# ADMA BIOLOGICS, INC. (ADMA) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ADMA BIOLOGICS, INC.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1368514/000114036123013467/brhc10049985_10k.htm
Accession: 0001140361-23-013467
Filing date: 2023-03-23
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ADMA/
All MD&A years: /company/ADMA/mda/
Previous year: /company/ADMA/mda/fy2021/ (FY 2021)
Next year: /company/ADMA/mda/fy2023/ (FY 2023)

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.

OVERVIEW

Our Business

ADMA Biologics, Inc. (the “Company,” “ADMA,” “we,” “us” or “our”) is an end-to-end commercial biopharmaceutical company dedicated to manufacturing, marketing and developing specialty plasma-derived biologics for the
treatment of immunodeficient patients at risk for infection and others at risk for certain infectious diseases. Our targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or
who may be immune-suppressed for medical reasons.

Through our ADMA BioManufacturing business segment, we currently have three products with U.S. Food and Drug Administration (the “FDA”) approval, all of which are currently marketed and commercially available: (i)
BIVIGAM (Immune Globulin Intravenous, Human), an Intravenous Immune Globulin (“IVIG”) product indicated for the treatment of Primary Humoral Immunodeficiency (“PI”), also known as Primary Immunodeficiency Disease (“PIDD”) or Inborn Errors of
Immunity, and for which we received FDA approval on May 9, 2019 and commenced commercial sales in August 2019; (ii) ASCENIV (Immune Globulin Intravenous, Human – slra 10% Liquid), an IVIG product indicated for the treatment of PI, for which we
received FDA approval on April 1, 2019 and commenced first commercial sales in October 2019; and (iii) Nabi-HB (Hepatitis B Immune Globulin, Human), which is indicated for the treatment of acute exposure to blood containing HBsAg and other listed
exposures to Hepatitis B. We seek to develop a pipeline of plasma-derived therapeutics, including a product based on our most recently approved patent application under U.S. Patent No. 10,259,865 related to methods of treatment and prevention of
S. pneumonia infection for an immunoglobulin manufactured to contain standardized antibodies to numerous serotypes of S. pneumoniae. Our products and product
candidates are intended to be used by physician specialists focused on caring for immune-compromised patients with or at risk for certain infectious diseases.

We manufacture these products at our FDA-licensed, plasma fractionation and purification facility located in Boca Raton, Florida with a peak annual processing capability of up to 600,000 liters (the “Boca Facility”).
Based on current production yields, our ongoing supply chain enhancements and capacity expansion initiatives, we believe this facility has the potential to produce sufficient quantities of our immune globulin (“IG”) products representing annual
revenues of $210 million or more in 2023, more than $250 million in annual revenue in 2024 and potentially in excess of $300 million of annual revenue thereafter, as well as achieving profitability during the first quarter of 2024. At these
revenue levels, we forecast achieving consolidated gross margins in the range of 40-50% and net income margins in the range of 20-30%. These assumptions translate to potential annual gross profit and net income in the range of $100-150 million
and $50-100 million, respectively, during the 2024-2025 time period and beyond.

Through our ADMA BioCenters subsidiary, we currently operate ten source plasma collection facilities in the U.S. This business unit, which we refer to as our Plasma Collection Centers business segment, provides us
with a portion of our blood plasma for the manufacture of our products, and also allows us to sell certain quantities of source plasma to third-party customers for further manufacturing. With respect to our operational plasma collection centers,
eight plasma collection centers currently hold FDA licenses, with the remaining plasma collection centers anticipated to receive FDA approvals throughout 2023. In addition, three of our FDA-approved plasma collection centers also have approvals
from the Korean Ministry of Food and Drug Safety (“MFDS”), as well as FDA approval to operate a Hepatitis B immunization program. After giving effect to the supply chain robustness initiatives undertaken in 2021 and 2022 as it pertains to our
plasma collection network expansion, we remain on track to achieve our goal of having 10 FDA-licensed plasma collection centers by the end of 2023. A typical plasma collection center, such as those operated by ADMA BioCenters, can collect
approximately 30,000 to 50,000 liters of source and hyperimmune 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 is sold to third-party customers in the U.S. and in other locations outside the U.S. where we are approved under supply agreements or in the open “spot” market.

62

Table of Contents

We sell plasma-derived intermediate fractions to certain customers, which are generated as part of our FDA-approved manufacturing process for IG and IVIG products. In January 2020, we announced our entry into a
five-year manufacturing and supply agreement to produce and sell these intermediate by-products, which are used as the starting raw material to produce other plasma-derived biologics. In addition, from time to time we provide contract
manufacturing services for certain third-party clients. We also provide laboratory contracting services to certain customers and anticipate providing contract filling, labeling and packing services utilizing our FDA-approved in-house fill-finish
capabilities.

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 included two FDA-licensed products, Nabi-HB and BIVIGAM, and the Boca Facility (the “Biotest Transaction”).

Our Products

BIVIGAM

BIVIGAM is a plasma-derived IVIG that 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 human Immunoglobulin G antibodies indicated for the treatment of PI, a group of genetic disorders. This includes, but is not limited to, the
humoral immune defect in common variable immunodeficiency, X-linked agammaglobulinemia, congenital agammaglobulinemia, Wiskott-Aldrich syndrome and severe combined immunodeficiency. These PIs are a group of genetic disorders. Based on recent
estimates, these disorders are no longer considered to be very rare, with as many as one in every 1,200 people in the United States having some form of PI.

