Good afternoon, and welcome to the ADMA Biologics Fourth Quarter and Full Year 2019 Financial Results Conference call on Thursday, March 12, 2020. [Operator Instructions]. Please be advised, this call is being recorded at the company's request and will be available on the company's website approximately 2 hours following the end of the call. At this time, I would like to introduce Mr. Sam Martin, Managing Director of Argot Partners ADMA's Investor Relations firm. Sir, please go ahead.

Thank you, Joanna. Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics' financial results for the fourth quarter and full year 2019. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Lenz, Executive Vice President and Chief Financial Officer. During today's call, Adam will provide some introductory comments and provide a corporate update, and then Brian will provide an overview of our fourth quarter and full year 2019 financial results. Adam will then provide some brief summary remarks before opening up the call for your questions. Earlier today, we issued a press release detailing our fourth quarter and full year 2019 financial results. The release is available on our website at admabiologics.com. Before we begin our formal comments, I'll remind you that we will be making forward-looking assertions during today's call that represent the company's intentions, expectations or beliefs concerning future events, which constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to factors, risks and uncertainties such as those detailed in today's press release announcing this call and in our filings with the SEC, which may cause actual results to differ materially from the results expressed or implied by such statements. In addition, any forward-looking statements represent our views only as of the date of this recording and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update any such statements. We refer you to the disclosure notice section in our earnings release of May and the Risk Factors section of the annual report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. With that, I would now like to turn the call over to Adam Grossman. Adam?

Thanks, Sam. And this is our first earnings call, quarterly conference call at ADMA Biologics. So welcome, everyone. And I've got all these fancy prepared remarks, which I am going to read, but really, for those that know me well, today was quite a day, interesting trading day. It's been an interesting trading, I guess, a couple of weeks. And I -- before I get into the prepared statements, and then we open it up for questions, I really just want to touch base and say, we're very proud of the fact that we were able to complete a strong financing earlier this year. We raised a lot of capital that's going to carry us to accomplish a number of milestones. The company is in the strongest capital position it has ever been in. We have 3 FDA-approved drugs. We are producing drug, manufacturing drug, releasing drug, making sales of drug, treating patients, helping to fulfill the tight supply in the immune globulin market in the United States. There's absolutely nothing that's changed with our company's fundamentals. I wake up every day very upset about where we are in the world from a financial market perspective from a macro picture. But we're excited here at ADMA Biologics because unless the government tells us we can't come to work, we've got a team of 350 some odd people here that are locked arm in arm, working very hard for our shareholders to execute on the plans that we've outlined for you. So I just want to start the call by saying, things are great at ADMA. The stock price is out of my control. And the ups and downs can make people sick. And the one thing I can say is, it's a rollercoaster ride, and what they all tell me…

Thank you, Adam. Since we issued a press release earlier today outlining our fourth quarter 2019 and full year 2019 financial results, I'll just review some of the highlights. For the fourth quarter of 2019, our total revenues were $12 million compared to $4.1 million for the same period in 2018, and this reflects an increase of approximately $7.9 million or 197%. The increase in revenues was attributed to several new contributing factors, which include the first commercial sales of ASCENIV in October 2019, the commercial relaunch of BIVIGAM in August of 2019. Sales of our intermediate fractions related to our recently disclosed new customer manufacturing and supply agreement and contract manufacturing revenue, all manufactured here at our Boca Raton Florida Facility. These revenues were partially offset due to ADMA having 1 FDA licensed plasma center during 2019, compared to having 2 FDA licensed plasma centers throughout 2018, generating revenue. ADMA transferred ownership of 2 of those plasma centers on January 1, 2019. This was part of the purchase price for the Boca Raton Florida Facility. We've already put plans in place to expand our plasma collection center network. From currently having one FDA-approved plasma center to expanding our plasma center network to including additional 5 to 10 plasma centers throughout the U.S. over the next 3 to 5 years. Our consolidated net loss for the fourth quarter 2019 was $10.6 million or $0.18 loss per basic share and diluted compared to a consolidated net loss for the fourth quarter of 2018 of $18 million or $0.39 loss per basic and diluted share. The decrease in net loss of $7.4 million was primarily due to higher revenues of approximately $7.9 million and a reduction of total operating expenses of $700,000 during the fourth quarter 2019 compared to the fourth quarter…

