Good afternoon, and welcome to the ADMA Biologics Third Quarter 2022 Financial Results and Corporate Update Conference Call on Wednesday, November 9, 2022. 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 website approximately 2 hours following the end of the call. At this time, I'd like to introduce Skyler Bloom, Senior Director of Business Development and Corporate Strategy at ADMA Biologics. Please go ahead.

Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics' financial results for the third quarter 2022 and recent corporate updates. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Lenz, Executive Vice President, Chief Financial Officer and General Manager, ADMA BioCenters. During today's call, Adam will provide some introductory comments and provide an update on corporate progress, and then Brian will provide an overview of the company's third quarter 2022 financial results. Finally, Adam will then provide some brief summary remarks before opening up the call for questions. Earlier today, we issued a press release detailing the third quarter 2022 financial results and summarized certain achievements and recent corporate updates. The release is available on our website at www.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 represents 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 any such statements. In addition, any forward-looking statements represent our views only as of the date of this call 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 in the Risk Factors section of our 2021 annual report on Form 10-K for the year ended December 31, 2021 as well as the risk factors section of our quarterly report on Form 10-Q for the quarter ended September 30, 2022 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, Skyler. Good afternoon, everyone, and thank you for joining us on today's call. We hope everyone remains healthy and safe. We believe our strong third quarter performance demonstrates our company's successful execution of our multiyear strategy and speaks to ADMA’s compelling prospects as we look to 2023 and beyond. In keeping with ADMA’s track record of delivering on our objectives. We are pleased to now again be raising financial expectations for full year 2022. The company now expects to generate total revenues of approximately $145 million, increased from the $130 million previously provided. We believe the third quarter revenue growth of 99% year-over-year coupled with the favorably evolving product mix, establishes a strong foundation for the company to accelerate towards profitability. As Brian will detail, we expect the coming quarters will better illuminate the pathway to profitability and increased visibility of the robust growth opportunities thereafter. Elevated ASCENIV demand trends persisted throughout the third quarter and have now continued into the fourth quarter. The body of commercial evidence we have been able to successfully demonstrate for ASCENIV throughout 2022 gives us confidence in our belief that the product will continue to rapidly grow throughout 2023 and ultimately, we believe ASCENIV is well positioned to account for a greater portion of our overall revenue product mix than we have historically messaged. We regard 2022 as a new launch year for ASCENIV. Due to the initial [indiscernible] of pandemic related barriers to physician provider and patient engagement, which throughout COVID impacted our ability to detail the truly unique product profile. With the first year of the new ASCENIV launch coming to a close, our enthusiasm cannot be overstated as we upwardly revise our internal forecast to account for the product's expected growth trajectory and peak opportunity. To build on ASCENIV…

Thank you, Adam. We issued a press release earlier today outlining our third quarter 2022 financial results. And I'll now discuss some of the key highlights. As Adam mentioned earlier, total revenues for the third quarter ended September 30, 2022 were $41.1 million as compared to $20.7 million during the third quarter of 2021. This represents an increase of $20.4 million or approximately 99%. The revenue growth for the third quarter of 2022 compared to the third quarter of 2021 was favorably impacted by the continued commercial ramp up of our IVIG product portfolio and expansion of our customer base for both BIVIGAM and ASCENIV. As a result of the year-to-date execution, we are raising our total revenue guidance for the second time this year and we now expect to generate full year 2022 total revenues of $145 million, up from $130 million as most recently provided. During the third quarter of 2022, ADMA realized a gross profit of $9.7 million compared to a gross profit of $0.4 million for the third quarter of 2021. Gross profit during the third quarter was driven by a favorable contribution from our higher margin product ASCENIV. Although, we are pleased with the underlying margin developments and favorably evolving product mix, it is important to note that a substantial portion of our BIVIGAM revenues during the third quarter consisted of legacy produced 2,200 liter scale product. This 2,200 liter scale product was produced during 2021 and yields a significantly lower margin compared to the 4,400 liter scale production process, which was approved by the FDA subsequent to the manufacturing of our 2,200 liter batches. Encouragingly, ADMA has been exclusively producing BIVIGAM at the 4,400 liter scale since the second half of 2021. The residual lower margin inventory produced at the 2,200 liter scale is…

