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Edited Transcript of ADMA.OQ earnings conference call or presentation 5-Nov-20 9:30pm GMT

·48 min read

Q3 2020 ADMA Biologics Inc Earnings Call RAMSEY Nov 7, 2020 (Thomson StreetEvents) -- Edited Transcript of ADMA Biologics Inc earnings conference call or presentation Thursday, November 5, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Adam S. Grossman ADMA Biologics, Inc. - Co-Founder, President, CEO & Director * Brian Lenz ADMA Biologics, Inc. - Executive VP & CFO * Skyler Bloom ADMA Biologics, Inc. - Director of IR & Corporate Strategy ================================================================================ Conference Call Participants ================================================================================ * Anthony Charles Petrone Jefferies LLC, Research Division - Healthcare Analyst * Elliot Henry Wilbur Raymond James & Associates, Inc., Research Division - Senior Research Analyst * Leland James Gershell Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst * Zachary Ross Weiner Jefferies LLC, Research Division - Equity Associate ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon and welcome to the ADMA Biologics Third Quarter 2020 Financial Results Conference Call on Thursday, November 5, 2020. (Operator Instructions) Please be advised that this call is being recorded at the company's request and will be available on the company's website approximately 2 hours following the end of the call. At this time, I would like to introduce Skyler Bloom, Director, Investor Relations and Corporate Strategy at ADMA Biologics. Please go ahead. -------------------------------------------------------------------------------- Skyler Bloom, ADMA Biologics, Inc. - Director of IR & Corporate Strategy [2] -------------------------------------------------------------------------------- Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics financial results for the third quarter of 2020. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Lenz, Executive Vice President and Chief Financial Officer. Today's call, Adam will provide some introductory comments and provide a corporate update, and then Brian will provide an overview of the company's third quarter and 9 months ended September 30, 2020, financial results. 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 third quarter 2020 financial results. 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 represents 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 recording 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 section in our earnings release we issued today in the Risk Factors section of our 2019 annual report on Form 10-K and our third quarter 2020 10-Q, which we expect to file following this conference call for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. With that, I would now like to turn the call over to Adam Grossman. Adam? -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Skyler. Good afternoon, everyone, and thank you for joining us on today's call. We hope that those joining us today continue to remain healthy and safe. The third quarter of 2020 was our strongest quarter this year, with ADMA generating approximately $10.3 million in revenue, which represents year-over-year growth of 42%. Year-to-date, we generated approximately $28.3 million of revenue, an increase of approximately 63% compared to the same prior year period. We achieved these strong results due to the focus and hard work of a dedicated ADMA Biologics team despite the continued COVID-19 operating headwinds. Looking ahead to the remainder of 2020. We continue to anticipate a strong fourth quarter with respect to top line revenue while also building inventory levels to contribute to anticipated future revenue growth. We believe we are well-positioned to achieve our previously stated goal of delivering considerable growth during the second half of 2020 compared to the first half, and we anticipate this revenue growth to continue into and throughout 2021. During the third quarter, we continued to add new customers and prescribers for BIVIGAM and ASCENIV as our virtual grassroots promotional and engagement efforts continue to yield results. Although traditional commercial engagement remains limited and challenging as COVID-19 headwinds persist, we are encouraged by the provider and physician reception to our presence at recent scientific and medical conferences, including at IDWeek 2020 in October, where we hosted an exclusive educational event on respiratory viral infections and strategies for their treatment and prevention. During the quarter, we continued to experience certain COVID-19-related impacts to areas of our supply chain. Specifically, as a result of past state and local shelter-in-place orders, we experienced lower-than-normal donor collections at our FDA-approved plasma collection center during the third quarter. With that being said, we, like other plasma collection organizations, have continued to see sequentially improving collections over recent weeks, and we are hopeful that these trends will continue for the balance of this year and into 2021. At present, the immune globulin market continues to expand, but remains restricted by historically tight supply. We expect the tightness to continue and even be somewhat exacerbated by the persisting COVID-19 pandemic. As there is a general feeling among many parts of the American public to only visit essential stores and businesses, some people are reluctant to go to plasma collection centers and donate source plasma. In spite of this backdrop of increasing broader immune globulin market tightness, we believe that ADMA is uniquely positioned as a smaller player to provide supply and even offer greater quantities of its FDA-approved IG products in the forward-looking periods ahead. As a smaller player in the early stages of our manufacturing and commercial scale up, we can say with confidence that we do not, at present, expect any disruption in our production throughput in the periods ahead. Beyond our revenue growth, we have several other important corporate accomplishments I would like to take a moment to highlight. First, we continue to build our inventory balance in support of further anticipated growth in the fourth quarter of 2020 and into 2021. We closed the third quarter with approximately $70 million in total inventory, up approximately 25% from $56 million at the end of the second quarter of 2020. Secondly, our net loss has been reduced considerably. We closed the third quarter of 2020 with a net loss of approximately $16.9 million, down 16% from approximately $20 million for the second quarter of 2020. As you can see, our top line revenue, inventory balance and spending are all heading in the right directions. Additionally, the expansion of our plasma collection center network is currently progressing ahead of schedule. We opened our second center in Knoxville, Tennessee in July and began donor collections shortly thereafter, including from COVID-19 recovered donors. We anticipate receiving approval from the FDA for the Knoxville biologics license application in mid-2021. Our ADMA BioCenters plasma collection business now has 6 plasma collection centers underway at various stages of development and approval, which include Kennesaw, Georgia, our current FDA-approved center, and now Knoxville, Tennessee, with a pending BLA and anticipated FDA approval in mid-2021, along with 4 other centers currently under construction and in the architectural design and planning stages. We are extremely pleased with the progress of these initiatives, securing favorable long-term leases with ideal locations, and we believe we are on track to achieve our stated goal of opening 5 to 10 new plasma collection centers over the next 3 to 5 years. The global demand for U.S.