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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 268 added, 167 removed, 271 unchanged (62% of the section changed)

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ADMA Biologics, Inc.

(the “Company,” “ADMA,” “we,” “us” or “our”) is an end-to-end commercial biopharmaceutical company dedicated to manufacturing, marketing and developing specialty biologics for the treatment of

immunodeficient patients at risk for infection and others at risk for certain infectious diseases.

Our targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or who may be

immune-suppressed for medical reasons.

(the “Company,” “ADMA,” “we,” “us” or “our”) is an end-to-end commercial biopharmaceutical company dedicated to manufacturing, marketing and developing specialty

biologics for the treatment of immunodeficient patients at risk for infection and others at risk for certain infectious diseases.

Our targeted patient populations include immune-compromised individuals who suffer from an underlying immune

deficiency disorder or who may be immune-suppressed for medical reasons.

Through our ADMA BioManufacturing business segment, we currently have three products with U.S.

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treatment of PI, and for which we received FDA approval on May 9, 2019 and commenced commercial sales in August 2019;

and (iii) Nabi-HB (Hepatitis B Immune Globulin, Human), which is indicated for the treatment of acute exposure to blood

containing HBsAg and other listed exposures to Hepatitis B.

and (iii) Nabi-HB (Hepatitis B Immune Globulin, Human), which is indicated for the treatment of acute exposure to blood containing

HBsAg and other listed exposures to Hepatitis B.

We seek to develop a pipeline of plasma-derived therapeutics, including a product based on our most recently approved patent application under U.S.

10,259,865 related to methods

of treatment and prevention of S.

10,259,865 related to methods of

treatment and prevention of S.

pneumonia infection for an immunoglobulin manufactured to contain standardized antibodies to numerous serotypes of S.

Our 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.

We manufacture these products at our FDA-licensed, plasma fractionation and purification facility located in Boca Raton, Florida with a peak annual processing capability of up to 600,000 liters (the “Boca Facility”).

Based on current production yields, our completed and ongoing supply chain enhancements and capacity expansion initiatives, we believe this facility has the potential to produce sufficient quantities of our immune globulin (“IG”) products

representing annual revenues greater than $355 million in 2024 and $410 million in 2025.

These revenue targets translate to potential fiscal year 2024 and 2025 net income exceeding $85 million and $135 million, respectively, and adjusted EBITDA

exceeding $110 million and $160 million, respectively.

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.

We manufacture these products at our FDA-licensed, plasma fractionation and purification facility located in Boca Raton, Florida with a peak annual processing capability of up to 600,000

liters (the “Boca Facility”).

globulin (“IG”) products representing annual revenues greater than $400 million in 2024 and $445 million in 2025.

These revenue targets translate to potential fiscal year 2024 and 2025 net income exceeding $105 million and $155 million,

respectively, and adjusted EBITDA exceeding $150 million and $200 million, respectively.

Through our ADMA BioCenters subsidiary, we currently operate ten source plasma collection facilities in the United States, all of which hold FDA licenses.

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agreements or in the open “spot” market.

We sell plasma-derived intermediate fractions to certain customers, which are generated as part of our FDA-approved manufacturing process for IG and IVIG products, through a five-year plasma intermediates supply

agreement we entered into in October 2019.

We sell plasma-derived intermediate fractions to certain customers, which are generated as part of our FDA-approved manufacturing process for IG and IVIG products, through a plasma intermediates supply agreement we

entered into in October 2019.

These intermediate by-products are used as the starting raw material to produce other plasma-derived biologics.

In addition, from time to time we provide contract manufacturing services for certain

third-party clients.

In addition, from time to time we provide contract manufacturing services for certain third-party clients.

We also provide laboratory contracting services to certain customers and anticipate providing contract filling, labeling and packing services utilizing our FDA-approved in-house fill-finish capabilities.

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October of 2019 and in 2023 ADMA commenced manufacturing ASCENIV at the 4,400 Liter production scale for the first time in the Company’s history.

We believe that this expansion will meaningfully improve the product’s margin profile and

increase plant production capacity as fewer batches will be needed to support our revenue goals .

ASCENIV’s prescriber and patient base continued to expand during 2023, which drove record utilization and

pull-through for this product.

These elevated demand trends have sustained into 2024, and ADMA currently expects that this product’s rapid growth will continue throughout 2024 and beyond.

This expansion has improved the product’s margin profile and increases plant production

capacity as fewer batches are needed to support our revenue goals .

ASCENIV’s prescriber and patient base continued to expand during 2023, which drove record utilization and pull-through for this product.

elevated demand trends have sustained into 2024, and ADMA currently expects that this product’s rapid growth will continue throughout 2024 and beyond.

BIVIGAM is a plasma-derived IVIG that contains a broad range of antibodies similar to those found in normal human plasma.

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RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our condensed consolidated financial statements, which have been prepared in accordance with Accounting Principles

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Actual results and experiences may differ materially from these

Significant estimates include rebates and certain other deductions from gross revenues, valuation of inventory, impairment of long-lived assets, assumptions used in projecting future liquidity and capital requirements, assumptions used

in the fair value of awards granted under our equity incentive plans and warrants issued in connection with the issuance of notes payable and estimates related to the valuation allowance for our deferred tax assets our effective tax rate for the

current fiscal year.

Some of the estimates and assumptions we have to make under U.S.

GAAP require difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, actual results could differ

from those estimates.

