Q3 2020 ADMA Biologics Inc Earnings Call

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Good afternoon, and welcome to the animal Biologics third quarter 2020 financial results Conference call on Thursday November five 2020 at this time all participants are in a way.

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.

This time I would like to introduce Skyler Bloom director Investor Relations and corporate strategy Adimab Biologics. Please go ahead.

Welcome everyone and thank you for joining us this afternoon to discuss ADMET biologics financial results for the third quarter 2020, I'm joined today by Adam Grossman, President and Chief Chief Executive Officer, and Brian Lynch 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.

The company's third quarter and nine months ended September 32020 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 releases are available on our website at www Dot ADMET biologics dot 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 offer.

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 an throughout 2021.

During the third quarter, we continued to add new customers and prescribers forbid again in a sentence as our virtual grass roots promotional an engagement efforts continue to yield results.

Although traditional commercial engagement remains limited and challenging is COVID-19 headwinds persist.

We are encouraged by the provider and physician reception to our presence at recent scientific and medical conferences, including an I D week 2020, and 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 R. F. D. A 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 endemic.

Is there is a general feeling among many parts of the American public to only visit the central stores and businesses.

Some people are reluctant to go to plasma collection centres and donate source plasma.

In spite of this backdrop of increasing brought her immune globulin market tightness, we believe that asthma is uniquely positioned.

As a smaller player to provide supply and even offer greater quantities of it's F. D. A approved igene products and the forward looking periods ahead.

As a smaller player in the early stages of our manufacturing in commercials Scaleup.

We can say with confidence that we do not at present expect any disruption in our production throughput and 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.

We opened our second center in Knoxville, Tennessee in July and began donor collection shortly thereafter, including from COVID-19 recovered donors.

We anticipate receiving approval from the F D. A for the Knoxville Biologics license application in mid 2021.

Or add my bio centers plasma collection business now has six plasma collection centres underway at various stages of development and approval.

Which include Kennesaw GA are current F. D. A approved center and now Knoxville, Tennessee, with a pending B L. A and anticipated F D. A approval in mid 2021.

Along with four other centers currently under construction and then the architectural design and planning stages.

We are extremely pleased with the progress of these initiatives securing favorable longterm leases with ideal locations and we believe we are on track to achieve our stated goal of opening five to 10, new plasma collection centers over the next three to five years.

The global demand for U S source plasma prefer the manufacturing continues to outpace the available supply.

And these investments into our Admah bio centers 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 a skeptic they'll finished capabilities with our newly installed van R X S. A twenty-five work so.

We are also advancing regulatory efforts for the plan capacity expansion to the 4400 liter began plasma pool process.

These and other ongoing important supply chain initiatives are designed to reduce operating costs improved product yields and margins increased scale and provide for faster production cycle turnaround time, which in turn could lead to a potential reduction and working capital requirements as well as provide us with increased controlling.

Independence from third party vendors and contractors.

We expect to submit the appropriate regulatory applications, resulting from these initiatives to the F. B a 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 E way for immuno rank a proprietary antibody assay that we believe if approved has the potential to provide faster simpler and a more cost effective way to identify.

By Sars Kobe too high titer convalescent plasma for using both in treating COVID-19 patients as well as for creating COVID-19, hyper immune blood ones.

With the advent biologics organization focus 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 three to five years.

With that I'll now turn the call over to Brian for a review of the financials Fry.

Thank you Adam.

Since we issued a press release earlier today outlining our third quarter of 2020 financial results I'll just review some of the highlights.

For the three months ended September 30th 2020, total revenues, where 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 <unk> and by the manufacturing and supply agreement Admah entered into in January of 2020 to produce and sell plasma derived intermediate fractions.

As I mentioned earlier are total inventory as of September 30th 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 here in 2019.

In accordance with generally accepted accounting principles the value of our inventory of state it at our cost and the periods ahead, we expect to continue to build both work in 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.

Dollars compared to approximately $71.8 million as of December 30, Onest 2019.

With that I will now turn the call back over to Adam for closing remarks.

Thank you Brian.

I just 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 in shortening production cycle timelines.

Given the unprecedented macro market conditions in the U.S. and COVID-19 effects being experienced by us in our third party vendors and suppliers we.

We believe these impacts will prove temporary and that our future is bright and ripe for growth.

We believe the rapid expansion of our ADMET bio centers 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 add Matt 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 began a sensitive and now BHP as.

As well as a growing level of intermediate fractions per sale to third parties.

Market demand for all of our plasma products remained strong and we remain confident in achieving considerable revenue growth for the second half of 2020 compared to the first half loss.

Longer term, we believe we are well positioned to grow our business to $250 million or more in topline annual revenue over the next three to five 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 are began and incentives and bringing each product to patients with life threatening immune deficiencies.

