Good afternoon, and welcome to the ADMA Biologics Third Quarter 2021 Financial Results and Corporate Update Conference Call on Wednesday, November 10, 2021. [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 of Investor Relations and Corporate Strategy at ADMA Biologics. Please go ahead.

Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics' Financial Results for the Third Quarter of 2021 and recent Corporate Updates. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Lenz, Executive Vice President and Chief Financial Officer. During today's call, Adam will provide some introductory comments and provide an update on corporate progress, and then Brian will provide an overview of the company's third quarter 2021 financial results. Finally, Adam will then provide some brief summary remarks before opening the call up for questions. Earlier today, we issued a press release detailing the third quarter 2021 financial results and summarized certain third quarter achievements in recent corporate updates. The release is available on our website at www.admabiologics.com. Before we begin our formal comments, I'll remind you that we will be making forward-looking assertions during today's call that represent the company's intentions, expectations or beliefs concerning future events, which constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to factors, risks and uncertainties, such as those detailed in today's press release, announcing this call and in our filings with the SEC, which may cause actual results to differ materially from the results expressed or implied by such statements. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update any such statements, except as required by the federal securities laws. We refer you to the Disclosure Notice section in our earnings release we issued today in the Risk Factors section of our 2020 annual report on Form 10-K and our quarterly report on Form 10-Q for the third quarter ended September 30, 2021, for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. With that, I'd like to now turn the call over to Adam Grossman. Adam?

Thank you, Skyler. Good afternoon, everyone, and thank you for joining us on today's call. We hope you remain healthy and safe. Third quarter 2021 marks another transformational period for ADMA Biologics and establishes a new baseline from which the company expects continued growth and value creation. During the quarter, we grew revenues by more than 100% year-over-year to $20.7 million. Even further, we realized a key inflection point for our business, as we generated positive gross profit for the first time in our company's history. Looking to the remainder of 2021 and beyond, we anticipate gross profits increasing and net losses narrowing as cost and operating efficiencies begin to materialize as a result of receiving FDA approvals for both the expanded 4,400-liter BIVIGAM production scale, and our aseptic fill/finish machine and its related processes. The multiyear remediation efforts and investments into the Boca Raton manufacturing facility, coupled with our BioCenters plasma collection business unit are now beginning to yield tailwinds for our operating results, which we anticipate will improve at an accelerating pace in the periods ahead. Our organization through its operational execution has clearly demonstrated strength and resilience, and we believe is well positioned to meet or exceed all our financial and operating targets and unlock value for stockholders. During the quarter, we took measures to address the long-standing financing overhang that has historically weighed on ADMA's valuation. In October, we significantly strengthened our cash position with the successful closing of an underwritten public equity offering of $57.5 million in gross proceeds. When taken into consideration with our active engagement with prospective debt lenders, we believe there is potential to substantially fully fund our business for value creation and profitability, potentially no later than the first quarter of 2024. Turning to ADMA BioCenters. The segment continues to excel,…

Thank you, Adam. Since we issued our press release earlier today, outlining our third quarter 2021 financial results. I'll just review some of the highlights. For the third quarter of 2021, total revenues were $20.7 million compared to $10.3 million for the quarter ended September 30, 2020, representing an increase of approximately $10.4 million or 101%. The revenue growth for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020, was favorably impacted by the continued increase in commercial rollout of ADMA's IG product portfolio and sale of intermediate fractions. We are extremely pleased and encouraged to report that for the first time in our company's history, ADMA generated positive gross profit during the third quarter of 2021. This key financial milestone was primarily attributable to the favorable product mix achieved during the quarter, where we sold more of our hyperimmune products compared to the previous quarter's results. Our hyperimmune immunoglobulin products have a higher margin than our standard immune globulin product. And this, coupled with a portion of sales from our conformance batches are the main drivers for this quarter, excellent results. Importantly, we expect the underlying gross profits to continue to grow in the coming quarters. As efficiencies kick in from the FDA approvals received for both the 4,400 liter expanded production scale, as well as our in-house fill/finish capabilities. As Adam mentioned earlier, ADMA significantly strengthened its balance sheet during the third quarter and subsequent periods. At September 30, 2021, ADMA had cash and cash equivalents of $34.4 million and accounts receivable of $20.4 million. Subsequent to the end of the third quarter, on October 25, 2021, the company closed an underwritten public offering, whereby the company received gross proceeds of $57.5 million, amounting to net proceeds after deducting underwriting discounts and expenses,…

Thank you, Brian. The totality of our 2021 accomplishments realized across business segments, positioned ADMA as a turnkey end-to-end manufacturer and marketer in the robust and expanding U.S. immune globulin market. As previously mentioned, we comprehensively reiterate all previously provided financial targets, including our expectation to meet or exceed an approximate $100 million annualized revenue run rate or more in the fourth quarter of 2021. The pathway to durable and significant cash flows is coming into focus, and we believe is, to a large extent, de-risked due to the 2021 FDA approvals received and supply chain robustness accomplishments realized during the year. In the continued face of external challenges from COVID-19 and the related effects, ADMA and its stellar team of dedicated individuals continues to achieve and deliver for the patients who rely on our products for survival and then improve quality of life. As we have stated in various public forums throughout 2021, we, as a management team and Board, are highly committed to creating and maximizing value for our stockholders. And keeping with this unwavering commitment, we have formally engaged Morgan Stanley to assist us with optimizing stockholder value. We look forward to the ongoing evaluation of alternative and strategic business opportunities with Morgan Stanley as our adviser, and we will report back appropriate information as required. Further, during the quarter, we took measures to strengthen our Board of Directors with the recent appointment of Dr. Young Kwon, who we believe will help us successfully navigate the contours of the commercial immune globulin landscape and effectively evaluate strategic and alternative business opportunities. Young brings a unique perspective and a proven track record of creating value at other public biotech companies to ADMA's Board, and we look forward to our continued operating successes with his added insights. The future has never been brighter for the company, and we believe as well for ADMA's stockholders and our courageous and dedicated staff. The intrinsic value of ADMA's asset base continues to rapidly appreciate as a result of the year-to-date milestones achieved, and we look forward to a successful conclusion to 2021. In closing, I'd like to thank you, our stockholders, for your continued support as your investment in ADMA helps to advance our mission to save lives and make high-quality, safe and efficacious products that help our friends, family and neighbors. Please donate plasma and help save lives. And with that, we'd now like to open up the call for your questions.

[Operator Instructions]. Our first question comes from the line of Kristen Kluska with Cantor Fitzgerald.

Congrats on a good revenue quarter and achieving this positive gross profit. So it looks like since last quarter, you added another plasma collection facility under your umbrella. So maybe based off of the centers you have up and running now in addition to those with FDA approval, what criteria has gone into finding and setting up the new locations for these centers to best maximize the value for you. And with the guidance of having 10 or more centers, what specifically will be the drivers in deciding specifically how many beyond that 10 goal.

Kristen, thanks so much for the question. And maybe I'll just start out by saying that we're really proud of our BioCenters team. I mean, we've expanded dramatically over the course of 2020 and 2021. We've been in the plasma collection business. Our first center was approved, Brian, correct me if I'm wrong, 2020 -- 2011, excuse me.

Correct.

So our first center was approved in 2011. So this is not something new for us. We've been doing it a long, long time, a lot longer than we've been making these products. So we certainly have a secret sauce as to how we look at positioning these centers across the country. With respect to how much plasma we need, I think that you look at the capacity of our facility. Earlier this year, we received approval for the 4,400-liter BIVIGAM plasma pool scale increase. And the total capacity of our plant is now approximately 600,000 liters of plasma annually. So typical plasma center, we've always said publicly, pre-COVID levels, somewhere between 40,000 to 50,000, maybe even 60,000 liters of plasma that you can collect. And as far as the comments that I've made and Brian made during the prepared remarks, we're seeing a dramatic improvement in donor numbers as well as yield with the implementation of the new Haemonetics' Persona technology. We're seeing increases approaching 10% or even more. Brian, I don't know if there's some stuff that you'd like to add there, but hopefully that answers most of it.

