Good afternoon, and welcome to the ADMA Biologics Second Quarter 2020 Financial Results Conference Call on Wednesday, August 5, 2020. At this time, all participants are in a listen only mode. There will be a question and answer session to follow. Please be advised that this call Michelle Papinostos, Managing Director of Argo Partners, ADMO's Investor Relations firm. Please go ahead.
Welcome everyone and thank you for joining us this afternoon to discuss Atmos Biologics' financial results for the Q2 2020. I am joined today by Adam Grossman, President and Chief Executive Officer and Brian Lens, Executive Vice President and Chief Financial Officer. During 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 Q2 6 months ended June 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 Q2 2020 financial results.
The release is available on our website at www.admobiologics.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 recording it 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 and the risk factors section of our 2019 annual report on Form 10 ks and our Q2 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 those forward looking statements. With that, I would now like to turn the call over to Adam Grossman. Adam?
Thank you, Michelle. Good afternoon, everyone, and thank you for joining us on this afternoon's call. We hope you and your families remain healthy and safe as we all continue to navigate this new world of living with COVID-nineteen. At ADMA, the first half of twenty twenty was marked by several key achievements and milestones, solidifying Atmos forward looking growth strategy. Like others, we faced some challenges associated with COVID-nineteen and its impacts as we continue to navigate through these unprecedented times.
Despite these challenges and are instituting an ongoing remote work from home and no travel policies, the company and staff continue to forge ahead and chip away at achieving our stated goals and objectives. Aetna continues to make progress with its manufacturing, supply chain and commercial objectives. We are proud to be a growing company in the plasma products industry. We are proud to be a company that's on the front lines interacting with convalescent COVID-nineteen plasma donors and having a voice to effect change as a member of the COVID-nineteen global plasma alliance. We are working on a number of early stage development activities at the present time targeting COVID-nineteen, including testing assays as well as potential treatments with differentiated plasma derived therapies.
As we progress with these R and D activities, we will be sure to inform our stakeholders. We thank you, our shareholders, for your continued support and commitment as an important part of the AgNO Biologics team, assisting us to pursue forward thinking research and development activities with the promise and power of plasma derived antibody products. Thank you. Now I would like to review progress in the Q2 and some of our recent milestones and achievements. At the end of June, we announced the opening and first collections at a new plasma collection center.
We have successfully submitted the accompanying Biologics license application to receive U. S. FDA approval for the center, which is anticipated for mid-twenty 21. We expect to open a 3rd U. S.
Plasma collection center and commence construction on a 4th center by the end of this year as well. We have several new plasma collection centers identified that are in various stages of development to meet our stated objective of having 5 to 10 built 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 ADMA Biocenter's business unit are anticipated to support ongoing production and growth into the future. As many of you are aware, during the Q2, ADMA joined the COVID-nineteen Global Plasma Alliance, a plasma industry collaboration led by CSL and Takeda that was established to accelerate the development of a plasma derived hyperimmune globulin therapy for COVID-nineteen. As an alliance member company, Atmos' whole non subsidiary, Atmos BioCenters, has been collecting and providing COVID-nineteen high titer plasma to the alliance from individuals who have recovered from COVID-nineteen infection. We are truly grateful for all of the donors who continue to do good for others and donate their plasma. We need many more donations as an industry, and we encourage all U.
S. Citizens to make a difference and donate your plasma. We are proud to be working together with these great companies to fight COVID-nineteen and provide a potential treatment for this highly infectious disease. The success of this alliance relies on the support of people across the globe to donate plasma. Even if you have not had COVID-nineteen, your plasma is useful and needed by many patients.
We encourage you to find a plasma center near you by visiting www.donatingplasma.org and donate your plasma today. Every donation makes a difference and patients are counting on all of us. Moving on now to revenue. Importantly, during the quarter, we continued to add new customers and prescribers for BIVVIGAM and Eseniv. ADEMIS commercial team has continued to push ahead and understands that many of the patients who are prescribed BIVIGAM and Esenif will require the therapies potentially year round.
Thus, managing the finished goods supply chain is a top priority for us as a company. We are working hard to ensure that any patient who is prescribed Vivigamericinib has continued doses available to them. In a historically tight IG supply environment, which is anticipated to have additional forward looking tightness in product market availability, ADMA must not lose sight of the fact that building brand loyalty and ensuring that our patients need not worry if they will have their IG supply next month or the months thereafter is of paramount importance for the long term success of our business. We are a company committed to responsible inventory management and treat our prescribers, patients and distribution partners' needs as a top priority. As we continue the commercial rollouts of BIVVIGAN and Incentive as well as continue to promote the use of Mond BHP in the face of the logistic and engagement challenges due to COVID-nineteen, our company's grassroots promotional efforts are starting to pay off.
