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ADMA: Consistent Progress Toward RI-002 Approval

By John Vandermosten, CFA

NASDAQ:ADMA

2015 Financial Results 

ADMA Biologics, Inc. (ADMA) reported full year 2015 results on March 23, 2016 and highlighted several milestones the company has achieved over the last 15 months.  Revenues of $7.2 million were greater than our expected $7.1 million due to faster ramp-up of the new plasma facility in Marietta, Georgia.  Net loss of ($18.0) million was slightly better than the ($18.6) million loss we anticipated.  On a per share basis, the loss of ($1.73) matched our estimate due to greater than expected dilution from share issuances.  Compared to 2014, research and development expenditures declined due to the completion of the Phase 3 trial for RI-002.  Plasma center and general & administrative expenses were higher on the launch of the new plasma collection facility and ramp up of infrastructure for the commercial launch later in 2016.  

ADMA generated $7.05 million in revenues from the sale of plasma from the company’s two Atlanta-based facilities and $0.13 million of license revenue related to service and a financial payment from partner Biotest.  Total revenues increased 21.3% over the prior year with growth heavily weighted toward the back half of the year as the new facility contributed to plasma sales.  Normal source plasma that was not sold and high-titer plasma for use in RI-002 was stored in inventory for use following approval of the Biologics License Application (BLA) submitted to the FDA.  

Cost of product revenue increased on a dollar basis but remained constant as a percentage of revenues throughout the year and the company maintained a gross margin of 40%.  This is a slight improvement from the 37% gross margin in 2014.  Research and development expenses declined from $9.5 million to $7.0 million as the Phase 3 trial for RI-002 came to a close.  These costs represent expenses related to clinical trials and regulatory activities, testing and validation, and close out study costs.  

General and administrative costs rose from $4.8 million in 2014 to $6.7 million, which corresponds to 82% and 94% of revenues respectively.  The increase was due to higher fees from consulting services for pre-launch, commercial planning, market research and analysis for RI-002.  Plasma center expense was $4.6 million for the year, increasing 20% over the prior year at essentially the same rate as blood plasma sales.  Other expense increased due to extinguishment of debt related to loan refinancing.  

Operations consumed approximately $15 million in cash for the year, which was partially offset by loan proceeds from Oxford Finance LLC, a specialty life sciences lender.  Total cash declined from $17.2 million to $10.4 million.  

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: 


In the following exhibit, we provide the company’s historical and anticipated timeline for RI-002 updated in their most recent presentation.

Our Forecasts 

We anticipate a third quarter 2016 FDA approval of RI-002 and a fourth quarter launch of the product.  Based on our model, 4Q:16 RI-002 revenues will be $4.1 million accelerating to $35.5 million for full year 2017 as additional sales persons and medical science liaisons (MSLs) are added to the roster targeting pharmacies, hospitals, pulmonologists, and infectious disease physicians.  We expect ADMA to hire between 25-30 sales reps initially.  ADMA also expects to add additional personnel for patient support, medical affairs, quality assurance, regulatory affairs, scientific affairs, reimbursement, inventory and logistics, human resources, and financial and operational management. In order to fulfill orders for RI-002, ADMA may also use a network of national distributors. If the product launch progresses as expected, we anticipate the company will generate a self-sustaining level of revenues and then generate a profit in 2018.  However, based on the costs for ramp-up of the sales force, launch costs and base operations, the company should generate a loss in 2016.  Revenues from plasma sales are expected to expand to $10.9 million in 2016 as the new center matures.  By 2017, we anticipate that the Marietta facility will be running at near full capacity.  

Cash burn for 2016 is expected to be on par with 2015 levels as higher G&A offsets lower R&D.  Given current cash balances, we believe that ADMA will require additional funding and will tap the debt or equity markets sometime in the third quarter following what we hope will be a positive announcement by the FDA.  Note that in March 2015, ADMA raised approximately $10 million in a public stock offering.  In fiscal year 2017, we anticipate that ADMA will be essentially cash flow neutral and will be both self-sustaining and able to generate profits and cash in 2018.  

Lead Product Background 

ADMA’s lead candidate, RI-002, is a specialty intravenous immunoglobulin (IVIG) product that contains polyclonal antibodies against various infectious agents that are derived from human plasma. RI-002 contains standardized, high levels of antibodies to respiratory syncytial virus (RSV) in addition to naturally occurring polyclonal antibodies (such as Streptococcus pneumoniae, Haemophilus influenzae type B, Cytomegalovirus, measles, tetanus, etc.). RI-002 is intended to prevent infections in a subset of patients diagnosed with Primary Immunodeficiency Disease (PIDD), and in particular Primary Humoral Immunodeficiency. The polyclonal antibodies that are found in RI-002 are expected to prevent infections in this population group. ADMA plans to seek approval for RI-002 for a target population range of approximately 8,000 to 15,000 patients primarily suffering from PIDD presentations. Potential off-label follow-on indications include hematopoietic stem cell transplant (HSCT) patients, solid organ transplant (lung, heart, liver, and multi-organ) patients, and cancer patients receiving chemotherapy during the winter months. 

Management believes that there is no other IVIG product currently on the market that contains standardized, high levels of RSV antibodies. Additionally, RI-002 is produced with reported consistent lot-to-lot potency. We believe that these features are what differentiate RI-002 from currently marketed IVIG products. More importantly, if approved, physicians and patients would have an additional selection for IVIG therapy, which in our opinion, could lead to enhanced quality of life for patients. The goal is for RI-002 to replace standard IVIG therapy during the winter months for the subset of patients with PIDD.

2016 Key Events 

  • 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
  • Continuing to expand intellectual property protection for RI-002 and related IVIG products
  • Initiating new specialty plasma collection programs at ADMA BioCenters
  • March 2016 – ADMA Announces Abstract