Absolutely. So we look at the landscape of some of our competitor plasma centers, and we certainly want to be a positive contribution to the local economy. This time last year, we had 2 centers that were collecting plasma. We currently have 5 centers that are collecting plasma, 9 under our corporate umbrella, which really sets the stage to have 10 FDA-approved plasma collection centers by year-end 2023. And that translates into self-sufficiency to fill our plant -- our 400,000-liter, now 600,000-liter plant with our own internal collections. So we're very pleased with the exponential growth over this year. We're expecting to have some additional filings, BLA filings towards the back half of this year and then subsequent approvals as we move into 2022.

Okay. And I wanted to ask some questions specifically related to trends observed during the pandemic. So one of your peers, for example, recently hosted an R&D Day and noted that their fiscal year had an increased sales for the IG business, despite the pandemic, although, of course, noting the expected growth would have been much higher if it wasn't for these headwinds. So how do you think about that space right now with the pandemic. And then also, what are the trends you're observing in the plasma donation centers? I understand there's still social distancing measures in place, but has this improved at all since we were kind of in the core of the pandemic?

Maybe I'll just start out by saying that we certainly are experiencing growth throughout the COVID-19 pandemic. As you see, we've been really focused very, very strongly on adding new customers. Our competitors continue to say that they're not taking on new customers, Kristen. And we have more product than ever before, if you look at the inventory number, I think we ended the quarter around $114 million of inventory. The inventory is growing. We typically have said, Brian, correct me if I'm wrong, 1/3, 1/3, 1/3. So raw material, work in process, finished goods. So we've got the material there to support this continued growth. And as our competitors' growth is slowing because they're having difficulties collecting as much plasma as they have historically. ADMA's plasma supply continues to remain intact. Grifols, as you know, is one of our main third-party suppliers. They continue to supply us every quarter as contractually agreed. So we appreciate Grifols doing that for us and keeping BIVIGAM and ASCENIV on the market and growing for our prescribers and our patients. With respect to the plasma collections, we've always said throughout the pandemic. And I know that you're joining us at this part of the story here. But we've experienced limited impact from the COVID-19 pandemic. And we have not had some of the collection downturns that some of the larger fractionators and folks with a more wider, if you will, geographic footprint have experienced. We have no border exposure. So a number of our competitors have a number of centers within 50, 70 miles or so of the U.S.-Mexico border. There's a lot of constraints going on with some changing rules and policies that are starting to be in force there. So we have no exposure there. And again, our plasma supply continues to remain constant. And we're putting plasma in the tanks as scheduled, and it's coming off the line, and we're here to be a reliable supplier and continue to grow our customer base quarter-over-quarter.

Okay. And last question for me is with the recent VanRx approval. Could you discuss the types of companies and opportunities for third-party utilization here? I guess, specifically what might you be looking at? And as we think about the long-term plan of the company, do you see any potential of adding more VanRx down the line?

Great question. Hopefully, you guys can hear me. I got a text message that I was breaking up, so hopefully, this is better. But we've got an FDA approval to fill/finish pharmaceutical-grade products, biologics, pharmaceuticals, vaccines, clinical and/or commercial stage products. So we're open for business. We've got a fully GMP-compliant facility here, and the VanRx is really working out very, very well for us. So again, it can handle small volumes to large volume batch sizes, and we can fill -- our own products, we fill in 2 ml to 50 ml vial sizes. So if you fit within that criteria, it's a lot faster process to get to clinical trials and/or commercial stage. The VanRx and the vial manufacturers make additional sizes, but we can pretty much do anything that any other aseptic fill/finish provider can do. So we're excited about the opportunity. I mean, obviously, the primary use of the VanRx is to improve our production cycle times, enhance yield and improve our ultimate gross margins. That's the primary benefit and driver of the machine and the related processes for the business. But certainly, even at our full capacity of 500,000, 600,000 liters processed annually, there would still be some downtime on the machine that would allow us the opportunity to fill for others. It's a pretty compact machine. We have some space in the plant if the need arose, Kristen, could we fit some more machines in. Sure, we certainly can, but that's something that we would look at well into the future, assuming that there is demand and potential. At the present time, most of our significant capital expenditures into the facility, they're behind us. So we're really laser-focused on building up our commercial force, penetrating with our commercial drug products, continuing to tell the story of our hyperimmunes and creating value for our stockholders. So less spending, more selling.

