UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2021 |
|
|
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from _________ to _________ |
Commission File Number: 001-36728
ADMA BIOLOGICS, INC. |
(Exact Name of Registrant as Specified in Its Charter) |
Delaware |
| 56-2590442 |
(State or Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
465 State Route 17, Ramsey, New Jersey |
| 07446 |
(Address of Principal Executive Offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (201) 478-5552
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common stock, par value $0.0001 per share | ADMA | Nasdaq Global Market |
Preferred Share Purchase Right | - | Nasdaq Global Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
Non-accelerated Filer | ☒ | Smaller Reporting Company | ☒ |
|
| Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates was $173,220,302 as of June 30, 2021 (the last business day of the registrant’s most recently completed second fiscal quarter), based on a total of 108,262,689 shares of common stock held by non-affiliates and a closing price of $1.60 as reported on the Nasdaq Global Market on June 30, 2021.
As of March 18, 2022, there were 195,920,353 shares of the issuer’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the ADMA Biologics, Inc. definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K and certain documents are incorporated by reference into Part IV.
PART I | ||
Item 1. | 3 | |
Item 1A. | 30 | |
Item 1B. | 60 | |
Item 2. | 60 | |
Item 3. | 60 | |
Item 4. | 60 | |
PART II | ||
Item 5. | 61 | |
Item 6. | 61 | |
Item 7. | 62 | |
Item 7A. | 74 | |
Item 8. | 74 | |
Item 9. | 74 | |
Item 9A. | 74 | |
Item 9B. | 75 | |
Item 9C. | 75 | |
PART III | ||
Item 10. | 76 | |
Item 11. | 76 | |
Item 12. | 76 | |
Item 13. | 76 | |
Item 14. | 77 | |
PART IV | ||
Item 15. | 77 | |
Item 16. | 82 |
• | our ability to manufacture BIVIGAM and ASCENIV on a commercial scale and further commercialize these products as a result of their approval by the U.S. Food and Drug Administration (the “FDA”) in 2019; |
• | our plans to develop, manufacture, market, launch and expand our commercial infrastructure and commercialize our current and future products and the success of such efforts; |
• | the safety, efficacy and expected timing of and our ability to obtain and maintain regulatory approvals for our current products and product candidates, and the labeling or nature of any such approvals; |
• | the achievement of or expected timing, progress and results of clinical development, clinical trials and potential regulatory approvals for our product candidates; |
• | our dependence upon our third-party customers and vendors and their compliance with applicable regulatory requirements; |
• | our belief that we have addressed the delays experienced with final drug product Good Manufacturing Practices (“GMP”) release testing by our third-party vendors by adding additional release testing laboratories to our FDA-approved consortium listed in our drug approval documents; |
• | our ability to obtain adequate quantities of FDA-approved plasma with proper specifications; |
• | our plans to increase our supplies of source plasma, which include plasma collection center expansion, our ability to obtain and maintain regulatory compliance and receive FDA approvals of new plasma collection centers and reliance on third-party supply agreements as well as any extensions to such agreements; |
• | the potential indications for our products and product candidates; |
• | potential investigational new product applications; |
• | the acceptability of any of our products, including BIVIGAM, ASCENIV and Nabi-HB, for any purpose, including FDA-approved indications, by physicians, patients or payers; |
• | our plans to evaluate the clinical and regulatory paths to grow the ASCENIV franchise through expanded FDA-approved uses; |
• | Federal, state and local regulatory and business review processes and timing by such governmental and regulatory agencies of our business and regulatory submissions; |
• | concurrence by the FDA with our conclusions concerning our products and product candidates; |
• | the comparability of results of our hyperimmune and immune globulin (“IG”) products to other comparably run hyperimmune and immune globulin clinical trials; |
• | the potential for ASCENIV and BIVIGAM to provide meaningful clinical improvement for patients living with Primary Immune Deficiency Disease or Primary Humoral Immunodeficiency Disease (“PIDD” or “PI”) or other immune deficiencies or any other condition for which the products may be prescribed or evaluated; |
• | our ability to market and promote Nabi-HB in a highly competitive environment with increasing competition from other antiviral therapies and to generate meaningful revenues from this product; |
• | our intellectual property position and the defense thereof, including our expectations regarding the scope of patent protection with respect to ASCENIV or other future pipeline product candidates; |
• | our manufacturing capabilities, third-party contractor capabilities and vertical integration strategy; |
• | our plans related to the expansion and efficiencies of our manufacturing capacity, yield improvements, supply-chain robustness, in-house fill-finish capabilities, distribution and other collaborative agreements and the success of such endeavors; |
• | our estimates regarding revenues, expenses, capital requirements, timing to profitability and positive cash flows and the need for and availability of additional financing; |
• | possible or likely reimbursement levels for our currently marketed products; |
• | estimates regarding market size, projected growth and sales of our existing products as well as our expectations of market acceptance of ASCENIV and BIVIGAM; |
• | effects of the coronavirus COVID-19 pandemic on our business, financial condition, liquidity and results of operations, and our ability to continue operations in the same manner as previously conducted prior to the macroeconomic effects of the COVID-19 pandemic; |
• | future domestic and global economic conditions, including, but not limited to, supply chain constraints, inflationary pressures or performance; and |
• | expectations for future capital requirements. |
Item 1. | Business |
• | Continue to expand the commercial production of our IG products, as well as the commercial presence, penetration and sales of BIVIGAM and ASCENIV for the treatment of patients with PI. Subject to the continuing restrictions surrounding COVID-19, we continue to enhance our recruiting initiatives and expand our existing specialty commercial sales force and commercial-facing organization to market BIVIGAM and ASCENIV to appropriate sites of care including home healthcare infusion facilities, hospitals, physician offices/clinics and other specialty treatment and infusion center organizations. We also anticipate staffing our Company with additional personnel for patient support, medical affairs, quality assurance, quality control, inventory management, regulatory affairs, scientific affairs production and third-party reimbursement. We currently use and may continue to partner with a network of national distributors to fulfill orders for BIVIGAM and ASCENIV. We have implemented and continue to implement virtual customer engagement programs to adapt and change with the current restrictions in place due to COVID-19, as well as continue with our in-person presence with customers and healthcare professionals and attend appropriate trade-related and scientific medical conferences as COVID-19 restrictions ease in various geographic regions of the country. |
• | Increase marketing efforts around Nabi-HB. Subject to the restrictions surrounding COVID-19, we plan to increase our marketing efforts and attend relevant virtual or in-person medical conferences during 2022, raising awareness of the risks associated with Hepatitis B and the benefits and efficacy of Nabi-HB in its indicated populations. We have published and may continue to publish scientific data supporting the use of Nabi-HB in at-risk and appropriate patient populations. |
• | Expand ASCENIV’s FDA-approved uses. Having received approval by the FDA for ASCENIV as a treatment for PIDD, we may elect to evaluate the clinical and regulatory paths to grow the ASCENIV franchise through expanded FDA-approved uses. We believe that there may be patient populations beyond PIDD that could potentially derive clinical benefit from ASCENIV, some of which may potentially be eligible for orphan status. We plan to leverage our previously conducted randomized, double-blind, placebo-controlled Phase II clinical trial evaluating RI-001, RI-002’s predecessor product candidate, in immune-compromised, RSV-infected patients to explore ASCENIV for the treatment of RSV or other potential respiratory viral pathogens, as well as in other patient populations we may believe are appropriate. |
• | Improve the Boca Facility’s operating efficiencies and gross margins. During 2022, we plan to execute on the capacity optimization efforts we put in place during 2021 to increase the Boca Facility’s manufacturing capacity throughput, look for operating efficiencies and gross margin improvements. We also plan to strengthen our supply chain capabilities to potentially unlock efficiencies, improve production yields and provide more control and visibility for timing of commercial product releases for all of our FDA-approved commercial products. During 2021, we received FDA approvals for our 4,400L expanded IVIG production scale, as well as our in-house fill-finish and related operations production line using our aseptic filling machine. |
• | Expand and develop our pipeline with additional specialty plasma and/or hyperimmune immunoglobulin products. Our core competency is in the development, manufacturing, testing and commercialization of plasma-derived therapeutics. We believe there are a number of under-addressed medical conditions for which plasma-derived therapeutics may be beneficial. Utilizing our intellectual property patents, which include our proprietary testing assay and other standardization methods and technologies, we have identified potential new product candidates that we may advance into preclinical activities. |
• | Develop and expand our plasma collection center network. We plan on expanding our plasma collection network with the goal of having 10 FDA-licensed plasma collection facilities operating in the U.S. by the end of 2023 as we seek to achieve plasma supply self-sufficiency over the next few years and prepare for production ramp-up and growth to capitalize on the global growing IVIG and source plasma markets, including obtaining FDA licenses for each new plasma collection center and regulatory approval in additional jurisdictions. |
• | Secure new supply contracts for potential contract manufacturing organization (“CMO”) opportunities. We are exploring new potential CMO, contract testing and business development opportunities, which include fill-finish capabilities, with our multi-faceted revenue generation platform, while continuing to fulfill our newly secured, long-term CMO supply agreement to produce and sell plasma-derived intermediate fractions. |
• | antibody deficiency and recurrent bacterial infections; |
• | T-lymphocyte deficiency and opportunistic infections; |
• | other lymphocyte defects causing opportunistic infections; |
• | neutrophil defects causing immunodeficiency; and |
• | complement deficiencies. |
• | Red blood cells – Used to carry oxygen from the lungs to the body; |
• | White blood cells – Used by the immune system to fight infection; |
• | Platelets – Used for blood clotting; and |
• | Plasma – Used to carry the aforementioned components throughout the body and provide support in clotting and immunity. |
• | completion of extensive preclinical laboratory tests, preclinical animal studies and formulation studies performed in accordance with the FDA’s Good Laboratory Practice (“GLP”) regulations and other applicable laws and regulations; |
• | submission to the FDA of an Investigational New Drug (“IND”) application which must become effective before clinical trials may begin; |
• | obtaining approval by an Institutional Review Board (“IRB”) at each clinical site before a clinical trial may be initiated at that site; |
• | performance of adequate and well-controlled clinical trials meeting FDA requirements, commonly referred to as Good Clinical Practices (“GCP”), and other additional requirements for the protection of human research subjects and to establish the safety and efficacy of the product candidate for each proposed indication; |
• | manufacturing (through an FDA-approved facility) of product in accordance with the FDA’s current Good Manufacturing Practices (“cGMP”) to be used in the clinical trials and providing manufacturing information needed in regulatory filings; |
• | submission of a BLA to the FDA for marketing approval that includes substantial evidence of safety, purity and potency from results of clinical trials; the results of preclinical testing; detailed information about the chemistry, manufacturing, and controls (“CMC”) and proposed labeling and packaging for the product candidate; |
• | satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the product candidate is produced, and potentially other involved facilities as well, to assess compliance with cGMP regulations and other applicable regulations; |
• | satisfactory completion of potential FDA inspections of the preclinical study and clinical trial sites that generate the data in support of the BLA and; |
• | FDA review and approval of a BLA prior to any commercial marketing, sale or shipment of the product, including agreement on post-marketing commitments. |
• | Phase I clinical trials are initially conducted in a limited population to test the product candidate for safety, dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients, such as cancer patients. |
• | Phase II clinical trials are generally conducted in a larger but limited patient population to identify possible adverse effects and safety risks, to determine the efficacy of the product candidate for specific targeted indications and to determine tolerance and optimal dosage. Multiple Phase II clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase III clinical trials. |
• | Phase III trials are conducted to establish the overall risk/benefit profile of the product. Certain Phase III clinical trials are referred to as pivotal trials. Phase III clinical trials aim to provide substantial evidence of reproducibility of clinical efficacy and safety results for approval and to further test for safety in an expanded and diverse patient population at multiple, geographically dispersed clinical trial sites. |
• | We have a history of losses and we may, in the future, need to raise additional capital to operate our business, which may not be available on favorable terms, if at all. |
• | We are currently not profitable and may never become profitable. |
• | The COVID-19 pandemic and efforts to reduce its spread has significantly affected worldwide economic conditions, and could have a material adverse impact on our business, liquidity, financial condition and results of operations, as well as a change to the overall market size and potential for our products. |
• | We contract with third parties for the filling, packaging, testing and labeling of the drug substance we manufacture. This reliance on third parties carries the risk that the services upon which we rely may not be performed in a timely manner or according to our specifications, which could delay the availability of our finished drug product and could adversely affect our commercialization efforts and our revenues. |
• | The estimates of market opportunity and forecasts of market and revenue growth included in our filings may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, if at all. |
• | Both of our business segments and our facilities are subject to periodic inspections by the FDA, which, depending on the outcome of such inspections, could result in certain FDA actions, including the issuance of observations, notices, citations or warning letters. |
• | Business interruptions could adversely affect our business. |
• | If we are unsuccessful in obtaining regulatory approval for any of our product candidates or if any of our product candidates do not provide positive results, we may be required to delay or abandon development of such product, which would have a material adverse impact on our business. |
• | Although we have received approval from the FDA to market ASCENIV as a treatment for PIDD, our ability to market or seek approval for ASCENIV for alternative indications could be limited and FDA could require clinical trials beyond what we may deem to be reasonable. Unless additional clinical trials are successfully conducted and the FDA approves a BLA or other required submission for review, we may not be authorized to market ASCENIV for any other indication. |
• | With the approval to market ASCENIV, BIVIGAM and Nabi-HB, there can be no assurance that we will be successful in further developing and expanding commercial operations or balancing our research and development activities with our commercialization activities. |
• | We depend on third-party researchers, developers and vendors to develop, manufacture, supply materials for or test our products and product candidates, and such parties are outside of our control. |
• | We may be unable to successfully expand our manufacturing processes to fulfill demand for our products or increase our production capabilities through the addition of new equipment, including if we do not obtain requisite approval from the FDA. |
• | Our products, and any additional products for which we may obtain marketing approval in the future, could be subject to post-marketing restrictions or withdrawal from the market and we could be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products following approval. |
• | Historically, a few customers have accounted for a significant amount of our total revenue and accounts receivable and the loss of any of these customers could have a material adverse effect on our business, results of operations and financial condition. |
• | Issues with product quality and compliance could have a material adverse effect upon our business, subject us to regulatory actions and cause a loss of customer confidence in us or our products. |
• | If physicians, payers and patients do not accept and use our current products or our future product candidates, our ability to generate revenue from these products will be materially impaired. |
• | Our long-term success may depend on our ability to supplement our existing product portfolio through new product development or the in-license or acquisition of other new products, product candidates and label expansion of existing products, and if our business development efforts are not successful, our ability to achieve profitability may be adversely impacted. |
• | Our ADMA BioCenters operations collect information from donors in the U.S. that subjects us to consumer and health privacy laws, which could create enforcement and litigation exposure if we fail to meet their requirements. |
• | Our senior credit facility with Hayfin Services LLP (“Hayfin”) is subject to acceleration in specified circumstances, which may result in Hayfin taking possession and disposing of any collateral. |
• | If we are unable to protect our patents, trade secrets or other proprietary rights, if our patents are challenged or if our provisional patent applications do not get approved, our competitiveness and business prospects may be materially damaged. |
• | Cyberattacks and other security breaches could compromise our proprietary and confidential information, which could harm our business and reputation. |
• | Our ability to continue to produce safe and effective products depends on the safety of our plasma supply, testing by third parties and the timing of receiving the testing results, and manufacturing processes against transmittable diseases. |
• | We could become supply-constrained and our financial performance would suffer if we cannot obtain adequate quantities of FDA-approved source plasma with proper specifications or other necessary raw materials. |
• | We require additional funding and may be unable to raise capital in the future, which would force us to delay, curtail or eliminate one or more of our research and development programs or potentially modify our ongoing operations, commercialization efforts and expansion plans, as well as impact the overall business plan for the organization. |
• | The market price of our common stock may be volatile and may fluctuate in a way that is disproportionate to our operating performance. |
• | expand commercialization and marketing efforts; |
• | implement additional internal systems, controls and infrastructure; |
• | hire additional personnel; |
• | expand and build out our plasma center network; and |
• | expand production capacity at the Boca Facility. |
• | we may be unable to identify contract fill/finishers on acceptable terms or at all because the number of potential service providers is limited and the FDA must inspect and qualify any contract manufacturers for current cGMP compliance as part of our marketing application; |
• | a new fill/finisher would have to be educated in, or develop substantially equivalent processes for, the production of our products and product candidates; |
• | the COVID-19 pandemic could adversely affect our contracted fill/finishers’ operations, supply chain or workforce; |
• | our contracted fill/finishers’ resources and level of expertise with plasma-derived biologics may be limited, and therefore they may require a significant amount of support from us in order to implement and maintain the infrastructure and processes required to deliver our finished drug product; |
• | our third-party fill/finishers might be unable to timely provide finished drug product in sufficient quantity to meet our commercial needs; |
• | contract manufacturers may not be able to execute our inspection procedures and required tests appropriately; |
• | contract manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP and other government regulations, and we do not have control over third-party providers’ compliance with these regulations; |
• | contract manufacturers may fail to comply with applicable regulatory requirements, placing them and us at risk of regulatory enforcement actions, recalls and other adverse consequences, which may negatively impact our business and their ability to supply products to meet our development, clinical and commercial needs; |
• | our third-party fill/finishers could breach or terminate their agreements with us; and |
• | our contract fill/finishers may have unacceptable or inconsistent drug product quality success rates and yields, and we have no direct control over our contract fill/finishers’ ability to maintain adequate quality control, quality assurance and qualified personnel. |
• | unforeseen safety issues; |
• | determination of dosing issues; |
• | lack of effectiveness during clinical trials; |
• | slower than expected rates of patient recruitment; |
• | inability to monitor patients adequately during or after treatment; |
• | inability or unwillingness of medical investigators to follow our clinical protocols; and |
• | temporary suspension resulting from the COVID-19 pandemic. |
• | Delays in reaching, or failure to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and our CROs; |
• | Regulators requiring us to perform additional or unanticipated clinical trials to obtain approval or becoming subject to additional post-marketing testing, surveillance, or REMS requirements to maintain regulatory approval; |
• | Failure by our third-party contractors to comply with regulatory requirements or the clinical trial protocol, or meet their contractual obligations to us in a timely manner, or at all, or our being required to engage in additional clinical trial site monitoring; |
• | The cost of clinical trials of our product candidates being greater than we anticipate or our having insufficient funds for a clinical trial or to pay the substantial user fees required by FDA upon the filing of a marketing application; |
• | Insufficient supply or inadequate quality of our product candidates or other materials necessary to conduct clinical trials; |
• | Inability to achieve sufficient study enrollment, subjects dropping out or withdrawing from our studies, delays in adding new investigators or clinical trial sites or a withdrawal of clinical trial sites; |
• | Flaws in our clinical trial design that are not discoverable until the clinical trial has progressed; |
• | Disagreement by the FDA or comparable foreign regulatory authorities with our intended indications or study design, including endpoints, or our interpretation of data from preclinical studies and clinical trials, finding that a product candidate’s benefits do not outweigh its safety risks or requiring that we conduct additional development or study work; |
• | The need to make changes to our product candidates that require additional testing or that cause our product candidates to perform differently than expected; |
• | Global trade policies that may impact our ability to obtain raw materials and/or finished product for commercialization; |
• | FDA or comparable regulatory authorities taking longer than we anticipate to make decisions on our products or product candidates; and |
• | Potential inability to demonstrate that a product or product candidate provides an advantage over current standards of care or current or future competitive therapies in development. |
• | delay commercialization of, and our ability to derive revenues from, our product candidates; |
• | impose costly procedures on us; and |
• | diminish any competitive advantages that we may otherwise enjoy. |
• | restrictions on such products or manufacturing processes; |
• | restrictions on the labeling or marketing of a product; |
• | restrictions on product distribution or use; |
• | clinical holds or termination of clinical trials; |
• | requirements to conduct further post-marketing studies or clinical trials, implement risk mitigation strategies, or to issue corrective information; |
• | warning letters or untitled letters; |
• | withdrawal of the products from the market; |
• | refusal to approve pending applications or supplements to approved applications that we submit; |
• | recall of products; |
• | restrictions on coverage by third-party payers; |
• | fines, restitution or disgorgement of profits or revenues; |
• | suspension or withdrawal of marketing approvals; |
• | refusal to permit the import or export of products; |
• | FDA debarment, suspension and debarment from government contracts, and refusal of orders under existing government contracts, exclusion from healthcare programs, consent decrees, or corporate integrity agreements; |
• | product seizure or detention; or |
• | injunctions or the imposition of civil or criminal penalties. |
• | our ability to sell our products at competitive prices; |
• | our ability to maintain features and quality standards for our products sufficient to meet the expectations of our customers; |
• | our ability to produce and deliver a sufficient quantity of our products in a timely manner to meet our customers’ requirements; and |
• | the impact of the ongoing COVID-19 pandemic and government responses thereto on our customers and their businesses, operations and financial condition. |
• | perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our products; |
• | cost-effectiveness of our products relative to competing products; |
• | availability of reimbursement for our products from government or other healthcare payers; and |
• | the effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any. |
• | sales or potential sales of substantial amounts of our common stock; |
• | uncertainties in the equity markets related to the effects of the COVID-19 pandemic; |
• | delay or failure in initiating or completing preclinical or clinical trials or unsatisfactory results of these trials; |
• | delay in a decision by federal, state or local business regulatory authority; |
• | the timing of acceptance, third-party reimbursement and sales of BIVIGAM and ASCENIV; |
• | announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions; |
• | developments concerning our licensors or third-party vendors; |
• | litigation and other developments relating to our patents or other proprietary rights or those of our competitors; |
• | conditions in the pharmaceutical or biotechnology industries; |
• | governmental regulation and legislation; |
• | overall market volatility; |
• | variations in our anticipated or actual operating results; and |
• | change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations. |
