Okay, good afternoon, everybody. Welcome to day one of the Cantor Health care Conference. Really excited about this one. It's been a while since I hosted you for a fireside chat. We have the ADMA Biologics team here, Adam Grossman, CEO, Brad Tade, the CFO. Thank you so much for being here.
Thanks for having us. Thank you.
So after years of blood, sweat, and tears, and I very much mean that pun, ADMA is truly at the best place you've ever been. Really impressive trajectory over these last few years.
Sure.
To start, could you give us an overview of your end-to-end processes to develop IG therapies and your three products?
Sure. So, we are a manufacturer of human-derived immunoglobulins. So it all starts with the collection of human plasma. We own ten plasma collection centers that we own and operate around the Southeast United States. Donors come in, and they donate their plasma, and we compensate them. That plasma then we use in our six hundred thousand liter capacity plasma manufacturing plant, which is located in Boca Raton, Florida, where we separate that plasma, and we throw away waste proteins, and we end up with finished bulk immunoglobulin. Think of immunoglobulin as a healthy immune system in a bottle. We also have fill-finish capacity within our Boca Raton manufacturing campus. So we fill, I'd say we fill the majority of our product in-house now.
We do work with some third-party fill-finish providers to augment our supply chain and ensure the continuity of supply, 'cause you never know what happens, but we do have full visibility and control into this manufacturing cycle. The manufacturing cycle time is about six to nine months today. So from the time that we collect a liter of plasma and can use that liter in manufacturing.
Nine months later, we have a drug that we can sell to the commercial market, so that's a little different than other industries because it gives us a unique visibility into the forward-looking revenue that we could potentially generate. Our three products, so we make all immunoglobulins. Two products we acquired when we acquired this manufacturing plant about seven years ago, but Nabi-HB is an intramuscular immunoglobulin that is used for the prevention of and management of hepatitis B infection. BIVIGAM is a standard intravenous immunoglobulin indicated for use in primary immune deficiency, and ASCENIV, which is ADMA's original homegrown superstar product, as I like to say, is manufactured as an immunoglobulin for primary immune deficiency, but it's done in a differentiated way.
We've got patented methodologies where we test and identify and screen plasma donors. They have high titers to respiratory Syncytial Virus, as well as a panel of other respiratory viral pathogens, and we use this high-titer plasma that's collected from about 10% of the donor population, and the resulting product is a unique antibody profile immunoglobulin that is really changing the lives of a number of patients out there in the market today.
So I've been following and even covering this story for a few years now, and the business has really exceeded your own initial expectations, especially out of coming out of the pandemic.
Sure
... kind of like a restart with social distancing and things like that ending. And sitting here today, you've provided comfortable revenue net income guidance to the street through 2025. I don't cover a single other company that's giving me that level of guidance. So what trends did you start to see that made you start to realize the revenue potential is a lot higher than you initially thought?
I think, you know, with respect to guidance, number one, the production cycle time.
Yeah.
We know how much product we're making-
Right
... so that's, that's certainly helpful. But I can say that, you know, probably, I'd say a calendar quarter or two after COVID ended, so I'd say late 2021, we started to re-engage with the medical community, with medical education-
Yeah
... and engaging at IDWeek and other medical conferences, and we really started to gain a lot of attention and traction because, you know, everybody was an immunologist then, and everybody understood more antibody was better than less when trying to treat or prevent infectious diseases. And something just started to click, and clinicians started to understand where they could use this. They were thinking about risk and immunocompromised patients much differently because of COVID, well, why should that risk go away? There are tons of infectious diseases that are impacting the immunocompromised, so we just started to see more utilization, and I think as the product... You know, it, the product is not a new drug anymore. I mean, we've been commercial since the second half of 2019.
Right.
So, I mean, COVID sucked, and it was not great to launch into that atmosphere.
Yeah.