Due to the estimation processes involved, the following summary of accounting estimates and their application are considered to be critical to understanding our business operations, financial condition and results of

For a description of our significant accounting policies, see Note 2 to the Consolidated Financial Statements included in the 2023 10-K.

Estimates and assumptions used in projecting future liquidity and capital requirements are

described in Note 1 to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

GAAP require very difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, we have identified those

as critical accounting estimates, which are considered critical to an understanding of our historical financial condition and results of operations and are reasonably likely to have a material impact on our future results of operations and

financial condition.

Critical accounting estimates include rebates and certain other deductions from gross revenues, valuation of inventory, impairment of long-lived assets, assumptions used in the fair value of awards granted under our equity

incentive plans and warrants issued in connection with the issuance of notes payable, estimates related to the valuation allowance for our deferred tax assets and our effective tax rate for the current fiscal year.

For a description of our

significant accounting policies, see Note 2 to the Consolidated Financial Statements included in the 2023 10-K.

Revenue Deductions for Rebates, Chargebacks and Sales Allowances

Our gross product revenues are subject to a variety of deductions, which are estimated and recorded in the same period that the revenues are recognized.

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subjective matters of knowledge and judgment when estimating the impact of these revenue deductions on net revenues for a reporting period.

Historically, adjustments to these estimates to reflect actual results or updated expectations have not been material to our overall business.

While we have some historical sales and rebate experience from our two

primary immunoglobulin products, ASCENIV and BIVIGAM, since their FDA approvals in 2019, it is not extensive.

If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate estimates of our future experience,

our results could be materially affected.

Prior to June 30, 2024, adjustments to these estimates to reflect actual results or updated expectations have not been material to our overall business.

While we have some historical sales and rebate experience from

our two primary immunoglobulin products, ASCENIV and BIVIGAM, since their FDA approvals in 2019, our historical experience is not extensive.

If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate

estimates of our future experience, our results could be materially affected.

Estimates that are most at risk for material adjustment are those associated with U.S.

Medicaid rebates because of the extensive time delay between the recording of the accrual and its ultimate settlement,

an interval that can generally take up to several years or more.

Medicaid rebates because of the extensive time delay between the recording of the

accrual and its ultimate settlement, an interval that can generally take up to several years or more.

These estimates may change from time to time based on changes in utilization, payer and channel mixes.

While our results of operations to date have not required any material

adjustment due to this risk, the delay between when this obligation is initially recorded and ultimately settled could potentially materially impact our revenues and our results of operations in the future.

During the three and six months ended June

30, 2024, we engaged a third-party specialist to assist in the evaluation of our accrual for U.S.

Medicaid rebates related to the sale of our immunoglobulin products.

As a result of this evaluation, we recognized a reduction in this accrual and a

corresponding increase to net revenues of $12.6 million in the three months ended June 30, 2024 (see Note 2 to the Consolidated Financial Statements).

The primary driver in our estimated rebates accrual at June 30, 2024 relates to a change in the

assumption around the payor mix for our products, specifically the proportion of our revenue that is attributable to providers and patients utilizing Managed Medicaid, Medicaid and Medicare Part D, relative to our total sales.

The change in this

key assumption to our standing estimation model was based on the collection of additional historical data from our direct experience with selling our primary immunoglobulin products.

Additional changes in estimate assumptions surrounding U.S.

Medicaid and other rebate obligations could materially impact our revenues and our results of operations in the future.

Valuation of Inventory

Estimates related to the valuation of inventory include net realizable value of inventory in determining whether the cost of inventory exceeds its net realizable value which, if this were the case, would require a

charge against earnings to write down the value of the inventory to its net realizable value.

Net realizable value of inventory is based on our management’s estimate of the future net selling price of the inventory, which is subject to market

conditions and the estimation processes we use for revenues as discussed above.

With respect to raw materials inventory, we are required to estimate the level and timing of usage of these materials prior to their expiration dates in determining

whether it is appropriate to carry these materials on our balance sheet as a valid asset of the Company.

Estimates related to the valuation of inventory include net realizable value of inventory in determining whether the cost of inventory exceeds its net realizable value which, if this were

the case, would require a charge against earnings to write down the value of the inventory to its net realizable value.

Net realizable value of inventory is based on our management’s estimate of the future net selling price of the inventory, which

is subject to market conditions and the estimation processes we use for revenues as discussed above.

With respect to raw materials inventory, we are required to estimate the level and timing of usage of these materials prior to their expiration

dates in determining whether it is appropriate to carry these materials on our balance sheet as a valid asset of the Company.

Changes in either of these estimates could materially impact our cost of product revenue and results of operations.

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straight-line basis over the grantee’s requisite vesting period.

For the purpose of valuing stock options granted to our employees, directors and officers, we use the Black-Scholes option pricing 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.

For the purpose of valuing stock options granted to our employees, directors and executive officers, we use the Black-Scholes option pricing 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, we utilize the U.S.

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Any changes in

the foregoing Black-Scholes assumptions, or our election to utilize an alternative method for valuing stock options granted to employees, directors and officers, could potentially impact our stock-based compensation expense and our results of

the foregoing Black-Scholes assumptions, or our election to utilize an alternative method for valuing stock options granted to employees, directors and executive officers, could potentially impact our stock-based compensation expense and our

results of operations.

We also use the Black-Scholes option valuation model for the purpose of estimating the fair value of warrants we issue from time to time in connection with the issuance of notes payable.

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as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results.

