Good afternoon and welcome to the ADMA Biologics Second Quarter 2020 Financial Results Conference call on Wednesday, August 5, 2020. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being recorded at the company's request and will be available on the company's Web site approximately two hours following the end of the call. At this time, I would like to introduce Mr. Michelle Pappanastos, Managing Director at Argot Partners, ADMA's Investor Relations firm. Please go ahead.

Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics' financial results for the second quarter 2020. 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 the company's second quarter and six months ended June 30, 2020 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 the second quarter 2020 financial results. The release is available on our Web site 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, except as required by the federal securities laws. We refer you to the disclosure notice section in our earnings release we issued today and the Risk Factors section of our 2019 annual report on Form 10-K and our second quarter 2020 10-Q which we expect to file following this conference call for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. With that, I would now like to turn the call over to Adam Grossman. Adam?

Thank you, Michelle. Good afternoon, everyone. And thank you for joining us on this afternoon's call. We hope you and your families remain healthy and safe as we all continue to navigate this new world of living with COVID-19. At ADMA, the first half of 2020 was marked by several key achievements and milestones, solidifying ADMA's forward-looking growth strategy. Like others, we faced some challenges associated with COVID-19 and its impacts as we continue to navigate through these unprecedented times. Despite these challenges and our instituting ongoing remote work from home and no travel policies, the company's staff continue to forge ahead and chip away at achieving our stated goals and objectives. ADMA continues to make progress with its manufacturing, supply chain and commercial objectives. We are proud to be a growing company in the plasma products industry. We are proud to be a company that's on the front lines interacting with convalescent COVID-19 plasma donors and having a voice to affect change as a member of the COVID-19 Global Plasma Alliance. We are working on a number of early stage development activities at the present time targeting COVID-19, including testing assays, as well as potential treatments with differentiated plasma-derived therapies. As we progress with these R&D activities, we will be sure to inform our stakeholders. We thank you, our shareholders, for your continued support and commitment as an important part of the ADMA Biologics team, assisting us to pursue forward-thinking research and development activities, with the promise and power of plasma-derived antibody products. Thank you. Now, I would like to review progress in the second quarter and some of our recent milestones and achievements. At the end of June, we announced the opening and first collections at our new plasma collection. We have successfully submitted the accompanying biologics license…

Thank you, Adam. Since we issued a press release earlier today outlining our second quarter 2020 financial results, I'll review some of the highlights. For the three months ended June 30, 2020, total revenues were $7.8 million compared to $6.6 million for the second quarter of 2019. This represents an increase of approximately $1.2 million or 19%. The favorable revenue realized during the second quarter of 2020 was primarily due to sales of BIVIGAM, ASCENIV and plasma-derived intermediate fractions compared to no sales from these products during the same prior year period. Recall, both ASCENIV and BIVIGAM were approved by the FDA in April and May of 2019, respectively, and the contract for certain plasma-derived intermediate fractions was executed in early 2020. Subsequent to these FDA approvals of ASCENIV and BIVIGAM, our Boca facility began the commercial production ramp up during the second half of 2019. As Adam mentioned earlier, our finished goods commercial inventory has increased by 75% from $5.2 million as of December 31, 2019 to $9.1 million as of June 30, 2020. Please keep in mind, in accordance with Generally Accepted Accounting Principles, the value of our inventory is stated at our cost. This increase reflects our stated manufacturing cycle time from the second half of 2019's commercial production ramp up and we look forward to now being in a good position with solid inventories to continue adding customers, distribution partners and prescribers over the coming quarters and potentially generating considerable increased revenue during the second half of 2020 compared to the first half of this year. Consolidated net loss for the three months ended June 30, 2020 was $20.2 million or $0.23 loss per basic and diluted share compared to a consolidated net loss of $13.2 million or $0.25 loss for basic and diluted share for the second quarter of 2019. For the six months ended June 30, 2020, total revenues were $18 million compared to $10.1 million for the six months ended June 30, 2019. And this represents an increase of $7.9 million or nearly 80%. The increase in revenues was primarily attributable to sales of BIVIGAM, ASCENIV and plasma-derived intermediate fractions, none of which again were available for commercial sale during the same prior-year period. Consolidated net loss for the six months ended June 30, 2020 was $39.4 million or $0.49 loss per basic and diluted share compared to consolidated net loss of $26.3 million or $0.53 loss per basic and diluted share for the six months ended June 30, 2019. At June 30, 2020, ADMA had cash and cash equivalents of $75.8 million and accounts receivable of $6.5 million. And this is compared to cash and cash equivalents of $26.8 million and accounts receivable of $3.5 million at December 31, 2019. ADMA's net working capital as of June 30, 2020 was $130.1 million compared to $71.8 million as of December 31, 2019. With that, I will now turn the call back over to Adam for closing remarks.

