ADMA Biologics, Inc. (NASDAQ:ADMA) Q4 2022 Earnings Call Transcript

ADMA Biologics, Inc. (NASDAQ:ADMA) Q4 2022 Earnings Call Transcript March 23, 2023

Operator: Good afternoon, and welcome to the ADMA Biologics Fourth Quarter and Full Year 2022 Financial Results and Corporate Update Conference Call on Thursday, March 23, 2023. . 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, 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 fourth quarter and full year 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 fourth quarter 2022 financial results. Finally, Adam will then provide some brief summary remarks before opening the call up for your questions. Earlier today, we issued a press release detailing the fourth quarter and full year 2022 financial results and summarizing 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 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 Factors section of our 2022 annual report on Form 10-K for the year ended December 31, 2022, for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. And with that, I would like to now turn the call over to Adam Grossman. Adam?

Adam Grossman: Thank you, Skyler. Good afternoon, everyone, and thank you for joining us on today’s call. We hope you all remain healthy and safe. During 2022, ADMA strengthened its position as the fastest-growing provider of immunoglobulin in the U.S. market, growing full year total revenues by 90%. Further, the persistence of encouraging business trends since the start of 2023 gives us confidence in our ability to exceed $210 million in full year 2023 total revenues as well as achieve first-time EBITDA profitability no later than the second half of 2023. Our organization’s continued commercial success, we believe, is, in large part, attributable to ADMA’s exclusive focus on targeting the immune-deficient patient segment, which is the fastest-growing cohort in the U.S. immunoglobulin market.

We believe our innovative business model, unique immune globulin portfolio offerings and targeted medical education efforts in this PI subsector position us well for continued future success. We anticipate 2023 to be an inflection point for ADMA. Our organization aims to sustain top-tier revenue growth, achieve first-time EBITDA profitability and shortly thereafter, solidify the pathway to an ultimate margin profile at the upper bound of ADMA’s plasma manufacturer peer group. Principally driving our confident outlook is due to ASCENIV, its uniqueness amongst immunoglobulin offerings and the real-world impact and improvements the drug is having on outcomes for problematic immune-deficient patients. Now well into 2023, we can confirm elevated ASCENIV utilization trends are continuing, and we believe that forward-looking demand indicators support product upside over the near term and longer term.

The attribution of ASCENIV’s growth continues to strengthen year-to-date as well. We are seeing encouraging signs of patient and prescriber persistence among those now entering their third year on therapy, which has been further compounded by a record expansion of new accounts as well as reorder velocity among existing customers. We continue to believe ASCENIV is trending to ultimately account for an even greater piece of our overall product mix than we have historically messaged. With our belief that ADMA’s fundamentals are excelling and the pathway to EBITDA profitability is now well defined, we are pleased to highlight several newly identified growth opportunities that we believe can increase revenue and improve margins beyond our previously provided financial targets.

Critical to note, we do not expect these incremental investments to compromise our strong funding position. Our emphasis remains on achieving near-term profitability, and we assure our stakeholders that pursuing these growth opportunities will not impact our forecasted cash flows but rather, if successful, will provide for meaningful upside to financial targets as well as compelling rates of return. First, among these opportunities, we plan to commence manufacturing ASCENIV at the 4,400-liter production scale for the first time in our corporate history. This expansion should significantly improve ASCENIV’s margin profile as well as accelerated production throughput while requiring fewer batches to support revenue targets. We believe we are in the early days of ASCENIV’s significant growth potential, and the expanded scale provides for uninterrupted production to support our forecasted rapid growth trajectory.

We believe these benefits could materialize as early as the second half of 2023. The second growth opportunity we’ve identified pertains to yield enhancement, manufacturing and production processes, which have demonstrated proof of concept in our development laboratories during the first quarter of 2023. Pending additional evaluation, further validation of commercial scale production and future 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 ADMA believes may ultimately provide opportunities for label expansion for both BIVIGAM and ASCENIV. Again, these opportunities represent potential upside to currently provided financial guidance.

