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ADMA Biologics Inc (NASDAQ:ADMA)
Q2 2020 Earnings Call
Aug 5, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to ADMA Biologics Second Quarter 2020 Financial Results Conference Call on Wednesday, August 5, 2020. [Operator Instructions] At the company's request and will be available on the company's website approximately two hours following the end of the call.

At this time, I would like to introduce Michelle, Managing Director of Argot Partners, ADMA's Investor Relations firm. Please go ahead.

Michelle Y. Pappanastos -- Investor Relations

Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics' financial results for the second quarter 2020. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Lenz, Executive Vice President and Chief Financial Officer. During today's call, Adam will provide some introductory comments and provide a corporate update and then Brian will provide an overview of the company's second quarter and six months ended June 30, 2020 financial results. Adam will then provide some brief summary remarks before opening the call up for your questions. Earlier today, we issued a press release detailing the second quarter 2020 financial results. The release is available on our website at www.admabiologics.com.

Before we begin our formal comments, I'll remind you that we will be making forward-looking assertions during today's call that represent the company's intentions, expectations or beliefs concerning future events, which constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to factors, risks and uncertainties such as those detailed in today's press release announcing this call. And in our filings with the SEC, which may cause actual results to differ materially from the results expressed or implied by such statements.

In addition, any forward-looking statements represent our views only as of the date of this recording, it should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update any such statements except as required by the federal securities laws. We refer you to the disclosure notice section in our earnings release we issued today and the Risk Factors section of our 2019 annual report on Form 10-K and our second quarter 2020 10-Q, which we expect to file following this conference call. For a discussion of important factors that could cause actual results to differ materially from those forward-looking statements.

With that, I would now like to turn the call over to Adam Grossman. Adam?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Thank you, Michelle. Good afternoon, everyone, and thank you for joining us on this afternoon's call. We hope you and your families remain healthy and safe as we all continue to navigate this new world of living with COVID-19. At ADMA, the first half of 2020 was marked by several key achievements and milestones, solidifying ADMA's forward-looking growth strategy. Like others, we faced some challenges associated with COVID-19 and its impacts as we continue to navigate through these unprecedented times. Despite these challenges and our instituted ongoing remote work from home and no travel policies, the company and staff continue to forge ahead and chip away at achieving our stated goals and objectives. ADMA continues to make progress with its manufacturing, supply chain and commercial objectives.

We are proud to be a growing company in the plasma products industry. We are proud to be a company that's on the front line interacting with convalescent COVID-19 plasma donors and having a voice to effect change as a member of the CoVIg-19 global plasma alliance. We are working on a number of early stage development activities at the present time targeting COVID-19. Including testing assays as well as potential treatments with differentiated plasma-derived therapies. As we progress with these R&D activities, we will be sure to inform our stakeholders. We thank you, our shareholders for your continued support and commitment as an important part of the ADMA Biologics team, assisting us to pursue forward-thinking research and development activities with the promise and power of plasma-derived antibody products.

Thank you. Now I would like to review progress in the second quarter and some of our recent milestones and achievements. At the end of June, we announced the opening and first collections at a new plasma collection center. We have successfully submitted the accompanied biologics license application to receive U.S. FDA approval for this center, which is anticipated for mid-2021. We expect to open a third U.S. plasma collection center and commence construction on a fourth center by the end of this year as well. We have several new plasma collection centers identified that are in various stages of development to meet our stated objective of having five to 10 built over the next three to five years.

The global demand for U.S.-sourced plasma for further manufacturing continues to outpace the available supply. And these investments into ADMA Biocenters business unit are anticipated to support ongoing production and growth into the future. As many of you are aware, during the second quarter, ADMA joined the CoVIg-19 Global Plasma Alliance, a plasma industry collaboration led by CSL and Takeda that was established to accelerate the development of a plasma-derived hyperimmune globulin therapy for COVID-19. As an alliance member company, ADMA's wholly own subsidiary ADMA biocenters has been collecting and providing COVID-19 high titer plasma to the alliance from individuals who have recovered from COVID-19 infection.

