WWW.ADMABIOLOGICS.COM
Dear Stockholder,
2017 was a year of transformation, as we completed the acquisition of certain assets from Biotest Pharmaceuticals
Corporation (BPC). We believe the acquisition places ADMA among the select few globally recognized US Food and
Drug Administration (FDA) approved plasma protein manufacturers. Within less than a year from the acquisition
closing, we believe we have remediated the outstanding compliance and manufacturing issues identified at the Boca
Raton, Florida facility we inherited from BPC. We are also pleased to report we have been generating accretive revenues
since the acquisition through the sale of commercial products and contract manufacturing sales. We are looking
forward to hopefully resuming supply of our other marketed product Bivigam later this year after we submit a Prior
Approval Supplement (PAS) for FDA review of our process optimization and comparability data.
We are anticipating an FDA inspection during the first half of 2018 and are planning to submit a PAS for the optimized
IGIV production process for Bivigam also during the first half of 2018. For the second half of 2018, we anticipate
relaunching Bivigam and are hopeful to have the Warning Letter status closed-out. If this should occur, we expect to be
in a position to respond to our Complete Response Letter (CRL) received for RI-002 and resubmit the associated
Biologics License Application (BLA) for this pipeline product. Lastly, we are hopeful to obtain FDA approval for our 3rd
US based plasma collection center prior to year end.
We are excited for what 2018 can deliver, as we are confident that our efforts and execution since acquiring the Boca
Raton, Florida facility provides ADMA stockholders a unique investment opportunity to own one of the select few
globally recognized plasma manufacturers. We would like to thank you for your continued support and trust.
Lastly, I would like to thank my team members at ADMA for their tireless efforts, dedication and commitment to ADMA’s
continued success. I believe we have accomplished a tremendous amount in a short period of time, which we are
hopeful will be recognized by our patients, employees and stockholders for the time to come.
Sincerely,
Adam S. Grossman
Founder, President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36728
ADMA BIOLOGICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
56-2590442
(I.R.S. Employer Identification No.)
465 State Route 17, Ramsey, New Jersey
(Address of Principal Executive Offices)
07446
(Zip Code)
Registrant’s telephone number, including area code: (201) 478-5552
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $0.0001 per share
Name of each exchange on which registered
NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer Accelerated Filer Non-accelerated Filer Smaller Reporting Company Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates was $25,433,363 as of June 30, 2017 (the
last business day of the registrant’s most recently completed second fiscal quarter), based on a total of 6,873,882 shares of common stock held by
non-affiliates and a closing price of $3.70 as reported on the Nasdaq Capital Market on June 30, 2017.
As of March 9, 2018, there were 45,317,244 shares of the issuer’s common stock outstanding, comprised of 36,726,084 shares of voting common
stock and 8,591,160 shares of non-voting common stock.
Portions of the ADMA Biologics, Inc. definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year
are incorporated by reference into Part III of this Annual Report on Form 10-K and certain documents are incorporated by reference into Part IV.
DOCUMENTS INCORPORATED BY REFERENCE
ADMA BIOLOGICS, INC.
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business ...........................................................................................................................
Risk Factors .....................................................................................................................
Unresolved Staff Comments ............................................................................................
Properties .........................................................................................................................
Legal Proceedings ...........................................................................................................
Mine Safety Disclosures ..................................................................................................
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART II
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ...................................................................................
Selected Financial Data ...................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of
Operations ..................................................................................................................
Quantitative and Qualitative Disclosures About Market Risk .........................................
Financial Statements and Supplementary Data ...............................................................
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure ..................................................................................................................
Controls and Procedures ..................................................................................................
Other Information ............................................................................................................
PART III
Item 10.
Item 11.
Item 12.
Directors, Executive Officers and Corporate Governance ..............................................
Executive Compensation .................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related
Item 13.
Item 14.
Stockholder Matters ...................................................................................................
Certain Relationships and Related Transactions, and Director Independence ................
Principal Accountant Fees and Services ..........................................................................
Item 15.
Item 16.
Exhibits and Financial Statement Schedules ...................................................................
Form 10-K Summary .......................................................................................................
PART IV
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Special Note Regarding Forward-Looking Statements
Some of the information in this Annual Report on Form 10-K contains forward-looking statements within
the meaning of the federal securities laws. These statements include, among others, statements about:
our ability to successfully leverage the anticipated benefits and synergies from our June 6, 2017
acquisition of certain assets of Biotest Pharmaceuticals Corporation (the “Biotest Transaction”),
including optimization of the combined businesses, operations and products and services, including the
nature, strategy and focus of the combined company and the management and governance structure of
the combined company;
our ability to resume the manufacturing and commercialization of Bivigam once the deficiencies
identified in a November 2014 warning letter (the “Warning Letter”) with respect to the outstanding
issues at the plasma fractionation facility in Boca Raton, FL acquired in the Biotest Transaction have
been resolved by us to the satisfaction of the U.S. Food and Drug Administration (the “FDA”), as well
as a positive review of the optimized manufacturing process under a Prior Approval Supplement by the
FDA;
our ability to successfully resubmit to the FDA our Biologics License Application (the “BLA”) for our
lead pipeline product candidate, RI-002 (“RI-002”), once the deficiencies identified in the Complete
Response Letter we received in July 2016 reaffirming the issues set forth in the Warning Letter have
been resolved by us and/or our third-party vendors to the satisfaction of the FDA, and other requests
for information included therein have been provided by us;
our plans to develop, manufacture, market, launch and expand our own commercial infrastructure and
commercialize our current products and future products and the success of such efforts;
the safety, efficacy and expected timing of and our ability to obtain and maintain regulatory approvals
for our current products and product candidates, including the timeframe within which we may receive
approval from the FDA, if at all, of our BLA resubmission for RI-002 and the labeling or nature of any
such approvals;
the achievement of or expected timing, progress and results of clinical development, clinical trials and
potential regulatory approvals;
our dependence upon our third-party and related-party customers and vendors and their compliance
with regulatory bodies;
our ability to obtain adequate quantities of FDA-approved plasma with proper specifications;
our plans to increase our supplies of plasma;
the potential indications for our product candidates;
potential investigational new product applications;
the acceptability of any of our products, including RI-002, for any purpose by physicians, patients or
payers;
concurrence by the FDA with our conclusions and the satisfaction by us of its guidance;
the comparability of results of our immune globulin products to other comparably run Intravenous
Immune Globulin trials;
the potential of RI-002 and Bivigam to provide meaningful clinical improvement for patients living
with Primary Immune Deficiency Disease;
our ability to market and promote Nabi-HB in a highly competitive environment and to generate
meaningful revenues from this product;
our intellectual property position and the defense thereof, including our expectations regarding the
scope of patent protection with respect to RI-002 or other future pipeline product candidates;
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our manufacturing capabilities, third-party contractor capabilities and strategy;
our plans related to manufacturing, supply and other collaborative agreements;
our estimates regarding expenses, capital requirements and the need for additional financing;
possible or likely reimbursement levels for our currently marketed products and, if any, if and when
RI-002 is approved for marketing;
estimates regarding market size, projected growth and sales for our existing products as well as our
expectations of market acceptance of RI-002;
future economic conditions or performance; and
expectations for future capital requirements.
These statements may be found under the “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Business” sections of this Annual Report on Form 10-
K. Forward-looking statements typically are identified by the use of terms such as “anticipates,” “believes,” “can,”
“continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or
the negative thereof or other variations thereof or comparable terminology. You should be aware that our actual
results could differ materially from those contained in the forward-looking statements due to the factors referenced
above.
In addition to the foregoing, you should also consider carefully the statements under the section entitled
“Risk Factors” and other sections of this Annual Report on Form 10-K, which address additional factors that could
cause our actual results to differ from those set forth in the forward-looking statements. We undertake no obligation
to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change
in our expectations or any changes in events, conditions or circumstances on which any such statement is based,
except as required by law.
This Annual Report on Form 10-K includes our trademarks, trade names and service marks, such as “Nabi-
HB®” and “Bivigam®” which are protected under applicable intellectual property laws and are the property of
ADMA Biologics, Inc., or its subsidiaries. Solely for convenience, trademarks, trade names and service marks
referred to in this Annual Report may appear without the ®, ™ or SM symbols, but such references are not intended
to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the
applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other
parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to
imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
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Item 1. Business
PART I
Unless the context otherwise requires, references in this Business section to “ADMA,” “ADMA Biologics,” the
“Company,” “we,” “us” and “our” refer to ADMA Biologics, Inc., a Delaware corporation, as well as its wholly-
owned and indirectly owned subsidiaries, ADMA Plasma Biologics, Inc., a Delaware corporation, ADMA Bio
Centers Georgia Inc., a Delaware corporation (“ADMA BioCenters”) and ADMA BioManufacturing, LLC, a
Delaware limited liability company (“ADMA BioManufacturing”).
Overview
We are a vertically integrated commercial biopharmaceutical and specialty immunoglobulin company that
manufactures, markets and develops specialty plasma-derived biologics for the treatment of immune deficiencies
and prevention of 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. We currently have two marketed products: Nabi-HB, indicated for the treatment of acute exposure
to blood containing Hepatitis B surface antigen (“HBsAg”); and Bivigam, indicated for the treatment of primary
humoral immunodeficiency. We are also developing a pipeline of plasma-derived therapeutics, including our lead
pipeline product candidate, RI-002, for the treatment of Primary Immune Deficiency Disease (“PIDD”). 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. Through ADMA BioCenters, we operate two
United States Food and Drug Administration (the “FDA”)-licensed, German Health Authority (“GHA”) and Korean
Ministry of Food and Drug Safety (“KMFDS”)-certified source plasma collection facilities located in the U.S.,
which provide us with a portion of our blood plasma for the manufacture of our products and product candidates. A
typical plasma collection center, such as those operated by ADMA BioCenters, can collect approximately 30,000 to
50,000 liters of source plasma annually, which may be sold for different prices depending upon the type of plasma,
quantity of purchase and market conditions at the time of sale. Plasma collected from ADMA BioCenters' facilities
that is not used to manufacture our products or product candidates is sold to third-party customers in the U.S., in
other locations where we are approved globally under supply agreements or in the open "spot" market.
On June 6, 2017, we completed the acquisition of certain assets (the “Biotest Assets”) of the Therapy
Business Unit (“BTBU”) of Biotest Pharmaceuticals Corporation (“BPC” and, together with Biotest AG, “Biotest”),
which include two FDA-licensed products, Nabi-HB (Hepatitis B Immune Globulin, Human) and Bivigam (Immune
Globulin Intravenous, Human) and a plasma fractionation facility located in Boca Raton, FL (the “Boca Facility”)
(the “Biotest Transaction”). The Boca Facility is FDA-licensed and certified by the GHA. In addition to the
manufacture and sale of Nabi-HB and Bivigam, we also provide contract manufacturing services for certain
historical clients, including the sale of intermediate by-products. Immediately following the acquisition, the Biotest
Assets were contributed into ADMA BioManufacturing.
Concurrent with the closing of the Biotest Transaction, Biotest committed to an aggregate of $40.0 million
of funding for us. Upon the closing of the Biotest Transaction, we received $27.5 million from Biotest, comprised of
$12.5 million in cash from BPC and a $15.0 million subordinated note at 6% interest payable to BPC with a
maturity of five years. At the closing of the Biotest Transaction, we delivered to BPC an aggregate equity interest
equal to 50%, less one share, of our then-issued and outstanding capital stock comprised of 25%, or 4,295,580
shares, of our voting common stock, $0.0001 par value per share (“Common Stock”), and 8,591,160 shares in the
form of our non-voting common stock, $0.0001 par value per share (“Non-Voting Common Stock”) (calculated as
of immediately following the closing and on a post-closing issuance basis). The Non-Voting Common Stock is
convertible into our Common Stock upon the occurrence of certain specified events. Biotest also participated in our
November 2017 follow-on equity offering by investing $12.5 million of the $42.0 million of total gross proceeds
from the offering (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
appearing elsewhere in this Annual Report).
As part of the purchase price to acquire the Biotest Assets, we agreed to transfer ownership of two of our
plasma collection facilities to BPC on January 1, 2019. We completed the construction of our third plasma collection
facility, filed our Biologics License Application with the FDA and initiated collections for this facility in December
2017. We anticipate FDA approval of our third plasma collection facility to occur during the second half of 2018
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Our Marketed Products
Nabi-HB
Nabi-HB is a hyperimmune globulin that is rich in antibodies to the Hepatitis B virus. Nabi-HB is a
purified human polyclonal antibody product collected from plasma donors who have been previously vaccinated
with a Hepatitis B vaccine. Nabi-HB is indicated for the treatment of acute exposure to blood containing HBsAg,
prenatal exposure to infants born to HBsAg-positive mothers, sexual exposure to HBsAg-positive persons and
household exposure to persons with acute Hepatitis B virus infection. Hepatitis B is a potentially life-threatening
liver infection caused by the Hepatitis B virus. It is a major global health problem. It can cause chronic infection and
puts people at high risk of death from cirrhosis and liver cancer. Nabi-HB has a well-documented record of long-
term safety and effectiveness since its initial market introduction. FDA approval for Nabi-HB was received on
March 24, 1999. Biotest acquired Nabi-HB from Nabi Biopharmaceuticals in 2007. Production of Nabi-HB at the
Boca Facility has continued under our leadership since the third quarter of 2017. Subsequent to the end of 2017, we
received authorization from the FDA for the release of our first commercial batch of Nabi-HB for commercial
distribution in the U.S.
Bivigam
Bivigam is an intravenous immune globulin indicated for the treatment of primary humoral
immunodeficiency. This includes, but is not limited to, agammaglobulinemia, common variable immunodeficiency,
Wiskott-Aldrich syndrome and severe combined immunodeficiency. These primary immunodeficiencies (“PIs” are a
group of genetic disorders. Initially thought to be very rare, it is now believed that as many as one in every 1,200-
2,000 people has some form of PI. Bivigam contains a broad range of antibodies similar to those found in normal
human plasma. These antibodies are directed against bacteria and viruses, and help to protect PI patients against
serious infections. Bivigam is a purified, sterile, ready-to-use preparation of concentrated Immunoglobulin (“IgG”)
antibodies. Antibodies are proteins in the human immune system that work to defend against disease. FDA approval
for Bivigam was received on December 19, 2012, and sales commenced in the first quarter of 2013. In December
2016, BPC temporarily suspended the commercial production of Bivigam in order to focus on the completion of
planned improvements to the manufacturing process. We resumed production of Bivigam utilizing our optimized
intravenous immunoglobulin (“IVIG”) manufacturing process with two conformance lots in the fourth quarter of
2017 and a third conformance lot in the first quarter of 2018. Subsequent to the end of 2017, we qualified and filled
these Bivigam conformance batches and the product is on stability. We expect to file a Prior Approval Supplement
(the “PAS”) with the FDA during the first half of 2018 and are seeking FDA clearance which would enable us to
relaunch this product during the second half of 2018.
Our Lead Pipeline Product Candidate – RI-002
We are currently developing our lead pipeline product candidate, RI-002, for the treatment of PIDD and
have completed a pivotal Phase III clinical trial, which met the primary endpoint of no Serious Bacterial Infections
(“SBIs”) reported. Secondary efficacy endpoints further demonstrated the benefits of RI-002 in the low incidence of
infection, therapeutic antibiotic use, days missed from work/school/daycare and unscheduled medical visits and
hospitalizations. RI-002 is derived from human plasma blended from normal donors and from donors tested to have
high levels of neutralizing titers to Respiratory Syncytial Virus (“RSV”). RI-002 is manufactured using a process
known as fractionation, which purifies human IgG from this blended plasma pool resulting in a final IVIG product
enriched with naturally occurring polyclonal anti-pathogen antibodies (such as streptococcus pneumonia, H.
influenza type B, Cytomegalovirus (“CMV”), measles and tetanus). We use our proprietary RSV
microneutralization assay to test for standardized levels of neutralizing antibodies to RSV in the final drug product.
Prior to the closing of the Biotest Transaction, BTBU was our third-party manufacturer for RI-002. In the
third quarter of 2015, the FDA accepted for review our Biologics License Application for RI-002 (the “BLA”) for
the treatment of PIDD. In July 2016, the FDA issued a Complete Response Letter (the “CRL”). The CRL reaffirmed
the issues set forth in a November 2014 warning letter (the “Warning Letter”) that had been issued by the FDA to
Biotest related to certain issues identified at the Boca Facility, but did not cite any concerns with the clinical safety
or efficacy data for RI-002 submitted in our BLA, nor did the FDA request any additional clinical studies be
completed prior to FDA approval of RI-002. The FDA identified in the CRL, among other things, certain
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outstanding inspection issues and deficiencies related to Chemistry, Manufacturing and Controls (“CMC”) and
Good Manufacturing Practices (“GMP”) at the Boca Facility and at certain of our third-party vendors, and requested
documentation of corrections for a number of these issues. The FDA indicated in the CRL that it cannot grant final
approval of our BLA until, among other things, these deficiencies are resolved. Following the completion of the
Biotest Transaction, we now have control over the regulatory, quality, general operations and drug substance
manufacturing process at the Boca Facility, and our highest priority is to remediate the outstanding compliance
issues that were identified at the Boca Facility in the Warning Letter. We have been working with a consulting firm
consisting of quality management systems and biologics production subject matter experts in preparation for a re-
inspection by the FDA in order to improve the FDA inspection classification relative to the Warning Letter
compliance issues as indicated in the CRL. We believe that we have been inspection-ready since the end of 2017.
Once the Warning Letter status is improved following the FDA inspection, we anticipate that we will be in a
position to refile our BLA for RI-002 in the second half of 2018. Subsequent to the end of 2017, we produced three
conformance lots using the optimized IVIG manufacturing process, and these batches are expected to be filled and
finished during the second quarter of 2018 and will then be placed on stability.
Evaluation of RI-002 in PIDD Patients
PIDD, a genetic disorder that causes a deficient or absent immune system, is caused by hereditary or
genetic defects and can affect anyone regardless of age or gender. PIDD patients are more vulnerable to infections
and more likely to suffer complications from these infections. IVIG is a plasma derived product that is used to
prevent serious infections in patients with PIDD. It is comprised of polyclonal antibodies, which are proteins
produced by B-cells that are used by the body’s immune system to neutralize foreign objects such as bacteria and
viruses. It is estimated that there are about 250,000 diagnosed PIDD patients in the U.S., approximately half of
whom are treated with IVIG regularly. In the U.S., sales of immune globulin products for all its uses were reported
to be approximately $4.8 billion in 2014.
The RI-002 pivotal Phase III clinical trial was conducted as a single arm study in which patients were
treated approximately once per month for a period of 12 months plus 90 days for follow up. Fifty-nine patients were
enrolled in nine treatment centers in the U.S. The pivotal Phase III primary endpoint followed published FDA
industry guidance, which provides for a reduction in the incidence of serious infections to less than one per year in
each subject receiving IVIG. The secondary outcome was safety and included other pharmacokinetic (“PK”) data
collection points including antibody titers for certain agents, including RSV antibody levels at various time points
after infusion.
RI-002 demonstrated positive results in the Phase III study in patients with PIDD, meeting its primary
endpoint of no SBIs reported. RI-002 was administered in a total of 793 infusions with zero serious adverse events
to 59 patients in nine treatment centers throughout the U.S. These results, included in our BLA, more than meet the
requirement specified by FDA guidance of ≤ 1 SBI per patient-year.
On February 22, 2015, at the 2015 American Academy of Allergy, Asthma & Immunology Annual
Meeting, scientific investigators reported on the secondary outcomes that included: a total of 93 days, or 1.66 days
per patient per year lost from work or school due to infection; one hospitalization due to an infection of only five
days duration in the entire study and IgG trough levels above those required by the FDA for IVIG products.
Additionally, there was a marked increase in all of the measured specific anti-pathogen antibodies in PK subjects
(n=31). The mean of maximum fold increases in specific antibody levels after infusion of RI-002 ranged from 1.9
fold (S. pneumonia type 19A) to 5.3 fold (RSV), which were statistically significant fold increases from the
pathogen's specific measured baselines. The safety profile of RI-002 is comparable to that of other
immunoglobulins.
Rationale for the Potential Evaluation of RI-002 in RSV Infected Patients
RSV is a common virus that ordinarily leads to mild, cold-like symptoms in healthy adults and children. In
high-risk groups, such as the PIDD population and the other immune-compromised populations, RSV can lead to a
more serious infection and may even cause death. The polyclonal antibodies which are present in RI-002 are
expected to prevent infections in immune-compromised patients.
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We previously conducted a randomized, double-blind, placebo-controlled Phase II clinical trial to evaluate
RI-001, RI-002’s predecessor product candidate, in immune-compromised, RSV-infected patients. This trial was
conducted with 21 patients in the U.S., Canada, Australia, and New Zealand. The Phase II dose-ranging trial
demonstrated a statistically significant improvement in the change from baseline RSV titers to day 18 in the high
dose and low dose treatment groups when compared with placebo (p=0.0043 and p=0.0268, respectively). The mean
fold increase for high dose was 9.24 (95% CI 4.07, 21.02) and the observed mean fold increase for low dose was
4.85 (95% CI 2.22, 10.59). The mean fold change for placebo treated patients was 1.42 (95% CI 0.64, 3.17). In
addition, more patients in the high dose (85.7%) and low dose (42.9%) groups experienced greater than a four-fold
increase from baseline to day 18 in RSV titer levels compared to placebo (0%). There were no serious drug-related
adverse events reported during the trial.
From April 2009 through February 2011, RI-001 was also administered to 15 compassionate use patients
where physicians requested access to the product for treating their patients with documented lower respiratory tract
RSV infections due to the fact that these patients had failed conventional therapeutic interventions. Serum samples
were obtained from 13 patients. Samples showed that patients demonstrated a four-fold or greater rise in RSV
antibody titers from baseline. Serum samples were not obtained from two patients that received Palivizumab. All 11
surviving patients received RI-001 within an average of 4.4 days after the onset of the diagnosis of RSV. The drug
was well-tolerated in all 15 patients and there were no reports of serious adverse events attributable to RI-001. Data
from our Phase II clinical trial, compassionate use experience and data obtained from the evaluation of RI-002 in the
infected cotton rat animal model has been presented at various conferences the past several years.
Based on these results, we intend to evaluate RI-002 for the treatment of RSV patients following FDA
approval, if received, for treatment of PIDD.
Manufacturing and Supply of Our Products
In order to produce plasma-derived immunoglobulin products, raw material plasma is collected from
human donors and then manufactured into specialized products. Historically, plasma for our products and product
candidates has been collected from healthy donors at FDA-licensed plasma donation centers. Source plasma is
collected at any one of over 400 FDA-licensed donation centers located throughout the U.S., using a process called
automated plasmapheresis. This sterile, self-contained, automated process separates red blood cells and other
cellular components in the blood, which are then returned to the donor. Source plasma obtained by plasmapheresis is
tested and must be negative for antibodies to human immunodeficiency virus types 1 and 2 (HIV-1/2), HBsAg and
Hepatitis C virus (“HCV”), using FDA-licensed serological test procedures.
After receipt of the source plasma, the frozen plasma is thawed and pooled and goes through the
fractionation process. This process is referred to as the Cohn method or cold ethanol method of fractionation. During
cold ethanol fractionation, classes of proteins are precipitated and removed by centrifugation or filtration. The
fractionation process includes the following steps; precipitation and absorption, depth filtration, centrifugation and
chromatography. Because of the human origin of the raw material and the thousands of donations required in the
fractionation process, the major risk associated to plasma products is the transmission of blood-borne infectious
pathogens. These purification processes have the potential to reduce the viral load. The manufacturing process also
utilizes a multistep viral removal/inactivation system, which further increases the safety of the products. The
following manufacturing processes have been validated for their capability to eliminate or inactivate viruses:
precipitation during cold ethanol fractionation, solvent/detergent treatment, and nanofiltration. Incorporation of
these processes in the manufacturing process ensures that the Company’s products comply with the requirements of
the FDA and are safe and efficacious.
Sales and Commercialization of Our Products
Historically, Nabi-HB has been sold through independent distributors, drug wholesalers acting as sales
agents, specialty pharmacies and other alternate site providers. In the U.S., third-party drug wholesalers ship a
significant portion of Nabi-HB through their distribution centers. These centers are generally stocked with adequate
inventories to facilitate prompt customer service. Sales and distribution methods include frequent contact by sales
and customer service representatives, automated communications via various electronic purchasing systems,
circulation of catalogs and merchandising bulletins, direct-mail campaigns, trade publication presence and
advertising.
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While we have been working towards remediating the Warning Letter and other CMC and GMP inspection
deficiencies and eventually refiling our BLA resubmission for RI-002, we expect to continue our commercialization
efforts for our approved products and plan to bolster these initiatives by hiring a small, specialty sales force to
market Nabi-HB, Bivigam upon its relaunch and, upon approval by the FDA, RI-002 to hospitals, physician
offices/clinics, and other specialty treatment organizations. We also anticipate staffing our company with additional
personnel for patient support, medical affairs, quality assurance, regulatory affairs, scientific affairs, third-party
reimbursement, inventory and logistics, human resources and financial and operational management. If and when we
receive FDA approval, we may also use a network of national distributors to assist with order fulfillment for RI-002
for use by healthcare professionals and hospitals.
Pharmaceutical Pricing and Reimbursement of Our Products
All sales of Nabi-HB, Bivigam and, if and when approved by the FDA, RI-002 in the U.S. depend in part
upon the availability of reimbursement from third-party payers. Third-party payers include government health
programs, managed care providers, private health insurers and other organizations. Nabi-HB and Bivigam are
reimbursed or purchased under several government programs, including Medicaid, Medicare Parts B and D, the
340B/Public Health Service program, and pursuant to an existing contract with the Department of Veterans Affairs.
Medicaid is a joint state and federal government health plan that provides covered outpatient prescription drugs for
low-income individuals. Under Medicaid, drug manufacturers pay rebates to the states based on utilization data
provided by the states.
Plasma Collection Facilities
ADMA BioCenters operates FDA-licensed, GHA and KMFDS certified source plasma collection facilities
located in the U.S. which provide us with a portion of our blood plasma for the manufacture of our products and
product candidates. A typical plasma collection center, such as those operated by ADMA BioCenters, can collect
approximately 30,000 to 50,000 liters of source plasma annually, which may be sold for different prices depending
upon the type of plasma, quantity of purchase, and market conditions at the time of sale. Plasma collected from
ADMA BioCenters' facilities that is not used to manufacture our products or product candidates are sold to third-
party customers in the U.S. and other locations where we are approved globally under supply agreements or in the
open "spot" market.
As part of the purchase price to acquire the Biotest Assets, we agreed to transfer ownership of two of our
plasma collection facilities to BPC on January 1, 2019. We completed the construction of our third plasma collection
facility, filed our Biologics License Application with the FDA and initiated collections for this facility in December
2017. We anticipate FDA approval of our third plasma collection facility to occur during the second half of 2018.
Leadership
The founders of ADMA have several decades of combined experience marketing and distributing blood
plasma products and devices. With our executive team, members of our Board of Directors (the “Board”) and our
commercial team, we collectively possess a significant level of deep medical, technical, development and
commercial experience in the biologics and pharmaceutical industries.
Our Strategy
Our goal is to be a leader in developing, manufacturing and commercializing specialized, targeted, plasma-
derived therapeutics that are intended to extend and enhance the lives of individuals who are naturally or medically
immune-compromised. The key elements of our strategy for achieving this goal are as follows:
Remediate the outstanding compliance deficiencies identified by the FDA in the CRL and
Warning Letter at the Boca Facility. Following the completion of the Biotest Transaction, we now
have control over the regulatory, quality, general operations and drug substance manufacturing process
at the Boca Facility. Our highest priority has been to remediate the outstanding compliance issues at
the Boca Facility while owned and operated by Biotest that were identified by the FDA in the CRL and
the Warning Letter. We engaged a leading consulting firm with extensive experience in remediating
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compliance and inspection issues related to quality management systems that manages a robust team of
subject matter experts in plasma derived products and biologic drugs to assist us in addressing all
identified CMC and current good manufacturing practice (“cGMP”) issues and deficiencies. We
believe that we have been inspection-ready since the end of 2017 and expect to have the FDA
inspection classification relative to the Warning Letter improved after the next inspection by the FDA.
Increase marketing efforts around Nabi-HB and relaunch Bivigam. We plan to increase our
marketing efforts and attend relevant medical conferences during 2018, raising awareness of the risks
associated with Hepatitis B and the benefits and efficacy of Nabi-HB. Similarly, we plan to relaunch
Bivigam following the submission and review by the FDA of the PAS, which will detail our optimized
Bivigam manufacturing process.
Obtain FDA approval of RI-002 as a treatment for PIDD. In the third quarter of 2015, the FDA
accepted for review our BLA for the treatment of PIDD. In July 2016, the FDA issued the CRL. The
CRL did not cite any concerns with the clinical safety or efficacy data for RI-002 submitted in our
BLA, nor did the FDA request any additional clinical studies be completed prior to FDA approval of
RI-002. In connection with our remediation efforts at the Boca Facility, we anticipate that we will be in
a position to refile our BLA for RI-002 in the second half of 2018.
Commercialize RI-002 as a treatment for PIDD. We plan to enhance our recruiting initiatives and
expand our existing specialty commercial sales force to market RI-002 to hospitals, physician
offices/clinics, and other specialty treatment and infusion center organizations. We also anticipate
staffing our company with additional personnel for patient support, medical affairs, quality assurance,
regulatory affairs, scientific affairs, third-party reimbursement, inventory and logistics, human
resources, and financial and operational management. We may also use a network of national
distributors to fulfill orders for RI-002.
Expand RI-002’s FDA-approved uses. If RI-002 is approved by the FDA as a treatment for PIDD,
we plan to evaluate the clinical and regulatory paths to grow the RI-002 franchise through expanded
FDA-approved uses. We believe that there may be patient populations beyond PIDD that would derive
clinical benefit from RI-002, some of which may be eligible for orphan status. We plan to leverage our
previously conducted randomized, double-blind, placebo-controlled Phase II clinical trial evaluating
RI-001, RI-002’s predecessor product candidate, in immune-compromised, RSV-infected patients to
explore RI-002 for the treatment of RSV.
Expand our pipeline with additional plasma-derived therapeutics. Our core competency is in the
development, manufacturing, testing and commercialization of plasma-derived therapeutics. We
believe there are a number of under-addressed medical conditions for which plasma-derived
therapeutics may be beneficial. Utilizing our intellectual property patents, which include our
proprietary testing assay and other standardization methods and technologies, we have identified
potential new product candidates that we may advance into preclinical activities in the near term.
Develop and expand ADMA BioCenters. In order to maintain partial control of our raw material
supply as well as generate revenues through additional sources, we operate ADMA BioCenters, a
subsidiary that manages plasma collection facilities in the U.S. These facilities hold FDA licenses,
along with GHA and KMFDS certifications. Under the FDA licenses, ADMA BioCenters may collect
normal source plasma and high-titer RSV plasma, with a portion of the plasma being sold to third-
party buyers. We also plan to grow through the creation and licensing of additional ADMA BioCenters
facilities in various regions of the U.S., including the recent construction of our third facility for which
we filed our BLA with the FDA in December 2017. Additional ADMA BioCenters may allow us to
cost-effectively secure additional plasma for our product manufacturing, and potentially increase
revenues through the collection and sale of normal source plasma and other hyperimmune plasma to
third parties.
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The Plasma Industry
Primary Immunodeficiency Disease
PIDD is a class of hereditary disorders characterized by defects in the immune system, due to either a lack
of necessary antibodies or a failure of these antibodies to function properly. According to the World Health
Organization, there are over 150 different presentations of PIDD. As patients suffering from PIDD lack a properly
functioning immune system, they typically receive monthly, outpatient infusions of IVIG therapy. Without this
exogenous antibody immune support, these patients would be susceptible to a wide variety of infectious diseases.
PIDD has an estimated prevalence of 1:1,200 in the U.S., or approximately 250,000 people. Of these 250,000 people
diagnosed with PIDD in the U.S., approximately 125,000 receive monthly infusions of IVIG and it is estimated that
over 300,000 patients worldwide receive monthly IVIG infusions for PIDD.
As most patients with PIDD present with infections, the differential diagnosis and initial investigations for
an underlying immune defect are typically guided by the clinical presentation. In subjects with PIDD, individual
infections are not necessarily more severe than those that occur in a normal host. Rather, the clinical features
suggestive of an immune defect may be the recurring and/or chronic nature of infections with common pathogens
that may result in end organ damage, such as bronchiectasis. In addition, subjects with PIDD will often respond
poorly to standard antimicrobial therapy or they may have repeated infections with the same pathogen. The
virulence of the infecting organism should also be considered, and a subject’s immune competence should be
questioned when invasive infections are caused by low virulence or opportunistic pathogens. For example, infection
with the opportunistic pathogens Pneumocystis jiroveci (previously Pneumocystis carinii) or atypical mycobacteria
should prompt an investigation for underlying immunodeficiency. Typical clinical presentations for subjects with
PIDD are:
antibody deficiency and recurrent bacterial infections;
T-lymphocyte deficiency and opportunistic infections;
other lymphocyte defects causing opportunistic infections;
neutrophil defects causing immunodeficiency; and
complement deficiencies.
PIDD can present at any age from birth to adulthood, posing a considerable challenge for the practicing
physician to know when and how to evaluate a subject for a possible immune defect. Subjects with marked antibody
deficiencies are generally dependent on IVIG therapy for survival. Benefits of adequate IVIG therapy in subjects not
able to produce antibodies normally include a reduction of the severity and frequency of infections, prevention of
chronic lung disease and prevention of enteroviral meningoencephalitis. Several immune globulin products have
already been approved by the FDA.
RI-002, our IVIG product candidate, contains polyclonal antibodies against various infectious agents, such
as streptococcus pneumoniae, H. influenza type B, CMV, measles and tetanus, including standardized antibodies
against RSV. RSV is a common respiratory virus that often presents during the winter months. Nearly all children
will have been infected with RSV by three years of age; however, the immune systems of most healthy children
prevent significant morbidity and mortality. Conversely, in patients who are immune-compromised, such as those
with PIDD or who have undergone a hematopoietic stem cell or solid organ transplant and may be on
immunosuppressive drugs or chemotherapy, RSV infection can be associated with significant morbidity and
mortality. Immune-compromised patients historically have a 5% to 15% rate of RSV infection, and, if left untreated,
lower respiratory tract RSV infections in immune-compromised patients can result in a mortality rate of up to 40%
of infected patients. In hematopoietic stem cell transplant (“HSCT”) patients, a subset of the immune-compromised
patient population with approximately 25,000 transplants being performed annually in the U.S., it is estimated that
about 25% of patients treated with the current standard of care (aerosolized Ribavirin) will progress to Lower
Respiratory Tract Infection (“LRTI”) while 41% of patients untreated with the current standard of care will progress
to LRTI.
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Plasma - Background, Composition and Manufacturing
Human blood contains a number of components including:
Red blood cells – Used to carry oxygen from the lungs to the body;
White blood cells – Used by the immune system to fight infection;
Platelets – Used for blood clotting; and
Plasma – Used to carry the aforementioned components throughout the body and provide support in
clotting and immunity.
Plasma is the most abundant blood component, representing approximately 55% of total blood volume.
Plasma, which is 90% water, is rich in proteins used by the human body for blood clotting and fighting infection.
These proteins account for approximately 7% of plasma’s volume. As plasma contains these valuable proteins,
plasma collection and the manufacturing of human plasma-derived therapeutics provide therapeutic benefits for ill
patients.
In order to produce plasma-derived therapeutics that can be administered to ill patients, raw material
plasma must be collected from human donors and then manufactured into specialized products. Plasma is collected
from healthy donors at FDA-licensed plasma donation centers. To ensure safety of the collected plasma, all plasma
donations are tested using FDA-approved methods of Nucleic Acid Testing for various infectious diseases, such as
HIV or HCV.
Plasma is collected using a process called “plasmapheresis.” During plasmapheresis, a donor’s blood is
drawn into a specialized medical device that separates the plasma component through centrifugation, and then
returns the other blood components back into the donor’s bloodstream. Plasmapheresis is performed utilizing an
FDA-approved, automated device with a sterile, self-contained collection kit. The plasma that is collected is known
as “normal source plasma.” There are over 500 plasma donation centers in the U.S. As noted in a variety of plasma
industry trade reports and related conferences, approximately 35 million liters of source plasma were collected in the
U.S. in 2015. In the U.S., a donor may donate plasma a maximum of two times during any seven-day period, with at
least two days in between donations. Plasma donation centers in the U.S. typically pay donors $25 to $50 per
donation and some donors with rare or high antibody levels can be paid more.
In order to isolate the desired therapeutic elements in normal source plasma, it must initially undergo a
manufacturing process known as “fractionation.” The process of fractionation was invented in the 1940’s by E.J.
Cohn and is referred to as the Cohn method or cold ethanol fractionation. First, the source plasma undergoes a
process called pooling, in which the individual plasma donations are combined into a pooling tank. Second, the
Cohn fractionation method, which is a combination of time, temperature, pH, alcohol concentration and
centrifugation, is used to separate the desired plasma protein components, or “fractions.” After fractionation, the
separated proteins are then re-suspended and are treated with a solvent detergent treatment process for viral
inactivation. Next, other forms of filtration, such as nanofiltration, are performed as an additional viral removal and
viral reduction step. Finally, with the various components separated and purified, the bulk product is formulated and
filled into final, finished vials. During these various steps of manufacturing, each lot is reviewed and tested for
potency and purity prior to being approved for release.
The proteins in human plasma fall into four categories: albumin (60% of protein volume), immune
globulins (15% of protein volume), coagulation factors (1% of protein volume), and other proteins (24% of protein
volume) such as alpha-1 proteinase inhibitor, C1 esterase inhibitor, fibrin sealants and fibrinogen. Many of the other
proteins in plasma have yet to be developed into commercial therapies. In the U.S., not only are the plasma
collection centers subject to FDA licensure, but each plasma protein product that is derived and fractionated from
plasma must undergo an approval process with FDA’s Center for Biologics Evaluation and Research.