Our next question comes from the line of Anthony Petrone with Jefferies.

I'll have one just on the quarter and then one on the announcements, a couple of weeks ago. So in the quarter, certainly $20.7 million ahead of our model. Just trying to get a sense of the mix between BIVIGAM and ASCENIV. And then specific to BIVIGAM, just to give us a sense maybe of sort of what changed here in the third quarter. Was it share gains in new infusion centers? Or was it just excess purchasing from existing sites? And I'll have a follow-up.

Sure. Thanks, Anthony. The quarter, we saw increased utilization of our hyperimmunes. I think that, that's represented by the first time positive gross margin. And we are really excited about the conversations and the engagement that we're having around the hyperimmune products with prescribers. The CDC and some of their health advisory alerts that have come out recently for influenza, RSV in certain geographic regions are certainly allowing us to engage more with the prescriber. And I think you probably saw some recent data that we had published regarding the emergency use and compassionate use of ASCENIV with the COVID-19 hospitalized patients. So I think having this data at medical conferences and the world opening back up is certainly increasing the conversation for us with the prescribers. Historically, we've said that our revenues are typically 90-10, 80-20 BIVIGAM for the hyperimmunes, I think it's certainly closer this quarter on the 80-20 side, if you will. And we see that as we grow into the future, when we look at some of our forecasted models as we approach that $250 million, $300 million peak in 2024 that we've talked about. We think that ASCENIV really has an opportunity to grow even further. So we're really proud of the work that we're doing. ASCENIV is starting to take off. And the medical community is starting to open up, and we're really able to get our dedicated commercial team and to see the treaters. So I guess to answer the second part of your question, it's a little bit of everything. I mean, we're opening up new specialty pharmacies, new alternate site infusion centers, new physicians offices as well as some new distribution partners. So we're seeing it across the board. The demand for IG continues to remain robust and strong. The plasma collection downturn is certainly causing difficulties for some of our competitors. And I think that ADMA being commercial for the last 24 months or so, we've really demonstrated to the customers and to the patients for that matter that we're a reliable supplier and that the product is there when they need it. So we're really starting to pick up traction. I certainly don't want to say that -- it's a lot easier when the customers are calling you saying they're not getting product A or product B in the same quantities that they work, can we fill some of that gap. Certainly, makes it a lot easier for us, but I think the quality of the product speaks for itself. I think the differentiation around ASCENIV and the engagement that we have with the prescribers is really starting to pay off, and I'm very optimistic that this growth will continue into the future.

Great. And the follow-up would be just you sort of referenced it in your prepared remarks, Adam, and the filings a couple of weeks ago with the pre-announcement sort of referencing evaluating a variety of strategic alternatives and financing alternatives. Maybe just a little bit on timing, complexity of the alternatives you're looking at. And then certainly on the debt side specifically, it sounds like that could be a solution that, again, you referenced bridges the company to breakeven in 2024. So just a little bit of details on those commentary and those disclosures. Congrats on a good quarter.

