UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Commission File Number: 001-36728
Delaware
56-2590442
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
465 State Route 17, Ramsey, New Jersey
07446
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (201) 478-5552
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, par value $0.0001 per share
ADMA
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates was $793,963,197 as of June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter), based on a total of 215,166,178 shares of common stock held by non-affiliates and a closing price of $3.69 as reported on the Nasdaq Global Market on June 30, 2023.
As of February 23, 2024, there were 228,220,236shares of the issuer’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the ADMA Biologics, Inc. definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K and certain documents are incorporated by reference into Part IV.
Item 9B.
Other Information
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
CONSOLIDATEDBALANCE SHEETS
Years Ended December 31, 2023 and 2022
December 31,
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Right-to-use assets
Deposits and other assets
TOTAL ASSETS
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Current portion of deferred revenue
Current portion of lease obligations
Total current liabilities
Senior notes payable, net of discount
Deferred revenue, net of current portion
Lease obligations, net of current portion
Other non-current liabilities
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES
Preferred Stock, $0.0001 par value, 10,000,000 shares authorized, noshares issued and outstanding
Common Stock - voting, $0.0001 par value, 300,000,000 shares authorized, 226,063,032and 221,816,930 shares issued and outstanding
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OFOPERATIONS
Years ended December 31,
2023
2022
REVENUES
Cost of product revenue
Gross profit
OPERATING EXPENSES:
Research and development
Plasma center operating expenses
Amortization of intangible assets
Selling, general and administrative
Total operating expenses
INCOME (LOSS) FROM OPERATIONS
OTHER INCOME (EXPENSE):
Interest income
Interest expense
Loss on extinguishment of debt
Other expense
Other expense, net
NET LOSS
BASIC AND DILUTED LOSS PER COMMON SHARE
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and Diluted
CONSOLIDATED STATEMENTS OF CHANGES INSTOCKHOLDERS’EQUITY
Additional
Total
Common Stock
Paid-in
Accumulated
Stockholders’
Shares
Amount
Capital
Deficit
Equity
Balance at December 31, 2020
Stock-based compensation
Issuance of common stock, net of offering expenses
Net loss
Balance at December 31, 2021
Exercise of stock options
Balance at December 31, 2022
CONSOLIDATED STATEMENTS OFCASH FLOWS
Year Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
Loss on disposal of fixed assets
Amortization of debt discount
Amortization of license revenue
Changes in operating assets and liabilities:
Accounts receivable
Accrued expenses
Other current and non-current liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable
Proceeds from issuance of common stock, net of offering expenses
Payment of debt refinancing fees
Proceeds from issuance of note payable
Taxes paid on vested Restricted Stock Units
Payments on finance lease obligations
Net cash (used in) provided by financing activities
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year
1.
ORGANIZATION AND BUSINESS
ADMA Biologics, Inc. (“ADMA” or the “Company”) is an end-to-end commercial biopharmaceutical company dedicated to manufacturing, marketing and developing specialty biologics for the treatment of immunodeficient patients at risk for infection and others at risk for certain infectious diseases. The Company’s targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or who may be immune-suppressed for medical reasons.
ADMA operates through its wholly-owned subsidiaries ADMA BioManufacturing, LLC (“ADMA BioManufacturing”) and ADMA BioCenters Georgia Inc. (“ADMA BioCenters”). ADMA BioManufacturing was formed in January 2017 to facilitate the acquisition of certain assets held by the Company’s former third-party contract manufacturer, which included the U.S. Food and Drug Administration (“FDA”)-licensed BIVIGAM and Nabi-HB immunoglobulin products, and an FDA-licensed plasma fractionation manufacturing facility located in Boca Raton, FL (the “Boca Facility”). ADMA BioCenters is the Company’s source plasma collection business withten plasma collection facilities located throughout the U.S., all of which hold an approved license with the FDA.