I mean, it was tough. But we stuck with it, and our investors stuck with it, and I think coming out of that, physicians started to really see benefits in these problematic immunocompromised patients. So patients that are on regular IG, they've switched brands, they've had their doses increased, and they've, they continued to have problems. They continued to have chronic persistent infections. They continued to have other socioeconomic risk factors and other comorbidities that render them more susceptible to infections. And we just started hearing reports that, "Oh, this patient switched to ASCENIV, and they've been on three months and back at work, and this one's not in the hospital anymore." You know, I really just think the grassroots medical education efforts that we've always said were gonna be how we're gonna sell it, started to work, and it's exciting.
So being able to collect more plasma, we had a nice inventory of plasma, RSV plasma, that we had collected over the years, and we just started to make more ASCENIV, and I think the visibility on the demand side really started to come to fruition in the last, you know, 12-24 months. Now, I think we've defined appropriate use. I think we have a good handle on how much we are producing. We understand our supply chain cycle, and ultimately, that allows us to be in this position. I mean, we have a unique business here. There are very few comparable companies to what we do. And look, what you're seeing is when you make a good product that helps people, this is the result.
You know, our label is very similar to other product labels out there for immunoglobulins, but the outcomes, the real-world evidence that doctors are experiencing and that patients are realizing, what happens when you make a product that helps?
A little ASCENIV can go a long way.
Yeah.
That's what we've been saying for years, right?
Sure.
So maybe just to take a step back, what is the immunotechnology that you have in place that is the core in terms of building this product?
So for ASCENIV, our company, we've got multiple issued patents across a wide array of areas. But for ASCENIV, we've got patents that are focused on the testing methodology that we use to identify donors. So we have a proprietary microneutralization assay that we use. Basically, as a new donor walks into one of our plasma centers or one of our third-party collection center vendors, we get a sample of that plasma. We test it in our assay. If it meets our criteria, we collect that donor plasma. We also have IP around how we formulate the plasma pool and the resulting ultimate composition of the immunoglobulin. So, you know, we've had... I've been answering this question all day today.
you know, we've had multiple debt lenders, one of our former lenders, in the room right now, and you know, we've had a lot of people do IP checks. We've had a lot of people run freedom-to-operate opinion. We've done our own work. I mean, we really feel very good about our IP, which runs through the middle of 2035. So we still have over a decade left, from an IP perspective, but, you know, it's not just about the IP that's issued. It certainly protects what we're doing, but, there's a lot of know-how, there's a lot of skill, there's a lot of elbow grease, if you will, involved with, you know, just treating donors very positively and making sure that they continue to come back because it really all starts there.
You know, this, all of the science that goes into ASCENIV starts with the high-titer plasma that we do obtain from hyperimmune donors.
I've been to one of your donation centers, and I saw the binders. I don't know where you find rings that big that close all the materials that were involved, so I believe you when you tell me that.
I'm surprised it's still paper.
So, you know, obviously, you have great IP protection, but yeah, a question we get all the time is, "Why can't somebody else just replicate this?" You have patent protection, but I think you obviously need to run a clinical trial here, and that- things like that take time, in addition to the know-how. So maybe emphasize or talk about that point.
It's a question also we've been getting all day today, too. You know, even if somebody had the desire and wanted to compete with us, we think it's a multi-year path for them to do so. Even for the biggest, baddest-ass companies out there, you know, with all the money, it still takes you three to six months to develop some sort of a test to identify the donors, then you have to collect the plasma. That takes however many months it takes to collect, then you have to manufacture product. Whether you're ADMA or you're one of the larger players in the plasma product space, it takes all of us six to nine months to produce a batch of drug.
Yeah.
So, you're looking at, at least, you know, 12 to 18 months already. Then you have to file an IND, start a clinical trial, run the 12-month clinical trial. That takes at least 18 months to do, probably longer, but I'm trying to give you the... if you're the best company. And then you have to compile the data. You have to submit to the FDA. There's a 10-month review for BLAs. I think when you add all that together, you're probably looking at 4 to 5 years it would take someone to be on our heels. So, we feel very good about our competitive positioning. As I said earlier, this is not a new product.
Right.