We truly thank our dedicated staff members for continuing to achieve it.

Because we all know and add more patients are counting on us.

With that we will now open up the call for your questions operator.

Thank you todays question and answer the question will be conducted electronically as a reminder to ask the question, we'll need to press star one on your telephone sales.

John Your question press, the bountiful well pause just a moment to assemble the roster.

Our first question comes on the line of Anthony Petrone from Jefferies. Your line is now open.

Thank you and good afternoon, I hope everyone is doing well congratulations on a great quarter here.

Adam maybe I can get him well to hope you're well you and your families. Maybe begin where you left off on your comment Adam on on continuity of supply.

And where the.

Where you sit on 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 visit 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 space.

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 in the growth of 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 with this product it's in working itself through.

The supply chain and we're sitting with more finished goods in inventory than we have previously and we're currently working on building a what we are considering it 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 and I've been reading a number of analyst reports from other.

Firms covering many different plasma companies.

Okay. All in 2021, and 2020, and we anticipate based on our plasma collections and uhm the reliability of our third party suppliers that we're gonna have more product to sell in 2022, and 2021 and I don't know how many other blood with 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.

That that telefon I'm wondering just as a follow up to your comments there Adam.

How does this position to.

The company really to play offense here.

Stanfill supply and 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 and our supply chain right now F. D. A releases are coming through our labs are operating things are moving forward very very well and we anticipate having that.

That supply two to three months supply if you will to demonstrate to our customers. We've got the inventory available for you you can feel confident about putting your patience on bit again. During this period, that's gonna be quite tumultuous based on all the reports that I was reading today. So you know we're here are products or commercial there F D a approved and and.

And we're ready to serve the market as as they need products.

That's very helpful and and you know I'll get more more <unk> and how it back in queue here, maybe just an update on immuno rank.

The assay for Sars cough, too and I'm, just sort of <unk>, how do you see this playing out.

Just considering the backdrop and where the development cycle is four polyclonal antibodies for COVID-19, just a quick update their thanks, a lot and for sure. So no no no. Thank you Anthony.

We're we're we're hopeful that we'll be able to choose some type of a uhm you a through F D. A and as we make more progress will will certainly update the market. You know this assay uhm, we're really proud of this because we really believe that Ah asthma and are developing partner Langkow technology.

You know maybe I can say this maybe I can't but I really believe that we're solving the key problem being able to detect which convalescent COVID-19 patient donors have the most potential to help are the ones with the highest antibody titers. You know this is a very easy to use our lives a kid space assay.

It's a standardized way for.

The hospitals blood collection centers as well as plasma centers to identify which donors have the highest neutralizing Tigers neutralizing titers to Sars Kobe too and that we believe that this is going to have the ability to determine which of these units. It's going to have the greatest potential for me a consult clinical benefit.

And Adam Brian the afternoon, how are you doing.

Doing all right. Thanks appreciate it.

Couple of questions, maybe I'll just start.

Start on right on the financials, if I could just ask.

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 increase customer base or increased customer penetration or mix more.

A more favorable incentive versus began uptake just some of the key drivers there as we think about the the sequential progress from Twoq results.

Sure.

Well I go ahead take this one sure. Thanks, Thanks, Adam paid on Elliott Vice too nice to hear for 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 revenue is attributed to.

Across the board increase stop sales from all products.

By products intermediates, and addition to additional customers that were seeing to Adams 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 as a premier seller of IB I'd products into the market.

The owners test it to have a sufficient titers of respiratory syncytial virus and that's a product that we have so as the winter months are upon us as covid becomes a top conversation our commercial team or medical Science organization. You know, we just had this big symposia that that we sponsored at Uhm I D.

<unk> 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 inappropriate utilization of send it in the hospital.

On the outpatient side you know the the the reimbursement through Medicare certainly is not hurting us. We're we're very very pleased with that you continue to if you will defend the a S. P. There are no changes to the price reported for the third call.

And we're hearing you know little little anecdotal reports that they're starting to reconvene. The you know I G treatment ethics committees at a number of institutions when when I G has been in short supply in previous periods throughout the immune globulins.

History over the last 2030 years.

They convenience committees to decide who should get product and and who's the most needy and and we're starting to hear rumblings that those committees are starting to be reformed So I G. As 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 the.

It was hard for me to ask for an expedited review or or to beg for any favors until we actually put the application on file. So the guidance that that we provided is that we should have this application on file before the end of the year and certainly when we do uhm.

Ups. Thanks.

Sure I can I can take this early on I don't its Brian.

Jurors 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.

It was for high titers to RSV, but they have a panel of <unk> <unk>. When you actually look at the Plaza, we're collecting RSP really is the marker.