The Company has threeFDA-approved products, all of which are currently marketed and commercially available: (i) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), an intravenous immune globulin (“IVIG”) product indicated for the treatment of Primary Humoral Immunodeficiency (“PI”), also known as Primary Immunodeficiency Disease (“PIDD”) or Inborn Errors of Immunity, for which the Company received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019; (ii) BIVIGAM (Immune Globulin Intravenous, Human), an IVIG product indicated for the treatment of PI, and for which the Company received FDA approval on May 9, 2019 and commenced commercial sales in August 2019; and (iii) Nabi-HB (Hepatitis B Immune Globulin, Human), which is indicated for the treatment of acute exposure to blood containing Hepatitis B surface antigen (“HBsAg”) and other listed exposures to Hepatitis B. In addition to its commercially available immunoglobulin products, the Company generates revenues from the sale of intermediate by-products that result from the immunoglobulin production process and from time to time provides contract manufacturing and laboratory services for certain clients. The Company seeks to develop a pipeline of plasma-derived therapeutics, and its products and product candidates are intended to be used by physician specialists focused on caring for immune-compromised patients with or at risk for certain infectious diseases.
As of December 31, 2023, the Company had working capital of $207.2 million, including $51.4 million of cash and cash equivalents, accounts receivable of $27.4 million and $172.9 million of inventories, partially offset by $49.8 million of current liabilities. Based upon the Company’s current projected revenue and expenditures, including capital expenditures and continued implementation of the Company’s commercialization and expansion activities, the Company’s management currently believes that its cash, cash equivalents and accounts receivable, along with its projected future operating cash flow, will be sufficient to fund ADMA’s operations, as currently conducted, through the end of the first quarter of 2025. However, the Company’s current outlook on cash flows and profitability may change based upon several factors, including the success of the Company’s commercial sales of its products, whether or not the assumptions underlying the Company’s projected revenues and expenses are correct and the continued acceptability of ADMA’s immune globulin products by physicians, patients or payers. The Company is subject to risks common to companies in the biotechnology and pharmaceutical manufacturing industries including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, inflationary pressures, supply chain constraints, protection of proprietary technology, and compliance with FDA and other governmental regulations and approval requirements.
2.
SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation and basis of presentation
The accompanying consolidated financial statements include the accounts of ADMA and its wholly-owned subsidiaries, and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Article 3 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). All intercompany balances have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (the “FASB”). During the years ended December 31, 2023, 2022 and 2021, comprehensive loss was equal to the net loss amounts presented for the respective periods in the accompanying consolidated statements of operations.
Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include rebates and chargebacks deducted from gross revenues, valuation of inventory, assumptions used in projecting future liquidity and capital requirements, assumptions used in the fair value of awards granted under the Company’s equity incentive plans and warrants issued in connection with the issuance of notes payable and the valuation allowance for the Company’s deferred tax assets.
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.
The Company regularly maintains cash and cash equivalents at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. Although the Company monitors the daily cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be impacted, and there could be a material adverse effect on the Company’s business, if one or more of the financial institutions with which the Company has deposits fails or is subject to other adverse conditions in the financial or credit markets. To date, the Company has not experienced a loss or lack of access to its deposited cash or cash equivalents; however, the Company cannot provide assurance that access to its cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets in the future.
Accounts receivable is reported at realizable value, net of allowances for contractual credits and doubtful accounts in the amount of $0.1 million at December 31, 2023 and 2022, which are recognized in the period the related revenue is recorded. The Company extends credit to its customers based upon an evaluation of each customer’s financial condition and credit history. Evaluations of the financial condition and associated credit risk of customers are performed on an ongoing basis. Based on these evaluations, the Company has concluded that its credit risk is minimal (see Note 16).
Raw materials inventory consists of normal source plasma (“NSP”) and Respiratory Syncytial Virus (“RSV”) high titer plasma collected at the Company’s plasma collection facilities, along with various materials purchased from suppliers, used in the production of the Company’s products. Work-in-process and finished goods inventories (see Note 3) reflect the cost of raw materials as well as costs for direct and indirect labor, primarily salaries, wages and benefits for applicable employees, as well as an allocation of overhead costs related to the Boca Facility including utilities, property taxes, general repairs and maintenance, consumable supplies and depreciation. The allocation of Boca Facility overhead to inventory is generally based upon the estimated square footage of the Boca Facility that is used in the production of the Company’s products relative to the total square footage of the facility.
Property and equipment
Assets comprising property and equipment (see Note 4) are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life. Land is not depreciated. The buildings have been assigned a useful life of 30 years. Property and equipment other than land and buildings have useful lives ranging from 3 to 15 years. Leasehold improvements are amortized over the lesser of the lease term or their estimated useful lives.
Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company. Goodwill at December 31, 2023 and 2022 was $3.5 million, all of which is attributable to the Company’s ADMA BioManufacturing business segment. There were no changes to the carrying amount of goodwill during the years ended December 31, 2023, 2022 and 2021.
Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators exist. The Company has the option to perform a qualitative assessment of goodwill to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company concludes that this is the case, then it must perform a goodwill impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company performs its annual goodwill impairment test as of October 1 of each year. The Company’s annual goodwill impairment tests as of October 1, 2023, 2022 and 2021 did not result in any impairment charges related to goodwill for the years ended December 31, 2023, 2022 and 2021.
Impairment of long-lived assets
The Company assesses the recoverability of its long-lived assets, which include property and equipment and finite-lived intangible assets, whenever significant events or changes in circumstances indicate impairment may have occurred. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to its carrying amount to determine whether the asset’s carrying value is recoverable. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the years ended December 31, 2023, 2022 and 2021, the Company determined that there was no impairment of its long-lived assets.
Revenue recognition
Revenues for the years ended December 31, 2023, 2022 and 2021 are comprised of (i) revenues from the sale of the Company’s immunoglobulin products, ASCENIV, BIVIGAM and Nabi-HB, (ii) product revenues from the sale of human plasma collected by the Company’s Plasma Collection Centers business segment, (iii) contract manufacturing and laboratory services revenue, (iv) revenues from the sale of intermediate by-products and (v) license and other revenues primarily attributable to the out-licensing of ASCENIV to Biotest, AG (“Biotest”) in 2012 to market and sell this product in Europe and selected countries in North Africa and the Middle East. Biotest has provided the Company with certain services and financial payments in accordance with the related Biotest license agreement and is obligated to pay the Company certain amounts in the future if certain milestones are achieved. Deferred revenue is amortized into income over the term of the Biotest license, representing a period of approximately 22 years.
Product revenues from the sale of human plasma collected at the Company’s plasma collection centers are recognized at the time control of the product has been transferred to the customer, which generally occurs at the time of shipment. Product revenues are recognized at the time of delivery if the Company retains control of the product during shipment.
Cost of product revenue includes costs associated with the manufacture of the Company’s FDA approved products and intermediates and for the collection of human source plasma, as well as expenses related to conformance batch production, process development and scientific and technical operations when these operations are attributable to marketed products. When the activities of these operations are attributable to new products in development, the expenses are classified as research and development expenses.
Research and development expenses
Research and development expenses consist of clinical research organization costs, costs related to clinical trials, post-marketing commitment studies for BIVIGAM and ASCENIV and salaries, benefits and stock-based compensation for employees directly related to research and development activities. All research and development costs are expensed as incurred.
Advertising and marketing expenses
Advertising and marketing expense includes cost for promotional materials and trade show expenses for the marketing of the Company’s products and expenses incurred for attracting donors to the Company’s plasma collection centers. All advertising and marketing expenses are expensed as incurred. Advertising and marketing expenses were $3.3 million, $2.2 million and $1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company follows recognized accounting guidance which requires all equity-based payments, including grants of stock options and restricted stock unit awards (“RSUs”), to be recognized in the statement of operations as compensation expense based on their fair values at the date of grant. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis over the associated vesting period of the award based on the grant date fair value of the award. Stock options granted to employees under the Company’s equity incentive plans generally have a four-year vesting period and a term of 10 years. RSUs granted to employees also have a four-year vesting period. For milestone-based equity awards (see Note 8) the Company periodically assesses the probability of vesting for each milestone-based award and adjusts compensation expense based on its probability assessment. Pursuant to ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), the Company has elected not to establish a forfeiture rate, as stock-based compensation expense related to forfeitures of unvested equity awards is fully reversed at the time of forfeiture.
Income taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or its tax returns. Under this method, deferred tax assets and liabilities are recognized for the temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company records a valuation allowance on its deferred tax assets if it is more likely than not that the Company will not generate sufficient taxable income to utilize its deferred tax assets (see Note 11). The Company is subject to income tax examinations by major taxing authorities for all tax years since 2019 and for previous periods as it relates to the Company’s net operating loss carryforwards.
