ADMA Biologics, Inc. (NASDAQ:ADMA) Q1 2024 Earnings Call Transcript

ADMA Biologics, Inc. (NASDAQ:ADMA) Q1 2024 Earnings Call Transcript May 9, 2024

ADMA Biologics, Inc. beats earnings expectations. Reported EPS is $0.07532, expectations were $0.05. ADMA isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon, and welcome to the ADMA Biologics First Quarter 2024 Financial Results and Business Update Conference Call on Thursday, May 09, 2024. 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 website approximately two hours following the end of the call. At this time, I would like to introduce Skyler Bloom, Please go ahead.

Skyler Bloom: Welcome, everyone. And thank you for joining us this afternoon to discuss ADMA Biologics financial results for the fourth quarter and full year of 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 us an update on corporate progress, and then Brian will provide an overview of the company’s first quarter 2024 financial results. Finally, Adam will then provide some brief summary remarks before opening up the call for your questions. Earlier today, we issued a press release detailing the first quarter 2024 financial results and summarized certain achievements in 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 or implied by such statements. In addition, any forward-looking statements represent our views as of the date of this call and should not be relied upon as representing our views as of the 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 Disclosure Notice section in our earnings release we issued today in the Risk Factors section of our annual report on Form 10-K for the year ended March 31, 2024, for a discussion of the important factors that could cause actual results to differ materially from these forward-looking statements. Please note that the discussion on today’s call includes certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. A reconciliation of these non-GAAP financial measures to the nearest comparable GAAP metric is available in our release. With that, I would now like to turn the call over to Adam Grossman.

Adam?

Adam Grossman: Good afternoon and welcome to the ADMA Biologics first quarter 2024 financial results and Business Update conference call on Thursday, May 9, 2024. 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 website approximately two hours following the end of the call. At this time, I would like to introduce Skylar Bloom. Please go ahead. Welcome everyone and thank you for joining us this afternoon to discuss ADMA Biologics financial results for the first quarter of 2024 and recent corporate updates. I’m joined today by Adam Grossman, President, Chief Executive Officer and interim financial officer, and Brad Taid, vice president of financial operations.

During today’s call, Adam will provide some summary introductory comments and provide an update on corporate progress. And then Brad will provide an overview of the Company’s first quarter 2024 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 2024 financial results and summarize certain achievements in recent corporate updates. The release is available on our website at www.adminbiologics.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 quarterly report on form ten Q for the quarter ended March 31, 2024.

For a discussion of the important risk factors that could cause actual results to differ materially from these forward looking statements. Please note that the discussion on today’s call includes certain non GAAP financial measures, including adjusted EBITDA. A reconciliation of these non GAAP financial measures to the most directly comparable GAAP metric is available in our earnings release. With that, I would now like to turn the call over to Adam Grossman. Adam, go ahead.

Adam Grossman: Thank you and welcome everyone. The beginning of 2024 has been a transformative period for us at ADMA Biologics. We believe the future has never been brighter and our commercial success story continues to unfold with great momentum. During the first quarter, we continued to execute on our growth strategy and exceeded our financial forecasts. Compounding revenue growth and management’s cost containment measures have enabled us to once again raise our financial guidance for both top and bottom line projections, underscoring the strength of our innovative business model, which we believe has proven to be distinctly durable and resilient through various operating conditions. Total revenues for the first quarter of 2024 grew by 44% year-over-year to $81.9 million.

This rapid revenue growth, combined with a tightly managed cost structure resulted in adjusted EBITDA of $26.4 million during the first quarter of 2024. This represents a 970% year-over-year growth rate compared to the first quarter of 2023. GAAP net income grew to $17.8 million during the first quarter of 2024 compared to a GAAP net loss of $6.8 million during the first quarter of 2023. We anticipate continued revenue growth leading to increased operating leverage and increased earnings across near term periods, which would further solidify ADMA’s position as one of the fastest growing and profitable biopharma companies in the United States. With net leverage approaching zero, we continue to believe that we are achieving significant new milestones for our financial performance.

As admits, forward looking business trends build momentum. We’re revising financial guidance upwards for both 2024 and 2025, increasing both top and bottom line projections. Based on current market factors, we now anticipate generating revenues during these periods of more than $355 million and $410 million, respectively. At these revenue levels, we estimate adjusted EBITDA will exceed $110 million and $160 million for 2024 and 2025, respectively, representing a 45% year-over-year growth rate. Similarly, we are increasing net income guidance to more than $85 million and $135 million for 2024 and 2025, respectively, representing an approximately 60% year-over-year increase. In addition to the significant increases to near term guidance, we expect to continue to favorably reassess the terminal earnings power beyond 2025 for our business and plan to communicate more detail around forecasted revenue and earnings growth post 2025.

As internal developments and projects progress, the underlying drivers of our revenue and earnings growth continue to strengthen. With the Centeniv reaching new highs across nearly all utilization KPI’s and Bivigam deepening its entrenchment in the growing US aminoglobulin market. We believe the continued growth of our commercial portfolio is largely attributable to our focus on the immune deficient patient segment, particularly those with complex comorbidities. We believe this specialized focus combined with our innovative business model, diverse product portfolio and targeted medical education, marketing and market access initiatives have differentiated ADMA within the US immunoglobulin landscape. Establishing what we are confident is an enduring and growing foothold.

Specifically regarding ascension, we see real growth potential within the products targeted addressable market, especially among immune deficient patients with complex comorbidities. Launch metrics remain supported with Ascenta’s unique product profile resonating in clinical practice and real world settings. As demand trends accelerate, we are reassessing the product’s peak potential. We believe that we are still in the early stages of tapping into the product’s full market opportunity. We expect these continuous improvements in both top and bottom line results will sustain over the near and longer terms. We are confident the ongoing strengthening of our balance sheet will position us well to pursue new growth opportunities in a capital efficient manner, including but not limited to advancing our preclinical R&D pipeline programs and otherwise opportunistically utilizing our cash flows to maximize shareholder value.

Moving to our longer term growth initiatives, we continue to make progress with all programs consistent with our prior communications. Our efforts to enhance immunoglobulin production yield through innovations to our manufacturing processes have continued to advance in 2024 year to date. We believe it’s successful. These initiatives can provide transformative accretion to our revenue and earnings objectives, beginning potentially in the second half of next year. Furthermore, we believe that our preclinical hyper immunoglobulin program targeting strep pneumonia aligns with unmet medical needs and leverages our expertise in clinical development, specialty biologics, manufacturing and commercial product launches. On the plasma supply front, our collection centers continue to perform well, positioning us to meet increased production forecasts for our IG portfolio.

We are seeing increased hyperimmune plasma collections to support the growing demand and utilization of incentives and collection volumes across the network on a same center basis are reaching new highs. Overall, we believe ADMet is well positioned for continued growth and innovation with a strong foundation for success in the years ahead. In the spirit of continuing to innovate across our business and operational functions during the first quarter, we expanded the implementation of our adminlytics, generative AI and machine learning platform to optimize and streamline certain production processes. We anticipate that admolytics will provide far reaching improvements and efficiencies across our operations, which would support the company’s rapid earnings growth trajectory and reinforce our position as a thought leader in the specialty biologics market.

Upon reflecting on the journey of ADMA, we believe that our achievements reflect the unwavering commitment and hard work demonstrated by our outstanding and knowledgeable team members. The evolution from a young virtual biotech startup company to now operating a compliant end to end controlled supply chain. We are advancing our position as one of the fastest growing and profitable biopharma companies in the United States. This is truly rare and remarkable to our employees. We extend our heartfelt gratitude for your tenacity, perseverance and tireless dedication, which not only fuels our progress, but also leaves a significant impact on those we serve. It’s the collaborative ethos and collective effort that truly distinguish our workplace. We deeply value the dedication, enthusiasm and diligence exhibited by each member of our team.

It’s this steadfast devotion that drives our successes and enables us to maintain firm control over our operations in line with our fundamental vision. We firmly believe that this strong foundation paves the way for even greater accomplishments in the periods ahead. With that, I’d now like to turn the call over to Brian for a review of the first quarter 2024 financials.

Brian Lenz: Thank you Adam. We issued a press release earlier today outlining our first quarter 2024 financial results, and we will also be issuing our first quarter ten Q report later this afternoon, which we would encourage you to read in conjunction with our comments and discussion points we will make during today’s call. I will now discuss some of the key financial highlights from the first quarter. Total revenues were $81.9 million for the quarter ended March 31, 2024, as compared to $56.9 million for the first quarter ended March 31, 2023, an increase of $25 million, or approximately 44%. The increase is primarily related to increased sales of our immunoglobulin products, partially offset by a planned decrease in sales of plasma to third parties due to the increasing retention of plasma for ADMA’s internal IVIG production.