On May 9, 2019, the FDA approved the Prior Approval Supplement (the “PAS”) for the use of our IVIG manufacturing process, thereby enabling us to commence commercial sales of this product in the U.S. We resumed
production of BIVIGAM during the fourth quarter of 2017 and commercial production is ongoing, using our FDA-approved IVIG manufacturing process under U.S. Department of Health and Human Services (“HHS”) License No. 2019. The commercial re-launch
and first commercial sales for this product commenced in August of 2019.

On April 28, 2021, we announced that the FDA granted approval for our expanded plasma pool production scale process, allowing for a 4,400-liter plasma pool for the manufacture of our BIVIGAM IVIG product. This
increased IVIG plasma pool scale, which allows us to produce BIVIGAM at an expanded capacity utilizing the same equipment, release testing assays and labor force, has had a favorable impact on our gross margins, manufacturing efficiencies and
operating results since the beginning of the third quarter of 2021.

ASCENIV

ASCENIV is a plasma-derived IVIG that contains naturally occurring polyclonal antibodies, which are proteins that are used by the body’s immune system to neutralize microbes, such as bacteria and viruses, and prevent
against infection and disease. We manufacture ASCENIV under HHS License No. 2019 using a process known as fractionation. The Centers for Medicare and Medicaid Services (“CMS”) has issued a permanent, product-specific-J-code for ASCENIV.  Under
the Healthcare Common Procedure Coding System (“HCPCS”), the J-code (J1554) became effective April 1, 2021. As part of our proprietary manufacturing process for ASCENIV, we leverage our unique, patented plasma donor screening methodology and
tailored plasma pooling design, which blends normal source plasma and plasma from donors tested to have high levels of neutralizing antibody titers to respiratory syncytial virus (“RSV”) using our proprietary microneutralization testing assay. We
are able to identify the high titer or “hyperimmune” plasma that meets our internal and required specifications for ASCENIV with our patented testing methods and assay. This type of high titer plasma is typically found in less than 10% of the
total donor collection samples we test.

63

Table of Contents

ASCENIV is approved for the treatment of Primary Immune Deficiency Disorder (“PIDD”), a class of inherited genetic disorders that causes a deficient or absent immune system in adults and
adolescents (12 to 17 years of age). Our pivotal Phase III clinical trial in 59 PIDD patients met the primary endpoint of no Serious Bacterial Infections (“SBI”) reported during 12 months of treatment. Secondary efficacy endpoints further
demonstrated the benefits of ASCENIV in the low incidence of infection, therapeutic antibiotic use, days missed from work/school/daycare and unscheduled medical visits and hospitalizations. We believe this clinical data together with the FDA
approval for the treatment of PIDD better positions ADMA to potentially further evaluate ASCENIV in immune-compromised patients infected with or at-risk for RSV infection or potentially other respiratory viral pathogens at an appropriate time.
Due to the COVID-19 pandemic, our plans have been delayed.  In the future however, we may work with the FDA and the immunology and infectious disease community to design an appropriate clinical trial to evaluate the use of ASCENIV in this
patient population. Commercial sales of ASCENIV commenced in October of 2019 and our commercial and medical education efforts are focused on the labeled indication of patients with PIDD. ASCENIV’s prescriber and patient base continued
to expand during the fourth quarter of 2022, which drove record utilization and pull-through for the product. These elevated demand trends have sustained into 2023, and ADMA currently expects the product’s rapid growth will continue throughout
2023 and beyond.

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 of infants born to HBsAg-positive mothers, sexual exposure to HBsAg-positive persons and household exposure to persons with
acute Hepatitis B virus infection in specific, listed settings. 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 places 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. The FDA approved Nabi-HB on March 24, 1999.  Production of Nabi-HB at the
Boca Facility has continued under our leadership since the third quarter of 2017. In early 2018, we received authorization from the FDA for the release of our first commercial batch of Nabi-HB for commercial distribution in the U.S. and we
continue to manufacture Nabi-HB under HHS License No. 2019.

IMPACT OF THE COVID-19 CRISIS

We continue to monitor the ongoing developments related to the COVID-19 pandemic, including the emergence of the Delta, Omicron and BA.2 variants and other resistant strains of the coronavirus, and its impacts to our
commercial and manufacturing operations and plasma collection facilities, including collections of source plasma, procurement of raw materials and packaging materials, a portion of which are sourced internationally, and the testing of finished
drug product that is required prior to its availability for commercial sale. A substantial portion of such testing has historically been performed by contract laboratories outside the United States.

Due to a combination of previously mandated state and local “shelter-in-place” orders, as well as government stimulus packages, persisting social distancing measures and varying roll-outs of vaccinations by state, we
experienced lower than normal donor collections at our FDA approved plasma collection centers during 2021. We are also subject to delays in shipments of source plasma from our contracted third-party suppliers, as well as delays in deliveries for
personal protective equipment, reagents and other non-plasma raw materials and supplies used in the manufacture and distribution of our products. In addition, we are subject to supply chain delays as a result of certain of our suppliers diverting
significant resources towards the rapid development and distribution of COVID-19 vaccines and, as a result, we have elected to carry more raw materials inventory than we have in the past. The COVID-19 pandemic previously impacted, to a certain
degree, our customer engagement initiatives, whereby ADMA’s sales and medical affairs field personnel faced difficulties communicating directly with physicians and other healthcare professionals, as well as the cancellation or postponement of a
number of key scientific and medical meetings, further limiting our ability to communicate with potential customers.