Thank you, Brian. ADMA has made excellent progress during 2020 thus far on its key corporate priorities, including initiatives to strengthen our supply chain, which will greatly benefit the company over the long term by reducing operating costs, improving margins and shortening production cycle timelines. Given the unprecedented macro market conditions in the US and the COVID-19 effects being experienced by us and our third-party vendors and suppliers, we believe these effects are temporary and that our future is bright and ripe for growth. While we have experienced some variability during our first year of sales, especially since we are commercializing our products on the backdrop of the COVID-19 pandemic, we are highly confident that revenues for the second half of 2020 will be considerably higher than that of the first half. And most importantly, for our shareholders, we remain on track to achieve our stated goal of generating in excess of $250 million in annual revenues over the next three to five years. I want to assure all of our stakeholders that our fundamentals remain strong and that the demand for our immune globulin products remains robust. We remain deeply committed to successfully navigating the ongoing commercial rollouts for BIVIGAM and ASCENIV and bringing each product to patients with life-threatening immune deficiencies. To the patients receiving our products, you have mine and my team's entire commitment to work relentlessly to ensure you have your immune globulin available when you need it. You can count on ADMA Biologics as a reliable and committed provider of immune globulins. We extend our sincerest gratitude and commend the efforts of the entire ADMA Biologics team that continues to rise to the challenge of navigating the company through this burdensome period in order to ensure that the critical plasma-derived, antibody-rich products we produce are available over the long term and continuously for our patients and customers. I truly thank all of you. With that, we will now open up the call for your questions. Operator?

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

Hey, this is Zack on for Anthony. Can you just talk about how many batches were locked up and delayed due to FDA testing?

Sure, it was it was a handful. We're not really prepared to give specific, Zack, but it was a few batches. Not very many. But what we can tell you is that if you think about the way we produce our product, this is drug that we had produced 7 to 12 months earlier. They were all ready to go. And unfortunately, due to COVID, we have a lab that's based overseas in the United Kingdom and, unfortunately, they were just unable to get test results to us. And we worked very, very rapidly with FDA. We were really pleased that the issue is totally resolved now. And we've resumed lot releases and we are back in regular lot release land, if that works. But everything has been resolved completely.

Okay, that's helpful. And then, looking at the second half, how should we look at expenses going forward?

Brian?

Sure. So, as we previously mentioned, we manufactured four conformance lots. And we disclosed that it's about a little over $6 million for those batches. I would say that that's – there are some extraordinary items in the cost of sales. But as we continue to grow the organization, grow the plasma operating centers, you would look at it – pretty comparable to where we had the first six months of this year, excluding the conformance batches.

Okay. And then, batch testing on BIVIGAM, can you just give us an update on that?

Batch testing on BIVIGAM for releases or are you talking about the capacity expansion project?

The capacity expansion?

Sure. So, I think during the quarter, we produced some additional conformance badges. And we are on schedule. As I said in my prepared remarks, we do have plans to submit the applications for a number of our ongoing supply chain robustness activities, including the fill finish machine for all three of our products as well as the capacity expansion for BIVIGAM, taking it from the already FDA approved scale of 2,200 liters per plasma pool, scaling that up to 4,400 liters. So, we're on track with the timing, and we will keep the shareholders and our analysts informed, but we're hopeful that we can have this on file with the agency before the end of this year and some of the applications into the first part of 2021.

And our next question comes from the line of Elliot Wilbur with Raymond James.

Just specifically following up on the actual filing process for the scale up, Adam. I presume that would qualify as a prior approval supplement and somewhere in the range of four to six months for final FDA approval. Is that correct?

