Good afternoon, and welcome to the ADMA Biologics Second Quarter 2022 Financial Results and Corporate Update Conference Call on Wednesday, August 10, 2022. At this time, all participants are in a listen-only mode. [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'd like to introduce Skyler Bloom, Senior Director of Business Development 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 second quarter 2022 and recent corporate updates. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Lenz, Executive Vice President, Chief Financial Officer and General Manager, ADMA BioCenters. 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 second quarter 2022 financial results. Finally, Adam will then provide some brief summary remarks before opening up the call for questions. Earlier today, we issued a press release detailing the second quarter 2022 financial results and summarized certain achievements and 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 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 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 2021 annual report on Form 10-K for the year ended December 31, 2021 as well as the risk factors section of our quarterly report on Form 10-Q for the quarter ended June 30, 2022 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?

Thank you, Skyler. Good afternoon, everyone, and thank you for joining us on today's call. We hope you all remain healthy and safe. The second quarter of 2022 was another banner period of execution for our company. During the quarter, we grew total revenues by 90% year-over-year, generated significant improvement of gross margin and meaningfully narrowed net losses from prior periods. The significant revenue growth, coupled with our disciplined expense management, establish a strong foundation for the company to accelerate towards profitability. Consistent with the robust year-to-date trends previously highlighted, we are particularly pleased with the continued growth for our higher-margin IG product, ASCENIV. Drawing from the strong underlying product demand trends, we are confident the product and margin mix will continue to favorably evolve over the coming period. In this context, we anticipate the company's pathway to profitability will become increasingly visible as the year progresses and our anticipated margin expansion unfolds. Enabled by the company's strong execution during the first half of the year, we are well-positioned to generate full year 2022 revenues exceeding $130 million. The revenue increases will be driven by both IVIG and market growth as well as anticipated share gains for our product portfolio. ASCENIV adoption continues to accelerate, and we are confident the product upside will sustain over the near and longer term periods. Our commercial organization has successfully positioned the product, constructed and conveyed appropriate commercial messaging and mobilized targeted medical education campaigns, which are focused on expanding the brand's awareness and products utility. Our team has identified yet to be realized growth opportunities among both new providers as well as headroom for increased penetration within existing institutions. Importantly, the problematic and at-risk primary immunodeficient patients being treated with ASCENIV are demonstrating real world benefits and quality of life improvements. Anecdotal market…

Thank you, Adam. We issued a press release earlier today, outlining our second quarter 2022 financial results. And I'll now discuss some of the key highlights. As Adam mentioned earlier, total revenues for the second quarter ended June 30, 2022 were $33.9 million as compared to $17.8 million during the second quarter of 2021. And this represents an increase of $16.1 million, or approximately 90%. The revenue growth for the second quarter of 2022 compared to the second quarter of 2021 was favorably impacted by the continued commercial ramp up of our IVIG product portfolio and expansion of our customer base for BIVIGAM and ASCENIV. As a result of the encouraging first half of 2022, we are well-positioned to generate full year 2022 revenues in excess of $130 million. During the second quarter of 2022, ADMA realized a gross profit of $7.8 million compared to a gross loss of $1 million for the second quarter of 2021. Gross profit during the second quarter was driven by a favorable contribution from our higher-margin product, ASCENIV. Our consolidated net loss for the quarter ended June 30, 2022 was $13.8 million, or a net loss of $0.07 per basic and diluted share, compared to a consolidated net loss of $18.9 million, or net loss of $0.15 per basic and diluted share for the quarter ended June 30. 2021. Net loss decreased by approximately $5.1 million. This is primarily attributed to higher gross margins of $8.8 million, offset by $1.3 million increase in interest expense as a result of additional debt, as well as rising interest rates, along with increased plasma center operating expenses of $1.1 million attributed to having eight plasma centers in operation compared to four centers this time last year, as well as increased general administrative expenses of $1.5 million, resulting…

Thank you, Brian. In summary, we have successfully implemented all requisite measures to enable our company's collected advancement toward profitability. We comprehensively reiterate all previously provided longer term financial guidance. We believe that ADMA is on track to generate $250 million or more in top line revenue in 2024 and $300 million or more annually thereafter. At this level, we continue to anticipate generating potential annual gross profit and net income of $100 million to $150 million and $50 million to $90 million, respectively, during the 2024, 2025 time period and beyond. While guided profitability is reiterated for no later than the first quarter of 2024, accelerated profitability timelines are possible should the demand trends for IG portfolio previously characterized and current market dynamics sustained. At the timing of profitability becomes clear, we will formally revisit this guidance. In closing, I'd like to thank your 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 to help our friends, family and neighbors. Please donate plasma and help save lives. And with that, we will now open up the call for your questions. Operator? Hello? Operator? Wanda, Jason. The operators seems to have disconnected. Working on getting a new one. Sorry for the technical difficulties everyone. Please stand by. Michelle?

Our first question comes from Elliot Wilbur with Raymond James. Your line is open.

Thanks. The operator has probably misplaced her personal PIN code as well.

How are you doing, Elliot?

Good. Thank you. Thank you. Good to hear your voice again. Congrats on the strong quarter. Just wanted to ask a couple of questions. Maybe first, actually, for Brian. And just thinking about given expectations for sequential top line increase over the balance of the year, how should we be thinking about gross margin both in dollar terms and percentages progressing as well given that I think last quarter, you sort of called out a couple of moving parts or one-time items that could impact 2Q margins, specifically the effects of the shutdown. And then I think some of the longer dated inventory was expected to have a favorable impact. So just trying to get a sense of how this -- representative of this quarter may be in terms of margin levels over the balance of the year.

Sure. Thank you for the compliments and thank you for the questions, Elliot. The way we're looking at the remaining balance of the year is continued gross profit expansion as well as narrowing that losses and continued revenue growth. Thinking about the impact of the recognition of the longer dated inventory, this was incremental in nature. What we've mentioned on previous calls, we continue to see our revenues being generated from our higher-margin products, ASCENIV and Nabi, where historically we were looking at our forecast and thinking about BIVIGAM standard IVIG mix compared to our higher-margin mix of a 90%. 10%, maybe 80%, 20%, we're seeing a 70%, 30% higher-margin mix BIVIGAM and ASCENIV. So with four consecutive quarters of positive gross margin, plus this current quarter being at 23%, we do -- we're hopeful that we're going to continue to see positive gross margins trend in that direction, and then eight consecutive quarters of top line revenue growth. And recently, certainly, narrowing net losses, we feel that this was a very, very clean quarter. And we look forward to continuing to produce increased revenues and improved gross margins and narrowing net losses as the quarters progress. I think the last couple of quarters were in that 10% to 13%, 15% range. This quarter, we did 23%. From a quantifiable standpoint, I would say somewhere continuing to rise modestly as we progress through the rest of the year, BIVIGAM peak gross margins, we think are going to be in that 25% to 35% range. And then ASCENIV will be in that 80% to 85% range; Nabi is in the 70% to 75% range on a blended basis, as we look to exit 2022 going into 2023 and certainly by peak we will have a blended 50% gross margin towards the end of 2023 and then going into 2024. So there'll be a modest continued increase in gross margins is how we're forecasting our continued success out of the remaining balance of the -- rest of this year.

And if I can, maybe I'll just add, Elliott, that we're really pleased with the 90% year-over-year growth. The business is firing on all cylinders. We've been producing a lot of drug and it's coming off the line. Inventory turns are happening a little bit faster. Things are really falling into favor these days. And I think it's important for me to just point out we've always been conservative in our estimates. We've always been -- I like to say we're a management team that sets achievable expectations, and we certainly love meeting them. So we're looking at this. We've, I guess reiterated our guidance. We've enhanced it to the point where we're saying, we expect to exceed $130 million. But we want to be cautious that with the macroeconomic uncertainties that are plaguing pharmaceutical manufacturers, with the supply chain, inflationary pressures, we just want to be conservative here. But we're very pleased with the execution, very pleased with the execution during the quarter, we've been able to really manage expenses well, and certainly the demand for our product continues to grow. And we expect to see continued quarter-over-quarter growth, all the way through profitability.

Thanks. And just following up on some of your comments there. Could you just talk about the current macro environment on the collection side. What you're seeing in terms of foot traffic, collection volumes? You mentioned remuneration, and you've prepared commentary, but what you're seeing in terms of overall inflationary pressures there in terms of being able to get donors into centers, but maybe just kind of high level commentary on the collection side?