Loss Per Share
Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders as adjusted for the effect of dilutive securities, if any, by the weighted average number of shares of common stock and dilutive common stock outstanding during the period. Potentially dilutive common stock includes the shares of common stock issuable upon the exercise of outstanding stock options and warrants (using the treasury stock method). Potentially dilutive common stock in the diluted net loss per share computation is excluded to the extent that it would be anti-dilutive. No potentially dilutive securities are included in the computation of any diluted per share amounts as the Company reported a net loss for all periods presented. For the years ended December 31, 2023, 2022 and 2021, the following securities were excluded from the calculation of diluted loss per common share because of their anti-dilutive effects:
For the Years Ended December 31,
Stock Options
Restricted Stock Units
Warrants
Fair value of financial instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are shown at cost, which approximates fair value due to the short-term nature of these instruments. The debt outstanding under the Company’s senior notes payable (see Note 7) approximates fair value due to the variable interest rate on this debt.
Recent Accounting Pronouncements
3.
INVENTORIES
The following table provides the components of inventories:
December 31,2023
December 31,2022
Raw materials
Work-in-process
Finished goods
Total inventories
Raw materials includes plasma and other materials expected to be used in the production of ASCENIV, BIVIGAM and Nabi-HB. These materials will be consumed in the production of products expected to be available for sale or otherwise have alternative uses that provide a probable future benefit. All other activities and materials associated with the production of inventories used in research and development activities are expensed as incurred.
Work-in-process inventory primarily consists of the Company’s IVIG products that are manufactured to the bulk drug substance and unlabeled filled vials stage of production.
Finished goods inventory is comprised of the Company’s immunoglobulin products that have reached the filled, labeled and serialized vial stage of production and related intermediates that are available for commercial sale, as well as plasma collected at the Company’s plasma collection centers which is expected to be sold to third-party customers.
4.
PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2023 and 2022 is summarized as follows:
December 31, 2023
December 31, 2022
Manufacturing and laboratory equipment
Office equipment and computer software
Furniture and fixtures
Construction in process
Leasehold improvements
Land
Buildings and building improvements
Less: Accumulated depreciation
Total property, plant and equipment, net
The Company recorded depreciation expense on property and equipment of $7.6 million, $6.4 million and $4.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.
5.
INTANGIBLE ASSETS
Intangible assets at December 31, 2023 and 2022 consist of the following:
Cost
Amortization
Net
Trademark and other intangible rights related to Nabi-HB
Rights to intermediates
Under the previous contract manufacturing agreement between ADMA and Biotest, intermediate by-products derived from the manufacture of ASCENIV were property of Biotest. As a result of the acquisition of certain assets from Biotest on June 6, 2017, ADMA obtained the right to these intermediate products, which are being amortized over a period of seven years. The intangible rights to Nabi-HB are also being amortized over a period of seven years. During the year ended December 31, 2023, the Company implemented an internally developed data intelligence and analytics program at a cost of approximately $0.2 million which is being amortized over a period of four years.
Amortization expense related to the Company’s intangible assets for the years ended December 31, 2023, 2022 and 2021 was $0.7 million. Estimated aggregate future aggregate amortization expense is expected to be as follows (in thousands):
2024
2025
6.
ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other current liabilities at December 31, 2023 and 2022 are as follows:
Accrued rebates
Accrued distribution fees
Accrued incentives
Accrued testing
Other
Total accrued expenses and other current liabilities
7.
NOTES PAYABLE
Senior Notes Payable
A summary of outstanding senior notes payable is as follows:
Term loan
Less:
Debt discount
Senior notes payable
On March 23, 2022 (the “Hayfin Closing Date”), the Company and all of its subsidiaries entered into the Hayfin Credit Agreement with Hayfin. The Hayfin Credit Agreement provided for a senior secured term loan facility in a principal amount of up to $175.0 million (the “Hayfin Credit Facility”), composed of (i) a term loan made on the Hayfin Closing Date in the principal amount of$ 150.0 million (the “Hayfin Closing Date Loan”), and (ii) a delayed draw term loan in the principal amount of $25.0 million (the “Hayfin Delayed Draw Loan” and, together with the Hayfin Closing Date Loan, the “Hayfin Loans”). The Hayfin Delayed Draw Loan was not drawn prior to the Ares Closing Date. The Hayfin Credit Facility had a maturity date of March 23, 2027 (the “Hayfin Maturity Date”), subject to acceleration pursuant to the Hayfin Credit Agreement, including upon an Event of Default (as defined in the Hayfin Credit Agreement).