• | the inability of stockholders to call special meetings; |
• | classification of our Board and limitation on filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our Company; and |
• | authorization of the issuance of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by the Board, without any need for action by stockholders. |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Location | Principal Business Activity | Approximate Square Feet | Owned or expiration date of lease | |
Ramsey, NJ | Corporate Headquarters | 4,200 | September 30, 2022 * | |
Boca Raton, FL | Manufacturing and Administration | 84,462 | Owned | |
Boca Raton, FL | Laboratory and Administration | 44,495 | Owned |
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Item 6. | Reserved |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | A significant adverse change in legal factors or in the business climate that could affect the value of the asset. |
• | Significant and continued cash flow losses. |
• | A significant adverse change in the extent or manner in which an asset is used, such as a restriction imposed by the FDA or other regulatory authorities that could affect our ability to manufacture our products using a particular asset. |
• | An expectation of losses or reduced profits associated with an asset. This could result, for example, from the introduction of a competitor’s product that impacts projected revenue growth, or a change in the acceptance of a product by patients, physicians and payers that results in an inability to sustain projected product revenues. |
Year Ended December 31, | ||||||||||||
2021 | 2020 | Increase (Decrease) | ||||||||||
Revenues | $ | 80,942,625 | $ | 42,219,783 | $ | 38,722,842 | ||||||
Cost of product revenue (exclusive of amortization expense shown below) | 79,769,341 | 61,291,426 | 18,477,915 | |||||||||
Gross profit (loss) | 1,173,284 | (19,071,643 | ) | 20,244,927 | ||||||||
Research and development expenses | 3,646,060 | 5,907,013 | (2,260,953 | ) | ||||||||
Plasma center operating expenses | 12,288,723 | 4,170,051 | 8,118,672 | |||||||||
Amortization of intangibles | 715,353 | 715,353 | - | |||||||||
Selling, general and administrative expenses | 42,896,889 | 35,050,817 | 7,846,072 | |||||||||
Loss from operations | (58,373,741 | ) | (64,914,877 | ) | 6,541,136 | |||||||
Interest expense | (13,056,834 | ) | (11,985,066 | ) | (1,071,768 | ) | ||||||
Gain on extinguishment of debt | - | 991,797 | (991,797 | ) | ||||||||
Other (expense) income, net | (217,043 | ) | 159,598 | (376,641 | ) | |||||||
Net loss | $ | (71,647,618 | ) | $ | (75,748,548 | ) | $ | 4,100,930 |
• | The procurement of raw material plasma and other raw materials necessary to maintain and scale up our manufacturing operations |
• | Employee compensation and benefits |
• | Capital expenditures for the building of additional plasma collection facilities and for equipment upgrades and capacity expansion at the Boca Facility |
• | Plasma donor fees and plasma center supplies |
• | Interest on our debt |
• | Marketing programs and continued commercialization efforts |
• | Boca Facility maintenance, repairs and supplies; and |
• | Conducting post-marketing clinical trials for our FDA-approved products. |
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Net cash used in operating activities | $ | (112,368,982 | ) | $ | (102,002,958 | ) | ||
Net cash used in investing activities | (13,511,258 | ) | (12,724,680 | ) | ||||
Net cash provided by financing activities | 121,048,206 | 143,896,655 | ||||||
Net change in cash and cash equivalents | (4,832,034 | ) | 29,169,017 | |||||
Cash and cash equivalents - beginning of year | 55,921,152 | 26,752,135 | ||||||
Cash and cash equivalents - end of year | $ | 51,089,118 | $ | 55,921,152 |
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (71,647,618 | ) | $ | (75,748,548 | ) | ||
Non-cash expenses, gains and losses | 10,959,055 | 7,526,908 | ||||||
Changes in accounts receivable | (15,339,567 | ) | (9,767,371 | ) | ||||
Changes in inventories | (43,188,489 | ) | (28,470,864 | ) | ||||
Changes in prepaid expenses and other current assets | (1,292,779 | ) | (512,873 | ) | ||||
Changes in accounts payable and accrued expenses | 9,697,041 | 5,300,930 | ||||||
Other | (1,556,625 | ) | (331,140 | ) | ||||
Cash used in operations | $ | (112,368,982 | ) | $ | (102,002,958 | ) |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accounting Fees and Services |
Item 15. | Exhibits, Financial Statement Schedules |
(1) | Consolidated Financial Statements. |
| Page |
Report of Independent Registered Public Accounting Firm | F-2 |
Consolidated Balance Sheets as of December 31, 2021 and 2020 | F-4 |
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 | F-5 |
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 | F-6 |
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 | F-7 |
Notes to Consolidated Financial Statements | F-8 |
(2) | Financial Statement Schedules. Required information is included in the footnotes to the financial |
(3) | Index to Exhibits. |
Exhibit No. | Description | |
10.17 | ||
10.18+ | ||
10.19++ | ||
10.24* | ||
10.25* | ||
101* | The following materials from ADMA Biologics, Inc. Form 10-K for the year ended December 31, 2021, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at December 31, 2021 and December 31, 2020, (ii) Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020; and (v) Notes to Consolidated Financial Statements. | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
Item 16. | Form 10-K Summary |
ADMA Biologics, Inc. | ||
Date: March 24, 2022 | By: | /s/ Adam S. Grossman |
Name: | Adam S. Grossman | |
Title: | President and Chief Executive Officer |
Signature | Title | Date | ||
/s/ Adam S. Grossman | ||||
Adam S. Grossman | President and Chief Executive Officer (Principal Executive Officer) and Director | March 24, 2022 | ||
/s/ Brian Lenz | ||||
Brian Lenz | Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | March 24, 2022 | ||
/s/ Steven A. Elms | ||||
Steven A. Elms | Chairman of the Board of Directors | March 24, 2022 | ||
/s/ Dr. Jerrold B. Grossman | ||||
Dr. Jerrold B. Grossman | Vice Chairman of the Board of Directors | March 24, 2022 | ||
/s/ Martha J. Demski | ||||
Martha J. Demski | Director | March 24, 2022 | ||
/s/ Bryant E. Fong | ||||
Bryant E. Fong | Director | March 24, 2022 | ||
/s/ Lawrence P. Guiheen | ||||
Lawrence P. Guiheen | Director | March 24, 2022 | ||
/s/ Young T. Kwon | ||||
Young T. Kwon | Director | March 24, 2022 |
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
/s/ CohnReznick LLP | |
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We have served as the Company’s auditor since 2008. | |
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Holmdel, New Jersey | |
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March 24, 2022 |
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2021 and 2020
| December 31, 2021 | December 31, 2020 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 51,089,118 | $ | 55,921,152 | ||||
Accounts receivable, net | 28,576,857 | 13,237,290 | ||||||
Inventories | 124,724,091 | 81,535,599 | ||||||
Prepaid expenses and other current assets | 4,339,245 | 3,046,466 | ||||||
Total current assets | 208,729,311 | 153,740,507 | ||||||
Property and equipment, net | 50,935,074 | 41,593,090 | ||||||
Intangible assets, net | 1,728,768 | 2,444,121 | ||||||
Goodwill | 3,529,509 | 3,529,509 | ||||||
Right to use assets | 7,262,658 | 4,259,191 | ||||||
Deposits and other assets | 4,067,404 | 2,106,976 | ||||||
TOTAL ASSETS | $ | 276,252,724 | $ | 207,673,394 | ||||
| ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 12,429,409 | $ | 11,073,708 | ||||
Accrued expenses and other current liabilities | 17,214,988 | 8,365,143 | ||||||
Current portion of deferred revenue | 142,834 | 142,834 | ||||||
Current portion of lease obligations | 591,084 | 365,682 | ||||||
Total current liabilities | 30,378,315 | 19,947,367 | ||||||
Senior notes payable, net of discount | 94,866,239 | 92,968,866 | ||||||
Deferred revenue, net of current portion | 1,975,865 | 2,118,698 | ||||||
Lease obligations, net of current portion | 7,462,388 | 4,334,151 | ||||||
Other non-current liabilities | 397,351 | 54,886 | ||||||
TOTAL LIABILITIES | 135,080,158 | 119,423,968 | ||||||
| ||||||||
COMMITMENTS AND CONTINGENCIES | 0 | 0 | ||||||
| ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred Stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding | 0 | 0 | ||||||
Common Stock - voting, $0.0001 par value, 300,000,000 and 150,000,000 shares authorized, 195,813,817 and 104,902,888 shares issued and outstanding | 19,581 | 10,490 | ||||||
Additional paid-in capital | 553,265,706 | 428,704,039 | ||||||
Accumulated deficit | (412,112,721 | ) | (340,465,103 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | 141,172,566 | 88,249,426 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 276,252,724 | $ | 207,673,394 |
The accompanying notes are an integral part of these consolidated financial statements.
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2021 and 2020
| Years Ended December 31, | |||||||
| 2021 | 2020 | ||||||
| ||||||||
REVENUES: | ||||||||
Product revenue | $ | 80,799,791 | $ | 42,076,949 | ||||
License revenue | 142,834 | 142,834 | ||||||
Total revenues | 80,942,625 | 42,219,783 | ||||||
Cost of product revenue | 79,769,341 | 61,291,426 | ||||||
Gross profit (loss) | 1,173,284 | (19,071,643 | ) | |||||
| ||||||||
OPERATING EXPENSES: | ||||||||
Research and development | 3,646,060 | 5,907,013 | ||||||
Plasma center operating expenses | 12,288,723 | 4,170,051 | ||||||
Amortization of intangible assets | 715,353 | 715,353 | ||||||
Selling, general and administrative | 42,896,889 | 35,050,817 | ||||||
Total operating expenses | 59,547,025 | 45,843,234 | ||||||
| ||||||||
LOSS FROM OPERATIONS | (58,373,741 | ) | (64,914,877 | ) | ||||
| ||||||||
OTHER INCOME (EXPENSE): | ||||||||
Interest income | 34,532 | 288,126 | ||||||
Interest expense | (13,056,834 | ) | (11,985,066 | ) | ||||
Gain on extinguishment of debt | 0 | 991,797 | ||||||
Other expense | (251,575 | ) | (128,528 | ) | ||||
Other expense, net | (13,273,877 | ) | (10,833,671 | ) | ||||
| ||||||||
NET LOSS | $ | (71,647,618 | ) | $ | (75,748,548 | ) | ||
| ||||||||
BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (0.51 | ) | $ | (0.88 | ) | ||
| ||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||
Basic and Diluted | 139,578,538 | 86,145,052 |
The accompanying notes are an integral part of these consolidated financial statements.
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Years Ended December 31, 2021 and 2020
| Additional | Total | ||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | |||||||||||||||
Balance at December 31, 2019 | 59,318,355 | $ | 5,932 | $ | 290,903,772 | $ | (264,716,555 | ) | $ | 26,193,149 | ||||||||||
Stock-based compensation | - | 0 | 2,855,122 | 0 | 2,855,122 | |||||||||||||||
Warrants issued in connection with note payable | - | 0 | 3,740,980 | 0 | 3,740,980 | |||||||||||||||
Vesting of Restricted Stock Units | 15,000 | 2 | (2 | ) | 0 | 0 | ||||||||||||||
Issuance of common stock, net of offering expenses | 45,562,907 | 4,555 | 131,190,736 | 0 | 131,195,291 | |||||||||||||||
Stock options exercised | 6,626 | 1 | 13,431 | 0 | 13,432 | |||||||||||||||
Net loss | - | 0 | 0 | (75,748,548 | ) | (75,748,548 | ) | |||||||||||||
Balance at December 31, 2020 | 104,902,888 | 10,490 | 428,704,039 | (340,465,103 | ) | 88,249,426 | ||||||||||||||
Stock-based compensation | - | 0 | 3,488,253 | 0 | 3,488,253 | |||||||||||||||
Vesting of Restricted Stock Units, net of shares withheld for taxes and retired | 64,900 | 6 | (61,604 | ) | 0 | (61,598 | ) | |||||||||||||
Issuance of common stock, net of offering expenses | 90,846,029 | 9,085 | 121,135,018 | 0 | 121,144,103 | |||||||||||||||
Net loss | - | 0 | 0 | (71,647,618 | ) | (71,647,618 | ) | |||||||||||||
Balance at December 31, 2021 | 195,813,817 | $ | 19,581 | $ | 553,265,706 | $ | (412,112,721 | ) | $ | 141,172,566 |
The accompanying notes are an integral part of these consolidated financial statements.
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2021 and 2020
| Years Ended December 31, | |||||||
| 2021 | 2020 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (71,647,618 | ) | $ | (75,748,548 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 5,495,502 | 3,942,292 | ||||||
Loss on disposal of fixed assets | 220,761 | 81,697 | ||||||
Stock-based compensation | 3,488,253 | 2,855,122 | ||||||
Amortization of debt discount | 1,897,373 | 1,782,428 | ||||||
Gain on extinguishment of debt | 0 | (991,797 | ) | |||||
Amortization of license revenue | (142,834 | ) | (142,834 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (15,339,567 | ) | (9,767,371 | ) | ||||
Inventories | (43,188,489 | ) | (28,470,864 | ) | ||||
Prepaid expenses and other current assets | (1,292,779 | ) | (512,873 | ) | ||||
Deposits and other assets | (1,775,205 | ) | (196,749 | ) | ||||
Accounts payable | 1,355,700 | 1,899,115 | ||||||
Accrued expenses | 8,341,341 | 3,401,815 | ||||||
Other current and non-current liabilities | 218,580 | (134,391 | ) | |||||
Net cash used in operating activities | (112,368,982 | ) | (102,002,958 | ) | ||||
| ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (13,511,258 | ) | (12,726,680 | ) | ||||
Proceeds from the sale of property and equipment | 0 | 2,000 | ||||||
Net cash used in investing activities | (13,511,258 | ) | (12,724,680 | ) | ||||
| ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal payments on notes payable | 0 | (13,950,000 | ) | |||||
Proceeds from issuance of common stock, net of offering expenses | 121,144,103 | 131,195,291 | ||||||
Proceeds from the exercise of stock options | 0 | 13,432 | ||||||
Payment of debt refinancing fees | 0 | (830,000 | ) | |||||
Proceeds from issuance of note payable | 0 | 27,500,000 | ||||||
Taxes paid on vested Restricted Stock Units | (61,598 | ) | 0 | |||||
Payments on finance lease obligations | (34,299 | ) | (32,068 | ) | ||||
Net cash provided by financing activities | 121,048,206 | 143,896,655 | ||||||
| ||||||||
Net (decrease) increase in cash and cash equivalents | (4,832,034 | ) | 29,169,017 | |||||
Cash and cash equivalents - beginning of year | 55,921,152 | 26,752,135 | ||||||
Cash and cash equivalents - end of year | $ | 51,089,118 | $ | 55,921,152 |
The accompanying notes are an integral part of these consolidated financial statements.