That's correct, Elliot. I think the way to answer that question, we should be looking at this as if it's a standard prior approval supplement. So, we will put that on file and then the FDA would have four to six months. But I'm optimistic that there are ways to expedite certain reviews with FDA during this period. I think should COVID-19 persist, maybe there are ways that we can work with the agency. They have been very collaborative with us, as noted by resolving some of our other problems, but I think looking at some of the nearest term potential tightness in IG supply, I think that there are mechanisms and maybe some levers we can pull to potentially expedite that. But for budgeting, forecasting, planning purposes, we are looking this as – that's correct, it is standard PAS, prior approval supplement, to amend our existing FDA-approved BLA to allow us to manufacture at that scale.

Okay. And then, with respect to ASCENIV, obviously, this is a very detailed sell. To some extent, that's kind of been hindered in the current environment. But just any anecdotes that you can offer in terms of a direct physician interaction detailing the product discussions with P&T committees, just trying to get a sense of sort of where you are kind of here in the early stages of that commercial launch?

Sure. I'll just kind of straight on and say, P&T committees, getting everybody that you need is definitely hard. With that being said, we've had a number of customer engagement meetings one on one at academic centers, at regional medical centers as well as in the outpatient setting for ASCENIV. I think that in light of the current environment and the current situation with the backdrop of COVID-19 and the increased awareness, if you will, an understanding that antibodies that are in immune globulin and that are naturally occurring antibodies are helpful when trying to manage, prevent and retreat different types of infectious diseases. So, we certainly had a number of inbounds requesting information through our medical affairs department. We've got a full library of information that we can share depending upon the patient populations. As well as in the outpatient setting, we're seeing that there are certain clinicians out there who are looking at different risk factors that their patients have, looking at environmental risk factors. And if you've seen, Elliot, the asceniv.com website has been up for a number of months now. And I think if you go through the asceniv.com, there are certain areas of information there that talk about the types of patients that may be at a higher risk or increased risk for having problems due to respiratory infections. And roughly 90% of patients who are on IVIG still have problems with certain chronic persistent recurrent infections. So, we're seeing some patients receiving authorization and third-party payer approval to switch from standard IG on to ASCENIV and we're very hopeful that, with this recent announcement that we've received, a reimbursement price, if you will, of our ASP, plus 6% for Medicare, that this should continue. So, our sales force is busy. I can't tell you that they're flying around the country, going to all the fancy medical meetings, I can't tell you that all of the wonderful symposia and tradeshow booths that we had designed and paid for and planned are being used, but we're keeping it all ready because we think we're going to come through this and be stronger as a country and as a global society, and we'll get the message out there. But we're doing it grassroots, Elliot. We're able to engage one doc at a time, one treatment center at a time, and we feel that we are making progress.

I just want to ask you a follow-up question to one of your last points there with respect to the recent J code issuance. Ultimately, how important do you expect Medicare to be in terms of the ASCENIV book of business? And then, with the issuance of that code, and correct me if I'm wrong, that basically allows clinicians to essentially use the product without any sort of prior authorization in the Medicare setting. Is that correct?

I guess your first part of the question, there are a number of patients that receive IVIG who are on Medicare. What percentage of ASCENIV's business, it's important. Every patient is important to us with a drug like ASCENIV. With respect to payer, there are – to answer your question, the short answer is, yes, you're correct. However, with immune globulin, typically, 90% of immune globulin starts whether they're on label or in evidence-based use, they typically do require some type of prior authorization. So, from what our sales force has been able to do is they work hand in hand – and our medical affairs force provides any sort of papers in the literature and we're working hand in hand with the treaters to achieve the prior authorization needed. But to answer your question, in theory, patients will now be able to receive ASCENIV if they have a prescription for intravenous immune globulins and the doctor feels that ASCENIV is the right product for their patient.

And then, just last question, with respect to COVID-19, there's been some investigator-initiated studies looking at standard IVIG. Curious if you've heard any anecdotes with respect to either further studies or any stories of success there and whether or not you've seen any utilization of ASCENIV in COVID-19 patients, given that there's a certain percentage that also tend to have a fairly high prevalence of RSV and other respiratory illnesses.