Thanks again, Brian. Again, I've got more prepared stuff here. But before I read this prepared stuff, I'm going to talk a little bit about our key strategic priorities for the upcoming year. And we woke up this morning to the same news that you all did, NBA is shut down. We saw baseball's closed. I think my kids' lacrosse is canceled for the rest of the season. So these strategic goals and priorities I'm going to outline for you are based upon assumptions that I have today. As we sit, our supply chain is intact. Our staff is coming to work, we're doing well. So this could change, refer to our risk factors in there. So I'm going to read this, and I don't want people to get all upset. Like how are you going to accomplish all this? We're realists. We've got contingency plans in place. Again, we've got the inventory. We're buying the inventory. We've got the cash to buy the inventory. We've got the staff to make the drug and we've got demand for the product to pull it through. So with that, I'll get back to the written remarks. Looking ahead now to 2020, I'd like to take a moment now to review ADMA's key strategic priorities for the upcoming year. So our goals are to continue to expand the activity of the BIVIGAM and ASCENIV for the treatment of patients with primary immune deficiency and continue to ramp the production throughput for the first full year of commercial sales of our products. To evaluate and implement strategies for potential manufacturing capacity expansion, which are ongoing, to execute on fulfilling the newly secured long commit to produce and sell plasma-derived intermediate fractions, to expand our plasma collection center network by at least 2 centers in 2020 and by at least 5 centers over the next 3 to 5 years. To execute on our supply chain robustness strategy and doing certain fill, finish and other capabilities in-house, secure new supply contracts for their potential CMO opportunities -- finally to enhance our intellectual property portfolio as we put out an announcement set this week, last week?

Last week.

Last week -- job security -- product development -- developments to enhance our intellectual property portfolio and product development pipeline candidate consisting of additional specialty plasma and our hyper-immunoglobulin products targeted to important infectious disease. We are monitoring the COVID-19 global situation. We can report today that there are no members of ADMA's management team, or operational team or otherwise that have been infected with the virus at this time. Presently, we're not experiencing any impact in our supply chain. However, we refer you to our risk factors in our 10-K, as we may not have all the information from our third-party vendors, suppliers, laboratories, et cetera. This is a global pandemic, and we continue to closely monitor the situation. And we hope that our shareholders and our analysts and our stakeholders know that you're dealing with the management team that is nimble, that is flexible, that's on-site at our manufacturing plant every day. Whether my family likes it or not, I'm here. I put the business first. And we're going to do everything we can to ensure that investment and that we protect the continuity of care for the patients that we've made a commitment for. In closing, I'd like to highlight that we're proud of the organization we built over the past 2.5 years. Our company is strong. Today, we have completely transformed the assets that we acquired in June of 2017, and we are now a commercial enterprise with 3 FDA-approved commercial immunoglobulin products. We're not waiting for any more approvals. We've got what we need. Collectively, these three products together with the associated intermediate fractions carry a total revenue potential of approximately $250 million annually or more. We have an FDA compliant manufacturing facility with a 400,000 liter processing capacity and room for expansion. In addition,…

[Operator Instructions]. Your first question comes from the line of Anthony Petrone of Jefferies.

Adam and Brian, congratulations on this -- on all the progress in the past year, and looking forward to continuing to attract the developments here at ADMA. So maybe just in light of where we are in the landscape with coronavirus. Adam, you had a press release last week, talking about expanded IP around ASCENIV that potentially covers 2 strains of coronavirus. One of your competitors has moved ahead to develop a high titer coronavirus product. So maybe where the plasma industry sits in terms of coronavirus? And how feasible can it be that we do have a antibody therapy from this industry to attack this virus, say, within the next year or two years? And then I'll have a couple of follow-ups.