1. | ORGANIZATION AND BUSINESS |
ADMA Biologics, Inc. (“ADMA” or the “Company”) is an end-to-end commercial biopharmaceutical company dedicated to manufacturing, marketing and developing specialty plasma-derived biologics for the treatment of immunodeficient patients at risk for infection and others at risk for certain infectious diseases. The Company’s targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or who may be immune-suppressed for medical reasons.
ADMA operates through its wholly-owned subsidiaries ADMA BioManufacturing, LLC (“ADMA BioManufacturing”) and ADMA BioCenters Georgia Inc. (“ADMA BioCenters”). ADMA BioManufacturing was formed in January 2017 to facilitate the acquisition of the Biotest Therapy Business Unit (“BTBU”) from BPC Plasma, Inc. (formerly Biotest Pharmaceuticals Corporation) (“BPC” and, together with Biotest AG, “Biotest”) on June 6, 2017. The acquisition included certain assets (the “Biotest Assets”) of BTBU, which included the FDA-licensed BIVIGAM and Nabi-HB immunoglobulin products, and an FDA-licensed plasma fractionation manufacturing facility located in Boca Raton, FL (the “Boca Facility”) (the “Biotest Transaction”). BTBU had previously been the Company’s third-party contract manufacturer. ADMA BioCenters is the Company’s source plasma collection business with 10 plasma collection facilities in various stages of approval and development located throughout the U.S., 5 of which hold an approved license with the U.S. Food and Drug Administration (the “FDA”).
The Company has 3 FDA-approved products, all of which are currently marketed and commercially available: (i) BIVIGAM (Immune Globulin Intravenous, Human), an Intravenous Immune Globulin (“IVIG”) product indicated for the treatment of Primary Humoral Immunodeficiency (“PI”), also known as Primary Immunodeficiency Disease (“PIDD”), and for which the Company received FDA approval on May 9, 2019 and commenced commercial sales in August 2019; (ii) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), an IVIG product indicated for the treatment of PI, for which the Company received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019; and (iii) Nabi-HB (Hepatitis B Immune Globulin, Human), which is indicated for the treatment of acute exposure to blood containing Hepatitis B surface antigen (“HBsAg”) and other listed exposures to Hepatitis B. In addition to its commercially available immunoglobulin products, the Company provides contract manufacturing and laboratory services for certain clients and generates revenues from the sale of intermediate by-products that result from the immunoglobulin production process. The Company seeks to develop a pipeline of plasma-derived therapeutics, and its products and product candidates are intended to be used by physician specialists focused on caring for immune-compromised patients with or at risk for certain infectious diseases.
As of December 31, 2021, the Company had working capital of $178.4 million, including $51.1 million of cash and cash equivalents. Based upon the Company’s current projected revenue and expenditures, including capital expenditures and continued implementation of the Company’s commercialization and expansion activities, the Company’s management currently believes that its cash, cash equivalents, projected revenue and accounts receivable, together with the remaining available funds under the distribution agreement discussed in Note 8 and the net proceeds received and expected to be received from the refinancing of the Company’s senior debt on March 23, 2022 (see Note 17), will be sufficient to fund ADMA’s operations, as currently conducted, into the first quarter of 2024, at which time the Company believes it will begin to generate positive cash flow from operations. These estimates may change based upon several factors, including the success of the Company’s commercial sales of its products, whether or not the assumptions underlying the Company’s projected revenues and expenses are correct and the acceptability of ADMA’s immune globulin products by physicians, patients or payers. There can be no assurance that the Company’s approved products will be commercially viable, or that plant capacity expansion, plasma center buildouts or other capital improvements will be successfully completed or that any product developed in the future will be approved. The Company is subject to risks common to companies in the biotechnology and pharmaceutical manufacturing industries including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, inflationary pressures, supply chain constraints, protection of proprietary technology, and compliance with FDA and other governmental regulations and approval requirements. The Company is also continuing to evaluate a variety of strategic and financing alternatives through its ongoing engagement with Morgan Stanley as a financial advisor.
During the year ended December 31, 2021, the Company issued 90,846,029 shares of its common stock through an underwritten public offering and various open market sale agreements for its common stock and received net proceeds of $121.1 million.
2. | SIGNIFICANT ACCOUNTING POLICIES |
Principles of Consolidation and Basis of presentation
The accompanying consolidated financial statements include the accounts of ADMA and its wholly-owned subsidiaries, and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). All intercompany balances have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (the “FASB”). During the years ended December 31, 2021 and 2020, comprehensive loss was equal to the net loss amounts presented for the respective periods in the accompanying consolidated statements of operations.
Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the realizable value of accounts receivable, valuation of inventory, assumptions used in projecting future liquidity and capital requirements, assumptions used in the fair value of awards granted under the Company’s equity incentive plans and warrants issued in connection with the issuance of notes payable and the valuation allowance for the Company’s deferred tax assets.
Cash and cash equivalents
The Company considers all highly-liquid instruments purchased with a maturity of three months or less to be cash equivalents.
The Company regularly maintains cash and cash equivalents at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. Although the Company monitors the daily cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be impacted, and there could be a material adverse effect on the Company’s business, if one or more of the financial institutions with which the Company has deposits fails or is subject to other adverse conditions in the financial or credit markets. To date, the Company has not experienced a loss or lack of access to its deposited cash or cash equivalents; however, the Company cannot provide assurance that access to its cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets in the future.
Accounts receivable
Accounts receivable is reported at realizable value, net of allowances for contractual credits and doubtful accounts in the amount of $0.2 million and $0.1 million at December 31, 2021 and December 31, 2020, respectively, which are recognized in the period the related revenue is recorded. The Company extends credit to its customers based upon an evaluation of each customer’s financial condition and credit history. Evaluations of the financial condition and associated credit risk of customers are performed on an ongoing basis. Based on these evaluations, the Company has concluded that its credit risk is minimal. (see Note 16).
Inventories
Raw materials inventory consists of various materials purchased from suppliers, including normal source plasma, used in the production of the Company’s products. Work-in-process and finished goods inventories (see Note 3) reflect the cost of raw materials as well as costs for direct and indirect labor, primarily salaries, wages and benefits for applicable employees, as well as an allocation of overhead costs related to the Boca Facility including utilities, property taxes, general repairs and maintenance, consumable supplies and depreciation. The allocation of Boca Facility overhead to inventory is generally based upon the estimated square footage of the Boca Facility that is used in the production of the Company’s products relative to the total square footage of the facility.
Inventories, including plasma intended for resale and plasma intended for internal use in the Company’s manufacturing, commercialization or research and development activities, are carried at the lower of cost or net realizable value determined by the first-in, first-out method. Net realizable value is generally determined based upon the consideration the Company expects to receive when the inventory is sold, less costs to deliver the inventory to the recipient. The estimates for net realizable value of inventory are based on contractual terms or upon historical experience and certain other assumptions, and the Company believes that such assumptions are reasonable. Inventory is periodically reviewed to ensure that its carrying value does not exceed its net realizable value, and adjustments are recorded to write down such inventory, with a corresponding charge to cost of product revenue, when the carrying value or historical cost exceeds its estimated net realizable value. In addition, costs associated with the production of conformance or engineering lots that would not qualify as immediately available for commercial sale are charged to cost of product revenue and not capitalized into inventory.
Property and equipment
Assets comprising property and equipment (see Note 4) are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life. Land is not depreciated. The buildings have been assigned a useful life of 30 years. Property and equipment other than land and buildings have useful lives ranging from 3 to 15 years. Leasehold improvements are amortized over the lesser of the lease term or their estimated useful lives.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company. Goodwill at December 31, 2021 and 2020 was $3.5 million, all of which is attributable to the Company’s ADMA BioManufacturing business segment. There were 0 changes to the carrying amount of goodwill during the years ended December 31, 2021 and 2020.
Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators exist. The Company has the option to perform a qualitative assessment of goodwill to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill and other intangible assets. If the Company concludes that this is the case, then it must perform a goodwill impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company performs its annual goodwill impairment test as of October 1 of each year. The Company’s annual goodwill impairment tests as of October 1, 2021 and 2020 did not result in any impairment charges related to goodwill for the years ended December 31, 2021 and 2020.
Impairment of long-lived assets
The Company assesses the recoverability of its long-lived assets, which include property and equipment and finite-lived intangible assets, whenever significant events or changes in circumstances indicate impairment may have occurred. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to its carrying amount to determine whether the asset’s carrying value is recoverable. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the years ended December 31, 2021 and 2020, the Company determined that there was 0 impairment of its long-lived assets.
Revenue recognition
Revenues for the years ended December 31, 2021 and 2020 are comprised of (i) revenues from the sale of the Company’s immunoglobulin products, BIVIGAM, ASCENIV and Nabi-HB, (ii) product revenues from the sale of human plasma collected by the Company’s Plasma Collection Centers business segment, (iii) contract manufacturing and laboratory services revenue, (iv) revenues from the sale of intermediate by-products; and (v) license and other revenues primarily attributable to the out-licensing of ASCENIV to Biotest in 2012 to market and sell this product in Europe and selected countries in North Africa and the Middle East. Biotest has provided the Company with certain services and financial payments in accordance with the related Biotest license agreement and is obligated to pay the Company certain amounts in the future if certain milestones are achieved. Deferred revenue is amortized into income over the term of the Biotest license, representing a period of approximately 22 years.
Product revenue is recognized when the customer is deemed to have control over the product. Control is determined based on when the product is shipped or delivered and title passes to the customer. Revenue is recorded in an amount that reflects the consideration the Company expects to receive in exchange. Revenue from the sale of the Company’s immunoglobulin products is recognized when the product reaches the customer’s destination, and is recorded net of estimated rebates, price protection arrangements and customer incentives, including prompt pay discounts, wholesaler chargebacks and other wholesaler fees. These estimates are based on historical experience and certain other assumptions, and the Company believes that such estimates are reasonable. For revenues associated with contract manufacturing and the sale of intermediates, control transfers to the customer and the performance obligation is satisfied when the customer takes possession of the product from the Boca Facility or from a third-party warehouse that is utilized by the Company.
Product revenues from the sale of human plasma collected at the Company’s plasma collection centers are recognized at the time control of the product has been transferred to the customer, which generally occurs at the time of shipment. Product revenues are recognized at the time of delivery if the Company retains control of the product during shipment.
Cost of product revenue
Cost of product revenue includes costs associated with the manufacture of the Company’s FDA approved products, intermediates and the sale of human source plasma, as well as expenses related to conformance batch production, process development and scientific and technical operations when these operations are attributable to marketed products. When the activities of these operations are attributable to new products in development, the expenses are classified as research and development expenses.
Research and development expenses
Research and development expenses consist of clinical research organization costs, costs related to clinical trials, post-marketing commitment studies for BIVIGAM and ASCENIV, wages, benefits and stock-based compensation for employees directly related to research and development activities. All research and development costs are expensed as incurred.
Advertising and marketing expenses
Advertising and marketing expense includes cost for promotional materials and trade show expenses for the marketing of the Company’s products and services and expenses incurred for attracting donors to the Company’s plasma collection centers. All advertising and marketing expenses are expensed as incurred. Advertising and marketing expenses were $1.4 million and $1.1 million for the years ended December 31, 2021 and 2020, respectively.