Sure, absolutely. I think that I'm one of the last people to say this publicly, but some of the other Plasma companies have stated that collection volumes are increasing, centers are operating very well. It's the same for ADMA. I can let Brian speak to the actual numbers here. But foot traffic is up. I'll just say, for those who've been following the company for a while, I mean, we've been public since 2013. Those can recall some of the headlines from the 2008 to 2012 timeline. Inflation rates and pressures to the general population certainly are positives for plasma donation. It's a way for folks to sort of offset some of these increasing costs that they're experiencing at the grocery store and at the pump and in their regular daily lives. So, government programs are sun-setting. Inflation is at extremely high level. We think that donor foot traffic should continue to accelerate. We work very closely, and we're really a big part of the communities where our centers are located. As we said, during the prepared remarks, we've got 10 centers under our corporate umbrella. We've got eight centers that are currently operating and collecting plasma. And we're ramping up, we are staffing, and we're seeing collection volumes month-over-month that are improving across the board in all of our geographies. So we feel very confident that we're going to be able to get to self sufficiency sometime next year. And we're really pleased with the opportunities ahead of us from a collection standpoint.

So just to elaborate a little bit more on that. Our donor foot traffic and collections are certainly much higher today than they were pre-pandemic as a result of opening up more centers, running special donor programs. But I think having the centers remain open throughout the pandemic, that's one of the things that ADMA was able to do. We didn't shut down our center. So we were able to roll out programs, we are able to keep the donors still coming in, even with some social distancing that was previously inactive. Obviously, now that's gone away. We're extremely excited geographically where we're located as well. So we think that even though inflation is increasing, we think that there's an opportunity for donors to earn additional income to augment their income based on rising prices, gas and groceries. So we're certainly happy to add to the local economies in the 10 centers that we've located throughout the United States.

Okay, thanks. Maybe just one final question for me, and I will get back in the queue here. But another more of a macro subject and wondering if we have any visibility into the legislation coming out of Washington with respect to good price. Negotiation. I know, the original legislation had a carve out for Plasma therapies such that they would not be subject to the provisions of that legislation, but a lot of kind of last moving, or fast moving changes and additions and deletions to legislation as it's come through both chambers here. I'm just wondering if you have any perspective in terms of whether or not that exemption still exists in the latest iteration of that bill.

Sure, Elliot. We -- I think the short answer to your question is yes, the exemption exists in the latest draft of the bill. I have to comment, ADMA's policy team, as well as the work that we do with the Plasma Protein Therapeutics Association, and our brethren companies in the plasma derived product space. Historically under Obama Care, plasma products were excluded. We felt confident that plasma products would continue to be excluded. They're -- we, I believe that there's a plasma caucus that has been formed now on Capitol Hill. That's due to the combined efforts, I think, of the industry. And I think that the folks that are really trying to get their arms around drug pricing reform. Understand that the world that we play in the arena that we're in is different than that of the small molecules and some of the other generic products that are out there. You cannot grow with the make in laboratories, we need human beings to be altruistic and come in and donate plasma. And the costs continue to rise. And I think things like dealing with global pandemics and infectious diseases and all of the additional testing and good manufacturing, good laboratory practices that we have to implement. I think that some of the regulators understand that there are additional costs and that there are additional pressures. And quite frankly, when you look at the margin profile of plasma companies, it's different than that of pharma. So we're very, very pleased. Every once in a while our government does some good stuff and we think excluding plasma from the Medicare Medicaid price negotiations is the right thing to do and it's going to help keep product into the veins of patients where it's most needed.

Thanks for the questions, Elliot. Our next question comes from Kristen Kluska with Cantor. Your line is open.

Hi, good afternoon, everyone. Thanks for taking my questions and congrats on another strong quarter. So I appreciate your conservative approach that you give as it relates to your forecasting. But could you talk about what you would need to see in these next few months or quarters to adjust some of your profitability guidance? And, for example, does your current internal forecasts assume the lower end of this revenue guidance that you've provided and similar growth trends on these individual product bases?

Sure, maybe I'll start off and as we said, [indiscernible] what does it take me to adjust profitability guidance? We alluded to it, Kristen, and thanks again, for the great question. We alluded to it. We're performing very well. We're unlocking -- even when we're faced with some of the supply chain, and after economic challenges. If we continue to see the growth in BIVIGAM utilization, the growth and utilization of ASCENIV continues to accelerate the way that we've seen. Are we surprised by our results? No, we're not surprised. Are we pleased? We're certainly very, very pleased. But I think that our commercial team is well oiled at this point, the medical messaging and the medical education campaigns are really doing their job. And I think word of mouth in our grassroots approach to sales and market penetration is proving to be successful. So I think we could see another, I've got a glimpse into the third quarter. We continue to see strong demand trends into the third quarter. I think as this continues, as we get close to the end of the year, we certainly believe that there is a potential to accelerate profitability timeline, and we will formally revisit that guidance in due course, as the year unfolds. One of the things, I said in the prepared statement is that the more we operate, the more visible profitability is becoming. And we really, we don't want to set expectations and then have something fall from the sky custom macroeconomic pressures that we really just don't see where we're trying our best to see around corners, we feel very confident that we're certainly on track for profitability, on or before the end of Q1' 24. And I think if we continue to do our jobs well, we certainly…