On the Ares Closing Date, the Company paid Hayfin the entire outstanding principal amount underlying the Hayfin Loans and all accrued and unpaid interest thereon, as well as the exit fee of 1.0% of the outstanding principal amount paid. This exit fee had been recorded separately as a non-current liability on the accompanying consolidated balance sheet as of December 31, 2022. In accordance with the terms of the Hayfin Credit Agreement, the Company also paid Hayfin the early prepayment fee in the amount equal 7.0% of the prepaid principal amount of $158.6 million, or $11.1 million.
All of the Company’s obligations under the Hayfin Credit Agreement were secured by a first-priority lien and security interest in substantially all of the Company’s tangible and intangible assets, including intellectual property, and all of the equity interests in the Company’s subsidiaries. The Hayfin Credit Agreement contained certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar debt financings. The negative covenants restricted or limited the ability of the Company and its subsidiaries to, among other things and subject to certain exceptions contained in the Hayfin Credit Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to the Company’s or its subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Hayfin Credit Agreement); change its fiscal year; pay dividends; repay certain other indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the impact of restricting the Company’s ability to make loan repayments under the Hayfin Credit Agreement. In addition, the Company was required (i) at all times prior to the Hayfin Maturity Date to maintain a minimum cash balance of $6.0 million; and (ii) as of the last day of each fiscal quarter, report IVIG product and related revenues for the trailing 12-month period that exceed the amounts set forth in the Hayfin Credit Agreement, which ranged from $75.0 million for the fiscal quarter ended June 30, 2022 to $110.0 million for the fiscal quarter ended September 30, 2023. As of the Ares Closing Date and December 31, 2022, the Company was in compliance with all of the covenants contained in theHayfin Credit Agreement.
As a result of the upfront fee and exit fee paid or payable to Hayfin, the expenses incurred by the Company in connection with this transaction and the value of the Hayfin Warrants and Hayfin Second Amendment Warrants, the Company recognized a discount on the Hayfin Loans in the amount of $13.9million for the year ended December 31, 2022 and an additional debt discount in the year ended December 31, 2023 in the amount of $5.7million. The Company records debt discount as a reduction to the face amount of the debt, and the debt discount is amortized as interest expense over the life of the debt using the interest method. As of the Ares Closing Date, $15.0 million of the aggregate debt discount associated with the Hayfin Credit Facility was unamortized, and this amount is reflected in the loss on extinguishment of debt for the year ended December 31, 2023. Based on the fair value of the Hayfin Warrants and the aggregate amount of fees and expenses associated with obtaining the Hayfin Credit Facility, the effective interest rate on the Hayfin Loans as of the Hayfin Closing Date and as of December 31, 2022 was approximately 13.0% and 16.1%, respectively.
8.
STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is currently authorized to issue up to 10 million shares of preferred stock, $0.0001 par value per share. There were no shares of preferred stock outstanding at December 31, 2023 and 2022.
Years Ended
Expected term
5.5-6.3 years
Volatility
68
%
Dividend yield
Risk-free interest rate
4.20-4.62
1.72-1.73
The following table summarizes information about stock options outstanding as of December 31, 2023, 2022 and 2021:
Weighted
Average
Exercise Price
Options outstanding, vested and expected to vest at December 31, 2021
Forfeited
Expired
Granted
Exercised
Options outstanding, vested and expected to vest at December 31, 2022
Options outstanding, vested and expected to vest at December 31, 2023
Options exercisable
Stock Options Outstanding
Stock Options Exercisable
Range of
Exercise Prices
Options Outstanding
Remaining
Contractual
Life (Years)
Weighted Average Exercise Price
Aggregate Intrinsic Value
($000’s)
$1.10 - $1.67
$1.73 - $2.60
$2.67 - $4.01
$10.80 - $16.20
Average Grant
Date Fair Value
Vested
Balance at December 31, 2023
Total stock-based compensation expense for all awards granted under the Company’s equity incentive plans for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):
Total stock-based compensation expense
9.