Stock-based compensation
The Company follows recognized accounting guidance which requires all equity-based payments, including grants of stock options, to be recognized in the statement of operations as compensation expense based on their fair values at the date of grant. Compensation expense related to awards to employees and directors with service-based vesting conditions is recognized on a straight-line basis over the associated vesting period of the award based on the grant date fair value of the award. Stock options granted under the Company’s equity incentive plans generally have a four-year vesting period and a term of 10 years. For milestone-based equity awards (see Note 8) the Company periodically assesses the probability of vesting for each milestone-based award and adjusts compensation expense based on its probability assessment. Pursuant to ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), the Company has elected not to establish a forfeiture rate, as stock-based compensation expense related to forfeitures of unvested equity awards is fully reversed at the time of forfeiture.
Income taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or its tax returns. Under this method, deferred tax assets and liabilities are recognized for the temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company records a valuation allowance on its deferred tax assets if it is more likely than not that the Company will not generate sufficient taxable income to utilize its deferred tax assets (see Note 11). The Company is subject to income tax examinations by major taxing authorities for all tax years since 2017 and for previous periods as it relates to the Company’s net operating loss carryforwards.
Loss Per Share
Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders as adjusted for the effect of dilutive securities, if any, by the weighted average number of shares of common stock and dilutive common stock outstanding during the period. Potentially dilutive common stock includes the shares of common stock issuable upon the exercise of outstanding stock options and warrants (using the treasury stock method). Potentially dilutive common stock in the diluted net loss per share computation is excluded to the extent that it would be anti-dilutive. No potentially dilutive securities are included in the computation of any diluted per share amounts as the Company reported a net loss for all periods presented. For the years ended December 31, 2021 and 2020, the following securities were excluded from the calculation of diluted loss per common share because of their anti-dilutive effects:
| For the Years Ended December 31, | |||||||
| 2021 | 2020 | ||||||
Stock options | 7,862,722 | 6,922,931 | ||||||
Restricted stock units | 4,485,133 | 326,000 | ||||||
Warrants | 4,528,160 | 4,528,160 | ||||||
| 16,876,015 | 11,777,091 |
Fair value of financial instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are shown at cost, which approximates fair value due to the short-term nature of these instruments. The debt outstanding under the Company’s senior notes payable (see Note 7) approximates fair value due to the variable interest rate on this debt.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”), which requires financial assets to be presented at the net amount expected to be collected, with an allowance for credit losses to be deducted from the amortized cost basis of the financial asset such that the net carrying value of the asset is presented as the amount expected to be collected. Under ASU 2016-13, the entity’s statement of operations is required to reflect the measurement of credit losses for newly recognized financial assets, as well as expected increases or decreases in expected credit losses that have taken place during the period. For public business entities, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019. The Company adopted ASU No. 2016-13 on January 1, 2020, and the adoption of this update did not have a significant impact on the Company’s consolidated financial statements.
3. | INVENTORIES |
The following table provides the components of inventories:
| December 31, | December 31, | ||||||
| ||||||||
Raw materials | $ | 36,755,720 | $ | 32,044,393 | ||||
Work-in-process | 58,968,535 | 30,293,288 | ||||||
Finished goods | 28,999,836 | 19,197,918 | ||||||
Total inventories | $ | 124,724,091 | $ | 81,535,599 |
Raw materials includes plasma and other materials expected to be used in the production of BIVIGAM, ASCENIV and Nabi-HB. These materials will be consumed in the production of goods expected to be available for sale or otherwise have alternative uses that provide a probable future benefit. All other activities and materials associated with the production of inventories used in research and development activities are expensed as incurred.
Work-in-process inventory primarily consists of bulk drug substance and unlabeled filled vials of the Company’s immunoglobulin products.
Finished goods inventory is comprised of immunoglobulin product inventory and related intermediates that are available for commercial sale, as well as plasma collected at the Company’s plasma collection center which is expected to be sold to third-party customers.
4. | PROPERTY AND EQUIPMENT |
Property and equipment at December 31, 2021 and 2020 is summarized as follows:
| December 31, 2021 | December 31, 2020 | ||||||
Manufacturing and laboratory equipment | $ | 16,702,991 | $ | 14,468,874 | ||||
Office equipment and computer software | 4,082,462 | 3,253,528 | ||||||
Furniture and fixtures | 3,389,140 | 2,389,585 | ||||||
Construction in process | 5,496,222 | 3,336,557 | ||||||
Leasehold improvements | 11,129,639 | 5,272,490 | ||||||
Land | 4,339,441 | 4,339,441 | ||||||
Buildings and building improvements | 19,067,032 | 17,396,557 | ||||||
| 64,206,927 | 50,457,032 | ||||||
Less: Accumulated depreciation | (13,271,853 | ) | (8,863,942 | ) | ||||
Total property, plant and equipment, net | $ | 50,935,074 | $ | 41,593,090 |
The Company recorded depreciation expense on property and equipment of $4.8 million and $3.2 million for the years ended December 31, 2021 and 2020, respectively.
5. | INTANGIBLE ASSETS |
Intangible assets at December 31, 2021 and 2020 consist of the following:
| December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||
| Cost | Accumulated Amortization | Net | Cost | Accumulated Amortization | Net | ||||||||||||||||||
Trademark and other intangible rights related to Nabi-HB | $ | 4,100,046 | $ | 2,684,554 | $ | 1,415,492 | $ | 4,100,046 | $ | 2,098,833 | $ | 2,001,213 | ||||||||||||
Rights to intermediates | 907,421 | 594,145 | 313,276 | 907,421 | 464,513 | 442,908 | ||||||||||||||||||
| $ | 5,007,467 | $ | 3,278,699 | $ | 1,728,768 | $ | 5,007,467 | $ | 2,563,346 | $ | 2,444,121 |
Under the previous contract manufacturing agreement between ADMA and BPC, intermediate by-products derived from the manufacture of ASCENIV were property of Biotest. As a result of the Biotest Transaction, ADMA obtained the right to these intermediate products, which are being amortized over a period of seven years. The intangible rights to Nabi-HB are also being amortized over a period of seven years.
Amortization expense related to the Company’s intangible assets for the years ended December 31, 2021 and 2020 was $0.7 million. Estimated aggregate future aggregate amortization expense is expected to be as follows:
2022 | $ | 715,352 | ||
2023 | 715,352 | |||
2024 | 298,064 |
6. | ACCRUED EXPENSES AND OTHER LIABILITIES |
Accrued expenses and other current liabilities at December 31, 2021 and 2020 are as follows:
| December 31, 2021 | December 31, 2020 | ||||||
Accrued rebates | $ | 5,040,200 | $ | 2,604,245 | ||||
Accrued distribution fees | 4,739,651 | 828,120 | ||||||
Accrued incentives | 4,066,109 | 3,210,884 | ||||||
Accrued testing | 1,189,970 | 779,660 | ||||||
Accrued payroll | 1,167,072 | 734,972 | ||||||
Other | 1,011,986 | 207,262 | ||||||
Total accrued expenses and other current liabilities | $ | 17,214,988 | $ | 8,365,143 |
7. | NOTES PAYABLE |
Senior Notes Payable
A summary of outstanding senior notes payable is as follows:
| December 31, 2021 | December 31, 2020 | ||||||
Notes payable | $ | 100,000,000 | $ | 100,000,000 | ||||
Less: | ||||||||
Debt discount | (5,133,761 | ) | (7,031,134 | ) | ||||
Senior notes payable | $ | 94,866,239 | $ | 92,968,866 |
On February 11, 2019 (the “Perceptive Closing Date”), the Company and all of its subsidiaries entered into a Credit Agreement and Guaranty (the “Perceptive Credit Agreement”) with Perceptive Credit Holdings II, LP, as the lender and administrative agent (“Perceptive”). The Perceptive Credit Agreement, as amended, provides for a senior secured term loan facility in a principal amount of $100.0 million (the “Perceptive Credit Facility”), comprised of (i) a term loan made on the Perceptive Closing Date in the principal amount of $45.0 million, as evidenced by the Company’s issuance of a promissory note (the “Perceptive Tranche I Note��) in favor of Perceptive on the Perceptive Closing Date (the “Perceptive Tranche I Loan”), (ii) a term loan in the principal amount of $27.5 million (the “Perceptive Tranche II Loan”) evidenced by the Company’s issuance of a promissory note (the “Perceptive Tranche II Note”) in favor of Perceptive on May 3, 2019, (iii) a term loan in the principal amount of $12.5 million evidenced by the Company’s issuance of a promissory note (the “Perceptive Tranche III Note”) in favor of Perceptive on March 20, 2020 (the “Perceptive Tranche III Loan”); and (iv) a term loan in the principal amount of $15 million evidenced by our issuance of a promissory note in favor of Perceptive on December 8, 2020 (the “Perceptive Tranche IV Loan”, and together with the Perceptive Tranche I Loan, the Perceptive Tranche II Loan and the Perceptive Tranche III Loan, the “Perceptive Loans”). The Perceptive Tranche III Loan is the result of an amendment to the Perceptive Credit Agreement that the Company and Perceptive entered into on May 3, 2019 (the “First Perceptive Amendment”), and the Perceptive Tranche III Loan became available to the Company upon the approval of BIVIGAM on May 9, 2019. The Perceptive Tranche IV Loan is the result of an amendment to the Perceptive Credit Facility entered into on December 8, 2020 (the “Second Perceptive Amendment”), which also extended the maturity date of the Perceptive Credit Facility to March 1, 2024 (the “Maturity Date”), subject to acceleration pursuant to the Perceptive Credit Agreement, including upon an Event of Default (as defined in the Perceptive Credit Agreement). Also on December 8, 2020, the Company retired a subordinated note payable to Biotest in the principal amount of $15.0 million with the proceeds from the Perceptive Tranche IV Loan. As part of this transaction, Biotest agreed to a 7% discount from the principal, and the obligation under the note was satisfied by a payment by the Company of approximately $14.0 million. As a result, the Company recorded a gain on the extinguishment of the note of approximately $1.0 million.
Borrowings under the Perceptive Credit Agreement bear interest at a rate per annum equal to 7.5% plus the greater of (i) one-month LIBOR and (ii) 3.5%; provided, however, that upon, and during the continuance of, an Event of Default, the interest rate will automatically increase by an additional 400 basis points. Accrued interest was payable to Perceptive on the last day of each month during the term of the Perceptive Credit Facility. The rate of interest in effect as of the Perceptive Closing Date and at December 31, 2021 was 11.0%.
All of the Company’s obligations under the Perceptive Credit Agreement were secured by a first-priority lien and security interest in substantially all of the Company’s tangible and intangible assets, including intellectual property and all of the equity interests in the Company’s subsidiaries. The Perceptive Credit Agreement contained certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings. The negative covenants restricted or limited the ability of the Company and its subsidiaries to, among other things and subject to certain exceptions contained in the Perceptive Credit Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to the Company’s or its subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Perceptive Credit Agreement); change its fiscal year; pay dividends; repay other certain indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that had the impact of restricting the Company’s ability to make loan repayments under the Perceptive Credit Agreement. In addition, the Company was required (i) at all times prior to the Maturity Date to maintain a minimum cash balance of $3.0 million; and (ii) as of the last day of each fiscal quarter commencing with the fiscal quarter ended June 30, 2019, report revenues for the trailing 12-month period that exceed the amounts set forth in the Perceptive Credit Agreement, which ranged from $7.0 million for the fiscal quarter ended June 30, 2019 to $55.0 million for the fiscal quarter ending December 31, 2021. At December 31, 2021, the Company was in compliance with all of the covenants contained in the Perceptive Credit Agreement.
