Today ADMA Biologics (Nasdaq: ADMA) announced that they entered into a senior secured loan term facility with Perceptive Advisors for up to $72.5 million under 2 funding tranches.
Let’s get clarify what all this means. Perceptive Advisors LLC is a financier of biotechnology and health care companies, not a set of actual “advisors”. Their focus is on forwarding the agenda of promising life sciences companies (like ADMA) providing financial resources needed to bring products to market. They presently have ~$4.2 billion in assets under management. What ADMA did was put up one of their facilities to borrow $72.5 million divided into two “funding tranches”.
Tranches are a type of debt security designed to mitigate risk by dividing up the security. In this case, the first tranche from Perceptive Advisors for $45 million was allocated to prepay ADMA’s previous senior secured credit facility of $30 million in full in addition to all associated costs and fees. The second tranche for $27.5 million is:
Predicated on the United States Food and Drug Administration (“FDA”) approval of either the BIVIGAM® Prior Approval Supplement or the RI-002 Biologics License Application and is available at ADMA’s election through June 30, 2020, with a minimum drawdown of $10 million.Source: ADMA Press Release
The interest for the loan facility has an interest only period through the entire duration of the loan facility maturing in March 2022. Benefits include lower interest rates than ADMA’s former senior secured credit facility and no back-end fees.
Great Strategic Move
This was a very positive development for ADMA for several reasons. First, this means there will most likely not be a dilutive public offering in the immediate future. Although, one is not off the table come April if the share price is catapulted by approval of BIVIGAMS’s PAS submission and or RI-002’s BLA approval.
Secondly, this suggests the ramping up for a commercial relaunch for BIVIGAM does not have to be curtailed. If approved, ADMA would be able to proceed as planned with their production and marketing and sales strategy entering the market with less financial hindrance.
Moreover, paying off their previous senior secured credit facility relieves some debt obligations. It seems sort of counter intuitive. Take on more debt to pay off debt? The timing of this move however is where the magic lies. Right now is a pivotal time for ADMA and the more successful their commercial launch can be for BIVIGAM, and RI-002 hopefully, the better chances of long-term capital appreciation for shareholders and the company.
The next press release hopefully will inform us on the categorization of the 2018 CRL. If it is a class 1 as we predicted that would be a catalyst of greater magnitude than today’s announcement, and put the PDUFA sometime in April. The next several months are shaping up to be exciting for ADMA Biologics with two big binary events potentially unfolding.
Read to learn more on why MS Money Moves initiated a swing position earlier this month in ADMA after realizing triple-digit gains in our SCYX swing move.
Additionally, check out our latest swing move by Cody Hall and equity analysis article, “Is Novo Nordisk Ready For Increased Biosimilar Competition?“, by MS Author and a healthcare industry expert Sebastian Gensior.