The pandemic could also impact our ability to interact with the FDA or other regulatory authorities and may result in delays in the conduct of inspections or review of pending applications or submissions. Although we
received FDA approvals for four of our plasma collection centers during the year ended December 31, 2022, received several FDA approvals and two FDA inspections of the Boca Facility were completed during the year ended December 31, 2021, no
assurances can be provided as to the timing for completion of any future regulatory submissions or applications that may be impacted by restrictions related to COVID-19.

64

Table of Contents

During the years ended December 31, 2022 and 2021, our revenue attributable to international customers was approximately 5% and 13%, respectively, of our total revenues. As we seek to grow this aspect of our
business, we may also be subject to the impacts of the COVID-19 pandemic in locations outside the United States.

Notwithstanding the foregoing, the COVID-19 pandemic to date has not had a material impact on our financial condition or results of operations, and we do not believe that our production operations at the Boca
Facility, our contract fill/finishers or our plasma collection facilities have been significantly impacted by the COVID-19 pandemic. As a result, we do not anticipate and have not experienced any material impairments with respect to any of our
long-lived assets, including our property and equipment, goodwill or intangible assets.

Although the COVID-19 pandemic has not, to date, materially adversely impacted our capital and financial resources, because we are unable to determine the ultimate severity or duration of the pandemic or its
long-term effects on, among other things, the global, national or local economies, the capital and credit markets or our workforce, customers or suppliers, at this time we are unable to predict whether COVID-19, or any known or future variant or
government order, will have a material adverse impact on our business, financial condition, liquidity and results of operations. After the COVID-19 global pandemic has settled, we may continue to experience adverse impacts to our business as a
result of evolving macroeconomic factors, including general economic uncertainty, unemployment rates, inflationary pressures and any actual economic recession that has occurred or may occur in the future.

RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

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. Significant estimates include rebates and certain other deductions from gross revenues, the realizable value of accounts receivable, valuation of inventory, impairment of long-lived assets, assumptions used in projecting future
liquidity and capital requirements, assumptions used in the fair value of awards granted under our equity incentive plans and warrants issued in connection with the issuance of notes payable and the valuation allowance for our deferred tax
assets.

Some of the estimates and assumptions we have to make under U.S. GAAP require difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, actual results could differ
from those estimates. Due to the estimation processes involved, the following summary of accounting estimates and their application are considered to be critical to understanding our business operations, financial condition and results of
operations. For a description of our significant accounting policies, see Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Estimates and assumptions used in projecting future liquidity and
capital requirements are described in Note 1 to the Consolidated Financial Statements.

Revenues

Our gross product revenues are subject to a variety of deductions, which are estimated and recorded in the same period that the revenues are recognized. These deductions primarily consist of rebates, distribution
fees, chargebacks and sales allowances. These deductions represent estimates of the related obligations, some of which are contractual in nature and do not require extensive judgment to be exercised by management, while other estimates require
complex or subjective matters of knowledge and judgment when estimating the impact of these revenue deductions on net revenues for a reporting period.

65

Table of Contents

Historically, adjustments to these estimates to reflect actual results or updated expectations, have not been material to our overall business. However, two of our primary immunoglobulin products, ASCENIV and
BIVIGAM, were only approved for commercial sale by the FDA in 2019, and as such our historical experience with rebates with respect to these products is limited. If any of our ratios, factors, assessments, experiences or judgments are not
indicative or accurate estimates of our future experience, our results could be materially affected. Estimates that are most at risk for material adjustment are those associated with U.S. Medicaid rebates because of the extensive time delay
between the recording of the accrual and its ultimate settlement, an interval that can generally take up to several years or more. While our results of operations to date have not required any material adjustment due to this risk, the delay
between when this obligation is initially recorded and ultimately settled could potentially materially impact our revenues and our results of operations in the future.

Stock-Based Compensation and Valuation of Warrants

All equity-based payments, including grants of stock options and restricted stock units (“RSUs”), are recognized at their estimated fair value at the date of grant, and compensation expense is recognized on a
straight-line basis over the grantee’s requisite vesting period. For the purpose of valuing stock options granted to our employees, directors and officers, we use the Black-Scholes option pricing model. The Black-Scholes option pricing model was
developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different from those of traded
options, and changes in the underlying Black-Scholes assumptions can materially affect the fair value estimate. To determine the risk-free interest rate, we utilize the U.S. 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 SEC 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 historical volatility of our Common Stock since our Common
Stock became publicly traded in the fourth quarter of 2013. 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. Any changes in
the foregoing Black-Scholes assumptions, or an election by us to utilize an alternative method for valuing stock options granted to employees, directors and officers, could potentially impact our stock-based compensation expense and our results
of operations.

We also use the Black-Scholes option pricing model for the purpose of estimating the fair value of warrants we issue from time to time in connection with the issuance of notes payable. Changes in our Black-Scholes
assumptions, or an election by us to utilize an alternative method for valuing warrants issued to our lenders, could impact our interest expense and results of operations.