We are truly grateful for all of the donors who continue to do good for others and donate their plasma. We need many more donations as an industry, and we encourage all U.S. citizens to make a difference and donate your plasma. We are proud to be working together with these great companies to fight COVID-19 and provide a potential treatment for this highly infectious disease. The success of this alliance relies on the support of people across the globe to donate plasma. Even if you have not had COVID-19, your plasma is useful and needed by many patients. We encourage you to find a plasma center near you by visiting www.donatingplasma.org and donate your plasma today. Every donation makes a difference and patients are counting on all of us.

Moving on now to revenue. Importantly, during the quarter, we continued to add new customers and prescribers for BIVIGAM and ASCENIV. ADMA's commercial team has continued to push ahead and understand that many of the patients who are prescribed BIVIGAM and ASCENIV will require the therapies potentially year round. Thus, managing the finished goods supply chain is a top priority for us as a company. We are working hard to ensure that any patient who is prescribed BIVIGAM or ASCENIV incentive has continued doses available to them. In a historically tight IG supply environment, which is anticipated to have additional forward-looking tightness in product market availability.

ADMA must not lose sight of the fact that building brand loyalty and ensuring that our patients need not worry if they will have their IG supply next month or the months thereafter is a paramount importance for the long-term success of our business. We are a company committed to responsible inventory management and treat our prescribers, patients and distribution partners' needs as a top priority. As we continue the commercial rollouts of BIVIGAM and ASCENIV as well as continue to promote the use of Nabi-HB in the face of the logistic and engagement challenges due to COVID-19, our company's grassroot promotional efforts are starting to pay off.

We've been setting the stage for building long-term brand loyalty and company awareness in a market that has been dominated by large players for decades. We are building a business one patient at a time. And for our shareholders who have watched companies like the former Baxalta, CSL and Grifols grow over the past five, 10, 20 years, understanding the growth and success that is afforded to companies that operate in compliance and place the care of their patients and staff as high priorities.

We have set the stage with our production over the previous 12 months, to be in a position to now supply the U.S. market with what we believe to be a reliable and continuous supply of BIVIGAM, ASCENIV and Nabi-HB, and we look forward to achieving significant growth over the next three to five years, where we believe we can grow our business to $250 million or more in top line annual revenue. For the first half of 2020, we generated total revenues of $18 million, reflecting a nearly 80% increase over the first half of 2019. This includes $7.8 million in total revenue for the second quarter of 2020.

While the second quarter revenues were greater than the same prior year period by approximately 19%, and they were lower compared to the first quarter of 2020 due to certain temporary unforeseen delays related to COVID-19, which we experienced in June, with our final GMP product release testing performed by certain third-party vendors. This means that while a few of our production batches were finished on schedule, we were unable to submit to the U.S. Food and Drug Administration for lot release authorization because of certain specific delayed lab test results. These testing delays prevented ADMA from receiving FDA authorization to sell additional completed production batches during the second quarter.

These delays were experienced during the latter part of the second quarter, which have been resolved during July. In response to these delays and in partnership with the FDA, we rapidly identified and added additional release testing laboratories to our approved consortium listed in our drug approval documents. We believe that we completely resolve this issue, and we do want to anticipate any additional testing or batch release delays going forward. As of mid-July, we began receiving FDA releases for several completed product batches with our new testing laboratories data. As we'll be seen in our second quarter 2020 10-Q, our finished goods inventory has increased 75% to $9.1 million since year-end December 31, 2019.

This translates into having more product batches ready for commercial sale as soon as the testing results are received. These batches of our commercial product are anticipated to be sold during the second half of 2020 and forward, with attention being paid to manage supply to ensure the continuity of patient care and taking into consideration uncertainties due to the backdrop of COVID-19. Now I want to highlight here that there has been no adverse impact on market demand for any of our products. Market demand for all of our plasma products remain strong in the market, and we expect considerable revenue growth for the forward-looking three to five-year period. It's important to keep in mind that this is our third full quarter of revenues for BIVIGAM and ASCENIV.

And given the seven to 12 month production time line, we are just now beginning to tap into the ING product that was manufactured in the second half of 2019 post FDA approval, about one year ago. This is why we are confident that the second half of 2020 can be considerably stronger than the first half. And we remain on track to achieve our stated goal of generating in excess of $250 million in annual revenues within the next three to five years. During the quarter, we continued to make great strides implementing our multifaceted supply chain robustness strategy, designed to enhance visibility and manufacturing throughput as we continue the commercial rollout of BIVIGAM and ASCENIV.

