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MS Number 1 Pick For April 2019

Last Updated on May 2, 2019 by Chris Stang

This stock has been at the top of our buy list since February. Despite Adma Biologics (Nasdaq: ADMA) gaining 78% in the past few months the share price still has room for near-term growth. Luckily, investors who missed out on this run can enter at a good price thanks to a healthy pull pack from premarket highs of $6.70 on April 2nd. The recent spike last week was stimulated by news of FDA approval of ADMA’s lead product RI-002, now called ASCENTIV.


ADMA manufactures and sells medicine derived from proteins called antibodies harvested from healthy plasma donors. These antibodies are termed immunoglobulins and are delivered intravenously into patients with immune deficiency disorders, hence the name “Intravenous Immunoglobulins”, or just “IVIG”. ADMA has developed a proprietary method for purifing IVIG medicine from plasma that supposedly gives them an advantage over competitors.

In this process plasma from donors with normal immunoglobulins (IGs) levels and elevated levels are combined, tested for specific antibodies, and then refined into a purified medicine. The recipients have primary humoral immune deficiency disorder (PIDD). Consequently, their bodies are unable to synthesize IGs critical for standard immune functions making them susceptible to a host of viral and bacterial-derived diseases.

On Monday, April 1st RI-002 (aka ASCENTIV) was approved by the FDA for treatment of adults and adolescents (12-17 yo) with PIDD. In 2017 ADMA purchased a manufacturing facility in Boca Raton, FL and two products (BIVIGAM and Nabi-HB) from Biotest Pharmaceuticals. The latter is on the market generating revenue as a treatment for people exposed to Hepatitis-B. The former has a prior approval supplement (PAS) being reviewed by the FDA. Commercial production of BIVIGAM ceased when the FDA raised concerns regarding the manufacturing and filling processes used to make the drug.

Together BIVIGAM and ASCENTIV could capture a sizable share of the $6.0+ billion U.S IVIG market. There are around 250K people with general PIDD for which BIVIGAM is a competitive treatment. Then there is another subset of patients with more severely compromised immune systems for which ASCENTIV is tailored for.

ADMA 1-Year Chart From Yahoo Finance

Recent Events

As you can see in the chart above ADMA experienced an abrupt sell-off in late December of 2018. this was due to a complete response letter (CRL) from the FDA in response to the PAS submission for BIVIGAM. After listening to the conference call that followed it appeared the CRL was a minor hiccup that should be relatively easy to resolve. Less than 2-weeks later ADMA responded to the CRL with supplemental information supporting the PAS submission. Meaning, no additional clinical trials/data was needed in support of approval. It was at this juncture we initiated our position in ADMA at $2.98.

In biotech, funding is just as important as having a safe and efficacious product. In February ADMA secured a $72.5 million loan facility from Perceptive Advisors. The facility provided $45 million upfront which was used to prepay a previous credit facility of $30 million in full. Now that RI-002 was approved the second tranche of up to $27.5 million is available to ADMA at their sole discretion through June 30th, 2020. Below is a quote from ADMA president and CEO Adam Grossman following the announcement of the loan facility:

This funding from Perceptive comes at an opportune time for ADMA as we continue to move forward seeking approval for our immunoglobulin products BIVIGAM® and RI-002,” stated Adam Grossman, President and Chief Executive Officer of ADMA. “As an existing equity holder in ADMA, Perceptive has an appreciable understanding of our business, and we believe that providing this loan facility demonstrates their confidence in our business and future prospects. This access to capital, combined with the potential FDA approvals of our product candidates, will allow us to increase our manufacturing activities, initiate building additional plasma collection centers, and prepare for the potential commercialization of BIVIGAM® and RI-002 this year.

Quote From ADMA Press Release

ADMA ran after this up to a high of $4.50 before receding back down to a low of $3.16 from a combination of intense short selling and weak hands folding. MS used this turbulence as an opportunity to increase our position. Since approval of ASCENTIV ADMA has received a license from the Department of Health and Human Services for their Boca Ration, FL facility enabling interstate commerce. ADMA also released a proxy statement for their upcoming shareholder’s meeting on June 5th. Proposals to be voted on are the following:

  • A proposal to elect two Class III directors to serve on the Company’s Board of Directors (the “Board”) for a term expiring at our 2022 annual meeting of
    stockholders and until their successors are duly elected and qualified, or until such director’s earlier resignation, removal or death;
  • A proposal to amend and restate the Company’s Amended and Restated Certificate of Incorporation to (i) increase the number of authorized shares of
    common stock, $0.0001 par value per share, from 75,000,000 shares to 150,000,000 shares, and (ii) remove the Company’s non-voting common stock,
    $0.0001 par value per share (“non-voting common stock”), which was retired in full on May 14, 2018, and delete all references therein to the non-voting
    common stock;
  • A proposal to approve the compensation of the Company’s named executive officers, on an advisory basis;
  • A proposal to determine, on an advisory basis, the frequency with which the stockholders of the Company shall have an advisory vote on executive
    compensation, as disclosed pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission;
  • A proposal to ratify the appointment of CohnReznick LLP as the Company’s independent registered public accounting firm for the year ending December 31,
    2019; and
  • A proposal to transact such other business as may properly come before the Annual Meeting or any adjournment or adjournments thereof

Proposals From ADMA’s SEC Filing PRE-14A

The Move

ADMA presents us with a unique and quite frankly appealing opportunity. What we have is an early commercial stage biotech company with competent leadership, low float, high institutional and insider ownership (57.5% and 25.5% respectively), two potential drug approvals in one month (RI-002 approved adn BIVIGAM could comea at any time), and a wanting market. In other words, a potentially lucrative money-making opportunity.

Not to mention there is a measles outbreak ongoing in the U.S. IVIG medicine like BIVIGAM is an accepted treatment for the disease. This could help expedite the approval of BVIGAM since the uptick in measles should accentuate the existing IVIG demand.

Another element I’d like to highlight is the largest institutional shareholder is Perceptive Advisors. Yes, the same Perceptive which loaned ADMA the senior secured credit facility for up to $72.5 million. In total, they own 14% of ADMA’s stock worth $15,585,433. The CEO of Perceptive Advisors is none other than Joseph Edelman (i.e. the 40% man). Mr. Edelmen is haled for having a sixth-sense for biotech. Since 2017 his flagship fund has gained over 40%! This is applaudable considering many hedge funds struggle to beat the S&P 500 on an annual basis. The point I am trying to make is guys like Joseph Edlemen back winners and he is behind ADMA as a core stakeholder and financer. Below is a quote from Perceptive portfolio manager Sam Chawla when commenting on the credit facility:

Perceptive shares ADMA’s vision of developing specialty immunoglobulin therapeutics, and is pleased to provide additional capital to support the Company’s product launch plans and growth strategy…The Company has made significant progress since acquiring the Boca Raton, FL manufacturing facility in 2017, including the improvement of the facility’s compliance status and obtaining new intellectual property for its proprietary product candidates. We look forward to ADMA’s progress, and our ability to fund the Company to drive important business objectives.

Quote From ADMA Press Release

During this interim between ASCENTIV approval and a regulatory update regarding BIVIGAM I will be consolidating my position. If my thesis is correct and BIVIGAM is approved within the next 1-2 months the share price should range between $6-8. At this point I will take my profits, wait for a pullback, and reenter. This is a company I believe will appreciate in 2019 and beyond.

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