-sourced plasma for further manufacturing continues to outpace the available supply. And these investments into our ADMA BioCenters plasma collection business unit are anticipated to support ongoing production and growth for our end-to-end biologics manufacturing company into the future. As an update with our supply chain robustness initiatives, these projects remain on track. We continue to invest in and make progress with several supply chain robustness enhancements, including the successful onboarding of aseptic fill-finish capabilities with our newly installed Vanrx SA25 Workcell. We are also advancing regulatory efforts for the planned capacity expansion to the 4,400-liter BIVIGAM plasma pool process. These and other ongoing important supply chain initiatives are designed to reduce operating costs, improve product yields and margins, increase scale and provide for faster production cycle turnaround time, which in turn could lead to a potential reduction in working capital requirements as well as provide us with increased control and independence from third-party vendors and contractors. We expect to submit the appropriate regulatory applications resulting from these initiatives to the FDA before the end of 2020 and into 2021, and we anticipate we will begin to see these initiatives impact our top and bottom lines potentially as early as mid-2021. With respect to our ongoing COVID-19 development efforts, we continue to work with our development partner towards a regulatory submission and potential EUA for ImmunoRank, a proprietary antibody assay that we believe, if approved, has the potential to provide faster, simpler and a more cost-effective way to identify SARS-CoV-2 high titer convalescent plasma for using both in treating COVID-19 patients as well as for creating COVID-19 hyperimmune globulins. With the ADMA Biologics organization focused more than ever on commercial execution, we remain committed to tightly managing our expense structure while we work towards achieving our previously provided operating targets, including reaching revenues of $250 million or more over the next 3 to 5 years. With that, I'll now turn the call over to Brian for a review of the financials. Brian? -------------------------------------------------------------------------------- Brian Lenz, ADMA Biologics, Inc. - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thank you, Adam. Since we issued a press release earlier today outlining our third quarter 2020 financial results, I'll just review some of the highlights. For the 3 months ended September 30, 2020, total revenues were approximately $10.3 million compared to $7.2 million for the third quarter of 2019. This represents an increase of approximately $3.1 million or 42%. The revenue growth for the third quarter of 2020 was favorably impacted by the continued commercial ramp up of BIVIGAM and ASCENIV and by the manufacturing and supply agreement ADMA entered into in January of 2020 to produce and sell plasma-derived intermediate fractions. As Adam mentioned earlier, our total inventory as of September 30, 2020, was approximately $70 million, up approximately 25% from the end of the second quarter of 2020. Finished goods commercial inventory has also increased to $15.6 million, up from $5.2 million compared to year-end 2019. In accordance with generally accepted accounting principles, the value of our inventory is stated at our cost. In the periods ahead, we expect to continue to build both work and process as well as finished goods inventories, which we believe will translate to quarter-over-quarter and year-over-year revenue growth moving forward. Additionally, given COVID-19-related uncertainties across the pharmaceutical supply chain, we intend to retain a portion of our growing inventories as safety stock, which we believe will strengthen our position as a reliable supplier to our customers, distribution partners and prescribers over the coming quarters. In addition to ensuring supply continuity, we anticipate our strong and growing inventory position will enable us to achieve our previously stated expectations for considerable revenue growth during the second half of this year compared to the first half as well as into and throughout 2021. Consolidated net loss for the 3 months ended September 30, 2020, was $16.9 million or a $0.19 loss per basic and diluted share. For the 9 months ended September 30, 2020, total revenues were approximately $28.3 million compared to $17.3 million for the 9 months ended September 30, 2019, and this represents an increase of $11 million or 63%. The increase in revenues was primarily attributable to increased sales of our immunoglobulin and plasma products portfolio, BIVIGAM, ASCENIV, Nabi-HB and intermediate fractions. Consolidated net loss for the 9 months ended September 30, 2020, was $56.3 million or a $0.68 loss per basic and diluted share compared to a consolidated net loss of $37.7 million or a $0.72 loss per basic and diluted share for the 9 months ended September 30, 2019. At September 30, 2020, ADMA had cash and cash equivalents of approximately $59.7 million and accounts receivable of $6.3 million compared to cash and cash equivalents of approximately $26.8 million and accounts receivable of approximately $3.5 million at December 31, 2019. ADMA's net working capital as of September 30, 2020, was approximately $123.1 million compared to approximately $71.8 million as of December 31, 2019. With that, I will now turn the call back over to Adam for closing remarks. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [5] -------------------------------------------------------------------------------- Thank you, Brian. ADMA has had a strong year thus far and has made excellent progress during 2020 on executing toward our key corporate priorities. These include initiatives to strengthen our supply chain, which we believe will greatly benefit the company over the long-term by reducing operating costs, increasing production yields, improving margins and shortening production cycle time lines. Given the unprecedented macro market conditions in the U.S. and COVID-19 effects being experienced by us and our third-party vendors and suppliers, we believe these impacts will prove temporary, and that our future is bright and right for growth. We believe the rapid expansion of our ADMA BioCenters plasma collection business unit demonstrates management's focus on ensuring raw material availability into the future, and we believe these initiatives will allow us to continue to increase production throughput into 2021 and beyond, ultimately allowing ADMA to have more finished immunoglobulin available for sale compared to prior periods. Looking ahead to the remainder of 2020 and beyond. We believe we have built a strong foundation with our supply chain and other initiatives over the past year to provide a continuous supply of BIVIGAM, ASCENIV and Nabi-HB as well as a growing level of intermediate fractions for sale to third parties. Market demand for all