We also purchased and installed a new aseptic filling machine of the NRx SA 25 work cell and manufactured four conference batches of BIVIGAM and an increased scale that will allow us to ultimately manufacture at twice the volume compared to the scale that is FDA-approved and in place today. These important initiatives are designed to reduce operating costs, improve our overall margins and provide for faster production cycle turnaround time, providing the company with increased control and independence from third-party vendors and contractors. We remain on track to submit the appropriate applications to the FDA during the second half of 2020 and into 2021 and expect to begin benefiting from our supply chain investments as early as mid-2021.

As we progress and make these regulatory filings, we will report any material news as it develops to our shareholders. Like many other companies in the life science sector, we experienced our share of COVID-19 challenges during the second quarter. In addition to the delay in exceeding resolution of the final GMP product release testing that I mentioned earlier, we also experienced certain COVID-19 related impact to other areas of our supply chain as well as our commercial engagement efforts. As a result of past state and local shelter in place orders, we experienced lower than normal donor collections at our FDA-approved plasma center during the second quarter.

During this early part of the third quarter, we have already observed an increase in plasma collections compared to the second quarter in 2020. We also experienced delayed shipments of non plasma raw materials, source plasma from our contracted third-party suppliers as well as delays in deliveries of personal protective equipment, reagents and supplies used in the manufacture of our products. During the quarter, we observed certain impacts to our customer engagement initiatives, including our sales and medical affairs field forces experiencing difficulties, communicating directly with physicians and other healthcare professionals. And the cancellation or postponement of a number of key scientific and medical meetings, which further eliminate our ability to communicate with potential customers. We have implemented a comprehensive suite of virtual engagement initiatives.

However, clinician engagement has been reduced due to the rapidly evolving COVID-19 priorities at many U.S. medical centers. Lastly, we achieved an important milestone this quarter regarding the reimbursement of ADMA's novel polyclonal IVIG product, ASCENIV. During the second quarter, thanks to the dedicated efforts of our market access and commercial team, we secured reimbursement for ASCENIV under the temporary J code and have established an average selling price or ASP for the therapy. This published payment limit by CMS of $963.54 per gram for ASCENIV is the first step for a new IVIG product to receive coverage by Medicare as well as supports reimbursement efforts for outpatient use by third party payers.

We are very pleased with how rapidly our ASP for ASCENIV has been established and reimbursement through Medicare was achieved. We are currently able to provide our three FDA-approved immunoglobulins to patients across the country in the inpatient and outpatient settings. Congrats to the team if you're listening for achieving this great milestone.

And with that, I'll turn the call now over to Brian Lenz, our CFO, to review the financials. Brian?

Brian Lenz, CPA -- Executive Vice President, Chief Financial Officer

Thank you, Adam. Since we issued a press release earlier today, outlining our second quarter 2020 financial results, I'll review some of the highlights. For the three months ended June 30, 2020, and total revenues were $7.8 million compared to $6.6 million for the second quarter of 2019. This represents an increase of approximately $1.2 million or 19%. The favorable revenue realized during the second quarter of 2020 was primarily due to sales of BIVIGAM, ASCENIV and plasma-derived intermediate fractions compared to no sales from these products during the same prior year period. Recall both ASCENIV and BIVIGAM were approved by the FDA in April and May of 2019, respectively, and the contract for certain plasma-derived intermediate fractions was executed in early 2020.

Subsequent to these FDA approval of ASCENIV and BIVIGAM, our BOCA facility began the commercial production ramp-up during the second half of 2019. As Adam mentioned earlier, our finished goods commercial inventory has increased by 70%, 75% from $5.2 million as of December 31, 2019, to $9.1 million as of June 30, 2020. And please keep in mind, in accordance with generally accepted accounting principles, the value of our inventory is stated at our cost. This increase reflects our stated manufacturing cycle time from the second half of 2019's commercial production ramp-up and we look forward to now being in a good position with solid inventories to continue adding customers, distribution partners and prescribers over the coming quarters.