Thank you, Brian. ADMA is well positioned to build on the foundation established during 2022. We are pleased with this year's results and look forward to a successful year end for 2022 and continuing the strong momentum into 2023. End market Immune Globulin growth remains one of the fastest growing segments in the pharmaceutical sector. And we are proud to have clearly demonstrated our company's staying power within this landscape. The pieces are in place for ADMA to sustain its best-in-class revenue growth profile and deliver on our long standing commitment of reaching profitability as rapidly as possible. The forward looking visibility that our seven to 12 month manufacturing lead time provides for and further considering the operational efficiencies we are presently unlocking, gives us unique insights into the coming quarters. It is in this vein that we confidently and comprehensively reiterate all previously provided near term and longer term top and bottom line financial guidance. We look forward to continuing to deliver on commitments as we enter 2023. The year that we expect will be defined by the company's rapid revenue growth and ADMA's advancement towards profitability. In closing, I would like to thank you our stockholders for your continued support as your investment in ADMA helps to advance our mission to save lives and make high quality, safe and efficacious products that help our friends, family and neighbors. Please donate plasma and help save lives. And with that, we'd now like to open up the call for your questions. Back to you, operator.

Thank you. Today's question-and-answer session will be conducted electronically. [Operator Instructions] Our first question comes from Anthony Petrone with Mizuho Group. You may proceed.

Hi, Anthony.

Anthony, if your line is on mute, please unmute.

Apologies for that. Hi, Adam. Hi, Brian. Hi, Skyler. First off, just congratulations on what really appears to be a milestone quarter for the company and the team, and really the culmination of lots of hard work and heavy lifting through the pandemic. So congratulations to the team and everyone in ADMA. Maybe…

Thank you. Just doing our job, Anthony.

Maybe to begin, Adam, it would be great to just start with a general update on the state of affairs across the plasma space. We're in the endemic phase of COVID-19, IG demand seems stable. However, the supply chains are still improving, but still are kind of clawing that way back from where we were pre-pandemic. So maybe just the state of affairs across plasma, your latest views on IG demand at the infusion center level? And then just a quick update on where you see supply trends trending into the end of the year? And then I'll have a few follow ups.

Thanks for the question, Anthony. I think to start out and reiterate the comments I made in the prepared remarks. The IG business is healthy. Plasma is strong. The recovery on the collection side and I think that you've heard that over the last couple of weeks with some of our brethren companies out there. We're seeing an uptick in collections improvement at the border. I think ultimately this is a benefit for the patients. Ultimately, there will be more supply in our seven to 12 months’ time horizon because that's the production cycle as I know you and a number of our shareholders understand. I can't speak to the broader business. I can speak about ADMA and our products. I mean, we're certainly doing our job not only with the product being pushed in, but the pull through is incredible. We've seen some record utilization months over the last quarter and that trend is continuing into the fourth quarter. I can tell you that the business is durable. It's sticky. I know that this is something that we've been speaking about all year on our conference calls and in our one-on-ones with shareholders. People have been asking, well, how do we know that ASCENIV utilization is going to stick? How do we know that the BIVIGAM is not a blip or that there are some supply issues with other manufacturers out there. And I think that as you see this continued quarter-over-quarter growth, especially as it pertains to our IG portfolio, we're in the right institutions. We've got great prescriber engagements and it's sticky. We're seeing more patients being added to both the BIVIGAM and ASCENIV infusion schedule weekly and we expect this to continue throughout the remainder of the year and throughout ‘23 and beyond. So we're feeling pretty good. Just maybe touch on your last part of your question, it's hard to predict my crystal ball and certainly cloudy, but historically demand has typically outpace supply. So I think even with the positivity around collections improving. It's going to be a while, I think, until we start to see that supply balance. There's pent up demand there that is starting to be fulfilled. And we've got more product sitting in work in process and finished goods than ever before. As you see with the strong inventory number and we're going to meet the challenges there. And we're ensuring the continuity of care and we've got the supply on hand. So we're going to continue to hit milestones and hopefully grow top line, increase our gross profits and narrow losses going forward.