For the three months ended March 31, 2024 and 2023, we did not identify any impairment indicators for our long-lived assets, and as

a result no impairment charges were recorded.

For the three and six months ended June 30, 2024 and 2023, we did not identify any impairment indicators for our long-lived assets,

and as a result no impairment charges were recorded.

Examples of events or circumstances that may be indicative of impairment that would require the use of significant judgment by management include:

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However, any changes to these estimates and assumptions could impact our determination of whether or not our goodwill is impaired.

We did not recognize any impairment charges related to goodwill for the three months ended March 31, 2024 and 2023.

We did not recognize any impairment charges related to goodwill for the three and six months ended June 30, 2024 and

Deferred Tax Assets and Effective Tax Rate

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Based on our history of losses through December 31,

2023, at this time we have not included future projected taxable income as a source of income to recognize our deferred tax assets, despite our achievement of positive net income for the three months ended March 31, 2024.

After consideration of all available positive and negative evidence regarding our estimates of future taxable income, we have elected to maintain a full valuation allowance for our deferred tax assets as of March 31,

We will continue to monitor this evidence through the balance of 2024 to determine if a reduction to the valuation allowance is required, which could potentially result in our recognition of an income tax benefit sometime during fiscal 2024.

Our income tax expense for the three months ended March 31, 2024 is based on our estimated effective tax rate for the full year 2024, which is a function of our projected net income under U.S.

Our income tax expense for the six months ended June 30, 2024 is based on our estimated effective tax rate for the full year 2024, which is a function of our projected net income under U.S.

GAAP, our estimates and

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as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

The following table presents a summary of the changes in our results of operations for the three months ended March 31, 2024, our first fiscal quarter, compared to the three months ended March 31,

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

The following table presents a summary of the changes in our results of operations for the three months ended June 30, 2024, our second fiscal quarter, compared to the three months ended June 30,

Three Months Ended June 30,

(in thousands)

Three Months Ended March 31,

Increase (Decrease)

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* - See Non-GAAP Financial Measures appearing at the end of this discussion

We recorded total revenues of $81.9 million for the three months ended March 31, 2024, as compared to $56.9 million for the three months ended March 31, 2023, an increase of $25.0 million, or approximately 44%.

increase is primarily related to increased sales of our IG products, ASCENIV, BIVIGAM and Nabi-HB, of $30.5 million in 2024, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV and expand our

customer base for BIVIGAM.

The foregoing increase in IG revenues in the first quarter of 2024 was partially offset by a $5.6 million decrease in third-party plasma sales by our Plasma Collection Centers business segment.

During the first quarter

of 2023, we fulfilled our entire commitment to supply normal source plasma (“NSP”) to our primary third-party customer for fiscal 2023, while that same commitment for fiscal 2024 will be met over the course of the full year.

We recorded total revenues of $107.2 million for the three months ended June 30, 2024, as compared to $60.1 million for the three months ended June 30, 2023, an increase of $47.1 million, or approximately 78%.

Excluding the $12.6 million adjustment we recorded in the second quarter of 2024 to decrease our accrual for U.S.

Medicaid rebates (which had the effect of increasing net revenues by $12.6 million), revenue would have increased by approximately

$34.4 million, or 57%.

This increase is primarily related to increased sales of our ASCENIV IG product, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV.

We also experienced a $0.6 million increase in third-party plasma sales by our Plasma Collection Centers business segment, as we fulfilled our entire commitment to supply normal source plasma (“NSP”) to our primary

third-party customer for fiscal 2023 in the first quarter of 2023, while that same commitment for fiscal 2024 is being met over the course of the full year.

Cost of Product Revenue and Gross Profit

Cost of product revenue was $42.8 million for the three months ended March 31, 2024, as compared to $40.4 million for the three months ended March 31, 2023.

Cost of product revenue was $49.7 million for the three months ended June 30, 2024, as compared to $43.4 million for the three months ended June 30, 2023.

This increase is primarily attributable to volume-driven

increases in product revenue costs related to the increased sales of our IG products of $7.9 million, partially offset by $4.9 million of lower product revenue costs related to plasma sales.

For the three months ended March 31, 2024, we had gross profit of $39.1 million, as compared to $16.5 million for the same period of a year ago, which represents a gross margin in the first quarter of 2024 of 47.8%, as

compared to 29.0% in the first quarter of 2023.

This improvement in gross margin is mainly driven by a significantly more favorable mix of higher margin IG sales in 2024 as compared to 2023, along with the 44% revenue increase which allows for

additional coverage of our non-variable manufacturing costs in 2024.

increases in product revenue costs related to the increased sales of our IG products and NSP of $7.1 million and $0.5 million, respectively, partially offset by decreases in other manufacturing costs totaling $1.4 million, mainly due to the

inventory losses in the second quarter of 2023 related to the IT systems disruption we experienced in June of 2023.

For the three months ended June 30, 2024, we had gross profit of $57.5 million, as compared to $16.7 million for the same period of a year ago, which represents a gross margin in the second quarter of 2024 of 53.6%, as

compared to 27.8% in the second quarter of 2023.

Excluding the $12.6 million adjustment we recorded in the second quarter of 2024 to reduce our accrual for estimated U.S.

Medicaid rebates, our gross profit for the second quarter of 2024 was $44.8

million, representing a gross margin of 47.4%.

This improvement in gross margin is mainly driven by a significantly more favorable mix of higher margin IG sales in 2024 as compared to 2023, along with the absence of the $2.1 million of inventory

losses experienced in 2023 due to the IT systems disruption.

