ADMA - ADMA Biologics: Achieving Important Inflection Points

2023-11-09 15:23:33 ET

Summary

• Today, we revisit ADMA Biologics, Inc., after this small cap biopharma just delivered better than expected Q3 results after the bell on Wednesday.
• The company is executing strongly, just became free cash flow positive for the first time, and boosted forward guidance.
• Why more upside is seen in store for the shares of ADMA Biologics is highlighted in the paragraphs below.

Rivers know this: there is no hurry. We shall get there some day .”? A.A. Milne.

Today, we put ADMA Biologics, Inc. ( ADMA ) in the spotlight for the first time since late in the second quarter . This off-the-radar small cap concern just reported another better-than-expected quarter and is gaining traction on multiple fronts. An updated analysis follows below.

Company Overview:

This New Jersey-based small cap biopharma company manufactures and markets specialty plasma-derived biologics for the treatment of immune deficiencies and infectious diseases. The stock now trades just over $3.75 a share and sports an approximate market capitalization of $890 million.

The company produces a couple of key products from its growing footprint of plasma collection facilities. The first is BIVIGAM, which was approved for the treatment of primary humoral immunodeficiency or PI in 2019. This condition afflicts approximately a quarter million individuals within the United States.

Also approved in 2019 is ASCENIV™ which is an Intravenous Immune Globulin drug product. It is used for the treatment of Primary Humoral Immunodeficiency Disease in adults and adolescents (12 to 17 years of age). The company's ninth plasma collection facility was approved in Dallas in July of this year, and ADMA Biologics is almost at its goal of having 10 of these centers nationwide.

Third Quarter Results:

The company reported third quarter numbers after the bell on Wednesday. ADMA Biologics delivered a GAAP profit of a penny a share as revenues soared by just over 63% on a year-over-year basis to $67.3 million, some $5 million above expectations.

It was the first time ADMA Biologics had positive net income ($2.6 million) for a quarter, and the company also delivered $12.7 million in positive adjusted EBITDA during the quarter. This should grow sharply in the quarters ahead as sales continue to expand and management continues to focus on improving manufacturing yield.

Management also boosted full year 2023 sales guidance by some $10 million to $250 million. Leadership also boosted FY2024 and FY2025 by $15 million to $290 million and $335 million, respectfully.

Analyst Commentary & Balance Sheet:

After second quarter results came out in early August, four analyst firms including Raymond James and Cantor Fitzgerald reiterated Buy ratings on ADMA. Price targets ranged from $5 to $8 a share. Based on Q3 results just released, I expect another round of buy reiterations from analyst firms in the week ahead. This time there will be some upward price target revisions, which should be a positive for the shares.

Just over four percent of the outstanding float in the shares are currently held short. Several insiders sold just over $10 million worth of equity collectively in mid-August. Two different insiders purchased approximately $580,000 worth of stock in total in late August interestingly.

ADMA Biologics, Inc. ended the third quarter with just over $74 million in cash and marketable securities after delivering positive operating cash flow on quarterly basis ($12 million) for the first time during the quarter. The company has just over $140 million of senior notes on its balance sheet as well. Net interest expense was just under $6 million during the quarter, and the company has the opportunity to reduce this going forward as free cash flow continues to grow.

Verdict:

ADMA Biologics lost 33 cents a share on GAAP basis in FY2022 on just over $154 million worth of sales. The current analysis firm consensus has the company losing 7 cents a share in FY2023 on revenues of $243 million followed by a profit of 12 cents a share in FY2024 on sale of $278 million. Based on just posted Q3 results, I would expect these projections will be taken up significantly by the analyst community in the weeks ahead based on new company guidance.

We concluded our last article on ADMA Biologics, Inc. noting I liked the long-term outlook for ADMA Biologics and that the best way to maintain a position within the shares was via covered call holdings. The shares have gyrated pretty widely over the past year, but are up nearly 40% over the past 12 months. Therefore, if it ain't broken, don't fix it. And I will continue to have a decent sized covered call position in ADMA Biologics.

It does not matter how slowly you go as long as you do not stop .”? Confucius.

For further details see: