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Why ADMA Biologics Is Tumbling 13.5% Today

By Todd Campbell - Feb 7, 2020 at 12:39PM

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The company's secondary stock offering was priced below its prior-day closing price.

What happened

After announcing it had priced an up-sized secondary offering of its shares at $3.50 per share, ADMA Biologics (ADMA 2.52%) shares tumbled 13.5% at 12:15 p.m. EST on Friday.

So what

A commercial-stage biotech company, ADMA Biologics markets Bivigam and Asceniv, two plasma-derived, polyclonal, intravenous immune globulin (IVIG) products that won FDA approval in 2019. These products provide antibodies necessary to combat illness caused by bacteria and viruses in patients with primary humoral immunodeficiency (PI), a rare genetically caused immune disease.

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In the fourth quarter, ADMA Biologics' revenue was $11.9 million, up 193% year over year, according to preliminary financial results reported on Jan. 9.

In addition to ramping commercialization of its IVIG products, ADMA Biologics is also looking to serve other drugmakers manufacturing plasma-derived products. On Jan. 7, it announced it had signed a multiyear deal with an undisclosed drug maker to supply them with plasma fractions unnecessary for making Bivigam and Asceniv. These fractions can be used to make other therapeutics, such as factor VIII replacement therapies for hemophilia A.

In a bid to sure-up its balance sheet in support of its commercial-stage strategy, management announced a $75 million stock offering on Feb. 6. After the closing bell, it announced it had priced the offering at $3.50 per share,  which is below yesterday's $4 closing price. It also said that it had increased the size of its offering to $82.3 million, before fees.

Now what

Dilutive offerings are common in biotech and, arguably, secondary stock offerings are a preferential way to raise money given that traditional bank loans can include restrictive covenants and costly interest payments.

Unlike some companies that raise money in support of research efforts, ADMA Biologics already has two fast-growing products on the market and its contract manufacturing business could be significant. Its recently signed supply deal is expected to generate over $5 million in annual revenue, with the potential to grow to over $10 million annually beginning 2022. Given ADMA Biologics estimates peak sales of its products could exceed $250 million annually, it seems prudent to raise money to support investments in its business.

 

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