusted EBITDA increased by $14.2 million for the three months ended March 31, 2023 as compared to an adjusted EBITDA loss of $11.7 million for the same period over a year ago. The adjusted EBITDA improvement was driven primarily by increased sales, improved gross profit and lower total operating losses. As Adam indicated, the recent credit amendment with Hayfin provides for multiple favorable changes. First, there’s the reduction of 1% in the nominal interest expense on ADMA’s current note. This will result in a lowered borrowing rate of SOFR plus 8.5%. Included in this base rate and consistent with the existing terms of the Hayfin facility, the company may elect to pay up to 2.5% of the interest in kind with the remaining portion of the interest payable in cash.

Second, within the first 24 months after the amendment closing date among other provisions, there is a newly structured 50% waiver of the prepayment fee in connection with an acquisition of the company or other certain strategic transactions. Taken together, we believe these changes will reduce ADMA’s cost of capital and provide for added financial flexibility over the near term and on an ongoing basis. In addition to the further enhancements of the capital structure, ADMA’s balance sheet remained strong. At March 31, 2023, ADMA had working capital of $227.4 million, primarily consisting of $164 million of inventory, cash and cash equivalent of $69.2 million and $26.5 million of accounts receivable. This was partially offset by current liabilities of $36.7 million while compared to a working capital balance at December 31, 2022 of $231.1 million.

Lastly, our ADMA BioCenters plasma collection network now consists of eight FDA licensed collection centers with two additional centers operational and collecting plasma, which are pending FDA licensure. The company remains on track to have the remaining two BioCenters FDA licensed by the end of 2023, and in the same period forecast raw material plasma supply self-sufficiency from all 10 centers. Now well into 2023, we are encouraged by the real time improvements in donor foot traffic and collection volumes, which are now considerably exceeding our organization’s prepandemic levels. With that, I’ll now turn the call back over to Adam for closing remarks.

Adam Grossman: Thank you, Brian. As demonstrated over the last two years, we take a conservative approach to guidance construction, contemplating a range of both macro and company specific variables. That being said, today, we are pleased to be increasing total revenue guidance, which is now expected to exceed $220 million. Further, we anticipate continued adjusted EBITDA growth from the newly established first quarter base. Growth in business trends are strengthening and the forward-looking visibility required to meet or exceed our financial targets is as clear as ever. We believe our investments in the supply chain and commercial infrastructure in recent years have created a solid foundation for maintaining best in class revenue growth and potentially achieving an ultimate margin profile at the upper bound among plasma product manufacturing peers.

Additionally, we’ve taken a thoughtful approach to pursuing new growth opportunities. We continue to progress with these projects, which we believe had the potential to yield further upside to what we already anticipate will be a highly profitable growth cycle over the near and longer term. We look forward to building on the momentum of early 2023 to drive further success. In closing, I’d like to thank you, our stockholders, for your continued support as your investment 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. With that, we’ll now open up the call for your questions. Thanks everyone. Thank you, operator.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Elliot Wilbur of Raymond James.

Operator: Our next question comes from the line of Anthony Petrone of Mizuho Securities, USA.

Operator: Our next question comes from the line of Kristen Kluska of Cantor Fitzgerald.

Operator: Ladies and gentlemen, this will conclude our question and answer portion of the call. I’d like to turn it back to Adam now for additional closing remarks.

Adam Grossman: I just want to say thank you to our staff. I mean, honestly, it’s been a long road for all of us. Some of you have been here a long time, some of you have been here a short time, but we can’t do it without each and every one of you. To our shareholders, we appreciate putting up with this, but we’re finally, showing you EBITDA, profitability. And we’re going to continue to under promise and overdeliver. So stick with us. Thank you again for your confidence and support everybody. It truly is — this is a very exciting day for us at ADMA Biologics, and I hope everyone listening is very proud. I’m proud of all of you and I’m proud to lead this organization where we’re really making an impact on patients’ lives who may not have a voice. So with that, have a good evening. Donate plasma out there, you’re going to help save a life. And that’s all I got to say. Have a great evening.

Operator: Ladies and gentlemen, this does conclude the conference call for today. We appreciate your participation, and you may now disconnect.