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Immune Globulins
In June 2008, the FDA published the FDA Guidance for Industry outlining the regulatory pathway for the
approval of IVIG for the treatment of PIDD (Guidance for Industry: Safety, Efficacy, and Pharmacokinetic Studies
to Support Marketing of Immune Globulin Intravenous (Human) as Replacement Therapy for Primary Humoral
Immunodeficiency).
Immune globulins can be administered in three ways: intramuscularly, intravenously or subcutaneously.
IVIG principally contains antibodies and, as such, provides passive immunization for individuals who are immune-
deficient or who have been exposed to various infectious agents. IVIG is used therapeutically in a variety of
immunological diseases/deficiencies, such as PIDD, idiopathic thrombocytopenic purpura, Guillain-Barré syndrome,
Kawasaki disease, bone marrow transplant, and chronic inflammatory demyelinating polyneuropathy. We are aware
that other companies are also evaluating IVIG in a clinical trial for the treatment of Alzheimer’s disease.
Additionally, IVIG is also used as therapy in a variety of other diseases that do not involve primary or secondary
immune deficiencies, such as multiple sclerosis, skin disease, and asthma. These latter uses are referred to as “off-
label” or evidence-based uses because the FDA has not approved their use in these indications and promotion of
such uses is not permitted by FDA unless a BLA or BLA supplement with additional data is approved. Among the
various IVIG products, there are only 14 labeled indications approved by the FDA. However, medical literature
identifies at least 150 evidence-based uses for IVIG, of which approximately 60 are currently included on lists of
reimbursable uses by Medicare and other healthcare plans. This provides opportunities for new product development
and submissions.
There are two types of immune globulins; standard and hyperimmune. The difference between standard
immune globulins and hyperimmune globulins is that the latter are manufactured using plasma obtained from donors
who have elevated amounts (high-titers) of specific antibodies. These high-titer products can be used to treat and
prevent diseases that present those specific antigens that are reactive with the high-titer antibodies. Hyperimmune
products currently available include Hepatitis B, tetanus, rabies, CMV and RhoD immune globulins.
As of 2014, the worldwide market for plasma-derived therapeutic drug products was approximately $15
billion and the U.S. market for all plasma-derived products was approximately $7.8 billion. IVIG products
accounted for approximately $4.8 billion of sales in the U.S. in 2014. IVIG products are used to treat primary
immune deficiencies, certain autoimmune diseases, and other illnesses for immune-compromised patients and
certain neuropathy indications. New research and data, additional labeled indications, an aging population and
emerging countries with new markets are all adding to the worldwide growth of IVIG utilization.
Manufacturing and Supply
In order to produce plasma-derived therapeutics that can be administered to patients, raw material plasma is
collected from healthy donors at plasma collection facilities licensed by the FDA. ADMA BioCenters operates
FDA-licensed, GHA and KMFDS certified source plasma collection facilities located in the U.S. which provide us
with a portion of our blood plasma for the manufacture of our current products and product candidates. A typical
plasma collection center, such as those operated by ADMA BioCenters, can collect approximately 30,000 to 50,000
liters of source plasma annually, which may be sold for different prices depending upon the type of plasma, quantity
of purchase, and market conditions at the time of sale. Plasma collected from ADMA BioCenters' facilities that is
not used for the manufacture of our current products and product candidates is sold to third-party customers in the
U.S., and other locations where we are approved globally under supply agreements or in the open "spot" market.
On June 6, 2017, we and BPC entered into a Termination Agreement with respect to the Manufacturing
Supply and License Agreement and Master Services Agreement, which included, effective as of January 21, 2017, a
mutual release with respect to any claims relating to or arising from any breach or default under the existing
Manufacturing Supply and License Agreement and Master Services Agreement between ADMA BioManufacturing
and BPC. Under our Manufacturing, Supply and License Agreement with BPC, we had agreed to purchase
exclusively from BPC our worldwide requirements of RSV immune globulin manufactured from human plasma
containing RSV antibodies. The term of the agreement was for a period of ten years from January 1, 2013,
renewable for two additional five year periods at the agreement of both parties. We were obligated under this
agreement to purchase a minimum of at least one lot of product during each calendar year after the finished product
is approved by the FDA. This number was subject to increase at our option. As consideration for BPC’s obligations
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under the agreement, we were obligated to pay a dollar amount per lot of RSV immune globulin manufactured from
human plasma containing RSV antibodies, as well as a percentage royalty on the sales thereof and of RI-002, up to a
specified cumulative maximum amount.
Pursuant to the terms of a Plasma Purchase Agreement with BPC, we have agreed to purchase from BPC an
annual minimum volume of source plasma containing antibodies to RSV to be used in the manufacture of RI-002.
We must purchase a to-be-determined and agreed upon annual minimum volume from BPC, but may also collect
high-titer RSV plasma from up to five wholly-owned ADMA BioCenters. During 2015, BPC and ADMA amended
its plasma supply agreement to allow ADMA the ability to collect its raw material RSV high-titer plasma from other
third-party collection organizations, thus allowing ADMA to expand its reach for raw material supply as we
approach commercialization for RI-002. Unless terminated earlier, the agreement expires in November 2021, after
which it may be renewed for two additional five-year periods if agreed to by the parties. Either party may terminate
the agreement if the other party fails to remedy any material default in the performance of any material condition or
obligation under the agreement following notice. Either party may also terminate the agreement, after providing
written notice, if a proceeding under any bankruptcy, reorganization, arrangement of debts, insolvency or
receivership law is filed by or against the other party, and is not dismissed or stayed, or a receiver or trustee is
appointed for all or a substantial portion of the assets of the other party, or the other party makes an assignment for
the benefit of its creditors or becomes insolvent. We may also terminate the agreement upon written notice if the
clinical development of our product candidate is halted or terminated, whether by the FDA, a Data Safety
Monitoring Board, or any other regulatory authority. Upon termination of the agreement, we must pay for any
source plasma already delivered to us and for any source plasma collected under the terms of the agreement. As part
of the closing of the Biotest Transaction, we amended the Plasma Purchase Agreement to extend BPC’s annual
minimum purchase requirements of plasma containing antibodies to RSV for ten years through the closing date of
the Biotest Transaction.
On June 22, 2012, we entered into a Plasma Supply Agreement with BPC for the purchase of normal
source plasma from ADMA BioCenters’ Norcross facility to be used in BPC's proprietary products’ manufacturing,
which was subsequently amended on February 25, 2014 and then amended and restated on March 23, 2016. After
the initial term, the agreement may be renewed on an annual basis upon the mutual consent of the parties. In
addition to any other remedy it may have, either party has the right to terminate the agreement if the other party fails
to remedy any material default in the performance of a material condition or obligation under the agreement
following written notice. In addition, upon giving the appropriate written notice, either party may terminate the
agreement upon the occurrence of any of the following events: a proceeding under bankruptcy, reorganization,
agreement of debts, insolvency or receivership law is filed by or against the other party, and is not dismissed or
stayed, or a receiver or trustee is appointed for all or a substantial portion of the assets of the other party, or the other
party makes an assignment for the benefit of its creditors or becomes insolvent. Neither party can assign the
agreement or any of its rights or obligations thereunder without the express written consent of the other party.
However, with notice to the other party, either party without the other party’s consent may assign the agreement to
(i) its affiliate, or (ii) a successor to all or substantially all of the assets related to the business of that party which is
involved in the fulfillment of its obligations under the agreement. Under the agreement, BPC applied to the GHA
for, and we have subsequently obtained, GHA certification.
On June 7, 2012, we entered into a Testing Services Agreement with Quest Diagnostics Clinical
Laboratories, Inc. (“Quest”) in which Quest agreed to provide biomarker testing and related support services for
protocol screening and recertification which are exclusive to us. All data, test results, studies and other information
generated by Quest in performing services under the agreement is our sole property, and either party can terminate
the agreement without cause upon written notice. Neither party can assign the agreement or any of its right or
obligations under the agreement without the express written consent of the other party, except under specified
circumstances. Quest agreed and acknowledged that we paid for the development and validation of the testing assay
and as such, the assay is our sole property and shall only be utilized for our benefit.
Marketing, Sales and Market Research
We intend to market and sell our product through our specialty sales force, distribution relationships and
other customary industry methods. We will focus our efforts specifically on the easily identifiable treatment centers
which specialize in the care and management of immune compromised individuals. We estimate that there are
approximately 500 leading specialty programs in the U.S. which have significant patient populations for PIDD,
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suitable for treatment with RI-002. We plan to hire our own specialty sales force which will consist of account
managers, medical science liaisons and other normal and customary scientific, medical and detail representatives.
Our management and Board has substantial prior direct marketing, sales and distribution experience with plasma
derived drugs, specialty immune globulins and other biological products. We also anticipate staffing the company
with additional personnel for patient support, medical affairs, quality assurance, regulatory affairs, scientific affairs,
third-party reimbursement, supply chain and logistics, human resources, financial and other operational management
positions. As is normal and customary in the plasma products industry, we may also use a network of national
distribution organizations that have specialty divisions that focus on plasma products to fulfill orders for RI-002. We
anticipate that due to certain recent events, including our Biotest Transaction, our current and anticipated plans and
intentions will evolve and change. See “Special Note Regarding Forward-Looking Statements.”
On June 6, 2017, we and BPC entered into a Termination Agreement with respect to the Manufacturing
Supply and License Agreement and Master Services Agreement, which included, effective as of January 21, 2017, a
mutual release with respect to any claims related to or arising from any breach or default under the existing
Manufacturing Supply and License Agreement and Master Services Agreement between ADMA BioManufacturing
and BPC. Pursuant to our Manufacturing, Supply and License Agreement, we granted Biotest an exclusive license to
market and sell RI-002 in Europe and in selected countries in North Africa and the Middle East (the ““Territory”), to
have access to our testing services for testing of BPC’s plasma samples using our proprietary RSV assay, and to
reference (but not access) our proprietary information for the purpose of Biotest seeking regulatory approval for the
RI-002 in the Territory. As consideration for the license, Biotest provided us with certain services at no charge and
also compensated us with cash payments upon the completion of certain milestones. Biotest was also obligated to
pay us an adjustable royalty based on a percentage of revenues from the sale of RI-002 in the Territory for 20 years
from the date of first commercial sale.
Competition
Although blood plasma and its derivative proteins are not subject to patent protection, the FDA recognizes
each immune globulin product as unique and generally requires a separate Investigational New Drug (“IND”)
clinical trial and BLA for each as a condition to approval. Regardless of whether competitors are able to develop an
assay that can achieve our level of consistency and reproducibility in providing RSV antibody titer data, we believe
they would still be required to validate and qualify such an assay as well as conduct clinical trials and undergo an
FDA review prior to marketing an immune globulin product. The plasma products industry is highly competitive.
We face, and will continue to face, intense competition from both U.S.-based and foreign producers of plasma
products, some of which have lower cost structures, greater access to capital, greater resources for research and
development, and sophisticated marketing capabilities.
These competitors may include: CSL Behring, Grifols Biologicals, Shire, Octapharma and Kedrion. In
addition to competition from other large worldwide plasma products providers, we face competition in local areas
from smaller entities. In Europe, where the industry is highly regulated and health care systems vary from country to
country, local companies may have greater knowledge of local health care systems, more established infrastructures
and have existing regulatory approvals or a better understanding of the local regulatory process, allowing them to
market their products more quickly. Moreover, plasma therapy generally faces competition from non-plasma
products and other courses of treatments. For example, recombinant Factor VIII products compete with plasma-
derived products in the treatment of Hemophilia A.
Intellectual Property
During the second quarter of 2015, U.S. Pat. App. Serial No. 14/592,721, entitled ‘Compositions and
Methods for the Treatment of Immunodeficiency’, encompassing our RI-002 product, was allowed and issued
August 18, 2015 as U.S. Patent No. 9,107,906. The ‘906 patent has a term at least through January 2035 and covers
compositions comprising pooled plasma, as well as immunoglobulin prepared therefrom, that contains a
standardized, elevated titer of RSV neutralizing antibodies as well as elevated levels of antibodies specific for one or
more other respiratory pathogens, as well as methods of making and using the compositions. Our proprietary
methods allow us to effectively identify and isolate donor plasma with high-titer RSV neutralizing antibodies and to
standardize RI-002’s antibody profile, which we believe may enable us to garner a premium price.
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During the third quarter of 2017, U.S. Pat. App. Serial No. 14/790,872, entitled ‘Compositions and
Methods for the Treatment of Immunodeficiency’, encompassing immunotherapeutic methods of using immune
globulin compositions proprietary to ADMA, was allowed and issued July 25, 2017 as U.S. Patent No. 9,714,283.
The ‘283 patent has a term at least through January 2035.
In November 2017, U.S. Pat. App. Serial No. 14/592,727, related to immune globulin compositions
containing elevated, neutralizing antibody titers to RSV, as well as elevated antibody titers to other respiratory
pathogens, was allowed and issued as U.S. Patent No. 9,815,886. The term of the issued patent extends to January
2035.
We also rely on a combination of patents, trademarks, trade secrets and nondisclosure and non-competition
agreements to protect our proprietary intellectual property and will continue to do so. We also seek to enhance and
ensure our competitive position through a variety of means, including our unique and proprietary plasma donor
selection criteria, our proprietary formulation methodology for plasma pooling and the proprietary reagents,
controls, testing standards, standard operating procedures and methods we use in our anti-RSV microneutralization
assay. While we intend to defend against threats to our intellectual property, litigation can be costly and there can be
no assurance that our patent will be enforced or that our trade secret policies and practices or other agreements will
adequately protect our intellectual property. We seek to preserve the integrity and confidentiality of our data and
trade secrets by maintaining physical security of our premises and physical and electronic security of our
information technology systems. These processes, systems, and/or security measures may be breached, and we may
not have adequate remedies as a result of any such breaches. Third parties may also own or could obtain patents that
may require us to negotiate licenses to conduct our business, and there can be no assurance that the required licenses
would be available on reasonable terms or at all.
In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
We also seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our
employees, consultants, scientific advisors and contractors. Although we rely, in part, on confidentiality,
nondisclosure and non-competition agreements with employees, consultants and other parties with access to our
proprietary information to protect our trade secrets, proprietary technology, processes and other proprietary rights,
there can be no assurance that these agreements or any other security measures related to such trade secrets,
proprietary technology, processes and proprietary rights will be adequate, will not be breached, that we will have
adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary
information or that third parties will not otherwise gain access to our trade secrets or proprietary knowledge. To the
extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for
us, disputes may arise as to the rights in related or resulting know-how and inventions. We have filed for other
provisional patent applications with the U.S. which are pending related to expanded hyperimmune globulin
products.
We currently hold multiple trademarks, including Bivigam and Nabi-HB. We have spent considerable
resources registering the trademarks and building brand awareness and equity of the ADMA Biologics trade name,
which has been used in commerce since 2006. We expect to maintain and defend our various trademarks to the
fullest extent possible.
Government Regulation and Product Approval
The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries
impose substantial requirements upon, among other things, the testing (preclinical and clinical), manufacturing,
labeling, storage, recordkeeping, advertising, promotion, import, export, marketing and distribution of products and
product candidates. If we do not comply with applicable requirements, we may be fined, the government may refuse
to approve our marketing applications or allow us to manufacture or market our products and we may be criminally
prosecuted. We and our manufacturers may also be subject to regulations under other federal, state and local laws.
U.S. Government Regulation
In the U.S., the FDA regulates products under the Federal Food, Drug, and Cosmetic Act (the “FDCA”)
and related regulations. Our current and anticipated future product candidates are considered “biologics” under the
FDA regulatory framework. The FDA's regulatory authority for the approval of biologics resides in the Public
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Health Service Act. However, biologics are also subject to regulation under the FDCA because most biological
products also meet the FDCA’s definition of "drugs." Most pharmaceuticals or “conventional drugs” consist of pure
chemical substances and their structures are known. Most biologics, however, are complex mixtures that are not
easily identified or characterized. Biological products differ from conventional drugs in that they tend to be heat-
sensitive and susceptible to microbial contamination. This requires sterile processes to be applied from initial
manufacturing steps. The process required by the FDA before our product candidates may be marketed in the U.S.
generally involves the following (although the FDA is given wide discretion to impose different or more stringent
requirements on a case-by-case basis):
completion of extensive preclinical laboratory tests, preclinical animal studies and formulation studies
performed in accordance with the FDA’s good laboratory practice regulations and other regulations;
submission to the FDA of an IND application which must become effective before clinical trials may
begin;
performance of adequate and well-controlled clinical trials meeting FDA requirements to establish the
safety and efficacy of the product candidate for each proposed indication;
manufacturing (through an FDA-licensed contract manufacturing organization) of product in
accordance with cGMP to be used in the clinical trials and providing manufacturing information need
in regulatory filings;
submission of a BLA to the FDA;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the
product candidate is produced, and potentially other involved facilities as well, to assess compliance
with cGMP regulations and other applicable regulations; and
the FDA review and approval of a BLA prior to any commercial marketing, sale or shipment of the
product.
The testing and approval process requires substantial time, effort and financial resources, and we cannot be
certain that any approvals for our product candidates will be granted on a timely basis, if at all. See “Item 1A Risk
Factors” appearing elsewhere in this Annual Report.
We submit manufacturing and analytical data, among other information, to the FDA as part of an IND
application. Subject to certain exceptions, an IND becomes effective 30 days after receipt by the FDA, unless the
FDA, within the 30-day time period, issues a clinical hold to delay a proposed clinical investigation due to concerns
or questions about the product or the conduct of the clinical trial, including concerns that human research subjects
will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any
outstanding concerns before the clinical trial can begin. Our submission of an IND, or those of our collaboration
partners, may not result in the FDA allowance to commence a clinical trial. A separate submission to an existing
IND must also be made for each successive clinical trial conducted during product development. The FDA must also
approve certain changes to an existing IND, such as certain manufacturing changes. Further, an independent
institutional review board (“IRB”) duly constituted to meet FDA requirements for each medical center proposing to
conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center
and it must monitor the safety of the study and study subjects until completed. The FDA, the IRB or the sponsor
may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being
exposed to an unacceptable health risk. Clinical testing also must satisfy extensive Good Clinical Practice
requirements and regulations for informed consent.
Clinical Trials
For purposes of BLA submission and approval, clinical trials are typically conducted in the following three
sequential phases, which may overlap (although additional or different trials may be required by the FDA as well):
Phase I clinical trials are initially conducted in a limited population to test the product candidate for
safety, dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on
occasion, in patients, such as cancer patients.
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Phase II clinical trials are generally conducted in a limited patient population to identify possible
adverse effects and safety risks, to determine the efficacy of the product candidate for specific targeted
indications and to determine tolerance and optimal dosage. Multiple Phase II clinical trials may be
conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase III
clinical trials.
Certain Phase III clinical trials are referred to as pivotal trials. When Phase II clinical trials
demonstrate that a dose range of the product candidate is effective and has an acceptable safety profile,
Phase III clinical trials are undertaken in large patient populations to provide substantial evidence of
reproducibility of clinical efficacy results and to further test for safety in an expanded and diverse
patient population at multiple, geographically dispersed clinical trial sites.
In addition, under the Pediatric Research Equity Act of 2003, a BLA application or supplement for a new
active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration must
contain data that is adequate to assess the safety and effectiveness of the drug for the claimed indications in all
relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for
which the product is safe and effective, unless the applicant has obtained a waiver or deferral. In 2012, the Food and
Drug Administration Safety and Innovation Act amended the FDCA to require that a sponsor who is planning to
submit such an application submit an initial Pediatric Study Plan (“PSP”) within sixty days of an end-of-phase 2
meeting or as may be agreed between the sponsor and the FDA. The FDA may, on its own initiative or at the request
of the applicant, grant deferrals for submission of data or full or partial waivers. The FDA and the sponsor must
reach agreement on the PSP.
In some cases, the FDA may condition continued approval of a BLA on the sponsor’s agreement to conduct
additional clinical trials, or other commitments. Such post-approval studies are typically referred to as Phase IV
studies.
Biological License Application
The results of product candidate development, preclinical testing and clinical trials, together with, among
other things, detailed information on the manufacture and composition of the product and proposed labeling, and the
payment of a user fee, are submitted to the FDA as part of a BLA. The FDA reviews all BLAs submitted before it
accepts them for filing and may reject the filing as inadequate to merit review or may request additional information
to be submitted in a very short time frame before accepting a BLA for filing. Once a BLA is accepted for filing, the
FDA begins an in-depth review of the application.
During its review of a BLA, the FDA may refer the application to an advisory committee of experts for
their review, evaluation and recommendation as to whether the application should be approved, which information is
taken into consideration along with the FDA’s own review findings. The FDA may refuse to approve a BLA and
issue a CRL if the applicable regulatory criteria are not satisfied. A CRL may also require additional clinical or other
data, including one or more additional pivotal Phase III clinical trials. Even if such requested data are submitted, the
FDA may ultimately decide that the BLA does not satisfy the criteria for approval and issue a denial of the BLA.
Data from clinical trials are not always conclusive and the FDA may interpret data differently than we do. If the
FDA’s evaluations of the BLA and the clinical and manufacturing procedures and facilities are favorable, the FDA
may issue an approval letter or a CRL, which contains the conditions that must be met in order to secure final
approval of the BLA. If a CRL is issued, a company has up to twelve months to resubmit or withdraw the BLA,
unless the FDA allows for an extension, of which ADMA has requested. If a CRL is issued, if and when those items
have been resolved to the FDA’s satisfaction, the FDA will issue an approval letter, authorizing commercial
marketing of the product for certain indications. The FDA may withdraw product approval if ongoing regulatory
requirements are not met or if safety problems occur after the product reaches the market. In addition, the FDA may
require testing, including Phase IV clinical trials, and surveillance programs to monitor the effect of approved
products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a
product based on the results of these post-marketing programs. Products may be marketed only for the FDA-
approved indications and in accordance with the FDA-approved label. The FDA generally does not allow drugs to
be promoted for “off-label” uses – that is, uses that are not described in the product’s approved labeling and that
differ from those that were approved by the FDA. Furthermore, the FDA generally limits approved uses to those
studied in clinical trials. If there are any modifications to the product, including changes in indications, other
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labeling changes, or manufacturing processes or facilities, we may be required to submit and obtain FDA approval
of a new BLA or BLA supplement, which may require us to develop additional data or conduct additional
preclinical studies and clinical trials, and/or require additional manufacturing data.
Satisfaction of the FDA regulations and approval requirements or similar requirements of foreign
regulatory agencies typically takes several years, and the actual time required may vary substantially based upon the
type, complexity and novelty of the product or disease. Typically, if a product candidate is intended to treat a
chronic disease, as is the case with RI-002, safety and efficacy data must be gathered over an extended period of
time. Government regulation may delay or prevent marketing of product candidates for a considerable period of time
and impose costly procedures upon our activities. The FDA or any other regulatory agency may not grant approvals
for changes in dose form or new indications for a product candidate on a timely basis, or at all. Even if a product
candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient
populations and dosages. Further, even after regulatory approval is obtained, later discovery of previously unknown
problems with a product may result in restrictions on the product or even complete withdrawal of the product from
the market. Delays in obtaining, or failures to obtain, regulatory approvals for any of our product candidates would
harm our business. In addition, we cannot predict what adverse governmental regulations may arise from future U.S.
or foreign governmental action.
Upon the resubmission of a BLA application, the FDA will classify the resubmission as Class 1 (triggering
a 2-month review goal for the FDA) or Class 2 (triggering a 6-month review goal for the FDA).
Other Regulatory Requirements
Biological drug products manufactured or distributed pursuant to FDA approvals are subject to extensive
and continuing regulation by the FDA, including, among other things, requirements related to recordkeeping
(including certain electronic record and signature requirements), periodic reporting, product sampling and
distribution, advertising and promotion and reporting of certain adverse experiences, deviations, and other problems
with the product. After approval, most changes to the approved product, such as adding new indications or other
labeling claims, are subject to prior FDA review and approval. There also are annual user fee requirements for any
marketed products and the establishments at which such products are manufactured, as well as new application fees
for supplemental applications with clinical data.
Manufacturers must continue to comply with cGMP requirements, which are extensive and require
considerable time, resources and ongoing investment to ensure compliance. In addition, changes to the
manufacturing process generally require prior FDA approval before being implemented and other types of changes
to the approved product, such as adding new indications and additional labeling claims, are also subject to further
FDA review and approval.
Manufacturers and certain other entities involved in the manufacturing and distribution of approved
products are required to register their establishments with the FDA and certain state agencies, and are subject to
periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws.
The cGMP requirements apply to all stages of the manufacturing process, including the production, processing,
sterilization, packaging, labeling, storage and shipment of the product. Manufacturers must establish validated
systems to ensure that products meet specifications and regulatory standards, and test each product batch or lot prior
to its release. For biologics products in particular, for each product lot the applicant must submit materials related to
that lot to the FDA before the lot can be released for distribution.
Changes to the manufacturing process are strictly regulated and often require prior FDA approval before
being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and
impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the
sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area
of production and quality control to maintain cGMP compliance.
The FDA may impose a number of post-approval requirements as a condition of approval of an application.
The FDA may withdraw a product approval if compliance with regulatory requirements is not maintained or if
problems occur after the product reaches the market. Later discovery of previously unknown problems with a
product, including adverse events of unanticipated severity or frequency, problems with manufacturing processes or
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failure to comply with regulatory requirements, may result in restrictions on the product or even complete
withdrawal of the product from the market. Failure to comply with the statutory and regulatory requirements can
subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing,
sales or use, seizure of product, injunctive action or possible fines and other penalties. We cannot be certain that we
or our present or future third-party manufacturers or suppliers will be able to comply with the cGMP regulations and
other ongoing FDA regulatory requirements. If we or our present or future third-party manufacturers or suppliers are
not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a product from
distribution, or withdraw approval of our BLA for that product.
The FDA closely regulates the post-approval marketing and promotion of products, including standards and
regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational
activities and promotional activities involving the Internet. A company can make only those claims relating to safety
and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse
publicity, warning and/or other regulatory letters, corrective advertising and potential major fines and other
penalties.
In addition, the distribution of prescription drug products (including biological drug products) is subject to
the Prescription Drug Marketing Act (the “PDMA”), which regulates the distribution of drugs and drug samples at
the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states.
Both the PDMA and state laws limit the distribution of prescription product samples and impose requirements to
ensure accountability in distribution.
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change
the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In
addition to new legislation, FDA regulations, guidance, and policies are often revised or reinterpreted by the agency
in ways that may significantly affect our business and our product candidates. It is impossible to predict whether
further legislative or FDA regulation or policy changes will be enacted or implemented and what the impact of such
changes, if any, may be.
Regulation of ADMA BioCenters
All blood and blood product collection and manufacturing centers which engage in interstate commerce
must be licensed by the FDA. In order to achieve licensure, the organization must submit a BLA and undergo pre-
licensure inspection. ADMA BioCenters has completed these requirements and holds FDA licenses, along with
GHA and KMFDS certifications, for its Norcross, GA and Marietta, GA facilities. In order to maintain these
licenses, the facilities operated by ADMA BioCenters will be inspected at least every two years. ADMA BioCenters
is also required to submit annual reports to the FDA.
Blood plasma collection and manufacturing centers are also subject to the Clinical Laboratory
Improvement Amendments, state licensure and compliance with industry standards such as the International Quality
Plasma Program. Compliance with state and industry standards is verified by means of routine inspection. We
believe that both of our ADMA BioCenters facilities are currently in compliance with state and industry standards.
Delays in obtaining, or failures to maintain, regulatory approvals for any facilities operated by ADMA BioCenters
would harm our business. In addition, we cannot predict what adverse federal and state regulations and industry
standards may arise in the future.
Foreign Regulation
In addition to regulations in the U.S., if we choose to pursue clinical development and commercialization in
the European Union, we will be subject to a variety of foreign regulations governing clinical trials and commercial
sales and distribution of any future product. Whether or not we obtain FDA approval for a product, we must obtain
approval of a product by the comparable regulatory authorities of foreign countries before we can commence
clinical trials or marketing of the product in those countries. The approval process varies from country to country,
and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
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Under European Union regulatory systems, marketing authorizations may be submitted either under a
centralized or mutual recognition procedure. The centralized procedure provides for the grant of a single marketing
authorization that is valid for all European Union member states. The mutual recognition procedure provides for
mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing
authorization may submit an application to the remaining member states. Within 90 days of receiving the
applications and assessment report, each member state must decide whether to recognize approval, refuse it or
request additional information.
Product Coverage, Pricing and Reimbursement
Significant uncertainties exist as to the coverage and reimbursement status of any products for which we
may obtain regulatory approval. In the U.S., sales of any products for which we may receive regulatory approval for
commercial sale will depend in part on the availability of coverage and reimbursement from third-party payers.
Third-party payers include government authorities, managed care providers, private health insurers and other
organizations. The process for determining whether a payer will provide coverage for a drug product may be
separate from the process for setting the reimbursement rate that the payer will pay for the drug product. Third-party
payers may limit coverage to specific drug products on an approved list, or formulary, which might not include all of
the FDA-approved drugs for a particular indication. Moreover, a payer’s decision to provide coverage for a drug
product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement
may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our
investment in product development.
Third-party payers are increasingly challenging the price and examining the medical necessity and cost-
effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage
and reimbursement for any product that might be approved for sale, we may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of any products, in
addition to the costs required to obtain regulatory approvals. Our product candidates may not be considered
medically necessary or cost-effective. If third-party payers do not consider a product to be cost-effective compared
to other available therapies, they may not cover the product after approval as a benefit under their plans or, if they
do, the level of payment may not be sufficient to allow a company to sell its products at a profit.
The U.S. government and state legislatures have shown significant interest in implementing cost
containment programs to limit the growth of government-paid health care costs, including price controls, restrictions
on reimbursement and requirements for substitution of generic products for branded prescription drugs. For
example, the Healthcare Reform Law contains provisions that may reduce the profitability of drug products,
including, for example, increased rebates for drugs reimbursed by Medicaid programs, extension of Medicaid
rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual
fees based on pharmaceutical companies’ share of sales to federal health care programs. Adoption of government
controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures,
could limit payments for pharmaceuticals.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer
if the government and third-party payers fail to provide adequate coverage and reimbursement. In addition, an
increasing emphasis on cost containment measures in the U.S. has increased and we expect will continue to increase
the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any
time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive
regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Research and Development
ADMA’s expenditures on research and development were approximately $6.2 million and $7.7 million for
the fiscal years ended December 31, 2017 and 2016, respectively.
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Employees
As of December 31, 2017, we had a total of 295 employees, comprised of 291 full-time employees and 4
part-time employees. Over the course of the next year, we anticipate hiring additional full-time employees devoted
to sales and marketing, medical and scientific affairs, general and administrative, as well as hiring additional staff to
the plasma collection centers as appropriate. We intend to use Clinical Research Organizations, or CROs, third
parties and consultants to perform our clinical studies and manufacturing, regulatory affairs and quality control
services in addition to corporate marketing, branding and commercialization activities.
Corporate Information
ADMA Biologics, Inc. was founded on June 24, 2004 as a New Jersey corporation and re-incorporated in
Delaware on July 16, 2007. We operate through our wholly-owned subsidiaries ADMA Plasma Biologics, ADMA
BioManufacturing and ADMA BioCenters. ADMA BioManufacturing was formed in January 2017 to facilitate the
acquisition of BTBU. ADMA BioCenters is the Company’s source plasma collection business which operates in the
U.S. Each operational ADMA BioCenter, once approved, will have a license with the FDA and may obtain
additional certifications from other regulatory agencies such as the GHA and the KMFDS. ADMA BioCenters
supplies ADMA with a portion of its raw material plasma for the manufacture of its products and product
candidates.
We maintain our headquarters at 465 State Route 17, Ramsey, NJ 07446. Our telephone number is (201)
478-5552. Our Florida campus is located at 5800 Park of Commerce Boulevard, Northwest, Boca Raton, FL 33487.
The Florida telephone number is (561) 989-5800. We maintain a website at www.admabiologics.com; however, the
information on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K. This
Annual Report and all of our filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
including copies of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and any amendments to those reports, are available free of charge through our website on the date we file those
materials with, or furnish them to, the U.S. Securities and Exchange Commission (the “SEC”). Such filings are also
available to the public on the internet at the SEC's website at www.sec.gov. The public may also read and copy any
document that we file at the SEC's Public Reference Room located at 100 F Street, NE, Washington, D.C. 20549 on
official business days during the hours of 10 a.m. to 3 p.m. For further information on the Public Reference Room,
the public is instructed to call the SEC at 1-800-SEC-0330.
Item 1A. Risk Factors
Described below are various risks and uncertainties that may affect our business. These risks and uncertainties are
not the only ones we face. You should recognize that other significant risks and uncertainties may arise in the future,
which we cannot foresee at this time. Also, the risks that we now foresee might affect us to a greater or different
degree than expected. Certain risks and uncertainties, including ones that we currently deem immaterial or that are
similar to those faced by other companies in our industry or business in general, may also affect our business. If any
of the risks described below actually occur, our business, financial condition or results of operations could be
materially and adversely affected. You should carefully consider the following risk factors and the section entitled
“Special Note Regarding Forward-Looking Statements” before you decide to invest in our securities.
Risks Relating to our Business
To date, we have generated limited product revenues, have a history of losses and will need to raise additional
capital to operate our business, which may not be available on favorable terms, if at all.
To date, we have generated a substantial portion of our revenues from the sale of plasma by our plasma
collections facilities. Following completion of the Biotest Transaction, we began generating revenues from the sale
of Nabi-HB, and we recorded additional revenue in connection with a contract manufacturing agreement. Unless and
until we receive approval from the FDA and other regulatory authorities for our RI-002 product candidate and other
products and product candidates in our pipeline, we do not expect to sell and generate revenue from the
commercialization of RI-002 and other products and product candidates in our pipeline, and we will be required to
raise additional funds through the sale of our equity and/or debt securities in order to establish a commercial sales
force, develop our commercial infrastructure and recognize any significant revenues.
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Our long-term liquidity will depend upon our ability to raise additional capital, fund our research and
development and commercial programs, establish and build out a commercial sales force and commercial
infrastructure and meet our ongoing obligations. If we are unable to successfully raise additional capital by the end
of 2018, we will likely not have sufficient cash flow and liquidity to fund our business operations as we currently
operate, forcing us to potentially curtail our activities and significantly reduce or cease operations. Even if we are
able to raise additional capital, such financings may only be available on unattractive terms, resulting in significant
dilution of stockholders' interests and, in such event, the value and potential future market price of our Common
Stock may decline. In addition, if we raise additional funds through license arrangements or through the disposition
of any of our assets, it may be necessary to relinquish potentially valuable rights to our product candidates or assets
or grant licenses on terms that are not favorable to us.
Based upon our projected revenue and expenditures for fiscal 2018, including regulatory and consulting
fees for the remediation of the Warning Letter and ongoing discussions with the FDA, continuing implementation of
our commercialization and expansion activities and certain other assumptions, we currently believe that our cash,
cash equivalents, projected revenue and accounts receivable, along with the additional $10.0 million we expect to be
able to draw down through our existing senior credit facility (see “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”) will be sufficient to fund our operations, as currently conducted,
through the end of 2018. In order to have sufficient cash to fund our operations thereafter and to continue as a going
concern, we will need to raise additional equity or debt financing by the end of 2018. This timeframe may change
based upon how quickly we are able to execute on our quality management systems’ remediation plans for the
ADMA BioManufacturing operations, commercial manufacturing ramp-up activities and the various financing
options we are exploring. These estimates may change based upon whether or when the FDA approves RI-002 or if
any of our other assumptions change. We currently do not have arrangements to obtain additional financing. Any
such financing could be difficult to obtain or only available on unattractive terms and could result in significant
dilution to stockholders. Failure to secure necessary financing in a timely manner and on favorable terms could have
a material adverse effect on our business plan and financial performance and could delay, discontinue or prevent
product development, clinical trials, commercialization activities or the approval of any of our potential products. In
addition, we could be forced to reduce or forgo sales and marketing efforts and forgo attractive business
opportunities.
Failure to timely and effectively remediate the outstanding Warning Letter and other inspection issues and
deficiencies at the Boca Facility will have a material adverse effect on our business.
Prior to the closing of the Biotest Transaction, BTBU was our third-party manufacturer for RI-002. In
response to our BLA submission in 2015, in July 2016 the FDA issued the CRL. The CRL did not specify or request
the need for any addition clinical trials or data; however, the CRL reaffirmed the issues set forth in the Warning
Letter issued to Biotest relating to inspection issues identified at the Boca Facility. The FDA identified in the CRL,
among other things, certain outstanding inspection issues and deficiencies related to CMC and GMP at the Boca
Facility and at certain of our third-party vendors, and requested documentation of corrections for a number of these
issues. The FDA indicated in the CRL that it cannot grant final approval of our BLA until, among other things, these
deficiencies are resolved. Following the completion of the Biotest Transaction, we now have control over the
regulatory, quality, general operations and drug substance manufacturing process at the Boca Facility, and our
highest priority is to remediate the outstanding compliance issues at the Boca Facility in the Warning Letter. We
engaged a leading consulting firm with extensive experience in remediating compliance and inspection issues
related to quality management systems that manages a robust team of subject matter experts in plasma derived
products and biologic drugs to assist us in addressing all identified CMC and cGMP issues and deficiencies. We
believe that we have been inspection-ready since the end of 2017 and expect to have the FDA inspection
classification relative to the Warning Letter improved after the next inspection by the FDA. However, there can be
no assurances that our efforts to remediate the Warning Letter and other inspection issues and deficiencies at the
Boca Facility will be effective or whether the FDA will accept these efforts. Failure to timely remediate the issues
identified in the Warning Letter and other inspection issues and deficiencies and/or receive approval from the FDA,
as well as passing an FDA inspection within this timeline, if at all, will have a material adverse effect on our
business, prospects, financial condition and results of operations.
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We are currently not profitable and may never become profitable.