And I think just a couple of things to add to that as we continue to ramp up production at the plant. Presently, we're about 50%, 60% production that we've said historically we have a 600,000 liter plant to produce close to 2 milligrams and that will be in that 2024, 2025 timeframe. So as we continue to realize efficiencies at the plant, improved inventory turns, perhaps increasing expediting testing results, all that will lead to improved working capital, and improved gross margin. So we're going to continue to obviously, monitor these things very closely improved inventory turns and other things, efficiencies in the business to continue to improve margins and narrow net losses.

Thank you. Appreciate that. So now that you've had a couple of successful quarters with ASCENIV and you've highlighted the momentum is ongoing. Are you seeing that the average number of doses per year has increased? Or is a lot of the growth also just attributed to new patients starts? Or is it really just a combination of these two factors?

The answer is yes. We are seeing patients. Most patients are going on a set of therapy, Kristen, because they've had complications and they have other comorbidities. And their success on standard IG is less than optimized. So clinicians are switching these primary immune deficient patients, secondary immune deficient patients off of their standard IG on to a set of therapy, which is labeled indicated use. And we're seeing patients remaining on therapy for a long period of time. A couple of patients that we have on therapy are in their second year. Typically, in this patient population, if you do well on a drug, you tend to stay on that drug. And we're starting to see that and we believe that the business that we're building is certainly sticky. We're seeing very, very consistent utilization amongst existing prescribers and existing patients. And we are seeing growth again at the same institutions and we're adding new institutions all the time. We feel very, very proud of what we're doing here. And I was just travelling around a little bit now that the world is opening up a couple of regional medical meetings and meeting with some of our KOL. And I can tell you that the message out there is one of that we're making a product that's truly, truly differentiated in the eyes of a number of prescribers, and that it's making a difference in the quality of life and outcomes for patients. So while I can't quantify that, specifically, today, I can tell you that [indiscernible] have a problem with their PI patient on another IVIG. We now have something where they can try and that's not just increasing the amount of IG or increasing the frequency. They now have a product that's manufactured with a plasma pool that's derived from donors that are tested to have sufficient levels of RSV antibodies. And we've shown in the public domain, in our papers and in our patents that these donors have high titers to a panel of other respiratory viral pathogens. And we feel that we're offering a differentiated opportunity to the doctors to provide for their patients. And we feel very, very good that the demand trends are going to continue to hold and that we're going to see accelerated pull-through as the battery of publications on patient outcomes continued to enter into the scientific domain.

Okay. And do you have a general sense of ballpark what percent of the IVIG market kind of fits into this bucket of either having complications with IG or they have these other comorbidities or they simply just don't respond well?

Yes, so in the primary immune deficient -- immunodeficient population, we figure about 30% of the market for immunoglobulin is in that market. So call it 100 million grams were typically used annually, so say 30 million grams of product are using the primary and secondary immune deficient patient population. Based on our internal models, there are probably about 150,000 primary immune deficiency patients. We say roughly 10% to 20% of these patients are higher risk. So they have comorbidities, they have underlying chronic lung conditions. They have chronic persistent infections, they're on antibiotics for long periods of time. So when we really look at that subset, and if you look at the asceniv.com website, we try to call out the types of risk factors that this patient population would be subjected to and some of the comorbidities

It's -- call it, it's in that 15,000 to 30,000 patients are really our target market. And when you look at the dosing of IG and you look at the utilization of incentive and you see this, a modest penetration into this marketplace will deliver substantial top line revenue to the company, helping to drive profitability.

Great. Thank you.

There are no further questions. I'd like to turn the call back over to Adam Grossman for any closing remarks.

Sure. Thank you everybody for your attention and time. Sorry for the technical difficulties and we appreciate your continued support in allowing us to make good products to help these immune compromised patients. Have a great afternoon.

This concludes the program. Have a great day.