I mean, My chairman is in the room, and we've been doing this together since 2007. So this is not something new. This is something that is innovative. I like to think of it as something that is really moving the peg forward and giving clinicians and patients who have had no alternatives something that they can turn to when they are, you know, when they've exhausted all other methodologies for caring for their illness. But there's nobody that we're aware of on our heels, and we really think that we've got a great share of voice in the immunocompromised patient community. And we're gonna keep doing what we're doing and creating value for shareholders. That's the name of the game.
Yeah, I'd suggest to our audience to check out the website. There's some nice anecdotes and patient stories that you provided that really-
The patient stories-
Give perspective
... I mean, that's something that, you know, it's not something that you're really talking about on your earnings calls, but, you know, we really are proud of some of the patient stories and the patient testimonials on ASCENIV.com website. So if you haven't seen those and you're interested, I really. You know, part of why we're doing this stuff is, look, we're doing this because we want patients to understand they're not alone, and they've got-
Right
... they've got somewhere to go, and we're encouraging them to go speak to their physicians and say, "Hey, is ASCENIV right for me?" But it's also for the investment community. I mean, we're really trying to help define for these new investors who are coming into the story now, that may be a little bit more generalist. We want them to understand that, you know, not all primary immunodeficient patients are created equal.
Right.
Not all immunodeficient patients are created equal. We're looking at this really, this very focused subset of refractory, comorbid, very, very sick patients who have exhausted all alternatives, and then they turn to ASCENIV, and the real-world evidence and the real-world data is demonstrating benefits.
So why is it that patients aren't switching to ASCENIV, getting better, and then going to, back to a standard IG? Why are they staying on ASCENIV long term?
You know, that's a great question, and it's also something that has been a theme throughout the day.
Sorry.
So I don't know who fed you your questions, but these are the questions of the day. I mean, you know, look, I think we underestimated that-
Yeah
candidly, and I think that that's why you've seen this compounded growth, is that we thought patients would, you know, clear their chronic persistent infections. They would stay on therapy for, you know, six months, nine months, a year. But what we're seeing is that patients continue, on the calendar flips, to stay on therapy, and it's typical with plasma-derived products. And if you look at hemophilia as an example-
... if you look at the Alpha-1 community, if you look at the HAE community, and you look at IVIG, patients that do well on a certain brand, a certain manufacturer's drug, tend to stay on that drug forever.
Yeah.
Why get off it if it, if it's working? You know, even in the hemophilia community, if, you know, historically, if some new drug came out, they would stay on the old, "I don't want to switch, Doc.
Yeah.
And that's the way it's been in the IG space, but we'd never anticipated the fact that patients would remain on therapy for multiple years. I truly believe it's a testament to the KOLs that we work with, our medical affairs team, our marketing teams, our commercial organization, and we've really defined appropriate use. We've really identified which patients are the right patients to go on ASCENIV. The payers don't push back because they know that these are the problematic patients. They know that these are the patients who were on different IGs before, and cost them tons of money, and would be in and out of the hospital, and would be switching brands, and are a drain on their programs.
Right.
So, you know, we're really, we're really pleased with our performance and the amount of data that we've been able to capture over the last, you know, call it three full years of commercial sales. We're starting to dig into the evidence and look at the real-world outcomes and look at the health economics there, and, you know, stay tuned, but hopefully sometime next year we'll have some publications really outlining, detailing the impact here. But these are very sick people-
Yeah
... and they're doing well, and why are you gonna take someone off of a drug that, that, that works? I think that's something that we underestimated. I think that's why you're seeing this compounding demand. You know, last year we were probably talking about stuff, and the question was: "Well, you know, is this durable? Is this durable? Can you continue to do this every quarter, every quarter?" and I think we've checked those boxes now. We think it's highly durable. We think this is just the beginning. We think we've got a lot of room to grow as we collect more plasma. I think the end user population... We've identified appropriate use. We know where the bodies are. We know where the docs are who are prescribing the products, so we're excited.
How is success determined commercially? Is it the doctor saying, "Wow," like, "these patients aren't having as many infections or hospitalizations?