Impairment of Long-Lived Assets

We assess the recoverability of our long-lived assets, which include property and equipment and definite-lived intangible assets, whenever significant events or changes in circumstances indicate impairment may have
occurred. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to its carrying amount to determine whether the asset’s carrying value is recoverable. Any resulting impairment is
recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the years ended December 31, 2022 and 2021, we determined that there was no impairment of our long-lived assets.
Examples of events or circumstances that may be indicative of impairment that would require the use of significant judgment by management include:

[[GREPCENT_TABLE]]
[["","\u2022","A significant adverse change in legal factors or in the business climate that could affect the value of the asset."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Significant and continued cash flow losses."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","A significant adverse change in the extent or manner in which an asset is used, such as a restriction imposed by the FDA or other regulatory authorities that could affect our ability to manufacture our products using a particular asset."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","An expectation of losses or reduced profits associated with an asset. This could result, for example, from the introduction of a competitor\u2019s product that impacts projected revenue growth, or a change in the acceptance of a product by patients, physicians and payers that results in an inability to sustain projected product revenues."]]
[[/GREPCENT_TABLE]]

66

Table of Contents

Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators exist. The testing of goodwill for impairment requires us to determine whether or not the fair
value of the reporting unit associated with the goodwill is less than its carrying amount, including goodwill and other intangible assets. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value,
with the impairment loss recognized not to exceed the total amount of goodwill allocated to that reporting unit. In order to determine the fair value of the reporting unit, we utilize the fair value of the Company as a whole, as determined by its
market capitalization. Determination of the fair value and carrying value of each reporting unit, relative to the fair value of the Company, requires management to employ certain estimates, assumptions and judgment, which we believe are
reasonable. However, any changes to these estimates and assumptions could impact our determination of whether or not our goodwill is impaired. We did not recognize any impairment charges related to goodwill for the years ended December 31, 2022
and 2021.

Deferred Tax Assets

We have historically maintained a full valuation allowance against all of our net deferred tax assets, and as a result have recorded no income tax benefit in the accompanying consolidated financial statements. This
valuation allowance reflects our assessment of whether it is more likely than not that we will generate sufficient taxable income in the future to be able to utilize our deferred tax assets. In determining whether a valuation allowance is
warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies. We consider all positive and negative evidence to estimate if sufficient future taxable income will be
generated to realize our deferred tax assets.  We consider cumulative losses in recent years to be a significant type of negative evidence, and based on our history of losses, at this time we have not included future projected taxable income as a
source of income to recognize our deferred tax assets.

Year Ended December 31, 2022 Compared to December 31, 2021

The following table presents a summary of the changes in our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021","","","Increase (Decrease)"],["Revenues","","$","154,079,692","","","$","80,942,625","","","$","73,137,067"],["Cost of product revenue","","","118,814,535","","","","79,769,341","","","","39,045,194"],["Gross profit","","","35,265,157","","","","1,173,284","","","","34,091,873"],["Research and development expenses","","","3,613,764","","","","3,646,060","","","","(32,296",")"],["Plasma center operating expenses","","","17,843,096","","","","12,288,723","","","","5,554,373"],["Amortization of intangibles","","","715,353","","","","715,353","","","","-"],["Selling, general and administrative expenses","","","52,458,024","","","","42,896,889","","","","9,561,135"],["Loss from operations","","","(39,365,080",")","","","(58,373,741",")","","","19,008,661"],["Interest expense","","","(19,279,373",")","","","(13,056,834",")","","","(6,222,539",")"],["Loss on extinguishment of debt","","","(6,669,941",")","","","-","","","","(6,669,941",")"],["Other expense, net","","","(589,556",")","","","(217,043",")","","","(372,513",")"],["Net loss","","$","(65,903,950",")","","$","(71,647,618",")","","$","5,743,668"]]
[[/GREPCENT_TABLE]]

Revenues

We recorded total revenues of $154.1 million during the year ended December 31, 2022, as compared to $80.9 million during the year ended December 31, 2021, an increase of $73.1 million, or approximately 90%. The
increase is mainly due to increased sales of our immunoglobulin products and intermediate fractions generated by our Boca Facility manufacturing operations in 2022 totaling $69.2 million as we conclude our third full year of commercial sales of
BIVIGAM and ASCENIV. We attribute this increase in revenue to the continued expansion of our customer base in 2022 and to increasing physician, payer and patient acceptance of both BIVIGAM and ASCENIV. We also experienced a $4.0 million increase
in plasma revenues generated by our Plasma Collection Centers business segment due to increased sales of plasma through spot market opportunities beyond our long-term supply agreement.

67

Table of Contents

Cost of Product Revenue and Gross Profit

Cost of product revenue was $118.8 million for the year ended December 31, 2022, as compared to $79.8 million for the year ended December 31, 2021. This increase of $39.0 million is primarily attributable to
volume-related increases in product revenue costs related to the sale of our immunoglobulin products of $30.4 million and increased product revenue costs related to our ADMA BioCenters business segment in the amount of $4.3 million. In addition,
we also experienced an increase in other manufacturing expenses of approximately $4.4 million in fiscal  2022 as compared to fiscal 2021, which is indicative of certain inflationary pressures being experienced by our industry for labor,
materials, freight, fuel surcharges and third-party services.