RELATED PARTY TRANSACTIONS
The Company leases an office building and equipment from Areth, LLC (“Areth”) pursuant to an agreement for services effective as of January 1, 2016, as amended from time to time, and pays monthly rent on this facility in the amount of $10,000. On October 18, 2022, the Company amended the agreement to extend its term to December 31, 2026, with automatic successive one-yearrenewals thereafter. Either party may terminate the agreement by providing the other party with one year’s prior written notice. Rent expense for the years ended December 31, 2023, 2022 and 2021 amounted to $0.1million. Areth is a company controlled by Dr. Jerrold B. Grossman, the Vice Chairman of the Board, and Adam S. Grossman, the Company’s President and Chief Executive Officer. The Company also reimburses Areth for office, warehousing and building related (common area) expenses, equipment and certain other operational expenses, which were not material to the consolidated financial statements for the years ended December 31, 2023, 2022 and 2021.
During the years ended December 31, 2023, 2022 and 2021, the Company purchased certain specialized medical equipment and services related to the Company’s plasma collection centers, as well as personal protective equipment, from GenesisBPS and its affiliates (“Genesis”) in the amount of $0.4million, $0.2 million and $0.2million, respectively. Genesis is owned by Dr. Grossman and Adam Grossman.
On August 15, 2023, two of the Company’s executive officers exercised options to purchase 2,909,721 shares of the Company’s common stock on a cashless basis, and 688,657 shares of common stock were issued to these executive officers, net of 257,867 shares of common stock to cover a portion of their tax liabilities (see Note 8).
10.
General Legal Matters
From time to time the Company is or may become subject to certain legal proceedings and claims arising in connection with the normal course of its business. Management does not expect that the outcome of any such claims or actions will have a material effect on the Company’s liquidity, results of operations or financial condition.
IT Systems Disruption
Vendor Commitments
Pursuant to the terms of a plasma purchase agreement dated as of November 17, 2011 (the “2011 Plasma Purchase Agreement”), the Company agreed to purchase from its former contract manufacturer an annual minimum volume of source plasma containing antibodies to RSV to be used in the manufacture of ASCENIV. The Company must purchase a to-be-determined and agreed upon annual minimum volume from the counterparty, and under the original 2011 Plasma Purchase Agreement the Company was permitted to also collect high-titer RSV plasma from up to five wholly-owned ADMA plasma collection facilities. During 2015, the Company amended the 2011 Plasma Purchase Agreement to (i) allow the Company to collect its raw material RSV high-titer plasma from any number of wholly-owned ADMA plasma collection facilities and (ii) allow the Company to purchase its raw material RSV high-titer plasma from other third-party collection organizations, in each case, provided that the annual minimum volumes from the Company’s former contract manufacturer were met, thus allowing the Company to expand its reach for raw material supply as it executes its commercialization plans for ASCENIV. Unless terminated earlier, the 2011 Plasma Purchase Agreement expires in June 2027, after which it may be renewed for two additional five-year periods if agreed to by the parties. On December 10, 2018, the Company’s former contract manufacturer assigned its rights and obligations under the 2011 Plasma Purchase Agreement to Grifols Worldwide Operations Limited (“Grifols”) as its successor-in-interest, effective January 1, 2019.
On June 6, 2017, the Company entered into a Plasma Supply Agreement with its former contract manufacturer, pursuant to which the counterparty supplies, on an exclusive basis subject to certain exceptions, to ADMA BioManufacturing an annual minimum volume of hyperimmune plasma that contain antibodies to the Hepatitis B virus for the manufacture of Nabi-HB. The Plasma Supply Agreement has a 10-year term. On July 19, 2018, the Plasma Supply Agreement was amended to provide, among other things, that in the event the counterparty elects not to supply in excess of ADMA BioManufacturing’s specified amount of Hepatitis B plasma and ADMA BioManufacturing is unable to secure Hepatitis B plasma from a third party at a price that is within a low double- digit percentage of the price that ADMA BioManufacturing pays to the counterparty, then the counterparty shall reimburse ADMA BioManufacturing for the difference in price ADMA BioManufacturing incurs. On December 10, 2018, the Company’s former contract manufacturer assigned its rights and obligations under the Plasma Supply Agreement to Grifols, effective January 1, 2019.