And potentially generating considerable increased revenue during the second half of 2020 compared to the first half of this year. Consolidated net loss for the three months ended June 30, 2020, was $20.2 million or a $0.23 loss per basic and diluted share compared to a consolidated net loss of $13.2 million or a $0.25 loss per basic and diluted share for the second quarter of 2019. For the six months ended June 30, 2020, total revenues were $18 million compared to $10.1 million for the six months ended June 30, 2019, and this represents an increase of $7.9 million or nearly 80%. The increase in revenues was primarily attributable to sales of BIVIGAM, ASCENIV and plasma-derived intermediate fractions, none of which, again, were available for commercial sale during the same prior year period.

Consolidated net loss for the six months ended June 30, 2020, was $39.4 million or a $0.49 loss per basic and diluted share compared to consolidated net loss of $26.3 million or a $0.53 loss per basic and diluted share for the six months ended June 30, 2019. At June 30, 2020, ADMA had cash and cash equivalents of $75.8 million and accounts receivable of $6.5 million, and this is compared to cash and cash equivalents of $26.8 million, and accounts receivable of $3.5 million at December 31, 2019. ADMA's net working capital as of June 30, 2020, was $130.1 million compared to $71.8 million as of December 31, 2019.

With that, I will now turn the call back over to Adam for closing remarks.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Thank you, Brian. ADMA has made excellent progress during 2020 thus far. On its key corporate priorities, including initiatives to strengthen our supply chain, which will greatly benefit the company over the long-term by reducing operating costs, improving margins and shortening production cycle time lines. Given the unprecedented macro market conditions in the U.S. and the COVID-19 effects being experienced by us and our third-party vendors and suppliers. We believe these effects are temporary and that our future is bright and ripe for growth. While we have experienced some variability during our first year of sales, especially since we are commercializing our products on the backdrop of the COVID-19 pandemic.

We are highly confident that revenues for the second half of 2020 will be considerably higher than that of the first half. And most importantly, for our shareholders, we remain on track to achieve our stated goal of generating in excess of $250 million in annual revenues over the next three to five years. I want to assure all of our stakeholders that our fundamentals remain strong and that the demand for our immunoglobulin products remains robust. We remain deeply committed to successfully navigating the ongoing commercial rollouts for BIVIGAM and ASCENIV and bringing each product to patients with life-threatening immune deficiencies.

To the patients receiving our products, you have mine and my team's entire commitment to work relentlessly to ensure you have your immune globulin available when you need it. You can count on ADMA Biologics as a reliable and committed provider of immune globulins. We extend our sincerest gratitude and commend the efforts of the entire ADMA Biologics team that continues to rise to the challenge of navigating the company through this burdensome period in order to ensure that the critical plasma-derived antibody rich products we produce are available. Over the long term, and continuously for our patients and customers. I truly thank all of you.

With that, we will now open up the call for your questions. Thank you, operator.

Questions and Answers:

Operator

Sure. Thank you. [Operator Instructions] Our first question comes from the line of Anthony Petrone with Jefferies. Your line is open. Please go ahead.

Jack -- Jefferies -- Analyst

This is Jack [Phonetic] on for Anthony. Can you just talk about how many batches were locked up and delayed due to FDA testing?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Sure. It was a handful. We're not really prepared to give specifics Zack was a few batches, not very many. But what we can tell you is that if you think about the way we produce our product, this is a drug that we had produced seven to 12 months earlier, they were all ready to go. And unfortunately, due to COVID, we have a lab that's based overseas in the United Kingdom. And unfortunately, they were just unable to get test results to us. And we worked very, very rapidly with FDA, and we're really pleased that the issue is totally resolved now. And we've resumed a lot releases, and we are back in regular lot release land, if that works. But everything has been resolved completely.

Jack -- Jefferies -- Analyst

Okay. That's helpful. And then looking into the second half, how should we look at expenses going forward?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Brian?

Brian Lenz, CPA -- Executive Vice President, Chief Financial Officer

Sure. So as we previously mentioned, we manufactured four conformance slots and we disclosed, it's about a little over $6 million for those batches. I would say that that's there are some extraordinary items in the cost of sales. But as we continue to grow the organization, grow the plasma operating centers, you would look at it pretty comparable to where we had the first six months of this year, excluding the

Conformance batches.