Our gross profit of $35.3 million for the year ended December 31, 2022 represents an improvement over the same period of a year ago of $34.1 million and is mainly due to the higher sales volume, the improved margins
we are experiencing with BIVIGAM at the larger plasma pool production scale, and to the increased relative contribution of ASCENIV to our total revenues. As a result, we achieved a gross margin of 22.9% for the year ended December 31, 2022, as
compared to a gross margin of 1.4% for the year ended December 31, 2021.

Subsequent to the FDA approvals for BIVIGAM and ASCENIV received in 2019 through December 31, 2022, substantially all of the normal source plasma (“NSP”) used in our Boca Facility IG production was sourced under a
supply agreement we had in place with Grifols Worldwide Operations Limited, the successor-in-interest to BPC (“Grifols”).  This agreement expired on December 31, 2022 and was not renewed. Although we have executed additional agreements with other
third-party suppliers of NSP, we anticipate that a substantial portion of the NSP used in IG production in 2023 and beyond will be sourced from our ADMA BioCenters plasma collection facilities. As a number of these facilities are still in their
initial stages of operation, we expect that the cost of collecting NSP at many of these facilities will exceed the price per liter of NSP we were paying to Grifols and other third-party suppliers. As a result, we expect the production costs for
our immune globulin products to increase in the near term, which could adversely impact our cost of product revenue and gross margins, without giving effect to other supply  chain initiatives completed and anticipated manufacturing efficiencies
expected in the future.

Research and Development Expenses

Research and development expenses (“R&D”) of $3.6 million for the year ended December 31, 2022 was essentially unchanged from the year ended December 31, 2021, as the lower compensation costs (including
stock-based compensation) in 2022 resulting from the 2021 resignation of our former Chief Medical and Chief Scientific Officer was offset by increased expenses associated with post-marketing commitment clinical
studies for ASCENIV and BIVIGAM (see Note 10 to the Consolidated Financial Statements).  

Plasma Center Operating Expenses

Plasma center operating expenses increased by $5.6 million to $17.8 million for the year ended December 31, 2022, as compared to $12.3 million for the year ended December 31, 2021. Plasma center operating expenses
consist of certain general and administrative plasma center costs, initial opening, marketing and start-up costs, rent expense, maintenance, utilities, compensation and benefits for center and administrative staff, advertising and promotion
expenses and computer software fees related to donor collections. The majority of our plasma collection centers have been in a development or start-up stage in fiscal 2022 and 2021.

During fiscal 2022, we opened three new plasma collection facilities, and an additional facility opened in March of 2023. In addition, for those plasma collection centers that were in construction or development but
not yet operational, we still needed to incur staffing, training, travel and other costs during the build-out period so that these facilities can be operational on the day they open. The increase in plasma center operating expenses in 2022 is
mainly attributable to increases in donor fees, some of which are specialty programs and promotions by the newly opened centers, of $10.7 million, employee compensation costs of $5.8 million, softgoods and supplies of $3.8 million, depreciation
expense of $1.1 million, rent expense of $0.5 million, plasma testing expenses of $2.8 million, travel expense of $0.2 million, software maintenance expense of $0.4 million, janitorial and utilities expense of $0.5 million, professional services
of $0.4 million, postage and freight of $0.3 million and advertising expenses of $0.3 million. These amounts were partially offset by a substantial increase in plasma collections which resulted in a reduction in our plasma center operating
expenses by approximately $21.4 million.

68

Table of Contents

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) were $52.5 million for the year ended December 31, 2022, an increase of $9.6 million from the year ended December 31, 2021. As we continued to support the
increase in the size and scope of our Boca Facility manufacturing and commercial operations in 2022, we experienced increases in employee compensation and related expenses, including travel, relocation and recruiting, of $4.6 million, $1.8
million of which is stock-based compensation. We also experienced increases in insurance expense of $1.4 million and utilities of $0.5 million in 2022, as well as an increase in data services and market intelligence fees  in the amount of $1.5
million in support of the commercialization efforts for BIVIGAM and ASCENIV. In addition, we incurred professional fees in connection with the Morgan Stanley strategic alternatives process in the amount of $1.4 million, with no comparable amount
in 2021.

Amortization of Intangibles

Amortization expense for intangible assets acquired in the Biotest Transaction was $0.7 million for the years ended December 31, 2022 and 2021.

Loss from Operations

Our operating loss was $39.4 million for the year ended December 31, 2022, as compared to $58.4 million for the year ended December 31, 2021.  The decrease in operating loss was mainly due to the improved gross
profit for the year ended December 31, 2022 of $34.1 million, partially offset by the increases in plasma center operating expenses and SG&A.

Interest Expense

Interest expense was $19.3 million for the year ended December 31, 2022, as compared to $13.1 million for the year ended December 31, 2021. The increase reflects the additional indebtedness and increase in
amortization of debt discount resulting from the refinancing of our senior credit facility on March 23, 2022 (see “Liquidity and Capital Resources”). The refinancing transaction resulted in additional indebtedness at closing in the approximate
amount of $51.8 million, and our debt principal increased by an additional $3.0 million subsequent to closing as our new senior credit facility allows us to pay “in kind” a portion of our monthly interest obligation in the form of additional
indebtedness to the lender. We expect to continue to pay a portion of our monthly interest obligation “in kind” during 2023. As a result, and given the expected continued rise in global interest rates, we expect our principal debt balance and the
associated interest expense to increase over the course of fiscal 2023 as compared to previous years.