First of all, thank you, Anthony. But as far as timing goes, that's a question for the FDA, how fast they want to approve something. But what I can speak about is that ADMA Biologics has published numerous piece of data in peer review publications. In 2015, I believe it was a journal called frontiers in immunology by the lead authors, Dr. Jordan Orange. We published data that demonstrated that plasma donors that we identify with our patented SDC micro neutralization assay also have high levels of neutralizing antibodies to a panel of seven other respiratory pathogens. Two of those pathogens were two common coronaviruses, 229E and OC43. We then further did additional testing on three batches of ASCENIV compared with a number of batches of commercially available IVIG at that time. And we demonstrated statistically significant levels of antibodies against RSV as well as this panel of other respiratory viruses, including those 2 coronaviruses that I mentioned, somewhere between approximately 2 to 8 fold greater levels of antibodies in commercially available IG. So ASCENIV today is manufactured using this technology. And we feel very confident that the antibody profile of our product as it pertains to respiratory packaging is pretty consistent. That's the way we manufacture the drug. So we've got a patent already issued. We are commercial with this product. Our press release went out before another company's press release. I'm not an IT expert. We've got fancy Shmancy IP counsel from a couple of different firms who we work with. So what I know is that you cannot do anything. People are allowed to investigate whatever they want. It's once they generate some sort of income or revenue -- derive some benefit that we may have an issue. We don't see any issues at this time. In…

No, it does. And I guess, just a couple of follow-ups. I'll let others jump in here. Would be [indiscernible] -- and IG shortages, in particular, and BIVIGAM is obviously launched. And so sort of when I look at the current state of IV shortages. Can you give us on update exactly kind of where that sits? How much slack or lack thereof, is there? And sort of when you consider the shortage situation, but where your balance sheet sits, you have $50 million of inventories exiting fourth quarter. How should we be thinking about 2020 and the potential to convert that into revenues over the next, say, 12 to 18 months?

Okay.You've got it Anthony. So Anthony, you like to use the word shortage, I like to use the word tightness of supply. From my perspective, the plasma industry produced more immune globulin in 2019 than they did in 2018 as a whole. And from the best of my memory, the industry produced more in '18 than they did in '17. So the industry, if you take it as a whole, is producing more immune globulin than ever before. So it's hard to -- shortages. I don't like that term. I like to think that there's a supply and demand imbalance. The demand is outpacing supply. So we look it as -- from looking at some market industry reports that we've read. What's really driving this demand is the growth in secondary immune deficiency, the utilization of T&B cell depleting agents, CAR-T cell immune modulating products, other novel therapies for autoimmune diseases in cancer. When you use these immune modulation products, it modifies the immune system and some patients may be more susceptible to opportunistic infection. Reports when we were at Jpmorgan, we were looking very closely at these reports. Back then, we were seeing somewhere in the range of 5% to 8% supply and demand imbalance. I defer to you, Anthony. I know that you track this stuff well. So it may be greater than that, it may be less than that. But different products, you may see some spot shortages, if you will. But as a whole, it's really being driven by the utilization, something that my sales force, we had a call with them today. I wanted to be prepared for this call and something that we're hearing from some of our field force out there is that in light of the current coronavirus situation, patients with immune deficiencies who are on IG. Some clinicians if they have the availability of product are [indiscernible] of certain immune compromised patients. This is because basic principles of immunology, teach us more antibodies better than less when trying to treat or prevent an infection. And the physicians don't know if their patients are going to be able to come in as regularly as they've been able to due to certain restrictions that may be put in place. So I think that this tightness of supply is going to continue for the foreseeable future. I know that there are a number of activities being undertaken from other manufacturers. But we really believe that as much product as ADMA can produce this year, next year, the year after, through 2024. We believe that the market will easily absorb all the immunoglobulin that we can produce out of this plant. To touch on your second part of the question, I'm going to turn it to Brian, please.

Sure. Thanks, Adam. So the -- Anthony, as you mentioned, converting the $50 million in inventory into sales. What I want to have everybody to keep in mind is the $53 million that we have on the balance sheet at the end of 2019, this isn't our cost. There's no margin -- there's no profit margin in that. That profit margin and gross margin will be recognized throughout 2020 and beyond. And also keep in mind, there's an inventory sales cycle, as we mentioned earlier, from 7 to 12 months. And as part of the inventory growth, we wanted to plan for the future as we purchased that inventory and build that inventory up after we received the FDA approvals in the middle of 2019, we anticipated future year-over-year revenue growth throughout 2020 and beyond. So that's how I think about the $53 million. There's no margin. There's no profit. It's at our cost. And then think about future year-over-year revenue growth.

