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ADMA: Additional Capital Raised; Plasma Center Collections Escalating

By John Vandermosten, CFA

NASDAQ:ADMA

First Quarter 2016 Financial Results 

ADMA Biologics, Inc. (ADMA) reported first quarter 2016 operational and financial results on May 13, 2016 and highlighted several key events in the quarter including participation in several medical conferences.  The release also highlighted a public offering of common stock and access to additional debt capital.  

The company posted revenues of $2.1 million which consisted almost exclusively of blood plasma sales.  This is a 41% increase in revenues over the comparable period in 2015, but behind our estimates of $2.3 million. Sales of $2.1 million were also below 4Q:15 levels of $2.5 million due to less inventory that expected being sold.  As part of total revenues, ADMA also saw $36 thousand (up 89%) from performing third party services and a financial payment from Biotest.  

Volatility in plasma center revenues during the ramp-up is attributable to sales of inventory collected prior to FDA approval.  As approval is granted, ADMA is able to sell collected inventory as demand arises.  We attribute the jump in 4Q:15 revenues and the subsequent fall in 1Q:16 revenues to the contribution from sales of inventory stocked during the Biologic License Application (BLA) approval process. 

Total operating expenditures, including cost of blood plasma product, was $6.3 million, below the $6.6 million we had forecasted in our model.  Lower plasma center cost and lower G&A were below our forecasts and were the reason behind the lower than expected expenses.  Gross margin on blood plasma sales was 40% in line with previous quarters but slightly better than the 39% level achieved in 1Q:15.  

Research and development costs were $2.0 million as compared to our estimate of $1.7 million and prior year expenditures of $1.4 million. Increased testing and validation expenses related to the approval of RI-002 and greater R&D segment employee costs were behind the increase. 

Plasma center operating expenditures increased by 22% to $1.3 million, which was lower than the $1.7 million we expected.  The increase was related to the higher costs in wages, rent, maintenance and plasma collection supplies related to the second plasma collection facility. 

General and administrative expenses totaled $1.7 million, up from $1.3 million in the prior year and slightly below our forecast.  The year over year increase stemmed from consulting expenses associated with pre-launch commercial planning activities, increased headcount, wages and benefits for employees, including stock-based compensation, market research and analysis in preparation for the launch of RI-002. 

Other expenses of $454 thousand were related to mark-to-market adjustments to issued warrants.  

ADMA posted a loss per share of ($0.43), which compares to the ($0.42) we forecast as lower than expected revenues were offset by lower than expected costs. 

At the end of the first quarter, on March 31, 2016, the company held $11.6 million in cash on the balance sheet and $14.4 million of debt.  Cash burn, defined as free cash flow to equity, was ($5.2) million in the first quarter, 

Following the end of the quarter, ADMA completed a public offering of 2.2 million shares (including an over-allotment), raising gross proceeds of $14.1 million and also securing $4.0 million of debt capital with Oxford Finance.  After payment of financing expenses, the company obtained approximately $17 million in additional capital.  

ADMA has several anticipated milestones on the horizon, with the approval of RI-002 the dominant item.  The FDA has a 10-month target for approving the BLA, which would place the anticipated approval date in early June.  However, the agency has been running behind this target and we anticipate a 12-month turnaround, placing approval sometime in August 2016.  Remaining goals also include: 


Summary

While revenues were slightly lower than expected due to timing of inventory sales, the key factor for determining our valuation is progress towards and success with FDA approval of RI-002.  We have updated our estimates to reflect the additional shares issued in early May.  This has had the impact of reducing loss per share for 2016, as operating losses are spread over a larger base.  We have not revised our revenue or operating expense estimates at this time.  The next milestone we anticipate is FDA approval in 2H:16 and we eagerly await an announcement at which time we will update our valuation. We maintain our target price of $19 per share. 

Below, we provide the company’s most recent historical and anticipated timeline for RI-002.

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  • Continuing commercialization and marketing preparation for RI-002
  • Obtaining FDA approval to manufacture and market RI-002 for the treatment of PIDD patients
  • First commercial sales of RI-002 upon successful approval
  • Expanding intellectual property protection for RI-002 and related IVIG products
  • Initiating new specialty plasma collection programs at ADMA BioCenters