The decline in external plasma sales is consistent with our prior messaging and forecast as we are utilizing a greater percentage of our internally sourced plasma from our collection network for our manufacturing of incentive and Visigap. Gross profit for the three months ended March 31, 2024 was $39.1 million, as compared to $16.5 million for the same period of a year ago which represents an increase of $22.6 million. As a result, ADMA achieved a corporate gross margin of approximately 48% in the first quarter of 2024 as compared to approximately 29% in the first quarter of 2023. We believe the pathway is well paved to continue to grow gross profits over future periods as we progress further into 2024. We believe we are just now beginning to generate financial results that demonstrate the distinct operating leverage the business is capable of realizing as our revenue growth rate improves and fixed expenses are tightly managed.

During the first quarter, we grew adjusted EBITDA to $26.4 million as compared to $2.5 million for the first quarter of 2023.Additionally, during the first quarter, we generated $17.8 million of GAAP net income as compared to a GAAP net loss of $6.8 million for the first quarter of 2023. The significant improvement in financial performance is driven primarily by increased sales, gross profit and continued fiscal operating management of our business. Based on Admit’s fourth quarter annualized adjusted EBIT growth and cash and cash equivalents, the company’s current net leverage ratio has organically improved to approximately 0.85. We anticipate the balance sheet will continue to strengthen over the coming periods enabled by forecasted free cash flow and growing adjusted EBITDA.

Specifically bracketing the second quarter, we anticipate a significant step up in free cash flow which we expect will continue to grow thereafter over the balance of 2024 and beyond. With that, I will now turn the call back over to Adam for closing remarks.

Adam Grossman: Thank you Brad. Our strong commitment to innovation and performance has yielded tangible results, driving significant growth and value creation, which we believe has set our company up for enduring success for years to come. Looking ahead to the remainder of 2024, we anticipate top tier revenue and earnings growth fueled by transformative initiatives, all underpinned by our strong foundation of scientific, manufacturing and commercial excellence. In the periods ahead, we look forward to leveraging both our R&D know how and innovative commercial model to unlock an even greater than anticipated terminal value for our business. With our upwardly revised financial guidance and forecasted increases to free cash flows in the second quarter and all foreseeable periods thereafter, we are extremely proud of the business we are building.

The market opportunity for Adma’s innovative specialty biologics has continued to grow and evolve and we are excited to expand upon the strong partnerships and inroads we’ve developed. I extend our heartfelt gratitude to all who have supported us on this journey. Your trust and partnership are invaluable as we continue to make a difference in the lives of patients as we move forward. I encourage you to join us in our mission. Donate plasma, help save lives, and make a meaningful impact on our communities. Thank you for your support and dedication. Together, we continue to write the story of Adma’s success. And with that, we’ll now open up the call for your questions. Thank you. Operator?

See also Dividend Stock Portfolio For Income: Top 15 Stocks and What is an Annuity for Retirement? 15 Dividend Stocks to Buy Instead.

Q&A Session

Operator: [Operator instructions]. Our first question comes from Anthony Petrone from Mizuho group. Please go ahead. Your line is open.

Anthony Petrone: Thank you, Anthony. Hi, Adam. And congratulations to the team. And the first thought in my head is, you know, are they paying attention yet to the performance here? But in looking ahead, I think one of the questions that we get from folks out there, and it seems like we touched on it, is where we are. And I think the capacity utilization today of the business with the center growing much faster than expected, and Vivigam certainly looking like it’s gaining steady market share in the traditional IG market. So maybe just a little bit on where capacity utilization is today. And you spoke a little bit about the peak potential of this business. You look at the guidance you put out there for ’24 and ’25. When we do our math, there’s a lot of, you know, room for variability, but we get to a number that’s quite a bit higher than your 2025 number.

But how should we be thinking about capacity utilization today? And, you know, bracketing where the peak potential is for this business? And I’ll have a couple of follow ups.