of our plasma products remain strong, and we remain confident in achieving considerable revenue growth for the second half of 2020 compared to the first half. Longer-term, we believe we are well-positioned to grow our business to $250 million or more in top line annual revenue over the next 3 to 5 years. I want to assure all of our stakeholders that our fundamentals remain strong, and we remain deeply committed to successfully navigating the ongoing commercial rollouts of BIVIGAM and ASCENIV, and bringing each product to patients with life-threatening immune deficiencies. We truly thank our dedicated staff members for continuing to achieve because we all know at ADMA, patients are counting on us. With that, we will now open up the call for your questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from the line of Anthony Petrone from Jefferies. -------------------------------------------------------------------------------- Anthony Charles Petrone, Jefferies LLC, Research Division - Healthcare Analyst [2] -------------------------------------------------------------------------------- I hope everyone is doing well. Congratulations on a great quarter here. Adam, maybe I can begin... -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, I hope you're doing well, too. -------------------------------------------------------------------------------- Anthony Charles Petrone, Jefferies LLC, Research Division - Healthcare Analyst [4] -------------------------------------------------------------------------------- I hope you're well, yes, and your families. Maybe begin where you left off on your comment, Adam, on continuity of supply and where the -- where you sit on visibility and consistency of supply. And so as you look into the fourth quarter and next year, maybe describe a little bit on why that visibility is in place today and what this does for the company as it negotiates with potential customers, whether those be physician groups or larger distributors in the IG space. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [5] -------------------------------------------------------------------------------- Sure. Thanks, Anthony, for the question. So I think there are a number of points that speak to this. And if you look at the Q and the financials, I think when you look at the amount of inventory and the growth, about 25% in the second quarter to the third quarter, I think that, that should give you a good idea that we've been producing this product, that's been working itself through the supply chain, and we're sitting with more finished goods and inventory than we have previously. And we're currently working on building a -- what we are considering to be a safety stock because I'm sure, as you can imagine, in the precarious environment that we're in due to COVID-19, and I've been reading a number of analyst reports from other firms covering many different plasma companies, the forward-looking forecast out there is that the IG market is going to be tightening. And what we're able to do is we're able to use our balance sheet really with our customers to demonstrate to them that, look, we've got these inventories. As you know, Anthony, our production cycle time ranges anywhere from 7 to 12 months. We're doing better, but we're in that 10- to 12-month timeframe. So the reason why we have this visibility is I know what we were doing 10 to 12 months ago. And as you can see, with that inventory growing, it's working itself through the supply chain. All of our issues that we experienced in the early to mid parts of navigating the COVID landscape with some of our third-party testing labs have been resolved. And we are releasing more batches than we ever have previously. So we feel really, really confident in our ability to deliver on our stated objectives of generating considerably more top line revenue in the second half and the first half. I think we've had a really strong quarter, our best quarter this year, and we're trending in the right direction. What I'm most proud of, Anthony, is that the team at ADMA has really been working tirelessly throughout COVID. And our operations under our control have been operating very, very well. And we have been producing product on schedule according to budget and plan this year. And it's really a testament to the dedication of our workforce that we will have more product available for sale in 2021 and 2020. And we anticipate based on our plasma collections and the reliability of our third-party suppliers that we're going to have more products to sell in 2022 than 2021. And I don't know how many other plasma companies out there are able to say that right now due to the headwinds from the collections market from COVID-19. So we feel really strong. We don't mean to sound like a broken record, but we want folks to use inventory as a measure for how much product we should have available for sale in subsequent quarters. -------------------------------------------------------------------------------- Anthony Charles Petrone, Jefferies LLC, Research Division - Healthcare Analyst [6] -------------------------------------------------------------------------------- That's helpful. I'm wondering, just as a followup to your comments there, Adam, how does this position the company really to play offense here and kind of going after share when you kind of referenced the dislocation in the market from other suppliers. How active were you in terms discussions, et cetera? -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [7] -------------------------------------------------------------------------------- I want to sit here and say to you, of course, we're going to be on offense. We're always on offense, Anthony, but we also recognize the size of our organization compared to those in the industry. As we've mentioned before, and in our corporate deck, we have a plant that could process today 400,000 liters of plasma with rough yields somewhere between 3.5 to 4 grams of finished immunoglobulin through our manufacturing process per liter. That leaves us somewhere with, call it, 1.5 million, 1.6 million grams. Last year, I believe, the number was around 100 million grams of IG sold. So we're about a 1% to 2% player in the market. So we're aggressively out there. But again, we're not going after these large hospital contracts. We're not looking to fill the void that may be left by some of the larger or the big 3 to 4 players out there. We're going after the customers that are being told that they're being put on allocation or that they're starting to see their deliveries be delayed. And we're receiving a number of inbound calls from different classes of trade and different types of IG infusion centers, health clinics, physicians offices, as you say. So we feel really, really good about this. The inventories are growing. And we are aggressive, but we also understand and we hope that the market understands our size. I feel very confident that as we build our inventory, we want to ensure that there is safety stock there for our customers. They don't want to put patients on a drug where they don't believe that they're going to have substantial supply in the subsequent months to ensure the continuity of care. So we're doing this in a very controlled way. We're very, very optimistic with our visibility in our inventory in our supply chain right now. FDA releases are coming through. Our labs are operating. Things are moving forward very, very well. And we anticipate having that supply, 2- to 3-month supply, if you will, to demonstrate to our customers we've got the inventory available for you. You can feel confident about putting your patients on BIVIGAM. During this period, that's going to be quite tumultuous based on all the reports that I was reading today. So we're here. Our products are commercial. They're FDA approved, and we're ready to serve the market as they need products. -------------------------------------------------------------------------------- Anthony Charles Petrone, Jefferies LLC, Research Division - Healthcare Analyst [8] -------------------------------------------------------------------------------- That's very helpful, and I'll get one more and hop back in queue here. Maybe just an update on ImmunoRank, the assay for SARS-CoV-2, and just sort of how do you see this playing out just considering the backdrop and where the development cycle is for polyclonal antibodies for COVID-19. Just a quick update there. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [9] -------------------------------------------------------------------------------- Sure. So -- no, no, thank you, Anthony. We're hopeful that we'll be able to achieve some type of a UA through FDA. And as we make more progress, we'll certainly update the market. This assay, we're really proud of this because we really believe that ADMA and our development partner, Leinco Technologies, maybe I can say this, maybe I can't, but I really believe that we're solving the key problem of being able to detect which convalescent COVID-19 patient donors have the most potential to help, the ones with the highest antibody titers. This is a very easy-to-use ELISA kit-based assay. It's a standardized way for hospitals, blood collection centers as well as plasma centers to identify which donors have the highest neutralizing titers, neutralizing titers to SARS-CoV-2. And that we believe that this is going to have the ability to determine which of these units is going to have the greatest potential for immediate and full clinical benefit. So it's hard for me to give you an idea as far as size. We really do believe that ADMA and our expertise and the expertise of our development partner that we're solving the #1 problem with convalescent plasma. Now we're not in the convalescent plasma treatment business. That's not our area. We're not getting into that business. We do not use the plasma that we collect for the therapeutic transfusion of COVID-19 donors. What we're really doing here, Anthony, and I know that you understand this, with ADMA's IP portfolio and the ability to differentiate ASCENIV from other IGs based on the plasma pool and the types of donors that we collect plasma from. We're really using our expertise in developing these specific testing assays to identify neutralizing titers in human plasma. And we're going to make that available to the world. So I'm optimistic that there's potential. But again, we're really just doing this because we find it something that was easy for us to do. It's right in our wheelhouse. And as we progress more, we'll keep you posted. But I'm excited to see what happens with this. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Our next question comes from the line of Elliot Wilbur from Raymond James. -------------------------------------------------------------------------------- Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [11] -------------------------------------------------------------------------------- A couple of questions. Maybe I'll just start on -- right on the financials. If I could just ask you to comment in terms of revenue performance in the quarter, maybe just talk about some of the key drivers of the increase, at least sequentially, whether it be increased customer base or increased customer penetration or mix, more favorable ASCENIV versus BIVIGAM uptake, just some of the key drivers there as we think about the sequential progress from 2Q results? -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [12] -------------------------------------------------------------------------------- Sure. Brian, go ahead. Take this one. -------------------------------------------------------------------------------- Brian Lenz, ADMA Biologics, Inc. - Executive VP & CFO [13] -------------------------------------------------------------------------------- Sure. Thanks. Thanks, Adam. Elliot, nice to hear from you. Regarding the revenue growth, I mean, we're very encouraged this quarter to see the continued market demand, and we were certainly in a place to meet it. I would say that increased revenues attributed to -- across the board, increased sales from all products, byproducts, intermediates, in addition to additional customers that we're seeing. To Adam's point earlier on the call, customers see our inventory continuing to grow, and that gives them confidence to continue to look at us and use us as a premier seller of IVIG products into the market. -------------------------------------------------------------------------------- Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [14] -------------------------------------------------------------------------------- Okay. And it sounds like based on some of your earlier commentary that, obviously, you're continuing to expect sequential growth in the fourth quarter. -------------------------------------------------------------------------------- Brian Lenz, ADMA Biologics, Inc. - Executive VP & CFO [15] -------------------------------------------------------------------------------- That's correct. That's correct. And if you look at our balance sheet, Elliot, you can see the finished goods have increased by 25%; second quarter, $56 million to $70 million overall inventory. So we continue to purchase inventory. We continue to move inventory through the channels while also keeping safety stock. So it's all been a positive quarter from that inventory standpoint, continue to expect the inventory to grow and build out the investor -- build out the customer base as well along the way. -------------------------------------------------------------------------------- Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [16] -------------------------------------------------------------------------------- Okay. A question for you, Adam. Anything you can share with us in terms of updates on key wins with additional points of distribution or P&T committees and payers? Just wondering what your ability to engage, what those constituents has been kind of mid sort of the resurgence of the pandemic in certain spots, and maybe more specifically, whether or not the recent grant of the J-code has kind of opened the door for more discussions, at least with respect to incentive, obviously. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [17] -------------------------------------------------------------------------------- Sure. I'll touch on incentive. I can certainly tell you that IVIG is pretty much on every hospital's formulary around United States. And when you look at the label for ASCENIV, it has a label similar to that of IG, the differentiating factor type of plasma that's used, and we blend normal donors with donors tested to have sufficient titers of respiratory syncytial virus, and that's the product that we have. So as the winter months are upon us, as COVID becomes a top conversation, our commercial team, our medical science organization, we just had this big symposia that that we sponsored at IDWeek a couple of weeks ago. We're starting to see a lot more engagement, a lot more thoughtfulness from the hospital-based community on appropriate patient types and appropriate utilization of ASCENIV in the hospital. On the outpatient side, the reimbursement through Medicare certainly is not hurting us. We're very, very pleased with that. We've continued to, if you will, defend the ASP. There are no changes to the price reported for the third quarter. And we are continuing to switch patients that physicians and their caregivers believe have appropriate risk factors and could benefit from monthly infusions of ASCENIV. BIVIGAM as well having that inventory available in a market, again, that's been historically tight. There's no shortage of customers out there, Elliot. I mean, we really are in a place right now where our sales force and our commercial operations team is truly engaged with folks. Some of our field reps -- I'm not the one pushing them out on the road, certainly not coming from me, but I can tell you that our folks want to carry that ADMA flag, and they're starting to reengage with certain clinicians in safe manners outside. And we are getting face-to-face time with prescribers and caregivers. So we're seeing things loosen up a bit. Virtual engagement efforts continue. We continue to have a presence at the medical and scientific conferences. And engagement is there. Immunoglobulin really is a hot topic right now from the pharmacy buyers and the hospital pharmacies. They're all getting notices about look at your IG utilization. We're hearing little anecdotal reports that they're starting to reconvene the IG treatment ethics committees in a number of institutions when IG has been in short supply in previous periods throughout immune globulin's history over the last 20, 30 years. They convene these committees to decide who should get product and who's the most needy. And we're starting to hear grumblings that those committees are starting to be reformed. So IG is a topic front and center. And again, not to reiterate the inventory balance, but we feel real good about our position here to be able to service the current unmet need and the potential future unmet need that's out there. -------------------------------------------------------------------------------- Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Division - Senior Research Analyst [18] -------------------------------------------------------------------------------- Okay. And just one last question. Adam, as you move forward with your enhanced fill-finish capabilities, it sounds like the timelines are fairly consistent with what you have discussed previously. But I know that on some past calls, we talked about sort of the statutory timeline in terms of FDA signing off on some of these processes, being roughly 4 to 6 months under a standard supplemental NDA. But wondering if you've had any -- at this point, if you've had been able to have any further discussions with the agency in terms of thinking about trying to get them to act in a somewhat more expeditious manner given the demand trends that are out there for IVIG. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [19] -------------------------------------------------------------------------------- Sure. That's a great question. And the answer I can give you is that we've got comfort around the fact that we've seen the agency is conducting a number of paper audits of a number of different types of pharmaceutical manufacturers, plasma collection organizations, et cetera. So we know the FDA is ongoing, and they're working. We have not yet submitted our application for the Vanrx machine for our products to FDA. So it's hard for me to ask for an expedited review or to bet for any favors until we actually put the application on file. So the guidance that we provided is that we should have this application on file before the end of the year. And certainly, when we do, if it's not me, it will be someone from our organization. We will call the agency and see what we can do and if there is a path for an expedited review. We feel really confident, I mean, the fact that we're continuing to remain on track with these timelines. I know a number of our staff do listen to these calls, but I got to give credit to the ADMA leadership, all the way down to the newly indoctrinated fill-finish technicians that are working tirelessly nights and weekends in order to keep us on schedule due to some of the impacts to COVID-19. So a lot of hard work, a lot of late nights, but we're staying on track. We understand we made commitments and promises to shareholders, and our team is breaking their backs in order to meet those timelines. So we feel really good, Elliot. We really do believe that mid-2021, second half of 2021, we should start realizing some benefits from a number of our supply chain robustness and enhancement initiatives, and fill-finish is certainly one of them. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Our next question comes from the line of Leland Gershell from Oppenheimer. -------------------------------------------------------------------------------- Leland James Gershell, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [21] -------------------------------------------------------------------------------- Just a few questions from me. I want to just drill a little bit further on the inventory trend as that increases. Do you have a -- any sort of numbers or brackets you can give us as to what you would consider a steady state for overall inventory of IG product that you might be getting to in the foreseeable future? And I have a couple of follow-ups. -------------------------------------------------------------------------------- Brian Lenz, ADMA Biologics, Inc. - Executive VP & CFO [22] -------------------------------------------------------------------------------- Sure. I can take this, Leland. It's Brian. With regard to the inventory, we stated that we expect to see sequential quarter-over-quarter, year-over-year revenue growth. So that's going to be commensurate along the lines of increased inventory. As we continue to purchase more plasma, we're opening up more plasma centers, so we're collecting more plasma. That plasma has a long shelf life, 10 years. We're going to continue to purchase more plasma, as I mentioned. And that inventory will then lead to future year-over-year revenue growth. So seeing that increased inventory will be a testament. It signifies continued quarter-to-quarter over -- year-over-year revenue growth, getting to that $250 million topline revenue line within the next 3 to 5 years. -------------------------------------------------------------------------------- Leland James Gershell, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [23] -------------------------------------------------------------------------------- Okay. All right. And then as we think about spend, admirably, you're building the centers perhaps ahead of schedule, but wanted to consider expense burden on the company as you have debt obligations and so forth. How should we think about kind of your outlook on cash as it stands from this report? And how we should think about additional cash resources that might need to come into play as you continue to build the