Yes, yes.
Or is that essentially what it is?
Yes, yes.
I mean, look, if you look at the patient stories-
Yeah
... I mean, these are people who are missing 200 days of work or school.
Wow!
They're in bed all the time.
Yeah.
They don't feel like getting up. They don't feel like living their life. They are... You know, I've used the term they are surviving, they're not thriving. When you're on immunoglobulin, the whole concept of immunoglobulin, I mean, everybody, whether you're a generalist or you're a scientist, we all know about the Bubble Boy. We've
Yeah.
... we know that there's a movie about it. But essentially, the healthy immune system in a bottle, that is IVIG, should allow you to live outside of the bubble and be
Yeah
... just like a regular person. That is the purpose of IVIG. If you're not experiencing that, that's not. There's a problem. So no one has advanced this. No one has really done anything in, you know, 40 years to really advance this before ASCENIV. And I'm not saying ASCENIV is the end-all be-all, but it is moving the peg forward and giving doctors something differentiated that's manufactured from donors that are hyperimmune to lots of different things.
I'm gonna guess that this next question is one you've also gotten a lot today, so sorry about that.
Killing me. You could have just recorded the earlier meeting and played it back.
Walk us through what the peak sales could look like. Again, this is a very interesting business because we can do back-of-the-envelope math here. We know your manufacturing capacity is like. We know there's interest in ASCENIV. If you hypothetically only sold ASCENIV, you can have over $2 billion in revenue.
Yeah.
That's like 5X where you're at today. I'm not saying that's gonna happen, but help us understand where that ceiling can be.
I mean, look, yes, I've gone on record saying that if we were able to collect enough plasma-
Yeah
... you know, 5-600,000 L , you know, plasma economics. A liter of plasma, you get about-
Yeah
... four grams per liter on this side of our yield enhancement-
Mm-hmm
... which I can speak about. So our plant today, at 500,000 L, say, is 2 million grams. On the other side of yield enhancement, we announced last quarter, potential for 20% more bulk drug from the same-
Sure
Starting plasma. So call that 2.4-2.5 million grams. I, you know, I think on the back of an envelope, we've said that, sure, 2.4 million grams at, you know, a $960 a gram ASCENIV price, you know, net revenues could get into that, you know, $1.5-$2 billion plus range.
Mm-hmm.
You know, are we gonna do that? I don't think so.
Yeah.
Is it possible? Maybe. Look, I didn't think patients were gonna stay on therapy for multiple years at a time, so I've been wrong. I might be-
Yeah
... wrong about this too. You know, look, our goal is to wake up every day and to make less BIVIGAM and more ASCENIV, period.
Yeah.
Why? It's not that the world doesn't need more BIVIGAM. The world needs all the BIVIGAM it can get. The world needs all the IG it can get. All manufacturers are selling all the product that they make in the United States. You know, there is a supply and demand imbalance and it's on the FDA website that IVIG are tight supply, so we need all the IVIG that we can. But from our perspective, and what ADMA's mission is, is we wanna make advanced therapies for the immunocompromised. So I think the peak is somewhere between our guidance from next year, which is... I don't wanna misspeak, $445 million, to your number, and if we're doing math and, you know, doing the mental game playing, it could be, you know, $2 billion plus. So somewhere between there-
Okay
... is where the peak would be. But you know, stay tuned. I think, look, as we get more visibility into the end of the year, as we get more visibility into when yield improvement could be FDA-approved, you know, I have gone so far as to say that we anticipate, you know, late 2025, but most likely 2026 forward, that's when we're really gonna see the accretion on the top line and certainly on the bottom line from yield enhancement. I think with timing of all of these things and our ability to collect more RSV plasma, I mean, look, we talked about it today with a number of investors. I mean, we are reducing the amount of BIVIGAM that we have-
Mm-hmm
... for the market because we're making more, and our plant has a finite capacity. We don't care what we're making every day. We do the same thing, whether we're making BIVIGAM or ASCENIV. It's essentially the same manufacturing process. All the science comes in with what plasma goes into that pool. So, we're gonna make less BIVIGAM, we're gonna make more ASCENIV. We're gonna continue to meet the unmet needs of the severely immunocompromised who are not having good outcomes on regular IG products.