Post-Marketing Commitments
In connection with the FDA approval of the BLA for BIVIGAM on December 19, 2012, Biotest committed to perform two additional post-marketing studies, a pediatric study to evaluate the efficacy and safety of BIVIGAM in children and adolescents, and a post-authorization safety study to further assess the potential risk of hypotension and hepatic and renal impairment in BIVIGAM-treated patients with primary humoral immunodeficiency. These studies were required to be completed by June 30, 2023. Both studies have been completed and the study reports have been submitted to the FDA. ADMA had assumed the remaining obligations, and the costs of the studies were expensed as incurred as research and development expenses. For the years ended December 31, 2023, 2022 and 2021, the Company incurred expenses related to these studies of $1.7 million, $2.2 million and $1.7 million, respectively.
In connection with the FDA approval of ASCENIV on April 1, 2019, the Company is required to perform a pediatric study to evaluate the safety and efficacy of ASCENIV in children and adolescents. For the years ended December 31, 2023, 2022 and 2021, the Company incurred expenses related to this study in the amount of $1.0 million, $0.5 million and $0.6 million, respectively. The Company expects to incur expenses of approximately $1.5 million to complete this study, which is required to be completed by June of 2026.
11.
INCOME TAXES
A reconciliation of income taxes at the U.S. federal statutory rate to the benefit for income taxes is as follows:
Years Ended December 31,
Benefit at U.S. federal statutory rate
State taxes - deferred
Increase in valuation allowance
Research and development credits
Benefit for income taxes
A summary of the Company’s deferred tax assets is as follows:
Federal and state net operating loss carryforwards
Federal and state research credits
Interest expense limitation carryforwards
Transaction costs
Deferred revenue
Accrued expenses and other
Total gross deferred tax assets
Less: valuation allowance for deferred tax assets
Net deferred tax assets
As of December 31, 2023, the Company had federal and state (post-apportioned basis) net operating losses (“NOLs”) of $315.6 million and $216.4 million, respectively, as well as federal research and development tax credit carryforwards of approximately $0.1 million. Approximately $35.6 million and $95.1 million of the foregoing Federal and state NOLs, respectively, will expire at various dates from 2028 through 2043, if not limited by triggering events prior to such time. Under the provisions of the Internal Revenue Code, changes in ownership of the Company, in certain circumstances, would limit the amount of federal NOLs that can be utilized annually in the future to offset taxable income. In particular, Section 382 of the Internal Revenue Code (“Section 382”) imposes limitations on an entity’s ability to use NOLs upon certain changes in ownership. If the Company is limited in its ability to use its NOLs in future years in which it has taxable income, then the Company will pay more taxes than if it were otherwise able to fully utilize its NOLs. The Company may experience ownership changes in the future as a result of subsequent shifts in ownership of the Company’s capital stock that the Company cannot predict or control that could result in further limitations being placed on the Company’s ability to utilize its Federal NOLs. As of December 31, 2023, the Company performed a substantive analysis of limitations imposed by Section 382 on historical information and concluded that no ownership changes occurred as of December 31, 2023 and 2022. As part of the substantive analysis, the Company did determine that an additional $14.2 million of state NOLs were not subject to limitation of prior ownership changes and are therefore available to offset future taxable income.
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income, exclusive of reversing taxable temporary differences, to outweigh objective negative evidence of recent financial reporting losses. Based on these criteria and the relative weighting of both the positive and negative evidence available, management continues to maintain a full valuation allowance against its net deferred tax assets.
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. The amount of the liability for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. Components of the liability are classified as either a current or a long-term liability in the accompanying consolidated balance sheets based on when the Company expects each of the items to be settled. The Company does not have any unrecognized tax benefits as of December 31, 2023 and 2022 and does not anticipate a significant change in unrecognized tax benefits during the next 12 months.
12.