That's great. And I'll shift to a couple of follow ups. One, I'll stay on revenue and then I'll pivot to Brian on margins. But maybe a little bit on ASCENIV, when we initially modeled out the company, we didn't have ASCENIV at this level of utilization and consumption. So maybe a little bit on the ASCENIV demand real time. How much is coming from the heightened RSV season that we're seeing right now versus utilization in primary and secondary immune deficient patients. And I'll have one last follow-up on margins.

So I know we missed you for a couple of quarters. We like RSV here. We're not an RSV company. I've said this before. I don't want to sound like a broken record on these calls, but we do not promote any of our products for RSV. RSV is the marker that we use to screen our plasma donors to see who has hyperimmune, high-titer antibodies to RSV in this panel of various respiratory viral pathogens. And as you know, we make ASCENIV using this hyperimmune platform and we blend it with normal source to create a unique IG that has IP protection through 2037. So the ASCENIV business, I'm not going to sit here and say to you that there is not some acute care use in hospitals, but it's limited. The majority of the ASCENIV, the overwhelming majority of the ASCENIV utilization is in the outpatient setting. It's in labeled patients, primary immune deficient patients. These are patients that are problematic. These are patients that have failed other IG therapies. They've had dose increases. They've got certain comorbidities and other socioeconomic risk factors that render them more susceptible to infections and they have a harder time clearing these infections. These are patients that have chronic and persistent sinusitis, otitis, they may be have had multiple bouts a bacterial pneumonia and they have bronchiectasis. And we're really engaged in a medical education conversation that as I said, I think during the last quarter call, the benefits of COVID and the awareness of COVID coming out of this pandemic has sort of accelerated these conversations with prescribers. But patients also take their care into their own hands. And I really truly believe that when you dig around the Internet a little bit, there's chatter about ASCENIV and about differentiated Immune Globulin out there for the immune deficient population. And I think that that's helping to drive awareness and to drive utilization. So we've also said it in the prepared remarks, we're very excited and encouraged by the developments in the vaccine community. Whether I should share this or not one of my passions and reasons for starting this business as a premature born infant, I had RSV and there was nothing for me back in the day. And I think it would be an absolute win for the medical community for a vaccine to be available. But I think as we all know, you need a competent immune system in order to respond to the antigens in the vaccine. And the patients to ADMA Biologics is passionate about the patients that benefit from our products. Are the immune compromised where typically there's limited utility or no utility from these vaccines. So the product is here. Again, we don't promote it for anything other than what it's indicated for Anthony and utilization is growing. And I really feel that we're moving the peg forward and we're doing something really special for the immune compromised.

That's excellent. And last one for me on margins, just the updated guidance looking outward and certainly intrigued by just a call here for net, a high level of net profits, I should say, in the 2024 to 2025 timeframe And so Brian maybe walk us through the dynamics there. How much of that is mix shift to ASCENIV? How much is coming from the transition to expanded leader pools and then just general leverage gains. Again, congratulations to everyone.

Thank you, Anthony, for the congratulatory remarks. We do continue to be very encouraged with our ongoing acceleration of our gross margin development. We are now seeing a 70-30 mix with BIVIGAM and our higher margin products, which has really evolved about a year earlier from our initial launch projections back in 2019, 2020 when we were thinking 90-10, 80-20, 75-25, 70-30. So that's really occurred about a year earlier. So as we further continue to deplete our remaining batches of our lower margin 2,200 liter BIVIGAM batches, and these were produced about a year ago. As you understand, the seven to 12 month manufacturing timeline, these BIVIGAM margins in the 4,400 liter production scale, which was recently approved in April 2021 from 2,200 batches will go from a single to low double-digit margin to the mid-20% to 30% gross margins for the 4,400 batches over the coming quarters. As we're exclusively producing only higher margin, a more efficient 4,400 batch process, near production for BIVIGAM. And as you know, we've already stated ASCENIV yields, gross margins are between 80% and 85%. So going -- looking forward into the future in the next couple of quarters and beyond, we look forward to continuing to grow gross margins and see continued gross profit expansion.