And what are pattern state is that these donors are also containing high levels of antibodies against influenza Andy made a new move Iris two types of Corona virus O C. Forty-three in two 290 as well as parainfluenza, one and three so when I can tell you that when these infectious disease doctors in clinical immunologist or <unk>.

Looking at the patience and they're looking at the data out there you know about 20% or so plus or minus or patients infected with covid are also co infected with some other respiratory viral pathogens one of the highest on the list is R. S. V. I think we all can agree that more antibody is better than last one trying to treat it <unk>.

Please monthly or quarterly or that's something that's possible I got taxes, reaccelerate or slow down the supply trough.

Sure I'm not cutting it down a little bit, but I believe the question was around our third party supplier for source plasma a win of the deliveries.

Between each and every plasma center.

Understood. Thanks for the diversification I want to bring together to talk about the you renew rank as a little bit is.

I know that there are a number of publications out there that talk about you know you know 2030 40 per cent of patients who recover from COVID-19 have have very low levels of available neutralizing antibodies and what this assay designed to do is designed to solve that problem.

With the work that we do but at the present time, we are unable to give and we don't really feel that theres.

You know a material impact if you will to the profitability outlook.

We have no plans to develop our own.

Hyper immune for Covanta 'em, we are still a member of the Cobi plasma alliance at the present time, we are collecting koby plasma that we do contribute to.

To the alliance, but.

We really look.

Sometimes in a number of companies are out there doing things for the greater good if there is a commercial opportunity for this assay certainly between now.

And our development partner line co we're going to do what we can to capitalize on that but but quite frankly, the the the real purpose behind this is helping.

Helping to solve the problem that we feel so many are out there. These are expertise that amount was founded on back.

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 they should do is show shareholders that look Adam is a differentiated company from the likes of.

The bigger players out there we're very nimble we were able to develop this asset quickly and I think it's a testament to the to the scientific prowess of our company.

And the forward thinking nature that ADMET brings to the plasma products community.

Argue Additionally, based on data that I've read.

You need approximately 20% more immunoglobulin and the Subcu.

Dosage form to achieve the same IBG trough levels that you can experience from an Ivy preparation so that utilizes more AG.

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 sub Q market, we're going to continue to provide where the lion's share of immunoglobulin is being used and thats an intravenous route of administration.

Alright, thanks, Thanks for your time.

Thanks for your questions.

Well it around for us.

Thank you. Our next question comes on the line of Zach Leaner from Jefferies. Your line is now open.

Hey, guys congrats on a great quarter.

One or more from us on a performance batches.

Can you give a timeline as to when you think the dividend purports batches will be sold through in right to the bottom line and then also if if you expect a more expensive performance batches for the additional ft acreage that you guys are currently working on with the fill finish.

Ams.

Yeah sure.

Sure. Thanks, Zach for the question. Good questions. You know, we we havent given specific we have not yet given specific timelines on the 4400 liter process and we're hopeful and optimistic that we have it on file later this year maybe early.

Q1, and it should be a four to six month standard Pjs review so.

Previous four or five calendar years, My management team is great they're running a great <unk>.

Shop, or quality unit or manufacturing team or facilities team and in our quality control team are working round the clock to get as much product out the door as possible. So we don't have to answer your other part of your question I don't believe we have any planned additional conformance patches.

But if you refer to a risk factors you know we never know what you have to be it's gonna ask us to do so we will certainly do our best to guide you in other analysts if we do see any potential R&D N or expenses that we may incur due to getting this very important.

Part of our strategic plan for supply chain robustness approved but everything's on track and you know I I I wish I could rush the clock zack's, but uhm seven to 12 months to produce a batch of drug F. D. A reviews or so running about four to six months.

For a prior approval supplement so.

Hang in there we're gonna continue to execute and meet our stated objectives milestones, while growing topline and controlling expenses and the burnt.

One thing to keep in mind Jackson.

Enough to confirm it's batch bachelor's that we went through earlier this year, we expense those confirm it's patches in the first half about $7 million, obviously that had all of our cost of sales. So as I mentioned the second half of 21, when we start selling those conformance batches pending F D a approval.

We would <unk>, we would realize 100 per cent gross margin 100 per cent profit on those batches straight to the bottom line.

Yep understood perfect. Thanks, so much.

Thanks for the question.

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 add him now for additional closing remark.

Thank you everybody. Thanks for your attention and time I want to thank you for calling in I wouldn't be a good C. O. If I didn't say get out there and donate plasma help save a life visit donating plasma dot org to find a plasma collection center near you, we really wish you uhm healthy and safe.

Winter period has it's getting colder around other parts of the country and wash your hands, where your mask and have a great and safe afternoon. Thanks, everybody. We appreciate your time.

Ladies and gentlemen, does does conclude the conference call for today, we appreciate your participation and my my uncle connect.

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