We've been setting the stage for building long term brand loyalty and company awareness in a market that has been dominated by large players for decades. We are building a business one patient at a time. And for our shareholders who have watched companies like the Fulmerzbach Salter, CSL and Grifols grow over the past 5, 10, 20 years, understand the growth and success that is afforded to companies that operate in compliance and place the care of their patients and staff as high priorities. We have set the stage with our production over the previous 12 months to be in a position to now supply the U. S.
Market with what we believe to be a reliable and continuous supply of Bivigene, Ascentiv and non BHB, and we look forward to achieving significant growth over the next 3 to 5 years, where we believe we can grow our business to $250,000,000 or more in top line annual revenue. For the first half of twenty twenty, we generated total revenues of $18,000,000 reflecting a nearly 80% increase over the first half of twenty nineteen. This includes $7,800,000 in total revenue for the Q2 of 2020. While the 2nd quarter revenues were greater than the same prior year period by approximately 19%, they were lower compared to the Q1 of 2020 due to certain temporary unforeseen delays related to COVID-nineteen, which we experienced in June with our final GMP product release testing performed by certain third party vendors. This means that while a few of our production batches were finished on schedule, we were unable to submit to the U.
S. Food and Drug Administration for lot release authorization because of certain specific delayed lab test results. These testing delays prevented Aetna from receiving FDA authorization to sell additional completed production batches during the Q2. These delays were experienced during the latter part of the second quarter, which have been resolved during July. In response to these delays and in partnership with the FDA, we rapidly identified and added additional release testing laboratories to our approved consortium listed in our drug approval documents.
We believe that we completely resolved this issue, and we do not anticipate any additional testing or batch release delays going forward. As of mid July, we began receiving FDA releases for several completed product badges with our new testing laboratories data. As we'll be seeing in our Q2 2020 10 Q, our finished goods inventory has increased 75 percent to $9,100,000 since year end December 31, 2019. This translates into having more product batches ready for commercial sale as soon as the testing results are received. These batches of our commercial product are anticipated to be sold during the second half of twenty twenty and forward, with attention being paid to managed supply to ensure the continuity of patient care and taking into consideration uncertainties due to the backdrop of COVID-nineteen.
Now I want to highlight here that there has been no adverse impact on market demand for any of our products. Market demand for all of our plasma products remains strong in the market, and we expect considerable revenue growth for the forward looking 3 to 5 year period. It's important to keep in mind that this is our 3rd full quarter of revenues for BIVVIGAM and Eseniv. And given the 7 to 12 month production time line, we are just now beginning to tap into the IG product that was manufactured in the second half of twenty nineteen post FDA approval about 1 year ago. This is why we are confident that the second half of twenty twenty can be considerably stronger than the first half, and we remain on track to achieve our stated goal of generating in excess of $250,000,000 in annual revenues within the next 3 to 5 years.
During the quarter, we continued to make great strides implementing our multifaceted supply chain robustness strategy, designed to enhance visibility and manufacturing throughput as we continue the commercial rollout of BIVVIGAN and Esenif. We also purchased and installed a new aseptic filling machine of the NRX SA25 work cell and manufactured 4 conformance batches of BIVVIGAN at an increased scale that will allow us to openly manufacture at twice the volume compared to the scale that is FDA approved and in place today. These important initiatives are designed to reduce operating costs, improve our overall margins and provide for faster production cycle turnaround time, providing the company with increased control and independence from third party vendors and contractors. We remain on track to submit the appropriate applications to the FDA during the second half of twenty twenty and into 2021 and expect to begin benefiting from our supply chain investments as early as mid-twenty 21. As we progress and make these regulatory filings, we will report any material news as it develops to our shareholders.
Like many other companies in the life science sector, we experienced our share of COVID-nineteen challenges during the Q2. In addition to the delay in expedient resolution of the final GMP product release testing that I mentioned earlier, We also experienced certain COVID-nineteen related impacts to other areas of our supply chain as well as our commercial engagement efforts. As a result of past state and local shelter in place orders, we experienced lower than normal donor collections at our FDA approved platinum center during the 2nd quarter. During this early part of Q3, we have already observed an increase in plasma collections compared to the Q2 in 2020. We also experienced delayed shipments of non plasma raw materials, sourced plasma from our contracted third party suppliers as well as delays in deliveries of personal protective equipment, reagents and supplies used in the manufacture of our products.