We look forward to updating the market as developments unfold. As we have communicated throughout our commercialization, ADMA’s commitment to ensuring the continuity of patient care remains a top priority. 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 as well as may provide for opportunistic external plasma sales. The rapid expansion of our internal collection network, coupled with contractually secured third-party supply contracts, provide us with financial and supply chain flexibility. Currently, all 10 plasma collection centers in our network are operational, and 8 are now FDA licensed. We are clearly on track to achieve complete licensure of our BioCenters network as well as plasma supply self-sufficiency prior to year-end 2023.

As a trusted partner with the local communities, we welcome donors to our state-of-the-art BioCenters to donate their lifesaving plasma, which allows ADMA to make its products. As always, our accomplishments and successes are the direct reflection of the commitment, passion and diligence of our employees. The collaboration among our staff, reinforced through the guidance of leadership and our advisers, embodies our corporate values to make the human connection a priority across all engagements. The transformation of our vision into the reality of assuming complete end-to-end control of operations is the result of our team’s work and unwavering connectivity. We recognize and thank our staff arising to the challenge every day to continually meet our pledge to patients, the medical community, prescribers, advocacy groups and to our stockholders.

Your efforts truly make a difference in the lives of those who are counting on us, and I thank you for all you do. Before turning the call over to Brian, I’d like to confirm that our strategic alternatives process remains ongoing, and exploring value-creating opportunities is the top priority for our company. The strategic alternatives process is separate and running in parallel to our pursuit of new growth opportunities, which I previously described. As developments occur, we will keep the market updated. With this said, I’d now like to turn the call over to Brian for a review of the fourth quarter and full year 2022 financials.

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Brian Lenz: Thank you, Adam. We issued a press release earlier today outlining our fourth quarter and full year 2022 financial results, and I’ll now discuss some of the key highlights. As Adam mentioned earlier, total revenues for the quarter ended December 31, 2022, were approximately $50 million as compared to $26.4 million during the fourth quarter of 2021. And this represents an increase of $23.6 million or approximately 90%. The revenue growth for the fourth quarter of 2022 compared to the fourth quarter of 2021 was favorably impacted by the continued commercial ramp-up of the company’s IVIG product portfolio and the expanding customer base for BIVIGAM and ASCENIV. Our gross profit for the fourth quarter of 2022 was $14.2 million compared to gross profit of $3.5 million for the fourth quarter of 2021.

Gross profit growth was driven by a favorable contribution from ASCENIV. Partially offsetting the favorably evolving product mix, ADMA sold a material amount of the remaining 2,200-liter scale, lower-margin BIVIGAM product during the fourth quarter of 2022. Excluding the impact of selling this lower-margin legacy BIVIGAM product, ADMA’s estimated fourth quarter 2022 corporate gross margins would have been approximately 200 to 300 basis points higher compared to reported results. At the midpoint, this adjustment translates to an estimated operating loss for the quarter of $4.7 million, which is approximately 64% improved compared to the prior year’s fourth quarter when accounting for transient gross margin dynamics, amounting to approximately $1.3 million.

Due to the record product demand, ADMA currently expects to monetize a substantial portion of the remaining lower-margin inventory in the first quarter of 2023, incrementally earlier than previous expectations of midyear 2023. Our consolidated net loss for the quarter ended December 31, 2022, was $12.2 million or a $0.06 loss per basic and diluted share compared to a consolidated net loss of $16.6 million or a $0.09 loss per basic and diluted share for the quarter ended December 31, 2021. Our fourth quarter 2022 net loss decreased by approximately $4.4 million compared to the fourth quarter of 2021, and this was primarily attributable to the higher gross profit driven by sales of ASCENIV. We have significantly strengthened our balance sheet and funding position over recent periods.

As of December 31, 2022, ADMA’s total asset value grew to approximately $348 million, notably including approximately $163 million of total inventory, and this is recorded at the company’s cost, approximately $87 million of cash and cash equivalents as well as accounts receivable of approximately $15.5 million. Lastly, we are very pleased with the expansion progress of our BioCenters plasma collection segment. ADMA BioCenters plasma collection network now consists of 8 FDA-licensed plasma collection centers with 2 additional plasma centers operational and collecting plasma, which are pending FDA licensure. The company remains on track to have the remaining 2 BioCenters FDA licensed by year-end 2023 and, in the same period, forecast raw material plasma supply self-sufficiency from all 10 BioCenters.