Your next question comes from the line of Elliott Wilbur of Raymond James.

This is actually [indiscernible] Cameron on for Elliot. Congrats on the progress. Glad everyone is safe. So I just have a couple here on ASCENIV and the commercial strategy going forward. So first off, could you update us on some other aspects of the initial launch dynamics on ASCENIV. And I know that you mentioned some details around the inventory build. But when would you expect to be in full launch mode from a commercial perspective? And maybe what are some of the gating factors in terms of reaching that point, especially when looking at things like reimbursement?

Sure. Thanks for the question. So when you say Full launch mode. So when you say full launch mode, I'm interpreting that to mean when we've hit full commercial capacity. We're launching the product. ASCENIV is a very detailed sell. As many folks know and the investment thesis around ASCENIV is that since it's manufactured like a hyperimmune, it is priced like a hyperimmune. So it's typically priced at a premium to where standard immune globulins are sold. We're very pleased with the launch so far. We're making drug. We've got drug in the channel, and we're pulling that drug through and it's being utilized in patients. The reimbursement pathways for ASCENIV is just to being used in a hospital-based setting today. We're working very closely with P&T committees, getting emergency access and emergency approval and the product is being covered under certain DRGs when certain patients are readmitted to a hospital setting with say, a type of pneumonia or an RSV confirmed diagnosis. Number of P&T committees have approved the use. In the outpatient setting, there are miscellaneous J-codes that can be used to obtain reimbursement from private and public payers at the present time. We plan a number of center specific as well as national, medical education symposiums. Some of these are slated for later in the year. Typically, as I mentioned earlier in my -- with my prepared remarks, but from IDWeek is typically in October. So we're very hopeful that IDWeek is going to take place. But we've got -- right now, we've got 5 salespeople pounding the street, we've got 3 field medical science liaisons, and we're out there responding to medical information requests and meeting with clinicians, payers and treaters all the time. We feel very good about the uptake of ASCENIV.

Okay, perfect. That's helpful. And I guess as a related follow-up. Are there any key milestones tough for us to watch for in terms of -- out of those specific payer negotiations or the P&T clinic reviews? And a second part to that, I guess, could you discuss any plans to build out the commercial organization over the course of 2020, either in terms of adding additional field reps or maybe even a chief commercial officer, et cetera?

Sure. I think with respect to milestones, I mean, it's not typical that I -- we don't have plan on our press release schedule that when we get payer coverage, we weren't necessarily planning on announcements. I mean, we think we're going to let revenue speak quarter-over-quarter as we go. The plan is to enhance our commercial team. But I'm not going to sit here and blow smoke and say, yes, we're going to hire another 3, 4, 5 people and another 3 medical science liaisons. I mean, look, if we find some super duper people, we're going to bring them on. But quite frankly, I mean, let's be straight. Right now, a number of hospitals around the country aren't allowing people in. So I think we've got to keep our eyes open. We've got to continue to move forward. We've got a good solid core team that's well-trained and understands this product. So I feel good about that, but I'm not going to sit here and tell you, yes, we're going to round up a whole team, and we're going to hire a fancy chief commercial guy. I mean, we'd love to do it all. It's part of our budget and our plan, but I got to see how this plays out. Hopefully, that's a fair answer. And I won't get my face ripped off for that.

Your next question comes from the line of Leland Gershell of Oppenheimer.

I want to ask about your ability to get hold of raw source -- without using your own centers. Right now, you're growing over the next few years. I know you have an agreement with Grifols. If you could remind us durability of that, when that expires? And also, when you say that you're going to build another, I think, I guess, 5 to 10 collection centers, would that be the right number for you to be self-sufficient? Would that align with your current fractionation abilities in terms of the Boca plant?

All great questions. Something I do want to say is that we're not experiencing any changes in donor behavior to date at our plasma collection center. Additionally, I had meetings yesterday with my friends over at Grifols. And they, too, have confirmed to me that they're not seeing any significant differences in donor collections, we are receiving all of the plasma that we are contracted for. The existing contract that we have, the first term expires in June of 2022. And then we have 2 2-year extensions on that agreement. We're very good partners with Grifols. We do certain testing for Grifols. They are our plasma supplier. As you know, they acquired the biotest plasma centers a number of years ago. They continue to be a very, very good provider and ADMA is receiving all of the plasma under its contract. We've got firm contracts in place, Leland. I don't see Grifols playing with these contracts at all. They are a tried and true collector of plasma, they have hundreds of centers in the United States. And for the amount of plasma that we're contracted for. It's a -- it's a pimple on the elephants behind from a supply standpoint. As you know, my plant here is 4,000-liter capacity. We believe it has the potential to grow to maybe 500,000, 600,000 liters capacity. Typical plasma center collects about 50,000, 60,000 liters per year. If you build good ones, maybe they get a little more. So when we're talking about building up the 10 centers, that would give us in that range of about 600,000 liters annually. So to answer your question, yes, that would make us totally self-sufficient. Our goal right now is to really find the right locations, get these centers onboarded because I think most folks know, I know that you've covered this in your report. Typical plasma center takes somewhere between $3 million, $3.5 million to build and obtain FDA approval. It's about a two year process, start to finish. And these centers trade on the open market, if you're looking to value them in the $10 million, $12 million, $15 million range. I also like to look at plasma as it's a different type of oil. It's a different type of commodity. I was talking to our board the other day, and this past Monday, when the market was down, the first 2000 point day ever, I said to them. Well, the good news is, guys, that $30 million, $40 million, $50 million of inventory we had. Guess what? It's worth more today than it was on Friday. So the value of plasma remains strong. ADMA's contracts are in good standing. We've got the plasma we need to, let's just say, produce the revenues that would keep our analysts happy from an expectation standpoint.

Okay. And then just kind of another way to ask about maybe a similar topic is, if you were to slow down on the build-out of those collection centers or just defer them, would you be concerned about getting hold of plasma? Or is this really more to have ADMA become self-sufficient sort of down the road you may look to some kind of strategic opportunity?

I can tell you, I lose sleep over a lot of things and plasma supply is not one of them. We have a very good relationship with our vendors. And Grifols is our main vendor. They're not our only vendor. So look, you're dealing with a management and board that has an extensive track record of success and industry relationships throughout the plasma industry. I am not concerned. My hope and goal is that this contract continues throughout the 2 extension terms as well as we build all of our centers. And I have excess supply there, and I can maintain the sale of source plasma to third parties as a revenue line. But just know that we're doing this because, look, I'm sitting in this office today, and I'm talking to you all from Boca Raton. We had no intent of owning this facility, but when I rely on third parties, sometimes they don't do the best job for me. I want to make sure my shareholders are protected. I have millions of dollars of my own money invested in this company, and I count on myself. I count on my management team and I count on my staff. And when I rely on my team and myself, we seem to get things done. When I rely on others, I've been screwed. I don't want to get screwed anymore. So we're just doing this because we think it makes sense. Globally, the demand for plasma is increasing at a rapid pace. And we don't talk about the pricing of source plasma, but the pricing of source plasma has been growing exponentially. You can raise the price of raw material a lot faster than you can raise the price of a finished drug that's commercially available. So a lot of folks don't look at that in the plasma space, but that's what makes our business unique. And any way you look at it, Leland, we want to ensure, he who has the raw material or she who has the raw material were they, whoever it may be, has the raw material, can make the IG. So we want to ensure that we have the right amount of material encumbered, so we can continue. Look, I'm coming out here, and I'm putting my neck on the line saying, when we get to peak potential, 4 or 5 years out, we say we can generate $250 million or more revenue out of this place. I can't do it unless I have plasma. That's why I'm doing it.

Your next question comes from the line of I-Eh Jen of Laidlaw & Company.

Congrats for your first earnings call, it's a pretty good start.

Thanks, I-Eh.

Two questions here. The first one is that you mentioned earlier -- as you have mentioned earlier, Anthony, that there are people try to make COVID-19 IVIG. And given now in the United States, that's unfortunately become available as well as there is, I guess, the government has about $8 billion fund, I believe $5 billion of those was tried to -- for treatments. Is there a thought for you guys to thinking about along that line, maybe work on that to sort of increase your pipelines?

Sure. Yes, great questions. Thank you. I can tell you, look, we like grants. We like non-dilutive capital. We know our shareholders like non-dilutive capital. We believe that as a company that is sitting with IP that has the words coronavirus in it and product publications that talked about coronavirus. We think we're in we're in a good spot. But again, nothing is guaranteed. And I assume that if we were awarded any sort of grant money or any sort of funding, that would certainly be something that we would announce as we'd be very proud of that. You mentioned it, and I guess, Victor mentioned it, too. One thing I do want to point out is the FDA issued some blood guidance guidelines yesterday. And if I recall correctly, they're saying that people who have been infected with COVID-19 or have been in close contact, they have to wait at least 28 days until after they recover in order to donate blood or plasma. There are many ways to make a hyperimmune. And I don't think we have the time to get into all of these ways, but you can use vaccines, you can use naturally occurring antibody. Again, I've talked about that ADMA has high titers to OC43 in ASCENIV, and we published this data and that OC43 is based on a couple of medical papers that I've seen from our med affairs department, OC43 does cross react with the COVID-19. I think it's -- I don't have enough details to comment on what some of the other plasma companies are doing. But I think it would be very hard, at least in the near-term to get enough plasma at least from U.S. citizens to be able to make a hyperimmune. And again, it takes for the best company, 7 to 12 months to produce a batch. Now, can FDA expedite some of these things? Can FDA give you emergency use in emergency access INDs and approvals? Yes, so I'm not going to say something can't happen, but I give my commitment that we are making as much noise as we possibly can. We are doing our best to gain attention from the powers that the -- in the government, the CDC, the NIH, the FDA and the medical community. So we feel very good about our position. Hopefully, that answers your question.

Absolutely. And maybe just one more question kind of on this. This winter seems to be a warmer ones. I know you're not going to break down the revenue sales on different lines as well, some guidance. But do you feel that given that it is not fully over yet, the ASCENIV cells of fifties and could that be impact by that, but maybe offset or the other way by having COVID-19. So maybe there's more patients, more people willing to take a higher dose. So how do you see this? Is there a...

I-Eh, I can tell you we are -- it would be against the law for us to go out and promote the product for something outside of its labeled indication. I'm not prepared to comment on how sales are in Q1. I can just tell you, I feel very good about the launch. I can tell you that the product is being purchased. It's being utilized. It's being infused into patients, and we feel very, very good about that. I do think that the awareness of the general public to respiratory viruses and that the habit that they can reak on the elderly and the immunocompromised certainly prevalent. It's nice that I've got CNN, FOX and MSNBC championing the message that I've been pounding on the table for the last 15 years and putting between myself and my family, approximately $15 million behind. So we believe in this. We think that plasma products, certainly, they may not be the end all be all answer, but we certainly believe that they help and they are certainly a very, very medically plausible and scientifically rational way to treat immunocompromised patients suffering from different viruses and bacterial infections.

Okay, great. Again, congrats on the good start.

Thank you, I-Eh. And it's only been a warm winter in the Northeast. It's been cold in Florida, if you can believe it this winter. So climate change. I saw the funniest meme ever yesterday. I saw climate change needs to call coronavirus' PR consultants. So I thought that was pretty funny. Any other questions?

Speakers, I'm showing no further questions at this time. And I would like to turn the conference back to Mr. Adam Grossman.

Okay. Thank you, everybody. Our timing was certainly interesting. Again, I'm very pleased that we completed the financing when we did into those shareholders who came in to support the great mission of our company. We certainly thank you. And I can tell you the patients, certainly, thank you. Today's call -- hopefully, the next time we have a call, the market is in a less volatile state. But I thank everybody for your continued support. This is a good company with good products. And we're going to continue to help people. So thank you for dialing in, and have a very good day and stay safe.

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.