Loss on Extinguishment of Debt

In connection with the refinancing of our senior credit facility on March 23, 2022, we incurred a loss on the extinguishment of debt in the amount of $6.7 million as a result of the redemption premium we paid to
retire our previously existing credit facility in the amount of $2.0 million, and the write-off of unamortized debt discount of $4.7 million related to that facility (see Note 7 to the Consolidated Financial Statements).

Net Loss

Our net loss was $65.9 million for the year ended December 31, 2022, as compared to $71.6 million for the year ended December 31, 2021. The decrease in net loss of $5.7 million was mainly due to the decrease in
operating loss, largely offset by the higher interest expense and loss on extinguishment of debt in 2022.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2022, we had working capital of $231.1 million, primarily consisting of $163.3 million of inventory, cash and cash equivalents of $86.5 million and accounts receivable of $15.5 million, partially
offset by current liabilities of $39.3 million, as compared to working capital at December 31, 2021 of $178.4 million, primarily consisting of $124.7 million of inventory, cash and cash equivalents of $51.1 million and accounts receivable of
$28.6 million, partially offset by $30.4 million of current liabilities. We have incurred an accumulated deficit of $478.0 million since inception and had negative cash flows from operations of $59.5 million and $112.4 million for the years ended
December 31, 2022 and 2021, respectively. We have funded our operations over the past few years primarily from the sale of our equity and debt securities. Our material cash requirements are primarily comprised of:

69

Table of Contents

[[GREPCENT_TABLE]]
[["","\u2022","The procurement of raw material plasma and other raw materials necessary to maintain and scale up our manufacturing operations;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Employee compensation and benefits;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Capital expenditures to complete the buildout for and maintain our plasma collection facilities and for equipment upgrades and capacity expansion at the Boca Facility;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Plasma donor fees and plasma center supplies;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Interest on our debt;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Marketing programs and continued commercialization efforts;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Boca Facility maintenance, repairs and supplies; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Conducting required post-marketing clinical trials for our FDA-approved products."]]
[[/GREPCENT_TABLE]]

In addition, our end-to-end production cycle time from procurement of raw materials to commercial release of finished product can take between seven and 12 months or potentially longer, requiring substantial inventories of raw material plasma
and other manufacturing materials and single use disposables.

We expect that we will not be able to generate a sufficient amount of product revenue to achieve profitability until the beginning of 2024. We currently anticipate, based upon our projected revenue and expenditures,
that our current cash, cash equivalents and accounts receivable will be sufficient to fund our operations, as currently conducted, through the end of the first quarter of 2024, at which time we believe we will begin to generate positive cash flow
from operations. This time frame may change based on several factors, including the success of our commercial efforts with respect to the sale of our products and the acceptability of our immune globulin products by physicians, patients or
payers, and whether or not the assumptions underlying our projected revenues and expenses are correct. If we are unable to achieve positive cash flow by the beginning of 2024, we may need to raise additional capital and if such capital is not
available due to widespread liquidity constraints or significant market instability that could result from the COVID-19 pandemic, inflationary pressures or other factors beyond our control, we may have to delay, curtail or eliminate some of our
commercialization efforts or product development activities. If we are unable to generate sufficient revenue to achieve positive cash flow by the beginning of 2024 and need to raise additional capital, we may decide to do so through public or
private equity offerings or debt financings, or we may enter into a corporate collaboration or licensing arrangement.  The sale of additional or equity debt securities, if convertible, could result in dilution to our stockholders and, in such
event, the value and potential future market price of our common stock may decline.

  ADMA continues to evaluate a variety of strategic alternatives through its ongoing engagement with Morgan Stanley. The exploration of value-creating opportunities remains a top corporate priority for ADMA.

On March 23, 2022, (the “Hayfin Closing Date”) we and all of our subsidiaries entered into a Credit and Guaranty Agreement (the “Hayfin Credit Agreement”) with Hayfin Services LLP (“Hayfin”). The
Hayfin Credit Agreement, as amended, provides for a senior secured term loan facility in a principal amount of up to $175.0 million (the “Hayfin Credit Facility”), composed of (i) a term loan made on the Hayfin Closing Date in the principal
amount of $150.0 million (the “Hayfin Closing Date Loan”), and (ii) a delayed draw term loan in the principal amount of $25.0 million (the “Hayfin Delayed Draw Loan” and, together with the Hayfin Closing Date Loan, the “Hayfin Loans”). Pursuant
to an amendment to the Hayfin Credit Agreement dated March 22, 2023, the obligation of the lenders to make the Hayfin Delayed Draw Loan expires on June 30, 2023. The obligation of the lenders to make the Hayfin Delayed Draw Loan is subject to the
satisfaction of certain conditions, including, but not limited to, our meeting certain 12-month revenue targets as set forth in the Hayfin Credit Agreement which have been met. The Hayfin Credit Facility has a maturity date of March 23, 2027 (the
“Hayfin Maturity Date”), subject to acceleration pursuant to the Hayfin Credit Agreement, including upon an Event of Default (as defined in the Hayfin Credit Agreement).