Sure. Thank you so much, Anthony. And with respect to financing the company. I mean we're really looking at our budget going into next year very, very differently. We recently passed an FDA inspection this past August. It's listed on the FDA website, I don't have a copy of the final report yet, but it's listed as a VAI status. So our second compliance inspection since taking over this plant in June of 2017 in compliance. And we're really looking at the investments that we've made are well behind us. And we're looking differently about where we're going to be spending capital going forward. So we're taking a look at that budget. We're certainly tightening the belt as you can see from the quarter results and the investments that we've made are starting to pay off. So with that said, we are engaged with a number of potential debt lenders. We certainly think with the asset base on our balance sheet growing, our inventory balance is growing as well as revenue is growing. And flipping with positive gross margin certainly makes all potential lenders and investors pleased with the results. We do think that there's an opportunity to finance this company with non-dilutive means in order to maximize the equity value of the assets that we have and the underlying business opportunity. So I'm not going to comment specifically, but Morgan Stanley has been a great adviser to us over the years. And I think the engagement of them illustrates our commitment to unlocking and seeking opportunities to maximize shareholder value. This last financing, Brian and I, along with a number of our board members, we invested in the deal. We are aligned with our shareholders. And we're extremely pleased with the opportunities that we see in front of us. I can tell you that we will continue to remain compliant, both on the FDA regulatory side and the SEC side. So as developments unfold, we will keep the Street priced as required. But in the meantime, it's all business all the time, making products, selling product and driving this company to profitability.

Our last question will come from the line of Eli Wilbur with Raymond James.

Maybe just a couple from me here. First, for Brian, just with respect to outlook for gross margin trends and ability to sort of maintain positive gross margin performance going forward. Is it fair to assume, at this point, that if revenues simply grow sequentially that you'll be able to continue to generate positive gross margin? Just trying to get a sense of how important or what the impact was of the conformance batches in the quarter.

Sure. Thank you, Elliot. So with this quarter being the first time we reported gross profits, as you could imagine, we're extremely pleased. That doesn't mean we're stopping here. We have -- we believe that significant cost benefits are going to continue to be derived. And even more so, as we roll out the 4,400 batches that we are producing now, we started producing once we received FDA approval in the middle of this year. And then the approval of our fill/finish machine additional gross margin benefits will be received. So we think there'll be additional value to be unlocked. The gross margins will accelerate into the first quarter of 2022 and second quarter of '22 and beyond. So we're certainly very extremely pleased for the first quarter outlook as we move forward into 2022.

Okay. And then with respect to your commentary around safety stock levels, have your expectations changed in terms of what you're going to keep in terms of safety stock, just given some of the dynamics in the marketplace?

I think our safety stock levels are remaining to be the same. We're looking to continue to build the raw as you'll see in the 10-Q, which will be published momentarily today. Total inventories were $114 million. Raw materials increased to just about $38 million, work in process significantly increased to $57 million and finished goods remained relatively flat from the end of year 2020 to the third quarter here of 2021 at $19 million. Most importantly here, you see work in process increasing significantly. And what does that translate to? That translates into higher finished goods that are going to be available in the fourth quarter of '21 and then the second half of 2022 to really propel us into that $100 million annualized revenue run rate as we exit this year.

Okay. And then maybe just one final question or set of questions. Obviously, a lot of commentary from reporting companies regarding increased logistics costs, supply chain issues and the like. Maybe just -- I know we talked about this a little bit last quarter, but maybe just talk about some of the dynamics or challenges that you may have faced or may be facing with respect to logistics and supply chain costs. And also want to hit on the notion of increased input costs, I guess, specifically with respect to cost of collection volumes. I know Takeda recently highlighted that it's actually curtailing collections because of increased costs. Obviously, a lot of that's ZIP-code dependent, but just curious on what you're seeing in ADMA BioCenters in terms of collection costs?

Maybe I can start out. Elliot, thanks for that question. I just want to say, I think it was the second quarter call that I mentioned, getting truck drivers was becoming a problem for us. And some people said that was an interesting comment. But we're very straight, Elliot. We tell you like it is all the time. And maybe you've heard it here first, right, on the ADMA Biologics call, we predicted these supply chain headaches. But that's really all they are for us right now. There are just little inconveniences here and there. But we have a great team. We're certainly all working very hard to mitigate this. We've got large inventories of a number of our raw materials, testing reagents and single-use disposable supplies that we use everywhere from the collection centers all the way through fractionation, purification and fill/finish. So we've taken a number of steps to ensure and mitigate that. Number one, we can control costs for the foreseeable future by stocking these larger inventories. And two, we're keeping ourselves afloat and in business because we're not waiting on deliveries or things that are stuck in containers coming from overseas. So we're still experiencing truck driver delays and difficulties there. I mean, I've been known to approve a payment here and there. I think, Brian, thank you for letting us do that for a truck that may be carrying some type of liquid that we need to put into the facility. They'll come a day early and we'll pay the driver to sleep on site overnight. I mean little things here and there. We're seeing -- we saw the news this morning, just like everybody else with respect to the inflation numbers. I mean we haven't received price increase notices yet. But we're certainly working this in. And earlier this year, we took some price increases on Nabi-HB. And I think that as we continue to move down the field, we'll evaluate opportunities to potentially increase pricing for some of our other drugs that we have on the market. Brian, sure, you probably want to comment a little bit on collection costs and things of that nature.