In order to do that, how are you gonna collect more of the plasma?
How am I gonna do it? I'm not gonna do it. We've hired a great team of people to do it, though. So, our internal collection network-
Yeah
... so we built out, I guess it was the beginning, right before COVID, I think it was J.P. Morgan 2019, we announced our supply chain robustness initiative program. We built out 10 plasma collection centers. We've got a lot of control over who comes to donate. We are incentivizing donors with more compensation. We are incentivizing donors with swag. We are, you know, greeting them and treating them with a smile. You know, we're very excited about the opportunities that we have with our donor community. But, you know, 10 centers is only gonna take you so far. You know, as I mentioned, as I've said previously, and I think it's in our filings, typical plasma center will collect 40,000-50,000 liters annually, and roughly about, you know, 5%-10% of donors have the antibodies-
Sure
... we're looking for. So, if we wanna grow from where we are, our third-party vendors become a lot more key and important, and we are incentivizing our third-party vendors to collect more plasma. We're paying them more, the more plasma they get. So usually it's the inverse. As I'm buying more, I want a lower price. No, I want you to collect more and more-
Yeah
... plasma, and if you sell me more plasma, I'm gonna pay you a higher price. You know, not that Brad likes when I talk about having margin to cede, but we've got some margin to cede. We've got, you know, 80+% gross margins with ASCENIV. Corporate gross margins are now in the 50-60% range?
50.
So, you know, we look at it as, again, out of a liter of plasma, you get four grams of IG, this side of yield enhancement. On the other side of yield enhancement, add 20% to that. So, so if we're gonna pay a donor an extra $50 or an extra $100, roughly, you know, between $10-$25 per gram, it-
Yeah
... it's not going-
Right
... to really impact our margins that much, and on the other side of yield enhancement, I mean, all of that yield enhancement, that extra 20%, will drop in at-
Yeah, I mean, think about it as, you know, you have 20% more product to sell, and most of that sales is gonna be at near 100% margin.
Right.
It's gonna be impactful.
Can you just remind our audience how often people can donate plasma?
You can donate plasma, twice a week, up to eight times per month. Drink a lot of water.
Yes.
But, yes, you can donate plasma twice a week.
Yes, and your centers make-
Yeah
... people very comfortable.
We try very hard. I mean, look, we take a different approach to this industry. We always have. I mean, I look at it as no different than a Starbucks or a Dunkin' Donuts. You know, you want a nice, clean place where people want to come, and they want to spend time, and we wanna make it inviting. You know, people always said that, you know, "Why are you decorating your centers like they're, you know, doctor's offices?" Why shouldn't you be doing that? I mean, it should make the donors feel safe and comfortable, and, you know, quite frankly, if...
I mean, one of the best things, I used to say this to investors all the time, and I probably shouldn't say this here, especially with my chairman in the room, but, you know, one of our best Google reviews ever is, "They have the cleanest bathrooms." I mean... I'm proud of that! I think that is an extremely proud, you know, that makes me proud. So to all of my Bio Centers folks, go check the bathrooms and keep them clean. But, you know, little things like that-
Yeah
... we take a different approach to this, and, you know, I look at these centers as a place that, you know, I would want to be able to go all the time. And, you know, they're the most valuable asset. These plasma donors are saving lives, patients every single day, and, you know, I'm very fortunate and thankful that, you know, the CFO, the board, my Chairman, have supported me in spending a little bit more on where it counts because I think it's paying off dividends now in the end.
I think we can agree it's paying off.
Uh-
Brad, how's the balance sheet looking like these days?
Balance-
Can you go to sleep well?
That balance sheet's looking good. We can sleep good at night. We're generating cash very nicely, and, as you know, we paid down debt a little bit, and, again, we feel very comfortable with the balance sheet.