Research and Development Expenses

Research and development (“R&D”) expenses totaled $0.5 million for the first quarter of 2024, as compared to $0.9 million for the first quarter of 2023.

The decrease is primarily due to the absence of expenditures

in 2024 related to the BIVIGAM post-marketing commitments, which were completed in June of 2023.

Research and development (“R&D”) expenses totaled $0.6 million for the second quarter of 2024, as compared to $1.4 million for the second quarter of 2023.

The decrease is primarily due to the absence of

expenditures in 2024 related to the BIVIGAM post-marketing commitments, which were completed in June of 2023.

Plasma Center Operating Expenses

Plasma Center Operating Expenses decreased from $1.8 million for the three months ended March 31, 2023 to $1.0 million for the three months ended March 31, 2024.

Plasma Center Operating Expenses decreased from $1.3 million for the three months ended June 30, 2023 to $0.9 million for the three months ended June 30, 2024.

The decrease is due to a 31% increase in the amount of

plasma collected in the first quarter of 2024 as compared to the first quarter of 2023, which resulted in a $3.7 million increase in the amount of plasma center costs we capitalized into inventory in 2024.

plasma collected in the second quarter of 2024 as compared to the second quarter of 2023, which resulted in a $3.7 million increase in the amount of plasma center costs we capitalized into inventory in 2024.

This amount was partially offset by

increases in donor fees of $1.3 million, softgoods and supplies of $0.7 million, donor testing expenses of $0.7 million, compensation, benefits and temporary labor of $0.1 million, depreciation of $0.1 million and software maintenance expense of

$0.1 million.

increases in donor fees of $2.2 million, softgoods and supplies of $0.4 million and donor testing expenses of $0.6 million.

Amortization of Intangibles

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.2 million for the three months ended March 31, 2024 and 2023.

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.1 million and $0.2 million for the three months ended June 30, 2024 and 2023,

respectively.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $15.6 million for the three months ended March 31, 2024, an increase of $1.1 million from the three months ended March 31, 2023.

Selling, general and administrative (“SG&A”) expenses were $16.6 million for the three months ended June 30, 2024, an increase of $2.4 million from the three months ended June 30, 2023.

The increase reflects

increases in employee-related costs, including salaries, benefits, stock-based compensation, travel, relocation and recruiting, in the amount of $1.4 million, state and local taxes of $0.1 million and insurance expense of $0.1 million, partially

offset by lower severance expense of $0.3 million and professional service fees of $0.2 million.

SG&A expenses as a percentage of net revenues decreased from 25.5% in the first quarter of 2023 to 19.1% in the first quarter of 2024.

increases in employee-related costs, including salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $1.3 million, severance expense of $0.3 million and temporary labor, software maintenance expense, insurance

expense and professional service fees in the amount of $0.2 million each.

SG&A expenses as a percentage of net revenues fell from 23.7% in the second quarter of 2023 to 15.5% in the second quarter of 2024, or 17.6% excluding the revenue

adjustment described above.

Income/Loss from Operations

Our operating income was $21.8 million for the first quarter of 2024, as compared to an operating loss of $0.8 million for the first quarter of 2023.

The $22.6 million increase in operating income was due to the

improved gross profit, as total operating expenses of $17.3 million in 2024 was essentially unchanged from 2023.

Our operating income was $39.2 million for the second quarter of 2024, as compared to an operating loss of $0.5 million for the second quarter of 2023.

The $39.7 million improvement in operating income was due to the

improved gross profit of $40.8 million, partially offset by an increase in total operating expenses of $1.1 million in 2024.

The higher gross profit reflects the foregoing change in estimate which increased our revenues in the second quarter of

2024 by $12.6 million.

Interest Expense

Interest expense for the three months ended March 31, 2024 was $3.8 million, as compared to $6.1 million for the three months ended March 31, 2023.

The decrease is due to the refinancing of our senior debt in December

of 2023 (see “Liquidity and Capital Resources”).

This transaction reduced our stated rate of interest from approximately 14.10% in the first quarter of 2023 to approximately 10.38% in the first quarter of 2024, and also resulted in a reduction to

our outstanding debt principal in the first quarter of 2024 compared with the first quarter of 2023 of approximately $20.4 million.

Interest expense for the three months ended June 30, 2024 was $3.8 million, as compared to $6.3 million for the three months ended June 30, 2023.

The decrease is due to the refinancing of our senior debt in December of

2023 (see “Liquidity and Capital Resources”).

This transaction reduced our stated rate of interest from approximately 13.9% in the second quarter of 2023 to approximately 10.3% in the second quarter of 2024, and also resulted in a reduction to our

outstanding debt principal in the second quarter of 2024 compared with the second quarter of 2023 of approximately $21.7 million.

In addition, we had lower amortization of debt discount in 2024 of approximately $0.5 million.

Other Income, Net

Other income, net, for the three months ended March 31, 2024 was $0.3 million, as compared to $0.1 million for the three months ended March 31, 2023.

Other income, net, which primarily consists of interest income on our cash balances, was $0.4 million for the three months ended June 30, 2024 and 2023.

Provision for Income Taxes

As a result of our generating pre-tax U.S.

GAAP income of $35.9 million for the three months ended June 30, 2024, we recorded income tax expense of $3.8 million for the three months ending June 30, 2024, with no

comparable amount for the three months ending June 30, 2023.