During the quarter, we observed certain impacts to our customer engagement initiatives, including our sales and medical affairs field forces experiencing difficulties communicating directly with physicians and other health care professionals and the cancellation or postponement of a number of key scientific and medical meetings, which further limited our ability to communicate with potential customers. We have implemented a comprehensive suite of virtual engagement initiatives. However, clinician engagement has been reduced due to the rapidly evolving COVID-nineteen priorities at many U. S. Medical centers.
Lastly, we achieved an important milestone this quarter regarding the reimbursement ADMA's novel polyclonal IVIG product, Aseniv. During the Q2, thanks to the dedicated efforts of our market access and commercial team, We secured reimbursement for ASCENDIV under the temporary J code and have established an average selling price or ASP for the therapy. This published payment limit by CMS of $963.54 per gram for incentive is the first step for a new IVIG product to receive coverage by Medicare as well as supports reimbursement efforts for outpatient use by 3rd party payers. We are very pleased with how rapidly our ASP for Ascentive has been established and reimbursement through Medicare was achieved. We are currently able to provide our 3 FDA approved immunoglobulins to patients across the country in the inpatient and outpatient settings.
Congrats to the team if you're listening for achieving this great milestone. And with that, I'll turn the call now over to Brian Lanes, our CFO, to review the financials. Brian?
Thank you, Adam. Since we issued a press release earlier today outlining our Q2 2020 financial results, I'll review some of the highlights. For the 3 months ended June 30, 2020, total revenues were $7,800,000 compared to $6,600,000 for the Q2 of 2019. This represents an increase of approximately $1,200,000 or 19%. The favorable revenue realized during the Q2 of 2020 was primarily due to sales of BIVVIGAM, Eseniv and plasma derived intermediate fractions compared to no sales from these products during the same prior year period.
Recall both Eseniv and BIVVIGAM were approved by the FDA in April May of 2019, respectively, and the contract for certain plasma derived intermediate fractions was executed in early 2020. Subsequent to these FDA approvals of Ascentiv and BIVV again, our Boca facility began the commercial production ramp up during the second half of twenty nineteen. As Adam mentioned earlier, our finished goods commercial inventory has increased by 70% 75% from $5,200,000 as of December 31, 2019 to $9,100,000 as of June 30, 2020. Please keep in mind, in accordance with generally accepted accounting principles, the value of our inventory is stated at our cost. This increase reflects our stated manufacturing cycle time from the second half of twenty nineteen's commercial production ramp up and we look forward to now being in a good position with solid inventories to continue adding customers, distribution partners and prescribers over the coming quarters and potentially generating considerable increased revenue during the second half of twenty twenty compared to the first half of this year.
Consolidated net loss for the 3 months ended June 30, 2020 was $20,200,000 or a $0.23 loss per basic and diluted share, compared to a consolidated net loss of $13,200,000 or a $0.25 loss per basic and diluted share for the Q2 of 20 19. For the 6 months ended June 30, 2020, total revenues were $18,000,000 compared to $10,100,000 for the 6 months ended June 30, 2019, and this represents an increase of $7,900,000 or nearly 80%. The increase in revenues was primarily attributable to sales of BIVVIGAM, Ascentiv and plasma derived intermediate fractions, none of which again were available for commercial sale during the same prior year period. Consolidated net loss for the 6 months ended June 30, 2020 was $39,400,000 or a $0.29 loss per basic and diluted share compared to consolidated net loss of $26,300,000 or a $0.53 loss per basic and diluted share for the 6 months ended June 30, 2019. At June 30, 2020, ADMA had cash and cash equivalents of $75,800,000 and accounts receivable of $6,500,000 and this is compared to cash and cash equivalents of $26,800,000 and accounts receivable of $3,500,000 at December 31, 2019.
ADMA's net working capital as of June 30, 2020 was $130,100,000 compared to $71,800,000 as of December 31, 2019. With that, I will now turn the call back over to Adam for closing remarks.