As consideration for the Perceptive Credit Agreement, the Company issued to Perceptive a warrant to purchase 1,360,000 shares of the Company’s common stock (the “Perceptive Warrant”) on the Perceptive Closing Date. The Perceptive Warrant has an exercise price equal to $3.28 per share, which is equal to the trailing 10-day volume weighted average price (“VWAP”) of the Company’s common stock on the business day immediately prior to the Perceptive Closing Date multiplied by 1.15. The Company valued the Perceptive Warrant at $2.7 million as of the Perceptive Closing Date and it has an expiration date of February 11, 2029. In connection with the First Perceptive Amendment, the Company issued an additional warrant (the “Perceptive Tranche III Warrant”) to purchase 250,000 shares of the Company’s common stock to Perceptive with an exercise price equal to $4.64 per share, which represents the trailing 10-day VWAP of the Company’s common stock as of May 2, 2019. The Perceptive Tranche III Warrant was valued by the Company at $0.9 million and has an expiration date of May 3, 2029. As consideration for the Second Perceptive Amendment, the Company issued an additional warrant (the “Perceptive Tranche IV Warrant” and, together with the Perceptive Warrant and the Perceptive Tranche III Warrant, the “Perceptive Warrants”) to purchase 2,390,000 shares of the Company’s common stock to Perceptive with an exercise price of $1.94 per share, which is equal to the trailing 10-day VWAP of the Company’s common stock on the business day immediately prior to the date of the Perceptive Second Amendment. The Perceptive Tranche IV Warrant was valued by the Company at $3.7 million and has an expiration date of December 8, 2030. Perceptive had represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act) and the Company issued the Perceptive Warrants in reliance upon an exemption from registration contained in Section 4(2) under the Securities Act. The Perceptive Warrants and the shares of common stock issuable thereunder may not be offered, sold, pledged or otherwise transferred in the U.S. absent registration or an applicable exemption from the registration requirements under the Securities Act.
As a result of the fees paid to Perceptive and the value of the Perceptive Warrants, the Company recognized an aggregate discount on the Perceptive Loans in the amount of $7.1 million. The Company records debt discount as a reduction to the face amount of the debt, and the debt discount is amortized as interest expense over the life of the debt using the interest method. Based on the fair value of the Perceptive Warrants and the aggregate amount of fees and expenses associated with obtaining the Perceptive Credit Facility, the effective interest rate on the Perceptive Loans since December 8, 2020 was approximately 13.7%.
8. | STOCKHOLDERS’ EQUITY |
Preferred Stock
The Company is currently authorized to issue up to 10 million shares of preferred stock, $0.0001 par value per share. There were 0 shares of preferred stock outstanding at December 31, 2021 and 2020.
Common Stock
On August 5, 2020, the Company entered into an open market sale agreement (as amended from time to time, the “Sale Agreement”) with Jefferies LLC (“Jefferies”), pursuant to which the Company could offer and sell, from time to time, at its option, through or to Jefferies, up to an aggregate of $50 million of shares of the Company’s common stock. On November 5, 2020 and February 3, 2021, the Company and Jefferies amended the Sale Agreement to provide for increases in the aggregate offering amount under the Sale Agreement such that the Company could sell shares having an aggregate offering price of up to $105.4 million under the Sale Agreement, as amended. For the year ended December 31, 2021, the Company issued and sold 27,805,198 shares of common stock under the 2020 Sale Agreement and received net proceeds of $60.4 million. For the year ended December 31, 2020, the Company sold 18,537,907 shares of common under the Sale Agreement and received net proceeds of $42.5 million.
On February 11, 2020, the Company completed an underwritten public offering of 23,500,000 shares of its common stock for gross proceeds of $82.3 million. On February 21, 2020, the Company sold an additional 3,525,000 shares pursuant to the underwriters’ exercise of their option to purchase additional shares of the Company’s common stock for additional gross proceeds of $12.3 million. The Company received net proceeds, after underwriting discounts and other expenses associated with the offering, of approximately $88.7 million.
During the year ended December 31, 2020, the Company issued 6,626 shares of common stock in connection with the exercise of stock options that had been granted to employees.
Warrants
On December 8, 2020, the Company issued the Perceptive Tranche IV Warrant, whereby Perceptive may purchase an aggregate of 2,390,000 shares of common stock at an exercise price $1.94 per share (see Note 7). The warrant was valued at $3.7 million, using the Black-Scholes option-pricing model assuming an expected term of 10 years, a volatility of 69.3%, a dividend yield of 0% and a risk-free interest rate of 0.92%.
Equity Incentive Plans
From time to time the Company grants stock options or other equity-based awards under the Company’s Amended and Restated 2014 Omnibus Incentive Compensation Plan (the “2014 Plan”).
During the years ended December 31, 2021 and 2020, the Company granted options to purchase an aggregate of 1,895,550 and 1,468,412 shares of common stock, respectively, to its directors, employees and certain third-party service providers. The fair value of stock options granted was determined on the date of grant using the Black-Scholes model. The Black-Scholes option valuation model was developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the underlying Black-Scholes assumptions can materially affect the fair value estimate. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of the grant with a term consistent with the term of the awards granted by the Company. The expected term of the options granted is in accordance with Staff Accounting Bulletins 107 and 110, which is based on the average between vesting terms and contractual terms. The expected dividend yield reflects the Company’s current and expected future policy for dividends on the Company’s common stock. For the years ended December 31, 2021 and 2020, the expected stock price volatility for the Company’s stock options was calculated by examining the historical volatility of the Company’s common stock since the stock became publicly traded in the fourth quarter of 2013.
The grant date fair values of stock options awarded during the years ended December 31, 2021 and 2020 were determined using the Black-Scholes option-pricing model with the following assumptions:
| Years Ended | |||||||
| December 31, 2021 | December 31, 2020 | ||||||
Expected term | 5.5-6.3 years | 5.5-6.3 years | ||||||
Volatility | 68-70 | % | 62-70 | % | ||||
Dividend yield | 0.0 | 0.0 | ||||||
Risk-free interest rate | 0.80-1.27 | % | 0.33-1.68 | % |
The 2014 Plan provides for the Board or a Committee of the Board (the “Committee”) to grant awards to optionees and to determine the exercise price, vesting term, expiration date and all other terms and conditions of the awards, including acceleration of the vesting of an award at any time. All options granted under the 2014 Plan are intended to be incentive stock options (“ISOs”), unless specified by the Committee to be non-qualified options (“NQOs”) as defined by the Internal Revenue Code. ISOs and NQOs may be granted to employees, consultants or Board members at an option price not less than the fair market value of the common stock subject to the stock option agreement. The following table summarizes information about stock options outstanding as of December 31, 2021 and 2020:
| Shares | Weighted Average Exercise Price | ||||||
Options outstanding, vested and expected to vest at December 31, 2019 | 5,630,351 | $ | 4.76 | |||||
Forfeited | (141,724 | ) | $ | 3.81 | ||||
Expired | (27,482 | ) | $ | 4.26 | ||||
Granted | 1,468,412 | $ | 2.93 | |||||
Exercised | (6,626 | ) | $ | 2.03 | ||||
Options outstanding, vested and expected to vest at December 31, 2020 | 6,922,931 | $ | 4.40 | |||||
Forfeited | (529,202 | ) | $ | 2.89 | ||||
Expired | (426,557 | ) | $ | 4.91 | ||||
Granted | 1,895,550 | $ | 2.14 | |||||
Exercised | 0 | 0 | ||||||
Options outstanding, vested and expected to vest at December 31, 2021 | 7,862,722 | $ | 3.93 | |||||
| ||||||||
Options exercisable | 5,521,312 | $ | 4.54 |
|
| Stock Options Outstanding |
|
| Stock Options Exercisable |
| |||||||||||||||||||||||||||
Range of Exercise Prices |
| Options Outstanding |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price |
|
| Aggregate Intrinsic Value |
|
| Options Outstanding |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price |
|
| Aggregate Intrinsic Value |
| |||||||||
$1.10 - $1.67 |
|
| 352,500 |
|
|
| 9.6 |
|
| $ | 1.10 |
|
| $ | 35,935 |
|
|
| 15,583 |
|
|
| 9.8 |
|
| $ | 1.10 |
|
| $ | 4,831 |
| |
$1.73 - $2.60 |
|
| 1,673,518 |
|
|
| 8.9 |
|
| $ | 2.42 |
|
|
| 0 |
|
|
| 374,318 |
|
|
| 8.5 |
|
| $ | 2.42 |
|
|
| 0 |
| |
$2.62 - $3.93 |
|
| 4,209,177 |
|
|
| 5.9 |
|
| $ | 3.51 |
|
|
| 0 |
|
|
| 3,554,848 |
|
|
| 5.6 |
|
| $ | 3.51 |
|
|
| 0 |
| |
$3.98 - $5.97 | 487,040 | 5.6 | $ | 5.07 | 0 | 442,202 | 5.4 | $ | 5.07 | ||||||||||||||||||||||||
$6.02 - $9.03 | 892,987 | 1.1 | $ | 7.74 | 0 | 886,861 | 1.0 | $ | 7.74 | ||||||||||||||||||||||||
$9.37 - $10.80 |
|
| 247,500 |
|
|
| 2.9 |
|
| $ | 10.28 |
|
|
| 0 |
|
|
| 247,500 |
|
|
| 2.9 |
|
| $ | 10.28 |
|
|
| 0 |
| |
|
|
| 7,862,722 |
|
|
| 6.1 |
|
| $ | 3.93 |
|
| $ | 35,935 |
|
|
| 5,521,312 |
|
|
| 4.9 |
|
| $ | 4.54 |
|
| $ | 4,831 |
|
| Shares | Weighted Average Grant Date Fair Value | ||||||
Balance at December 31, 2019 | 0 | $ | 0 | |||||
Granted | 361,000 | $ | 2.82 | |||||
Vested | (15,000 | ) | $ | 2.92 | ||||
Forfeited | (20,000 | ) | $ | 2.83 | ||||
Balance at December 31, 2020 | 326,000 | $ | 2.81 | |||||
Granted | 4,384,744 | $ | 1.30 | |||||
Vested | (92,750 | ) | $ | 2.82 | ||||
Forfeited | (132,861 | ) | $ | 2.51 | ||||
Balance at December 31, 2021 | 4,485,133 | $ | 1.34 |
Total stock-based compensation expense for all awards granted under the Company’s equity incentive plan for the years ended December 31, 2021 and 2020 was as follows:
| 2021 | 2020 | ||||||
Research and development | $ | 153,924 | $ | 471,146 | ||||
Plasma center operating expenses | 60,257 | 33,464 | ||||||
Selling, general and administrative | 2,958,008 | 2,107,577 | ||||||
Cost of product revenue | 316,064 | 242,935 | ||||||
Total stock-based compensation expense | $ | 3,488,253 | $ | 2,855,122 |
9. | RELATED PARTY TRANSACTIONS |
The Company leases an office building and equipment from Areth, LLC (“Areth”) pursuant to an agreement for services effective as of January 1, 2016, as amended from time to time. Effective October 1, 2017, monthly rent on this facility was reduced to $10,000. On September 27, 2018, the agreement was amended to extend the term of the agreement through September 30, 2019. On November 7, 2019, an additional amendment was entered into between Areth and the Company to extend the term of this agreement through September 30, 2020, and to provide for automatic one-year renewals unless ADMA gives written notice of termination to Areth 60 days prior to the end of the term. The Company did not provide such written notice to Areth as of July 31, 2021. Rent expense for the years ended December 31, 2021 and 2020 amounted to $0.1 million. Areth is a company controlled by Dr. Jerrold B. Grossman, the Vice Chairman of the Company’s Board of Directors, and Adam S. Grossman, the Company’s President and Chief Executive Officer. The Company also reimburses Areth for office, warehousing and building related (common area) expenses, equipment and certain other operational expenses, which were not material to the consolidated financial statements for the years ended December 31, 2021 and 2020.
During the years ended December 31, 2021 and 2020, the Company purchased certain specialized medical equipment and services related to the Company’s plasma collection centers, as well as personal protective equipment, from GenesisBPS and its affiliates (“Genesis”) in the amount of $0.2 million and $0.1 million, respectively. Genesis is owned by Dr. Grossman and Adam Grossman.
10. | COMMITMENTS AND CONTINGENCIES |
General Legal Matters
From time to time the Company is or may become subject to certain legal proceedings and claims arising in connection with the normal course of its business. Management does not expect that the outcome of any such claims or actions will have a material effect on the Company’s liquidity, results of operations or financial condition.
COVID-19 Pandemic
Notwithstanding the foregoing, the COVID-19 pandemic to date has not had a material impact on the Company’s financial condition or results of operations, and the Company does not believe that its production operations at the Boca Facility, the Company’s contract fill/finishers or its plasma collection facilities have been significantly impacted by the COVID-19 pandemic. As a result, the Company does not anticipate and has not experienced any material impairments with respect to any of its long-lived assets, including the Company’s property and equipment, goodwill or intangible assets.