The provision for income taxes for the second quarter of 2024 represents an effective tax rate of 8.1% for the first six months of 2024 and reflects federal and state income tax

liabilities that are not fully sheltered by net operating losses due to limitations from prior ownership changes and other limitations on net operating loss carryforwards under the Internal Revenue Code of 1986, as amended (see “Risk Factors”

appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Our effective tax rate for the three months ended June 30, 2024 differs from the federal statutory tax rate of 21%, mainly due to the reversal of the

valuation allowance on certain federal and state net operating loss carryforwards expected to be realized in the current year.

Net Income/Loss

Our net income was $32.1 million for the second quarter of 2024, as compared to a net loss of $6.4 million for the second quarter of 2023.

This $38.9 million improvement in our results of operations was primarily due

to the increase in operating income of $39.7 million discussed above and the reduction in interest expense for the period, partially offset by the provision for income taxes in 2024.

The foregoing change in estimate in our accrual for Medicaid

rebates favorably impacted our net income for the second quarter of 2024 by approximately $11.6 million.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

The following table presents a summary of the changes in our results of operations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023:

Six Months Ended June 30,

(in thousands)

Increase (Decrease)

Cost of product revenue

Research and development expenses

Plasma center operating expenses

Amortization of intangibles

Selling, general and administrative expenses

Income (loss) from operations

Interest expense

Other income, net

Income (loss) from before taxes

Provision for income taxes

Net income (loss)

Adjusted EBITDA *

* - See Non-GAAP Financial Measures appearing at the end of this discussion

We recorded total revenues of $189.1 million for the six months ended June 30, 2024, as compared to $117.0 million for the six months ended June 30, 2023, an increase of approximately $72.0 million, or 62%.

the $12.6 million adjustment we recorded in the second quarter of 2024 to decrease our accrual for U.S.

Medicaid rebates (which had the effect of increasing net revenues by $12.6 million), revenue would have increased by approximately $59.4

million, or 51%.

This increase is primarily related to increased sales of ASCENIV and our other IG products, as we continue to experience increased physician, payer and patient acceptance and utilization of ASCENIV and expand our customer base for

The foregoing increase in IG revenues for the first six months of 2024 was partially offset by a $4.9 million decrease in third-party plasma sales by our Plasma Collection Centers business segment.

During the first

quarter of 2023, we fulfilled our entire commitment to supply NSP to our primary third-party customer for fiscal 2023, while that same commitment for fiscal 2024 is being met over the course of the full year.

Cost of Product Revenue and Gross Profit

Cost of product revenue was $92.5 million for the first six months of 2024, as compared to $83.8 million for the first six months of 2023.

This increase is primarily attributable to volume-driven increases in product

revenue costs related to the increased sales of our IG products of $15.1 million, partially offset by $4.5 million of lower product revenue costs related to plasma sales and a reduction in other manufacturing costs of $1.8 million.

For the six months ended June 30, 2024, we had gross profit of $96.6 million, as compared to $33.2 million for the same period of a year ago, which represents a gross margin in the first six months of 2024 of 51.1%, as

compared to 28.4% in the first six months of 2023.

Excluding the $12.6 million adjustment we recorded in the second quarter of 2024 to reduce our accrual for estimated U.S.

Medicaid rebates, our gross profit for the first six months of 2024 was

$83.9 million, representing a gross margin of 47.6%.

This improvement in gross margin is mainly driven by a significantly more favorable mix of higher margin IG sales in 2024 as compared to 2023, along with the reduction in other manufacturing

Research and Development Expenses

R&D expenses totaled $1.0 million for the first six months of 2024, as compared to $2.3 million for the first six months of 2023.

The decrease is primarily due to the absence of expenditures in 2024 related to the

BIVIGAM post-marketing commitments, which were completed in June of 2023.

Plasma Center Operating Expenses

Plasma Center Operating Expenses decreased from $3.1 million for the six months ended June 30, 2023 to $1.9 million for the six months ended June 30, 2024.

The decrease is due to a 34% increase in the amount of plasma

collected in the first six months of 2024 as compared to the first six months of 2023, which resulted in a $7.4 million increase in the amount of plasma center costs we capitalized into inventory in 2024.

This amount was partially offset by

increases in donor fees of $3.5 million, softgoods and supplies of $1.1 million, donor testing expenses of $1.3 million and software maintenance expense of $0.3 million.

Amortization of Intangibles

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.3 million and $0.4 million for the six months ended June 30, 2024 and 2023,

respectively.

Selling, General and Administrative Expenses

SG&A expenses were $32.2 million for the six months ended June 30, 2024, an increase of $3.5 million from the six months ended June 30, 2023.

The increase reflects increases in employee-related costs, including

salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $2.5 million, $1.9 million of which is stock-based compensation, repairs and maintenance expense of $0.5 million, software maintenance expense of $0.3 million

and insurance expense of $0.2 million.

SG&A expenses as a percentage of net revenues decreased from 24.6% in the first six months of 2023 to 17.1% in the first six months of 2024, or 18.3% excluding the revenue adjustment described above.

Income/Loss from Operations

Our operating income was $61.0 million for the first six months of 2024, as compared to an operating loss of $1.3 million for the first six months of 2023.

The $62.3 million increase in operating income was mainly due

to the improved gross profit, partially offset by $1.0 million of lower total operating expenses.

The higher gross profit reflects the foregoing change in estimate which increased our revenues for the six months ended June 30, 2024 by $12.6

Interest Expense

Interest expense for the six months ended June 30, 2024 was $7.6 million, as compared to $12.4 million for the six months ended June 30, 2023.