Jack -- Jefferies -- Analyst

Okay. And then batch testing on BIVIGAM. Can you just give us an update on that?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Batch testing on BIVIGAM for releases? Or are you talking about the capacity expansion project?

Jack -- Jefferies -- Analyst

The capacity expansion?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Sure. So I think during the quarter, we produced some additional conformance batches. And we are on schedule. As I said in my prepared remarks, we do have plans to submit the applications for a number of our ongoing supply chain robustness activities, including the fill/finish machine for all three of our products as well as the capacity expansion for BIVIGAM, taking it from the already FDA-approved scale of 2,200 liters per plasma pool scaling that up to 4,400 liters. So we're on track with the timing. And we will keep the shareholders and our analysts informed, but we're hopeful that we can have this on file with the agency before the end of this year and some of the applications into the first part of 2021.

Jack -- Jefferies -- Analyst

Okay, that's all for us will hop back in the queue. Thanks.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Thanks.

Operator

And our next question comes from the line of Elliot Wilbur with Raymond James. Your line is open. Please go ahead.

Elliot Wilbur -- Raymond James -- Analyst

Thanks. I trouble with my that name myself. Just specifically following up on the actual filing process for the scale up, Adam. I presume that that would qualify as a prior approval supplement and somewhere in the range of four to six months for final FDA approval. Is that correct?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

That's correct, Elliot. I think the way to answer that question as we should be looking at this as it's a standard prior approval supplement, so we will put that on file, and then the FDA would have four to six months. But I'm optimistic that there are ways to expedite certain reviews with FDA during this period. I think should COVID-19 persist? Maybe there are ways that we can work with the agency, they have been very collaborative with us, as noted by resolving some of our other problems.

But I think looking at some of the nearish term potential tightness in IG supply, I think that there are mechanisms and maybe some levers we can pull potentially expedite that. But, for budgeting, forecasting, planning purposes, we are looking this as that's correct. It is a standard PAS prior approval supplement to amend our existing FDA-approved BLA to allow us to manufacture at that scale.

Elliot Wilbur -- Raymond James -- Analyst

Okay. And then with respect to ASCENIV. Obviously, this is a very detailed sale, and to some extent, that's kind of been hindered in the current environment. But just any anecdotes that you can offer in terms of a direct physician interaction detailing the product, discussions with P&T committees? Just trying to get a sense of sort of where you are kind of here in the early stages of that commercial launch?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Sure. I'll just kind of straight on and say P&T committees, getting everybody that you need is definitely hard. With that being said, there are we've had a number of customer engagement meetings, one-on-one at academic centers at regional medical centers as well as in the outpatient setting for ASCENIV. And I think that in light of the current environment and the current situation with the backdrop of COVID-19 and the increased awareness, if you will, in understanding that antibodies that are in immunoglobulin and that are naturally occurring antibodies are helpful when trying to manage, prevent and/or treat different types of infectious diseases. So we certainly have had a number of inbounds, requesting information and through our medical affairs department.

We got a full library of information that we can share, depending upon the patient populations as well as in outpatient setting, we're seeing that there are certain clinicians out there who are looking at different risk factors that their patients have, looking at environmental risk factors. And if you've seen Elliot the asceniv.com website has been up for a number of months now. And I think if you go through the asceniv.com website, there are certain areas of information that I talk about, the types of patients that may be at a higher risk or increase risk for having problems due to respiratory infections. And that roughly 90% of patients who are on IVIG still have problems with certain chronic, persistent recurring infections.

So we're seeing some patients receiving authorization and third-party payer approval to switch from standard IG on to ASCENIV, and we're very hopeful that with this recent announcement that we've received a reimbursement price, if you will, of our ASP plus 6% from Medicare, that should continue. So our sales force is busy. I can't tell you that flying around the country, going to all the fancy medical meetings. I can't tell you that all of the wonderful and trade show booths that we had designed and paid for and planned are being used, but we're keeping it already because we think we're going to come through this and be stronger as a country and as a global society, and we'll get the message out there. But we're doing a grassroot, Elliot, we're able to engage one doc at a time, one treatment center at a time, and we feel that we are making progress.