Thank you, Brian. ADMA has made excellent progress during 2020 thus far on its key corporate priorities, including initiatives to strengthen our supply chain, which will greatly benefit the company over the long term by reducing operating costs, improving margins and shortening production cycle timelines. Given the unprecedented macro market conditions in the U. S. And the COVID-nineteen effects being experienced by us and our third party vendors and suppliers, We believe these effects are temporary and that our future is bright and ripe for growth.
While we have experienced some variability during our 1st year of sales, especially since we are commercializing our products on the backdrop of the COVID-nineteen pandemic, We are highly confident that revenues for the second half of twenty twenty will be considerably higher than that of the first half. And most importantly for our shareholders, we remain on track to achieve our stated goal of generating in excess of $250,000,000 in annual revenues over the next 3 to 5 years. I want to assure all of our stakeholders that our fundamentals remain strong and that the demand for our immunoglobulin products remains robust. We remain deeply committed to successfully navigating the ongoing commercial rollouts for bivigam and incentive and bringing each product to patients with life threatening immune deficiencies. To the patients receiving our products, you have my and my team's entire commitment to work relentlessly to ensure you have your immune globulin available when you need it.
You can count on ADMA Biologics as a reliable and committed provider of immunoglobulins. We extend our sincerest gratitude and commend the efforts of our the entire ADMA Biologics team that continues to rise to the challenge of navigating the company through this burdensome period in order to ensure that the critical plasma derived antibody rich products we produce are available over the long term and continuously for our patients and customers. I truly thank all of you. With that, we will now open up the call for your questions.
Thank you. Operator? You. Our first question comes from the line of Anthony Petrone with Jefferies. Your line is open.
Please go ahead.
Hey, this is Zach on for Anthony. Can you just talk about how many batches were locked up and delayed due to FDA testing?
Sure. It was a handful. We're not really prepared to give specific Zacks, but it was a few batches, not very many. But what we can tell you is that if you think about the way we produce our product, this is drug that we had produced 7 to 12 months earlier. They were all ready to go.
And unfortunately, due to COVID, we had a lab that's based overseas in the United Kingdom. And unfortunately, they were just unable to get test results to us. And we work very, very rapidly with FDA, and we're really pleased that the issue is totally resolved now. And we are we've resumed lot releases, and we are back in regular lot release land, if that works. But everything has been resolved completely.
Okay. That's helpful. And then looking at the second half, how should we look at expenses
going forward? Brian?
Sure. So as we previously mentioned, we manufactured 4 conformance lots and we disclosed, so it's about a little over $6,000,000 for those batches. I would say that that's there are some extraordinary items in the cost of sales. But as we continue to grow the organization, grow the plasma operating centers, you would look at it pretty comparable to where we had the 1st 6 months of this year, excluding the conformance batches.
Okay. And then batch testing on BIVIGAN, can you just give us an update on that?
Batch testing on BIVVIGAN for releases? Or are you talking about the capacity expansion project?
The capacity expansion.
Sure. So I think during the quarter, we produced some additional conformance batches, and we are on schedule. As I said in my prepared remarks, we do have plans to submit the applications for a number of our ongoing supply chain robustness activities, including the fill finish machine for all three of our products as well as the capacity expansion for BIVVIGAN, taking it from the already FDA approved scale of 2,200 liters per plasma pool, scaling that up to 4,400 liters. So we're on track with the timing, and we will keep the shareholders and our analysts informed. But we're hopeful that we can have this on file with the agency before the end of this year and some of the applications into the 1st part of 2021.
Okay. That's all for us. We'll hop back in the queue. Thanks.
Thanks, Zach.
Thank you. And our next question comes from the line of Elliot Wilbur with Raymond James.
I have trouble with that name myself. Just specifically following up on the actual filing process for the scale up, Adam, I presume that, that would qualify as a prior approval supplement and somewhere in the range of 4 to 6 months for final FDA approval. Is that correct?
That's correct, Elliot. I think the way to answer that question, as we should be looking at this as it's a standard prior approval supplement. So we will put that on file and then the FDA would have 4 to 6 months. But I'm optimistic that there are ways to expedite certain reviews with FDA during this period. I think should COVID-nineteen persist, maybe there are ways that we can work with the agency.
They have been very collaborative with us, as noted by resolving some of our other problems. But I think looking at some of the nearest term potential tightness in IG supply, I think that there are mechanisms and maybe some levers we can pull to potentially expedite that. But for budgeting, forecast and planning purposes, we are looking this as that's correct. It is a standard PAS prior approval supplement to amend our existing FDA approved BLA to allow us to manufacture at that scale.
Okay. And then with respect to Acinet, obviously, this is a very detailed sale. And to some extent that's kind of been hindered in the current environment. But just any anecdotes that you could offer in terms of a direct physician interaction detailing the product, discussions with P and T Committees, just trying to get a sense of sort of where you are kind of here in the early stages of that commercial launch?
Sure. I'll just come straight out and say P and T committees getting everybody that you need is definitely hard. With that being said, there are we've had a number of customer engagement meetings 1 on 1 at academic centers, at regional medical centers as well as in the outpatient setting for Atseniv. And I think that in light of the current environment and the current situation with the backdrop of COVID-nineteen and the increased awareness, if you will, and understanding that antibodies that are in immunoglobulin and that are naturally occurring antibodies are helpful when trying to manage, prevent and or treat different types of infectious diseases. So we certainly have had a number of inbounds requesting information in through our medical affairs department.
We got a full library of information that we can share depending upon the patient populations. As well as in an outpatient setting, we're seeing that there are certain clinicians out there who are looking at different risk factors that their patients have, looking at environmental risk factors. And if you've seen Elliot's theassentive.com website has been up for a number of months now. And I think if you go through the ascenitive.com website, there are certain areas of information there that talk about the types of patients that may be at a higher risk or increased risk for having problems due to respiratory infections. And that roughly 90% of patients who are on IVIg still have problems with certain chronic persistent recurring infections.
So we're seeing some patients receiving authorization and third party payer approval to switch from standard IG on to Ascentive. And we're very hopeful that with this recent announcement that we've received a reimbursement price, if you will, of our ASP plus 6% from Medicare that this should continue. So our sales force is busy. I can't tell you that they're flying around the country going to all the fancy medical meetings. I can't tell you that all of the wonderful symposia and trade show booths that we had designed and paid for and planned are being used, but we're keeping it all ready because we think we're going to come through this and be stronger as a country and as a global society, and we'll get the message out there.
But we're doing it grassroots, Elliot. We're able to engage 1 doc at a time, one treatment center at a time, and we feel that we are making progress.
Thanks. Just want to ask you a follow-up question to one of your last points there with respect to the recent J code issuance. Ultimately, how important do you expect Medicare to be in terms of the incentive book of business? And then with the issuance of that code and correct me if I'm wrong, I mean that basically allows clinicians to essentially use the product without any sort of prior authorization in the Medicare setting. Is that correct?
So I think and so I guess your first part of the question, there are a number of patients that receive IVIg who are on Medicare. What percentage of Ascentive's business? It's important. Every patient is important to us with a drug like Ascentive. With respect to payer, there are to answer your question, the short answer is yes, you're correct.
However, with immunoglobulin, typically 90% of immunoglobulin starts, whether they're on label or in an evidence based use, they typically do require some type of prior authorization. So from what our sales force has been able to do is they work hand in hand and our medical affairs force provides any sort of papers in the literature and we're working hand in hand with the treaters to achieve the prior authorization needed. But to answer your question, in theory, patients will now be able to receive ASCENTIVE if they have a prescription for intravenous immunoglobulins and the doctor feels that ASCENTIVE is the right product for their patient.
Okay. And then just last question with respect to COVID-nineteen. There's been some investigator initiated studies looking at standard IVIG. Curious if you've heard any anecdotes with respect to either further studies or any stories of success there and whether or not you've seen any utilization of incentive in COVID-nineteen patients given that there's a certain percentage that also tend to have a fairly high prevalence of RSV and other respiratory illnesses?
Sure. I've read the same data as most of you and it seems that depending upon the dose, depending upon the time that immunoglobulin is added to the treatment armamentarium, if you will, there has been a trend and some of the data is out of China, some of the data is out of the U. S, but there has been a trend that patients seem to be doing better. I mean, there's a plethora of data in the literature to support the utilization of immune globulin to help manage these infections. Now this is outside of the package, insert labeling, and ADMA does not have any ongoing trials looking at these uses.
I think the way to answer your next question, I mean, I hear a lot of things from our sales force. I hear a lot of things from a lot of people. And I don't think it's I don't have a way to confirm what they're using Acentive for other than what people are telling me. So I think the best way to answer your question is, our products are commercially available. There are other IVIg products that are commercially available.
And I'm fairly certain that there are a number of institutions around the country that are deploying the use of immunoglobulin in the inpatient setting to manage patients with COVID-nineteen. So I think it's reasonable to assume that if a clinician has the ability to prescribe 1 of the ADMEA's FDA approved products, they may. IVIg is used 50% to 60 percent in an evidence based way. And I think that it's reasonable to assume that IVIG, including ADEMIS products, based on availability, will be used in these hospitals. I think that's the best way I can answer your question.
Okay. Those were the questions. Thank you.
Thanks, Elliot, very much.
Thank you. And our next question comes from the line of Ram Selvaraju with H. C. Wainwright. Your line is open.
Please go ahead.
Thanks so much for taking my question. So general question which had been on my mind for quite some time. I was wondering if you could comment on the implications for ADNOC of the shift from the previously administered immunoglobulin to subcutaneously administered immunoglobulin. And if you think that, that might potentially present some benefit or opportunity to ADMA? And also specifically, if you could comment on the potential for Apteniv in particular to see if it's just subcutaneous.
Sure. Thanks, Ram. Hope you're well. So ADMA at the present time does not have any FDA approved products that are administered through the subcutaneous route of administration. Our products are administered intravenously or with NaBHB intramuscularly.
I think that we can debate till the cows come home about some of the benefits of giving immunoglobulin for certain patients intravenously compared to giving the benefits of immunoglobulin subcutaneously. And I think with the patient population that Aetna has its labeled indication for, which are patients with primary immune deficiency, we believe that the IV rabbit administration certainly allows for rapid bioavailability of the antibody, and it's been shown to work for 20, 30 years. We look at the data and we look out there and subcutaneous route of And it certainly helps in the time of COVID with respect to having patients administer the IG themselves without the need to go to an infusion center. In ADMO's experience right now, we have been informed that a number of patients who are receiving BIVVIGAN and or Ascentiv in an infusion center, either connected with a hospital or a freestanding clinic, that the payers have been approving at home IV administration. So from our perspective, we don't see any impact.
And the last thing I'll say is that when you look at the data and I was just on a panel, it feels like just, but Elliot's not on the line anymore, but it was at the Raymond James conference and I was under the at least the data that I've seen is that in order to achieve the same IgG trough levels between an intravenous product and a subcutaneous product that you require more infusion. And there was a clinician on the panel with me at the Raymond James conference who gave what I thought was a staggering percentage of how much more product you need to administer. So I look at subcutaneous as something that we could do in the future. But at the present time, our focus is on manufacturing our intravenous product, pushing forward on our R and D efforts with respect to COVID-nineteen as well as expanding the label for a Seniv at the opportune time and focusing on building up our safety inventories to ensure a reliable continuous supply of immunoglobulin to our patients.
Okay. And then a couple other minor detail things. I was wondering if you could just verify that the new filling line expense that contributed to the increase in R and D spending is a non recurring item? And then also if you could specify what percentage of the 2Q revenue base came from intermediate fractions?
Sure. I can take this, Ram. The R and D look, throughout the year, we're going to have various projects in R and D, but this should be the bulk of the expenses from this fill line. With regards to breaking out revenues, we look at BIVVIGAM, Ascentive, NaVHB and our intermediate fractions is all part of our collective aggregate revenues and the total amount of revenues for those products. We do not break our individual products separately.
But that would be intermediate fractions is probably a minor contributor, right, if we were to characterize it qualitatively?
We previously announced in early 2020 that we entered into a long term supply agreement with a third party customer that we will be selling intermediate fractions in the several $1,000,000 this year and then it would grow to $10,000,000 to $15,000,000 to $20,000,000 over the next 2 to 3 years annual growth. So it's a I mean, I think it's a I would say it's a meaningful contributor. We just signed the agreement earlier this year and we are seeing ongoing revenue increases.
That's right. As our production ramp grows from we're going to be obviously producing more of the plasma drive intermediates for sale. And we're looking forward to it.
Okay. And then just one last one on the plasma collection volume. When do you anticipate that those could return to chronophilic normalized level?
Well, that's a great question. When if I could ask you one back, when do you think COVID-nineteen is going to be gone? I think that that is the question that we're all asking, right? Look, Aetna has exposure to this market. We've got a center that's operating.
As I mentioned in my prepared remarks, and I think Brian has said too, we have certainly seen a rebound, if you will, from the lows that were experienced during the second quarter, already in Q3. So we're doing better. We feel pretty good. I think the industry as a whole is feeling better that look, the government has made a decision on the unemployment additional stipend. There are other things that have been changing around the country with respect to certain geographic regions opening up, depending upon which one of my friends that have older children that are going back to college, some are open, some aren't, I think that also can provide benefits.
So I think it's a gradual return over the next 12 to 18 months, till we get back to something normal. But with respect to ADMA, I want to reiterate that our supply contract is solid. We feel very confident, and we continue to receive all the plasma that we anticipate receiving in purchasing under our agreement. So between the addition of us building new centers, our existing centers seeing rebound and the fact that our contract is currently in good standing and our supplier is delivering plasma as agreed. We feel very good that we're able to weather this storm probably a little bit better than some of the other fractionators that may have a bigger exposure with respect to their collections.
Does that answer your question?
Yes. No, that's very helpful. Thank you.
Thanks, Ram.
Thank you. And our next question comes from the line of Leland Gershell with Oppenheimer. Your line is open. Please go ahead.
Hi, Adam. Thanks for taking my questions. Just a question or 2. Just on the inventory line, keeping that number pretty stable, dollars 56,000,000 now versus $53,000,000 back at the end of the year and $52,000,000 at the end of the Q1. So should we expect overall inventories then to continue to remain stable or will those also go up as you make more immunoglobulin in addition to the fact that the finished product inventory obviously will continue to rise.
That's what we think about that relationship
I'll give you a very short answer, but I'll let Brian give you some more detail. Go ahead, Brian.
Sure. Leon, I hope you're doing well. We think the inventory is going to continue to increase now that we have entered into commercial scale ramp up since the second half of twenty nineteen. As you can see the finished goods, they increased by 75% just from the beginning of the year. And we are going to continue to collect more plasma as we're opening up more centers.
We're going to continue to buy plasma from our 3rd party vendors. So I would expect the inventory to continue to grow we expect revenues to continue to grow. Don't forget in the beginning of the call and in our press release, we did say we're anticipating $250,000,000 in revenues over the next 3 to 5 years. You need inventory to grow to meet those numbers, and we are doing that.
Okay, great. That's helpful. I'm just wondering if you could quantify in any way possible kind of the advantages with the new a subject filling machine in terms of both expense and margins and also timelines to finished product. Anyway, you can quantify it. I know it won't be coming online until probably mid next year, but just wanted to see if you could share any thoughts there.
Thanks.
I mean, I think I
could take a stab at this, Brian. Leland, it's hard for me to give you exact numbers because we haven't really made that much in it yet. But what I can tell you that attracted me to this machine itself is that it does not use destructive weight checks. And for anybody who's been in the fillfinish industry and who understands, how this process works, depending upon if there's a purge vessel, depending upon if there are other types of feeder pumps and areas that go into this. There are places throughout the fill finish process that are inherent for loss.
So we're really looking at this from the standpoint of there's nondestructive weight checks. The device is a state of the art technology. And we're looking at it, I mean, the internal estimates are to achieve about a 10% improvement to gross margins. There's no transportation costs. We don't have to hire the fancy FedEx custom critical truck and have all that insurance and pay all that money to drive the product to our 3rd party contract fill finished provider.
And we bring it in house, we can also expedite, if you will, the production throughput process because we'll now have all that control. And ultimately, we think that, that will contribute to being able to turn our inventory into commercial products faster, maybe on the shorter side of that 7 to 12 month period rather than being within that 7 to 12 month period. So there could potentially be some additional improvements, if you will, and enhancements to overall margins by having to maintain less inventory and less working capital for that matter, generating receivables faster, all these things can contribute. So hopefully, that gives you some insights into this. But ultimately, I mean, this thing I can't wait to tell you what I really think it's going to be.
I mean, I think 10% is a fair assessment, but I'm very hopeful. And for the admin team listening, I'm hopeful that they can make some magic here. So we're very excited. IG. IG is a very, very scarce resource, and we want to make sure that we can maximize all of it in the vial to go to patients, not to go for losses.
And this does close today's question and answer session. And I would like to turn the conference back over to Adam Grossman for any further remarks.
Sure. I just want to thank everybody for your continued confidence and support and understanding during this time. The company is really doing great. We're really proud of the work that we're doing. And again, please donate plasma.
It's not lip service. The only way we're going to really, really save our fellow countrymen and family members is to donate plasma. So thanks for your attention. Thanks for your support, and we look forward to hopefully seeing you soon. Take care, everybody.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.