The decrease is due to the refinancing of our senior debt in December of

2023 (see “Liquidity and Capital Resources”).

This transaction reduced our stated interest rate by approximately 365 basis points in 2024 compared to 2023, and also resulted in a reduction to our outstanding debt principal balance.

In addition, we

had lower amortization of debt discount in 2024 of approximately $0.7 million.

Other Income, Net

Other income, net, for the six months ended June 30, 2024 was $0.8 million, as compared to $0.5 million for the six months ended June 30, 2023.

The increase is mainly due to an increase in interest income of $0.3

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Provision for Income Taxes

As result of our generating pre-tax U.S.

GAAP income of $18.4 million for the three months ended March 31, 2024, we recorded income tax expense of $0.6 million for the three months ending March 31, 2024, with no

comparable amount for the three months ending March 31, 2023.

The provision for income taxes for the first quarter of 2024 represents an effective tax rate of 3.2% and reflects federal and state income tax liabilities that are not fully sheltered

by net operating losses or research and development tax credit carryforwards due to limitations from prior ownership changes and other limitations on net operating loss carryforwards under the Internal Revenue Code of 1986, as amended (see “Risk

Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Our effective tax rate for the three months ended March 31, 2024 differs from the federal statutory tax rate of 21%, mainly due to the reversal of

the valuation allowance on certain federal and state net operating loss carryforwards expected to be realized in the current year.

We recorded income tax expense of $4.4 million for the six months ended June 30, 2024, with no comparable amount for the six months ending June 30, 2023.

The provision for income taxes for the first six months of 2024

represents an effective tax rate of 8.1% and reflects federal and state income tax liabilities that are not fully sheltered by net operating losses due to limitations from prior ownership changes and other limitations on net operating loss

carryforwards under the Internal Revenue Code of 1986, as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

After consideration of all available positive and negative evidence

regarding our estimates of future taxable income, we have elected to maintain a full valuation allowance for our deferred tax assets as of June 30, 2024.

We will continue to monitor this evidence through the balance of 2024 to determine if a

reduction to the valuation allowance is required, which could potentially result in our recognition of an income tax benefit later in fiscal 2024.

Net Income/Loss

Our net income was $17.8 million for the first quarter of 2024, as compared to a net loss of $6.8 million for the first quarter of 2023.

This $24.6 million improvement in our results of operations was primarily due to

the increase in operating income of $22.6 million discussed above, combined with the reduction in interest expense for the period.

Our net income was $49.9 million for the first six months of 2024, as compared to a net loss of $13.2 million for the first six months of 2023.

This $63.0 million improvement in our results of operations was primarily

due to the increase in operating income of $62.3 million and lower interest expense of $4.9 million discussed above, partially offset by the provision for income taxes for the period.

The foregoing change in estimate in our accrual for Medicaid

rebates favorably impacted our net income for the first six months of 2024 by approximately $11.6 million.

Non-GAAP Financial Measures

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA

EBITDA and Adjusted EBITDA are important non-GAAP financial measures used by our management and Board of Directors to assess our operating performance.

We use EBITDA and Adjusted EBITDA as key performance measures

because we believe that they facilitate operating performance comparisons from period to period that exclude potential differences driven by the impact of variations of non-cash items such as depreciation and amortization, as well as, in the case

of Adjusted EBITDA, stock-based compensation or certain one-time and non-recurring items.

In addition, we believe that EBITDA, Adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other

parties in evaluating companies in our industry as a measure of financial performance and debt-service capabilities.

See below for a reconciliation of our EBITDA and Adjusted EBITDA to net income/loss, the most directly comparable financial measure

calculated and presented in accordance with U.S.

EBITDA and Adjusted EBITDA are important non-GAAP financial measures used by our management and Board of Directors to assess our operating

We use EBITDA and Adjusted EBITDA as key performance measures because we believe that they facilitate operating performance comparisons from period to period that exclude potential differences driven by the impact of variations of

non-cash items such as depreciation and amortization, as well as, in the case of Adjusted EBITDA, stock-based compensation or certain one-time and non-recurring items.

In addition, we believe that EBITDA, Adjusted EBITDA and similar measures are

widely used by investors, securities analysts, ratings agencies and other parties in evaluating companies in our industry as a measure of financial performance and debt-service capabilities.

See below for a reconciliation of our EBITDA and Adjusted

EBITDA to net income/loss, the most directly comparable financial measure calculated and presented in accordance with U.S.

Because EBITDA and Adjusted EBITDA are measures not deemed to be in accordance with U.S.

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measures of other companies, including companies in our industry, because other companies may calculate EBITDA and Adjusted EBITDA in a different manner than we calculate these measurements.

Although the Company uses

Adjusted EBITDA as one of several financial measures to assess its operating performance, its use is limited as it excludes certain significant operating expenses.

EBITDA and Adjusted EBITDA are not intended to represent cash flows for the

periods presented, nor have they been presented as an alternative to operating income/loss, net income/loss or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance

prepared in accordance with U.S.

The following table presents the reconciliation of net income/loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands)

Although we use Adjusted

EBITDA as one of several financial measures to assess our operating performance, its use is limited as it excludes certain significant operating expenses.

EBITDA and Adjusted EBITDA are not intended to represent cash flows for the periods

presented, nor have they been presented as an alternative to operating income/loss, net income/loss or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in

accordance with U.S.