Sure. So just before the collection costs, I think what's very encouraging is the majority of the spend at the Boca plant from the FDA remediation costs as well as our supply chain enhancements are well behind us as a result of the FDA approvals of the 4,400 liter and the fill/finish capacity expansion. So those significant costs are well behind us. I think our costs are going to be more predictive, more controlled going forward. And you are correct, Elliot. It is ZIP-code dependent, depending on where the plasma center collections, our plasma center collections are located compared to our competitors. Are there some competitive pricing with regards to higher donor fees and incentive programs? We're running those. We certainly feel very encouraged with the week-over-week and month-over-month plasma's throughput from additional donors coming through the center. So certainly, things are on the uptrend. And again, we feel very encouraged going into the fourth quarter, especially into the first half of 2022 with all these investments behind us now?

I'm sorry, if I could ask one follow-up question as well. Adam, your commentary broke up a little bit earlier in response to some of your discussion around ASCENIV and a little bit more favorable contribution in the overall revenue mix. Just wanted to get a little bit better perspective in terms of whether or not you thought that was -- is driven just by overall strong demand for IVIG therapies in general, or you think that's getting a boost more from sort of the significant spike in RSV trends that we've seen over the past couple of months.

I think it could be one or both of those things, but I really think it's also something different, Elliot. I think that the message and the novelty around the patented methods that we use to identify the plasma donors, formulate the plasma pool and standardize the unique antibody profile that the product has is really taking hold with prescribers. Not all immune-compromised patients suffer from the same underlying condition. Not all of them have the same risk factors. And I think that COVID and the severity of COVID in different age groups and different lifestyle segments, in different socioeconomic groups and just people with different medical conditions is really open the eyes of a number of treaters who do prescribe IG and may not see these super sick patients that are hospitalized at the academic institutions. So I truly feel that we've invented and we produce a drug here that is unique and novel on the market. Yes, it's an immune globulin. Yes, it has an indication for the replacement of IG in patients with primary humoral immune deficiency, but it's manufactured using a special method of collecting plasma, identifying which donors meet our criteria. And it's in our BLA. The way that we make this product, we must standardize the levels and use sufficient levels of antibodies targeted to RSV in the plasma pool. And when you read about our patents and the publications. The resulting product has statistically significant levels of antibodies to a panel of different respiratory viral pathogens. So I think the story is there. I think everything that we promised the Street since we started this company we're delivering on. And I think that the results of this quarter, we're really in the strongest position that we've ever been in. And we've got a…

Yes.

Did we lose Elliot?

Elliot?

Maybe we lost Elliot. Operator, are there questions in the queue?

There are no further questions. Ladies and gentlemen, this will conclude our question-and-answer portion of the call. I'd like to turn the call back over to Adam now for additional closing remarks.

Thank you, everybody. Sorry for some of the technical glitches during this call. But certainly, we're on the up and up. Again, great quarter to the ADMA team who is listening today. We couldn't perform at this level without your dedication and support. So commend you for it. To our stockholders, we truly appreciate you and your investment into the company, you're allowing us to do some great work, save a lot of lives. Thank you very much, everyone. We're going to continue to deliver for you. And on behalf of our Board of Directors, Brian and I, were going to work to maximize value for our shareholders. Thanks very much. Donate some plasma if you're out and about, you're going to help save lives and have a great evening. Thanks for your time.

Ladies and gentlemen, this does conclude today's conference call. We appreciate your participation. You may now disconnect.