LEASE OBLIGATIONS
The Company leases certain properties and equipment for its ADMA BioCenters and ADMA BioManufacturing subsidiaries, which leases provide the right to use the underlying assets and require lease payments through the respective lease terms which expire at various dates through 2033. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense for such leases are recognized on a straight-line basis over the lease term. All other leases are recorded on the balance sheet with assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. Right-to-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of the lease payments is determined using the Company’s incremental borrowing rate as of the lease commencement date. For the lease liabilities recognized during the years ended December 31, 2023 and 2022, the Company used discount rates of 13% to 16% to determine the present value of its lease obligations. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is reflected in Plasma center operating expenses and Selling, general and administrative expenses in the accompanying consolidated statements of operations. Aggregate lease expense for the Company’s operating leases for the years ended December 31, 2023, 2022 and 2021 was $2.4 million, $2.1 million and $1.4 million, respectively. Aggregate cash paid on these leases for the years ended December 31, 2023, 2022 and 2021 was $2.4 million, $1.8 million and $1.4 million, respectively.
During the year ended December 31, 2023, the Company recognized one additional right-to-use asset and corresponding lease liability in the amount of $0.1 million for office equipment leased for the Boca Facility.During the year ended December 31, 2022, the Company recognized additional right-to-use assets and corresponding lease liabilities aggregating to approximately $4.0 million in connection with two new property leases where the Company has opened additional plasma collection facilities, a property lease for the storage of raw materials inventory and a property lease for the building that the Company utilizes as its corporate headquarters (see Note 9). Including a finance lease the Company entered into in June 2018, the Company has aggregate lease liabilities of $10.8 million and $11.6 million as of December 31, 2023 and 2022, respectively, which are comprised primarily of the leases for the Company’s plasma collection centers. The Company’s operating leases have a weighted average remaining term of 7.6 years. Scheduled payments under the Company’s lease obligations are as follows (in thousands):
Year ended December 31, 2024
2026
2027
2028
Thereafter
Total payments
Less: imputed interest
Current portion
13.
SEGMENTS
The Company is dedicated to manufacturing, marketing and developing specialty plasma-derived biologics. The Company’s ADMA BioManufacturing segment reflects the Company’s immune globulin manufacturing and development operations in Florida, acquired on June 6, 2017. The Plasma Collection Centers segment consists of ten plasma collection facilities as of December 31, 2023, all of which were operational,collecting plasma, and hold an approved license with the FDA (and of which three facilities have received approvals from the Korean Ministry of Food and Drug Safety as well as FDA approval to implement a Hepatitis B immunization program). The Corporate segment includes general and administrative overhead expenses. The Company defines its segments as those business units whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to analyze performance and allocate resources. The Company’s CODM is its President and Chief Executive Officer. Summarized financial information concerning reportable segments is shown in the following tables:
Year Ended December 31, 2023
(in thousands)
BioManufacturing
Plasma Collection
Centers
Corporate
Consolidated
Revenues
Income (loss) from operations
Interest and other expense, net
Net income (loss)
Capital expenditures
Depreciation and amortization expense
Total assets
Year Ended December 31, 2022
Year Ended December 31, 2021
Loss from operations
14.
OTHER EMPLOYEE BENEFITS
The Company sponsors a 401(k) savings plan. Under the plan, employees may make contributions which are eligible for a Company discretionary percentage contribution as defined in the plan and determined by the Board. The Company recognized $1.3 million, $1.3 million and $1.1 million of related compensation expense for the years ended December 31, 2023, 2022 and 2021, respectively.
15.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31, 2023, 2022 and 2021 is as follows:
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
Noncash Financing and Investing Activities:
Equipment acquired reflected in accounts payable and accrued liabilities
Right-to-use assets in exchange for lease obligations
Warrants issued in connection with notes payable
16.
CONCENTRATIONS
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. At December 31, 2023, five customers accounted for approximately 98% of the Company’s consolidated accounts receivable. At December 31, 2022, twocustomers accounted for approximately 92% of the Company’s consolidated accounts receivable.
For the year ended December 31, 2023, two customers accounted for approximately 72% of the Company’s consolidated revenues. For the year ended December 31, 2022, two customers accounted for approximately 74% of the Company’s consolidated revenues. For the year ended December 31, 2021, four customers accounted for approximately 81% of the Company’s consolidated revenues.
During the years ended December 31, 2023 and 2022, plasma purchases from Grifols totaled approximately $9.5 million and $47.7 million, respectively, or approximately 21% and 65%, respectively, of the Company’s total inventory purchases.