The following table presents the reconciliation of net income/loss to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Three Months ended June 30,

Six Months ended June 30,

(In thousands, except share and per share data)

Net income (loss)

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Stock-based compensation

IT systems disruption

Adjusted EBITDA

Adjusted EBITDA increased by $24.0 million for the three months ended March 31, 2024 as compared to the same period of a year ago.

The improvement is driven primarily by the increased sales and gross profit in 2024, as

well as continued operational oversight and cost containment efforts at both of our business segments.

Adjusted EBITDA increased for the three and six months ended June 30, 2024 by $38.1 million and $62.1 million, respectively, as compared to the same periods of a year ago.

The improvement is driven primarily by the

increased sales and gross profit in 2024, as well as continued operational oversight and cost containment efforts at both of our business segments.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2024, we had working capital of $223.3 million, primarily consisting of $177.7 million of inventory, cash and cash equivalents of $45.3 million and $49.6 million of accounts receivable, partially offset by

At June 30, 2024, we had working capital of $259.5 million, primarily consisting of $179.8 million of inventory, cash and cash equivalents of $88.2 million and $30.1 million of accounts receivable, partially offset by

current liabilities of $44.2 million, as compared to working capital at December 31, 2023 of $207.2 million, primarily consisting of $172.9 million of inventory, cash and cash equivalents of $51.4 million and accounts receivable of $27.4 million,

partially offset by current liabilities of $49.8 million.

We have incurred an accumulated deficit of $488.5 million since inception, and although we had negative cash flows from operations of $2.2 million and $14.7 million for the three months

ended March 31, 2024 and 2023, respectively, we had positive cash flows from operations for the year ended December 31, 2023 of $8.8 million and we expect to generate significant cash flows from operations and net income for the year ended December

Prior to fiscal 2023, we have funded our operations primarily from the sale of our equity and debt securities.

We had positive cash flows from operations for the six months ended June 30, 2024 and the year ended December 31, 2023 of $43.4 million and $8.8 million, respectively.

Prior to fiscal 2023,

we funded our operations primarily from the sale of our equity and debt securities.

Our material cash requirements are primarily comprised of:

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Boca Facility maintenance, repairs and supplies;

Conducting required post-marketing clinical trials for our FDA-approved products;

Conducting required post-marketing clinical trials for ASCENIV;

Continuous improvements and updates to our IT infrastructure, laboratory equipment and assays, and facilities and engineering equipment.

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We currently anticipate, based upon our projected revenue and expenditures, that our current cash, cash equivalents and accounts receivable, along with our projected future operating cash flow, will be sufficient to

fund our operations, as currently conducted, through the end of the second quarter of fiscal 2025 and beyond.

fund our operations, as currently conducted, through the end of the third quarter of fiscal 2025 and beyond.

Based on current operations and assuming continued market acceptance and utilization of our finished drug products, we do not anticipate

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$1.6 million, all accrued and unpaid interest outstanding on the Hayfin Credit Facility as of the Ares Closing date, as well as certain fees and expenses related thereto.

Borrowings under the term loan bear interest at the adjusted Term SOFR for a three‑month tenor in effect on the day that is two business days prior to the first day of the applicable calendar quarter

plus 6.50% (the “Initial SOFR Term Loan Applicable Margin”).

Borrowings under the revolving facility initially bear interest at the adjusted Term SOFR for a three‑month tenor in effect on the day that is two business days prior to the first day

of the applicable calendar quarter plus 3.75% (the “SOFR Revolving Facility Applicable Margin”).

As of March 31, 2024 and December 31, 2023, the interest rate on

the term loan was approximately 11.83% and 11.88%, respectively, and the interest rate on the revolving facility was approximately 9.08% and 9.13%, respectively.

Borrowings under the term loan bear interest at the adjusted Term SOFR for a three‑month tenor in effect on the day that is two business days prior to the first day of the applicable calendar

quarter plus 6.50% (the “Initial SOFR Term Loan Applicable Margin”).

Borrowings under the revolving facility initially bear interest at the adjusted Term SOFR for a three‑month tenor in effect on the day that is two business days prior to the

first day of the applicable calendar quarter plus 3.75% (the “SOFR Revolving Facility Applicable Margin”).

As of June 30, 2024 and December 31, 2023, the interest

rate on the term loan was approximately 11.84% and 11.88%, respectively, and the interest rate on the revolving facility was approximately 9.05% and 9.13%, respectively.

On the Ares Maturity Date, we are required to pay Ares the entire outstanding principal amount underlying the Ares Loans and any accrued and unpaid interest thereon.

Prior to the Ares Maturity Date,

there are no scheduled principal payments on the Ares Credit Facility, and we are required to make quarterly interest payments during the term of Ares Credit Facility of approximately $3.6 million.

We may prepay the outstanding principal under

the revolving facility, together with any accrued but unpaid interest on the prepaid principal amount, at any time and from time to time upon three business days’ prior written notice with no prepayment premium.

However, in the event that we

prepay an amount under the revolving facility that is greater than 50% of the current $72.5 million outstanding balance, we will still be required to pay interest on 50% of this balance, or $36.3 million, through the term of Ares Credit Facility.