Adam Grossman: Always good questions, Anthony. Thank you for the kind words. I definitely think my team is, is paying attention. And maybe before I jump in, I just want to take my hat off to the folks here at ADMA. I mean, it’s everybody working together. I think this is what happens when you have a business that, look, obviously we have a great product. It meets the unmet needs of these immune compromised patients with complex comorbidities, with Asceniv and with bivigam. It’s a durable, growing, high quality product out there. And I take my hat off to everyone that makes this possible, because you can’t do it. You can’t have a great idea without a lot of people who are going to give 100% effort every single day. And that’s the admin team.

With that said, I mean, look, we’re probably, I think I’ve said this before, it’s about 70% to 80% capacity. That’s where we’re running now with production. Obviously, we’re looking at ways to expand that. The more we can push in, the more we’re going to get out yield enhancement. We have not even given guidance yet. All these revised upward numbers do not include any accretion from yield enhancement. But what I can tell you is that, look, we’re certainly penetrating stronger, harder, faster than we ever thought we would with incentive right now. The calendar flip was great. I said this at the Raymond James conference. I guess it’s a couple months ago now. Gary asked a similar question. And if you look at our plant, 600,000 liter peak capacity, and you just do the plasma economics, four grams per liter yield on average, somewhere between, call it 1.8 to 2.2 million gram come out of this plant, 2.4 million gram at peak.

If all of that was incentive, Anthony, you’d be looking at a billion and a half to two billion plus in total top line revenue annually. Do I think that’s possible? No, I don’t, but anything’s possible. I think being able to secure that much hyper immune plasma to make incentive, I think would be a challenge. But I think somewhere the terminal value for this business or the terminal revenue generation opportunity with what we have today is somewhere between the near term forward guidance of 410 and $2 billion. I don’t know the exact number. My team is working very, very expeditiously with respect to ramping up our ability to test for these hyper immune high titer RSV plasma donors. We’ve seen increased collections. Again, we’re producing more product than ever.

But I really think that the terminal earnings and the terminal revenue generation from this business, we’re really in the early innings here. But I do think that there is significant and sustained growth beyond 2025. With Asceniv and Bivigam, again, this is stage one of yield improvement. Hopefully in the middle term of this year, we’ll be able to give some more details on timeline and guidance. But we do think that we could be accretive with revenue generation as early as the second half of next year. But again, that’s not in our revised guidance that we’ve given today. So hopefully that answers your question.

Anthony Petrone: Very helpful. I’m going to let others jump in. I got a bunch, but I just want to maybe ask one on the supply chain and I’ll hop in. You talk about the donor side of the equation for RSV high tide or RSV Navy being a limitation, is there a vaccination strategy that you can leverage now that we have RSV vaccines out there? Congratulations again to the team. Thanks.

Adam Grossman: Thanks, Anthony. The answer is no. We do not want to use the vaccine. The special sauce here is not just the RSV. And I have talked about this before, and I don’t mean to bore folks by saying the same thing, but RSV is the marker that we use to test to identify which donors have high levels of antibodies to this panel of different respiratory viruses. On the website, in the publication section, we talk about this. Our donors are not just high titer to RSV, they’re high titer to a panel of different infectious pathogens. So it’s the naturally occurring antibody we feel. It’s really identifying who these high responders are. And look, they’re out there. They’re out there. The hit rates are what we’ve seen historically.

The post pandemic return of the plasma donor is here. We’re working on very unique and good strategies with our plasma centers and our third party collectors who provide us with the hyper immune plasma, on paying these donors bonuses, bringing them back in more frequently, and we’re seeing the fruits of our labor. I mean, we have more material, we have more raw material collected than ever before, and we feel very, very confident about our ability to deliver sustained quarter over quarter growth for the foreseeable future.

Operator: Our next question comes from Kristen Kluska from Cantor Fitzgerald. Please go ahead, your line is open.

Kristen Kluska: Hey, Kristin. Hi, everyone. Hey, congrats on the quarter and starting to sound like a broken record here, but once again, really impressive numbers and, you know, kind of beating all of our expectations. So well done. As you have a very unique position giving you insight into forecasting revenues, I wanted to ask at what point you might consider reinvesting some of this capital to either expand the business or improve things on the manufacturing front. Or if there’s anything else you’re looking at. I know you’ve also guided on, you know, looking at other indications as well?