Although the COVID-19 pandemic has not, to date, materially adversely impacted the Company’s capital and financial resources, because the Company is unable to determine the ultimate severity or duration of the pandemic or its long-term effects on, among other things, the global, national or local economies, the capital and credit markets or the Company’s workforce, customers or our suppliers, at this time the Company is unable to predict whether COVID-19 will have a material adverse impact on the Company’s business, financial condition, liquidity and results of operations.
Vendor and Licensor Commitments
Pursuant to the terms of a plasma purchase agreement with BPC dated as of November 17, 2011 (the “2011 Plasma Purchase Agreement”), the Company agreed to purchase from BPC an annual minimum volume of source plasma containing antibodies to RSV to be used in the manufacture of ASCENIV. The Company must purchase a to-be-determined and agreed upon annual minimum volume from BPC, but may also collect high-titer RSV plasma from up to 5 wholly-owned ADMA plasma collection facilities. During 2015, the Company and BPC amended the 2011 Plasma Purchase Agreement to allow the Company the ability to collect its raw material RSV high-titer plasma from other third-party collection organizations, thus allowing the Company to expand its reach for raw material supply as it executes its commercialization plans for ASCENIV. As part of the closing of the Biotest Transaction, the parties amended the 2011 Plasma Purchase Agreement to extend the initial term through the ten-year anniversary of the closing date of the Biotest Transaction. Unless terminated earlier, the 2011 Plasma Purchase Agreement expires in June 2027, after which it may be renewed for 2 additional five-year periods if agreed to by the parties. On December 10, 2018, BPC assigned its rights and obligations under the 2011 Plasma Purchase Agreement to Grifols Worldwide Operations Limited (“Grifols”) as its successor-in-interest, effective January 1, 2019. On January 1, 2019, Grifols and the Company entered into an additional amendment to the 2011 Plasma Purchase Agreement for the purchase of source plasma containing antibodies to RSV from Grifols (see Note 16). Pursuant to this amendment, until January 1, 2022, the Company may purchase RSV plasma from Grifols from the 2 plasma collection centers that were transferred to BPC on January 1, 2019 at a price equal to cost plus 5percent (5%) (without any additional increase due to inflation). Effective January 1, 2022, RSV plasma purchased from these 2 plasma collection centers will be subject to the pricing terms in effect for RSV plasma purchased from other plasma collection centers owned by Grifols.
On June 6, 2017, the Company and BPC entered into a Plasma Supply Agreement pursuant to which BPC supplies, on an exclusive basis subject to certain exceptions, to ADMA BioManufacturing an annual minimum volume of hyperimmune plasma that contain antibodies to the Hepatitis B virus for the manufacture of Nabi-HB. The Plasma Supply Agreement has a 10-year term. On July 19, 2018, the Company and BPC entered into an amendment to the Plasma Supply Agreement to provide, among other things, that in the event BPC elects not to supply in excess of ADMA BioManufacturing’s specified amount of Hepatitis B plasma and ADMA BioManufacturing is unable to secure Hepatitis B plasma from a third party at a price that is within a low double- digit percentage of the price that ADMA BioManufacturing pays to BPC, then BPC shall reimburse ADMA BioManufacturing for the difference in price ADMA BioManufacturing incurs. On December 10, 2018, BPC assigned its rights and obligations under the Plasma Supply Agreement to Grifols, effective January 1, 2019.
On June 6, 2017, the Company and BPC entered into a Plasma Purchase Agreement (the “2017 Plasma Purchase Agreement”), pursuant to which ADMA BioManufacturing purchases normal source plasma (“NSP”) from BPC at agreed upon annual quantities and prices. The 2017 Plasma Purchase Agreement has an initial term of five years after which the 2017 Plasma Purchase Agreement may be renewed for additional 2 terms of two years each upon the mutual written consent of the parties. On July 19, 2018, the Company and BPC entered into an amendment to the 2017 Plasma Purchase Agreement to, among other things, provide agreed upon amounts of normal source plasma to be supplied by BPC to ADMA BioManufacturing in calendar year 2019 at a specified price per liter, provided that ADMA BioManufacturing delivers a valid purchase order to BPC. Additionally, pursuant to the amendment to the 2017 Plasma Purchase Agreement, BPC agreed that, for calendar years 2020 and 2021, it shall supply no less than a high double-digit percentage of ADMA BioManufacturing’s requested NSP amounts, provided that such requested NSP amounts are within an agreed range, at a price per liter to be mutually determined. Furthermore, pursuant to the amendment to the 2017 Plasma Purchase Agreement, in the event BPC fails to supply ADMA BioManufacturing with at least a high double-digit percentage of ADMA BioManufacturing’s requested NSP amounts, BPC shall promptly reimburse ADMA BioManufacturing the difference in price ADMA BioManufacturing incurs due to BPC’s election not to supply NSP to ADMA BioManufacturing in such amounts as requested. On December 10, 2018, BPC assigned its rights and obligations under the Plasma Purchase Agreement to Grifols, effective January 1, 2019.
Effective as of May 12, 2021, the Company and Grifols amended the foregoing 2017 Plasma Purchase Agreement whereby, among other things, the term of the agreement was extended through December 31, 2022, while certain historical provisions were deleted. In order to maintain a reliable supply of raw material plasma thereafter, the Company has executed additional agreements with multiple third-party suppliers of NSP to supplement the 2017 Plasma Purchase Agreement. The Company has also increased its number of planned plasma collection center buildouts such that the Company expects to have 10 FDA-approved plasma collection centers in operation by the end of 2023, while also continuing to increase its plasma collection capabilities at its ADMA BioCenters plasma collection centers business segment.
Post-marketing commitments
In connection with the approval of the BLA for BIVIGAM, on December 19, 2012 Biotest committed to perform two additional post-marketing studies, a pediatric study to evaluate the efficacy and safety of BIVIGAM in children and adolescents, and a post-authorization safety study to further assess the potential risk of hypotension and hepatic and renal impairment in BIVIGAM-treated patients with primary humoral immunodeficiency. These studies are still pending completion. ADMA has assumed the remaining obligations, and the costs of the studies will be expensed as incurred as research and development expenses. The Company currently expects to incur expenses of approximately $3.0 million to $4.0 million to complete these studies, with both studies to be completed by June of 2023.
In connection with the FDA’s approval of ASCENIV on April 1, 2019, the Company is required to perform a pediatric study to evaluate the safety and efficacy of ASCENIV in children and adolescents. The Company expects to incur expenses of approximately $2 million to complete this study, which is required to be completed by June of 2023.
Employment contracts
The Company has entered into employment agreements with Mr. Grossman and Mr. Lenz.
Other commitments
In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these arrangements is unknown as of December 31, 2021. The Company does not anticipate recognizing any significant losses relating to these arrangements.
11. | INCOME TAXES |
A reconciliation of income taxes at the U.S. federal statutory rate to the benefit for income taxes is as follows:
| Year Ended December 31, | |||||||
| 2021 | 2020 | ||||||
Benefit at U.S. federal statutory rate | $ | (15,045,999 | ) | $ | (15,907,195 | ) | ||
State taxes - deferred | (251,839 | ) | (3,797,393 | ) | ||||
Increase in valuation allowance | 14,618,762 | 19,535,265 | ||||||
Research and development credits | (239,585 | ) | (246,989 | ) | ||||
Decrease in federal net operating loss | 623,679 | 0 | ||||||
Other | 294,982 | 416,312 | ||||||
Benefit for income taxes | $ | 0 | $ | 0 |
A summary of the Company’s deferred tax assets is as follows:
| Year Ended December 31, | |||||||
| 2021 | 2020 | ||||||
Federal and state net operating loss carryforwards | $ | 73,036,983 | $ | 59,114,928 | ||||
Federal and state research credits | 31,333 | 921,577 | ||||||
Interest expense limitation carryforwards | 6,013,040 | 2,911,508 | ||||||
Transaction costs | 977,046 | 1,080,041 | ||||||
Deferred revenue | 519,819 | 563,956 | ||||||
Accrued expenses and other | 1,030,064 | 2,397,513 | ||||||
Total gross deferred tax assets | 81,608,285 | 66,989,523 | ||||||
Less: valuation allowance for deferred tax assets | (81,608,285 | ) | (66,989,523 | ) | ||||
Net deferred tax assets | $ | 0 | $ | 0 |
As of December 31, 2021, the Company had federal and state (post-apportioned basis) net operating losses (“NOLs”) of $299.9 million and $185.0 million, respectively. Approximately $55.2 million and $77.8 million of the foregoing federal and state NOLs, respectively, will expire at various dates from 2027 through 2041, if not limited by triggering events prior to such time. Under the provisions of the Internal Revenue Code, changes in ownership of the Company, in certain circumstances, would limit the amount of federal NOLs that can be utilized annually in the future to offset taxable income. In particular, Section 382 of the Internal Revenue Code imposes limitations on an entity’s ability to use NOLs upon certain changes in ownership. If the Company is limited in its ability to use its NOLs in future years in which it has taxable income, then the Company will pay more taxes than if it were otherwise able to fully utilize its NOLs. The Company may experience ownership changes in the future as a result of subsequent shifts in ownership of the Company’s capital stock that the Company cannot predict or control that could result in further limitations being placed on the Company’s ability to utilize its federal NOLs. As of December 31, 2021, the Company performed an analysis of limitations imposed by Section 382 of the Internal Revenue Code and as a result has written off the deferred tax assets related to $3.0 million of federal NOLs, $1.0 million of federal research and development tax credits and $28.1 million of state NOLs which are limited by historical ownership changes. As a result, there was a $3.9 million reduction to the Company’s net deferred tax assets, which is offset by a corresponding $3.9 million reduction in the Company’s valuation allowance, resulting in no net impact to the Company’s provision for income taxes for the year ended December 31, 2021.
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income, exclusive of reversing taxable temporary differences, to outweigh objective negative evidence of recent financial reporting losses. Based on these criteria and the relative weighting of both the positive and negative evidence available, management continues to maintain a full valuation allowance against its net deferred tax assets.
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. The amount of the liability for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. Components of the liability are classified as either a current or a long-term liability in the accompanying consolidated balance sheets based on when the Company expects each of the items to be settled. The Company does 0t have any unrecognized tax benefits as of December 31, 2021 and 2020, and does not anticipate a significant change in unrecognized tax benefits during the next 12 months.
12. | LEASE OBLIGATIONS |
The Company leases certain properties and equipment for its ADMA BioCenters subsidiary and certain equipment for its ADMA BioManufacturing subsidiary, which leases provide the right to use the underlying assets and require lease payments through the respective lease terms which expire at various dates through 2033. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. Right-to-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of the lease payments is determined using the Company’s incremental borrowing rate as of the lease commencement date. For the lease liabilities recognized during the years ended December 31, 2021 and 2020, the Company used a discount rate of 13% to determine the present value of its lease obligations. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is reflected in Plasma center operating expenses and Selling, general and administrative expenses. Aggregate lease expense for the Company’s operating leases for the years ended December 31, 2021 and 2020 was $1.4 million and $0.7 million, respectively. Aggregate cash paid on these leases for the years ended December 31, 2021 and 2020 was $1.1 million and $0.5 million, respectively.
During the year ended December 31, 2021, the Company recognized additional right-to-use assets and corresponding lease liabilities of $3.6 million in connection with 4 new property leases where the Company has opened or intends to open additional plasma collection facilities. Including a finance lease the Company entered into in June 2018, the Company has aggregate lease liabilities of $8.1 million and $4.7 million as of December 31, 2021 and 2020, respectively, which are comprised primarily of the leases for the Company’s plasma collection centers. The Company’s operating leases have a weighted average remaining term of 9.1 years. Scheduled payments under the Company’s lease obligations are as follows:
Year ended December 31, 2022 | $ | 1,596,006 | ||
2023 | 1,641,603 | |||
2024 | 1,517,229 | |||
2025 | 1,525,793 | |||
2026 | 1,260,391 | |||
Thereafter | 6,345,559 | |||
Total payments | 13,886,581 | |||
Less: imputed interest | (5,833,109 | ) | ||
Current portion | (591,084 | ) | ||
Balance at December 31, 2021 | $ | 7,462,388 |
13. | SEGMENTS |
The Company is engaged in the manufacture, marketing and development of specialty plasma-derived biologics. The Company’s ADMA BioManufacturing segment reflects the Company’s immune globulin manufacturing and development operations in Florida, acquired on June 6, 2017. The Plasma Collection Centers segment consists of 10 plasma collection facilities in various stages of development as of December 31, 2021, 6 of which are operational and collecting plasma, and 5 of which hold an approved license with the FDA (and of which 1 facility has received approvals from the Korean Ministry of Food and Drug Safety as well as FDA approval to implement a Hepatitis B immunization program). The Corporate segment includes general and administrative overhead expenses. The Company defines its segments as those business units whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to analyze performance and allocate resources. The Company’s CODM is its President and Chief Executive Officer. Summarized financial information concerning reportable segments is shown in the following tables:
Year Ended December 31, 2021 | ||||||||||||||||
| ADMA BioManufacturing | Plasma Collection Centers | Corporate | Consolidated | ||||||||||||
| ||||||||||||||||
Revenues | $ | 74,935,528 | $ | 5,864,263 | $ | 142,834 | $ | 80,942,625 | ||||||||
| ||||||||||||||||
Cost of product revenue | 74,124,999 | 5,644,342 | 0 | 79,769,341 | ||||||||||||
| ||||||||||||||||
Loss from operations | (29,293,309 | ) | (12,056,364 | ) | (17,024,068 | ) | (58,373,741 | ) | ||||||||
| ||||||||||||||||
Interest and other expense, net | (218,053 | ) | (5,660 | ) | (13,050,164 | ) | (13,273,877 | ) | ||||||||
| ||||||||||||||||
Net loss | (29,511,362 | ) | (12,062,024 | ) | (30,074,232 | ) | (71,647,618 | ) | ||||||||
| ||||||||||||||||
Capital expenditures | 4,876,983 | 8,634,275 | 0 | 13,511,258 | ||||||||||||
Depreciation and amortization expense | 4,217,771 | 1,272,397 | 5,334 | 5,495,502 | ||||||||||||
Total assets | 208,391,019 | 24,681,691 | 43,180,014 | 276,252,724 |
Year Ended December 31, 2020 | ||||||||||||||||
| ADMA BioManufacturing | Plasma Collection Centers | Corporate | Consolidated | ||||||||||||
| ||||||||||||||||
Revenues | $ | 36,673,287 | $ | 5,403,662 | $ | 142,834 | $ | 42,219,783 | ||||||||
| ||||||||||||||||
Cost of product revenue | 55,908,696 | 5,382,730 | 0 | 61,291,426 | ||||||||||||
| ||||||||||||||||
Loss from operations | (46,904,634 | ) | (4,410,890 | ) | (13,599,353 | ) | (64,914,877 | ) | ||||||||
| ||||||||||||||||
Interest and other expense, net | (984,017 | ) | (7,388 | ) | (10,834,063 | ) | (11,825,468 | ) | ||||||||
| ||||||||||||||||
Gain on extinguishment of debt | 0 | 0 | 991,797 | 991,797 | ||||||||||||
| ||||||||||||||||
Net loss | (47,888,651 | ) | (4,418,278 | ) | (23,441,619 | ) | (75,748,548 | ) | ||||||||
| ||||||||||||||||
Capital expenditures | 7,579,437 | 5,147,243 | 0 | 12,726,680 | ||||||||||||
Depreciation and amortization expense | 3,341,506 | 591,593 | 9,193 | 3,942,292 | ||||||||||||
Total assets | 140,908,957 | 13,102,008 | 53,662,429 | 207,673,394 |
14. | OTHER EMPLOYEE BENEFITS |
The Company sponsors a 401(k) savings plan. Under the plan, employees may make contributions which are eligible for a Company discretionary percentage contribution as defined in the plan and determined by the Board of Directors. The Company recognized $1.1 million and $0.9 million of related compensation expense for the years ended December 31, 2021 and 2020, respectively.
15. | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
Supplemental cash flow information for the years ended December 31, 2021 and 2020 is as follows:
| 2021 | 2020 | ||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | 11,159,461 | $ | 10,267,632 | ||||
Noncash Financing and Investing Activities: | ||||||||
Equipment acquired reflected in accounts payable and accrued liabilities | $ | 1,352,627 | $ | 973,958 | ||||
Right-to-use assets in exchange for lease obligations | $ | 3,554,473 | $ | 3,329,374 | ||||
Warrants issued in connection with notes payable | $ | 0 | $ | 3,740,980 |
16. | CONCENTRATIONS |
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. At December 31, 2021, 3 customers accounted for approximately 94% of the Company’s consolidated accounts receivable. At December 31, 2020, 3 customers accounted for approximately 92% of the Company’s consolidated accounts receivable.
For the year ended December 31, 2021, 4 customers accounted for approximately 81% of the Company’s consolidated revenues. For the year ended December 31, 2020, 3 customers represented an aggregate of 82% of the Company’s consolidated revenues.
The Company purchases substantially all of its raw material plasma from Grifols. For the year ended December 31, 2021, plasma purchases from Grifols were approximately $42.0 million, or 69% of the Company’s total inventory purchases. For the year ended December 31, 2020, plasma purchases from Grifols were approximately $25.0 million, or 68% of the Company’s total inventory purchases.
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
United States | $ | 70,625,848 | $ | 36,552,244 | ||||
International | 10,316,777 | 5,667,539 | ||||||
Total revenues | $ | 80,942,625 | $ | 42,219,783 |
17. | SUBSEQUENT EVENTS |
Refinancing of Senior Credit Facility
On March 23, 2022, (the “Hayfin Closing Date”) the Company and all of its subsidiaries entered into a Credit and Guaranty Agreement (the “Hayfin Credit Agreement”) with Hayfin Services LLP (“Hayfin”). The Hayfin Credit Agreement provides for a senior secured term loan facility in a principal amount of up to $175.0 million (the “Hayfin Credit Facility”), composed of (i) a term loan made on the Hayfin Closing Date in the principal amount of $150.0 million(the “Hayfin Closing Date Loan”), and (ii) a delayed draw term loan in the principal amount of $25.0 million (the “Hayfin Delayed Draw Loan” and, together with the Hayfin Closing Date Loan, the “Hayfin Loans”). The obligation of the lenders to make the Hayfin Delayed Draw Loan expires on March 22, 2023 and is subject to the satisfaction of certain conditions, including, but not limited to, the Company’s meeting certain 12-month revenue targets as set forth in the Hayfin Credit Agreement. The Hayfin Credit Facility has a maturity date of March 23, 2027 (the “Hayfin Maturity Date”), subject to acceleration pursuant to the Hayfin Credit Agreement, including upon an Event of Default (as defined in the Hayfin Credit Agreement).
On the Hayfin Closing Date, the Company used $100.0 million of the Hayfin Closing Date Loan to terminate and pay in full all of the outstanding obligations under the Perceptive Credit Facility (see Note 7). The Company also used $2.0 million of the Hayfin Closing Date Loan proceeds to pay a redemption premium to Perceptive and used approximately $0.3 million of the Hayfin Closing Date Loan proceeds to pay certain fees and expenses incurred in connection with this transaction. In addition, a $1.8 million upfront fee payable to Hayfin was paid “in kind” and was added to the outstanding principal balance in accordance with the terms of the Hayfin Credit Agreement. In connection with the repayment of the Perceptive Loans, the Company will record a loss on extinguishment of debt in the approximate amount of $6.7 million, consisting of the write-off of unamortized discount related to the Perceptive Loans and the redemption premium paid to Perceptive.
Borrowings under the Hayfin Credit Agreement will bear interest, at the Company’s election, at either (a) a base rate (equal to the highest of (i) the rate of interest per annum last quoted by the Wall Street Journal as the “Prime Rate” in the United States, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) adjusted Term Secured Overnight Financing Rate (“SOFR”) for a one-month tenor in effect on such day plus 1.00%) plus an applicable margin of 8.5%, or (b) adjusted Term SOFR for either a one-month or three-month tenor, as elected by the Company, and subject to a floor of 1.25%, plus an applicable margin of 9.5% (the “Applicable Margin”); provided, however, that upon, and during the continuance of, an Event of Default, the Applicable Margin shall increase by an additional 3% per annum. On the last day of each calendar month or quarter during the term of the Hayfin Credit Facility, the Company will pay accrued interest to Hayfin. The rate of interest in effect as of the Hayfin Closing Date was 10.75%. The Company will also pay “in kind” a portion of the interest on the Hayfin Loans for each monthly or quarterly interest period in an amount equal to 2.5% per annum, which will be added to the principal amount of the outstanding debt under the Hayfin Credit Facility.
On the Hayfin Maturity Date, the Company will pay Hayfin the entire outstanding principal amount underlying the Hayfin Loans and any accrued and unpaid interest thereon, as well as an exit fee of 1.0% of the outstanding principal amount being paid. Prior to the Hayfin Maturity Date, there will be 0 scheduled principal payments on the Hayfin Loans. The Company may prepay outstanding principal on the Hayfin Loans at any time and from time to time upon 5 business days’ prior written notice, subject to the payment to Hayfin of, (A) any accrued but unpaid interest on the prepaid principal amount plus (B) an early prepayment fee in the amount equal to (i) 7.0% of the prepaid principal amount, if prepaid on or prior to the first anniversary of the Hayfin Closing Date, (ii) 3.0% of the prepaid principal amount, if prepaid after the first anniversary of the Hayfin Closing Date and on or prior to the second anniversary of the Hayfin Closing Date, or (iii) 1.0% of the prepaid principal amount, if prepaid after the second anniversary of the Hayfin Closing Date and on or prior to the third anniversary of the Hayfin Closing Date. In addition, for any prepayments of principal or payment of principal on the Hayfin Maturity Date, the Company is required to pay an exit fee of 1.0% of the amount of principal being paid.
All of the Company’s obligations under the Hayfin Credit Agreement are secured by a first-priority lien and security interest in substantially all of the Company’s tangible and intangible assets, including intellectual property and all of the equity interests in the Company’s subsidiaries. The Hayfin Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings. The negative covenants restrict or limit the ability of the Company and its subsidiaries to, among other things and subject to certain exceptions contained in the Hayfin Credit Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to the Company’s or its subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Hayfin Credit Agreement); change its fiscal year; pay dividends; repay other certain indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the impact of restricting the Company’s ability to make loan repayments under the Hayfin Credit Agreement. In addition, the Company is required (i) at all times prior to the Maturity Date to maintain a minimum cash balance of $6.0 million; and (ii) as of the last day of each fiscal quarter commencing with the fiscal quarter ending June 30, 2022, report IVIG product and related revenues for the trailing 12-month period that exceed the amounts set forth in the Hayfin Credit Agreement, which range from $75.0 million for the fiscal quarter ending June 30, 2022 to $250.0 million for the fiscal quarter ending December 31, 2026.
As consideration for the Hayfin Credit Agreement, the Company issued to various entities affiliated with Hayfin, on the Hayfin Closing Date, warrants to purchase 9,103,047 shares of the Company’s common stock (the “Hayfin Warrants”). The Hayfin Warrants have an exercise price equal to $1.6478 per share, which is equal to the trailing 30-day Volume Weighted-average Price of the Company’s common stock on the business day immediately prior to the Hayfin Closing Date (the “Closing Date Exercise Price”). The Hayfin Warrants were valued by the Company at approximately $9.6 million as of the Hayfin Closing Date and have an expiration date of March 23, 2029.
As a result of the fees paid to Hayfin and the value of the Hayfin Warrants, the Company recognized an aggregate discount on the Hayfin Loans in the amount of $13.2 million. The Company records debt discount as a reduction to the face amount of the debt, and the debt discount is amortized as interest expense over the life of the debt using the interest method. Based on the fair value of the Hayfin Warrants and the aggregate amount of fees and expenses associated with obtaining the Hayfin Credit Facility, the effective interest rate on the Hayfin Loans as of March 23, 2022 was approximately 12.9%.
F-30