We may prepay the outstanding principal on the term loan, together with any accrued but unpaid interest on the prepaid principal amount, at any time and from time to time upon three business days’ prior written notice, subject to the payment to

Ares of a prepayment premium equal to (i) the present value as of such date of all remaining required interest payments on the principal amount being repaid plus 1.5% of the prepaid principal amount, if prepaid on or prior to the first

there are no scheduled principal payments on the Ares Credit Facility, and we are required to make quarterly interest payments during the term of the Ares Credit Facility of approximately $3.6 million.

We may prepay the outstanding principal

under the revolving facility, together with any accrued but unpaid interest on the prepaid principal amount, at any time and from time to time upon three business days’ prior written notice with no prepayment premium.

However, in the event that

we prepay an amount under the revolving facility that is greater than 50% of the current $72.5 million outstanding balance, we will still be required to pay interest on 50% of this balance, or $36.3 million, through the term of the Ares Credit

payment to Ares of a prepayment premium equal to (i) the present value as of such date of all remaining required interest payments on the principal amount being repaid plus 1.5% of the prepaid principal amount, if prepaid on or prior to the first

anniversary of the Ares Closing Date, (ii) 1.5% of the prepaid principal amount, if prepaid after the first anniversary of the Ares Closing Date and on or prior to the second anniversary of the Ares Closing Date, or (iii) 1.0% of the prepaid

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In addition, we are also required to pay Ares an exit fee of $1.7 million upon the earlier of any prepayment date or the Ares Maturity Date, and this amount has been accrued

as a separate liability in our consolidated balance sheet as of December 31, 2023.

As a result, we recognized an aggregate debt discount of $4.4 million as of the Ares Closing Date, and the weighted-average effective interest rate on the Ares

Loans as of March 31, 2024 and December 31, 2023 was 11.36% and 11.39%, respectively.

as a separate liability in our consolidated balance sheet as of June 30, 2024 and December 31, 2023.

As a result, we recognized an aggregate debt discount of $4.4 million as of the Ares Closing Date, and the weighted-average effective interest

rate on the Ares Loans as of June 30, 2024 and December 31, 2023 was 11.35% and 11.39%, respectively.

All of our obligations under the Ares Credit Agreement are secured by a first-priority lien and security interest in substantially all of our tangible and intangible assets, including intellectual

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impact of restricting our ability to make loan repayments under the Ares Credit Agreement.

As of March 31, 2024, we were in compliance with all of the covenants contained in the Ares Credit Agreement.

As of June 30, 2024, we were in compliance with all of the covenants contained in the Ares Credit Agreement.

Events of default on the Ares Loans include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency

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The following table sets forth a summary of our cash flows for the periods indicated:

Six Months Ended June 30,

(in thousands)

Three Months Ended March 31,

Net cash used in operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

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Cash and cash equivalents - end of period

Net Cash Used in Operating Activities

Cash used in operations for the three months ended March 31, 2024 was $2.2 million, a decrease of $12.5 million from the same period of a year ago, mainly due to the increase in net income in 2024, partially offset by

unfavorable changes in accounts receivable and inventories.

Net Cash Provided by (Used in) Operating Activities

Cash provided by operations for the six months ended June 30, 2024 was $43.4 million, as compared to cash used in operations of $20.8 million, for the same period of a year ago, mainly due to the increase revenues,

gross margin and net income in 2024.

The following table illustrates the primary components of and changes to our cash flows from operations:

Six Months Ended June 30,

(in thousands)

Three Months Ended March 31,

Net income (loss)

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Changes in inventories

Changes in prepaid expenses and other current assets

Changes in accounts payable and accrued expenses

Cash used in operations

Cash provided by (used in) operations

Net Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2024 and 2023 was $2.4 million and $1.9 million, respectively, and is mainly comprised of capital expenditures at the Boca Facility.

decrease in capital expenditures in 2024 is due to the completion of the construction and buildout of our 10 plasma collection facilities, with the tenth facility opening in the first quarter of 2023.

While we currently have no firm commitments for

capital expenditures, we expect our total capital expenditures will be between $7.0 million and $12.0 million for the remainder of fiscal 2024, mainly for additional upgrades to the Boca Facility manufacturing operations and related operational

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 was $4.7 million and $2.8 million, respectively, and is mainly comprised of capital expenditures at the Boca Facility.

currently have no firm commitments for capital expenditures, we expect our total capital expenditures will be between $5.0 million and $10.0 million for the remainder of fiscal 2024, mainly for additional upgrades to the Boca Facility manufacturing

operations and related operational systems.

Net Cash Used in Financing Activities

Net cash used in financing activities was $1.4 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively.

Net cash used in financing activities was $1.8 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

The increase is due to additional taxes paid in connection with shares that were

withheld from RSUs that vested during the period, partially offset by $1.0 million in proceeds from the exercise of stock options in 2024.

withheld from RSUs that vested during the period, partially offset by an increase in proceeds from the exercise of stock options.

Effect of Inflation

Inflation impacted a number of facets of our business during the three months ended March 31, 2024 and for the years ended December 31, 2023 and 2022 at each of our business segments.

We experienced price increases

for, among other items, certain raw materials, consumable supplies, services for repairs and maintenance of our facilities, utilities, shipping and freight charges, fuel surcharges and labor costs, among other expenses.

Inflation impacted a number of facets of our business during the six months ended June 30, 2024 and for the years ended December 31, 2023 and 2022 at each of our business segments.

We experienced price increases for,

among other items, certain raw materials, consumable supplies, services for repairs and maintenance of our facilities, utilities, shipping and freight charges, fuel surcharges and labor costs, among other expenses.

Based upon the macroeconomic

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis