ADMA Biologics, Inc. (NASDAQ:ADMA) Q3 2023 Earnings Call Transcript
ADMA Biologics, Inc. (NASDAQ:ADMA) Q3 2023 Earnings Call Transcript November 8, 2023
ADMA Biologics, Inc. beats earnings expectations. Reported EPS is $0.01, expectations were $-0.01.
Operator: Good afternoon, and welcome to the ADMA Biologics Third Quarter 2023 Financial Results and Corporate Update Conference Call on Wednesday, November 8, 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 website approximately two hours following the end of the call. At this time, I would like to introduce Skyler Bloom, Head of 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 third quarter of 2023 and recent corporate updates. I am 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 third quarter 2023 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 third quarter 2023 financial results and summarize 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 disclosure 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, as well as our quarterly report on Form 10-Q for the third quarter ended September 30, 2023, for a discussion of 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. A reconciliation of the non-GAAP financial measures to the nearest comparable GAAP metric is available in our earnings release.
With that, I would now like to turn the call over to Adam Grossman. Adam?
Adam Grossman: Thank you, Skyler, and welcome, everyone. We are pleased to present a number of firsts today, with strong financial results for the third quarter of 2023, which underscore both our unwavering commitment to the continuity of patient care and steady financial execution for our stockholders. Total third quarter revenues reached $67.3 million, representing an impressive 64% growth rate year-over-year. This rapid growth enabled a 98% quarter-over-quarter increase in adjusted EBITDA to $12.7 million. Furthermore, it gives me great pleasure to announce that for the first time in ADMA's history, we are profitable with GAAP net income reaching $2.6 million during the third quarter. We also generated positive free cash flow for the first time in corporate history, totaling $11.6 million during the quarter.
These milestone results are a testament to the efficiency of our organization and our relentless focus on maintaining top tier revenue growth, while judiciously managing expenses. We fully anticipate this positive trajectory will continue to drive earnings growth for the foreseeable future. Building on the momentum we've established this year, we've revised our total revenue guidance higher yet again for fiscal years 2023 through 2025. We now anticipate generating revenues during these periods of more than $250 million, $290 million, and $335 million, respectively. Our company's success in carving a solid niche in the $10 billion immunoglobulin end market. It is a direct result of our innovative business model, diverse product portfolio and our targeted medical education, marketing, and market access initiatives.
We remain the fastest growing provider of immunoglobulin in the U.S. marketplace with a specialization in treating immune deficient patients. Specifically within the later line at risk primary immune deficient patient population segment, ASCENIV continues to make significant inroads in the third quarter leading ASCENIV demand metrics hit all-time highs across the Board. We are seeing record new ASCENIV patient starts and promising persistence and adherence trends as certain patients progress through their third year on therapy. Equally encouraging, ASCENIV prescriber base is expanding and we anticipate will further compound the growth among existing prescribers and institutions. The value proposition of our product offerings was highlighted at the Annual 2023 IDWeek International Conference, where ADMA sponsored a symposium with two national clinical experts.
First among these opinion leaders was Dr. Aliyah Baluch, who discussed the heightened severity of respiratory viral infections or RVIs in immune compromised patients with up to 80% mortality risk in some cases. Dr. Baluch emphasized the lack of standard RVI management approach leading to an unmet need and further touched on emerging therapies. Additionally, Dr. Jolan Walter highlighted the evolving approach to managing infectious diseases in immune compromised patients, focusing on RVI management. She introduced ASCENIV a unique intravenous immune globulin with increased antibody tighter levels against respiratory pathogens. Dr. Walter presented a case where ASCENIV effectively managed recurrent respiratory infections that were unresponsive to standard immune globulin therapy and shared her own real world experience demonstrating the drug's clinical impact in this setting.
All told, we are encouraged to see ASCENIV's unique product profile continuing to resonate in clinical practice and the real world setting. The therapy is accelerating demand trends and healthy growth attribution continually catalyze us to favorably rethink the ultimate size of the market opportunity, and we reiterate that we believe we are in the early innings here with the product's total potential. Turning to our 2024/2025 corporate growth initiatives. All activities continue to progress as planned. We have successfully expanded ASCENIV's production to the 4,400 liter manufacturing scale, enhancing the product's margin, yield and capacity. We expect to realize these profitability benefits beginning late in the fourth quarter and more materially in 2024.
Additionally, our post-marketing clinical studies are progressing well and may lead to label expansion with a potential pediatric age group, if successful, further strengthening our product portfolio. Our excitement continues to build as we see the potential impact of our manufacturing immunoglobulin yield enhancement initiatives. During the third quarter, we made significant strides in scaling up our processes and conducting laboratory bench scale runs and analysis. If ultimately successful, we believe enhanced production yields will be transformative in providing increased finished goods output, which would substantially increase ADMA's peak revenues and earnings potential. While it's important to note that these opportunities won't have a potential financial impact until 2025, we cannot overemphasize our enthusiasm for the promising benefits this opportunity offers on both the top and bottom lines.
On the plasma supply front, we are confident in our ability to meet the increased production to our class for our immunoglobulin portfolio. Our BioCenters collection network expansion, in addition to our contractually secured third-party supply contracts provide us with the flexibility needed to meet the growing end market demand for ADMA's immunoglobulin product portfolio. Currently, all 10 collection centers in our network are operational, with nine already FDA license, and we anticipate achieving FDA licensure for our 10th and final collection center by the end of this year with plasma supply self-sufficiency also expected by year-end. Reflecting on ADMA's journey, it's become evident that our success is a direct result of the unwavering dedication and hard work exhibited by our exceptional staff members.
Our remarkable transformation from a virtual clinical stage biotech company to one that is now cGMP-compliant has an end-to-end controlled supply chain now positioned for rapid advancement with a highly profitable commercial trajectory. Thank you for your relentless efforts, which not only drive our accomplishments, but also create a meaningful impact in the lives of those who depend on us. It is the collective spirit and teamwork that truly make our workplace exceptional. We appreciate the commitment, passion and diligence that each team member brings to the table. It's this dedication that propels our organization's triumphs and empowers us to maintain complete control of operations in alignment with our core vision. We believe the solid foundation lays the groundwork for even greater success in the future.
With this said, I now like to turn the call over to Brian for a review of the third quarter financials. Brian?
Brian Lenz: Thank you, Adam. We issued a press release earlier today outlining our third quarter 2023 financial results, and we'll be also issuing our third quarter 10-Q 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'll now discuss some of the key highlights from the third quarter. As Adam mentioned earlier, total revenues for the three months ended September 30, 2023, were approximately $67.3 million as compared to $41.1 million during the three months ended September 30, 2022. This represents an increase of $26.2 million, or approximately 64%. The increase is attributed to higher sales of our immunoglobulin products, driven by increased physician, payer, and patient acceptance and utilization, as well as the expansion of our customer base.
The growth in product revenues during the quarter was partially offset by a $3.1 million decrease in third-party plasma sales from our BioCenters business segment, which was consistent with our expectations in the context of fulfilling our long-term plasma supply agreement during the first quarter of 2023, while also providing a significant supply of normal source and high titer plasma to our Boca facility for the manufacturing of the ASCENIV and BIVIGAM as we migrate toward plasma supply self-sufficiency. Gross profit for the three months ended September 30, 2023, was $24.7 million as compared to $9.7 million for the same period of a year ago. And this represents an increase of $15 million, which is attributed to selling more of our higher margin product ASCENIV during 2023 as compared to 2022.
As a result, ADMA achieved a corporate gross margin of 36.6% in the third quarter of 2023 as compared to 23.5% in the third quarter of 2022. We believe the pathway is well paved to continue to grow gross profits over the coming periods. We are very pleased to report, as Adam mentioned earlier, that for the first time in corporate history; ADMA has achieved GAAP net income profitability and has generated first time positive operating cash flow. During the third quarter of 2023, GAAP net income reached $2.6 million as compared to a GAAP net loss of $14.9 million for the third quarter of 2022. Our operating cash flow for the three months ended September 30, 2023, totaled $12 million, increasing ADMA's cash on hand to $74.2 million at the end of the third quarter of 2023.
ADMA grew adjusted EBITDA to $12.7 million for the three months ended September 30, 2023, as compared to an adjusted EBITDA loss of $6.1 million the same period of a year ago. The improvement is driven primarily by increased sales, gross profit, and fiscal operating management of our business segments. Based on ADMA's third quarter adjusted EBITDA growth and cash generation, the company's current net leverage ratio has organically improved to an impressive 1.6x. We believe we anticipate the balance sheet will continue to strengthen over the coming periods enabled by forecasted operating cash flow and growing adjusted EBITDA. Lastly, the ADMA BioCenters network now consists of nine FDA licensed plasma collection centers, with our 10th center operational and collecting plasma, which is pending FDA licensure anticipated by year-end 2023.
Additionally, in the same period, we forecast raw material plasma supply self-sufficiency from all 10 of our centers. We remain encouraged by the real-time improvements in donor foot traffic and collection volumes, which continue to achieve record all-time highs and remain considerably above 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. ADMA's business prospects and company morale have never been higher. All systems and teams are working in concert across our organization. We are committed to finishing 2023 on a high note and entering 2024 from a position of strength. 2023 with all of its challenges is truly proving to be a banner year for the entire organization. With ADMA's cash holdings growing to $74.2 million during the third quarter and adjusted EBITDA annualizing at more than $50 million, we have established a strong foundation from which we anticipate continuous growth in both revenues and profits. Our ongoing corporate initiatives, particularly those centered on enhancing immunoglobulin manufacturing yields have the potential to further accelerate ADMA's growth outlook and peak earnings potential.
We believe that our financial achievements and growth outlook position ADMA as a distinguished player among standalone biopharma companies with substantial barriers to entry in the United States immunoglobulin market and a robust intellectual property estate. In the case of ASCENIV, we are confident in our ability to deliver one of the most durable earnings growth stories in the biopharma industry. Our accomplishments in the third quarter of 2023 reflect our commitment to patient care, financial growth and market leadership. We are enthusiastic about the opportunities ahead and our dedication to delivering value to our stockholders and patients. Thank you for your continued support and trust in the company. We wholeheartedly appreciate those of you who have supported us through this journey and we are committed to delivering for you in the periods to come.
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. With that, we will now open up the call for your questions. Operator?
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