organization? -------------------------------------------------------------------------------- Brian Lenz, ADMA Biologics, Inc. - Executive VP & CFO [24] -------------------------------------------------------------------------------- Sure. Thanks, Leland. So with regards to cash and cash needs, look, we're going to manage the expenses as close as we can. You could see quarter-over-quarter from second quarter '20 to third quarter '20, net loss is down from $20 million to about $17 million. So net loss is heading in the right direction. We believe our revenue growth is going to outpace our increased expenditures. So revenue growth is heading in the right way. With regards to debt -- you mentioned our debt relationship, we have -- we've dramatically increased our capitalization, receiving several regulatory approvals since taking on the additional debt back in 2019. And it's all content -- context of very supportive credit market. So we're confident that we're able to address our debt, our debt relationship with our largest lender. They're aligned with management, they're a largest holder, about 19%, they as well as our Board and management. They've made -- we've made open market purchases throughout the year. And again, our balance sheet from a collateral position continues to directionally grow in the right place. -------------------------------------------------------------------------------- Leland James Gershell, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [25] -------------------------------------------------------------------------------- Okay. And then my last question, just on ASCENIV. As you know, you had launched that last winter, but it was kind of -- we were already kind of into the winter season as that was rolling out, and then you made investments in the -- sales effort behind that coming into this season and as we're in the colder months now, just want to ask if you're seeing a return from those additional investments as perhaps the mix shifts toward ASCENIV as we get through this winter. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [26] -------------------------------------------------------------------------------- Sure, Leland. Yes, we are seeing the investments pay off. I mean, we're having a lot more conversations. We're having a lot more detailed conversations. And again, we are converting patients, and we're getting the product, and we're seeing utilization in hospitals as well as in outpatient infusion centers and in the home care setting. So we feel really, really good that we're in a great place to supply a differentiated IG, a product that when you look at the published data and you look at the patents that we have around the product that we screen these donors for high titers to RSV, but they have a panel of -- but when you actually look at the plasma that we're collecting, RSV really is the marker. And what our patent state is that these donors are also containing high levels of antibodies against influenza A and B, metapneumovirus, 2 types of coronavirus, OC43 and 229E as well as parainfluenza 1 and 3. So when -- I can tell you that when these infectious disease doctors and clinical immunologists are looking at the patients and they're looking at the data out there, about 20% or so plus or minus of patients infected with COVID are also co-infected with some other respiratory viral pathogen. One of the highest on the list is RSV. I think we all can agree that more antibody is better than less when trying to treat or prevent an infection. And the way that we manufacture our product offers standardized levels of these antibodies. So clinicians and payers can be sure that every time they pay for and prescribe ASCENIV, they're giving a consistent amount of this unique antibody profile IG to their patients. So we -- we're seeing growth. Things can always grow faster than they are. Leland, I would love it to grow faster. And if our commercial team is listening, we're getting out there. We're making it happen. We're seeing growth across all of our immunoglobulin manufacturing product portfolio. And we're really proud on what we anticipate is going to occur in the fourth quarter and throughout 2021. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Our next question comes from the line of Ram Selvaraju from H.C. Wainwright. -------------------------------------------------------------------------------- Unidentified Analyst, [28] -------------------------------------------------------------------------------- Hi, this is (inaudible) Ram Selvaraju. Can you hear me okay? -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [29] -------------------------------------------------------------------------------- Yes, we can. -------------------------------------------------------------------------------- Unidentified Analyst, [30] -------------------------------------------------------------------------------- A few questions. So just as how often does the supplier deliver plasma to ADMA? Is it weekly or monthly or quarterly or as often as possible? And what factors could accelerate or slow down the supply process? -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [31] -------------------------------------------------------------------------------- Sure. You're cutting in and out a little bit, but I believe the question was around our third-party supplier for sourced plasma, one of the deliveries. I can tell you that we've got a delivery schedule that's been already formally agreed to with our third-party vendor. And I only get told when there are problems, and I haven't been told that there's a problem in a long time. So I believe that we do receive deliveries as per our contractual arrangement right now. Those deliveries typically occur monthly. We do keep inventory in a third-party warehouse location as well as on-site in Boca Raton that is being prepared for further manufacturing. So the supply relationship is intact. The contract is being serviced. We have experienced no delays or difficulties with our vendor in the quarter. And we're really appreciative of their efforts. We know that it's not easy out there, but they are 100% committed to ADMA, and they're committed to honoring their obligation, and we truly thank them for their support. They understand that patients are counting on us as well, and they're giving us the product -- the raw material that we need in order to keep our production ongoing. So it takes a village in this industry, and we all seem to be supporting each other very well right now. So we thank our partner very much. -------------------------------------------------------------------------------- Unidentified Analyst, [32] -------------------------------------------------------------------------------- Yes. Thanks for the clarity. And moving forward, so you mentioned that ADMA could generate $250 million annual revenue at some point in the near future. So can I just assume all the (inaudible). -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [33] -------------------------------------------------------------------------------- So the $250 million in top line revenue would be cumulative of our entire organization. So everything stemming from our plasma collection business unit to contract manufacturing activities as well as our commercial products and then the sale of our intermediate fractions. We feel really, really confident that the way that we've set our business up today. And again, this is based