On the Hayfin Closing Date, we used $100.0 million of the Hayfin Closing Date Loan to terminate and pay in full all of the outstanding obligations under our previous senior credit facility with
Perceptive (see Note 7 to the Consolidated Financial Statements). We also used $2.0 million of the Hayfin Closing Date Loan proceeds to pay a redemption premium to Perceptive and used approximately $1.0 million of the Hayfin Closing Date Loan
proceeds to pay certain fees and expenses incurred in connection with this transaction. In addition, a $1.8 million upfront fee payable to Hayfin was paid “in kind” and was added to the outstanding principal balance in accordance with the terms
of the Hayfin Credit Agreement. The remainder of the proceeds received or to be received from the Hayfin Loans will be used for working capital and other general corporate purposes.

70

Table of Contents

Borrowings under the Hayfin Credit Agreement currently bear interest at the adjusted Term Secured Overnight Financing Rate (“SOFR”) for either a one-month or three-month tenor, as elected by us, and
subject to a floor of 1.25%, plus an applicable margin of 9.5% (the “Applicable Margin”); provided, however, that upon, and during the continuance of, an Event of Default, the Applicable Margin shall increase by an additional 3% per annum. We
will also pay “in kind” a portion of the interest on the Hayfin Loans for each monthly or quarterly interest period in an amount equal to 2.5% per annum. Such interest paid “in kind” will reduce our quarterly cash interest obligation by
approximately $1.0 million and will be added to the principal amount of the outstanding debt under the Hayfin Credit Facility. As a result, our outstanding debt principal on the Hayfin Loans will increase each month as long as we elect to
continue to pay a portion of our interest obligation “in kind.” On the Hayfin Closing Date and as of December 31, 2022, the stated interest rate on the Hayfin Loans interest rate was 10.75% and approximately 13.9%, respectively. Based on the
interest rate in effect as of the date of this report, on the last day of each calendar month or quarter during the term of the Hayfin Credit Facility, we are required to pay accrued interest to Hayfin of approximately $1.6 million per month or
approximately $4.7 million per quarter, after giving effect to the “in kind” interest of 2.5% per annum, but without giving effect to the Hayfin Delayed Draw Loan, which we have yet to draw upon.

Our interest obligations under the Hayfin credit agreement are subject to variable interest rates based on the Term SOFR in effect at the beginning of each monthly interest period.  With the global
rise in interest rates, we expect our interest rate and our monthly cash interest obligation to be higher in fiscal 2023 as compared to previous years. For example, our stated interest rate, which was 10.75% for the month of June 2022, increased
to approximately 12.06% for the month of September and was approximately 14.16% for the month of February 2023.

On the Hayfin Maturity Date, we will pay Hayfin the entire outstanding principal amount underlying the Hayfin Loans and any accrued and unpaid interest thereon, as well as an exit fee of 1.0% of the
outstanding principal amount being paid. Prior to the Hayfin Maturity Date, there are no scheduled principal payments on the Hayfin Loans. We may prepay outstanding principal on the Hayfin Loans at any time and from time to time upon five
business days’ prior written notice, subject to the payment to Hayfin of, (A) any accrued but unpaid interest on the prepaid principal amount plus (B) a prepayment fee in the amount equal to (i) 7.0% of the prepaid principal amount, if prepaid on
or prior to the first anniversary of the Hayfin Closing Date, (ii) 3.0% of the prepaid principal amount, if prepaid after the first anniversary of the Hayfin Closing Date and on or prior to the second anniversary of the Hayfin Closing Date, or
(iii) 1.0% of the prepaid principal amount, if prepaid after the second anniversary of the Hayfin Closing Date and on or prior to the third anniversary of the Hayfin Closing Date. In addition, for any prepayments of principal, we are required to
pay the 1.0% exit fee for the amount of principal being paid.

All of our obligations under the Hayfin Credit Agreement are secured by a first-priority lien and security interest in substantially all of our tangible and intangible assets, including intellectual
property and all of the equity interests in our subsidiaries. The Hayfin Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar
financings. The negative covenants restrict or limit our ability and the ability of our subsidiaries to, among other things and subject to certain exceptions contained in the Hayfin Credit Agreement, incur new indebtedness; create liens on
assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to our or our subsidiaries’ business activities; make certain Investments or Restricted Payments (each as defined in the Hayfin Credit
Agreement); change our fiscal year; pay dividends; repay other certain indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the impact of restricting our ability to make loan
repayments under the Hayfin Credit Agreement. In addition, we are required (i) at all times prior to the Maturity Date to maintain a minimum cash balance of $6.0 million; and (ii) as of the last day of each fiscal quarter, report IVIG product and
related revenues for the trailing 12-month period that exceed the amounts set forth in the Hayfin Credit Agreement, which range from $75.0 million for the fiscal quarter ending June 30, 2022 to $250.0 million for the fiscal quarter ending
December 31, 2026 and each fiscal quarter thereafter. As of December 31, 2022, we were in compliance with all of the financial covenants contained in the Hayfin Credit Agreement.