Sure. Great question, Elliot. Thank you. I've read the same data as most of you and it seems that, depending upon the dose, depending upon the time that immune globulin is added to the treatment armamentarium, if you will, there has been a trend and some of the data is out of China, some of the data out of the US, but there has been a trend that patients seem to be doing better. There's a plethora of data in the literature to support the utilization of immune globulin to help manage these infections. Now, this is outside of the package insert labeling and ADMA does not have any ongoing trials looking at these uses. I think the way to answer your next question, I hear a lot of things from our sales force. I hear a lot of things from a lot of people. And I don't think it's – I don't have a way to confirm what they're using ASCENIV for other than what people are telling me. So, I think the best way to answer your question is, our products are commercially available. There are other IVIG products that are commercially available, and I'm fairly certain that there are a number of institutions around the country that are deploying the use of immune globulin in the inpatient setting to manage patients with COVID-19. So, I think it's reasonable to assume that, if a clinician has the ability to prescribe one of the ADMA's FDA-approved products, they may. IVIG is used 50%, 60% in an evidence-based way. And I think that it's reasonable to assume that IVIG, including ADMA's products, based on availability, will be used in these hospitals. I think that's the best way I can answer your question.

And our next question comes from the line of Ram Selvaraju with H.C. Wainwright.

So, a general question which had been on my mind for quite some time. I was wondering if you could comment on the implications for ADMA of the shift from the intravenously-administered immunoglobulin to subcutaneously-administered immunoglobulin and if you think that that might potentially present benefits or opportunity to ADMA. And also, specifically, if you could comment on the potential for ASCENIV in particular to be administered subcutaneously.

So, ADMA at the present time does not have any FDA-approved products that are administered through the subcutaneous route of administration. Our products are administered intravenously or with NABI-HB intramuscularly. I think that we can debate till the cows come home about some of the benefits of giving immune globulin for certain patients intravenously compared to giving the benefits of immune globulin subcutaneously. And I think with the patient population that ADMA has its labeled indications for, which are patients with primary immune deficiency, we believe that the IV route of administration certainly allows for rapid bioavailability of the antibody and it's been shown to work for 20, 30 years. We look at the data and we look out there and subcutaneous route of administration certainly offers convenience. It certainly offers the ability for patients to dose themselves when it's convenient for them. And it certainly helps in the time of COVID with respect to having patients administer the IG themselves without the need to go to an infusion center. In ADMA's experience, right now, we have been informed that a number of patients who are receiving BIVIGAM and/or ASCENIV in an infusion center, either connected with a hospital or a freestanding clinic, that the payers have been approving at-home IV administration. So, from our perspective, we don't see any impact. And the last thing I'll say is that, when you look at the data – and I was just on a panel. It feels like just. But Elliot's not on the line anymore, but it was at the Raymond James conference. And I was under the – at least the data that I've seen is that in order to achieve the same IgG trough levels between an intravenous product and a subcutaneous product, you require more infusion. And there was a clinician on the panel with me at the Raymond James conference who gave what I thought was a staggering percentage of how much more product you need to administer. So, I look at subcutaneous as something that we could do in the future. But at the present time, our focus is on manufacturing our intravenous product, pushing forward our R&D efforts with respect to COVID-19 as well as expanding the label for ASCENIV at the opportune time, and focusing on building up our safety inventories to ensure a reliable, continuous supply of immune globulin to our patients.

Okay. Again, a couple other minor detail things. I was wondering if you could just verify that the new filling line expense that contributed to the increase in R&D spending is a non-recurring item. And then, also, if you could specify what percentage of the 2Q revenue base came from intermediate fractions.

Sure. I can take this, Ram. The R&D, look, throughout the year, we're going to have various projects in R&D, but this should be the bulk of the expenses from this fill line. With regards to breaking out revenues, we look at BIVIGAM, ASCENIV, NABI-HB and our intermediate fractions as all part of our collective aggregate revenues and the total amount of revenues for those products. We do not break out our individual products separately.

But the intermediate fractions is probably a minor contributor, right, if we were to characterize qualitatively?

We previously announced in early 2020 that we entered into a long-term supply agreement with a third-party customer that we'll be selling intermediate fractions in the several million dollars this year and then it would grow to $10 million to $15 million to $20 million over the next two to three years, annual growth. So, I would say it's a meaningful contributor. We just signed the agreement earlier this year and we are seeing ongoing revenue increases.

As our production ramp grows from – we're going to be obviously producing more of the plasma-derived intermediates for sale. And we're looking forward to it.

Okay. And then, just one last one on the plasma collection volume. When do you anticipate that those could return to sort of "normalized levels?"

Well, that's a great question. If I could ask you one back, when do you think COVID-19 is going to be gone? I think that that is the question that we're all asking. Right? Look, ADMA has exposure to this market. We've got a center that's operating. As I mentioned in my prepared remarks, and I think Brian has said too, we have certainly seen a rebound, if you will, from the lows that were experienced during the second quarter already in the third quarter. So, we're doing better. We feel pretty good. I think the industry as a whole is feeling better that – look, the government has made a decision on the unemployment additional stipend. There are other things that have been changing around the country with respect to certain geographic regions opening up. Depending upon which one of my friends that have older children that are going back to college, some are open and some aren't. I think that also can provide benefits. So, I think it's a gradual return over the next 12 to 18 months till we get back to something normal. But with respect to ADMA, I want to reiterate that our supply contract is solid. We feel very confident and we continue to receive all the plasma that we anticipate receiving and purchasing under our agreement. So, between the addition of us building new centers, our existing centers seeing rebounds and the fact that our contract is currently in good standing and our supplier is delivering plasma as agreed, we feel very good that we're able to weather this storm probably a little bit better than some of the other fractionators that may have a bigger exposure with respect to their collections.

And our next question comes from the line of Leland Gershell with Oppenheimer.

Just on the inventory line, you've been keeping that number pretty stable, $56 million now versus $53 million back at the end of the year and $52 million at the end of the first quarter. So, we expect overall inventories then to continue to remain stable or will those also go up as you make more immunoglobulin in addition to the fact that the finished product inventory obviously will continue to rise? How should we think about that relationship?

I'll give you a very short answer, but I'll let Brian give you some more detail. Go ahead, Brian.

We think the inventory is going to continue to increase now that we have entered into commercial scale ramp up since the second half of 2019. As you can see, the finished goods, they increased by 75%, just from the beginning of the year. And we are going to continue to collect more plasma as we're opening up more centers. We're going to continue to buy plasma from our third-party vendors. So, I would expect the inventory to continue to grow as we expect revenues to continue to grow. Don't forget, in the beginning of the call and in our press release, we did say we're anticipating $250 million in revenues over the next three to five years. You need inventory to grow to meet those numbers. And we are doing that.

Just wondering if you could quantify in any way possible kind of the advantages with the new aseptic filling machine in terms of both expense and margins and also timelines to finish product? Any way you can quantify it? I know it won't be coming online until probably mid next year, but just wanted to see if you could share any thoughts there?

I think I can take a stab at this, Brian. Leland, it's hard for me to give you exact numbers because we haven't really made that much in it yet. But what I can tell you that attracted me to this machine itself is that it does not use destructive weight checks. And for anybody who has been in the fill finish industry and who understands how this process works, depending upon if there's a purge vessel, depending upon if there are other types of feeder pumps and areas that go into this, there are places throughout the fill finish process that are inherent for loss. So, we're really looking at this from the standpoint of – there's non-destructive weight checks. The device is a state-of-the-art technology. And we're looking at it – the internal estimates are to achieve about a 10% improvement to gross margins. There's no transportation costs. We don't have to hire the fancy FedEx custom critical truck and have all that insurance and pay all that money to drive the product to our third-party contract fill finish provider and bring it in-house. We can also expedite, if you will, the production throughput process because we'll now have all of that control. And ultimately, we think that that will contribute to being able to turn our inventory into commercial product faster. Maybe on the shorter side of that 7 to 12-month period rather than being within that 7 to 12-month period. So, there could potentially be some additional improvements, if you will, and enhancements to overall margins by having to maintain less inventory and less working capital. For that matter, generating receivables faster. All of these things can contribute. So, hopefully, that gives you some insights into this. But, ultimately, this thing, I can't wait to tell you what I really think it's going to be. I think 10% is a fair assessment, but I'm very hopeful. And for the ADMA team listening in, I'm hopeful that they can make some magic here. So, we're very excited. IG is a very, very scarce resource, and we want to make sure that we can maximize all of it in the vial to go to patients, not to go for losses.

Thank you. And this does close today's question-and-answer session. And I would like to turn the conference back over to Adam Grossman for any further remarks.

Sure. I just want to thank everybody for your continued confidence and support and understanding during this time. The company is really doing great. We're really proud of the work that we're doing. And again, please, please donate plasma. It's not lip service. The only way we're going to really, really save our fellow countrymen and family members is to donate plasma. So, thanks for your attention. Thanks for your support. And we look forward to hopefully seeing you soon. Take care, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.