Elliot Wilbur -- Raymond James -- Analyst

I just want to ask you a follow-up question to one of your last points there with respect to the recent J code issuance, ultimately, how important do you expect Medicare to be in terms of the ASCENIV book of business? And then with the issuance of that code, and correct me if I'm wrong, I mean, that basically allows clinicians to essentially use the product without any sort of prior authorization in the Medicare setting. Is that correct?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

So I think and so I guess your first part of the question, there are a number of patients that receive IVIG who are on Medicare. What percentage of ASCENIV's business, it's important, every patient is important to us with a drug like ASCENIV. With respect to payer, there are to answer your question, the short answer is, yes, you're correct. However, with immunoglobulin, typically 90% of immunoglobulin starts, whether they're on label or an evidence-based use, they typically do require some type of prior authorization.

So from what our sales force has been able to do is they work hand-in-hand and our medical affairs force provides any sort of papers in the literature. And we're working hand-in-hand with the treaters to achieve the prior authorization needed. But to answer your question, in theory, patients will now be able to receive ASCENIV, they have a prescription for intravenous immunoglobulins and the doctor feel that ASCENIV is the right product for their patient.

Elliot Wilbur -- Raymond James -- Analyst

Okay. And then just last question with respect to COVID-19, there's been some some investigator initiatives studies looking at standard IVIG, curious if you've heard any anecdotes with respect to either further studies or any stories of success there and whether or not you've seen any utilization of ASCENIV in COVID-19 patients, given that there's a certain percentage that also tend to have a fairly high prevalence of RSV and other respiratory illnesses.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Sure. Great question, Elliot. Thank you. I've read the same data as most of you, and it seems that depending upon the dose, depending upon the time that immunoglobulin is added to the treatment armamentarium, if you will. There has been a trend and some of the data out of China, some of the data is out of the U.S. there has been a trend that patients need to be doing better. I mean there's a plethora of data in the literature to support the utilization of immunoglobulin to help manage these infections. Now this is outside of the package insert labeling, and ADMA does not have any ongoing trials looking at these uses.

I think the way to answer your next question, I mean I hear a lot of things from our sales force. I hear a lot of things for a lot of people. And I don't think it's I don't have a way to confirm what they're using ASCENIV for other than what people are telling me. So I think the best way to answer your question is, our products are commercially available? There are other IVIG products that are commercially available. And I'm fairly certain that there are a number of institutions around the country that are deploying the use of immunoglobulin in the inpatient setting to manage patients with COVID-19.

So I think it's reasonable to assume that if a clinician has the ability to prescribe one of the ADMA's FDA approved products, they may. IVIG is used 50%, 60% in an evidence-based way. And I think that it's reasonable to assume that IVIG, including ADMA's products, based on availability will be used in these hospitals. I think that's the best way I can answer your question.

Elliot Wilbur -- Raymond James -- Analyst

Okay. Those were the questions. Thank you.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Thanks very much.

Operator

Thank you. And our next question comes from the line of Ram Selvaraju with H.C. Wainwright. Your line is open. Please go ahead.

Ram Selvaraju -- H.C. Wainwright -- Analyst

Thanks so much for taking my questions. So general question, which has been on my mind for quite some time. I was wondering if you could comment on the implications for ADMA of the shift from our meaningly administered immunoglobulin to subcutaneously administration immunoglobulin, and if you think that, that might potentially present a benefit or opportunity, through ADMA? And also specifically, if you could comment on the potential for ASCENIV, in particular, to be the subcutaneous.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Sure. Thanks, Ram. I hope you're well. So ADMA at the present time does not have any FDA-approved products that are administered through the subcutaneous route of administration. Our products are administered intravenously or with Nabi-HB intramuscularly. I think that we can to date until the come home about some of the benefits of giving immunoglobulin for certain patients intravenously. Compared to giving the benefits of immune globulin subcutaneously. And I think with the patient population that ADMA has its labeled indications which are patients with primary immune deficiency, we believe that the IV route of administration certainly allows for rapid bioavailability of the antibody, and it's been shown to work for 20, 30 years.