We have a history of losses and expect to incur substantial losses and negative operating cash flow for the
foreseeable future, and we may never achieve or maintain profitability. For the years ended December 31, 2017 and
2016, we incurred net losses of $43.8 and $19.5 million, respectively, and from our inception in 2004 through
December 31, 2017, we have incurred an accumulated deficit of $150.7 million. Even if we succeed in developing
and commercializing one or more of our product candidates, we expect to incur substantial losses for the foreseeable
future and may never become profitable. We also expect to continue to incur significant operating and capital
expenditures and anticipate that our operating expenses will increase substantially in the foreseeable future as we:
remediate the outstanding compliance deficiencies identified by the FDA in the CRL and Warning
Letter at the Boca Facility;
seek regulatory approval(s);
initiate commercialization and marketing efforts;
implement additional internal systems, controls and infrastructure;
hire additional personnel;
expand and build out our plasma center network; and
continue to integrate the Biotest Assets into our business.
We also expect to experience negative cash flows for the foreseeable future as we fund our operating losses
and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain
profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to
achieve or maintain profitability could negatively impact the value of our securities.
Although our financial statements have been prepared on a going concern basis, we must raise additional capital
by the end of 2018 to fund our operations in order to continue as a going concern.
CohnReznick LLP, our independent registered public accounting firm, has included an explanatory
paragraph in their opinion that accompanies our audited consolidated financial statements as of and for the year
ended December 31, 2017, indicating that our current liquidity position and history of losses raise substantial doubt
about our ability to continue as a going concern. If we are unable to improve our liquidity position we may not be
able to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our
assets and may receive less than the value at which those assets are carried on our financial statements. We may also
be forced to make reductions in spending, including delaying or curtailing our clinical development, trials or
commercialization efforts, or seek to extend payment terms with our vendors and creditors. Our ability to raise or
borrow the capital needed to improve our financial condition may be hindered by a variety of factors, including
market conditions and the availability of such financing on acceptable terms, if at all. If we are unable to obtain
sufficient funding, our business, prospects, financial condition and results of operations will be materially and
adversely affected and we may be unable to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result if we are unable to continue as a going concern and,
therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business,
which could cause our security holders to suffer the loss of all or a substantial portion of their investment.
We anticipate that our principal sources of liquidity will only be sufficient to fund our activities, as
currently conducted, through the end of 2018. In order to have sufficient cash to fund our operations thereafter and
to continue as a going concern, we will need to raise additional equity or debt financing by the end of 2018. This
time frame may change based upon how quickly we are able to execute on our quality management systems’
remediation plans for the ADMA BioManufacturing operations, commercial manufacturing ramp-up activities and
the various financing options we are exploring. In order to have sufficient cash to fund our operations thereafter, we
will need to raise additional equity or debt capital, and we cannot provide any assurance that we will be successful in
doing so. If our assumptions underlying our estimated expenses prove to be wrong, we may have to raise additional
capital sooner than the fourth quarter of 2018.
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We have a limited operating history upon which to base an investment decision.
We have not demonstrated an ability to perform the functions necessary for the successful
commercialization of RI-002. The successful development and commercialization of any product candidate will
require us or our collaborators to perform a variety of functions, including:
undertaking product development and clinical trials;
participating in regulatory approval processes;
formulating and manufacturing products; and
conducting sales and marketing activities once product approval is received.
Our operations thus far provide a limited basis for you to assess our ability to commercialize our product candidates
and the advisability of investing in our securities.
Business interruptions could adversely affect our business.
ADMA BioCenters operates FDA-licensed, GHA and KMFDS certified source plasma collection facilities
located in the U.S., which provide us with a portion of our blood plasma for the manufacture of our products and
product candidates. Plasma collected from ADMA BioCenters' facilities that is not used to manufacture our products
and product candidates is sold to third-party customers in the U.S. and other locations where we are approved
globally under supply agreements or in the open "spot" market. Furthermore, we have completed the construction of
our third plasma collection facility, and we filed our BLA with the FDA and initiated collections for this facility in
December 2017. Nabi-HB and Bivigam are manufactured at the Boca Facility, an FDA-licensed facility certified by
the GHA. A portion of our revenues are dependent upon the continued operation of these facilities. Our operations
are vulnerable to interruption by fire, weather related events such as hurricanes, wind and rain, other acts of God,
electric power loss, telecommunications failure, equipment failure and breakdown, human error, employee issues
and events beyond our control. We do not have detailed disaster recovery plans for our facilities nor do we have a
backup manufacturing facility, other than our other facilities, or contractual arrangements with any other
manufacturers in the event of a casualty to or destruction of any facility or if any facility ceases to be available to us
for any other reason. If we are required to rebuild or relocate any of our facilities, a substantial investment in
improvements and equipment would be necessary. We carry only a limited amount of business interruption
insurance, which may not sufficiently compensate us for losses that may occur.
Our lead pipeline product candidate, RI-002, requires extensive clinical data analysis and regulatory review and
may require additional testing. Clinical trials and data analysis can be very expensive, time-consuming and
difficult to design and implement. If we are unsuccessful in obtaining regulatory approval for RI-002, or any of
our product candidates do not provide positive results, we may be required to delay or abandon development of
such product, which would have a material adverse impact on our business.
Continuing product development requires additional and extensive clinical testing. Human clinical trials are
very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory
requirements. The clinical trial process is also time-consuming. While we have met the primary endpoint for our
pivotal Phase III trial for RI-002, we cannot provide any assurance or certainty regarding when we might receive
regulatory approval of our BLA for RI-002. Furthermore, failure can occur at any stage of the process, and we could
encounter problems that cause us to abandon our BLA or repeat clinical trials. The commencement and completion
of clinical trials for any current or future development product candidate may be delayed by several factors,
including:
unforeseen safety issues;
determination of dosing issues;
lack of effectiveness during clinical trials;
slower than expected rates of patient recruitment;
23
inability to monitor patients adequately during or after treatment; and
inability or unwillingness of medical investigators to follow our clinical protocols.
In addition, the FDA or an independent institutional review board may suspend our clinical trials at any time if it
appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our
Investigational New Drug (“IND”) submissions or the conduct of these trials. Therefore, we cannot provide any
assurance or predict with certainty the schedule for future clinical trials. In the event we do not ultimately receive
regulatory approval for RI-002, we may be required to terminate development of our only product candidate. Unless
we acquire or develop other product candidates that are saleable, our business will be limited to plasma collection
and sales, as well as sales of Nabi-HB and Bivigam.
If the results of our clinical trials do not support our product candidate claims, completing the development of
such product candidate may be significantly delayed or we may be forced to abandon development of such
product candidate altogether.
Even though our clinical trials for RI-002 have been completed as planned, we cannot be certain that their
results will support our product candidate claims. Success in preclinical testing and early clinical trials does not
ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will
replicate the results of prior clinical trials and preclinical testing. The clinical trial process may fail to demonstrate
that our product candidates are safe for humans and effective for indicated uses. This failure would cause us to
abandon a product candidate and may delay development of other product candidates. Any delay in, or termination
of, our clinical trials will delay our ability to commercialize our product candidates and generate product revenues.
In addition, our clinical trials involve a relatively small patient population. Because of the small sample size, the
results of these clinical trials may not be indicative of future results. In addition, certain portions of the clinical trial
and product testing for RI-002 were performed outside of the U.S., and therefore, may not have been performed in
accordance with standards normally required by the FDA and other regulatory agencies.
If we do not obtain the necessary U.S. or worldwide regulatory approvals to commercialize RI-002, we will not be
able to sell RI-002.
If we cannot obtain regulatory approval for RI-002, we will not be able to generate revenue from this
product candidate. As a result, our sources of revenue may continue to be from a product mix consisting only of
plasma collection and sales revenues, revenues generated from sales of our FDA-approved commercial products,
revenues generated from ongoing contract manufacturing for third parties and revenues generated from the sales of
manufacturing intermediates. We cannot assure you that we will receive the approvals necessary to commercialize
RI-002 or any other product candidate we may acquire or develop in the future. In order to obtain FDA approval of
RI-002 or any other product candidate requiring FDA approval, our clinical development must demonstrate that the
product candidate is safe for humans and effective for its intended use, and we must successfully complete an FDA
BLA review. Obtaining FDA approval of any other product candidate generally requires significant research and
testing, referred to as preclinical studies, as well as human tests, referred to as clinical trials. Satisfaction of the
FDA's regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the
product candidate and requires substantial resources for research, development and testing. We cannot predict
whether our research and clinical approaches will result in products that the FDA considers safe for humans and
effective for indicated uses. The FDA has substantial discretion in the product approval process and may require us
to conduct additional preclinical and clinical testing or to perform post-marketing studies. The approval process may
also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA
policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may:
delay commercialization of, and our ability to derive product revenues from, our product candidate;
impose costly procedures on us; and
diminish any competitive advantages that we may otherwise enjoy.
Even if we comply with all FDA requests, the FDA may ultimately reject our BLA. In addition, the FDA could
determine that we must test additional subjects and/or require that we conduct further studies with more
24
subjects. We may never obtain regulatory approval for RI-002, or any other future potential product candidate or
label expansion activity. Failure to obtain FDA approval of any of our product candidates will severely undermine
our business by leaving us without the ability to generate additional accretive revenues. There is no guarantee that
we will ever be able to develop or acquire other product candidates. In foreign jurisdictions, we must receive
approval from the appropriate regulatory authorities before we can commercialize any products or product
candidates outside the U.S. Foreign regulatory approval processes generally include all of the risks and uncertainties
associated with the FDA approval procedures described above. We cannot assure you that we will receive the
approvals necessary to commercialize any product candidate for sale outside the U.S.
Even if we receive approval from the FDA to market RI-002, our ability to market RI-002 for alternative
applications could be limited.
The FDA strictly regulates marketing, labeling, advertising and promotion of prescription drugs. These
regulations include standards and restrictions for direct-to-consumer advertising, industry-sponsored scientific and
educational activities, promotional activities involving the Internet and off-label promotion. The FDA generally does
not allow drugs to be promoted for “off-label” uses — that is, uses that are not described in the product’s labeling
and that differ from those that were approved by the FDA. Generally, the FDA limits approved uses to those studied
by a company in its clinical trials. In addition to the FDA approval required for new formulations, any new
indication for an approved product also requires FDA approval. We have sought approval from the FDA to market
RI-002 for the treatment of PIDD and, even if approved, we cannot be sure whether we will be able to obtain FDA
approval for any desired future indications for RI-002.
While physicians in the U.S. may choose, and are generally permitted, to prescribe drugs for uses that are
not described in the product’s labeling, and for uses that differ from those tested in clinical studies and approved by
the regulatory authorities, our ability to promote our products is narrowly limited to those indications that are
specifically approved by the FDA. “Off-label” uses are common across medical specialties and may constitute an
appropriate treatment for some patients in varied circumstances. Regulatory authorities in the U.S. generally do not
regulate the behavior of physicians in their choice of treatments. Regulatory authorities do, however, restrict
communications by pharmaceutical companies on the subject of off-label use. Although recent court decisions
suggest that certain off-label communications, such as truthful and non-misleading speech, may be protected under
the First Amendment, the scope of any such protection is unclear, and there are still significant risks in this area as it
is unclear how these court decisions will impact the FDA’s enforcement practices, and there is likely to be
substantial disagreement and difference of opinion regarding whether any particular statement is truthful and not
misleading. Moreover, while we intend to promote our products consistent with what we believe to be the approved
indication for our drugs, the FDA may disagree. If the FDA determines that our promotional activities fail to comply
with the FDA’s regulations or guidelines, we may be subject to warnings from, or enforcement action by, these
authorities. In addition, our failure to follow FDA rules and guidelines related to promotion and advertising may
cause the FDA to issue warning letters or untitled letters, bring an enforcement action against us, suspend or
withdraw an approved product from the market, require a recall or institute fines or civil fines, or could result in
disgorgement of money, operating restrictions, injunctions or criminal prosecution, any of which could harm our
reputation and our business.
We depend on third-party researchers, developers and vendors to develop RI-002, and such parties are, to some
extent, outside of our control.
We depend on independent investigators and collaborators, such as universities and medical institutions,
contract laboratories, clinical research organizations, contract manufacturers and consultants to conduct our
preclinical, clinical trials, CMC testing and other activities under agreements with us. These collaborators are not
our employees and we cannot control the amount or timing of resources that they devote to our programs. These
investigators may not assign as great a priority to our programs or pursue them as diligently as we would if we were
undertaking such programs ourselves. If outside collaborators fail to devote sufficient time and resources to our
product-development programs, or if their performance is substandard, the approval of our FDA application(s), if
any, and our introduction of new products, if any, will be delayed. These collaborators may also have relationships
with other commercial entities, some of whom may compete with us. If our collaborators assist our competitors at
our expense, our competitive position would be harmed. Additionally, any change in the regulatory compliance
status of any of our vendors may impede our ability to receive approval for our product candidates.
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Historically a single customer has accounted for a significant amount of our total revenue and, together with a
second customer, represented 78% of our total revenue for the year ended December 31, 2017, and therefore the
loss of such single customer could have a material adverse effect on our business, results of operations and
financial condition.
Historically, a significant amount of our total revenue is attributable to a single customer, BPC. For the
year ended December 31, 2017, BPC and Sanofi Pasteur S.A. (“Sanofi”), represented 78% of our total revenue, with
BPC representing 47% of our total revenue and Sanofi representing 31% of our total revenue. Although we expect
this concentration to decrease during 2018 as additional sales of Nabi-HB, revenues from our contract
manufacturing services and sale of intermediate by-products are reflected in our consolidated financial statements,
BPC is still expected to account for a significant portion of our total revenue.
The loss of BPC as a customer or a material change in the revenue generated by BPC could have a material
adverse effect on our business, results of operations and financial condition. Factors that could influence our
relationships with our customers include, among other things:
our ability to sell our products at competitive prices;
our ability to maintain features and quality standards for our products sufficient to meet the
expectations of our customers; and
our ability to produce and deliver a sufficient quantity of our products in a timely manner to meet our
customers’ requirements.
Additionally, an adverse change in the financial condition of BPC could have a material adverse effect on our
business and results of operations.
Issues with product quality could have a material adverse effect upon our business, subject us to regulatory
actions and cause a loss of customer confidence in us or our products.
Our success depends upon the quality of our products. Quality management plays an essential role in
meeting customer requirements, preventing defects, improving our products and services and assuring the safety and
efficacy of our products. Our future success depends on our ability to maintain and continuously improve our quality
management program. A quality or safety issue may result in adverse inspection reports, warning letters, product
recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal
sanctions, costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations or
withdrawal of existing approvals and licenses. An inability to address a quality or safety issue by us or by a third-
party vendor in an effective and timely manner may also cause negative publicity, a loss of customer confidence in
us or our current or future products, which may result in the loss of sales and difficulty in successfully
commercializing our current products and launching new products.
If physicians and patients do not accept and use our current products or our future product candidates, our
ability to generate revenue from these products will be materially impaired.
Even if the FDA approves a product made by ADMA Biologics, physicians and patients may not accept
and use it. Acceptance and use of our products will depend on a number of factors including:
perceptions by members of the healthcare community, including physicians, about the safety and
effectiveness of our products;
cost-effectiveness of our products relative to competing products;
availability of reimbursement for our products from government or other healthcare payers; and
the effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
The failure of our current and future products to find market acceptance would harm our business and could require
us to seek additional financing or make such financing difficult to obtain on favorable terms, if at all.
26
Industry and other market data used in this Annual Report and our other materials, including those undertaken
by us or our engaged consultants, may not prove to be representative of current and future market conditions or
future results.
This Annual Report and our other materials include statistical and other industry and market data that we
obtained from industry publications and research, surveys and studies conducted by third parties and surveys and
studies we commissioned regarding the market potential for our current products as well as RI-002. Although we
believe that such information has been obtained from sources believed to be reliable, neither the sources of such
data, nor we, can guarantee the accuracy or completeness of such information. While we believe these industry
publications and third-party research, surveys and studies are reliable, we have not independently verified such data.
With respect to the information from third-party consultants, the results of this data represent the independent
consultants’ own methodologies, assumptions, research, analysis, projections, estimates, composition of respondent
pool, presentation of data and adjustments, each of which may ultimately prove to be incorrect, and cause actual
results and market viability to differ materially from those presented in such report. Readers should not place undue
reliance on this information.
Our long-term success may depend on our ability to supplement our existing product portfolio through new
product development or the in-license or acquisition of other new products and product candidates, and if our
business development efforts are not successful, our ability to achieve profitability may be adversely impacted.
Our current product development portfolio consists primarily of RI-002 and label expansion activities for
Nabi-HB and Bivigam. We have initiated small scale preclinical activities to potentially expand our current portfolio
through new product development efforts or to in-license or acquire additional products and product candidates. If
we are not successful in developing or acquiring additional products and product candidates, we will have to depend
on our ability to raise capital for, and the successful development and commercialization of, RI-002, as well as the
revenue we may generate from the sale of Nabi-HB, Bivigam, contract manufacturing, and intermediates and plasma
attributable to the operations of ADMA BioCenters, to support our operations.
Our ADMA BioCenters facilities collect information from donors in the U.S. that subjects us to consumer and
health privacy laws, which could create enforcement and litigation exposure if we fail to meet their requirements.
Consumer privacy is highly protected by federal and state law. The Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), as amended by as amended by the Health Information Technology for
Economic and Clinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, impose,
among other things, obligations, including mandatory contractual terms, with respect to safeguarding the privacy,
security and transmission of individually identifiable health information held by covered entities and business
associates. A “covered entity” is the primary type of HIPAA-regulated entity. Health plans/insurers, health care
providers engaging in standard transactions (insurance/health plan claims and encounters, payment and remittance
advice, claims status, eligibility, enrollment/disenrollment, referrals and authorizations, coordination of benefits and
premium payments), and health care clearinghouses (switches that convert data between standard and non-standard
data sets) are covered entities. A “business associate” provides services to covered entities (directly or as
subcontractors to other business associates) involving arranging, creating, receiving, maintaining, or transmitting
protected health information (“PHI”) on a covered entity’s behalf. In order to legally provide access to PHI to
service providers, covered entities and business associates must enter into a “business associate agreement”
(“BAA”) with the service provider PHI recipient. Among other things, HITECH made certain aspects of the
HIPAA’s rules (notably the Security Rule) directly applicable to business associates – independent contractors or
agents of covered entities that receive or obtain protected health information in connection with providing a service
on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to
make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new
authority to file civil actions for damages or injunctions in federal court to enforce the federal HIPAA laws and seek
attorney’s fees and costs associated with pursuing federal civil actions. The Department of Health and Human
Services Office of Civil Rights (“OCR”) has increased its focus on compliance and continues to train state attorneys
general for enforcement purposes. OCR has recently increased both its efforts to audit HIPAA compliance and its
level of enforcement, with one recent penalty exceeding $5 million.
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While we are not a covered entity or business associate subject to HIPAA, even when HIPAA does not
apply, according to the U.S. Federal Trade Commission (the “FTC”), failing to take appropriate steps to keep
consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of
Section 5(a) of the Federal Trade Commission Act, 15 U.S.C § 45(a). The FTC expects a company’s data security
measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds,
the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
Medical data is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately
securing consumers’ personal information is similar to what is required by the HIPAA Security Rule. In addition,
states impose a variety of laws protecting consumer information, with certain sensitive information such as
HIV/Sexually Transmitted Disease status subject to heightened standards. In addition, federal and state privacy, data
security, and breach notification laws, rules and regulations, and other laws apply to the collection, use and security
of personal information, including social security number, driver’s license numbers, government identifiers, credit
card and financial account numbers. We could be subject to enforcement action and litigation exposure if we fail to
adhere to these data privacy and security laws.
We may not realize the strategic and financial benefits currently anticipated from the Biotest Transaction.
We may not realize all of the strategic and financial benefits currently anticipated from the Biotest
Transaction. For example, we may not realize the anticipated benefits of acquiring control of all aspects of RI-002
drug manufacturing, regulatory affairs and business operations. In addition, we may not be able to resolve the
outstanding issues at the Boca Facility that resulted in the Warning Letter. As part of the remediation of the Warning
Letter, in December 2016 BTBU temporarily suspended the production of Bivigam in order to focus on the
completion of planned improvements to the manufacturing process. As a result, Bivigam was not available for sale
or distribution throughout fiscal 2017. If we are unable to address the underlying concerns at the Boca Facility that
resulted in the Warning Letter and the CRL in July 2016 that identified deficiencies and inspection issues related to
certain of our third-party contract manufacturers, including BPC, and provide requested documentation of
corrections for a number of these issues, we will not be able to apply for the PAS related to the manufacturing of
Bivigam or reapply for FDA approval to market and sell RI-002, which could have a material adverse effect on us.
Failure to resolve any outstanding issues or any administrative actions taken or changes made by the FDA toward
our contract manufacturers, vendors or us could impact our ability to receive approval for RI-002, including the
timing thereof, disrupt our business operations and the timing of our commercialization efforts and may have a
material adverse effect on our financial condition and operating results.
Through the Biotest Transaction, we assumed a contract manufacturing agreement related to the
fractionation of plasma provided by one of our third-party customers that includes certain minimum production
requirements. If we are unable to meet our contractual obligations under this agreement, we may be liable for the
payment of liquidated damages. If we are unable to resolve these issues, such failure could have a material adverse
effect on us.
There is also uncertainty as to whether the combined business will be able to operate at a profitable level in
the future given the relatively small size of the Biotest Assets and the competitive environment in which we operate.
Furthermore, there is no assurance and no definitive timeline as to when or if the Warning Letter will be resolved by
the FDA, or when the FDA will inspect our operations. These factors could have a material adverse effect on us.
We may not be successful in integrating the Biotest Assets into our business.
The Biotest Transaction involves the integration of two businesses that previously have operated
independently with principal offices in two distinct locations. We are expending significant management attention
and resources to integrate the two companies following completion of the Biotest Transaction. The failure to
integrate successfully and to manage successfully the challenges presented by the integration process may result in
the combined company’s failure to achieve some or all of the anticipated benefits of the Biotest Transaction.
Potential difficulties that may be encountered in the integration process include, but are not limited to, the
following:
using our cash and other assets efficiently to develop the business on a post-Biotest Transaction basis;
28
appropriately managing the liabilities of our Company on a post-Biotest Transaction basis;
potential unknown or currently unquantifiable liabilities associated with the Biotest Transaction and
the operations of our Company on a post-Biotest Transaction basis;
potential unknown and unforeseen expenses, delays or regulatory conditions associated with the
Biotest Transaction; and
performance shortfalls in one or both of the businesses as a result of the diversion of the applicable
management’s attention caused by completing the Biotest Transaction and integrating the business.
Delays in the integration process could adversely affect the combined company’s business, financial results,
financial condition and stock price following the Biotest Transaction. Even if the combined company were able to
integrate the business operations successfully, there can be no assurance that this integration will result in the
realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this
integration or that these benefits will be achieved within a reasonable period of time.
By completing the Biotest Transaction, we agreed to transfer assets that have historically generated substantially
all of our revenue.
As part of the purchase price to acquire the Biotest Assets, we have agreed to transfer to BPC ownership of
our two licensed plasma collection facilities in the U.S. and certain related assets and liabilities. These plasma
collection facilities to be transferred have historically been the source of substantially all of our revenue. Although
we have completed construction of a new plasma collection facility, there can be no assurances that we will generate
similar revenues as historically reported from the plasma collection facilities we will transfer to BPC on January 1,
2019.
The Biotest Transaction exposes us to liabilities, a release of claims and competition that could have a material
adverse effect on our business, financial condition, results of operations and stock price.
As part of the consideration for the Biotest Transaction, we agreed to assume certain liabilities of BPC
related to BTBU. Because we agreed to assume liabilities related to the Biotest Assets, we are exposed to liabilities
that are not within our control and we cannot predict the extent to which these liabilities may arise in the future. Any
liabilities that may arise could have a material adverse effect on our business, financial condition, results of
operations and stock price.
The Master Purchase and Sale Agreement, dated as of January 21, 2017 (as amended, restated,
supplemented or otherwise modified from time to time, the “Purchase Agreement”), with BPC, and for certain
limited purposes set forth in the Purchase Agreement, Biotest AG, BPC’s parent corporation, and Biotest US
Corporation, a Delaware corporation and subsidiary of Biotest AG (together with Biotest AG, the “Biotest
Guarantors”), contains indemnification undertakings by the parties thereto for certain losses, including, among other
things, indemnification for any losses arising from breaches of its representations, warranties, covenants and
agreements in the Purchase Agreement. In addition, we have agreed to indemnify BPC for any assumed liability,
and BPC has agreed to indemnify us for any excluded asset or excluded liability. The parties' representations and
warranties (other than fundamental representations and warranties) survive for 15 months following the closing of
the Biotest Transaction, fundamental representations survive indefinitely, tax representations survive until the date
that is 30 days following the applicable statute of limitations, covenants to be performed on or prior to the closing of
the Biotest Transaction survive for 15 months following the closing of the Biotest Transaction, and post-closing
covenants survive in accordance with their terms or if no term is specified, indefinitely. Each party’s
indemnification obligations with respect to (a) its representations and warranties (other than its fundamental
representations) are subject to a $25,000 mini-basket and $750,000 true deductible and (b) its representations,
warranties and pre-closing covenants are subject to a $25,000,000 cap. Significant indemnification claims by BPC
or its affiliates or a breach by BPC or its affiliates of any indemnity obligations owed to us under the Purchase
Agreement could have a material adverse effect on our business, financial condition, results of operations and stock
price.
29
As part of the consideration for the Biotest Transaction, the parties also agreed to a mutual release, pursuant
to which the parties agreed not to bring any suit, action or claim for any breach or default under the existing
manufacturing and supply agreement or master services agreement prior to the closing of the Biotest Transaction.
This release remains effective from and after the closing of the Biotest Transaction. Without this release, we would
have otherwise been permitted to bring a claim against BPC related to the Warning Letter that could have possibly
entitled us to remedies in the event that we are unable to resolve the Warning Letter. The inability to seek these
remedies could have a material adverse effect on our business, financial condition, results of operations and stock
price.
In addition, while the Purchase Agreement contains certain non-compete clauses, such clauses do not
prohibit either the Biotest Guarantors or their other affiliates from directly or indirectly (other than through BPC)
competing with BTBU after the closing of the Biotest Transaction. Such competition could result in the loss of
existing or new customers, price reductions, reduced operating margins and loss of market share, which could have a
material adverse effect on our business, financial condition, results of operations and stock price.
If our due diligence investigation for the Biotest Transaction was inadequate and/or the representations,
warranties and indemnification given to us by BPC was inadequate, then it could result in a material adverse
effect on our business.
Even though we believe that we conducted a reasonable and customary due diligence investigation of
BTBU and we received market representations, warranties and indemnities from Biotest and BPC, we cannot be
sure that our due diligence investigation uncovered all material or non-material issues that may be present. There
also can be no assurances that we received access to or had the ability to diligence certain information, as well as
appropriate representations and or warranties, that it would be possible to uncover all material issues through
customary due diligence, that issues outside of our control will not later arise or that all material issues which are or
could be discovered are otherwise covered by the representations and warranties of Biotest and BPC and therefore
indemnifiable. If we failed to identify any important issues, or if it were not possible to uncover all material issues or
if we did not receive representations and warranties and indemnification concerning any or all material or non-
material issues, it could result in a material adverse effect on our business, financial condition, results of operations
and stock price.
Our credit agreement (the “Credit Agreement”) with Marathon Healthcare Finance Fund, L.P. (“Marathon”) is
subject to acceleration in specified circumstances, which may result in Marathon taking possession and disposing
of any collateral.
On October 10, 2017, we entered into the Credit Agreement with Marathon which provides for a senior
secured term loan facility in an aggregate amount of up to $40.0 million (collectively, the “Credit Facility”),
comprised of (i) a term loan in the principal amount of $30.0 million (the “Tranche One Loan”), (ii) an additional
term loan to be made in the maximum principal amount not to exceed $10.0 million (the “Tranche Two Loan;” and,
together with the Tranche One Loan, the “Loans”), which Tranche Two Loan availability is subject to the
satisfaction of certain conditions. The Loans each have a maturity date of April 10, 2022 (the “Maturity Date”),
subject to acceleration pursuant to the Credit Agreement, including upon an Event of Default (as defined in the
Credit Agreement). The Loans are secured by substantially all of our assets, including our intellectual property.
Events of Default include, among others, non-payment of principal, interest, or fees, violation of covenants,
inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults
to material contracts and events constituting a change of control. In addition to an increase in the rate of interest on
the Loans of 5% per annum, the occurrence of an Event of Default could result in, among other things, the
termination of commitments under the Credit Facility, the declaration that all outstanding Loans are immediately
due and payable in whole or in part, and Marathon taking immediate possession of, and selling, any collateral
securing the Loans.
Developments by competitors may render our products or technologies obsolete or non-competitive.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and
significant technological change. Our current products, RI-002 (if we obtain regulatory approval) and any future
product we may develop will have to compete with other marketed therapies. In addition, other companies may
30
pursue the development of pharmaceuticals that target the same diseases and conditions that we are targeting. We
face competition from pharmaceutical and biotechnology companies in the U.S. and abroad. In addition, companies
pursuing different but related fields represent substantial competition. Many of these organizations competing with
us have substantially greater financial resources, larger research and development staffs and facilities, longer
product development history in obtaining regulatory approvals and greater manufacturing and marketing capabilities
than we do. These organizations also compete with us to attract qualified personnel and parties for acquisitions, joint
ventures or other collaborations.
If we are unable to protect our patents, trade secrets or other proprietary rights, if our patents are challenged or if
our provisional patent applications do not get approved, our competitiveness and business prospects may be
materially damaged.
As we move forward in clinical development we are also uncovering novel aspects of our product and are
drafting patents to cover our inventions. We rely on a combination of patent rights, trade secrets and nondisclosure
and non-competition agreements to protect our proprietary intellectual property, and we will continue to do so.
There can be no assurance that our patent, trade secret policies and practices or other agreements will adequately
protect our intellectual property. Our issued patents may be challenged, found to be over-broad or otherwise
invalidated in subsequent proceedings before courts or the USPTO. Even if enforceable, we cannot provide any
assurances that they will provide significant protection from competition. The processes, systems, and/or security
measures we use to preserve the integrity and confidentiality of our data and trade secrets may be breached, and we
may not have adequate remedies as a result of any such breaches. In addition, our trade secrets may otherwise
become known or be independently discovered by competitors. There can be no assurance that the confidentiality,
nondisclosure and non-competition agreements with employees, consultants and other parties with access to our
proprietary information to protect our trade secrets, proprietary technology, processes and other proprietary rights, or
any other security measures relating to such trade secrets, proprietary technology, processes and proprietary rights,
will be adequate, will not be breached, that we will have adequate remedies for any breach, that others will not
independently develop substantially equivalent proprietary information or that third parties will not otherwise gain
access to our trade secrets or proprietary knowledge. To the extent that our consultants, contractors or collaborators
use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or
resulting know-how and inventions.
We could lose market exclusivity of a product earlier than expected.
In the pharmaceutical and biotechnology industries, the majority of an innovative product’s commercial
value is realized during its market exclusivity period. In the U.S. and in some other countries, when market
exclusivity expires and generic versions are approved and marketed or when biosimilars are introduced (even if only
for a competing product), there are usually very substantial and rapid declines in a product’s revenues.
Market exclusivity for our products is based upon patent rights and certain regulatory forms of exclusivity.
The scope of our patent rights may vary from country to country and may also be dependent on the availability of
meaningful legal remedies in a country. The failure to obtain patent and other intellectual property rights, or
limitations on the use or loss of such rights, could be material to us. In some countries, basic patent protections for
our products may not exist because certain countries did not historically offer the right to obtain specific types of
patents and/or we (or our licensors) did not file in those markets. In addition, the patent environment can be
unpredictable and the validity and enforceability of patents cannot be predicted with certainty. Absent relevant
patent protection for a product, once the data exclusivity period expires, generic versions can be approved and
marketed.
Patent rights covering RI-002 may become subject to patent litigation. In some cases, manufacturers may
seek regulatory approval by submitting their own clinical trial data to obtain marketing approval or choose to launch
a generic product “at risk” before the expiration of our patent rights/or before the final resolution of related patent
litigation. Enforcement of claims in patent litigation can be very costly and no assurance can be given that we will
prevail. There is no assurance that RI-002, or any other of our products for which we are issued a patent, will enjoy
market exclusivity for the full time period of the respective patent.
31
Third parties could obtain patents that may require us to negotiate licenses to conduct our business, and there
can be no assurance that the required licenses would be available on reasonable terms or at all.
We may not be able to operate our business without infringing third-party patents. Numerous U.S. and
foreign patents and pending patent applications owned by third parties exist in fields that relate to the development
and commercialization of immune globulins. In addition, many companies have employed intellectual property
litigation as a way to gain a competitive advantage. It is possible that infringement claims may occur as the number
of products and competitors in our market increases. In addition, to the extent that we gain greater visibility and
market exposure as a public company, we face a greater risk of being the subject of intellectual property
infringement claims. We cannot be certain that the conduct of our business does not and will not infringe intellectual
property or other proprietary rights of others in the U.S. and in foreign jurisdictions. If our products, methods,
processes and other technologies are found to infringe third-party patent rights, we could be prohibited from
manufacturing and commercializing the infringing technology, process or product unless we obtain a license under
the applicable third-party patent and pay royalties or are able to design around such patent. We may be unable to
obtain a license on terms acceptable to us, or at all, and we may not be able to redesign our products or processes to
avoid infringement. Even if we are able to redesign our products or processes to avoid an infringement claim, our
efforts to design around the patent could require significant time, effort and expense and ultimately may lead to an
inferior or more costly product and/or process. Any claim of infringement by a third party, even those without merit,
could cause us to incur substantial costs defending against the claim and could distract our management from our
business. Furthermore, if any such claim is successful, a court could order us to pay substantial damages, including
compensatory damages for any infringement, plus prejudgment interest and could, in certain circumstances, treble
the compensatory damages and award attorney fees. These damages could be substantial and could harm our
reputation, business, financial condition and operating results. A court also could enter orders that temporarily,
preliminarily or permanently prohibit us, our licensees, if any, and our customers from making, using, selling,
offering to sell or importing one or more of our products or practicing our proprietary technologies or processes, or
could enter an order mandating that we undertake certain remedial activities. Any of these events could seriously
harm our business, operating results and financial condition.
If we are unable to successfully manage our growth, our business may be harmed.
Our success will depend on the expansion of our commercial and manufacturing activities, supply of
plasma and overall operations and the effective management of our growth, which will place a significant strain on
our management and on our administrative, operational and financial resources. To manage this growth, we must
expand our facilities, augment our operational, financial and management systems and hire and train additional
qualified personnel. If we are unable to manage our growth effectively, our business could be harmed.
The loss of one or more key members of our management team could adversely affect our business.
Our performance is substantially dependent on the continued service and performance of our management
team, who have extensive experience and specialized expertise in our business. In particular, the loss of Adam S.
Grossman, our President and Chief Executive Officer, could adversely affect our business and operating results. We
do not have "key person" life insurance policies for any members of our management team. We have employment
agreements with each of our executive officers; however, the existence of an employment agreement does not
guarantee retention of members of our management team and we may not be able to retain those individuals for the
duration of or beyond the end of their respective terms. The loss of services of key personnel, or the inability to
attract and retain additional qualified personnel, could result in delays in development or approval of our product
candidates and diversion of management resources. Notwithstanding the foregoing, in the event Mr. Grossman is
terminated for cause or resigns other than for good reason, then the standstill provisions contained in the
Stockholders Agreement, dated as of June 6, 2017, by and between the Company and BPC, which prohibits BPC
and its affiliates collectively from, among other things, acquiring more than (i) 50%, less one share, of the
Company’s issued and outstanding shares of capital stock on an as-converted basis, or (ii) 30% of the issued and
outstanding shares of Common Stock, will terminate and be of no further force and effect. Such event could result in
Biotest acquiring additional shares of our Common Stock or taking other actions with the goal of acquiring
additional shares of our Common Stock.
32
Cyberattacks and other security breaches could compromise our proprietary and confidential information, which
could harm our business and reputation.
In the ordinary course of our business, we generate, collect and store proprietary information, including
intellectual property and business information. The secure storage, maintenance, and transmission of and access to
this information is important to our operations and reputation. Computer hackers may attempt to penetrate our
computer systems and, if successful, misappropriate our proprietary and confidential information including e-mails
and other electronic communications. In addition, an employee, contractor, or other third party with whom we do
business may attempt to obtain such information, and may purposefully or inadvertently cause a breach involving
such information. While we have certain safeguards in place to reduce the risk of and detect cyber-attacks, including
a company-wide cybersecurity policy, our information technology networks and infrastructure may be vulnerable to
unpermitted access by hackers or other breaches, or employee error or malfeasance. Any such compromise of our
data security and access to, or public disclosure or loss of, confidential business or proprietary information could
disrupt our operations, damage our reputation, provide our competitors with valuable information and subject us to
additional costs, which could adversely affect our business.
If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.
We will need to hire additional qualified personnel with expertise in commercialization, sales, marketing,
medical affairs, reimbursement, government regulation, formulation and manufacturing and finance and accounting.
In particular, over the next 12-24 months, we expect to hire several new employees devoted to commercialization,
sales, marketing, medical and scientific affairs, regulatory affairs, quality control, financial, general and operational
management. We compete for qualified individuals with numerous biopharmaceutical companies, universities and
other research institutions. Competition for such individuals is intense, and we cannot assure you that our search for
such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success and any
failure to do so successfully may have a material adverse effect on us.
We currently collect human blood plasma at our ADMA BioCenters facilities, and if we cannot maintain FDA
approval for these facilities we may be adversely affected and may not be able to sell or use this human blood
plasma for future commercial purposes.
We intend to maintain FDA and other governmental and regulatory approvals of our ADMA BioCenters
collection facilities for the collection of human blood plasma. These facilities are subject to FDA and other
governmental and regulatory inspections and extensive regulation, including compliance with current cGMP, FDA
and other government approvals. Failure to comply with applicable governmental regulations or to receive
applicable approvals for our future facilities, including our third facility, may result in enforcement actions, such as
adverse inspection reports, warning letters, product recalls or seizures, monetary sanctions, injunctions to halt
manufacture and distribution of products, civil or criminal sanctions, costly litigation, refusal of regulatory authority
approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses, any of which
may significantly delay or suspend our operations for these locations, potentially having a materially adverse effect
on our ability to manufacture our products or offer for sale plasma collected at the affected site(s).
We currently manufacture our current marketed products, pipeline products, and products for third parties in
our manufacturing and testing facilities, and if we cannot maintain appropriate FDA status for these facilities,
we may be adversely affected, and may not be able to sell, manufacture or commercialize these products.
We currently operate under the Warning Letter due to issues identified by the FDA in their prior
inspections while the Boca Facility was under Biotest’s operational control. We engaged a leading consulting firm
with extensive experience in remediating compliance and inspection issues related to quality management systems
and which manages a robust team of subject matter experts in plasma derived products and biologic drugs to assist
us in addressing all identified CMC and cGMP issues and deficiencies. We believe that we have been inspection-
ready since the end of 2017 and expect to have the FDA inspection classification relative to the Warning Letter
improved after the next inspection by the FDA.
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If we do not receive FDA approval for additional plasma collection centers, including our third center for which
construction was completed in late 2017, before January 1, 2019, then we may be required to seek a waiver and
extension from Biotest for the contractually required transfer of two of our facilities.
We recently completed construction our third plasma center and plan to leverage our existing plasma center
license in order to seek approval for this new facility with the FDA. The BLA for this facility was filed with the
FDA in December 2017. If we do not receive FDA approval for this third plasma center on or before January 1,
2019, then we will be required to seek a waiver and extension from Biotest for our contractual obligation to transfer
the two facilities under the Purchase Agreement. However, there can be no assurances that Biotest will waive or
extend its rights with respect to such transfer. In the event Biotest refuses to waive and extend such right, we will be
obligated to transfer the two facilities under the Purchase Agreement and risk not having an FDA-approved plasma
center in the event of a delay or refusal to issue our future license for the new plasma center by the FDA. Any such
delay or refusal to issue the license by the FDA could have a material adverse effect on our operations.
We may incur substantial liabilities and may be required to limit commercialization of our products in response
to product liability lawsuits.
The testing and marketing of medical products entail an inherent risk of product liability. If we cannot
successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to
limit commercialization of our products. Our inability to obtain sufficient product liability insurance at an acceptable
cost to protect against potential product liability claims could prevent or inhibit the commercialization of
pharmaceutical products we develop, either alone or with collaborators.
Many of our business practices are subject to scrutiny by federal and state regulatory authorities, as well as to
lawsuits brought by private citizens under federal and state laws. Failure to comply with applicable law or an
adverse decision in lawsuits may result in adverse consequences to us.
The laws governing our conduct in the U.S. are enforceable on the federal and state levels by criminal, civil
and administrative penalties. Violations of laws such as the Federal Food, Drug, and Cosmetic Act, the Social
Security Act (including the Anti-Kickback Law), the Public Health Service Act and the Federal False Claims Act,
and any regulations promulgated under the authority of the preceding, may result in jail sentences, fines or exclusion
from federal and state programs, as may be determined by Medicare, Medicaid and the Department of Health and
Human Services and other regulatory authorities as well as by the courts. Similarly, the violation of applicable laws,
rules and regulations of the State of Florida with respect to the manufacture of our products and product candidates
may result in jail sentences, fines or exclusion from applicable state programs. There can be no assurance that our
activities will not come under the scrutiny of federal and/or state regulators and other government authorities or that
our practices will not be found to violate applicable laws, rules and regulations or prompt lawsuits by private citizen
"relators" under federal or state false claims laws.
For example, under the Anti-Kickback Law and similar state laws and regulations, the offer or payment of
anything of value for patient referrals, or in return for purchasing, leasing, ordering or arranging for or
recommending the purchase, lease, or ordering of any time or service reimbursable in whole or in part by a federal
health care program is prohibited. This places constraints on the marketing and promotion of products and on
common business arrangements, such as discounted terms and volume incentives for customers in a position to
recommend or choose products for patients, such as physicians and hospitals, and these practices can result in
substantial legal penalties, including, among others, exclusion from the Medicare and Medicaid programs.
Arrangements with referral sources such as purchasers, group purchasing organizations, physicians and pharmacists
must be structured with care to comply with applicable requirements. Also, certain business practices, such as
payments of consulting fees to healthcare providers, sponsorship of educational or research grants, charitable
donations, interactions with healthcare providers that prescribe products for uses not approved by the FDA and
financial support for continuing medical education programs, must be conducted within narrowly prescribed and
controlled limits to avoid any possibility of wrongfully influencing healthcare providers to prescribe or purchase
particular products or as a reward for past prescribing. Under the Patient Protection and Affordable Care Act and the
companion Health Care and Education Reconciliation Act, which together are referred to as the “Healthcare Reform
Law”, such payments by pharmaceutical manufacturers to U.S. healthcare practitioners and academic medical
centers must be publicly disclosed. A number of states have similar laws in place. Additional and stricter
34
prohibitions could be implemented by federal and state authorities. Where such practices have been found to be
improper incentives to use such products, government investigations and assessments of penalties against
manufacturers have resulted in substantial damages and fines. Many manufacturers have been required to enter into
consent decrees or orders that prescribe allowable corporate conduct.
Failure to satisfy requirements under the Federal Food, Drug, and Cosmetic Act can also result in penalties,
as well as requirements to enter into consent decrees or orders that prescribe allowable corporate conduct. In
addition, while regulatory authorities generally do not regulate physicians' discretion in their choice of treatments for
their patients, they do restrict communications by manufacturers on unapproved uses of approved products or on the
potential safety and efficacy of unapproved products in development. Companies in the U.S., Canada and the
European Union cannot promote approved products for other indications that are not specifically approved by the
competent regulatory authorities such as the FDA in the U.S., nor can companies promote unapproved products. In
limited circumstances, companies may disseminate to physicians information regarding unapproved uses of
approved products or results of studies involving investigational products. If such activities fail to comply with
applicable regulations and guidelines of the various regulatory authorities, we may be subject to warnings from, or
enforcement action by, these authorities. Furthermore, if such activities are prohibited, it may harm demand for our
products. Promotion of unapproved drugs or devices or unapproved indications for a drug or device is a violation of
the Federal Food, Drug, and Cosmetic Act and subjects us to civil and criminal sanctions. Furthermore, sanctions
under the Federal False Claims Act have recently been brought against companies accused of promoting off-label
uses of drugs, because such promotion induces the use and subsequent claims for reimbursement under Medicare
and other federal programs. Similar actions for off-label promotion have been initiated by several states for
Medicaid fraud. The Healthcare Reform Law significantly strengthened provisions of the Federal False Claims Act,
the Anti-Kickback Law that applies to Medicare and Medicaid, and other health care fraud provisions, leading to the
possibility of greatly increased qui tam suits by relators for perceived violations. Violations or allegations of
violations of the foregoing restrictions could materially and adversely affect our business.
We are required to report detailed pricing information, net of included discounts, rebates and other
concessions, to the Centers for Medicare & Medicaid Services (“CMS”) for the purpose of calculating national
reimbursement levels, certain federal prices and certain federal and state rebate obligations. Inaccurate or incomplete
reporting of pricing information could result in liability under the False Claims Act, the federal Anti-Kickback Law
and various other laws, rules and regulations.
We will need to establish systems for collecting and reporting this data accurately to CMS and institute a
compliance program to assure that the information collected is complete in all respects. If we report pricing
information that is not accurate to the federal government, we could be subject to fines and other sanctions that
could adversely affect our business. If we choose to pursue clinical development and commercialization in the
European Union or otherwise market and sell our products outside of the U.S., we must obtain and maintain
regulatory approvals and comply with regulatory requirements in such jurisdictions. The approval procedures vary
among countries in complexity and timing. We may not obtain approvals from regulatory authorities outside the
U.S. on a timely basis, if at all, which would preclude us from commercializing products in those markets.
In addition, some countries, particularly the countries of the European Union, regulate the pricing of
prescription pharmaceuticals. In these countries, pricing discussions with governmental authorities can take
considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval
in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product
candidate to other available therapies. Such trials may be time-consuming and expensive, and may not show an
advantage in efficacy for our products. If reimbursement of our products is unavailable or limited in scope or
amount, or if pricing is set at unsatisfactory levels, in either the U.S. or the European Union, we could be adversely
affected.
Also, under the U.S. Foreign Corrupt Practices Act, the U.S. has increasingly focused on regulating the
conduct by U.S. businesses occurring outside of the U.S., generally prohibiting remuneration to foreign officials for
the purpose of obtaining or retaining business. To enhance compliance with applicable health care laws, and
mitigate potential liability in the event of noncompliance, regulatory authorities such as the U.S. Health and Human
Services Department Office of Inspector General (the “OIG”) have recommended the adoption and implementation
of a comprehensive health care compliance program that generally contains the elements of an effective compliance
35
and ethics program described in Section 8B2.1 of the U.S. Sentencing Commission Guidelines Manual. Increasing
numbers of U.S.-based pharmaceutical companies have such programs. In the future, we may need to adopt
healthcare compliance and ethics programs that would incorporate the OIG's recommendations, and train our
applicable employees in such compliance. Such a program may be expensive and may not assure that we will avoid
compliance issues.
We are also required to comply with the applicable laws, rules, regulations and permit requirements of the
various states in which our business operates, including the State of Florida where our manufacturing facility is
located. These regulations and permit requirements are not always in concert with applicable federal laws, rules and
regulations regulating our business. Although compliant with applicable federal requirements, we may be required
to comply with additional state laws, rules, regulations and permits. Failure to appropriately comply with such state
requirements could result in temporary or long-term cessation of our manufacturing operations, as well as fines and
other sanctions. Any such penalties may have a material adverse effect on our business and results of operations.
The manufacturing processes for plasma-based biologics are complex and involve biological intermediates that
are susceptible to contamination.
Plasma is a raw material that is susceptible to damage and contamination and may contain human
pathogens, any of which would render the plasma unsuitable as raw material for further manufacturing. For instance,
improper storage of plasma, by us or third-party suppliers, may require us to destroy some of our raw material. If
unsuitable plasma is not identified and discarded prior to the release of the plasma to the manufacturing process, it
may be necessary to discard intermediate or finished product made from that plasma or to recall any finished
product released to the market, resulting in a charge to cost of product revenue. The manufacture of our plasma
products is an extremely complex process of fractionation, purification, filling and finishing. Our products can
become non-releasable or otherwise fail to meet our stringent specifications or regulatory agencies' specifications
through a failure in one or more of these process steps. We may detect instances in which an unreleased product was
produced without adherence to our manufacturing procedures or plasma used in our production process was not
collected or stored in a compliant manner consistent with our cGMP or other regulations. Such an event of
noncompliance would likely result in our determination that the implicated products should not be released or
maybe replaced or withdrawn from the market and therefore should be destroyed. Once manufactured, our plasma-
derived products must be handled carefully and kept at appropriate temperatures. Our failure, or the failure of third
parties that supply, ship or distribute our products, to properly care for our products may require that those products
be destroyed. Even if handled properly, biologics may form or contain particulates or have other issues or problems
after storage which may require products to be destroyed or recalled. While we expect to write off small amounts of
work-in-progress in the ordinary course of business due to the complex nature of plasma, our processes and our
products, unanticipated events may lead to write-offs and other costs materially in excess of our expectations and the
reserves we have established for these purposes. Such write-offs and other costs could cause material fluctuations in
our results of operations.
Furthermore, contamination of our products could cause investors, consumers, or other third parties with
whom we conduct business to lose confidence in the reliability of our manufacturing procedures, which could
adversely affect our revenues. In addition, faulty or contaminated products that are unknowingly distributed could
result in patient harm, threaten the reputation of our products and expose us to product liability damages and claims
from companies for whom we do contract manufacturing.
Our ability to continue to produce safe and effective products depends on the safety of our plasma supply and
manufacturing processes against transmittable diseases.
Despite overlapping safeguards, including the screening of donors and other steps to remove or inactivate
viruses and other infectious disease causing agents, the risk of transmissible disease through blood plasma products
cannot be entirely eliminated. For example, since plasma-derived therapeutics involves the use and purification of
human plasma, there has been concern raised about the risk of transmitting human immunodeficiency virus (“HIV”),
prions, West Nile virus, H1N1 virus or "swine flu" and other blood-borne pathogens through plasma-derived
products. There are also concerns about the future transmission of H5N1 virus, or "bird flu." In the 1980s, thousands
of hemophiliacs worldwide were infected with HIV through the use of contaminated Factor VIII. Other producers of
Factor VIII, though not us, were defendants in numerous lawsuits resulting from these infections. New infectious
36
diseases emerge in the human population from time to time. If a new infectious disease has a period during which
time the causative agent is present in the bloodstream but symptoms are not present, it is possible that plasma
donations could be contaminated by that infectious agent. Typically, early in an outbreak of a new disease, tests for
the causative agent do not exist. During this early phase, we must rely on screening of donors for behavioral risk
factors or physical symptoms to reduce the risk of plasma contamination. Screening methods are generally less
sensitive and specific than a direct test as a means of identifying potentially contaminated plasma units. During the
early phase of an outbreak of a new infectious disease, our ability to manufacture safe products would depend on the
manufacturing process' capacity to inactivate or remove the infectious agent. To the extent that a product's
manufacturing process is inadequate to inactivate or remove an infectious agent, our ability to manufacture and
distribute that product would be impaired. If a new infectious disease were to emerge in the human population, the
regulatory and public health authorities could impose precautions to limit the transmission of the disease that would
impair our ability to procure plasma, manufacture our products or both. Such precautionary measures could be taken
before there is conclusive medical or scientific evidence that a disease poses a risk for plasma-derived products. In
recent years, new testing and viral inactivation methods have been developed that more effectively detect and
inactivate infectious viruses in collected plasma. There can be no assurance, however, that such new testing and
inactivation methods will adequately screen for, and inactivate, infectious agents in the plasma used in the
production of our products.
We could become supply-constrained and our financial performance would suffer if we cannot obtain adequate
quantities of FDA-approved source plasma with proper specifications.
In order for plasma to be used in the manufacturing of our products, the individual centers at which the
plasma is collected must be licensed by the FDA and approved by the regulatory authorities of any country in which
we may wish to commercialize our products. When we open a new plasma center, and on an ongoing basis after
licensure, it must be inspected by the FDA for compliance with cGMP and other regulatory requirements. An
unsatisfactory inspection could prevent a new center from being licensed or risk the suspension or revocation of an
existing license. We do not and will not have adequate plasma to manufacture our products. Therefore, we are
reliant on the purchase of plasma from third parties to manufacture our products. We can give no assurances that
appropriate plasma will be available to us on commercially reasonable terms, or at all, to manufacture our products.
In order to maintain a plasma center's license, its operations must continue to conform to cGMP and other regulatory
requirements. In the event that we determine that plasma was not collected in compliance with cGMP, we may be
unable to use and may ultimately destroy plasma collected from that center, which would be recorded as a charge to
cost of product revenue. Additionally, if non-compliance in the plasma collection process is identified after the
impacted plasma has been pooled with compliant plasma from other sources, entire plasma pools, in-process
intermediate materials and final products could be impacted. Consequently, we could experience significant
inventory impairment provisions and write-offs which could adversely affect our business and financial results. We
plan to increase our supplies of plasma for use in the manufacturing processes through increased purchases of
plasma from third-party suppliers as well as collections from our existing ADMA BioCenters plasma collection
centers. This strategy is dependent upon our ability to maintain a cGMP compliant environment in both plasma
centers and to expand production and attract donors to both centers. There is no assurance that the FDA will inspect
and license our unlicensed plasma collection centers in a timely manner consistent with our production plans. If we
misjudge the readiness of a center for an FDA inspection, we may lose credibility with the FDA and cause the FDA
to more closely examine all of our operations. Such additional scrutiny could materially hamper our operations and
our ability to increase plasma collections. Our ability to expand production and increase our plasma collection
centers to more efficient production levels may be affected by changes in the economic environment and population
in selected regions where ADMA BioCenters operates its current or future plasma centers, by the entry of
competitive plasma centers into regions where ADMA BioCenters operates such centers, by misjudging the
demographic potential of individual regions where ADMA BioCenters expects to expand production and attract new
donors, by unexpected facility related challenges, or by unexpected management challenges at selected plasma
centers.
Our ability to commercialize our products, alone or with collaborators, will depend in part upon the extent to
which reimbursement will be available from governmental agencies, health administration authorities, private
health maintenance organizations and health insurers and other healthcare payers, and also depends upon the
approval, timing and representations by the FDA or other governmental authorities for our product candidates.
As the FDA BLA review process is ongoing, we are subject to information requests and communications from the
37
FDA on a routine basis and may not have clarity on any or all specific aspects of the approval timing, language,
name, claims and any other future requirements that may be imposed by the FDA or other governmental
agencies for marketing, authorization and ultimately financial reimbursement for patient utilization.
Our ability to generate product revenues will be diminished if our products sell for inadequate prices or
patients are unable to obtain adequate levels of coverage. Significant uncertainty exists as to the reimbursement
status of newly approved healthcare products, as well as to the timing, language, specifications and other details
pertaining to the approval of such products. Healthcare payers, including Medicare, are challenging the prices
charged for medical products and services. Government and other healthcare payers increasingly attempt to contain
healthcare costs by limiting both coverage and the level of reimbursement for products. Even if one of our product
candidates is approved by the FDA, insurance coverage may not be available, and reimbursement levels may be
inadequate, to cover such product. If government and other healthcare payers do not provide adequate coverage and
reimbursement levels for one of our products, once approved, market acceptance of such product could be reduced.
Prices in many countries, including many in Europe, are subject to local regulation and certain pharmaceutical
products, such as plasma-derived products, are subject to price controls in several of the world's principal markets,
including many countries within the European Union. In the U.S., where pricing levels for our products are
substantially established by third-party payers, including Medicare, if payers reduce the amount of reimbursement
for a product, it may cause groups or individuals dispensing the product to discontinue administration of the product,
to administer lower doses, to substitute lower cost products or to seek additional price-related concessions. These
actions could have a negative effect on our financial results, particularly in cases where our products command a
premium price in the marketplace, or where changes in reimbursement induce a shift in the site of treatment. The
existence of direct and indirect price controls and pressures over our products could materially adversely affect our
financial prospects and performance.
The new biosimilar pathway established as part of the healthcare reform may make it easier for competitors to
market biosimilar products.
The Healthcare Reform Law introduced an abbreviated licensure pathway for biological products that are
demonstrated to be biosimilar to an FDA-licensed biological product. A biological product may be demonstrated to
be “biosimilar” if data show that, among other things, the product is “highly similar” to an already-approved
biological product, known as a reference product, and has no clinically meaningful differences in terms of safety and
effectiveness from the reference product. The law provides that a biosimilar application may be submitted as soon as
four years after the reference product is first licensed, and that the FDA may not make approval of an application
effective until 12 years after the reference product was first licensed. Since the enactment of the law, the FDA has
issued several guidance documents to assist sponsors of biosimilar products in preparing their approval
applications. The FDA approved the first biosimilar product in 2015, and approved three biosimilar products in
2016. As a result of the biosimilar pathway in the U.S., we expect in the future to face greater competition from
biosimilar products, including a possible increase in patent challenges.
The implementation of the Healthcare Reform Law in the U.S. may adversely affect our business.
Through the March 2010 adoption of the Healthcare Reform Law in the U.S., substantial changes are being
made to the current system for paying for healthcare in the U.S., including programs to extend medical benefits to
millions of individuals who currently lack insurance coverage. The changes contemplated by the Healthcare Reform
Law are subject to rule-making and implementation timelines that extend for several years, and this uncertainty
limits our ability to forecast changes that may occur in the future. However, implementation has already begun with
respect to certain significant cost-saving measures under the Healthcare Reform Law, for example with respect to
several government healthcare programs, including Medicaid and Medicare Parts B and D, that may cover the cost
of our future products, and these efforts could have a material adverse impact on our future financial prospects and
performance. For example, in order for a manufacturer's products to be reimbursed by federal funding under
Medicaid, the manufacturer must enter into a Medicaid rebate agreement with the Secretary of the U.S. Department
of Health and Human Services and pay certain rebates to the states based on utilization data provided by each state
to the manufacturer and to CMS and pricing data provided by the manufacturer to the federal government. The states
share these savings with the federal government, and sometimes implement their own additional supplemental rebate
programs. Under the Medicaid drug rebate program, the rebate amount for most branded drug products was
previously equal to a minimum of 15.1% of the Average Manufacturer Price (“AMP”) or the AMP less Best Price,
38
whichever is greater. Effective January 1, 2010, the Healthcare Reform Law generally increased the size of the
Medicaid rebates paid by manufacturers for single source and innovator multiple source (brand name) drug products
from a minimum of 15.1% to a minimum of 23.1% of AMP, subject to certain exceptions. For non-innovator
multiple source (generic) products, the rebate percentage is increased from a minimum of 11.0% to a minimum of
13.0% of AMP. In 2010, the Healthcare Reform Law also newly extended this rebate obligation to prescription
drugs covered by Medicaid managed care organizations. These increases in required rebates may adversely affect
our future financial prospects and performance. In order for a pharmaceutical product to receive federal
reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government
agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing
program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate
amounts reported by the manufacturer. As the 340B drug pricing is determined based on AMP and Medicaid rebate
data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required
340B discount to increase.
Effective in 2011, the Healthcare Reform Law imposed an annual, nondeductible fee on any entity that
manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities
according to their market share in certain government healthcare programs. These fees may adversely affect our
future financial prospects and performance. The Healthcare Reform Law established the Center for Medicare and
Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and
Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the
mission of the Center for Medicare and Medicaid Innovation through 2019.
The Healthcare Reform Law also creates new rebate obligations for our products under Medicare Part D, a
partial, voluntary prescription drug benefit created by the U.S. federal government primarily for persons 65 years old
and over. The Part D drug program is administered through private insurers that contract with CMS. Beginning in
2011, the Healthcare Reform Law generally requires that in order for a drug manufacturer's products to be
reimbursed under Medicare Part D, the manufacturer must enter into a Medicare Coverage Gap Discount Program
agreement with the Secretary of the U.S. Department of Health and Human Services, and reimburse each Medicare
Part D plan sponsor an amount equal to 50% savings for the manufacturer's brand name drugs and biologics which
the Part D plan sponsor has provided to its Medicare Part D beneficiaries who are in the "donut hole" (or a gap in
Medicare Part D coverage for beneficiaries who have expended certain amounts for drugs). The Part D plan sponsor
is responsible for calculating and providing the discount directly to its beneficiaries and for reporting these amounts
paid to CMS's contractor, which notifies drug manufacturers of the rebate amounts it must pay to each Part D plan
sponsor. The rebate requirement could adversely affect our future financial performance, particularly if contracts
with Part D plans cannot be favorably renegotiated or the Part D plan sponsors fail to accurately calculate payments
due in a manner that overstates our rebate obligation. Regarding access to our products, the Healthcare Reform Law
established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and
fund Comparative Effectiveness Research (“CER”). While the stated intent of CER is to develop information to
guide providers to the most efficacious therapies, outcomes of CER could influence the reimbursement or coverage
for therapies that are determined to be less cost-effective than others. Should any of our products be determined to
be less cost effective than alternative therapies, the levels of reimbursement for these products, or the willingness to
reimburse at all, could be impacted, which could materially impact our future financial prospects and results.
There have been repeated attempts by Congress to repeal or change the Healthcare Reform Law. At this
time, it remains unclear whether there will be any changes made to or any repeal or replacement of the Healthcare
Reform Law, with respect to certain of its provisions or in its entirety.
Developments in the worldwide economy may adversely impact our business.
The difficult economic environment may adversely affect demand for our products. RI-002, our current
product candidate, is expected to be sold to hospitals, specialty pharmacies and clinicians in the U.S. As a result of
loss of jobs, patients may lose medical insurance and be unable to purchase our products or may be unable to pay
their share of deductibles or co-payments. Hospitals adversely affected by the economy may steer patients to less
costly therapies, resulting in a reduction in demand, or demand may shift to public health hospitals, which may
purchase at a lower government price.
39
Risks Relating to our Finances, Capital Requirements and Other Financial Matters
We require additional funding and may be unable to raise capital when needed, which would force us to delay,
curtail or eliminate one or more of our research and development programs or commercialization efforts.
Our operations have consumed substantial amounts of cash since inception. For the years ended December
31, 2017 and 2016, we had negative cash flows from operations of approximately $37.3 million and $18.3 million,
respectively. We expect to continue to spend substantial amounts on product development, including
commercialization activities, procuring raw material plasma, manufacturing, conducting potential future clinical
trials for our product candidates and purchasing clinical trial materials from our suppliers. We currently anticipate ,
based upon our projected revenue and expenditures, as well as the additional $10.0 million we expect to be able to
draw down under the Credit Agreement, that our current cash, cash equivalents and accounts receivable will be
sufficient to fund our operations, as currently conducted, through the end of 2018. In order to have sufficient cash to
fund our operations thereafter and to continue as a going concern, we will need to raise additional equity or debt
financing by the end of 2018. This time frame may change based upon how quickly we are able to execute on our
operational initiatives and the various financing options we are exploring. However, if the assumptions underlying
our estimated expenses prove to be incorrect, we may have to raise additional capital sooner than we currently
expect. Until such time, if ever, as we can generate a sufficient amount of product revenue to achieve profitability,
we expect to continue to finance our operations through additional equity or debt financings or corporate
collaboration and licensing arrangements. If we are unable to raise additional capital as needed, we will have to
delay, curtail or eliminate our product development activities, including conducting clinical trials for our product
candidates and purchasing clinical trial materials from our suppliers, as well as future commercialization efforts.
Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution
to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
To the extent that we raise additional capital by issuing equity securities, the share ownership of existing
stockholders will be diluted. Any future debt financing may involve covenants that, among other restrictions, limit
our ability to incur liens or additional debt, pay dividends, redeem or repurchase our common stock, make certain
investments or engage in certain merger, consolidation or asset sale transactions. In addition, if we raise additional
funds through licensing arrangements or the disposition of any of our assets, it may be necessary to relinquish
potentially valuable rights to our product candidates or grant licenses on terms that are not favorable to us.
Our cash, cash equivalents and short-term investments could be adversely affected if the financial institutions in
which we hold our cash, cash equivalents and short-term investments fail.
We regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit
Insurance Corporation insurance limit. While we monitor the cash balances in our operating accounts on a daily
basis and adjust the balances as appropriate, these balances could be impacted, and there could be a material adverse
effect on our business, if one or more of the financial institutions with which we deposit cash fails or is subject to
other adverse conditions in the financial or credit markets. To date, we have experienced no loss or lack of access to
our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and
cash equivalents will not be impacted by adverse conditions in the financial and credit markets.
If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to
produce accurate and timely financial statements could be impaired, which could harm our operating results,
investors' views of us and, as a result, the value of our Common Stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related rules, our management is required
to report on the effectiveness of our internal control over financial reporting. The rules governing the standards that
must be met for management to assess our internal control over financial reporting are complex and require
significant documentation, testing and possible remediation. To comply with the requirements of being a reporting
company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have been required to
upgrade, and may need to implement further upgrades, to our financial, information and operating systems,
implement additional financial and management controls, reporting systems and procedures and hire additional
accounting and finance staff.
40
Our ability to use our net operating loss carryforwards (“NOLs”) may be limited.
We have incurred substantial losses during our history. As of December 31, 2017, we had federal and state
NOLs of $125.3 million and $201.5 million, respectively. These NOLs will begin to expire at various dates
beginning in 2027, if not limited by triggering events prior to such time. Under the provisions of the Internal
Revenue Code, changes in our ownership, in certain circumstances, will limit the amount of federal NOLs that can
be utilized annually in the future to offset taxable income. In particular, Section 382 of the Internal Revenue Code
imposes limitations on a company’s ability to use NOLs upon certain changes in such ownership. If we are limited
in our ability to use our NOLs in future years in which we have taxable income, we will pay more taxes than if we
were able to fully utilize our NOLs. We may experience ownership changes in the future as a result of subsequent
shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on
our ability to utilize our federal NOLs.
The recently passed Tax Cuts and Jobs Act (the “TCJA”) could adversely affect our business and financial
condition.
On December 22, 2017, President Trump signed into law the TCJA, which significantly reforms the
Internal Revenue Code. The TCJA, among other things, contains significant changes to corporate taxation, including
reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax
deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the
deduction for net operating losses generated after December 31, 2017 to 80% of current year taxable income and
elimination of net operating loss carrybacks, immediate deductions for certain new investments instead of
deductions for depreciation expense over time and modifying or repealing many business deductions and credits.
Federal net operating losses arising in taxable years ending after December 31, 2017 will be carried forward
indefinitely pursuant to the TCJA. We continue to examine the impact this tax reform legislation may have on our
business. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the TCJA is uncertain
and our business and financial condition could be adversely affected. The impact of this tax reform on holders of our
common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax
advisors with respect to such legislation and the potential tax consequences of investing in our Common Stock.
Risks Associated with our Common Stock
The market price of our Common Stock may be volatile and may fluctuate in a way that is disproportionate to our
operating performance.
Our stock price may experience substantial volatility as a result of a number of factors, including:
sales or potential sales of substantial amounts of our Common Stock;
our ability to successfully leverage the anticipated benefits and synergies from the Biotest Transaction,
including optimization of the combined businesses, operations and products and services, including the
nature, strategy and focus of the combined company and the management and governance structure of
the combined company;
delay or failure in initiating or completing preclinical or clinical trials or unsatisfactory results of these
trials;
delay in FDA approval for RI-002;
the timing of acceptance, third-party reimbursement and sales of RI-002;
our ability to resume the manufacturing of Bivigam once the deficiencies identified in the CRL have
been resolved by us to the satisfaction of the FDA;
announcements about us or about our competitors, including clinical trial results, regulatory approvals
or new product introductions;
developments concerning our licensors or third-party vendors;
41
litigation and other developments relating to our patents or other proprietary rights or those of our
competitors;
conditions in the pharmaceutical or biotechnology industries;
governmental regulation and legislation;
variations in our anticipated or actual operating results; and
change in securities analysts’ estimates of our performance, or our failure to meet analysts’
expectations.
Many of these factors are beyond our control. The stock markets in general, and the market for pharmaceutical and
biotechnology companies in particular, have historically experienced extreme price and volume fluctuations. These
fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These
broad market and industry factors could reduce the market price of our Common Stock, regardless of our actual
operating performance.
An investment in our Common Stock is extremely speculative and there can be no assurance of any return on
any such investment.
An investment in our Common Stock is extremely speculative and there is no assurance that investors will
obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in us,
including the risk of losing their entire investment.
Sales of a substantial number of shares of our common stock, or the perception that such sales may occur, may
adversely impact the market price of our Common Stock.
As of December 31, 2017, most of our 45,316,659 outstanding shares of common stock, as well as a
substantial number of shares of our Common Stock underlying outstanding warrants, were available for sale in the
public market, subject to certain restrictions with respect to sales of our Common Stock by our affiliates, either
pursuant to Rule 144 under the Securities Act (“Rule 144”) or under effective registration statements. The
12,886,740 shares of common stock, including 8,591,160 shares of Non-Voting Common Stock, acquired by BPC in
the Biotest Transaction were subject to a lock-up for six months after closing of the Biotest Transaction, which lock-
up expired on December 6, 2017. For three years after the end of such six-month period, subject to certain limited
exceptions, under the stockholders agreement entered into between the Company and BPC upon closing the Biotest
Transaction, sales by BPC of our equity interests may not exceed 15% of the issued and outstanding common stock
of ADMA in any twelve-month period; provided, however, that if our market capitalization increases to double our
market capitalization immediately following the closing of the Biotest Transaction, then BPC may sell up to 20% of
our issued and outstanding common stock in any twelve-month period; provided, further, that (x) if our market
capitalization increases to triple our market capitalization immediately following the closing of the Biotest
Transaction, or (y) upon the one-year anniversary of BPC holding less than a 25% economic interest in us, then BPC
may sell its equity interests in us at any time (subject to applicable securities laws). At the closing of the Biotest
Transaction, we entered into a registration rights agreement with BPC, pursuant to which BPC will have, among
other things, certain registration rights under the Securities Act with respect to its shares of our common stock,
subject to certain transfer restrictions. Sales of a substantial number of shares of our common stock, or the
perception that such sales may occur, may adversely impact the market price of our Common Stock.
Our affiliates control a substantial amount of our shares of common stock. Provisions in our Amended and
Restated Certificate of Incorporation (the “Certificate of Incorporation”), our Amended and Restated Bylaws (the
“Bylaws”) and Delaware law might discourage, delay or prevent a change in control of our company or changes
in our management and, therefore, depress the trading price of our Common Stock.
Provisions of our Certificate of Incorporation, our Bylaws and Delaware law may have the effect of
deterring unsolicited takeovers or delaying or preventing a change in control of our Company or changes in our
management, including transactions in which our stockholders might otherwise receive a premium for their shares
over then current market prices. As of December 31, 2017, BPC, our directors and executive officers and their
42
affiliates beneficially owned in excess of 55% of the outstanding shares of our common stock. In addition, these
provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best
interests. These provisions include:
the inability of stockholders to call special meetings;
the ability of our Board to institute a stockholder rights plan, also known as a poison pill, that would
work to dilute our stock,
classification of our Board and limitation on filling of vacancies could make it more difficult for a third
party to acquire, or discourage a third party from seeking to acquire, control of our company; and
authorization of the issuance of “blank check” preferred stock, with such designation rights and
preferences as may be determined from time to time by the Board, without any need for action by
stockholders.
In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation
from engaging in a business combination with an interested stockholder, generally a person which together with its
affiliates owns, or within the last three years, has owned 15% of our voting stock, for a period of three years after the
date of the transaction in which the person became an interested stockholder, unless the business combination is
approved in a prescribed manner. The existence of the foregoing provisions and anti-takeover measures could limit
the price that investors might be willing to pay in the future for shares of our common stock. They could also deter
potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your
common stock in an acquisition. In addition, as a result of the concentration of ownership of our shares of common
stock, our stockholders may, from time to time, observe instances where there may be less liquidity in the public
markets for our securities.
We have never paid and do not intend to pay cash dividends in the foreseeable future. As a result, capital
appreciation, if any, will be your sole source of gain.
We have never paid cash dividends on any of our capital stock and we currently intend to retain future
earnings, if any, to fund the development and growth of our business. In addition, the terms of existing and future
debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common
stock will be your sole source of gain for the foreseeable future.
If we fail to adhere to the strict listing requirements of the Nasdaq Capital Market (“Nasdaq”), we may be subject
to delisting. As a result, our stock price may decline and our Common Stock may be delisted. If our stock were
no longer listed on Nasdaq, the liquidity of our securities likely would be impaired.
Our Common Stock currently trades on Nasdaq under the symbol “ADMA.” If we fail to adhere to
Nasdaq's strict listing criteria, including with respect to stock price, our market capitalization and stockholders’
equity, our stock may be delisted. This could potentially impair the liquidity of our securities not only in the number
of shares that could be bought and sold at a given price, which may be depressed by the relative illiquidity, but also
through delays in the timing of transactions and the potential reduction in media coverage. As a result, an investor
might find it more difficult to dispose of our Common Stock. We believe that current and prospective investors
would view an investment in our Common Stock more favorably if it continues to be listed on Nasdaq. Any failure
at any time to meet the Nasdaq continued listing requirements could have an adverse impact on the value of and
trading activity of our Common Stock. Although we currently satisfy the listing criteria for Nasdaq, if our stock
price declines dramatically, we could be at risk of failing to meet the Nasdaq continued listing criteria.
Penny stock regulations may affect your ability to sell our Common Stock.
Because the price of our Common Stock currently trades below $5.00 per share, our Common Stock is
subject to Rule 15g-9 under the Exchange Act, which imposes additional sales practice requirements on broker
dealers which sell these securities to persons other than established customers and accredited investors. Under these
rules, broker-dealers who recommend penny stocks to persons other than established customers and “accredited
investors” must make a special written suitability determination for the purchaser and receive the purchaser’s written
43
agreement to a transaction prior to sale, which includes an acknowledgement that the purchaser’s financial situation,
investment experience and investment objectives forming the basis for the broker-dealer’s suitability determination
are accurately stated in such written agreement. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock
market and the associated risks. The additional burdens imposed upon broker-dealers by these requirements could
discourage broker-dealers from effecting transactions in our Common Stock and may make it more difficult for
holders of our Common Stock to sell shares to third parties or to otherwise dispose of them.
We are an “emerging growth company,” and elect to comply with reduced public company reporting
requirements applicable to emerging growth companies, which could make our Common Stock less attractive to
investors.
We are an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act (the “JOBS
Act”). The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for
qualifying public companies. As an “emerging growth company,” we may, under Section 7(a)(2)(B) of the
Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such
standards would otherwise apply to private companies. We may continue to take advantage of this extended
transition period until the first to occur of the date that we (i) are no longer an “emerging growth company” or (ii)
affirmatively and irrevocably opt out of this extended transition period.
We could be an emerging growth company until December 31, 2018, which is the last day of the fiscal year
following the fifth anniversary of the first sale of our common equity securities pursuant to an effective registration
statement under the Securities Act. However, if certain events occur prior to the end of such five-year period,
including if we become a “large accelerated filer,” our annual gross revenues exceed $1 billion or we issue more
than $1 billion of non-convertible debt in any three-year period, we would cease to be an emerging growth company
prior to the end of such five-year period.
We have elected to take advantage of the benefits of this extended transition period. Our financial
statements may therefore not be comparable to those of companies that comply with such new or revised accounting
standards. Until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt
out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or revised accounting
standard that applies to our financial statements and that has a different effective date for public and private
companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date
on which we will adopt the recently issued accounting standard. As an emerging growth company, we are also
exempt from the requirement to have our independent registered public accounting firm provide an attestation report
on our internal control over financial reporting.
We cannot predict if investors will find our Common Stock less attractive as a result of our reliance on
these exemptions. If some investors find our Common Stock less attractive as a result of any choice we make to
reduce disclosure, there may be a less active trading market for our Common Stock, our stock price may be more
volatile and our stock price may decline dramatically.
Our Board may, without stockholder approval, issue and fix the terms of shares of preferred stock and issue
additional shares of Common Stock adversely affecting the rights of holders of our common stock.
Our Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares of “blank check”
preferred stock, with such designation rights and preferences as may be determined from time to time by the Board.
Currently, our Certificate of Incorporation authorizes the issuance of up to 75,000,000 shares of Common Stock, of
which 34,469,713 shares remain available for issuance and may be issued by us without stockholder approval, and
up to 8,591,160 shares of Non-Voting Common Stock, all of which are issued and outstanding.
Item 1B. Unresolved Staff Comments
Not Applicable.
44
Item 2. Properties
Our headquarters are located in approximately 4,200 square feet of space at 465 State Route 17, Ramsey,
NJ. Our telephone number is (201) 478-5552. Currently we operate under a shared services agreement with Areth,
LLC (“Areth”) for the office, warehouse space and certain related services and have the ability to cancel this
agreement upon 30 days’ notice. Areth is a company controlled by Dr. Jerrold B. Grossman, our Vice Chairman,
and Adam S. Grossman, our President and Chief Executive Officer, and we pay Areth monthly fees for the use of
such office space and for other information technology, general warehousing and administrative services. Effective
October 1, 2017, rent under the shared services agreement is $10,000 per month.
ADMA BioCenters’ facilities are located in Norcross, GA, Marietta, GA and Kennesaw, GA. The
combined facilities have a total of approximately 40,000 square feet of space, and total rent for the three facilities is
approximately $53,000 per month. The Norcross, GA lease, the term of which was extended by five years on
January 1, 2014 pursuant to the first of two available five-year renewal options, expires on September 30, 2023, and
the Marietta, GA lease expires on January 31, 2024. The Kennesaw, GA lease expires April 1, 2026.
As part of the Biotest Transaction, we acquired the Boca Facility, which consists of two buildings
aggregating 83,543 square feet residing on approximately 14.6 acres of land in Boca Raton, FL. All of our plasma
fractionation and drug product manufacturing are conducted at the Boca Facility, which also contains administrative
office space for our ADMA BioManufacturing subsidiary and for certain of our centralized corporate functions. In
connection with the acquisition of the Biotest Assets, we assumed two warehouse leases in Boca Raton, FL for
additional storage space for raw materials, spare parts and other supplies related to its business. One of these leases
expired on December 31, 2017 and the other lease expires on July 31, 2018. The aggregate minimum lease payments
for these two leases are approximately $9,000 per month.
Additionally, on January 1, 2019, pursuant to the terms of a separate purchase agreement entered into
between ADMA BioManufacturing and BPC at the closing, we agreed to sell, transfer and convey to BPC for no
additional consideration, all of our right, title and interest in and to certain of our plasma collection facilities located
in the U.S., which are subject to a repurchase right in favor of us if within five years after January 1, 2019, the
Biotest stockholders and its related entities own less than 20% of our issued and outstanding capital stock.
We believe that our leased and owned properties are adequate to meet our current and future needs.
Item 3. Legal Proceedings
We are and may become subject to certain legal proceedings and claims arising in connection with the
normal course of our business. In the opinion of management, there are currently no claims that would have a
material adverse effect on our consolidated financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
45
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market Information
Our Common Stock has been listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol "ADMA"
since November 10, 2014.
The following table sets forth, for each of the calendar periods indicated, the high and low sales prices for
our Common Stock, as reported by Nasdaq:
First Quarter ....................................................
Second Quarter ...............................................
Third Quarter ..................................................
Fourth Quarter ................................................
$
$
$
$
Holders
Year Ended
December 31, 2017
Low
4.44
High
5.79
$
5.44
3.95
3.48
$
$
$
2.93
2.67
2.01
Year Ended
December 31, 2016
Low
4.15
High
8.28
$
8.85
$
5.71
8.00
$
5.00
7.34
$
4.34
$
$
$
$
As of February 28, 2018, there were eight record holders of our Common Stock, based upon information
received from our transfer agent. However, this number does not include beneficial owners whose shares were held
of record by nominees or broker dealers. We estimate that there are more than 1,400 beneficial owners of our
Common Stock. As of March 1, 2018, BPC was the sole record holder of our Non-Voting Common Stock.
Dividend Policy
We have never paid any cash dividends on our capital stock. We anticipate that we will retain earnings, if
any, to support operations and to finance the growth and development of our business. In addition, the terms of our
Credit Agreement with Marathon precludes us from paying cash dividends without the consent of
Marathon. Therefore, we do not expect to pay cash dividends for the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth certain information regarding our equity compensation plans as of December
31, 2017:
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding
options, warrants
and rights
Number of securities
remaining available
for future issuance
under equity
compensation
plans
3,276,043
$
— $
5.52
—
5.52
654,645
—
654,645
Plan Category
Equity compensation plans approved by
security holders ..............................
Equity compensation plans not
approved by security holders .........
Total ......................................................
3,276,043
$
46
Stock Performance Graph
Not applicable.
Sale of Unregistered Securities
During the three months ended December 31, 2017, we had no sales of unregistered securities that have not
been previously disclosed in a Current Report on Form 8-K or Quarterly Reports on Form 10-Q.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not repurchase any of our securities during the three months ended December 31, 2017.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The
various sections of this discussion contain a number of forward-looking statements, all of which are based on our
current expectations and could be materially affected by the uncertainties and risk factors described throughout this
Annual Report. See “Special Note Regarding Forward-Looking Statements.” Our actual results may differ
materially.
Our Business
OVERVIEW
We are a vertically integrated commercial biopharmaceutical and specialty immunoglobulin company that
manufactures, markets and develops specialty plasma-derived biologics for the treatment of immune deficiencies
and prevention of 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. We currently have two marketed products: Nabi-HB, indicated for the treatment of acute exposure
to blood containing Hepatitis B surface antigen (“HBsAg”); and Bivigam, indicated for the treatment of primary
humoral immunodeficiency. We are also developing a pipeline of plasma-derived therapeutics, including our lead
pipeline product candidate, RI-002, for the treatment of Primary Immune Deficiency Disease (“PIDD”). 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. Through our wholly-owned subsidiary, ADMA
Bio Centers Georgia, Inc., (“ADMA BioCenters”), we operate two United States Food and Drug Administration (the
“FDA”)-licensed, German Health Authority (“GHA”) and Korean Ministry of Food and Drug Safety
(“KMFD”)certified source plasma collection facilities located in the U.S., which provide us with a portion of our
blood plasma for the manufacture of our products and product candidates. A typical plasma collection center, such
as those operated by ADMA BioCenters, can collect approximately 30,000 to 50,000 liters of source plasma
annually, which may be sold for different prices depending upon the type of plasma, quantity of purchase and
market conditions at the time of sale. Plasma collected from ADMA BioCenters' facilities that is not used to
manufacture our products or product candidates is sold to third-party customers in the U.S., in other locations where
we are approved globally under supply agreements or in the open "spot" market.
On June 6, 2017, we completed the acquisition of certain assets (the “Biotest Assets”) of the Therapy
Business Unit (“BTBU”) of Biotest Pharmaceuticals Corporation (“BPC” and, together with Biotest AG, “Biotest”),
which include two FDA-licensed products, Nabi-HB (Hepatitis B Immune Globulin, Human) and Bivigam (Immune
Globulin Intravenous, Human), and a plasma fractionation facility located in Boca Raton, FL (the “Boca Facility”)
(the “Biotest Transaction”). The Boca Facility is FDA-licensed and certified by the GHA. In addition to the
manufacture and sale of Nabi-HB and Bivigam, we also provide contract manufacturing services for certain
historical clients, including the sale of intermediate by-products. Immediately following the acquisition, the Biotest
Assets were contributed into our subsidiary, ADMA BioManufacturing, LLC (“ADMA BioManufacturing”).
47
Concurrent with the closing of the Biotest Transaction, Biotest committed to an aggregate of $40.0 million
of funding for the Company. Upon the closing of the Biotest Transaction, we received $27.5 million in cash from
Biotest, consisting of $12.5 million in cash and $15.0 million from a subordinated note at 6% interest payable to
BPC with a maturity of five years. At the closing of the Biotest Transaction, we delivered to BPC an aggregate
equity interest equal to 50%, less one share, of our then-issued and outstanding capital stock comprised of 25%, or
4,295,580 shares, of our voting common stock, $0.0001 par value per share (“Common Stock”), and 8,591,160
shares in the form of our non-voting common stock, $0.0001 par value per share (“Non-Voting Common Stock”)
(calculated as of immediately following the closing and on a post-closing issuance basis). The Non-Voting Common
Stock is convertible into our Common Stock upon the occurrence of certain specified events.
As part of their commitment under the Biotest Transaction, Biotest participated in our November 2017
follow-on public offering of our Common Stock and invested $12.5 million of the $42.0 million of total gross
proceeds from the offering (see “Liquidity and Capital Resources”). As a result, Biotest currently owns 41.3% of our
total issued and outstanding capital stock, comprised of 10,109,534 shares, or 27.5%, of our Common Stock and
8,591,160 shares, or 100%, of our Non-Voting Common Stock.
On February 15, 2018, Dr. Bernhard Ehmer notified us that he has resigned as a member of our Board of
Directors (the “Board”). This resignation was precipitated by certain commitments made by Biotest with the
Committee on Foreign Investment in the United States (“CFIUS”) in connection with a transaction unrelated to the
Company. There was no disagreement between Dr. Ehmer and us on any matter related to our operations, policies or
practices. Dr. Ehmer had served as a member of our Board since June 2017 and did not hold any positions on any
committee of the Board. Also on February 15, 2018, we received notification from Michael Ramroth that he has
resigned as an observer of the Board, effective immediately. This resignation was also precipitated by certain
commitments made by Biotest with CFIUS in connection with a transaction unrelated to the Company. Mr. Ramroth
had served as a Board observer since June 2017. Pursuant to the terms of that certain Stockholders Agreement, dated
as of June 6, 2017, by and between the Company and BPC, BPC holds the right to designate (i) one person as a
nominee to the Board, subject to Board approval, and (ii) one person as a Board observer.
Our Marketed Products
Nabi-HB
Nabi-HB is a hyperimmune globulin that is rich in antibodies to the Hepatitis B virus. Nabi-HB is a
purified human polyclonal antibody product collected from plasma donors who have been previously vaccinated
with a Hepatitis B vaccine. Nabi-HB is indicated for the treatment of acute exposure to blood containing HBsAg,
prenatal exposure to infants born to HBsAg-positive mothers, sexual exposure to HBsAg-positive persons and
household exposure to persons with acute Hepatitis B virus infection. Hepatitis B is a potentially life-threatening
liver infection caused by the Hepatitis B virus. It is a major global health problem. It can cause chronic infection and
puts people at high risk of death from cirrhosis and liver cancer. Nabi-HB has a well-documented record of long-
term safety and effectiveness since its initial market introduction. FDA approval for Nabi-HB was received on
March 24, 1999. Biotest acquired Nabi-HB from Nabi Biopharmaceuticals in 2007. Production of Nabi-HB at the
Boca Facility has continued since the third quarter of 2017. Subsequent to the end of 2017, we received
authorization from the FDA for the release of our first commercial batch of Nabi-HB for commercial distribution in
the U.S.
Bivigam
Bivigam is an intravenous immune globulin indicated for the treatment of primary humoral
immunodeficiency. This includes, but is not limited to, agammaglobulinemia, common variable immunodeficiency,
Wiskott-Aldrich syndrome and severe combined immunodeficiency. These primary immunodeficiencies (“PIs”) are
a group of genetic disorders. Initially thought to be very rare, it is now believed that as many as one in every 1,200-
2,000 people has some form of PI. Bivigam contains a broad range of antibodies similar to those found in normal
human plasma. These antibodies are directed against bacteria and viruses, and help to protect PI patients against
serious infections. Bivigam is a purified, sterile, ready-to-use preparation of concentrated Immunoglobulin (“IgG”)
antibodies. Antibodies are proteins in the human immune system that work to defend against disease. FDA approval
for Bivigam was received on December 19, 2012, and sales commenced in the first quarter of 2013. In December
48
2016, BPC temporarily suspended the commercial production of Bivigam in order to focus on the completion of
planned improvements to the manufacturing process. We resumed production of Bivigam utilizing our optimized
intravenous immunoglobulin (“IVIG”) manufacturing process with two conformance lots in the fourth quarter of
2017 and a third conformance lot in the first quarter of 2018. Subsequent to the end of 2017, we qualified and filled
these Bivigam conformance batches and the product is on stability. We expect to file a Prior Approval Supplement
(the “PAS”) with the FDA during the first half of 2018 and are seeking FDA clearance which would enable us to
relaunch this product during the second half of 2018.
Our Lead Pipeline Product Candidate – RI-002
We are currently developing our lead pipeline product candidate, RI-002, for the treatment of PIDD, and
have completed a pivotal Phase III clinical trial, which met the primary endpoint of no Serious Bacterial Infections
reported. Secondary efficacy endpoints further demonstrated the benefits of RI-002 in the low incidence of infection,
therapeutic antibiotic use, days missed from work/school/daycare, and unscheduled medical visits and
hospitalizations. RI-002 is derived from human plasma blended from normal donors and from donors tested to have
high levels of neutralizing titers to Respiratory Syncytial Virus (“RSV”). RI-002 is manufactured using a process
known as fractionation, which purifies IgG from this blended plasma pool resulting in a final IVIG product enriched
with naturally occurring polyclonal anti-pathogen antibodies, such as streptococcus pneumonia, H. influenza type B,
Cytomegalovirus, measles and tetanus. We use our proprietary RSV microneutralization assay to test for
standardized levels of neutralizing antibodies to RSV in the final drug product.
Prior to the closing of the Biotest Transaction, BTBU was our third-party manufacturer for RI-002. In the
third quarter of 2015, the FDA accepted for review our Biologics License Application for RI-002 (the “BLA”) for
the treatment of PIDD. In July 2016, the FDA issued a Complete Response Letter (the “CRL”), which reaffirmed the
issues set forth in the November 2014 warning letter that had been issued by the FDA to Biotest related to certain
issues identified at the Boca Facility (the “Warning Letter”), but did not cite any concerns with the clinical safety or
efficacy data for RI-002 submitted in our BLA, nor did the FDA request any additional clinical studies be completed
prior to FDA approval of RI-002. The FDA identified in the CRL, among other things, certain outstanding
inspection issues and deficiencies related to Chemistry, Manufacturing and Controls and Good Manufacturing
Practices at the Boca Facility and at certain of our third-party vendors, and requested documentation of corrections
for a number of these issues. The FDA indicated in the CRL that it cannot grant final approval of our BLA until,
among other things, these deficiencies are resolved. Following the completion of the Biotest Transaction, we now
have control over the regulatory, quality, general operations and drug substance manufacturing process and our
highest priority is to remediate the outstanding compliance issues that were identified at the Boca Facility in the
Warning Letter. We have been working with a consulting firm consisting of quality management systems and
biologics production subject matter experts in preparation for a re-inspection by the FDA in order to improve the
FDA inspection classification relative to the Warning Letter compliance issues as indicated in the CRL. We believe
that we have been inspection-ready for the FDA since the end of 2017. Once the Warning Letter status is improved
following an FDA inspection, we anticipate that we will be in a position to refile our BLA for RI-002 in the second
half of 2018. Subsequent to the end of 2017, we produced three conformance lots using the optimized IVIG
manufacturing process, and these batches are expected to be filled and finished during the second quarter of 2018
and will then be placed on stability.
Plasma Collection Facilities
ADMA BioCenters operates two FDA-licensed, GHA and KMFD certified source plasma collection
facilities located in the U.S., which provide us with a portion of our blood plasma for the manufacture of our
products and product candidates. A typical plasma collection center, such as those operated by ADMA BioCenters,
can collect approximately 30,000 to 50,000 liters of source plasma annually, which may be sold for different prices
depending upon the type of plasma, quantity of purchase and market conditions at the time of sale. Plasma collected
from ADMA BioCenters' facilities that is not used to manufacture our products or product candidates is sold to
third-party customers in the U.S., and other locations where we are approved globally under supply agreements or in
the open "spot" market.
49
As part of the purchase price to acquire the Biotest Assets, we have agreed to transfer ownership of two of
our plasma collection facilities to BPC on January 1, 2019. We completed the construction of our third plasma
collection facility, filed our Biologics License Application with the FDA and initiated collections for this facility in
December 2017. We anticipate FDA approval of our third plasma collection facility to occur during the second half
of 2018.
Critical Accounting Policies and Estimates
RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on
our consolidated financial statements, which have been prepared in accordance with Accounting Principles
Generally Accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. On an ongoing basis, we evaluate these estimates and assumptions, including those
described below. We base our estimates on our historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results and experiences may differ materially from these estimates.
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 policies and
their application are considered to be critical to understanding our business operations, financial condition and
results of operations. For a detailed discussion on the application of these and our other accounting policies, see
Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report.
Revenue Recognition
Revenues for the year ended December 31, 2017 are comprised of (i) revenues from Nabi-HB, (ii) product
revenues from the sale of human plasma collected from our plasma collection centers segment, (iii) a compensation
fee related to the amendment of our contract manufacturing agreement with Sanofi Pasteur S.A. (“Sanofi”); and (iv)
license and other revenues primarily attributable to the out-licensing of RI-002 to Biotest to market and sell in
Europe and selected countries in North Africa and the Middle East. Biotest has provided us with certain services and
financial payments in accordance with the related Biotest license agreement and is obligated to pay us certain
amounts in the future if certain milestones are achieved. Deferred revenue is recognized over the term of the Biotest
license. Deferred revenue is amortized into income for a period of approximately 22 years, the term of the Biotest
license agreement.
Revenue from the sale of Nabi-HB is recognized when the product reaches the customer’s destination.
Nabi-HB revenue is recorded net of estimated customer prompt pay discounts and contractual allowances in
accordance with managed care agreements, including wholesaler chargebacks, rebates, customer returns and other
wholesaler fees.
Product revenues from the sale of human plasma collected at our plasma collection centers are recognized
at the time of transfer of title and risk of loss to the customer, which generally occurs at the time of
shipment. Product revenues are recognized at the time of delivery if the Company retains the risk of loss during
shipment.
For the year ended December 31, 2017, BPC represented 47% of our consolidated revenues, and the
revenue attributable to the amendment of a contract manufacturing agreement represented 31% of our consolidated
revenues. For the year ended December 31, 2016, BPC and another customer represented approximately 82% and
14%, respectively, of our consolidated revenues.
50
Accounts Receivable
Accounts receivable are reported at realizable value, net of allowances for contractual credits and doubtful
accounts, which are recognized in the period the related revenue is recorded. At December 31, 2017, Sanofi
accounted for 48% of our total accounts receivable and Sanofi, BPC, AmerisourceBergen and McKesson
Corporation accounted for 96% of consolidated accounts receivable. At December 31, 2016, BPC accounted for
95% of our total accounts receivable.
Cost of Product Revenue
Cost of product revenue includes expenses related to process development as well as scientific and
technical operations when these operations are attributable to marketed products. When the activities of these
operations are attributable to new products in development, the expenses are classified as research and development
expenses. Expenses associated with remediating the issues identified in the Warning Letter for the year ended
December 31, 2017 of approximately $3.8 million are expensed as incurred and are reflected in cost of product
revenue. In addition, for the year ended December 31, 2017, all operating expenses associated with the Boca
Facility, other than the limited Nabi-HB production that was capitalized into inventory, have been expensed as
incurred since the date of the Biotest Transaction.
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the
award, and is recognized as expense over the grantee’s requisite vesting period on a straight-line basis. For the
purpose of valuing stock options granted to our employees, directors and officers, we use the Black-Scholes option
pricing model. We granted options to purchase an aggregate of 3,276,043 and 1,535,187 shares of Common Stock
during the years ended December 31, 2017 and 2016, respectively. To determine the risk-free interest rate, we
utilized the U.S. Treasury yield curve in effect at the time of the grant with a term consistent with the expected term
of our awards. The expected term of the options granted is in accordance with Staff Accounting Bulletins 107 and
110, and is based on the average between vesting terms and contractual terms. The expected dividend yield reflects
our current and expected future policy for dividends on our Common Stock. The expected stock price volatility for
our stock options was calculated by examining the pro rata historical volatilities for similar publicly traded industry
peers and the trading history for our Common Stock. We will continue to analyze the expected stock price volatility
and expected term assumptions and will adjust our Black-Scholes option pricing assumptions as appropriate. In
accordance with Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based
Payment Accounting (Topic 718), we have elected not to establish a forfeiture rate, as stock-based compensation
expense related to forfeitures of unvested stock options is fully reversed at the time of forfeiture.
Research and Development Expenses
Our research and development (“R&D”) costs are expensed as incurred, including costs associated with (i)
planning and conducting clinical trials; (ii) drug product manufacturing for RI-002, including the cost of plasma,
plasma storage and transportation costs; (iii) quality testing, validation, regulatory consulting and filing fees; and
(iv) employees’ compensation expenses directly related to R&D activities.
Impairment of Long-Lived Assets
We assess the recoverability of its 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 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 year ended December 31, 2017, we recorded an impairment charge in the amount of $0.8 million
related to assets acquired in the Biotest Transaction. For the year ended December 31, 2016, we determined that
there was no impairment of its long-lived assets.
51
Goodwill is not amortized, but is assessed for impairment on an annual basis or more frequently if
impairment indicators exist. We have the option to perform a qualitative assessment of goodwill to determine
whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including
goodwill and other intangible assets. If we were to conclude that this is the case, then we must perform a goodwill
impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment charge is
recorded to the extent the reporting unit’s carrying value exceeds its fair value, with the impairment loss recognized
not to exceed the total amount of goodwill allocated to that reporting unit. We did not recognize any impairment
charges related to goodwill for the year ending December 31, 2017.
Recent Accounting Pronouncements
On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”), was signed into law. The
JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public
companies. We could be an emerging growth company until December 31, 2018, which is the last day of the fiscal
year following the fifth anniversary of the first sale of our common equity securities pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the “Securities Act”). However, if certain
events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual
gross revenues exceed $1 billion or we issue more than $1 billion of non-convertible debt in any three-year period,
we would cease to be an emerging growth company prior to the end of such five-year period. As an “emerging
growth company,” we may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised
accounting standards applicable to public companies until such standards would otherwise apply to private
companies. We may take advantage of this extended transition period until the first to occur of the date that we (i)
are no longer an “emerging growth company” or (ii) affirmatively and irrevocably opt out of this extended transition
period. We have elected to take advantage of the benefits of this extended transition period. Our consolidated
financial statements may therefore not be comparable to those of companies that comply with such new or revised
accounting standards. Until the date that we are no longer an “emerging growth company” or affirmatively and
irrevocably opt out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or
revised accounting standard that applies to our consolidated financial statements and that has a different effective
date for public and private companies, we will disclose the date on which adoption is required for non-emerging
growth companies and the date on which we will adopt the recently issued accounting standard. As an emerging
growth company, we are also exempt from the requirement to have our independent auditors provide an attestation
report on our internal control over financial reporting.
In May 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards
Update (“ASU”) No. 2017-09, Modification Accounting for Share-Based Payment Arrangements, which amends the
scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types
of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply
modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair
value, vesting conditions, and classification of the awards are the same immediately before and after the
modification. The ASU is effective for annual reporting periods, including interim periods within those annual
reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any
interim period. We do not expect this new guidance to have a material impact on our consolidated financial
statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of
a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should
be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for
determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an
input and a substantive process that contribute to an output to be considered a business. This standard is effective for
fiscal years beginning after December 15, 2017, including interim periods within that reporting period. We adopted
this standard in the second quarter of 2017, and the adoption of this standard did not have a material impact on our
consolidated financial statements as of and for the year ended December 31, 2017.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which
removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of
the goodwill impairment test. As a result, under the ASU, “an entity should perform its annual, or interim, goodwill
52
impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an
impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however,
the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU is
effective prospectively for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim
or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted ASU 2017-04 in
the fourth quarter of 2017, and adoption of this update did not have a material impact on our consolidated financial
statements as of and for the year ended December 31, 2017.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which clarifies guidance and
presentation related to restricted cash in the statement of cash flows, including stating that restricted cash should be
included within cash and cash equivalents in the statement of cash flows. The standard is effective for fiscal years
beginning after December 15, 2017, with early adoption permitted, and is to be applied retrospectively. We adopted
this standard in the fourth quarter of 2017, and adoption of this update did not have a material impact on our
consolidated financial statements as of and for the years ended December 31, 2017 and 2016.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment
Accounting (Topic 718), which provides for simplification of certain aspects of employee share-based payment
accounting including income taxes, classification of awards as either equity or liabilities, accounting for forfeitures
and classification on the statement of cash flows. We adopted this standard in the first quarter of 2017, and the
adoption of this standard did not have a material impact on our consolidated financial statements as of and for the
year ended December 31, 2017.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to
recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. The
guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years. Early application is permitted. ASU 2016-02 requires modified retrospective adoption for all leases
existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are
currently evaluating the impact that the standard may have on our consolidated financial statements and related
disclosures.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740), Balance Sheet
Classification of Deferred Taxes, which includes amendments that require deferred tax liabilities and assets be
classified as non-current in a classified statement of financial position. The amendments in this ASU are effective
for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018. Earlier application is permitted as of the beginning of an interim
or annual reporting period. The amendments may be applied either prospectively to all deferred tax liabilities and
assets or retrospectively to all periods presented. We adopted this standard in the second quarter of 2017. Because
we carry a full valuation allowance against our deferred tax assets as of December 31, 2017 and 2016, adoption of
this standard did not have a material impact on our consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying
the Accounting for Measurement-Period Adjustments, which includes amendments that require an acquirer to
recognize adjustments to provisional amounts that are identified during the measurement period in the reporting
period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer
record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or
other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had
been completed at the acquisition date. The amendments in this ASU require an entity to present separately on the
face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings
by line item that would have been recorded in previous reporting periods if the adjustment to the provisional
amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for fiscal years
beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The
amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective
date of the ASU with earlier application permitted for financial statements that have not yet been made available for
issuance. We adopted this standard in the first quarter of 2017, and the adoption of this standard did not have a
material impact on our consolidated financial statements as of and for the year ended December 31, 2017.
53
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of
Inventory. The standard requires entities to measure most inventory “at the lower of cost and net realizable value,”
thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or
market (market in this context is defined as one of three different measures, one of which is net realizable value).
We adopted this standard in the first quarter of 2017, and the adoption of this standard did not have a material
impact on our consolidated financial statements as of and for the year ended December 31, 2017.
In May 2014, the FASB issued new guidance related to revenue recognition, ASU 2014-09, Revenue from
Contracts with Customers (“ASC 606”), which outlines a comprehensive revenue recognition model and supersedes
most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon
transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in
exchange for those goods or services. ASC 606 defines a five-step approach for recognizing revenue, which may
require a company to use more judgment and make more estimates than under the current guidance. The new
guidance becomes effective in calendar year 2018 and early adoption in calendar year 2017 is permitted. Two
methods of adoption are permitted: (a) full retrospective adoption, meaning the standard is applied to all periods
presented; or (b) modified retrospective adoption, meaning the cumulative effect of applying the new guidance is
recognized at the date of initial application as an adjustment to the opening retained earnings balance.
In March 2016, April 2016 and December 2016, the FASB issued ASU No. 2016-08, Revenue From
Contracts with Customers (ASC 606): Principal Versus Agent Considerations, ASU No. 2016-10, Revenue From
Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing, and ASU No. 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue From Contracts with Customers, respectively,
which further clarify the implementation guidance on principal versus agent considerations contained in ASU No.
2014-09. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, narrow-scope
improvements and practical expedients that provide clarification on assessing the collectability criterion,
presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition.
These standards became effective for the Company in the first quarter of 2018.
We will adopt the new standard and related updates effective January 1, 2018, using the modified
retrospective method of adoption. Based on our review of the terms and conditions of our existing customer
contracts and applying the five discrete criteria required for recognizing revenue as set forth in ASU 2014-09, we do
not expect the new revenue recognition guidance to have a material impact on our consolidated financial statements.
Year Ended December 31, 2017 Compared to December 31, 2016
Our results of operations for the year ended December 31, 2017 reflect the results of operations attributable
to the Biotest Assets effective as of June 6, 2017. As a result, our operating results for the year ended December 31,
2017 are generally not comparable to our operating results for the year ended December 31, 2016. The following
table presents a summary of the changes in our results of operations for the year ended December 31, 2017 as
compared to December 31, 2016:
Revenues.....................................................................................
Cost of product revenue (exclusive of amortization expense
shown below) ......................................................................
Gross (loss) profit .......................................................................
Research and development expenses ..........................................
Plasma center operating expenses ..............................................
Asset impairment charge ............................................................
Amortization of intangibles ........................................................
Selling, general and administrative expenses .............................
Loss from operations ..................................................................
Interest expense ..........................................................................
Other (expense) income, net .......................................................
Net loss .......................................................................................
54
Year Ended December 31,
2017
$ 22,760,560
2016
$ 10,661,037
113%
Percentage
Increase/
(Decrease)
29,164,321
(6,403,761)
6,229,587
6,503,750
845,389
1,234,674
18,092,835
(39,309,996)
(3,285,847)
(1,163,132)
6,360,761
4,300,276
7,688,238
5,447,691
—
—
8,494,742
(17,330,395)
(2,239,569)
54,813
$ (43,758,975) $ (19,515,151)
359%
-249%
-19%
19%
NM
NM
113%
127%
47%
NM
124%
Revenues
We recorded total revenues of $22.8 million for the year ended December 31, 2017, as compared to $10.7
million for the year ended December 31, 2016. The increase in total revenue of $12.1 million is primarily due to: (i)
sales of Nabi-HB in the amount of $4.0 million for 2017, with no comparable amount in 2016, (ii) $7.0 million of
revenue related to an amendment to the Sanofi Manufacturing Agreement (as defined below) that we assumed as
part of the Biotest Transaction; and (iii) an increase in sales of plasma attributable to our ADMA BioCenters plasma
collection centers segment of $1.1 million in 2017 due to higher collection volume.
In September 2011, BPC entered into a manufacturing agreement, as subsequently amended, with Sanofi
(the “Manufacturing Agreement”) in which Sanofi purchased from BPC specific Batches (as defined therein) of
purified Rabies Fraction II Paste manufactured from human plasma containing rabies antibodies (the “Product”).
The number of Batches of Product purchased by Sanofi under the Manufacturing Agreement vary from year to year
and are subject to certain minimum purchase requirements by Sanofi. In the event that Sanofi fails to purchase any
quantity of Product as part of its Firm Purchase Commitment (as defined under the Manufacturing Agreement),
Sanofi is required to pay us, as the successor-in-interest to BPC, for the number of Batches not purchased in any
given year. In addition, under the Manufacturing Agreement, damages are owed to Sanofi in the event the minimum
Batch amounts are not manufactured or fail to comply with the supply plan and an escalating low single digit to low
double digit percentage discount is applied to Batches which are delayed. The Manufacturing Agreement contains
customary representations and warranties, mutual confidentiality provisions and mutual indemnification provisions
subject to limitations of liability, and continues in effect for up to two years from the date of termination of the
human Rabies Hyperimmune Plasma agreement between Sanofi and BPC.
In December 2017, we further amended the Manufacturing Agreement to modify the number of Batches of
Product which Sanofi is to purchase from us in 2018 and 2019 and to update the supply plan which describes the
agreed-upon timing for production of such Batches of Product. Pursuant to this third amendment to the
Manufacturing Agreement, we are liable to Sanofi for liquidated damages in the event that we fail to supply a
minimum number of Batches of Product or in the event we fail to adhere to the updated supply plan. Furthermore,
pursuant to this third amendment to the Manufacturing Agreement, in consideration for certain quantities of Product
that we would have otherwise been contractually obligated to supply, and that Sanofi would have been contractually
obligated to purchase, prior to entry into such amendment, Sanofi agreed to pay us a one-time compensation fee in
the aggregate amount of $7.0 million.
Cost of Product Revenue
Cost of product revenue was $29.2 million for the year ended December 31, 2017, as compared to $6.4
million for the year ended December 31, 2016, an increase of $22.8 million. The increase is mainly attributable to
unabsorbed manufacturing costs related to the Boca Facility of $12.8 million, third party consultant fees pertaining
to the remediation efforts in response to the Warning Letter in the amount of $3.8 million, cost of product revenue
related to Nabi-HB in the amount of $3.3 million, $1.6 million of production costs incurred in the fourth quarter of
2017 related to of two lots of Bivigam and a sales volume-related increase at ADMA BioCenters of $0.9 million.
Cost of product revenue related to Nabi-HB reflects the sale of inventory acquired in the Biotest
Transaction, which has been carried on our consolidated balance sheet at its estimated fair value. As this inventory is
liquidated in the normal course of business and replaced with inventory produced subsequent to the date of the
Biotest Transaction, we expect that the margins for Nabi-HB will be higher in future periods as compared to those
realized during the year ended December 31, 2017.
Although we expect that our Bivigam inventory will ultimately be available for commercial sale, we have
established an allowance for all of this inventory in the amount of $1.6 million at December 31, 2017, due to
uncertainties surrounding the Warning Letter and the PAS related to improvements in the manufacturing process
that must be filed with and approved by the FDA prior to this inventory being available for commercial sale.
55
Research and Development Expenses
R&D expenses were $6.2 million for the year ended December 31, 2017, a decrease of $1.4 million as
compared to the same period of a year ago. The decrease is primarily the result of lower validation, testing, BLA and
production costs related to RI-002 in 2017. Once we have further clarity from the FDA regarding the timing of our
expected BLA resubmission and anticipated RI-002 approval, we would then expect our R&D costs to increase.
Plasma Center Expenses
Plasma center expenses were $6.5 million for the year ended December 31, 2017, an increase of $1.1
million from the $5.4 million of plasma center expenses for the year ended December 31, 2016. The increase in
plasma center expenses is attributable to hiring additional staff and increasing the hours of operations at our
Marietta, GA location during the first quarter of 2017.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (“SG&A”) were $18.1 million for the year ended December
31, 2017, an increase of $9.6 million as compared to the year ended December 31, 2016. The year ended December
31, 2017 reflects $5.9 million of SG&A expenses associated with BTBU with no comparable amounts in 2016, and
Biotest Transaction costs of $3.9 million, including fees paid for legal, accounting and financial advisory services
related to due diligence and other costs associated with the acquisition of the Biotest Assets and the issuance of a
fairness opinion, as compared to $1.9 million for the year ended December 31, 2016. SG&A expenses in 2017 also
include $0.3 million of one-time compensation expense associated with the Biotest Transaction, an increase in
insurance expense of $0.5 million associated with the acquisition of the Biotest Assets and an increase in stock-
based compensation of approximately $0.3 million.
Amortization of Intangibles
During the year ended December 31, 2017, we incurred amortization expense of $1.2 million related to
intangible assets acquired in the Biotest Transaction (see Notes 3 and 6 to the consolidated financial statements),
with no comparable amount for the year ended December 31, 2016.
Asset Impairment Charge
During the year ended December 31, 2017, we recorded an impairment charge in the amount of $0.8
million related to certain assets acquired in the Biotest Transaction (see Note 3 to the consolidated financial
statements), with no comparable amount for the year ended December 31, 2016.
Loss from Operations
Our operating loss was $39.3 million for the year ended December 31, 2017, as compared to $17.3 million
for the year ended December 31, 2016. The increase was mainly due to the increase in cost of product revenue of
$22.8 million, the $9.6 million increase in SG&A expenses, the $1.1 million increase in plasma center expenses and
amortization of intangible assets of $1.2 million, partially offset by the $12.1 million increase in total revenues and
the $1.4 million decrease in R&D expenses.
Interest Expense
Interest expense was $3.3 million for the year ended December 31, 2017, compared to $2.2 million for the
year ended December 31, 2016. The increase is due to higher interest expense, including amortization of debt
discount, resulting from higher average debt balances in 2017 due to (i) the $15 million note payable to BPC, (ii) the
increase of $4.0 million to our then-current debt to Oxford Finance, LLC (“Oxford”) in May 2016 and (iii) the
refinancing of the Oxford debt in October 2017, which resulted in an additional $10 million of interest-bearing debt
(see “Liquidity and Capital Resources”).
56
Other (Expense) Income
Other expense, net was $1.2 million for the year ended December 31, 2017, as compared to other income of
approximately $55,000 for the year ended December 31, 2016. The increase is mainly due to the loss on
extinguishment of debt in the amount of $1.2 million, primarily the result of writing off unamortized debt discount,
recognized in 2017 in connection with the refinancing of the Oxford debt.
Net Loss
Net loss was $43.8 million for the year ended December 31, 2017, an increase of $23.9 million from the
prior year. The increase was mainly due to the increases in operating loss and, to a lesser extent, interest expense, as
well as the loss on extinguishment of debt in 2017, with no comparable amount in 2016.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2017, we had working capital of $53.7 million, including cash and cash equivalents of
$43.1 million, and stockholders’ equity of $40.3 million, as compared to working capital of $10.4 million, including
cash and cash equivalents of $9.9 million, and a stockholders’ deficit of $4.5 million as of December 31, 2016. We
have had limited revenue from operations, incurred an accumulated deficit of $150.7 million since inception, and for
the years ended December 31, 2017 and 2016 we had negative cash flows from operations of $37.3 million and
$18.3 million, respectively. We have funded our operations to date primarily from the sale of our equity and debt
securities, acquisition proceeds from the Biotest Transaction and loans from our primary stockholders.
We expect to continue to spend substantial amounts on product development, quality assurance, regulatory
affairs, procurement of raw material plasma, manufacturing, marketing, sales and conducting clinical trials for our
product candidates and purchasing clinical trial materials from our suppliers, some of which may be required by the
FDA. We currently anticipate, based upon our projected revenue and expenditures, that our cash, cash equivalents,
projected revenue and accounts receivable, along with the $10.0 million we expect to be able to draw down under
the Credit Agreement (as defined below), will be sufficient to fund our operations, as currently conducted, through
the end of 2018. In order to have sufficient cash to fund our operations thereafter and to continue as a going concern,
we will need to raise additional equity prior to the end of 2018. This time frame may change based upon how
quickly we are able to execute on our quality management systems’ enhancement plans for the ADMA
BioManufacturing operations, commercial manufacturing ramp-up activities and the various financing options we
are exploring. We currently have no firm commitments for additional financing, and we cannot provide any
assurance that we will be able to secure additional financing on terms that are acceptable to us, or at all. Failure to
secure any necessary financing in a timely manner and on commercially reasonable terms could have a material
adverse effect on our business plan and financial performance and we could be forced to delay or discontinue our
product development, clinical trial or commercialization activities, delay or discontinue the approval efforts for any
of our potential products, or potentially cease operations. In addition, we could also be forced to reduce or forgo
sales and marketing efforts and forgo attractive business opportunities.
Furthermore, if the assumptions underlying our estimated expenses are incorrect, we may have to raise
additional capital sooner than anticipated. Because of numerous risks and uncertainties associated with the research
and development and potential future commercialization of our product candidates, we are unable to estimate with
certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical
trials and development activities. Our current estimates may be subject to change as circumstances regarding our
business requirements evolve. We may decide to raise capital through public or private equity offerings and such
financings may only be available on unattractive terms, resulting in significant dilution of stockholders’ interests
and, in such event, the value and potential future market price of our Common Stock may decline. We may also
decide to obtain additional debt financing or a bank credit facility, subject to the restrictions contained in the Credit
Agreement, or to enter into corporate collaboration and licensing arrangements. The sale of additional equity or debt
securities, if convertible, could result in dilution to our current stockholders. The incurrence of additional
indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our
operations or other future financing alternatives.
57
Our long-term liquidity depends upon our ability to raise additional capital, fund our research and
development and commercial programs and achieve commercial status for our products and product candidates in
order to generate sufficient revenues to cover our operating expenses and meet our obligations on a timely basis. We
believe that we will continue to incur losses and negative cash flows from operating activities through the
foreseeable future. As such, these conditions raise substantial doubt about our ability to continue as a going concern.
On November 13, 2017, we completed an underwritten public offering of 19,523,255 shares of Common
Stock for gross proceeds of $42.0 million. Net proceeds from this offering, after payment of underwriting discounts
and offering expenses of $2.8 million, were $39.2 million. The proceeds from this offering have been or are being
used for (i) the purchase of raw material inventory and the ramp-up of our manufacturing capabilities, (ii) continued
remediation of the issues identified in the CRL and the Warning Letter and completion of our internal quality
management systems overhaul, (iii) capital expenditures for the Boca Facility, (iv) product launch and medical
education campaigns, (v) the build-out of our third plasma collection facility, (vi) research and development
activities for our plasma collection programs and specialty plasma products, and (vii) working capital needs and
general corporate purposes, including expenses associated with improving the FDA inspection classification relative
to the Warning Letter, filing the PAS and obtaining marketing clearance for the relaunch of Bivigam and refiling the
BLA for RI-002.
On October 10, 2017 (the “Marathon Closing Date”), we entered into a Credit Agreement (the “Credit
Agreement”) with Marathon Healthcare Finance Fund, L.P. (“Marathon” or the “Lender”) and Wilmington Trust,
National Association, as the administrative agent for the Lender (the “Administrative Agent”). The Credit
Agreement provides for a senior secured term loan facility in an aggregate amount of up to $40.0 million
(collectively, the “Credit Facility”), comprised of (i) a term loan made on the Marathon Closing Date in the principal
amount of $30.0 million (the “Tranche One Loan”), and (ii) an additional term loan to be made in the maximum
principal amount not to exceed $10.0 million (the “Tranche Two Loan” and, together with the Tranche One Loan,
the “Loans”), which Tranche Two Loan availability is subject to the satisfaction of certain conditions, including, but
not limited to, those described below. The Loans each have a maturity date of April 10, 2022 (the “Maturity Date”),
subject to acceleration pursuant to the Credit Agreement, including upon an Event of Default (as defined in the
Credit Agreement).
On the Marathon Closing Date, we used approximately $17.0 million of the Tranche One Loan to retire and
pay in full our previously existing credit facility, as amended, with Oxford Finance, LLC (“Oxford”) and all of the
obligations thereunder, including the end-of-term liability of $1.8 million and prepayment penalties of $0.2 million.
We also (i) used $5.5 million of the Tranche One Loan to pre-fund a debt service reserve account in accordance with
the terms of the Credit Agreement, and (ii) paid diligence fees, legal and other expenses associated with the Credit
Facility in the amount of approximately $1.5 million, which fees exclude a deferred facility fee to Marathon equal to
9.20% of the Tranche One Loan payable at maturity. The remaining $6.0 million of proceeds was used for the
continued remediation of the issues identified in the CRL and the Warning Letter and for general corporate
purposes.
The obligation of Marathon to make the Tranche Two Loan is subject to the satisfaction of certain
conditions related to FDA approval for specified products and the Company’s financial condition, including, without
limitation, the following: (a) (i) the FDA must validate the improved manufacturing process of Bivigam and (ii) not
less than $0.5 million in net revenue must be generated in calendar year 2018 from the sale in the U.S. of Bivigam;
or (b) (i) the FDA must approve the commercialization of RI-002 and (ii) not less than $0.5 million in net revenue
must be generated in calendar year 2019 from the sale in the U.S. of RI-002.
On the Marathon Closing Date, we issued a promissory note in favor of the Administrative Agent in the
principal amount of $30.0 million (the “Tranche One Note”), evidencing our indebtedness resulting from the
Tranche One Loan. Borrowings under the Credit Agreement bear interest at a rate per annum equal to LIBOR plus
9.50% with a 1% LIBOR floor; provided, however, that in the event that we achieve sales of not less than $61.7
million for the 2018 calendar year and the Tranche Two Loan has been funded, then the interest rate on the
borrowings under the Credit Agreement will decrease to LIBOR plus 7.75% with a 1% LIBOR floor. During an
Event of Default under the Credit Agreement, the outstanding amount of indebtedness under the Credit Agreement
will bear interest at a rate per annum equal to the interest rate then applicable to the borrowings under the Credit
Agreement plus 5% per annum. Quarterly cash interest payments are due the first business day of each March, June,
September and December, beginning on December 1, 2017.
58
The Company will pay Marathon a facility fee in an amount equal to 9.20% of the amount funded, payment
of which is deferred until the Maturity Date pursuant to the terms of the Credit Agreement. Commencing on October
10, 2020, and on the first business day of each month, we are required to make principal payments on the Tranche
One Loan (and Tranche Two Loan in the event it shall have been funded) in equal monthly installments over 18
months, subject to certain conditions in the Credit Agreement. The outstanding principal amount of the Loans,
together with all accrued interest thereon, is due on the Maturity Date.
As consideration for the Credit Agreement, we issued warrants to purchase an aggregate of 339,301 shares
of our Common Stock to the Lender and certain of the Lender’s affiliates (the “Tranche One Warrants”). The
Tranche One Warrants, which we valued at $0.6 million, have (i) an exercise price equal to $3.0946, which was the
trailing 10-day volume weighted-average price of our Common Stock prior to the Marathon Closing Date, and (ii)
an expiration date of October 10, 2024. We issued the Tranche One Warrants in reliance upon an exemption from
registration contained in Section 4(2) under the Securities Act. The Tranche One Warrants and the shares of
Common Stock issuable thereunder may not be offered, sold, pledged or otherwise transferred in the U.S. absent
registration or an applicable exemption from the registration requirements under the Securities Act.
Based on the fair value of the Tranche One Warrants, the facility fee and the fees and expenses associated
with obtaining the Credit Facility, the effective interest rate on the Tranche One Note is approximately 16.5%. Our
obligations under the Credit Agreement are secured by a first-priority lien and security interest in substantially all of
our assets, including a mortgage on the Boca Facility, and those of ADMA’s subsidiaries as well as all of the equity
interests in each subsidiary.
The Credit Agreement contains market representations and warranties, affirmative covenants, negative
covenants, financial covenants, and conditions that are customarily required for similar financings. The affirmative
covenants, among other things, require us to undertake various reporting requirements. The negative covenants
restrict or limit our and our subsidiaries’ ability to, among other things, incur new indebtedness; create liens on
assets; engage in certain fundamental corporate changes or changes to our business activities; sell or otherwise
dispose of assets; repurchase stock, pay dividends; repay certain other indebtedness; engage in certain affiliate
transactions; or enter into any other agreements that restrict our ability to make loan repayments. In addition, we
may not permit our liquidity, defined in the Credit Agreement as cash held in the debt service reserve account and
any other deposit account subject to a control agreement with the Administrative Agent, to be less than $5.5 million
at any time. The Credit Agreement also required the establishment of the debt service reserve account. We are
currently required to maintain a minimum balance in this account of $5.5 million. Upon the satisfaction of certain
conditions related to some of our leased properties, the minimum required balance in the debt service reserve
account will be reduced to $4.0 million.
The Credit Agreement also contains customary Events of Default which include, among others, non-
payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties,
bankruptcy and insolvency events, material judgments, cross-defaults to material contracts and events constituting a
change of control. The occurrence of an Event of Default could result in, among other things, the termination of
commitments under the Credit Facility and the declaration that all outstanding Loans are immediately due and
payable in whole or in part.
In June 2017, we received $27.5 million in connection with the Biotest Transaction, comprised of $12.5
million in cash from BPC and an unsecured subordinated 6% note payable to BPC in the amount of $15.0 million.
Also in June 2017, BPC provided us with a firm equity commitment to invest up to an additional $12.5 million in
future equity financings of the Company, and this commitment was invested in the foregoing November 2017 public
offering of Common Stock.
59
The following table sets forth a summary of our cash flows for the periods indicated:
Year Ended
December 31,
2017
2016
Net cash used in operating activities ....................................................................... $ (37,271,774) $ (18,268,973)
Net cash provided by investing activities ............................................................... 15,213,856
904,583
Net cash provided by financing activities ............................................................... 60,750,625 16,838,298
(526,092)
Net change in cash and cash equivalents ................................................................ 38,692,707
Cash and cash equivalents - beginning of year .......................................................
9,914,867 10,440,959
Cash and cash equivalents, including restricted cash - end of year ........................ $ 48,607,574 $ 9,914,867
The following table illustrates the primary components of our cash flows from operations:
Year Ended
December 31,
2017
2016
Net loss ................................................................................................................... $ (43,758,975) $ (19,515,151)
2,253,759
Non-cash expenses, gains and losses ......................................................................
(93,559)
Changes in accounts receivable ..............................................................................
(1,574,373)
Changes in inventories ............................................................................................
(202,887)
Changes in prepaid expenses and other current assets ............................................
893,798
Changes in accounts payable and accrued expenses ...............................................
(30,560)
Other .......................................................................................................................
Cash used in operations .......................................................................................... $ (37,271,774) $ (18,268,973)
6,769,443
(2,862,127)
589,318
(941,272)
3,426,549
(494,710)
Cash used in operations increased by $19.0 million for the year ended December 31, 2017 as compared to
the year ended December 31, 2016, mainly due to the higher net loss, partially offset by an increase in non-cash
charges. The increase in net loss in 2017 is primarily the result of the Biotest Transaction and the operations
associated with the Boca Facility. The increase in non-cash expenses in 2017 is mainly due to increased depreciation
expense on property and equipment and amortization expense for intangible assets acquired in the Biotest
Transaction (see Note 3 to the consolidated financial statements), and to the loss on extinguishment of debt
recognized in connection with repayment of the indebtedness under the Oxford credit facility.
Net cash provided by investing activities was $15.2 million for the year ended December 31, 2017, which
reflects the $12.5 million cash received by us in connection with the acquisition of the Biotest Assets, and the
redemptions of short-term investments in the amount of $5.4 million, partially offset by capital expenditures in the
amount of $2.7 million. Our capital expenditures were mainly the result of the continued build out of our third
ADMA BioCenters plasma collection facility. We expect our total capital expenditures will be between $3.5 million
and $4.0 million for fiscal 2018.
Net cash provided by investing activities was $0.9 million for the year ended December 31, 2016, which
was related to the redemption of short-term investments, net of purchases of such investments.
Net cash provided by financing activities totaled $60.8 million for the year ended December 31, 2017,
consisting primarily of $39.2 million of net proceeds from a public offering of Common Stock, $15.0 million
received from the issuance of the note payable to BPC and the refinancing of the Oxford indebtedness with the
Marathon Credit Facility, which resulted in net proceeds of approximately $11.5 million (including $5.5 million in
cash held in the debt service reserve account), partially offset by repayments on the principal balances of our notes
payable to Oxford in the amount of $5.0 million.
60
Net cash provided by financing activities totaled $16.8 million for the year ended December 31, 2016,
which consisted primarily of $12.9 million of net proceeds received from the issuance of Common Stock during the
second quarter of 2016 and $4.0 million received from the issuance of notes to Oxford during the second quarter of
2016.
Effect of Inflation
Inflation did not have a significant impact on ADMA’s net sales, revenues or income from continuing
operations in 2015, 2016 or 2017.
Off-Balance Sheet Arrangements
None.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
Our financial statements required to be filed pursuant to this Item 8 appear in a separate section of this
Annual Report on Form 10-K, beginning on page F-1.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We designed our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the
Exchange Act, to provide reasonable assurance that information required to be disclosed by us in reports we file or
submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required
disclosures.
Under the supervision and with the participation of our management, including our principal executive
officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of
December 31, 2017. Based on this evaluation, our principal executive officer and our principal financial officer
concluded that our disclosure controls and procedures as of December 31, 2017 are functioning effectively to
provide reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange
Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms, and (ii) accumulated and communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding disclosures.
A control system, no matter how well designed and operated, cannot provide absolute assurance that the
objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been detected.
Management’s Annual Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting for the Company. Internal control over financial reporting is defined in Rules 13a-15(f) and
15d-15(f) promulgated under the Exchange Act.
61
The Company’s management assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2017. In making this assessment, the Company’s management used the criteria set
forth by the Committee of Sponsoring Organization of the Treadway Commission in its 2013 “Internal Control-
Integrated Framework.” Based on this assessment, management concluded that, as of December 31, 2017, the
Company’s internal control over financial reporting is effective.
We are currently integrating the business processes and information systems in effect prior to the closing of
the Biotest Transaction with those of ADMA BioManufacturing, including internal controls. In accordance with
guidance issued by the SEC, registrants are permitted to exclude acquisitions from their assessment of internal
controls over financial reporting during the first year subsequent to the acquisition while integrating the acquired
operations. Management’s assessment of internal control over financial reporting excluded the operations of BTBU,
which was acquired on June 6, 2017 and immediately contributed into ADMA BioManufacturing. At December 31,
2017, ADMA BioManufacturing had total assets of $54.0 million.
As a smaller reporting company, the Company is not required to include in this Annual Report a report on
the effectiveness of internal control over financial reporting by the Company’s independent registered public
accounting firm.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended
December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met, and therefore, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within a company have been
detected. We do not expect that our disclosure controls and procedures or our internal control over financial
reporting are able to prevent with certainty all errors and all fraud.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information required to be disclosed by this Item with respect to our executive officers is incorporated into
this Annual Report on Form 10-K by reference from the section entitled “Executive Officers and Director and
Officer Compensation: Executive Officers” contained in our definitive proxy statement for our 2018 annual meeting
of stockholders, which we intend to file within 120 days of the end of our fiscal year ended December 31, 2017.
Information required to be disclosed by this Item about our Board is incorporated into this Annual Report
on Form 10-K by reference from the section entitled “Proposal No. 1: Election of Directors” contained in our
definitive proxy statement for our 2018 annual meeting of stockholders, which we intend to file within 120 days of
the end of our fiscal year ended December 31, 2017.
Information required to be disclosed by this Item about the Section 16(a) compliance of our directors and
executive officers is incorporated into this Annual Report on Form 10-K by reference from the section entitled
“Section 16(a) Beneficial Ownership Reporting Compliance” contained in our definitive proxy statement for our
2018 annual meeting of stockholders, which we intend to file within 120 days of the end of our fiscal year ended
December 31, 2017.
62
Information required to be disclosed by this Item about our Board, the Audit Committee of our Board, our
audit committee financial expert, our Code of Ethics and Business Conduct Standards, and other corporate
governance matters is incorporated into this Annual Report on Form 10-K by reference from the section entitled
“Corporate Governance” contained in our definitive proxy statement for our 2018 annual meeting of stockholders,
which we intend to file within 120 days of the end of our fiscal year ended December 31, 2017.
The text of our Code of Ethics and Business Conduct Standards, which applies to our directors and
employees (including our principal executive officer, principal financial officer, and principal accounting officer or
controller, and persons performing similar functions), is posted in the “Corporate Governance” section of the
Investors section of our website, http://www.admabiologics.com/. A copy of the Code of Ethics and Business
Conduct Standards can be obtained free of charge on our website. We intend to disclose on our website any
amendments to, or waivers from, our Code of Ethics and Business Conduct Standards that are required to be
disclosed pursuant to the rules of the SEC and The Nasdaq Stock Market.
The information presented on our website is not a part of this Annual Report on Form 10-K and the
reference to our website is intended to be an inactive textual reference only.
Item 11. Executive Compensation
Information required to be disclosed by this Item is incorporated into this Annual Report on Form 10-K by
reference from the section entitled “Executive Officers and Director and Officer Compensation” contained in our
definitive proxy statement for our 2018 annual meeting of stockholders, which we intend to file within 120 days of
the end of our fiscal year ended December 31, 2017.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Information required to be disclosed by this Item is incorporated into this Annual Report on Form 10-K by
reference from the sections entitled “Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters” contained in our definitive proxy statement for our 2018 annual meeting of
stockholders, which we intend to file within 120 days of the end of our fiscal year ended December 31, 2017.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required to be disclosed by this Item is incorporated in this Annual Report on Form 10-K
by reference from the section entitled “Certain Relationships and Related Transactions, and Director Independence”
contained in our definitive proxy statement for our 2018 annual meeting of stockholders, which we intend to file
within 120 days of the end of our fiscal year ended December 31, 2017.
Item 14. Principal Accountant Fees and Services
The information required to be disclosed by this Item is incorporated into this Annual Report on Form 10-K
by reference from the section entitled “Audit and Other Fees” contained in our definitive proxy statement for our
2018 annual meeting of stockholders, which we intend to file within 120 days of the end of our fiscal year ended
December 31, 2017.
63
Item 15. Exhibits, Financial Statement Schedules
Financial Statement Schedules
PART IV
(a) The following documents are filed as part of this Annual Report on Form 10-K:
(1) Consolidated Financial Statements.
Page
Report of Independent Registered Public Accounting Firm ................................................................................. F-2
Consolidated Balance Sheets as of December 31, 2017 and 2016 ....................................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 2017 and 2016 ................................. F-4
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended
December 31, 2017 and 2016 ...................................................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016 ................................ F-6
Notes to Consolidated Financial Statements......................................................................................................... F-7
(2) Financial Statement Schedules.
Required information is included in the footnotes to the financial statements.
(3) Exhibits.
See Exhibit Index immediately following the financial statements to this Annual Report on Form 10-K.
Item 16. Form 10-K Summary
None.
64
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 29, 2018
ADMA Biologics, Inc.
By:
Name:
Title:
/s/ Adam S. Grossman
Adam S. Grossman
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Adam S. Grossman
Adam S. Grossman
President and Chief Executive
Officer (Principal Executive Officer)
/s/ Brian Lenz
Brian Lenz
/s/ Steven A. Elms
Steven A. Elms
/s/ Dr. Jerrold B. Grossman
Dr. Jerrold B. Grossman
/s/ Bryant E. Fong
Bryant E. Fong
Director
Director
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Chairman of the Board of Directors and
March 29, 2018
Director
Vice Chairman of the Board of Directors and
March 29, 2018
March 29, 2018
March 29, 2018
March 29, 2018
March 29, 2018
March 29, 2018
March 29, 2018
/s/ Dov A. Goldstein, M.D.
Dov A. Goldstein, M.D.
Director
/s/ Lawrence P. Guiheen
Lawrence P. Guiheen
/s/ Eric I. Richman
Eric I. Richman
Director
Director
65
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ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm ............................................................................. F-2
Consolidated Balance Sheets as of December 31, 2017 and 2016 ................................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 2017 and 2016 ............................. F-4
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended
December 31, 2017 and 2016 .................................................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016 ............................ F-6
Notes to Consolidated Financial Statements..................................................................................................... F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of ADMA Biologics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ADMA Biologics, Inc. and Subsidiaries (the
Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in
stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to
as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its
operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in
the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue
as a going concern. As further discussed in Note 1 to the accompanying consolidated financial statements,
management believes that the Company will continue to incur net losses and negative net cash flows from operating
activities through the drug development, approval and commercialization preparation process. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2008.
Roseland, New Jersey
March 29, 2018
F-2
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016
December 31, December 31,
2017
2016
ASSETS
Current assets:
9,914,867
Cash and cash equivalents .................................................................................. $ 43,107,574 $
5,390,184
—
Short-term investments .......................................................................................
1,018,027
3,880,154
Accounts receivable, net .....................................................................................
5,020,146
12,628,181
Inventories ..........................................................................................................
313,914
2,050,740
Prepaid expenses and other current assets ..........................................................
—
Restricted cash ....................................................................................................
1,500,000
63,166,649 21,657,138
Total current assets ......................................................................................
2,000,784
30,466,858
Property and equipment, net ...................................................................................
—
4,849,350
Intangible assets, net ...............................................................................................
—
3,529,509
Goodwill .................................................................................................................
—
1,496,410
Assets to be transferred under purchase agreement ................................................
4,000,000
—
Restricted cash ........................................................................................................
Deposits and other assets ........................................................................................
27,163
510,057
TOTAL ASSETS .................................................................................................. $ 108,018,833 $ 23,685,085
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ................................................................................................ $
Accrued expenses ...............................................................................................
Current portion of notes payable .........................................................................
Current portion of deferred revenue ....................................................................
Other current liabilities .......................................................................................
Total current liabilities ....................................................................................
Notes payable, net of discount ................................................................................
End of term liability, notes payable ........................................................................
Deferred revenue, net of current portion ................................................................
Note payable - related party, net of discount ..........................................................
Obligation to transfer assets under purchase agreement .........................................
Other non-current liabilities ....................................................................................
TOTAL LIABILITIES .........................................................................................
5,920,873 $
3,318,478
—
142,834
57,998
2,564,681
2,385,356
6,111,111
145,154
16,559
9,440,183 11,222,861
25,368,458 12,321,640
1,790,000
2,760,000
2,690,033
2,547,199
—
14,842,396
12,621,844
—
117,813
105,996
67,686,076 28,142,347
COMMITMENTS AND CONTINGENCIES....................................................
—
—
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $0.0001 par value, 10,000,000 shares authorized,
no shares issued and outstanding ....................................................................
—
—
Common Stock - voting, $0.0001 par value, 75,000,000 shares
authorized, 36,725,499 and 12,886,741 shares issued and outstanding ..........
3,673
1,289
Common Stock - non-voting, $0.0001 par value, 8,591,160 shares
authorized, 8,591,160 and 0 shares issued and outstanding ............................
—
Additional Paid-In Capital .................................................................................. 191,022,018 102,476,267
Accumulated Deficit ........................................................................................... (150,693,793) (106,934,818)
(4,457,262)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)..........................................
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)....... $ 108,018,833 $ 23,685,085
40,332,757
859
The accompanying notes are an integral part of these consolidated financial statements.
F-3
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2017 and 2016
REVENUES:
Product revenue ................................................................................................... $ 15,617,726 $ 10,518,203
142,834
License revenue ...................................................................................................
—
Other revenue .......................................................................................................
Total Revenues ............................................................................................... 22,760,560 10,661,037
142,834
7,000,000
2017
2016
OPERATING EXPENSES:
Cost of product revenue (exclusive of amortization expense shown below) ....... 29,164,321
6,229,587
Research and development ..................................................................................
6,503,750
Plasma centers .....................................................................................................
845,389
Asset impairment charge......................................................................................
1,234,674
Amortization of intangibles .................................................................................
Selling, general and administrative ...................................................................... 18,092,835
6,360,761
7,688,238
5,447,691
—
—
8,494,742
TOTAL OPERATING EXPENSES..................................................................... 62,070,556 27,991,432
LOSS FROM OPERATIONS .............................................................................. (39,309,996) (17,330,395)
OTHER INCOME (EXPENSE):
Interest and other income .....................................................................................
Interest expense....................................................................................................
Loss on extinguishment of debt ...........................................................................
Other (expense) income .......................................................................................
OTHER EXPENSE, NET .....................................................................................
57,228
(3,285,847)
(1,210,216)
(10,144)
(4,448,979)
50,317
(2,239,569)
—
4,496
(2,184,756)
NET LOSS .............................................................................................................. $ (43,758,975) $ (19,515,151)
BASIC AND DILUTED LOSS PER COMMON SHARE ................................. $
(1.91) $
(1.61)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and Diluted ............................................................................................... 22,896,042 12,153,407
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
Years Ended December 31, 2017 and 2016
Balance at December 31, 2015 ...... 10,713,087 $
Issuance of common stock, net of
offering expenses ..................... 2,176,154
—
(2,500)
Stock-based compensation .............
Restricted stock ..............................
Warrants issued in connection with
—
note payable .............................
—
Net loss ...........................................
Balance at December 31, 2016 ...... 12,886,741
Stock-based compensation .............
—
Shares issued in connection with
Common Stock
Voting
Non-Voting
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
1,072
— $
— $ 88,239,569 $ (87,419,667) $
Total
820,974
217
—
—
—
—
1,289
—
—
—
—
—
—
—
—
— 12,900,324
1,250,074
—
—
—
— 12,900,541
1,250,074
—
—
—
86,300
—
—
— 102,476,267 (106,934,818)
—
—
86,300
— (19,515,151) (19,515,151)
(4,457,262)
1,561,659
1,561,659
—
acquisition ................................ 4,295,580
430 8,591,160
859 47,164,179
— 47,165,468
Warrants issued in connection with
note payable .............................
—
—
—
—
614,513
—
614,513
Issuance of common stock, net of
offering expenses ..................... 19,523,255
19,923
Stock options exercised ..................
Net loss ...........................................
—
Balance at December 31, 2017 ...... 36,725,499 $
1,952
2
—
—
—
—
3,673 8,591,160 $
— 39,199,850
— 39,197,898
7,504
—
—
7,502
—
— (43,758,975) (43,758,975)
859 $191,022,018 $(150,693,793) $ 40,332,757
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2017 and 2016
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................................................. $ (43,758,975) $ (19,515,151)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ......................................................................
Loss on disposal of fixed assets ....................................................................
Stock-based compensation ............................................................................
Asset impairment charge ..............................................................................
Amortization of debt discount ......................................................................
Loss on extinguishment of debt ....................................................................
Amortization of license revenue ...................................................................
2,692,301
10,144
1,561,659
845,389
781,567
1,021,217
(142,834)
469,576
—
1,250,074
—
676,943
(142,834)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable ......................................................................................
(93,559)
Inventories ....................................................................................................
(1,574,373)
Prepaid expenses and other current assets ....................................................
(202,887)
Other assets ...................................................................................................
—
Accounts payable ..........................................................................................
476,826
Accrued expenses .........................................................................................
416,972
Other current liabilities .................................................................................
(30,560)
Net cash used in operating activities ............................................................. (37,271,774) (18,268,973)
(2,862,127)
589,318
(941,272)
(482,894)
2,812,066
614,483
(11,816)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of short-term investments ....................................................................
Purchase of short-term investments ..............................................................
Purchase of property and equipment.............................................................
(2,676,328)
Cash acquired in acquisition transaction ....................................................... 12,500,000
Net cash provided by investing activities ..................................................... 15,213,856
5,390,184 16,657,993
— (15,680,000)
(73,410)
—
904,583
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ............................................................ (20,000,000)
—
Proceeds from issuance of common stock, net of offering expenses ............ 39,199,850 12,900,541
Proceeds from the exercise of stock options .................................................
—
7,504
Payment of end of term fee ...........................................................................
(1,790,000)
—
Proceeds from issuance of related party note payable .................................. 15,000,000
Proceeds from issuance of note payable ....................................................... 30,000,000
4,000,000
Payment of debt issuance costs .....................................................................
(47,104)
(1,650,170)
(15,139)
(16,559)
Payments of leasehold improvement loan ....................................................
Net cash provided by financing activities ..................................................... 60,750,625 16,838,298
(526,092)
Net increase (decrease) in cash and cash equivalents ........................................ 38,692,707
9,914,867 10,440,959
Cash and cash equivalents - beginning of year ..................................................
Cash and cash equivalents - end of year, including restricted cash ................. $ 48,607,574 $ 9,914,867
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
1. ORGANIZATION AND BUSINESS
ADMA Biologics, Inc. (“ADMA” or the “Company”) is a vertically integrated commercial
biopharmaceutical and specialty immunoglobulin company that manufactures, markets and develops specialty
plasma-derived biologics for the treatment of immune deficiencies and prevention of certain infectious diseases. The
Company’s targeted patient populations include immune-compromised individuals who suffer from an underlying
immune deficiency disorder or who may be immune-suppressed for medical reasons. ADMA operates through its
wholly-owned subsidiaries ADMA BioManufacturing, LLC (“ADMA BioManufacturing”) and ADMA Bio Centers
Georgia Inc. (“ADMA BioCenters”). ADMA BioManufacturing was formed in January 2017 to facilitate the
acquisition of the Biotest Therapy Business Unit (“BTBU”) of Biotest Pharmaceuticals Corporation (“BPC” and,
together with Biotest AG, “Biotest”) as more fully described below. ADMA BioCenters is the Company’s source
plasma collection business, with facilities located in Norcross, GA, Marietta, GA and Kennesaw, GA. Both the
Norcross and Marietta, GA facilities have approved licenses with the U.S. Food and Drug Administration (the
“FDA”) and certifications from the German Health Authority (the “GHA”) and the Korean Ministry of Food and
Drug Safety, and the Company filed a Biologics License Application with the FDA for its Kennesaw, GA facility in
December of 2017. ADMA BioCenters supplies ADMA with a portion of its raw material plasma for the
manufacture of RI-002, ADMA’s lead pipeline product candidate, which the Company is currently developing for
the treatment of Primary Immune Deficiency Disease (“PIDD”).
As discussed in Note 3, on June 6, 2017, ADMA completed the acquisition of certain assets (the “Biotest
Assets”) of BTBU, which include two FDA-licensed products, Nabi-HB (Hepatitis B Immune Globulin, Human)
and Bivigam (Immune Globulin Intravenous, Human), and a plasma fractionation facility located in Boca Raton, FL
(the “Boca Facility”) (the “Biotest Transaction”). In addition to Nabi-HB and Bivigam, BTBU also provides
contract manufacturing services for certain clients, including the sale of intermediate by-products. The Boca Facility
is FDA-licensed and certified by the GHA. Immediately following the closing of the Biotest Transaction, the Biotest
Assets were contributed into ADMA BioManufacturing.
Nabi-HB is a hyperimmune globulin that is rich in antibodies to the hepatitis B virus. Nabi-HB is indicated
for the treatment of acute exposure to blood containing hepatitis B surface antigen (“HBsAg”), prenatal exposure to
infants born to HBsAg-positive mothers, sexual exposure to HBsAg-positive persons and household exposure to
persons with acute Hepatitis B virus infection. FDA approval for Nabi-HB was received on March 24, 1999. ADMA
resumed production of Nabi-HB in the third quarter of 2017, as substantially all of the Nabi-HB inventory received
as part of the Biotest Transaction has been sold in the normal course of business.
Bivigam is indicated for the treatment of primary humoral immunodeficiency. FDA approval for Bivigam
was received on December 19, 2012, and sales commenced in the first quarter of 2013. In December 2016, Biotest
temporarily suspended the commercial production of Bivigam in order to focus on the completion of planned
improvements to the manufacturing process. ADMA resumed production of Bivigam late in the fourth quarter of
2017. The Bivigam inventory currently being produced will be used in conjunction with a Prior Approval
Supplement (the “PAS”), which is expected to be filed with the FDA during the first half of 2018. Upon approval of
the PAS, the Company intends to relaunch Bivigam, and, pending FDA approval, this relaunch is expected to take
place in the second half of 2018.
Concurrent with the closing of the Biotest Transaction, the Company received $27.5 million in cash from
Biotest, comprised of $12.5 million in cash from BPC and a $15.0 million loan from Biotest evidenced by a 6%
subordinated note payable to BPC with a maturity of 5 years (see Note 7). In addition, BPC committed to participate
in any future equity offering or private placement undertaken by the Company in an amount equal to up to $12.5
million on a pro-rata basis. The entire $12.5 million commitment was invested in the follow-on public offering of
the Company’s common stock, which closed on November 13, 2017 (see Note 8).
Prior to the closing of the Biotest Transaction, BTBU was the Company’s third-party manufacturer for RI-
002. In the third quarter of 2015, the FDA accepted for review the Company’s Biologics License Application for RI-
002 (the “BLA”) for the treatment of PIDD. In July 2016, the FDA issued a Complete Response Letter (the “CRL”)
to the Company for the BLA. Although the CRL did not cite any concerns with the clinical safety or efficacy data
for RI-002 submitted in the BLA, nor did the FDA request any additional clinical studies be completed prior to FDA
F-7
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
approval of RI-002, the CRL reaffirmed the issues set forth in the November 2014 warning letter (the “Warning
Letter”) that had been issued by the FDA to Biotest related to certain compliance issues identified at the Boca
Facility, and also identified certain outstanding inspection issues and deficiencies at the Boca Facility and certain of
the Company’s third-party vendors, and requested documentation of corrections for a number of these issues. The
FDA indicated in the CRL that it cannot grant final approval of the BLA until, among other things, these
deficiencies are resolved. Following the completion of the Biotest Transaction, ADMA now has control over the
regulatory, quality, general operations and drug substance manufacturing process at the Boca Facility, and the
Company’s highest priority has been the remediation of the outstanding compliance issues that were identified at the
Boca Facility in the Warning Letter. The Company has been working with a consulting firm consisting of quality
management systems and biologics production subject matter experts in preparation for a re-inspection by the FDA
in order to improve the FDA inspection classification relative to the Warning Letter compliance issues as indicated
in the CRL, and the Company believes it has been inspection-ready since the end of 2017. The Company expects a
re-inspection of the Boca Facility by the FDA to take place during the first half of 2018. Once the Warning Letter
status is improved following the FDA inspection, the Company anticipates that it will be in a position to refile the
BLA for RI-002 in the second half of 2018.
As of December 31, 2017, the Company had working capital of $53.7 million, including $43.1 million of
cash and cash equivalents. Based upon the Company’s current projected revenue and expenditures for 2018,
including regulatory and consulting fees for the remediation of the Warning Letter and ongoing discussions with the
FDA, continued implementation of the Company’s commercialization and expansion activities and certain other
assumptions, the Company’s management currently believes that its cash, cash equivalents, projected revenue and
accounts receivable, along with the $10.0 million it expects to be able to draw down under its senior credit facility
(see Note 7), will be sufficient to fund ADMA’s operations, as currently conducted, through the end of 2018. In
order to have sufficient cash to fund its operations thereafter and to continue as a going concern, the Company will
need to raise additional capital prior to the end of 2018. These estimates may change based upon how quickly the
Company is able to execute on its quality management systems’ remediation plans for the ADMA
BioManufacturing operations, commercial manufacturing ramp-up activities and the various financing options being
explored. The Company currently has no firm commitments for additional financing, and there can be no assurances
that the Company will be able to secure additional financing on terms that are acceptable to the Company, or at
all. Furthermore, if the Company’s assumptions underlying its estimated expenses and revenues are incorrect, it may
have to raise additional capital sooner than currently anticipated.
Due to numerous risks and uncertainties associated with ongoing remediation efforts, the research and
development and potential future commercialization of its products and product candidates, the Company is unable
to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with its
development activities. The Company’s current estimates may be subject to change as circumstances regarding its
business requirements evolve. The Company may decide to raise capital through public or private equity offerings or
debt financings, or obtain a bank credit facility or corporate collaboration and licensing arrangements. The sale of
additional equity or debt securities, if convertible, could result in dilution to the Company’s stockholders and, in
such event, the value and potential future market price of its common stock may decline. The incurrence of
indebtedness would result in increased fixed obligations and could also result in covenants that would restrict the
Company’s operations or other financing alternatives. Failure to secure any necessary financing in a timely manner
and on commercially reasonable terms could have a material adverse effect on the Company’s business plan and
financial performance and it could be forced to delay or discontinue its product development, clinical trial or
commercialization activities, delay or discontinue the approval efforts for any of the Company’s potential products
or potentially cease operations. The Company has reported losses since inception in June 2004 through December
31, 2017 of $150.7 million. Management believes that the Company will continue to incur net losses and negative
net cash flows from operating activities to fund its research and development, commercial programs and meet its
obligations on a timely basis through the foreseeable future. As such, these factors raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not
include any adjustments related to the recoverability and classification of asset carrying amounts and the
classification of liabilities that might be necessary from the outcome of this uncertainty.
F-8
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of presentation
The accompanying consolidated financial statements include the accounts of ADMA and its wholly-owned
subsidiaries, and have been prepared in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) and in accordance with Article 8 of Regulation S-X of the Securities and
Exchange Commission (the “SEC”). All intercompany balances have been eliminated in consolidation. Any
reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards
Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board
(the “FASB”).
During the years ended December 31, 2017 and 2016, comprehensive loss was equal to the net loss
amounts presented for the respective periods in the accompanying consolidated statements of operations. In
addition, certain prior year balances have been reclassified to conform to the current presentation. Specifically, the
current and non-current portions of the Company’s tenant allowance liability and leasehold improvement loan have
been reclassified to other current liabilities and other non-current liabilities, respectively, in the accompanying
consolidated balance sheet as of December 31, 2016.
Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates include the fair value of assets acquired and liabilities
assumed in a business combination, valuation of inventory, assumptions used in the fair value determination of
stock-based compensation, warrants, and the allowance for the valuation of future tax benefits.
Cash and cash equivalents
The Company considers all highly-liquid instruments purchased with a maturity of three months or less to
be cash equivalents. From time to time, the Company purchases certificates of deposit with maturity schedules of
three, six, nine and twelve months. Instruments with original maturities greater than three months but less than
twelve months are included in short-term investments.
The Company regularly maintains cash and short-term investments at third-party financial institutions in
excess of the Federal Deposit Insurance Corporation, or FDIC, insurance limit. While the Company monitors the
daily cash balances in the operating accounts and adjusts the balances as appropriate, these balances could be
impacted, and there could be a material adverse effect on the Company’s business, if one or more of the financial
institutions with which the Company has deposits fails or is subject to other adverse conditions in the financial or
credit markets. To date, the Company has not experienced a loss or lack of access to its invested cash or cash
equivalents; however, the Company cannot provide assurance that access to its invested cash and cash equivalents
will not be impacted by adverse conditions in the financial and credit markets in the future.
Restricted cash
Restricted cash consists of cash held in a reserve account as required by the terms of the Company’s senior
lending agreement (see Note 7).
Accounts receivable
Accounts receivable are reported at realizable value, net of allowances for contractual credits and doubtful
accounts, which are recognized in the period the related revenue is recorded.
F-9
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Inventories
Inventories, including plasma intended for resale and plasma intended for internal use
in the Company's research and development and future anticipated commercialization activities, are carried at the
lower of cost or market value determined by the first-in, first-out method. Research and development plasma used
in clinical trials is processed to a finished product and subsequently expensed to research and
development. Although the Company expects that Bivigam inventory will ultimately be available for commercial
sale, due to uncertainties surrounding the Warning Letter and the PAS related to improvements in the manufacturing
process that must be filed with and approved by the FDA prior to this inventory being available for commercial sale,
all costs related to the production of Bivigam during the year ended December 31, 2017 have been charged to cost of
product revenue in the accompanying consolidated statement of operations.
Property and equipment
Assets comprising property and equipment (see Note 5) are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the asset’s estimated useful life. Land is not
depreciated. The buildings have been assigned a useful life of 30 years. Property and equipment other than land and
buildings have useful lives ranging from 3 to 10 years. Leasehold improvements are amortized over the lesser of the
lease term or their estimated useful lives.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company.
Goodwill at December 31, 2017 and December 31, 2016 was $3.5 million and $0, respectively. All of the
Company’s goodwill is attributable to its ADMA BioManufacturing business segment. The following table presents
the changes in the carrying amount of goodwill during the year ended December 31, 2017:
Balance as of January 1, 2017 ................................................................................................... $
Goodwill recorded in connection with the acquistion of the Biotest Assets .............................
Balance as of December 31, 2017 ............................................................................................. $
—
3,529,509
3,529,509
Goodwill is not amortized, but is assessed for impairment on an annual basis or more frequently if
impairment indicators exist. The Company has the option to perform a qualitative assessment of goodwill to
determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount,
including goodwill and other intangible assets. If the Company concludes that this is the case, then it must perform a
goodwill impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment
charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value. The impairment loss
recognized would not exceed the total amount of goodwill allocated to that reporting unit. The Company’s
impairment analysis as of October 1, 2017 did not result in any impairment charges related to goodwill for the year
ending December 31, 2017.
Impairment of long-lived assets
The Company assesses the recoverability of its 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 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 year ended December 31, 2017, the Company recorded an impairment charge in the
amount of $0.8 million related to assets acquired in the Biotest Transaction. For the year ended December 31, 2016,
the Company determined that there was no impairment of its long-lived assets.
F-10
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Revenue recognition
Revenues for the year ended December 31, 2017 are comprised of (i) revenues from Nabi-HB, (ii) product
revenues from the sale of human plasma collected from the Company’s plasma collection centers segment, (iii)
revenues related to a contract manufacturing agreement (see Note 6); and (iv) license and other revenues primarily
attributable to the out-licensing of RI-002 to Biotest to market and sell in Europe and selected countries in North
Africa and the Middle East. Biotest has provided the Company with certain services and financial payments in
accordance with the related Biotest license agreement and is obligated to pay the Company certain amounts in the
future if certain milestones are achieved. Deferred revenue is recognized over the term of the Biotest
license. Deferred revenue is amortized into income for a period of approximately 22 years, the term of the Biotest
license agreement.
Revenue from the sale of Nabi-HB is recognized when the product reaches the customer’s destination.
Nabi-HB revenue is recorded net of estimated customer prompt pay discounts and contractual allowances in
accordance with managed care agreements, including wholesaler chargebacks, rebates, customer returns and other
wholesaler fees. These estimates are based on historical experience, and the Company believes that such estimates
are reasonable. For sales of intermediates, title typically transfers when the product is delivered to a third party
warehouse. With all other contract manufacturing, the title transfers to the customer when they take possession of
the product from the Boca Facility. As the Company maintains a significant risk of loss throughout the contract
manufacturing process, contract manufacturing revenue is not recognized until the product is released and title
transfers to the customer.
Product revenues from the sale of human plasma collected at the Company’s plasma collection centers are
recognized at the time of transfer of title and risk of loss to the customer, which generally occurs at the time of
shipment. Product revenues are recognized at the time of delivery if the Company retains the risk of loss during
shipment.
Cost of product revenue
Cost of product revenue includes expenses related to process development as well as scientific and
technical operations when these operations are attributable to marketed products. When the activities of these
operations are attributable to new products in development, the expenses are classified as research and development
expenses. Expenses associated with remediating the issues identified in the Warning Letter for the year ended
December 31, 2017 of approximately $3.8 million are expensed as incurred and are reflected in cost of product
revenue in the accompanying consolidated statements of operations. In addition, for the year ended December 31,
2017, all operating expenses associated with the Boca Facility, other than the limited Nabi-HB production that was
capitalized into inventory, have been expensed as incurred since the date of the Biotest Transaction.
Research and development expenses
Research and development expenses consist of clinical research organization costs, costs related to clinical
trials, consulting expenses related to regulatory and medical affairs, quality assurance and control, assay
development, ongoing testing costs, drug product manufacturing for RI-002, including the cost of plasma, plasma
storage and transportation costs, as well as wages, benefits and stock-based compensation for employees directly
related to the research and development activities All research and development costs are expensed as incurred.
Advertising and marketing expenses
Advertising and marketing expense includes cost for promotional materials and trade show expenses for the
marketing of the Company’s products and services. Advertising and marketing expenses were $0.6 million and $0.2
million for the years ended December 31, 2017 and 2016, respectively.
F-11
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Stock-based compensation
The Company follows recognized accounting guidance which requires all stock-based payments, including
grants of stock options, to be recognized in the statement of operations as compensation expense, based on their fair
values on the grant date. Compensation expense related to awards to employees and directors with service-based
vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated vesting
period of the award, which is generally four years.
The grant date fair values of stock options awarded during the years ended December 31, 2017 and 2016
were determined using the Black-Scholes option-pricing model with the following assumptions:
Year Ended
Year Ended
Expected term ....................................................................
Volatility ...........................................................................
Dividend yield ...................................................................
Risk-free interest rate ........................................................
December 31, 2017 December 31, 2016
5.8-6.3 years
51-52%
0.0
1.54-1.79%
5.8-6.3 years
56-64%
0.0
1.77-2.29%
Income taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the consolidated financial statements or its tax returns. Under this method,
deferred tax assets and liabilities are recognized for the temporary differences between the tax basis of assets and
liabilities and their respective financial reporting amounts at enacted tax rates in effect for the years in which the
temporary differences are expected to reverse. The Company records a valuation allowance on its deferred income
tax assets if it is more likely than not that these deferred income tax assets will not be realized.
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the
Company is more likely than not to be sustained upon examination by the applicable taxing authority, including
resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax
benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being
realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company
recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has
not incurred any liability for unrecognized tax benefits as of December 31, 2017 and 2016. The Company is subject
to income tax examinations by major taxing authorities for all tax years since 2013 and for previous periods as it
relates to the Company’s net operating loss carryforward.
Earnings (Loss) Per Share
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the
weighted average number of shares of common stock outstanding during the period. For purposes of computing
basic and diluted loss per share, the non-voting class of common stock (see Notes 3 and 8) is included in the
common stock outstanding as the characteristics of the non-voting class are substantially the same as the voting class
of common stock.
Diluted net loss per share is calculated by dividing net loss attributable to common stockholders as adjusted
for the effect of dilutive securities, if any, by the weighted average number of shares of common stock, including the
non-voting class of common stock, and dilutive common stock outstanding during the period. Potentially dilutive
common stock includes the shares of common stock issuable upon the exercise of outstanding stock options and
warrants (using the treasury stock method). Potentially dilutive common stock in the diluted net loss per share
computation is excluded to the extent that it would be anti-dilutive. No potentially dilutive securities are included in
the computation of any diluted per share amounts as the Company reported a net loss for all periods presented. For
the years ended December 31, 2017 and 2016, the following securities were excluded from the calculation of diluted
loss per common share because of their anti-dilutive effects:
F-12
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Stock options ..........................................................................................................
Warrants .................................................................................................................
For the year ended
December 31,
2017
3,276,043
528,160
3,804,203
2016
1,535,187
300,446
1,835,633
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting in
accordance with FASB ASC 805, Business Combinations. Identifiable assets acquired, liabilities assumed, and
contingent consideration are recorded at their acquisition date fair values. Any change in the fair value of the
acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after
the acquisition date, will be recognized in the period of the estimated fair value change. Goodwill represents the
excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed as a result of
the business combination. Identifiable assets with finite lives are amortized over their useful lives. Acquisition
related costs are expensed as incurred.
Fair value of financial instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and cash
equivalents, short-term investments, accounts payable, and notes payable are shown at cost, which approximates fair
value due to the short-term nature of these instruments. The debt outstanding under the Company’s senior notes
payable (see Note 7) approximates fair value due to the variable interest rate on this debt. With respect to the related
party note payable in the amount of $15.0 million as of December 31, 2017 (see Notes 3 and 7), which is held by a
principal stockholder of the Company and was issued concurrent with an acquisition transaction with such
stockholder, the Company has concluded that an estimation of fair value for this note is not practicable.
Recent Accounting Pronouncements
In May 2017, the FASB issued ASU No. 2017-09, Modification Accounting for Share-Based Payment
Arrangements, which amends the scope of modification accounting for share-based payment arrangements. The
ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which
an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not
apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same
immediately before and after the modification. The ASU is effective for annual reporting periods, including interim
periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted,
including adoption in any interim period. The Company does not expect this new guidance to have a material impact
on its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations – Clarifying the Definition of
a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should
be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for
determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an
input and a substantive process that contribute to an output to be considered a business. This standard is effective for
fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The
Company adopted this standard in the second quarter of 2017, and the adoption of this standard did not have a
material impact on its consolidated financial statements as of and for the year ended December 31, 2017.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which
removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of
the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill
impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an
impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however,
F-13
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU is
effective prospectively for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim
or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted ASU
2017-04 in the fourth quarter of 2017, and adoption of this update did not have a material impact on its consolidated
financial statements as of and for the year ended December 31, 2017.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which clarifies guidance and
presentation related to restricted cash in the statement of cash flows, including stating that restricted cash should be
included within cash and cash equivalents in the statement of cash flows. The standard is effective for fiscal years
beginning after December 15, 2017, with early adoption permitted, and is to be applied retrospectively. The
Company adopted this standard in the fourth quarter of 2017, and adoption of this update did not have a material
impact on the Company’s consolidated financial statements as of and for the years ended December 31, 2017 and
2016.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment
Accounting (Topic 718), which provides for simplification of certain aspects of employee share-based payment
accounting including income taxes, classification of awards as either equity or liabilities, accounting for forfeitures
(see Note 8) and classification on the statement of cash flows. The Company adopted this standard in the first
quarter of 2017, and the adoption of this standard did not have a material impact on its consolidated financial
statements as of and for the year ended December 31, 2017.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to
recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. The
guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years. Early application is permitted. ASU 2016-02 requires modified retrospective adoption for all leases
existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The
Company is currently evaluating the impact the standard may have on its consolidated financial statements and
related disclosures.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740), Balance Sheet
Classification of Deferred Taxes, which includes amendments that require deferred tax liabilities and assets be
classified as non-current in a classified statement of financial position. The amendments in this ASU are effective
for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within
annual periods beginning after December 15, 2018. Earlier application is permitted as of the beginning of an interim
or annual reporting period. The amendments may be applied either prospectively to all deferred tax liabilities and
assets or retrospectively to all periods presented. The Company adopted this standard in the second quarter of 2017.
As the Company carried a full valuation allowance against its deferred tax assets as of December 31, 2017 and 2016,
adoption of this standard did not have a material impact on its consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying
the Accounting for Measurement-Period Adjustments, which includes amendments that require an acquirer to
recognize adjustments to provisional amounts that are identified during the measurement period in the reporting
period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer
record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or
other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had
been completed at the acquisition date. The amendments in this ASU require an entity to present separately on the
face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings
by line item that would have been recorded in previous reporting periods if the adjustment to the provisional
amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for fiscal years
beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The
amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective
date of the ASU with earlier application permitted for financial statements that have not yet been made available for
issuance. The Company adopted this standard in the first quarter of 2017, and the adoption of this standard did not
have a material impact on its consolidated financial statements as of and for the year ended December 31, 2017.
F-14
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of
Inventory. The standard requires entities to measure most inventory “at the lower of cost and net realizable value,”
thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or
market (market in this context is defined as one of three different measures, one of which is net realizable value).
The Company adopted this standard in the first quarter of 2017, and the adoption of this standard did not have a
material impact on the Company’s consolidated financial statements as and for the year ended December 31, 2017.
In May 2014, the FASB issued new guidance related to revenue recognition, ASU 2014-09, Revenue from
Contracts with Customers (“ASC 606”), which outlines a comprehensive revenue recognition model and supersedes
most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon
transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in
exchange for those goods or services. ASC 606 defines a five-step approach for recognizing revenue, which may
require a company to use more judgment and make more estimates than under the current guidance. The new
guidance becomes effective in calendar year 2018 and early adoption in calendar year 2017 is permitted. Two
methods of adoption are permitted: (a) full retrospective adoption, meaning the standard is applied to all periods
presented; or (b) modified retrospective adoption, meaning the cumulative effect of applying the new guidance is
recognized at the date of initial application as an adjustment to the opening retained earnings balance.
In March 2016, April 2016 and December 2016, the FASB issued ASU No. 2016-08, Revenue From
Contracts with Customers (ASC 606): Principal Versus Agent Considerations, ASU No. 2016-10, Revenue From
Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing, and ASU No. 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue From Contracts with Customers, respectively,
which further clarify the implementation guidance on principal versus agent considerations contained in ASU No.
2014-09. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, narrow-scope
improvements and practical expedients which provides clarification on assessing the collectability criterion,
presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition.
These standards became effective for the Company beginning in the first quarter of 2018. Early adoption is
permitted.
ADMA will adopt ASC 606 and the foregoing related updates effective January 1, 2018, using the
modified retrospective method of adoption. Based on the Company’s review of the terms and conditions of its
existing customer contracts and applying the five discrete criteria required for recognizing revenue as set forth in
ASU 2014-09, the Company does not expect the new revenue recognition guidance to have a material impact on its
consolidated financial statements.
3. ACQUISITION
On June 6, 2017, ADMA completed the acquisition of the Biotest Assets from BPC. As a result of this
transaction, the Company acquired Nabi-HB, Bivigam, the Boca Facility and certain other assets of BTBU. The
acquisition of the Biotest Assets expands the Company’s product offering with two FDA-approved products and
provides direct control over the manufacturing and regulatory processes impacting the Company’s RI-002 product
candidate, including remediation of the Warning Letter as well as certain other remediation items affecting the Boca
Facility. Pursuant to the acquisition, the Company issued to Biotest 4,295,580 voting shares of its common stock
and 8,591,160 shares of non-voting common stock. The Company will also transfer ownership of two of its plasma
centers to Biotest on January 1, 2019 as additional consideration.
The purchase price was calculated as follows:
Issuance of 12,886,740 shares of common stock (voting and non-voting) valued at
$3.66 per share........................................................................................................... $ 47,165,468
Transfer of two plasma collection centers ........................................................................ 12,621,844
Total purchase price ......................................................................................................... $ 59,787,312
F-15
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
The following table summarizes the allocation of the purchase consideration to the assets acquired and
liabilities assumed based on their estimated fair values:
Cash .................................................................................................................................................... $ 12,500,000
Inventory.............................................................................................................................................
8,197,353
Land and buildings ............................................................................................................................. 20,000,000
8,209,800
Property and equipment ......................................................................................................................
845,389
Assets held for sale .............................................................................................................................
795,553
Other current assets ............................................................................................................................
4,100,046
Trademark and other intangible rights to Nabi-HB ............................................................................
907,421
Right to intermediates .........................................................................................................................
1,076,557
Customer contract ...............................................................................................................................
3,529,510
Goodwill .............................................................................................................................................
Liabilities assumed .............................................................................................................................
(374,317)
Total purchase price ............................................................................................................................ $ 59,787,312
The Company engaged various third party valuation specialists to determine the fair value of the land and
buildings, property and equipment, right to intermediates, customer contract and Nabi-HB intangible assets, as well
as the assets held for sale. Goodwill is expected to be deductible for tax purposes.
Assets held for sale reflects certain manufacturing equipment acquired in the transaction that will not be
utilized in the manufacture or development of any of the Company’s current products or product candidates, and the
Company’s plans as of the date of acquisition was to complete the sale of these assets within one year from the date
of the Biotest Transaction. These sales efforts have been unsuccessful and at December 31, 2017, the Company
recorded an impairment charge for the full carrying value of these assets in the amount of $0.8 million.
As a result of the foregoing transaction, BPC became a principal stockholder and Biotest became a related
party of the Company. Therefore, all of the Company’s transactions with Biotest between June 6, 2017 and
December 31, 2017, including product and license revenues attributable to Biotest, were related party transactions.
The results from BTBU’s operations are included in the Company’s consolidated financial statements from the date
of acquisition. The Company incurred a total of approximately $5.8 million in transaction closing costs, which were
expensed as incurred as selling, general and administrative expenses in the consolidated statement of operations. For
the years ended December 31, 2017 and 2016, transaction closing costs amounted to approximately $3.9 million and
$1.9 million, respectively.
The following unaudited pro forma summary presents consolidated information of the Company as if the
business combination had occurred on January 1, 2016. The pro forma information is presented for informational
purposes only and is not necessarily indicative of the results of operations that would have been achieved had the
acquisition been consummated as of that time or that may result in the future.
Year Ended December 31,
2017
2016
Revenues:
As reported ..................................................................................................... $ 22,760,560 $ 10,661,037
Proforma ......................................................................................................... $ 41,024,330 $ 86,706,074
Net loss
As reported ..................................................................................................... $ (43,758,975) $ (19,515,151)
Proforma ......................................................................................................... $ (52,928,428) $ (82,982,280)
Basic and diluted net loss per share:
As reported ..................................................................................................... $
Proforma ......................................................................................................... $
(1.91) $
(1.17) $
(1.61)
(3.31)
F-16
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
4. INVENTORIES
The following table provides the components of inventories:
December 31,
2017
December 31,
2016
Raw materials ......................................................................................................... $ 10,395,433 $ 5,020,146
—
Work-in-progress ....................................................................................................
Finished goods ........................................................................................................
—
Total inventories ..................................................................................................... $ 12,628,181 $ 5,020,146
1,265,339
967,409
Inventories are stated at the lower of cost or net realizable value with cost being determined on the first-in,
first-out method. Finished goods inventory as of December 31, 2017 is comprised of Nabi-HB, and was recorded at
fair value as part of the purchase price allocation of the Biotest Assets acquired. Raw materials includes plasma and
other materials expected to be used in the production of RI-002, as there are alternative uses for these materials. All
other activities and materials associated with the production of inventories used in research and development
activities are expensed as incurred.
5. PROPERTY AND EQUIPMENT
Property, plant and equipment at December 31, 2017 and 2016 is summarized as follows:
December 31,
2017
Manufacturing and laboratory equipment ........................................... $
7,148,405 $
Office equipment and computer software ...........................................
1,086,756
Furniture and fixtures ..........................................................................
1,136,623
Construction in process .......................................................................
738,093
Leasehold improvements .....................................................................
1,642,903
4,339,441
Land.....................................................................................................
Buildings ............................................................................................. 15,660,559
31,752,780
(1,285,922)
$ 30,466,858 $
Less: Accumulated depreciation and amortization ..............................
December 31,
2016
306,411
188,277
1,030,257
—
2,699,104
—
—
4,224,049
(2,223,265)
2,000,784
The Company recorded depreciation expense on property and equipment of $1.5 million, which includes $0.4
million of depreciation expense on the plasma assets to be transferred (see Note 3) and $0.5 million for the years
ended December 31, 2017 and 2016, respectively.
6. INTANGIBLE ASSETS
Intangible assets at December 31, 2017 and 2016 consist of the following:
December 31, 2017
Accumulated
Amortization
Cost
Net
Cost
December 31, 2016
Accumulated
Amortization
Net
Trademark and other
intangible rights
related to Nabi-
HB® .................. $ 4,100,046 $
Right to
341,670 $3,758,376 $
— $
— $
intermediates .....
Customer contract ...
Total ............. $ 6,084,024 $ 1,234,674 $4,849,350 $
907,421
1,076,557
75,618
817,386
831,803
259,171
—
—
— $
—
—
— $
—
—
—
—
F-17
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Under the previous contract manufacturing agreement between ADMA and BPC, intermediate by-products
derived from the manufacture of RI-002 were property of Biotest. As a result of the Biotest Transaction, ADMA
obtained the right to these intermediate products, which are being amortized over a period of 7 years. The intangible
rights to Nabi-HB is also being amortized over a period of 7 years.
The customer contract pertains to a contract manufacturing agreement with a third party that the Company
assumed upon the consummation of the Biotest Transaction. On December 22, 2017, Company and the customer
entered into an amendment to this contract which reduced the number of batches the Company was committed to
supply to the customer. In connection with this amendment, the customer agreed to pay the Company an aggregate
compensation fee of $7.0 million, which was recognized as other revenue in the accompanying consolidated
statement of operations for the year ended December 31, 2017. The remaining required production volume is 13
batches over 2018 and 2019, and the Company recorded additional amortization expense of approximately $0.6
million in connection with the reduced volume. The net unamortized balance of this asset as of December 31, 2017
is being amortized through the end of the contract period.
Amortization expense related to the Company’s intangible assets for the year ended December 31, 2017
was $1.2 million. Estimated aggregate future aggregate amortization expense for the next five years is expected to
be as follows:
2018 ................................................................................................................................. $
2019 .................................................................................................................................
2020 .................................................................................................................................
2021 .................................................................................................................................
2022 .................................................................................................................................
844,938
844,938
715,352
715,352
715,352
7. NOTES PAYABLE
Senior Notes Payable
A summary of outstanding senior notes payable as of December 31, 2017 and 2016 is as follows:
2017
2016
Notes payable: ........................................................................................................ $ 30,000,000 $ 20,000,000
Less:
Debt discount ........................................................................................................
Current portion .....................................................................................................
(1,567,249)
(6,111,111)
Senior notes payable ............................................................................................... $ 25,368,458 $ 12,321,640
(4,631,542)
—
On October 10, 2017 (the “Marathon Closing Date”), the Company entered into a Credit Agreement (the
“Credit Agreement”) with Marathon Healthcare Finance Fund, L.P. (“Marathon” or the “Lender”) and Wilmington
Trust, National Association, as the administrative agent for the Lender (the “Administrative Agent”). The Credit
Agreement provides for a senior secured term loan facility in an aggregate amount of up to $40.0 million
(collectively, the “Credit Facility”), comprised of (i) a term loan made on the Marathon Closing Date in the principal
amount of $30.0 million evidenced by a secured promissory note (the “Tranche One Note”), and (ii) an additional
term loan evidenced by a secured promissory note to be made in the maximum principal amount not to exceed $10.0
million (the “Tranche Two Note” and, together with the Tranche One Note, the “Notes”), which Tranche Two Note
availability is subject to the satisfaction of certain conditions, including, but not limited to, those described below.
The Notes each have a maturity date of April 10, 2022 (the “Maturity Date”), subject to acceleration pursuant to the
Credit Agreement, including upon an Event of Default (as defined in the Credit Agreement).
On the Marathon Closing Date, the Company used approximately $17.0 million of the proceeds from the
Tranche One Note to retire and pay in full the Company’s previously existing indebtedness under a Loan and
Security Agreement (the “LSA”) with Oxford Finance, LLC (“Oxford”) and all of the obligations thereunder in
accordance with the terms of the LSA, as amended, including the end-of-term liability of $1.8 million and
F-18
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
prepayment penalties of $0.2 million. The Company also (i) used $5.5 million of the proceeds from the Tranche One
Note to pre-fund a debt service reserve account in accordance with the terms of the Credit Agreement, and (ii) paid
diligence fees, legal and other expenses associated with the Credit Facility in the amount of approximately $1.5
million. The Company used the remaining $6.0 million of proceeds for the continued remediation of the issues
identified in the CRL and the Warning Letter and for general corporate purposes. In connection with the retirement
of the Oxford indebtedness, the Company recognized a loss on the extinguishment of debt in the amount of $1.2
million, comprised primarily of the write-off of debt discount related to the LSA.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to LIBOR plus 9.50% with
a 1% LIBOR floor; provided, however, that in the event that the Company achieves sales of not less than $61.7
million for the 2018 calendar year and the Tranche Two Loan has been funded, then the interest rate on the
borrowings under the Credit Agreement will decrease to LIBOR plus 7.75% with a 1% LIBOR floor. During an
Event of Default under the Credit Agreement, the outstanding amount of indebtedness under the Credit Agreement
will bear interest at a rate per annum equal to the interest rate then applicable to the borrowings under the Credit
Agreement plus 5% per annum. Quarterly cash interest payments are due the first business day of each March, June,
September and December, beginning on December 1, 2017.
The Company will pay Marathon a facility fee in an amount equal to 9.20% of the amount of the Tranche
One Note, payment of which is deferred until the Maturity Date pursuant to the terms of the Credit
Agreement. Commencing on October 10, 2020, and on the first business day of each month, the Company is
required to make principal payments on the Tranche One Note (and Tranche Two Note in the event it shall have
been funded) in equal monthly installments over 18 months, subject to certain conditions in the Credit Agreement.
The outstanding principal amount of the Notes, together with all accrued interest thereon, is due on the Maturity
Date.
As consideration for the Credit Agreement, the Company issued a warrant to purchase an aggregate of
339,301 shares of the Company’s common stock to the Lender and certain of its affiliates (the “Tranche One
Warrants”). The Tranche One Warrants, which the Company valued at $0.6 million, have (i) an exercise price equal
to $3.0946, which was the trailing 10-day volume weighted-average price of the Company’s common stock prior to
the Marathon Closing Date, and (ii) an expiration date of October 10, 2024. The Company issued the Tranche One
Warrants in reliance upon an exemption from registration contained in Section 4(2) under the Securities Act of
1933, as amended (the “Securities Act”). The Tranche One Warrants and the shares of common stock issuable
thereunder may not be offered, sold, pledged or otherwise transferred in the U.S. absent registration or an applicable
exemption from the registration requirements under the Securities Act.
As a result of the diligence fees, legal and other expenses associated with the Credit Facility, the Tranche
One Warrants and the facility fee, the Company recognized a discount on the Tranche One Note on the Marathon
Closing Date in the amount of $4.8 million as follows:
Facility fee .......................................................................................................................................... $ 2,760,000
1,475,330
Deferred financing fees ......................................................................................................................
Tranche One Warrants ........................................................................................................................
614,513
Total debt discount at Marathon Closing Date ................................................................................... $ 4,849,843
The obligation of Marathon to purchase the Tranche Two Note is subject to the satisfaction of certain
conditions related to FDA approval for specified products and the Company’s financial condition, including, without
limitation, the following: (a) (i) the FDA must validate the improved manufacturing process of Bivigam and (ii) not
less than $0.5 million in net revenue must be generated in calendar year 2018 from the sale in the U.S. of Bivigam;
or (b) (i) the FDA must approve the commercialization of RI-002 and (ii) not less than $0.5 million in net revenue
must be generated in calendar year 2019 from the sale in the U.S. of RI-002.
Based on the fair value of the Tranche One Warrants, the facility fee and the fees and expenses associated
with obtaining the Credit Facility, the effective interest rate on the Tranche One Note is approximately 16.5%. The
Company’s obligations under the Credit Agreement are secured by a first-priority lien and security interest in
F-19
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
substantially all of the Company’s assets, including a mortgage on the Boca Facility, and those of the Company’s
subsidiaries as well as all of the equity interests in each subsidiary.
The Credit Agreement contains market representations and warranties, affirmative covenants, negative
covenants, financial covenants, and conditions that are customarily required for similar financings. The affirmative
covenants, among other things, require the Company to undertake various reporting requirements. The negative
covenants restrict or limit the ability of the Company and its subsidiaries to, among other things, incur new
indebtedness; create liens on assets; engage in certain fundamental corporate changes or changes to the Company’s
business activities; sell or otherwise dispose of assets; repurchase stock, pay dividends; repay certain other
indebtedness; engage in certain affiliate transactions; or enter into any other agreements that restrict the Company’s
ability to make loan repayments. In addition, the Company is required to maintain a minimum liquidity, defined in
the Credit Agreement as cash held in the debt service reserve account and any other deposit account subject to a
control agreement with the Administrative Agent, of not less than $5.5 million at all times. The Credit Agreement
also required the establishment of the debt service reserve account. The Company is currently required to maintain a
minimum balance in this account of $5.5 million, and this amount is reflected as restricted cash in the accompanying
consolidated balance sheet as of December 31, 2017. Upon the satisfaction of certain conditions related to some of
the Company’s leased properties, the minimum required balance in the debt service reserve account, as well as the
minimum liquidity requirement, will be reduced to $4.0 million. At December 31, 2017 and 2016, the Company was
in compliance with all of the covenants contained in its senior lending agreements.
The Credit Agreement also contains customary Events of Default which include, among others, non-
payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties,
bankruptcy and insolvency events, material judgments, cross-defaults to material contracts and events constituting a
change of control. The occurrence of an Event of Default could result in, among other things, the termination of
commitments under the Credit Facility and the declaration that all outstanding Loans are immediately due and
payable in whole or in part.
In the event the Company prepays a term loan for any reason, including the acceleration of indebtedness
upon an Event of Default, the Company is obligated to pay a prepayment charge corresponding to a percentage of
the principal amount of the applicable term loan prepaid, as well as a make-whole premium based on the excess of
the amount of the loan being prepaid over the discounted amount of such prepayment, in accordance with the terms
of the Credit Agreement.
Related Party Note Payable
A summary of the outstanding related party note payable is as follows:
Related party note payable to Biotest ..................................................................... $ 15,000,000 $
Less:
Debt discount ........................................................................................................
(157,604)
Note payable - related party .................................................................................... $ 14,842,396 $
2017
2016
—
—
—
In connection with the acquisition of the Biotest Assets (see Note 3), ADMA BioManufacturing issued a
subordinated note payable to BPC and in connection therewith received cash proceeds of $15.0 million. The note
bears interest at a rate of 6.0% per annum and matures on June 6, 2022. The Company is obligated to make semi-
annual interest payments, with all principal and unpaid interest due at maturity. The note is subordinate to the
Tranche One Note with Marathon. In the event of default, all principal and unpaid interest is due on demand. The
subordinated note also contains several non-financial covenants with which the Company was in compliance as of
December 31, 2017. The Company incurred $0.2 million of debt issuance costs in connection with the issuance of
this note, which were recorded as a debt discount. The debt discount is being amortized as interest expense over the
term of the note.
F-20
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
8. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is currently authorized to issue up to 10 million shares of preferred stock, $.0001, par value.
There were no shares of preferred stock outstanding at December 31, 2017 and 2016.
Common Stock
As of December 31, 2017, the Company was authorized to issue 75 million shares of its common stock, and
36,725,499 shares of common stock were outstanding. After giving effect to shares reserved for the issuance of
warrants and stock options, 34,470,298 shares of common stock were available for issuance as of December 31,
2017. As of December 31, 2017, 8,591,160 shares of the Company’s non-voting common stock were authorized,
issued and outstanding.
On November 13, 2017, the Company completed an underwritten public offering of 19,523,255 shares of
its common stock for gross proceeds of $42.0 million. Net proceeds from this offering, after payment of
underwriting discounts and offering expenses of $2.8 million, were $39.2 million.
On June 6, 2017, the Company issued 4,295,580 shares of common stock and 8,591,160 shares of its non-
voting common stock to Biotest in connection with the Biotest Transaction (see Note 3). Except as otherwise
required by applicable law, holders of shares of non-voting common stock are not entitled to vote on any matter that
is submitted to a vote of the stockholders of the Company; provided, however, that for so long as any shares of non-
voting common stock are outstanding, the Company may not, without the prior vote of the holders of at least a
majority of the shares of non-voting common stock then outstanding (voting separately as a single class), amend,
alter or repeal, whether by merger, consolidation or otherwise, the powers, preferences, or other rights of the shares
of non-voting common stock in an adverse manner relative to the powers, preferences or other rights of the shares of
the voting common stock, except as permitted by the stockholders’ agreement between the Company and BPC or the
Company’s Amended and Restated Certificate of Incorporation. Under certain conditions, the non-voting common
stock is convertible into voting common stock.
On May 3, 2016, the Company completed an underwritten public offering of 2,176,154 shares of its
common stock for gross proceeds of approximately $14.1 million. Net proceeds from this offering were $12.9
million, after payment of underwriting discounts and offering expenses of approximately $1.2 million.
Warrants
On October 10, 2017, the Company issued to Marathon the Tranche One Warrants (see Note 7) whereby
Marathon may purchase an aggregate of 339,301 shares of common stock with an exercise price $3.0946 per share.
The Tranche One Warrants became exercisable on the Marathon Closing Date, were valued at $0.6 million and were
recorded as discount to the Tranche One Note.
In May 2016, the Company issued to Oxford warrants to purchase an aggregate of up to 24,800 shares of
the Company’s common stock at an exercise price equal to $6.37 per share. The warrants became exercisable on
May 13, 2016 for cash or by net exercise and will expire seven years after their issuance on May 13, 2023. The fair
value of these warrants was $0.1 million, which was recognized as a debt discount to the carrying value of the loan.
The fair values of the warrants issued during the years ended December 31, 2017 and 2016 were
determined using the Black-Scholes option-pricing model with the following assumptions:
Year Ended
Year Ended
Expected term .......................................................................
Volatility ..............................................................................
Dividend yield ......................................................................
Risk-free interest rate ...........................................................
7 years
December 31, 2017 December 31, 2016
7 years
54%
0.0
1.51 %
57%
0.0
2.18 %
F-21
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
At December 31, 2017, the Company had outstanding warrants to purchase an aggregate of 528,160 shares
of common stock, with a weighted average exercise price of $4.76 per share and with expiration dates ranging
between June 2022 and October 2024.
Stock Options
From time to time the Company grants stock options or other equity-based awards under the Company’s
2007 Employee Stock Option Plan (the “2007 Plan”) and the Amended and Restated 2014 Omnibus Incentive
Compensation Plan (the “2014 Plan”).
The 2014 Plan, as amended, was approved by the Board of Directors of ADMA (the “Board”) on March
15, 2017 and ratified by the Company’s stockholders on May 25, 2017. Currently, the maximum number of shares
reserved for grant under the 2014 Plan is: (a) 2,334,940 shares, less any shares available as of such date for issuance
under the 2007 Plan; plus (b) an annual increase as of the first day of the Company’s fiscal year, beginning in 2018
and occurring each year thereafter through 2022, equal to 4% of the outstanding shares of common stock as of the
end of the Company’s immediately preceding fiscal year, or any lesser number of shares determined by the Board;
provided, however, that no more than an aggregate of 10 million shares of common stock may be issued pursuant to
incentive stock options intended to qualify under Section 422 of the Internal Revenue Code. As of December 31,
2017, an aggregate of 654,645 shares were available for issuance under the 2007 Plan and the 2014 Plan. In
accordance with the foregoing, on January 1, 2018, the aggregate number of shares available for issuance increased
to 2,467,311.
During the years ended December 31, 2017 and 2016, the Company recorded stock-based compensation
expense to employees of $1.6 million and $1.3 million, respectively. The fair value of employee options granted was
determined on the date of grant using the Black-Scholes model. The Black-Scholes option valuation model was
developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are
fully transferable. The Company’s employee stock options have characteristics significantly different from those of
traded options, and changes in the underlying Black-Scholes assumptions can materially affect the fair value
estimate. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the
time of the grant with a term consistent with the expected term of the Company’s awards. The expected term of the
options granted is in accordance with Staff Accounting Bulletins 107 and 110, which is based on the average
between vesting terms and contractual terms. The expected dividend yield reflects the Company’s current and
expected future policy for dividends on the Company’s common stock. The expected stock price volatility for the
Company’s stock options was calculated by examining the pro rata historical volatilities for similar publicly traded
industry peers and the trading history for the Company’s common stock. The Company will continue to analyze the
expected stock price volatility and expected term assumptions.
The 2007 Plan and 2014 Plan provide for the Board or a Committee of the Board (the “Committee”) to
grant awards to optionees and to determine the exercise price, vesting term, expiration date and all other terms and
conditions of the awards, including acceleration of the vesting of an award at any time. All options granted under the
2007 and 2014 Plans are intended to be incentive stock options (“ISOs”), unless specified by the Committee to be
non-qualified options (“NQOs”) as defined by the Internal Revenue Code. ISOs and NQOs may be granted to
employees, consultants or Board members at an option price not less than the fair market value of the common stock
subject to the stock option agreement. The following table summarizes information about stock options outstanding
as of December 31, 2017 and 2016:
F-22
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Balance at December 31, 2015 ............................................................................
Forfeited ..............................................................................................................
Expired ................................................................................................................
Granted ................................................................................................................
Balance at December 31, 2016 ............................................................................
Forfeited ..............................................................................................................
Expired ................................................................................................................
Granted ................................................................................................................
Exercised .............................................................................................................
Balance at December 31, 2017 ............................................................................
Options exercisable ..............................................................................................
Weighted
Average
Exercise Price
8.02
8.02
7.88
6.20
7.90
7.72
9.02
3.73
2.68
5.52
7.68
Shares
1,464,203 $
(21,334 ) $
(8,666 ) $
100,984 $
1,535,187 $
(94,024 ) $
(47,476 ) $
1,976,295 $
(93,939 ) $
3,276,043 $
1,338,568 $
The weighted average remaining contractual term of stock options outstanding and expected to vest at
December 31, 2017 is 7.9 years. The weighted average remaining contractual term of stock options exercisable at
December 31, 2017 is 5.8 years. The following table summarizes additional information regarding outstanding and
exercisable options under the stock option plans at December 31, 2017:
Stock Options Outstanding
Weighted
Average
Remaining
Contractual
Life
(Years)
8.9
9.4
5.2
7.3
7.9
Weighted
Average
Exercise
Price
1.97 $
3.75
7.64
10.33
$
$
$
$
$
5.52 $
Stock Options Exercisable
Aggregate
Intrinsic
Value
44,092
21,385
—
—
65,477
Options
Outstanding
4,668
133,869
993,581
206,450
1,338,568
Weighted
Average
Remaining
Contractual
Life
(Years)
2.4
9.0
5.1
7.3
5.8
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
$
1.34 $
$
3.87
7.65
$
$ 10.44
7.68 $
$
8,729
3,067
—
—
11,796
Range of
Exercise Prices
$1.34 - $2.06
$2.53 - $5.00
$5.96 - $8.98
$9.37 - $10.80
Options
Outstanding
35,418
1,927,331
1,026,794
286,500
3,276,043
Stock-based compensation expense for the years ended December 31, 2017 and 2016 was as follows:
2017
2016
Research and development ..................................................................................
Plasma centers .....................................................................................................
Selling, general and administrative ......................................................................
Cost of goods sold ...............................................................................................
$
Total stock-based compensation expense ............................................................ $
380,925 $
47,330
1,081,236
52,168
439,982
52,973
757,119
—
1,561,659 $ 1,250,074
As of December 31, 2017, the total unrecognized compensation expense related to unvested options was
$4.0 million, which is expected to be recognized over a weighted-average period of 2.8 years. The Company’s
outstanding and exercisable options had an intrinsic value of approximately $12,000 as of December 31, 2017.
9. RELATED PARTY TRANSACTIONS
The Company leases an office building and equipment from Areth, LLC (“Areth”) pursuant to a shared
services agreement on a month-to-month basis of which terms had been amended by the Company’s Board of
Directors in June 2016. Effective October 1, 2017, monthly rent on this facility was reduced to $10,000. Rent
expense amounted to $0.2 million for the years December 31, 2017 and 2016. Areth is a company controlled by Dr.
Jerrold B. Grossman, the Company’s Vice Chairman, and Adam S. Grossman, the Company’s President and Chief
Executive Officer. The Company pays Areth monthly fees for the use of such office space and for other information
F-23
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
technology, general warehousing and administrative services. The Company also reimburses Areth for office and
building related (common area) expenses, equipment and certain other operational expenses, which were not
material to the consolidated financial statements for the years ended December 31, 2017 and 2016.
During the years ended December 31, 2017 and 2016, the Company maintained deposits and other accounts
at Lakeland Bankcorp, Inc., formerly Pascack Bankcorp, a bank of which Dr. Grossman served as a director through
January 2016, and which was approximately 5%-owned by members of the Grossman family. Pascack Bankcorp
was acquired by Lakeland Bancorp, Inc. in January 2016 and Dr. Grossman is currently a member of the Corporate
Advisory Council of Lakeland Bancorp Inc.
As of December 31, 2017, the Company has a $15.0 million subordinated note payable to BPC (see Note
7), and the Company recognized interest expense on this note for the year ended December 31, 2017 in the amount
of $0.5 million.
For the years ended December 31, 2017 and 2016, the Company recognized revenues under its out-
licensing agreement with Biotest of $0.1 million. Deferred revenue of $2.7 million and $2.8 million as of December
31, 2017 and 2016, respectively, is related to this agreement.
Biotest is the Company’s largest customer for the sale of normal source plasma. Plasma sales to Biotest for
the years ended December 31, 2017 and 2016 were $10.7 million and $8.7 million, respectively. Accounts
receivable includes $1.2 million and $1.0 million due from Biotest as of December 31, 2017 and 2016, respectively.
Additionally, Biotest is a supplier of plasma to ADMA, with the Company purchasing approximately $2.8 million
and $1.6 million of plasma in the years ended December 31, 2017 and 2016, respectively. Included in accounts
payable is approximately $0.1 million due to Biotest as of December 31, 2017 and 2016. The following table
summarizes the related party balances with Biotest:
Year Ended December 31,
2016
2017
Sale and purchase of plasma
Product revenue ............................................................................. $
Purchases .......................................................................................
10,664,456
2,776,959
$
License revenue ..............................................................................
142,834
Interest expense ..............................................................................
520,000
8,745,844
1,606,573
142,834
—
Accounts receivable ......................................................................... $
Accounts payable .............................................................................
Accrued expenses .............................................................................
Note payable, net of discount ...........................................................
Accrued interest ...............................................................................
Deferred revenue ..............................................................................
December 31,
2017
1,245,677
139,939
314,820
14,842,396
65,000
2,690,033
December 31,
$
2016
969,675
82,427
—
—
—
2,832,867
In connection with the acquisition of the Biotest Assets, the Company entered into a Transition Services
Agreement with BPC pursuant to which each of the Company and BPC agreed to provide transition services to the
other party, including services related to finance, human resources, information technologies, leasing of equipment
and clinical and regulatory services for a period of up to 24 months after the June 6, 2017 closing date, as well as
agreements to lease certain laboratory space within the Boca Facility to BPC for a period of up to 24 months after
the closing date of the acquisition transaction. As of December 31, 2017, $0.3 million was payable by the Company
to BPC for expenses incurred on behalf of the Company and services related to these agreements. This amount is
reflected in accrued expenses in the accompanying consolidated balance sheet. The services component of amounts
billed to the Company by BPC for the year ended December 31, 2017 was not material to the Company’s
consolidated financial statements.
F-24
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Under the terms of the Biotest Transaction, the Company will transfer ownership of two plasma collection
centers to BPC on January 1, 2019. The Company has estimated the fair value of these assets to be $12.6 million,
and the obligation to transfer these assets to Biotest is reflected in non-current liabilities in the accompanying
consolidated balance sheet as of December 31, 2017.
10. COMMITMENTS AND CONTINGENCIES
Lease commitments
The Company has entered into various non-cancelable operating lease agreements for its three ADMA
BioCenters facilities in Georgia, as well as for certain operating equipment and warehouse space. Total rent expense
for the Company’s leased facilities and equipment was $0.6 million and $0.5 million, respectively. Future minimum
lease payments for both leases, for each of the next five years ending December 31, and thereafter are as follows:
2018 .................................................. $
2019 ..................................................
2020 ..................................................
2021 ..................................................
2022 ..................................................
Thereafter .........................................
701,494
680,509
679,166
670,814
680,317
1,260,718
$ 4,673,018
Vendor and Licensor Commitments
In a license agreement effective December 31, 2012, the Company granted Biotest an exclusive license to
market and sell RI-002 in Europe and in selected countries in North Africa and the Middle East, (the “Territory”), to
have access to the Company’s testing services for testing of BPC’s plasma samples using the Company’s proprietary
RSV assay, and to reference (but not access) the Company’s proprietary information for the purpose of Biotest
seeking regulatory approval for RI-002 in the Territory. As consideration for the license, Biotest agreed to provide
the Company with certain services at no charge and also compensate the Company with cash payments upon the
completion of certain milestones. Such services have been accounted for as deferred revenue which was recognized
in 2013 as a result of certain research and development services as provided for in accordance with the license
agreement. Deferred revenue is recognized over the term of the license and is amortized into income for a period of
approximately 22 years, the term of the license agreement. Biotest is also obligated to pay the Company an
adjustable royalty based on a percentage of revenues from the sale of RI-002 in the Territory for 20 years from the
date of first commercial sale.
Pursuant to the terms of a Plasma Purchase Agreement with BPC, the Company has agreed to purchase
from BPC an annual minimum volume of source plasma containing antibodies to RSV to be used in the manufacture
of RI-002. The agreement does not provide for any penalties in the event the Company does not purchase the
agreed- upon annual minimum volume from BPC. In addition, the Company may also collect high-titer RSV plasma
from up to five wholly-owned ADMA BioCenters. During 2015, BPC and ADMA amended their Plasma Purchase
Agreement to allow ADMA the ability to collect its raw material RSV high-titer plasma from other third party
collection organizations, thus allowing ADMA to expand its reach for raw material supply as the Company
approaches commercialization for RI-002. In connection with the Biotest Transaction, BPC and ADMA amended
the Plasma Purchase Agreement to extend the term for ten years from the June 6, 2017 closing date of the Biotest
Transaction. Either party may terminate the agreement if the other party fails to remedy any material default in the
performance of any material condition or obligation under the agreement following notice. The Company may also
terminate the agreement upon written notice if the clinical development of RI-002 is halted or terminated, whether
by the FDA, a Data Safety Monitoring Board, or any other regulatory authority. Upon termination of the agreement,
the Company must pay for any source plasma already delivered to the Company and for any source plasma collected
under the terms of the agreement.
F-25
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
Employment contracts
The Company has entered into employment agreements with its executive management team consisting of
its President and Chief Executive Officer, Chief Medical and Scientific Officer and Chief Financial Officer.
Contract Manufacturing Agreement
In connection with the acquisition of the Biotest Assets, the Company acquired all of the rights and
assumed all of the obligations under an existing agreement with a third party related to the fractionation of plasma
provided by the third party. As more fully described in Note 6, the contract was amended on December 22, 2017
with reduced production requirements. The contract maintains minimum production requirements as well as a
payment due to the counterparty to the contract of $1.5 million per year if the minimum volume is not manufactured
in that year and no other breach or default under the contract has occurred.
General legal matters
From time to time the Company is or may become subject to certain legal proceedings and claims arising in
connection with the normal course of its business. Management does not expect that the outcome of any such claims
or actions will have a material effect on the Company’s liquidity, results of operations or financial condition.
Other commitments
In the normal course of business, the Company enters into contracts that contain a variety of
indemnifications with its employees, licensors, suppliers and service providers. Further, the Company indemnifies
its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s
maximum exposure under these arrangements is unknown as of December 31, 2017. The Company does not
anticipate recognizing any significant losses relating to these arrangements.
11. INCOME TAXES
A reconciliation of income taxes at the U.S. Federal statutory rate to the benefit for income taxes is as follows:
Year Ended December 31,
2017
2016
Benefit at U.S. federal statutory rate ....................................................................... $ (14,758,443) $ (6,635,151)
(1,581,844)
(266,312)
State taxes – deferred ..............................................................................................
5,755,413
(751,505)
Increase in valuation allowance ..............................................................................
(322,499)
Research and development credits ..........................................................................
(272,262)
Federal tax reform rate change ............................................................................... 17,263,248
—
1,468,549
100,806
Other .......................................................................................................................
Benefit for income taxes ......................................................................................... $
—
— $
A summary of the Company’s deferred tax assets is as follows:
Year Ended December 31,
2017
2016
Federal and state net operating loss carryforwards ................................................. $ 29,137,918 $ 30,843,479
4,099,249
Federal and state research credits ...........................................................................
652,695
Transaction costs ....................................................................................................
972,345
Deferred revenue ....................................................................................................
747,586
Accrued expenses and other ...................................................................................
Total gross deferred tax assets .............................................................................. 36,563,849 37,315,354
Less: valuation allowance for deferred tax assets ................................................... (36,563,849) (37,315,354)
—
Net deferred tax assets ............................................................................................ $
4,526,201
1,269,443
679,068
951,219
— $
F-26
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
As of December 31, 2017, the Company had federal and state Net Operating Losses (“NOLs”) of $125.3
million and $201.5 million, respectively, as well as federal research and development tax credit carryforwards of
approximately $4.5 million. The NOLs will begin to expire at various dates beginning in 2027, if not limited by
triggering events prior to such time. Under the provisions of the Internal Revenue Code, changes in our ownership,
in certain circumstances, will limit the amount of federal NOLs that can be utilized annually in the future to offset
taxable income. In particular, section 382 of the Internal Revenue Code imposes limitations on a company’s ability
to use NOLs upon certain changes in ownership. If the Company is limited in its ability to use its NOLs in future
years in which it has taxable income, then the Company will pay more taxes than if it were otherwise able to fully
utilize its NOLs. The Company may experience ownership changes in the future as a result of subsequent shifts in
ownership of the Company’s capital stock that the Company cannot predict or control that could result in further
limitations being placed on the Company’s ability to utilize its federal NOLs.
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When
determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses
all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history,
expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that
could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive
and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is
generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable
temporary differences to outweigh objective negative evidence of recent financial reporting losses. Based on these
criteria and the relative weighting of both the positive and negative evidence available, management continues to
maintain a full valuation allowance against its net deferred tax assets.
On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to
as the Tax Cuts and Jobs Act (the “TCJA”). The TCJA makes broad changes to the U.S. tax code, including, but not
limited to, (1) reducing the U.S federal corporate tax rate from 35% to 21%; (2) eliminating the corporate alternative
minimum tax; (3) creating a new limitation on deductible interest expense; (4) creating the base erosion and anti-
abuse tax, a new minimum tax; (5) limitation on the deductibility of certain executive compensation; (6) enhancing
the option to claim accelerated depreciation deductions on qualified property, and (7) changing the rules related to
uses and limitations of NOLs in tax years beginning after December 31, 2017.
The TCJA reduces the corporate tax rate to 21%, effective January 1, 2018. The accounting for this portion
of the TCJA has caused a reduction to the net deferred tax assets before valuation allowance of $17.3 million for the
year ended December 31, 2017. However, as discussed above, the Company maintains a full valuation allowance
against its deferred tax assets. As a result, the $17.3 million reduction to the Company’s deferred tax assets is offset
by a corresponding $17.3 million reduction in the Company’s valuation allowance, resulting in no net impact to the
Company’s tax provision.
The Company has not completed its determination of the accounting implications of the TCJA on its tax
accruals. However, the Company has estimated the effects of the TCJA as described above as of December 31,
2017, which is primarily comprised of the re-measurement of federal net deferred tax assets resulting from the
permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%. As the Company completes its
analysis of the TCJA, collects and prepares necessary data and interprets any additional guidance issued by the U.S.
Treasury Department, the IRS, and other standard-setting bodies, it may make adjustments to the provisional
amounts recorded as of December 31, 2017. However, those adjustments are not anticipated to have a material
impact on the Company’s tax provision for the year ended December 31, 2017.
The Company recognizes a tax benefit from any uncertain tax positions only if they are more likely than
not to be sustained upon examination based on the technical merits of the position. The amount of the accrual for
which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis
that the Company believes is more likely than not to be realized upon ultimate settlement of the position. The
Company does not have any unrecognized tax benefits as of December 31, 2017, and does not anticipate a
significant change in unrecognized tax benefits during the next 12 months.
F-27
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
12. SEGMENTS
The Company is engaged in the manufacture, marketing and development of specialty plasma-derived
biologics. The Company’s operating segments reflect the consummation of the Biotest Transaction on June 6, 2017
(see Notes 1 and 3), and the nature of its operations subsequent to the close of the transaction. The Company’s
ADMA BioManufacturing segment reflects the Company’s immune globulin manufacturing and development
operations in Florida, acquired on June 6, 2017 (see Note 3). The Plasma Collection Centers segment consists of two
FDA-licensed source plasma collection facilities located in Georgia, with a third collection center that opened in
December 2017 for which a BLA is pending. The Corporate segment includes general and administrative overhead
expenses. The Company defines its segments as those business units whose operating results are regularly reviewed
by the chief operating decision maker (“CODM”) to analyze performance and allocate resources. The Company’s
CODM is its President and Chief Executive Officer. Summarized financial information concerning reportable
segments is shown in the following tables:
Year Ended December 31, 2017
Revenues......................................................... $
Cost of product revenue ..................................
Gross (loss) profit ...........................................
Loss from operations ......................................
Interest and other expense, net ........................
Net loss ...........................................................
Capital expenditures .......................................
Depreciation and amortization expense ..........
Total Assets ....................................................
ADMA
BioManufacturing
Plasma
Collection
Centers
Corporate Consolidated
10,980,987 $ 11,636,739 $
142,834 $ 22,760,560
7,302,181
21,862,140
— 29,164,321
(6,403,761)
4,334,558
(10,881,153)
(2,169,192) (17,339,349) (39,309,996)
(19,801,455)
(537,235)
(4,448,979)
(2,176,077) (21,244,208) (43,758,975)
(20,338,690)
15,263 2,676,328
1,913,663
747,402
2,204,772
50,842 2,692,301
436,687
3,933,673 50,080,464 108,018,833
54,004,696
(3,904,859)
142,834
(6,885)
Year Ended December 31, 2016
ADMA
BioManufacturing
Plasma
Collection
Centers
Corporate Consolidated
142,834 $ 10,661,037
— $ 10,518,203 $
— 6,360,761
6,360,761
—
—
142,834 4,300,276
4,157,442
(1,290,249) (16,040,146) (17,330,395)
—
—
(2,184,756) (2,184,756)
(1,290,249) (18,224,902) (19,515,151)
—
73,410
—
469,576
—
2,421,535 21,263,550 23,685,085
56,328
414,464
17,082
55,112
—
Revenues......................................................... $
Cost of product revenue ..................................
Gross profit .....................................................
Loss from operations ......................................
Other expense, net ..........................................
Net loss ...........................................................
Capital expenditures .......................................
Depreciation and amortization expense ..........
Total Assets ....................................................
13. OTHER EMPLOYEE BENEFITS
The Company sponsors a 401(k) savings plan. Under the plan, employees may make contributions which
are eligible for a Company discretionary percentage contribution as defined in the plan and determined by the Board
of Directors. The Company recognized $0.5 million and $0.2 million of related compensation expense for the years
ended December 31, 2017 and 2016, respectively. Compensation expense for the year ended December 31, 2017
includes expense attributable to ADMA BioManufacturing effective as of June 6, 2017.
F-28
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31, 2017 and 2016 is as follows:
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest .......................................................................................... $
2,293,590 $ 1,530,235
2017
2016
Noncash Financing and Investing Activities:
Assets acquired through the issuance of common stock and
liabilities assumed ........................................................................................ $ 60,161,629 $
544,125 $
2,760,000 $
614,513 $
Equipment acquired reflected in accounts payable and accrued liabilities ......... $
End of term liability for senior notes payable ..................................................... $
Warrants issued in connection with notes payable ............................................. $
—
—
358,000
86,300
15. CONCENTRATIONS
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash
and cash equivalents and accounts receivable. At December 31, 2017, two customers accounted for 79% of the
Company’s total accounts receivable. At December 31, 2016, a single customer accounted for 95% of the
Company’s total accounts receivable.
For the year ended December 31, 2017, BPC represented 47% of the Company’s consolidated revenues,
and another customer represented 31% of the Company’s consolidated revenues. For the year ended December 31,
2016, BPC and another customer represented approximately 82% and 14%, respectively, of the Company’s
consolidated revenues.
16. SUBSEQUENT EVENTS
On February 9, 2018, the Board approved grants of options to purchase an aggregate of 650,000 shares of
the Company’s common stock to the Company’s executive officers. The options were granted under the 2014 Plan
(see Note 8), and the estimated fair value of the options granted was approximately $1.4 million.
F-29
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Exhibit No.
2.1
EXHIBIT INDEX
Description
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1†
10.2†
10.3†
10.4†
10.5†
10.6+
Master Purchase and Sale Agreement, dated as of January 21, 2017, by and among Biotest
Pharmaceuticals Corporation, ADMA BioManufacturing, LLC, ADMA Biologics, Inc., Biotest AG
and Biotest US Corporation (incorporated herein by reference to Exhibit 2.1 to the Company’s Current
Report on Form 8-K, filed with the SEC on January 23, 2017).
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference
to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 12, 2017).
Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, filed with the SEC on October 7, 2016).
Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to Amendment
No. 1 to the Company’s Current Report on Form 8-K/A, filed with the SEC on March 29, 2012).
Form of Warrant Agreement with Hercules Technology Growth Capital, Inc. (incorporated herein by
reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1, filed with the SEC on
February 11, 2013).
Form of Warrant Agreement with Oxford Finance LLC (incorporated herein by reference to Exhibit
4.6 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2016).
Warrant to Purchase Stock, dated October 10, 2017, issued by the Company to Marathon Healthcare
Finance Fund, L.P. (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report
on Form 8-K, filed with the SEC on October 11, 2017).
Form of Secured Term Loan Promissory Note issued to Hercules Technology Growth Capital, Inc.
(incorporated herein by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1,
filed with the SEC on February 11, 2013).
Form of Secured Term B Loan Promissory Note issued to Oxford Finance LLC (incorporated herein
by reference to Exhibit 4.7 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on
May 13, 2016).
Tranche One Term Note, dated October 10, 2017, issued by the Company to Marathon Healthcare
Finance Fund, L.P. (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report
on Form 8-K, filed with the SEC on October 11, 2017).
2007 Employee Stock Option Plan, as amended by Amendment No. 3 (incorporated herein by
reference to Exhibit A to the Information Statement on Schedule 14C, filed with the SEC on October
29, 2012).
Amended and Restated ADMA Biologics, Inc. 2014 Omnibus Incentive Compensation Plan
(incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-
8 filed on August 18, 2017).
Amended and Restated Employment Agreement, dated January 28, 2016, by and between ADMA
Biologics, Inc. and Adam Grossman (incorporated herein by reference to Exhibit 10.2 to the
Company’s Annual Report on Form 10-K, filed with the SEC on March 23, 2016).
Amended and Restated Employment Agreement, dated January 28, 2016, by and between ADMA
Biologics, Inc. and Brian Lenz (incorporated herein by reference to Exhibit 10.8 to the Company’s
Annual Report on Form 10-K, filed with the SEC on March 23, 2016).
Amended and Restated Employment Agreement, dated January 28, 2016, by and between ADMA
Biologics, Inc. and James Mond, M.D., Ph.D. (incorporated herein by reference to Exhibit 10.11 to the
Company’s Annual Report on Form 10-K, filed with the SEC on March 23, 2016).
Plasma Purchase Agreement, dated as of November 17, 2011, by and between Biotest Pharmaceuticals
Corporation and ADMA Biologics, Inc., as amended by First Amendment to Plasma Purchase
Agreement, dated as of December 1, 2011, by and between Biotest Pharmaceuticals Corporation and
ADMA Biologics, Inc. (incorporated herein by reference to Exhibit 10.9 to Amendment No. 3 to the
Company’s Current Report on Form 8-K/A, filed with the SEC on June 22, 2012).
10.6.1+
10.6.2
10.6.3
10.7+
10.8+
10.9+
10.10
10.11
10.12+
10.13
10.14
10.15
10.16+
10.17
10.17.1
Second Amendment to Plasma Purchase Agreement, dated as of December 18, 2015, by and between
Biotest Pharmaceuticals Corporation and ADMA Biologics, Inc. (incorporated herein by reference to
Exhibit 10.3.1 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 23,
2016).
Third Amendment to Plasma Purchase Agreement, dated as of April 8, 2016, by and between Biotest
Pharmaceuticals Corporation and ADMA Biologics, Inc. (incorporated herein by reference to Exhibit
10.3.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2016).
Fourth Amendment to Plasma Purchase Agreement, dated as of June 6, 2017, by and between Biotest
Pharmaceuticals Corporation and ADMA Biologics, Inc. (incorporated herein by reference to Exhibit
10.9 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2017).
Amended and Restated Plasma Supply Agreement, dated as of March 23, 2016, by and between
ADMA Biologics, Inc. and Biotest Pharmaceuticals Corporation (incorporated herein by reference to
Exhibit 10.10 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 23, 2016).
Plasma Supply Agreement, dated as of June 6, 2017, by and between ADMA BioManufacturing, LLC
and Biotest Pharmaceuticals Corporation (incorporated herein by reference to Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2017).
Plasma Purchase Agreement, dated as of June 6, 2017, by and between ADMA BioManufacturing,
LLC and Biotest Pharmaceuticals Corporation (incorporated herein by reference to Exhibit 10.6 to the
Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2017).
Amended and Restated Agreement for Services, effective as of January 1, 2016, by and between
ADMA Biologics, LLC and Areth LLC (incorporated herein by reference to Exhibit 10.18 to the
Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 12, 2016).
Agreement of Lease, effective June 1, 2008 and confirmed on November 13, 2008, by and among
ADMA Bio Centers Georgia Inc., ADMA Biologics, Inc. and C1VF I-GA1W15-W23, LLC (DCT
Holdings), as amended on January 20, 2011, May 24, 2012 and January 1, 2014 (incorporated herein
by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed with the SEC on
February 13, 2012).
Lease, dated as of January 20, 2014, by and between ADMA Bio Centers Georgia Inc. and U.S. Bank
National Association, effective February 1, 2014, as amended on December 18, 2014 and July 9, 2015
(incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with
the SEC on March 28, 2014).
Lease, effective as of February 17, 2017, by and between Home Center Properties, LLC and ADMA
Bio Centers Georgia Inc. (incorporated herein by reference to Exhibit 10.22 to the Company’s Annual
Report on Form 10-K, filed with the SEC on February 24, 2017).
Purchase Agreement, dated as of June 6, 2017, by and among the Company, Biotest Pharmaceuticals
Corporation and ADMA Bio Centers Georgia, Inc. (incorporated herein by reference to Exhibit 10.7 to
the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2017).
Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.12 to the
Company’s Current Report on Form 8-K, filed with the SEC on February 13, 2012).
Testing Services Agreement, dated as of June 8, 2012, by and between ADMA Biologics, Inc. and
Quest Diagnostics Clinical Laboratories, Inc. (incorporated herein by reference to Exhibit 10.16 to
Amendment No. 4 to the Company’s Registration Statement on Form S-1, filed with the SEC on
August 10, 2012).
Loan and Security Agreement, dated as of June 19, 2015, by and among Oxford Finance LLC, the
lenders party thereto, ADMA Biologics, Inc., ADMA Plasma Biologics, Inc. and ADMA Bio Centers
Georgia Inc. (incorporated herein by reference to Exhibit 10.23 to the Company’s Quarterly Report on
Form 10-Q, filed with the SEC on August 11, 2015).
First Amendment to Loan and Security Agreement, dated as of May 13, 2016, by and among Oxford
Finance LLC, the lenders party thereto, ADMA Biologics, Inc., ADMA Plasma Biologics, Inc. and
ADMA Bio Centers Georgia Inc. (incorporated herein by reference to Exhibit 10.17.1 to the
Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2016).
10.18
10.19
10.20
10.21
10.22
10.23+
10.23.1
10.24++ *
Subordinated Loan Agreement, dated as of June 6, 2017, by and among the Company, ADMA
BioManufacturing, LLC and Biotest Pharmaceuticals Corporation (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 12, 2017).
Credit Agreement, dated as of October 10, 2017, by and among the Company, ADMA Plasma
Biologics, Inc., ADMA Bio Centers Georgia Inc., ADMA BioManufacturing, LLC, Marathon
Healthcare Finance Fund, L.P. and Wilmington Trust, National Association (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on
October 11, 2017).
Security Agreement, dated as of October 10, 2017, by and among the Company, ADMA Plasma
Biologics, Inc., ADMA Bio Centers Georgia Inc., ADMA BioManufacturing, LLC and Wilmington
Trust, National Association (incorporated herein by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K, filed with the SEC on October 11, 2017).
Intellectual Property Security Agreement, dated as of October 10, 2017, by and among the Company,
ADMA Plasma Biologics, Inc., ADMA Bio Centers Georgia Inc., ADMA BioManufacturing, LLC and
Wilmington Trust, National Association (incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K, filed with the SEC on October 11, 2017).
Pledge Agreement, dated as of October 10, 2017, by and between the Company and Wilmington Trust,
National Association (incorporated herein by reference to Exhibit 10.4 to the Company’s Current
Report on Form 8-K, filed with the SEC on October 11, 2017).
License Agreement, effective as of December 31, 2012, by and between ADMA Biologics, Inc. and
Biotest Aktiengesellschaft (incorporated herein by reference to Exhibit 10.21 to the Company’s
Registration Statement on Form S-1, filed with the SEC on February 11, 2013).
First Amendment to License Agreement, dated as of June 6, 2017, by and between the Company and
Biotest Aktiengesellschaft (incorporated herein by reference to Exhibit 10.8 to the Company’s
Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2017).
Manufacturing Agreement, dated as of September 30, 2011, by and between ADMA
BioManufacturing, LLC (as successor-in-interest to Biotest Pharmaceuticals Corporation) and Sanofi
Pasteur S.A.
10.24.1++ * Amendment #2 to the Manufacturing Agreement, effective as of August 1, 2016, by and between
ADMA BioManufacturing, LLC (as successor-in-interest to Biotest Pharmaceuticals Corporation) and
Sanofi Pasteur S.A.
10.24.2++ * Amendment #3 to the Manufacturing Agreement, effective as of December 21, 2017, by and between
10.25
10.26
10.27+
10.28
21.1
23.1*
ADMA BioManufacturing, LLC and Sanofi Pasteur S.A.
Stockholders Agreement, dated as of June 6, 2017, by and between the Company and Biotest
Pharmaceuticals Corporation (incorporated herein by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed on June 12, 2017).
Registration Rights Agreement, dated as of June 6, 2017, by and between the Company and Biotest
Pharmaceuticals Corporation (incorporated herein by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed on June 12, 2017).
Transition Services Agreement, dated as of June 6, 2017, by and between ADMA BioManufacturing,
LLC and Biotest Pharmaceuticals Corporation (incorporated herein by reference to Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 11, 2017).
Termination Agreement (Manufacturing, Supply and License Agreement and Master Services
Agreement), dated as of June 6, 2017, by and between the Company and Biotest Pharmaceuticals
Corporation (incorporated herein by reference to Exhibit 10.10 to the Company’s Quarterly Report on
Form 10-Q, filed with the SEC on August 11, 2017).
Subsidiaries of the Company (incorporated herein by reference to Exhibit 21.1 to the Company’s
Registration Statement on Form S-1, filed with the SEC on October 11, 2018).
Consent of CohnReznick LLP.
31.1*
31.2*
32.1**
32.2**
101*
Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
The following materials from ADMA Biologics, Inc. Form 10-K for the year ended December 31,
2017, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets
at December 31, 2017 and December 31, 2016, (ii) Consolidated Statements of Operations for the
years ended December 31, 2017 and 2016 (iii) Consolidated Statements of Changes in Stockholders’
(Deficiency) Equity for the years ended December 31, 2017 and 2016, (iv) Consolidated Statements of
Cash Flows for the years ended December 31, 2017 and 2016 and (v) Notes to Consolidated Financial
Statements.
+ Confidential treatment has been granted with respect as to certain portions of this exhibit. Such portions have
been redacted and submitted separately to the SEC.
++ Confidential treatment has been requested with respect as to certain portions of this exhibit. Such portions have
been redacted and submitted separately to the SEC.
* Filed herewith.
** Furnished herewith.
† Management compensatory plan, contract or arrangement.
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Corporate Information
Board of Directors
Steven A. Elms, Chairman of the Board
Managing Partner, Aisling Capital
Dr. Jerrold B. Grossman, Founder and Vice Chairman
of the Board
Founder and President, GenesisBPS
Bryant E. Fong, Director
Managing Director and General Partner, Biomark
Capital Fund
Dov A. Goldstein, M.D., Director
Private Investor
Lawrence P. Guiheen, Director
Chief Commercial Officer, Kedrion BioPharma, Inc.
Eric I. Richman, Director
Venture Partner, Brace Pharma Capital
Adam S. Grossman, Founder, Director
Management Team
Adam S. Grossman
President and CEO
Brian Lenz, CPA
Vice President, CFO
James Mond, M.D., Ph.D.
Executive Vice President, CSO & CMO
Corporate Headquarters
465 Route 17 South
Ramsey, NJ 07446
Phone: (201) 478-5552
Fax: (201) 478-5553
Email: info@admabiologics.com
www.admabiologics.com
Florida Campus
5800 & 5900 Park of Commerce Blvd NW
Boca Raton, FL 33487
Phone: (561) 989-5799
Fax: (561) 989-5890
Common Stock Trading
The Company’s common stock trades on the NASDAQ
Capital Market under the symbol "ADMA".
Annual Meeting of Stockholders
The Company’s Annual Meeting of Stockholders will
be held at 10AM ET on June 22, 2018, at the offices of
DLA Piper LLP (US), 51 John F. Kennedy Parkway, Short
Hills, NJ 07078.
Investor Relations
For additional information, please contact our
Investor Relations Department at (201) 478-5552 or via
email at: info@admabiologics.com
Independent Auditors
CohnReznick LLP
4 Becker Farm Road
Roseland, NJ 07068
Phone: (973) 228-3500
Code of Ethics
ADMA Biologics, Inc. has adopted a corporate Code of
Ethics and Business Conduct Standards that applies to
all of its directors, officers (including our chief
executive officer and chief financial and accounting
officer) and employees. ADMA requires that all of its
directors, officers and employees certify compliance
with the Code of Ethics and Business Conduct
Standards on an annual basis. A copy of the Code of
Ethics and Business Conduct Standards is accessible
through the “Investors-Corporate Governance-
Governance Documents” section of the ADMA
Biologics, Inc. website at www.admabiologics.com.
Transfer Agent
Continental Stock Transfer & Trust Company
17 Battery Place
New York, NY 10004
Phone: (800) 509-5586
www.continentalstock.com
Legal Counsel
DLA Piper LLP (US)
51 John F. Kennedy Parkway, Suite 120
Short Hills, NJ 07078
Phone: (973) 520-2550
OUR VALUES
Our superior commitment to patients is anchored to our core values:
HUMAN
We make human connection a priority in our products, our patients, and our people.
COURAGEOUS
We take on the challenges others won't by embracing rare diseases and the underserved populations.
DYNAMIC
We are relentless in transforming groundbreaking science into meaningful action.
TENACIOUS
We are tireless in our pursuit of perfection because people's lives are in our hands.
Through our relentless commitment to improving people’s lives, we are changing the
future with our immunotechnology.
Company Profile
ADMA Biologics is a vertically integrated commercial biopharmaceutical and specialty immunoglobulin company that manufactures, markets
and develops specialty plasma-derived biologics for the treatment of immune deficiencies and prevention of 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. Our product candidates are intended to be used by physician specialists focused on caring for
immune-compromised patients with or at risk for infectious diseases.
ADMA Biologics, through its wholly-owned subsidiaries, operates ADMA BioManufacturing and ADMA BioCenters. ADMA BioManufacturing was formed
in January 2017 to facilitate the acquisition of our contract manufacturer. ADMA BioCenters is our source plasma collection business, with
facilities located in Norcross, GA, Marietta, GA and Kennesaw, GA. Both the Norcross and Marietta, GA facilities have approved licenses with
the U.S. Food and Drug Administration (the “FDA”) and certifications from the German Health Authority and the Korean Ministry of Food and
Drug Safety, and we filed a Biologics License Application with the FDA for our Kennesaw, GA facility in December 2017. ADMA BioCenters
supplies ADMA with a portion of our raw material plasma for the manufacture of RI-002, ADMA’s lead pipeline product candidate, which we
are currently developing for the treatment of Primary Immune Deficiency Disease (“PIDD”). RI-002 targets the unmet needs of immune
deficient patients. RI-002 demonstrated positive Phase III results and successfully achieved its primary endpoint of preventing serious bacterial
infections such as bacterial pneumonia, osteomyelitis and bacterial sepsis in immune-compromised PIDD patients. ADMA also has two FDA
approved products, Bivigam®, a standard immune globulin, which is indicated for the treatment of PIDD, and Nabi-HB® a hyperimmune
globulin that is rich in antibodies to the hepatitis B virus, which is indicated for the treatment of acute exposure to blood containing hepatitis B
surface antigen (“HBsAg”), prenatal exposure to infants born to HBsAg-positive mothers, sexual exposure to HBsAg-positive persons and
household exposure to persons with acute hepatitis B virus infection.
Cautionary Statement regarding forward-looking information
This annual report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995 about ADMA Biologics, Inc. (“ADMA”). Forward-looking statements include, without limitation, any statement that may
predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate," “project,” "intend,"
“forecast,” "target,” ”anticipate,” “plan,” “planning,” “expect,” “believe,” “will," “is likely,” “will likely,” “should,” “could,” "would," "may," or, in each
case, their negative, or words or expressions of similar meaning. These forward-looking statements also include, but are not limited to,
statements regarding the description of the plans for product development, announcement of results, submissions to regulatory authorities,
possible approvals thereof, FDA action and commercial sales, expectations, objectives, and other forward-looking statements included in the
Letter to the Stockholders and Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which is included herein. Such
statements are based on management’s current expectations and are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking statements. In particular, careful consideration should be given to
cautionary statements made in ADMA’s filings with the U.S. Securities and Exchange Commission, specifically those statements found in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under the caption “Risk Factors” in Item 1A. Therefore, current and
prospective security holders are cautioned that there can be no assurance that the forward-looking statements contained in this annual report
will prove to be accurate. Except as required by law, ADMA undertakes no responsibility to update any forward-looking statements or
announce revisions to any forward-looking statements.
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