Thank you.

Thank you. One moment for questions. Our next question comes from Elliot Wilbur with Raymond James. You may proceed.

Hey, Elliot.

Hey. Thanks. Good afternoon.

Good afternoon.

Good afternoon, Elliot.

I want to ask a follow-up question around gross margin dynamics in the quarter, the math seems pretty clear with respect to the dynamics between the 4,400 and 2,200 liter production volumes, but just want to think about this over the next couple of quarters because it sounds like there's some residual inventory that probably will remain around, I'm guessing, till sort of mid-2023. But fair to say that this is sort of the peak quarter in terms of the impact of having the lower margin 2,200 liter inventory run through the P&L. And am I thinking about it right in the sense that it's probably fully exhausted by mid-2023? And then just longer term, does the 2,200 liter batch production capability ever enter the equation again or is all production essentially going to be completed using the JV 4,400 liter capacity.

Maybe I'll just take that part of the question. The 2,200 liter scale is approved. Do we want to make product at that scale? No. It's approved. We have other products that we may want to make in the future. There are other hyperimmunes. As you know, we are expanding our CDMO potential opportunities. So you want to have different various scales that are validated and qualified Elliott. But just hit that part of the question going forward, BIVIGAM especially. Since the approval in July of ‘21, we have been making BIVIGAM exclusively at the 4,400 liter scale and we have no plans to produce any additional BIVIGAM at that scale going forward. Now I'll shut off and let Brian answer the meat of the question.

No. Thank you. Thank you, Elliot, again, for the congratulatory remarks as well. So to specifically answer your question, you're spot on, we expect the remaining 2,200 liter batches that will produce up until call it, the middle of 2021 to be depleted or meaning sold throughout the next couple of quarters be completely sold by the middle of 2023. There's substantially we've already sold the majority of the 2,200 to date. There's a couple of quarters to go that we feel that the 4,400 will be sold exclusively starting in the middle of 2023 at a higher margin production process again in the 20% to 30% range for the 4,400 batch production liter process.

There's not a lot of inventory left. It may accelerate, Elliott, but I think Brian is right. It could last into the middle of the year.

Okay. Which would obviously…

Go ahead. Sorry.

No, I was just going to say which would obviously accelerate the overall corporate gross margin to a higher level as we continue to -- as we continue to go into 2023 and go beyond 2023 to get to that 40% to 50% overall corporate gross margin.

Okay. Thanks. Then Adam, I want to ask a follow-up question on your earlier commentary around the RSV landscape. In general, the emergence of vaccines obviously going to be a lot more noise in the space over the next 18 to 24 months and a lot of data coming out in broader populations. But just sounds like your take is that ASCENIV kind of stands on its own in the marketplace. It's not an RSV based product, vaccinations really don't have impact in the immuno compromised population. And I'm not sure some of the larger studies that are still underway whether or not they're actually specifically looking at that population or not. But outside of evacuation impact. I'm just wondering if you take divergence of all these different therapies including some of the maps could somehow eventually have an impact on the donor pool.

That's a great question and it's something that I think about all the time. I mean, yes, hypothetically, there's widespread vaccination with an RSV vaccine like there was with COVID, would there be high levels of RSV antibodies in the general population in plasma? Sure. There would be. But again, I think what's interesting about ASCENIV is we're not just looking for these donors that have high taters to RSV. Again, they're a marker for people that are high responders to a wide array of different viral and bacterial pathogens. In the immunology textbooks, roughly about 10% of the population are considered high responders. And we feel that that's who we are targeting when we are using our proprietary and patented microneutralization assay to identify these donors. So naturally occurring antibody, slightly different than antibody that is being generated from a vaccine from the standpoint of the donors that we're looking for are naturally high responders and they have high titers for long periods of time. Again, to reiterate, ASCENIV is a drug for immune deficient patients, full stop. It's a drug for the primary immune deficient population. It's a drug that is utilized in secondary immune deficient patients. These are patients that have cancer. They're on chemotherapy. They may have had organ or bone marrow transplants. They're on active immunosuppression. Wherever IG is used to support the immune system. ASCENIV is a healthy immune system in a bottle that is manufactured in a unique way where we blend hyperimmune in normal plasma. That's how to think about it. The noise in the RSV world, the noise in the monoclonal antibody world, again, we are truly excited about this from a scientific perspective. I've been involved in the RSV markets since the late-90s. So I can tell you that this is an extremely exciting time. And the scientists in me is certainly watching and rooting for all these companies. I don't think that there's any impact on ASCENIV. I don't think there's any impact on the IG space in general. I think that if all these products prove successful, less people will die. And ultimately, that's why we get up in the morning here at ADMA. And I'm pretty sure that's why a lot of folks that are in pharma and biotech get up as well. So it's exciting times.

Thanks. Just one quick additional question. You spoke earlier to trends in collection volumes. Just wondering if you could speak maybe more specifically to cost of collection volumes and whether or not you're seeing more of a systemic impact in terms of the actual collection costs based on donor competition and/or just sort of general macro environment inflationary pressures et cetera.? Thanks.

Sure. Thanks, Elliot. Well, just to talk about collections and the progress we've made with our centers, obviously, we're very pleased with our year-over-year collections. Our plasma center growth and FDA approvals this year. At this time last year, we had three FDA approved centers, now we have seven. So thanks to the FDA and our dedicated staff. We've had a tremendous year so far. We have five centers opened this time last year collecting NSP and RSV Plasma, now we have nine and our 10 center is currently in construction. Regarding the donor fees, we're seeing donor fees stabilizing. In some locations, we've seen decreases from historic high donor fees. They are again starting to stabilize in some areas starting to come down a bit of a decline all based on competition and other centers that are located near ours. Again, recall our manufacturing process is seven to 12 months. So those higher donor fees that were reflected and previously produced and collected production costs or recently that those donor fees having a decline, they'll be downwardly adjusting our costs, which will be factored into the product as we sell subsequent in the next seven to 12 months, meaning our margin should expect it to be -- continue to improve. And lastly regarding the plasma centers, we still remain on track to have our 10 centers construction completed within our internal timelines and our three remaining centers to be FDA approved by the end of 2023, even with supply chain issues and other disruptions that have been seen across the global economy. So we're very proud of how far we've come with our centers.

Thank you. One moment for questions. Our next question comes from Kristen Kluska with Cantor Fitzgerald. You may proceed.

Hi. Good afternoon, everybody. Let me also add my congratulations to you on this quarter.

Thank you.

Yeah, of course. So I saw in the print that you reiterated your thoughts on peak revenue opportunities in the outer years. But based on the trends that you're seeing here quarter-over-quarter and your enthusiasm, heading into next year around the mix of products. How much of this growth is really built into those calculations at this time?

Well, I mean, -- it's a great question. I think I can start off by saying what's interesting about our business, Kristen, is that with this seven to 12 month production cycle, we know how much we made last year. And I also know what the capacity of my plant is. So when we look at this, there's a finite amount of product that we can make. Now I think what your alluding to is, so we've always thought 90-10 growing to 80-20 growing to 70-30 between our standard IG BIVIGAM and our higher margin products ASCENIV in non-BHP. If the demand for ASCENIV continues at this pace. And again, we don't have a crystal ball on when are we going to reach critical mass. We know that there are roughly about 10% to 30% of the primary inefficient patients have comorbidities, have chronic lung diseases, have bronchiectasis and the sky could be the limit there. The amount of RSV plasma that we can collect from our center network and our third-party providers. So I think there are a number of variables there. We feel quite comfortable that the information on the corporate website and our slide deck that we've said, we can roughly process 600,000 liters here. We roughly get, call it, 4 grams per liter. So you could do the math on how many grams we can produce out of this plant, but that mix could change. If you're asking, is there upside? Yes, there's upside. Do we feel confident that the guidance that we've given to the Street is reasonable guidance? Yes. We want to continue growing quarter-over-quarter. We understand what you and other analysts like. We understand what our investors like. We're doing our best to manage inventories. We're doing our best to manage collections. We're doing our best to manage cash flow and we're doing our best to sell as much of our products as we can at the highest price as possible. So all of this fits together. And from my view, I feel very confident with the $250 million or more guidance I think we've given for 2024 and then $300 million plus thereafter. If we sell more ASCENIV, thank God we help in that many more patients. We can collect more plasma. Thank God, we'll be able to help that many more patients and it'll flow into the bottom line. And that's why I keep putting my money into the company. We're proud of what we're doing here. And I feel good about our position. I feel good about reiterating guidance. Very proud in this backdrop where so many other companies are pulling guidance, lowering guidance. We're sitting here really to my commercial team, what I know is listening, you guys are doing a great job, to my production facilities, quality team, keep making a high quality product, you see people will use it. And if we keep doing our jobs right, everything will fall into place.

Great. Thank you for that. And then with ASCENIV, I know in the nature of these PI patients, you can tell pretty rapidly the effects, but given that you've seen a lot of this quarter-over-quarter growth, I would imagine that a number of these patients have been staying on it for a long time. So wanted to ask if you're seeing any interesting longer term trends with ASCENIV usage?

We are seeing patients remaining on therapy and this is compounding. What we alluded to in our prepared remarks around these expanding opportunities, the early adopters, the folks who jumped on board early. They've been out there publishing -- putting posters at scientific meetings, we've sponsored a number of medical education symposia. And this is certainly look, it’s anecdotal data, small patient numbers, one patient, two patients, three patients in certain clinics at a time. But I think I'm okay with saying that some of the more conservative or “textbook physicians” that are out there, I think they want to get involved in the conversation too. I think that there's been enough chatter about the product, I alluded in the prepared remarks that we consider 2022 to be this new launch here. I mean, it’s time where we've had restrictions off and the ability to engage front facing with the healthcare community across nursing, IG support, patient advocacy as well as the scientific engagement with the healthcare professionals. And I think that what we're seeing is that folks that were either on the fence [indiscernible] is there any extra utility with this product. I think the market is saying, there is, in the right patient population, there is utility that can be derived by prescribing ASCENIV. So we feel good about it. We think the demand is growing and it's sticky. We think that it's durable. We really feel that we've moved the peg forward and are providing something else in the physician's armamentarium treat these patients where they don't just have to say, I'm sorry, this is the best I can do. There's something else for patients to try and from what I hear and maybe my commercial force only likes to tell me the good news, but from what I hear, patients come on product and they stay on product. So we've lost very few patients. Obviously, people have issues with insurance and reimbursement things of that nature. But at the end of the day, once you stay on a brand of IG that works for you, you tend to stay on it for a long, long time.

Great. Thanks so much for taking my questions.

Thanks, Kristen.

Thank you. Ladies and gentlemen, this will conclude our question-and-answer portion of the call. I'd like to turn it back over to Adam now for additional closing remarks.

Thank you for the analysts for joining. Thank you to our shareholders for your interest in the great work that we're doing here at ADMA. To our staff, keep up the great work. We appreciate you. And to everyone listening, donate some plasma, help save some lives. Visit admabiocenters.com to find one of our centers that may be near you. Stay healthy and have a great evening.

Thank you. Ladies and gentlemen, this does conclude the conference call for today. We appreciate your participation. You may now disconnect.