We look at the data and we look out there and subcutaneous route of administration certainly offers convenience. It certainly offers the ability for patients to dose themselves when it's convenient for them. And it certainly helps in the time of COVID with respect to having patients administer the IG themselves without the need to go to an infusion center. In ADMA's experience right now, we have been informed that a number of patients who are receiving BIVIGAM and were ASCENIV in an infusion center, either connected with a hospital or a freestanding clinic that payers have been approving at Home IV administration. So from our perspective, we don't see any impact. And the last thing, I'll say is that when you look at the data, and I guess just panel. It feels like just.

But Elliot is not on the line anymore, but it was not the Raymond James conference, and I was under the at least the data that I've seen is that in order to achieve the same IgG trough levels between an intravenous product and a subcutaneous product that you require more infusion. And there was a clinician on the panel with me at the Raymond James conference, who gave what I thought was a staggering percentage of how much more product you need to administer. So I look at subcutaneous as something that we could do in the future.

But at the present time, our focus is on manufacturing our intravenous product, pushing forward on our R&D efforts with respect to COVID-19 as well as expanding the label for ASCENIV at the opportune time and focusing on building up our safety inventories to ensure a reliable continuous supply of immunoglobulin to our patients.

Ram Selvaraju -- H.C. Wainwright -- Analyst

Okay. And then a couple of other minor detailed things. I was wondering if you could just verify that the new filling line expenses that contributed to the increase in R&D spending is a nonrecurring item. And then also, if you could specify what percentage of the 2Q revenue base came from intermediate fractions?

Brian Lenz, CPA -- Executive Vice President, Chief Financial Officer

Sure. I can take this, Ram. The R&D look, throughout the year, we're going to have various projects in R&D, but this should be the bulk of the expenses from this fill line with regards to breaking out revenues. We look at BIVIGAM, ASCENIV, Nabi-HB and our intermediate fractions is all part of our collective aggregate revenues in the total amount of revenues for those products. We do not break our individual products separately.

Ram Selvaraju -- H.C. Wainwright -- Analyst

But that the intermediate fractions is probably a minor contributor, right? If we were to characterize it qualitatively.

Brian Lenz, CPA -- Executive Vice President, Chief Financial Officer

We previously announced in early 2020 that we entered into a long-term supply agreement with a third-party customer that we will be selling intermediate fractions in the several million dollars this year, and then it would grow to $10 to $15 to $20 million over the next two to three years' annual growth. So it's I mean, I think it's I would say it's a meaningful contributor. We just signed the agreement earlier this year, and we are seeing ongoing revenue increases.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

That's right. As our production ramp grows from, we're going to be obviously producing more of the plasma drive intermediates for sale. And we're looking forward to it.

Ram Selvaraju -- H.C. Wainwright -- Analyst

Okay. And then just one last one on the plasma collection volume. When do you anticipate that those could return to sort of a normalized level?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Well, that's a great question. And if I could ask you one back, when do you think COVID-19 is going to be gone? I think that, that is the question that we're all asking, right? Look, ADMA ADMA has exposure to this market. We've got a center that's operating. As I mentioned in my prepared remarks, I think Brian has said, too. We have certainly seen a round, if you will, from the lows that were experienced during the second quarter already in the third quarter. So we're doing better. We feel pretty good. I think the industry as a whole is feeling better that, look, the government has made a decision on the unemployment additional stipend.

There are other things that have been changing around the country with respect to certain geographic regions opening up, depending upon which one of my friends that have older children that are going back to college, some are open, some aren't. I think that also can provide benefits. So I think it's a gradual return over the next 12 to 18 months until we get back to something normal. But with respect to add my, I want to reiterate that our supply contract is solid.

We feel very confident, and we continue to receive all the plasma that we anticipate receiving and purchasing under our agreement. So between the addition of us building new centers, our existing centers seeing rebounds and the fact that our contract is currently a good, and our supplier is delivering plasma as agreed. We feel very good that we're able to weather this storm, probably a little bit better than some of the other fractionators that may have a bigger exposure with respect to their collections. Does that answer your question?

Ram Selvaraju -- H.C. Wainwright -- Analyst

Yeah, no, that's very helpful. Thank you.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Thanks, Ram.

Operator

Thank you. And our next question comes from the line of Leland Gershel with Oppenheimer. Your line is open. Please go ahead.