on the existing capacity of our manufacturing facility, that 400,000 liter capacity I believe I mentioned earlier on the call. As we progress to the 4,400 liter BIVIGAM plasma pool expansion project, we believe that our capacity is going to grow potentially by up to 50%. And so there may be even upside over and above this $250 million cumulative top line revenue generation from our entire manufacturing portfolio and subsidiary business unit. So hopefully, that answers your question there. The 5 to 10 new centers that we're -- that we've given guidance that we're building, and we said in our remarks earlier today that we currently have 6 centers from approval through just having their leases signed, that effort is really about demonstrating to our shareholders that management is focused on self-sufficiency at some point in time. If we have the ability to sell some of that plasma, we certainly will. The price of normal sourced plasma is increasing almost weekly in this climate, and we really want to be able to insulate ourselves from the supply and demand fluctuation that may be out there, especially when you look at what's happening due to the COVID-19 pandemic and its impact to collections. So we feel really good about our initiatives there. It all comes down to the sourced plasma, right? When we have visibility on how much plasma we can put into our manufacturing plan, that's when we're going to have very good visibility into consistent revenues and consistent growth quarter-over-quarter, year-over-year. And everything seems to be on track at the present time. So knock wood, we're going to keep it up. -------------------------------------------------------------------------------- Brian Lenz, ADMA Biologics, Inc. - Executive VP & CFO [34] -------------------------------------------------------------------------------- Regarding the plasma centers, if I may. Typical plasma centers, once they're FDA-approved and operating within, call it, 18 to 24 months, there's a market value that we've seen. Public information they sell anywhere from $10 million to $15 million. Not saying we're going to sell our plasma centers, but there's a true asset value behind these FDA-approved plasma centers, not just collecting the plasma and using it for our FDA-approved products, but we believe that there's true asset value between each and every plasma center. -------------------------------------------------------------------------------- Unidentified Analyst, [35] -------------------------------------------------------------------------------- Understood. Thanks for the clarification. I want to switch gears and talk about the ImmunoRank assay. So is it universal that all patients who recovered from COVID-19 exhibit high levels of neutralizing antibodies? Or is it only a small percentage of patients? What conclusions could be drawn from your own ImmunoRank assays? -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [36] -------------------------------------------------------------------------------- Sure. So I'd love to answer that question. And it's based -- we have not published any data yet regarding our evaluation of donors out there. I can tell you that our immune systems do not all function the same way. So not every person who recovers from COVID-19 amounts a substantial neutralizing antibody response. And in fact, there are even people who are asymptomatic who we test from time to time in our normal plasma collection center. Donations who appear to have very, very strong neutralizing and high levels of neutralizing titers to SARS-CoV-2. So at the present time, we have not published any of our data. I think as we generate more data, you may see some publications at some medical conferences either later this year or there are a couple of immunology meetings early next year. But I know that there are a number of publications out there that talk about 20%, 30%, 40% of patients who recover from COVID-19 have very low levels of available neutralizing antibodies. And what this assay is designed to do is it's designed to solve that problem. Not every person who recovers from COVID-19 is a great fit to be a plasma donor for convalescent plasma treatment. So that's what this assay is designed to do is it's designed to help the clinician. It's designed to help the hospital, help the blood center. The folks who are actually dealing with help the hospital, help the blood center, the folks who are actually dealing with the therapeutic transfusion of convalescent plasma. Again, we feel that we've got the ability to solve this problem for them and provide them with an easy-to-use cost-effective assay to help them determine which of these recovered COVID-19 patients are most likely to provide clinical benefit. So we have to wait and see what the FDA says with respect to an EUA, but we feel really, really confident that we're on the right track. -------------------------------------------------------------------------------- Unidentified Analyst, [37] -------------------------------------------------------------------------------- That's great to hear. And along the lines, so yours is a plasma products company. And do you think the ImmunoRank assay would be a strategic fit for your business objectives? And also if you can talk about terms and conditions between you and Leinco Technologies with respect to the ImmunoRank assay kit, that would be helpful. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [38] -------------------------------------------------------------------------------- Sure. So we're not prepared to talk about the financial terms and conditions at this time. We have not made any disclosure around that. And look, we're a plasma products company, as you say, and we also have a number of different patents in our portfolio around the ability to screen and generate high titer plasma pools in order to make hyperimmune globulins. This assay is synergistic with the work that we do. But at the present time, we are unable to give, and we don't really feel that there's a material impact, if you will, to the profitability outlook. We have no plans to develop our own hyperimmune for COVID. We are still a member of the COVID plasma alliance at the present time. We are collecting COVID plasma that we do contribute to, to the alliance. But we really -- look, sometimes and a number of companies are out there doing things for the greater good. If there is a commercial opportunity for this assay, certainly, between ADMA and our development partner, Leinco, we're going to do what we can to capitalize on that. But quite frankly, the real purpose behind this is helping to solve the problem that we feel so many are out there. These are expertise that ADMA was founded on back in 2004, 2007. I mean, we've got the ability to develop these novel testing methodologies in order to detect neutralizing antibodies in plasma. And I think what this should do is show shareholders that, look, ADMA is a differentiated company from the likes of the bigger players out there. We're very nimble. We were able to develop this assay quickly. And I think it's a testament to the scientific prowess of our company and the forward-thinking nature that ADMA brings to the plasma products community. -------------------------------------------------------------------------------- Unidentified Analyst, [39] -------------------------------------------------------------------------------- Great. And one final question, if I may. So have you guys talked about or maybe you can clarify where do you stand in terms of developing subcutaneous formulations for ASCENIV and BIVIGAM? I mean, considering, we are in the pandemic period and the subcutaneous drugs are gaining traction. And these are considered -- perceived more safer. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [40] -------------------------------------------------------------------------------- Yes, I think you cut out there, but your question was around subcutaneous formulation. At the present time, we have no plans to develop subcu. We've got a lot on our plate at ADMA Biologics. And subcu is growing in the IG space. But I can tell you that -- I don't know if I should quote the data if I'm not correct about it, but I know the majority of immunoglobulin that is utilized on the market today remains in the IV form in preparation. We like to target the immune-compromised patient population. I don't want to get into all the scientific differences around bioavailability of antibody and the mechanisms of action that may differ between subcu and IV, but we feel very strongly that IV is an appropriate route of administration for an immune-compromised patient. I think that there are some benefits that certain clinicians can argue. Additionally, based on data that I've read, we need approximately 20% more immunoglobulin in the subcu dosage form to achieve the same IgG trough levels that you can experience from an IV preparation. So that utilizes more IG. Our goal is to provide as much product as we can to treat as many patients as possible. So at the present time, we're going to let the big boys fight it out in the subcu market. We're going to continue to provide where the lion's share of immunoglobulin is being used, and that's in the intravenous route of administration. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Our next question comes from the line of Zach Weiner from Jefferies. -------------------------------------------------------------------------------- Zachary Ross Weiner, Jefferies LLC, Research Division - Equity Associate [42] -------------------------------------------------------------------------------- Congrats on a great quarter. One more from us on performance batches. Can you give a time line as to when you think the BIVIGAM performance batches will be sold through and right to the bottom line? And then also if you expect a more expansive performance batches for the additional FDA clearances that you guys are currently working on with the fill-finish and -- that's it, yes. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [43] -------------------------------------------------------------------------------- Sure. Thanks, Zach, for the question. Good questions. We haven't given specific -- we have not yet given specific timelines on the 4,400 liter process. We're hopeful and optimistic that we have it on file later this year, maybe early Q1, and it should be a 4- to 6-month standard PAS review. So as Brian and I said during the prepared comments, we expect to see benefits on the top and bottom line in the middle part of next year to the second half of next year. So I mean, we understand the production cycle times. We told you when we need these batches that we get them on file. Now we're hopeful third, fourth quarter that we'll have those batches available for release. Again, we really do feel very strongly about the sequential quarter-over-quarter future revenue growth. And certainly, I don't have your model right in front of me. But I think as we approach the second half of 2021, we anticipate considerable growth. And I think that some of that can be attributed to not only the fill-finish and the additional yield there and the faster cycle turnaround times, but also that at some point next year, we're going to begin producing at a 4,400 liter scale and getting more product out the door using the same staff, the same equipment, the same disposables. And really, it's going to change the outlook of our business going forward. I mean, we're doing everything the right way. We're doing it in a methodical way. We've demonstrated to the street. We've demonstrated to the FDA that when we put our mind to something, and we give you guys guidance on our time lines, we do hit them. And we feel really confident about our ability to produce IG. As I mentioned, we are producing more IG than this plant has produced in the previous 4 or 5 calendar years. My management team is great. They're running a great shop. Our quality unit, our manufacturing team, our facilities team and our quality control team are working around the clock to get as much product out the door as possible. So we don't have -- to answer the other part of your question, I don't believe we have any planned additional conformance batches. But if you refer to our risk factors, we never know what the FDA is going to ask us to do. So we will certainly do our best to guide you and other analysts. If we do see any potential R&D and/or expenses that we may incur due to getting this very important part of our strategic plan for supply chain robustness approved. But everything is on track. And I wish I could rush the clock back, but 7 to 12 months to produce a batch of drug. FDA reviews are still running about 4 to 6 months for a prior approval supplement. So hang in there. We're going to continue to execute and meet our stated objectives and milestones while growing top line and controlling expenses in the burn. -------------------------------------------------------------------------------- Brian Lenz, ADMA Biologics, Inc. - Executive VP & CFO [44] -------------------------------------------------------------------------------- One thing to keep in mind, Zach. Thanks for bringing up the conformance batch -- batches that we went through earlier this year, we expensed those conformance batches in the first half, about $7 million. Obviously, that hit all of our cost of sales. So as Adam mentioned, in the second half of '21, when we start selling those conformance batches, pending FDA approval, we would realize 100% gross margin, 100% profit on those batches, straight to the bottom line. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, this will conclude our question-and-answer portion of the call. I'd like to turn it back over to Adam now for additional closing remarks. -------------------------------------------------------------------------------- Adam S. Grossman, ADMA Biologics, Inc. - Co-Founder, President, CEO & Director [46] -------------------------------------------------------------------------------- Thank you, everybody. Thanks for your attention and time. I want to thank you for calling in. I wouldn't be a good CEO if I didn't say get out there and donate plasma. Help save a life. Visit donatingplasma.org to find a plasma collection center near you. We really wish you a healthy and safe winter period as it's getting colder around other parts of the country. And wash your hands, wear your mask. And have a great and safe afternoon. Thanks, everybody. We appreciate your time. -------------------------------------------------------------------------------- Operator [47] -------------------------------------------------------------------------------- Ladies and gentlemen, this does conclude the conference call for today. We appreciate your participation, and you may now disconnect.