Now several months into 2023, we are encouraged by the real-time improvements in donor foot traffic and plasma collection volumes, which are now considerably exceeding our organization’s pre-pandemic levels. With that, I will now turn the call back over to Adam for closing remarks.

Adam Grossman: Thank you, Brian. As in previous years, we’ve taken a conservative approach to constructing our financial guidance, considering various macroeconomic uncertainties. However, we are optimistic that we will potentially exceed our top and bottom line guidance ranges if current demand trends and margin dynamics continue. Our level of conviction is based on several factors. First, there is a 7- to 12-month manufacturing lead time for our products, which means that we can anticipate the impact of our past production efforts on our future financial performance with a unique level of visibility. This is unique to our industry because of these immune globulin-specific manufacturing lead times. Additionally, elevated product demand trends have not only persisted, but strengthened so far this year, which further bolsters our confidence in our forward-looking financials.

Given these factors, we comprehensively reiterate all our previously stated objectives, including exceeding $210 million in total 2023 revenues and generating positive EBITDA no later than the second half of 2023. Regarding new growth initiatives, we want to emphasize that we do not probability adjust financial opportunities before receiving regulatory approval. Therefore, we will only include the potential financial contribution from these growth opportunities in formal guidance when we receive any such regulatory approvals. 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 our plasma product manufacturing peers.

As a result, we believe we are well positioned for continued success in the future. 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. With that, we’ll now open up the call for your questions. Thank you. Operator?

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Q&A Session

Operator: . And our first question is Anthony Petrone from Mizuho.

Anthony Petrone: Congratulations on a strong end to 2022 and, obviously, the progress going forward here. I think, Adam, maybe I want to start just with guidance for 2023. The $210 million relative to $154 million in 2022, it’s 36% year-over-year growth. And so it still is calling for a quarterly sort of step-up, I think, sequentially throughout the year. So maybe how should we be thinking about the quarterly complexion for 2023 and then the target for EBITDA positive by second half? Maybe just a little bit on sort of the first half, how that looks for EBITDA or just the progress to EBITDA positive. And then when we think about EBITDA positive in the second half, I mean are there sort of ranges we should be thinking about? And I’ll have a couple of follow-ups.

Adam Grossman: Sure. Thanks for the question and for the continued support. Yes, this is always a unique time for folks like me because we’re sitting here with about a week out from closing the first quarter and we’re talking about how well we did last year, which I don’t want to minimize. But look, we’re very, very bullish on the persistence of top and bottom line trends. If you listen to the prepared remarks, and I’m sure you’ll read the transcript later, we have incrementally tweaked the verbiage around EBITDA and profitability guidance and also revenue guidance. We really do take this conservative approach to setting targets. And look, we set targets that we can meet and feel comfortable about meeting in the face of all the macroeconomic challenges and other headwinds that we may face.

We know that the market doesn’t care about that. They want us to meet the guidance that we’ve set. So we are conservative, but hopefully, you read in the press release and you heard it in the prepared remarks that we believe that we’ve got an opportunity to achieve EBITDA sooner than the back half. And I think that if the demand trends and if the utilization that we’ve seen through the first quarter continues, I mean it will be another stellar year. I’m very proud of the progress that our company is making. And it’s certainly based on the tremendous efforts across the organization. And from our production staff, our plasma collection staff, testing, facilities, the whole nine yards, I mean we are doing everything we can the right way. We make good products that are efficacious and help people.

And we’re really happy with the real-world evidence that’s being disseminated out there. And quite frankly, we’ve seen some very, very strong utilization numbers so far this year. And I don’t want to give away too much, Anthony, because the quarter is not done yet, but we do feel very, very strongly about our ability to potentially hit some of our milestones financially earlier than what we previously messaged. So hang in there, grab your popcorn, we’re going to keep hitting it out of the park. And as long as the world continues to operate the way it is today, we feel very confident that we should meet or exceed all of our previously stated targets.

Anthony Petrone: That’s very helpful. Maybe just when we think about the $210 million and just the progress here, the prepared remarks, press release, you talk about just continued uptake of both ASCENIV and BIVIGAM but that you’re adding new prescribers and patients, the reutilization rate for patients is sticky. So when you think about the $210 million, how much of that is just existing prescribers? And have you baked in incremental prescribers as well into that $210 million?