ADMA BIOLOGICS INC

Previous wording

Through our ADMA BioManufacturing business segment, we currently have three products with U.S. Food and Drug Administration (the “FDA”) approval, all of which are currently marketed and commercially available: (i) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), an Intravenous Immune Globulin (“IVIG”) product indicated for the treatment of Primary Humoral Immunodeficiency (“PI”), also known as Primary Immunodeficiency Disease (“PIDD”) or Inborn Errors of Immunity in adults and adolescents, for which we received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019; (ii) BIVIGAM (Immune Globulin Intravenous, Human), an IVIG product indicated for the 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. We seek to develop a pipeline of plasma-derived therapeutics, including a product based on our most recently approved patent application under U.S. Patent No. 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. pneumoniae. 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.

Current wording

Through our ADMA BioManufacturing business segment, we currently have three products with U.S. Food and Drug Administration (the “FDA”) approval, all of which are currently marketed and commercially available: (i) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), an Intravenous Immune Globulin (“IVIG”) product indicated for the treatment of Primary Humoral Immunodeficiency (“PI”), also known as Primary Immunodeficiency Disease (“PIDD”) or Inborn Errors of Immunity in adults and adolescents, for which we received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019; (ii) BIVIGAM (Immune Globulin Intravenous, Human), an IVIG product indicated for the 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. We seek to develop a pipeline of plasma-derived therapeutics, including a product based on our most recently approved patent application under U.S. Patent No. 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. pneumoniae. We have successfully completed production of a pilot-scale batch and identified a laboratory partner to conduct forthcoming animal studies for our S. pneumoniae hyperimmune globulin program, SG-001. 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.

Previous wording

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 $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.

Current wording

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 $415 million in 2024 and $465 million in 2025. These revenue targets translate to potential fiscal year 2024 and 2025 net income exceeding $120 million and $165 million, respectively, and adjusted EBITDA exceeding $160 million and $215 million, respectively.

Previous wording

ASCENIV is approved for the treatment of PIDD or PI, a class of inherited genetic disorders that causes a deficient or absent immune system in adults and adolescents (12 to 17 years of age). Our pivotal Phase III clinical trial in 59 PIDD patients met the primary endpoint of no Serious Bacterial Infections (“SBI”) reported during 12 months of treatment. Secondary efficacy endpoints further demonstrated the benefits of ASCENIV in the low incidence of infection, therapeutic antibiotic use, days missed from work, school and daycare and unscheduled medical visits and hospitalizations. We believe this clinical data together with the FDA approval for the treatment of PIDD better positions ADMA to potentially further evaluate ASCENIV in immune-compromised patients infected with or at-risk for RSV infection or potentially other respiratory viral pathogens at an appropriate time. In the future, we may elect to work with the FDA and the immunology and infectious disease community to design an appropriate clinical trial to evaluate the use of ASCENIV in this patient population. Following FDA approval in April 2019, commercial sales of ASCENIV commenced in 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. 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. These elevated demand trends have sustained into 2024, and ADMA currently expects that this product’s rapid growth will continue throughout 2024 and beyond.

Current wording

ASCENIV is approved for the treatment of PIDD or PI, a class of inherited genetic disorders that causes a deficient or absent immune system in adults and adolescents (12 to 17 years of age). Our pivotal Phase III clinical trial in 59 PIDD patients met the primary endpoint of no Serious Bacterial Infections (“SBI”) reported during 12 months of treatment. Secondary efficacy endpoints further demonstrated the benefits of ASCENIV in the low incidence of infection, therapeutic antibiotic use, days missed from work, school and daycare and unscheduled medical visits and hospitalizations. We believe this clinical data together with the FDA approval for the treatment of PIDD better positions ADMA to potentially further evaluate ASCENIV in immune-compromised patients infected with or at-risk for RSV infection or potentially other respiratory viral pathogens at an appropriate time. In the future, we may elect to work with the FDA and the immunology and infectious disease community to design an appropriate clinical trial to evaluate the use of ASCENIV in this patient population. Following FDA approval in April 2019, commercial sales of ASCENIV commenced in October of 2019 and in 2023 ADMA commenced manufacturing ASCENIV at the 4,400-Liter production scale. 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. These elevated demand trends have sustained into 2024, and ADMA currently expects that this product’s rapid growth will continue throughout 2024 and beyond.

Previous wording

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

Current wording

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. These estimates may change from time to time based on changes in utilization, payer and channel mixes. During the second quarter of 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 the adjustment to 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.

Previous wording

We assess the recoverability of our long-lived assets, which include property and equipment and definite-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 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:

Current wording

We assess the recoverability of our long-lived assets, which include property and equipment and definite-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 three and nine months ended September 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:

Previous wording

Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators exist. The testing of goodwill for impairment requires us to determine whether or not the fair value of the reporting unit associated with the goodwill is less than its carrying amount, including goodwill and other intangible assets. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value, with the impairment loss recognized not to exceed the total amount of goodwill allocated to that reporting unit. In order to determine the fair value of the reporting unit, we utilize the fair value of the Company as a whole, as determined by its market capitalization. Determination of the fair value and carrying value of each reporting unit, relative to the fair value of the Company, requires management to employ certain estimates, assumptions and judgment, which we believe are reasonable. 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 and six months ended June 30, 2024 and 2023.

Current wording

Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators exist. The testing of goodwill for impairment requires us to determine whether or not the fair value of the reporting unit associated with the goodwill is less than its carrying amount, including goodwill and other intangible assets. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value, with the impairment loss recognized not to exceed the total amount of goodwill allocated to that reporting unit. In order to determine the fair value of the reporting unit, we utilize the fair value of the Company as a whole, as determined by its market capitalization. Determination of the fair value and carrying value of each reporting unit, relative to the fair value of the Company, requires management to employ certain estimates, assumptions and judgment, which we believe are reasonable. 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 and nine months ended September 30, 2024 and 2023.

Previous wording

We currently maintain a full valuation allowance against all of our net deferred tax assets, and as a result we have historically not recorded an income tax benefit in the accompanying consolidated financial statements despite continued losses through December 31, 2023. This valuation allowance reflects our assessment of whether it is more likely than not that we will generate sufficient taxable income in the future to be able to utilize our deferred tax assets. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies. We consider all positive and negative evidence to estimate if sufficient future taxable income will be generated to realize our deferred tax assets. We consider cumulative losses in recent years to be a significant type of negative evidence. 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 and six months ended June 30, 2024.

Current wording

We currently maintain a full valuation allowance against all of our net deferred tax assets, and as a result we have historically not recorded an income tax benefit in the accompanying consolidated financial statements despite continued losses through December 31, 2023. This valuation allowance reflects our assessment of whether it is more likely than not that we will generate sufficient taxable income in the future to be able to utilize our deferred tax assets. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies. We consider all positive and negative evidence to estimate if sufficient future taxable income will be generated to realize our deferred tax assets. We consider cumulative losses in recent years to be a significant type of negative evidence. 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 and nine months ended September 30, 2024.

Previous wording

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.

Current wording

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 September 30, 2024. We will continue to monitor this evidence through the remainder of 2024 to determine if a reduction to the valuation allowance is warranted, which could potentially result in our recognition of an income tax benefit later in fiscal 2024.

Previous wording

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 assumptions regarding certain permanent and temporary differences between U.S. GAAP income and taxable income, and the limitations to our net operating loss carryforwards and their limitations under Section 382 of the Internal Revenue Code of 1986, as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Current wording

Our income tax expense for the nine months ended September 30, 2024 is based on our estimated effective tax rate for the full year 2024, which is a function of our projected pre-tax income under U.S. GAAP, our estimates and assumptions regarding certain permanent and temporary differences between U.S. GAAP income and taxable income, and the limitations to our net operating loss carryforwards and their limitations under Section 382 of the Internal Revenue Code of 1986, as amended (see “Risk Factors” appearing elsewhere in this report and Note 13 to the Consolidated Financial Statements).

Previous wording

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, 2023:

Current wording

The following table presents a summary of the changes in our results of operations for the three months ended September 30, 2024, our third fiscal quarter, compared to the three months ended September 30, 2023:

Previous wording

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.

Current wording

We recorded total revenues of $119.8 million for the three months ended September 30, 2024, as compared to $67.2 million for the three months ended September 30, 2023, an increase of $52.6 million, or approximately 78%. The 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.

Previous wording

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.

Current wording

We also experienced a $6.0 million increase in third-party plasma sales by our Plasma Collection Centers business segment, mainly due to an additional spot purchase of normal source plasma (“NSP”) by our primary third-party customer in excess of the amount of NSP we are contractually committed to sell to this customer in fiscal 2024.

Previous wording

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 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.

Current wording

Cost of product revenue was $60.2 million for the three months ended September 30, 2024, as compared to $42.6 million for the three months ended September 30, 2023. This increase is primarily attributable to volume-driven increases in product revenue costs related to the increased sales of our IG products, including intermediates, and NSP of $13.0 million and $6.5 million, respectively, partially offset by decreases in other manufacturing costs totaling $1.9 million, mainly due to lower unabsorbed manufacturing expenses in 2024.

Previous wording

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.

Current wording

For the three months ended September 30, 2024, we had gross profit of $59.7 million, as compared to $24.7 million for the same period of a year ago, which represents a gross margin in the third quarter of 2024 of 49.8%, as compared to 36.6% in the third 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 reduction in other manufacturing costs in the third quarter of 2024 as compared with the third quarter of 2023.

Previous wording

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.

Current wording

Research and development (“R&D”) expenses totaled $0.4 million for the third quarter of 2024, as compared to $0.6 million for the third 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.

Previous wording

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

Current wording

Plasma center operating expenses increased from approximately $0.5 million for the three months ended September 30, 2023 to $1.0 million for the three months ended September 30, 2024. The increase is primarily due to increases in donor fees of $0.9 million and softgoods and supplies of $0.3 million, partially offset by an increase in the capitalization of plasma center expenses into inventory of $0.4 million related to increased collections and to lower donor testing expenses of $0.2 million.

Previous wording

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.

Current wording

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $28,000 and $0.2 million for the three months ended September 30, 2024 and 2023, respectively. The decrease is mainly due to the intangibles acquired in 2017 becoming fully amortized in June of 2024.

Previous wording

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, 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.

Current wording

Selling, general and administrative (“SG&A”) expenses were $18.6 million for the three months ended September 30, 2024, an increase of $3.8 million from the three months ended September 30, 2023. The increase reflects increases in employee-related costs, including salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $3.0 million, temporary labor and software maintenance expense of $0.3 million each and professional fees in the amount of $0.2 million. SG&A expenses as a percentage of net revenues fell from 21.9% in the third quarter of 2023 to 15.5% in the third quarter of 2024.

Previous wording

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.

Current wording

Our operating income was $39.6 million for the third quarter of 2024, as compared to $8.7 million for the third quarter of 2023. The approximately $31.0 million improvement in operating income was due to the improved gross profit of $35.0 million, partially offset by an increase in total operating expenses of $4.1 million in 2024.

Previous wording

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.

Current wording

Interest expense for the three months ended September 30, 2024 was $3.5 million, as compared to $6.4 million for the three months ended September 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 third quarter of 2023 to approximately 10.4% in the third quarter of 2024, and also resulted in a reduction to our outstanding debt principal of approximately $23.6 million. We also had lower amortization of debt discount in 2024 of approximately $0.5 million. In addition, our interest expense for the third quarter of 2024 was favorably impacted by the $30.0 million partial paydown of our senior debt on August 14, 2024.

Previous wording

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.

Current wording

Other income, net, which primarily consists of interest income on our cash balances, was $0.6 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

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.

Current wording

We recorded income tax expense of $0.8 million for the three months ending September 30, 2024, with no comparable amount for the three months ending September 30, 2023. The provision for income taxes for the third quarter of 2024 represents an effective tax rate of 5.7% for the first nine 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 September 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 and, to a lesser extent, the tax benefit associated with the employee exercise of stock options and vesting of RSUs.

Previous wording

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.

Current wording

Our net income was $35.9 million for the third quarter of 2024, as compared to $2.6 million for the third quarter of 2023. The $33.3 million increase was primarily due to the increase in operating income of approximately $31.0 million discussed above and the reduction in interest expense for the third quarter of 2024.

Previous wording

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:

Current wording

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

Previous wording

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%. 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 $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 BIVIGAM.

Current wording

We recorded total revenues of $308.9 million for the nine months ended September 30, 2024, as compared to $184.3 million for the nine months ended September 30, 2023, an increase of $124.6 million, or 68%. 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 $112.0 million, or 61%. 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. The revenue increase also includes an increase in NSP sales by our Plasma Collection Centers business segment in the amount of $1.1 million.

Previous wording

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.

Current wording

Cost of product revenue was $152.7 million for the first nine months of 2024, as compared to $126.5 million for the first nine 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 and NSP of $28.1 million and $2.3 million, respectively, partially offset by a reduction in other manufacturing costs, mainly unabsorbed manufacturing expenses, of $4.2 million.

Previous wording

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 costs.

Current wording

For the nine months ended September 30, 2024, we had gross profit of $156.2 million, as compared to $57.9 million for the same period of a year ago, which represents a gross margin for the first nine months of 2024 of 50.6%, as compared to 31.4% in the first nine 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 nine months of 2024 was approximately $143.5 million, representing a gross margin of 48.4%. The 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 costs.

Previous wording

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.

Current wording

R&D expenses totaled $1.4 million for the first nine months of 2024, as compared to $2.9 million for the first nine months of 2023. The decrease is primarily due to the absence of expenditures in 2024 related to the BIVIGAM post-marketing commitments, for which we incurred $1.7 million of expenses in 2023, partially offset by an increase in expenses associated with our ASCENIV post-marketing commitment in the amount of $0.3 million.

Previous wording

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.

Current wording

Plasma center operating expenses decreased from $3.6 million for the nine months ended September 30, 2023 to $3.0 million for the nine months ended September 30, 2024. The decrease is due to a 22% increase in the amount of plasma collected in the first nine months of 2024 as compared to the same period of a year ago, which resulted in a $7.8 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 $4.4 million, softgoods and supplies of $1.4 million, donor testing expenses of $1.0 million, salaries, wages, benefits and temporary labor of $0.2 million and software maintenance expense of $0.2 million.

Previous wording

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.

Current wording

Amortization expense mainly pertains to the amortization of intangible assets acquired in a 2017 acquisition transaction and was $0.4 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

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.

Current wording

SG&A expenses were $50.8 million for the nine months ended September 30, 2024, an increase of $7.3 million from the nine months ended September 30, 2023. The increase reflects increases in employee-related costs, including salaries, benefits, stock-based compensation, relocation and recruiting, in the amount of $5.7 million, $3.1 million of which is stock-based compensation, repairs and maintenance expense of $0.6 million, software maintenance expense of $0.6 million and temporary labor expense of $0.5 million. SG&A expenses as a percentage of net revenues decreased from 23.6% in the first nine months of 2023 to 16.4% in the first nine months of 2024, or 17.2% excluding the revenue adjustment described above.

Previous wording

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 million.

Current wording

Our operating income was $100.7 million for the first nine months of 2024, as compared to $7.4 million for the first nine months of 2023. The $93.3 million increase in operating income was mainly due to the improved gross profit, partially offset by $5.1 million of higher total operating expenses. The higher gross profit reflects the foregoing change in estimate which increased our revenues for the nine months ended September 30, 2024 by $12.6 million.

Previous wording

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.

Current wording

Interest expense for the nine months ended September 30, 2024 was $11.1 million, as compared to $18.8 million for the nine months ended September 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 360 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 $1.2 million.

Previous wording

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 million in 2024.

Current wording

Other income, net, for the nine months ended September 30, 2024 was $1.4 million, as compared to $0.8 million for the nine months ended September 30, 2023. The increase is mainly due to an increase in interest income of $0.5 million in 2024.

Previous wording

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.

Current wording

We recorded income tax expense of $5.2 million for the nine months ended September 30, 2024, with no comparable amount for the nine months ending September 30, 2023. The provision for income taxes for the first nine months of 2024 represents an effective tax rate of 5.7% 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 September 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.

Previous wording

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.

Current wording

Our net income was $85.8 million for the first nine months of 2024, as compared to a net loss of $10.6 million for the first nine months of 2023. This $96.4 million improvement in our results of operations was primarily due to the increase in operating income of $93.3 million and lower interest expense of $7.8 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 nine months of 2024 by approximately $12.0 million.

Previous wording

Because EBITDA and Adjusted EBITDA are measures not deemed to be in accordance with U.S. GAAP and are susceptible to varying calculations, our EBITDA and Adjusted EBITDA may not be comparable to similarly titled 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 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. GAAP. 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:

Current wording

Because EBITDA and Adjusted EBITDA are measures not deemed to be in accordance with U.S. GAAP and are susceptible to varying calculations, our EBITDA and Adjusted EBITDA may not be comparable to similarly titled 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 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, 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. GAAP. The following table presents the reconciliation of net income/loss to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023:

Previous wording

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.

Current wording

Adjusted EBITDA increased for the three and nine months ended September 30, 2024 by $32.6 million and $94.7 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.

Previous wording

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 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:

Current wording

At September 30, 2024, we had working capital of $273.3 million, primarily consisting of $171.8 million of inventory, cash and cash equivalents of $86.7 million and $50.1 million of accounts receivable, partially offset by current liabilities of $44.9 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 had positive cash flows from operations for the nine months ended September 30, 2024 and the year ended December 31, 2023 of $68.5 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:

Previous wording

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 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 the need to raise additional capital at this time. However, should the market for our products or political, economic or inflationary conditions change, we may need to seek additional capital which may not be available due to a variety of potential factors beyond our control (see “Risk Factors” appearing elsewhere in this report).

Current wording

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 fourth 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 the need to raise additional capital at this time. However, should the market for our products or political or economic conditions change, we may need to seek additional capital which may not be available due to a variety of potential factors beyond our control (see “Risk Factors” appearing elsewhere in this report).