On December 9, 2022, we completed an underwritten public offering whereby we issued 24,125,873 shares of our common stock. Net proceeds after underwriting discounts and expenses associated with the offering were
approximately $64.6 million and are being used to accelerate commercialization and production activities, complete plasma center buildouts and obtain FDA approvals, to conclude post‑FDA marketing approval research and development projects, and
for working capital, capital expenditures and general corporate purposes.

71

Table of Contents

On October 25, 2021, we completed an underwritten public offering whereby we issued 57.5 million shares of our common stock and received gross proceeds of $57.5 million. Net proceeds, after underwriting discounts and
expenses associated with the offering, were approximately $53.8 million, and were used to advance the commercial sales of our FDA approved products through the procurement of raw materials for the manufacturing of
BIVIGAM and ASCENIV, to expand our plasma collection facility network, to scale up the manufacturing capacity of the Boca Facility and make continuous improvements in order to adhere to cGMP compliance, to explore business development
opportunities and for general corporate purposes and other capital expenditures.

On September 3, 2021, we entered into a distribution agreement with Raymond James & Associates, Inc., as agent (“Agent”), pursuant to which we may offer and sell, from time to
time, at our option, through or to the Agent, up to an aggregate of $50 million of shares of our common stock (the “Distribution Agreement”). We currently intend to use any net proceeds from the sale of our common stock under the Distribution
Agreement for general corporate purposes, including procurement of source plasma and other raw materials, supply chain initiatives and production expenditures, funding expansion of plasma collection centers, working capital, capital
expenditures, expansion and resources for commercialization activities, and other potential research and development and business opportunities. During the year ended December 31, 2021, we issued 5,540,831 shares of our common stock under the
Distribution Agreement and received net proceeds of $6.9 million. We did not issue any shares under this agreement during the year ended December 31, 2022, and we currently have approximately $42.8 million of shares available to sell under
the Distribution Agreement.

Cash Flows

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

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021"],["Net cash used in operating activities","","$","(59,508,257",")","","$","(112,368,982",")"],["Net cash used in investing activities","","","(13,911,171",")","","","(13,511,258",")"],["Net cash provided by financing activities","","","108,851,852","","","","121,048,206"],["Net change in cash and cash equivalents","","","35,432,424","","","","(4,832,034",")"],["Cash and cash equivalents - beginning of period","","","51,089,118","","","","55,921,152"],["Cash and cash equivalents - end of period","","$","86,521,542","","","$","51,089,118"]]
[[/GREPCENT_TABLE]]

Net Cash Used in Operating Activities

Cash used in operations for the year ended December 31, 2022 was $59.5 million, a decrease of $52.9 million from the same period of a year ago, mainly due to the improvement in our operating results after giving
effect to non-cash items, driven by higher revenues and gross margins, and reductions in accounts receivable related to the timing of shipments and collections from customers. The following table illustrates the primary components of our cash
flows from operations:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2022","","","2021"],["Net loss","","$","(65,903,950",")","","$","(71,647,618",")"],["Non-cash expenses, gains and losses","","","24,680,958","","","","10,959,055"],["Changes in accounts receivable","","","13,071,809","","","","(15,339,567",")"],["Changes in inventories","","","(38,555,957",")","","","(43,188,489",")"],["Changes in prepaid expenses and other current assets","","","(755,900",")","","","(1,292,779",")"],["Changes in accounts payable and accrued expenses","","","8,334,553","","","","9,697,041"],["Other","","","(379,770",")","","","(1,556,625",")"],["Cash used in operations","","$","(59,508,257",")","","$","(112,368,982",")"]]
[[/GREPCENT_TABLE]]

72

Table of Contents

Net Cash Used in Investing Activities

Net cash used in investing activities for the year ended December 31, 2022 was $13.9 million, which consisted of $8.7 million for the construction and buildout of several new plasma collection facilities and $5.2
million for equipment purchases and upgrades to the Boca Facility. Net cash used in investing activities for the year ended December 31, 2021 was $13.5 million, which consisted of $8.6 million for the construction and buildout of new plasma
collection facilities and $4.9 million of capital expenditures at the Boca Facility, which included equipment purchases and continued implementation of our in-house fill/finish capabilities. While we do not have any firm commitments for material
capital expenditures in 2023, we expect our total capital expenditures will be between $8.0 million and $12.0 million for fiscal 2023.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the year ended December 31, 2022 was $108.9 million, as we received approximately $47.0 in net proceeds from the refinancing of our senior credit facility in March of
2022 and $64.6 million in net proceeds from the December 9, 2022 public offering of our common stock. Cash provided by financing activities during the year ended December 31, 2021 was $121.0 million, which is mainly comprised of the net proceeds
of $67.3 million from the sale of our common stock through several sale agreements and $53.8 million from the October 2021 underwritten public offering.

Effect of Inflation

Inflation impacted a number of facets of our business during the years ended December 31, 2022 and 2021 at each of our business segments. We experienced price increases for, among other items, certain raw materials,
consumable supplies, services for repairs and maintenance of our facilities, utilities, shipping and freight charges, fuel surcharges and labor costs. We expect this trend to continue at least into 2023 or longer, which could have a significant
impact on our future results of operations. In addition, some of our plasma purchase agreements provide for annual price increases that are tied to various consumer price indices, which have resulted in higher than historical percentage price
increases and has resulted in and is expected to continue to result in higher source plasma and other raw material and supplies costs in fiscal 2023.