So the last question I have for you, and please touch on anything I may have missed. I think, we can all agree your stock's done quite well this year, especially in the last three months. If I'm an investor, why isn't it too late for me to look at the company?
Well, I mean, look, I think we're in the early stages here. I've kind of answered this already, but we are in the early stages. I think the forward-looking growth outlook is tremendous for us. I mean, we know where the patients are. We know that there's demand there. I think as we're able to collect more plasma, I think, you know, 2026 forward, you're just going to see compounding growth with expanding gross margin, expanding EBITDA margins, and let's get the debt off the balance sheet. Let's look at other ways to be shareholder-friendly and generate value for shareholders there. But you've got a management team who's aligned with the stockholders.
But I just think that we've really, you know, cracked the code, and I think that there are other opportunities that we have in our pipeline. Our R&D engine is not expensive to fund.
Sure.
I think that there are other IP, which we didn't talk about, which we can save for another time, but there are other products that we have our eye on, not that I don't like BIVIGAM, but, you know, I want to make differentiated products-
Yeah
... that, you know, ultimately will provide additional clinical benefits to the immunocompromised patient population, and you know, from a business perspective, this is a business we can get a higher margin for. You know, if you make good products that help people, everything falls into place. I think from you know, the second half of 2025 through the end of the decade, it's just gonna be consistent growth.
Yeah, I would just add that, you know, as you see the ASCENIV mix shift going more towards ASCENIV, you're gonna see margin accretion. We've said this in the past before, when you look at our operating structure, our operating structure is set today for tomorrow's growth, right? Do we need to have some, a few strategic hires in there? Of course. Do we need to continue to coach and mentor future leaders? Absolutely. But there's not, there's no spending spree out there, where we're gonna bloat the middle of our income statement. So when you think about the mix shift from BIVIGAM to ASCENIV, not only do you get the gross margin accretion, but our operating structure is such that we are gonna generate significant operating leverage, meaningful operating leverage in the future as we continue to go towards that favorable mix shift.
Then you throw in yield enhancement on top of that and everything else that's going on. It's... There's a long runway, is what I'm trying to say.
Agreed, and yeah, absolutely, mix shift. I mean, it's something that we crossed the 50% mark with ASCENIV last quarter from a revenue standpoint. Units are BIVIGAM. Revenue generation, I mean, I wanna say ASCENIV is a 20-30 times-
Yeah, think of it this way: ASCENIV gross profitability is north of 25X on a dollar basis compared to BIVIGAM.
So as that mix continues to shift, this is where it is, and it's the early innings. So you know, every day we're waking up. You know, investors laughed at me. I remember investors also asked me, "You know, why are you talking about investing into your RSV donor testing?" And this is back in, like, 2020. Well, guess what? Because today we've got the capability to screen, you know, tens of thousands of samples a month. Without that, we wouldn't be able to be having the conversation that-
Yeah
... we're having. So, you know, we've really been very, very methodical in where we've invested money. I mean, look, we're not trying to build an empire here.
Right.
We're trying to make the best drug we can as efficiently as possible, you know, fulfill the demand. And again, even when we look at if those mental games we were playing, right? If all of the plant capacity was earmarked to ASCENIV, you're probably looking at, you know, five to eight thousand patients.
Yeah.
And that gets you to the revenue numbers that are pie in the sky. So why invest? Because, look, we're a management team that has delivered on every promise we've made to the street. Maybe it's taken a little longer, maybe it's cost a little more, but at the end of the day, we've delivered on every promise. I think we've beat the last, I don't wanna misspeak, 16 quarters.
I have a chart somewhere.
We've raised guidance a number of times.
Yeah.
I mean, look, we're a conservative management team. We take our job seriously.
Yeah.
It's not a game. We understand that Wall Street is doing what they do, but-
Sure
... we're making drugs that help people, and we're gonna continue to do that. So I think that's why you should invest.
Thank you so much for your time.
Thank you, Kristen.
Congrats on all the success.
Thank you.
Donate plasma!
Thank you.
Thank you very much. Absolutely. Donate some plasma. Thank you, everyone.