Leland Gershel -- Oppenheimer -- Analyst

Hi, everyone. Thanks for taking my questions. Just a question or two on just on the inventory line, you've been keeping that number pretty stable. A $56 million now versus $53 million back at the end of the year and $52 at the end of the first quarter. So should we expect overall inventories to continue to remain stable? Or will those also go up as you make more immunoglobulin in addition to the fact that the finished product inventories will continue to rise. How should we think about that relationship?

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

I will give you a very short answer, but I'll let Brian give you some more detail. Go ahead, Brian.

Brian Lenz, CPA -- Executive Vice President, Chief Financial Officer

Yes sure, Leland, I hope you're doing well. We think the inventory is going to continue to increase. Now that we have entered into commercial scale ramp up since the second half of 2019, as you can see, the finished goods they increased by 75% just from the beginning of the year. And we are going to continue to collect more plasma as we're opening up more centers. We're going to continue to buy plasma from our third-party vendors.

So I would expect the inventory to continue to grow as we expect revenues to continue to grow. Don't forget, in the beginning of the call and in our press release, we did say, we're anticipating the $250 million in revenues over the next three to five years, you need inventory to grow to meet those numbers. And we are doing that.

Leland Gershel -- Oppenheimer -- Analyst

Okay. Great. That's helpful. I wonder if you could quantify in any way possible, kind of the advantages with the new machine in terms of both expense and margins and also time lines to finished products. Any way you can quantify I know it won't be coming online until probably mid next year, but I just wanted to see if you could share any thoughts there.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

I mean I think I could take a at this. Leland, it's hard for me to give you exact numbers because we haven't really made that much in it yet, but what I can tell you that attracted me to this machine itself is that it does not use destructive way checks. And for anybody who's been in the fill/finish industry and who understands how this works, depending upon if there's a purge vessel, depending upon if there are other types of feeder pumps and areas that go into this. There's there are places throughout the fill/finish process that are inherent for loss.

So we're really looking at this from the standpoint of there's nondestructive weight checks. The device is a state-of-the-art technology. And we're looking at it. I mean, the internal estimates are to achieve about a 10% improvement to gross margins. There's no transportation costs. We don't have to hire the fancy Fedex critical truck and have all that insurance and pay all that money to drive the product to our third-party contract fill/finish provider. And we bring it in-house, we can also expedite, if you will, the production throughput process. Because we'll now have all of that control.

And ultimately, we think that, that will contribute to being able to turn our inventory into commercial product faster. Maybe on the shorter side of that seven to 12 month period rather than being within that seven to 12 month period. So there could potentially be some additional improvements, if you will, in enhancements to overall margins by having to maintain less inventory and less working capital. For that matter, generating receivables faster, all these things can contribute. So hopefully, that gives you some insights into this.

But ultimately, I mean, this thing, I can't wait to tell you what I really think it's going to be. I mean, I think 10% is a fair assessment, but I'm very hopeful. And for the ADMA team listening, I'm hopeful that they can make some magic here. So we're very excited. IG is a very, very scarce resource, and we want to make sure that we can maximize all of it in the vial to go to patients not to go for losses.

Leland Gershel -- Oppenheimer -- Analyst

Great. Hey, thanks for taking my questions.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Thank you. Leland.

Operator

Thank you. And this does close today's question-and-answer session. And I would like to turn the conference back over to Adam Grossman for any further remarks.

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Sure. I just want to thank everybody for your continued confidence and support and understanding during this time. The company is really doing great. We're really proud of the work that we're doing. And again, please please donate plasma. It's not service, the only way we're going to really, really save our fellow countryman and family members is to donate plasma.

So thanks for your attention. Thanks for your support, and we look forward to hopefully seeing you soon. Take care, everybody.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Michelle Y. Pappanastos -- Investor Relations

Adam S. Grossman -- Founder, Director, President and Chief Executive Officer

Brian Lenz, CPA -- Executive Vice President, Chief Financial Officer

Jack -- Jefferies -- Analyst

Elliot Wilbur -- Raymond James -- Analyst

Ram Selvaraju -- H.C. Wainwright -- Analyst

Leland Gershel -- Oppenheimer -- Analyst

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