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ADMA Biologics Is De-Risked and Ready to Rise

- By John Engle

After years of struggle, ADMA Biologics (ADMA) appears at last to be poised for bigger things. The Food and Drug Administration's recent approval of two of its intravenous immune globulin (IVIG) drug products, Asceniv and Bivigam, has put this stock back on the radar.

Combined with a timely capital raise, ADMA's two new products should set it up for an impressive breakout in the second half of 2019.


High (and growing) demand

Polyvalent immune globulin (IG) has seen explosive growth as a therapeutic tool and has seen a growing market for more than 30 years straight. The power of IVIG therapies has been made clear across a range of indications , especially with regard to immunotherapies:


"IG is essentially a concentrate of the most critical portion of the humoral immune systems of not one but thousands of individual plasma donors. Unlike single molecular entities, IVIG and SCIG products contain many thousands of highly specific IgG antibodies with a diversity of incompletely understood immunoregulatory, anti-inflammatory and infectious disease-targeting functions."



Demand has certainly proven robust, increasing by a significant margin every year. The IVIG market now stands at about $6 billion and, while there are many available offerings already on the market, demand has persistently outstripped supply. That dynamic is not likely to change anytime soon, given the projected growth in the IVIG market shows demand up nearly 50% from current levels by the end of 2024.

It is certainly unusual to see this sort of market dynamic play out with a pharmaceutical product, but IVIG has proven to be something of a special case. Expanding clinical utility, increasing reliance on aggressive high-dose IVIG therapies and rising global usage have all served - and are likely to continue to serve - as a strong tailwind to demand.

A pair of wins creates opportunity

This where ADMA comes in. Its two newly approved IVIG products, Asceniv and Bivigam, should be on the market by the second half of the year. Both drug products have been approved as therapies for the treatment of patients with primary humoral immunodeficiency disease (PI), which currently afflicts 250,000 Americans - and far more worldwide.

ADMA has a shot at a very lucrative piece of the growing, high-demand IVIG market, as CEO Adam Grossman recently discussed :


"We are pleased to re-introduce BIVIGAM into the market, where demand for IVIG therapy continues to outpace supply. The $6 billion U.S. market for IVIG continues to grow and the relaunch of BIVIGAM can help to alleviate a portion of the tight supply for this important patient population, where dependable and consistent supply of IVIG is critical to patients' well-being."



With significant inventory of Bivigam already stockpiled, the company's plan to scale commercial operations in the back-half of 2019 looks quite reasonable.

Enough cash to get the job done

The company has has also built up some crucial financial firepower in the form of a substantial equity offering, as well as considerable non-dilutive financing. In all, ADMA now has more than $100 million in cash that it can deploy to finance operations, expand production and sales and explore other potential clinical indications for its products.

Cash is king with all companies, but with developmental growth companies perhaps most of all. Cash fuels everything from research and development to sales commissions, so it is crucial to have enough firepower before trying to make a play in the market.

Currently, ADMA looks to be comfortably capitalized for more than a year of operations at its current burn rate, which ought to be more than enough for it to achieve breakeven with its fresh product lineup.

Verdict

Overall, ADMA appears to be a de-risked growth stock opportunity. It has two products that will serve a ready and growing market and has the cash necessary to launch a successful commercial rollout.

The company's story has changed fundamentally in recent months. Before May, it was a developmental biotech stock with a share price and valuation driven by speculation around binary approval events. With the key approvals achieved, it is now an execution story. The stock may take a while to adjust to this new reality.

As a consequence of ADMA's changing narrative, we expect to see some volatility over the next few months. If the company can show strong execution in its commercialization of Asceniv and Bivigam by the end of 2019, this stock could soar.

Disclosure: No positions.

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This article first appeared on GuruFocus.