Q4 2023 ADMA Biologics Inc Earnings Call

Participants

Skyler Bloom; Senior Director, Corporate Strategy & Business Development; ADMA Biologics, Inc.

Adam Grossman; Founder, Director, President & CEO; ADMA Biologics, Inc.

Brian Lenz; EVP, CFO & General Manager, ADMA BioCenters; ADMA Biologics, Inc.

Anthony Petrone; Analyst; Mizuho Americas

Kristen Kluska; Analyst; Cantor Fitzgerald

Gary Nachman; Analyst; Raymond James

Presentation

Operator

Good afternoon, and welcome to the ADMA Biologics Fourth Quarter and Full Year 2023 financial results and business update conference call on Wednesday, February 28, 2024. At this time, all participants are in a listen only mode. There will be a question and answer session to follow. Please be advised that this call is being recorded 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 Skyler Bloom, Senior Director of Business Development and Corporate Strategy at ADMA Biologics. Please go ahead.

Skyler Bloom

Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics financial results for the fourth quarter and full year of 2023 and recent corporate updates. I'm joined today by Adam Grossman, President and Chief Executive Officer; and Brian Linn's, Executive Vice President, Chief Financial Officer, and General Manager of our ADMA Biologics.
During today's call, Adam will provide some introductory comments and provide us an update on corporate progress, and then Brian will provide an overview of the Company's fourth quarter and full year 2023 financial results. Finally, Adam will then provide some brief summary remarks before opening up the call for your questions. Earlier today, we issued a press release detailing the fourth quarter and full year 2023 financial results and summarized certain achievements and recent corporate updates. It is available on our website at w. w. w. dot asthma biologics.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 as of the date of this call and should not be relied upon as representing our views of the 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 annual report on Form 10 K for the year ended December 31st, 2023, for a discussion of the important factors that could cause actual results to differ materially from these forward-looking statements please note that the discussion on today's call includes certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. A reconciliation of these non-GAAP financial measures to the nearest comparable GAAP metric is available in our release. With that, I would now like to turn the call over to Adam Grossman. Adam?

Adam Grossman

Thank you, Skyler, and welcome, everyone. We are extremely pleased with our 2023 performance, which marked first time adjusted net income and positive cash flow from operations on a full year basis. We believe these significant milestones are a testament to both our unwavering commitment to the continuity of patient care and steady financial execution for our stockholders during 2023 and much strengthened its position as one of the fastest-growing providers of immunoglobulin in the US market and advanced its financial profile to become one of the fastest growing and profitable biopharma companies in the United States.
We believe our significantly strengthened balance sheet following the fourth quarter debt refinancing as well as our robust four forecasted earnings growth and cash generation puts our company in a strong position as we start 2024 and look to the future. Full year 2023, total revenues grew by 68% to $258.2 million. This rapid growth enabled us to generate positive adjusted net income and more than $40 million in adjusted EBITDA on a trailing 12 month basis.
We believe these exceptional results speak to the efficiency in our organization's operations and our relentless focus on maintaining top tier revenue growth while judiciously managing overhead and expenses. We fully anticipate our positive trajectory will continue to drive earnings growth for the foreseeable future.
Has had less forward-looking business trend gain momentum. We are revising financial guidance upwards for both 2024 and 2025, increasing top and bottom line projections. Based upon current market factors, we now anticipate generating revenues during these periods of more than $330 million and $380 million, respectively. At this level in 2024 we've increased adjusted EBITDA guidance to more than $90 million and adjusted net income to more than $65 million.
Similarly, for 2025, we've increased adjusted EBITDA guidance to more than $140 million and net income guidance to more than $115 million. We believe our commercial success driven in large part by the recent and continued growth of Ascentage utilization, which we believe is attributable to our unwavering focus on the immune deficient patient segment, especially in those PI. patients who suffer from complex co-morbidities the specialized focus in combination with our innovative business model, diverse product portfolio and our targeted medical education, marketing and market access initiatives have provided ad mode with its highly differentiated messaging and product offerings.
We believe we have successfully established an enduring and growing foothold within the USIG. landscape. Specific to Essentis, we are confident that there remains a significant growth opportunity for the product within its targeted addressable market, further penetrating the treatment setting comprise of immune deficient patients grappling with these complex co-morbidities launch metrics for US Senate remain broadly supportive and again made new record highs across leading demand indicators, including measures of both breadth and depth.
All told, we are encouraged to see ASCENIV's unique product profile continuing to resonate and clinical practice and the real world setting. The therapies, accelerating demand trends and healthy growth attribution continually catalyze us to favorably rethink the ultimate size of the market opportunities, and we reiterate that we believe we are in the early innings with the product's total potential.
Prior to providing an update on our growth initiatives, I'll spend a moment reviewing the recent implementation of our innovative AI program ADMAlytics. Over the last year-and-a-half, our internal information technology leadership team has been working tirelessly to develop analytics, which has now been successfully tailored to our organization's bespoke needs and implemented for commercial use it.
ADMAlytics combined AI and machine learning and is designed to optimize and streamline certain of our intricate production processes in the complex landscape of specialty biologics production. Maintaining uninterrupted operations is paramount, and we believe that ADMAlytics will further bolster our commitment to ensuring the continuity of patient care.
We anticipate the program's rollout across the organization will in due course bring far-reaching improvements and efficiencies across our operations and further support the company's rapid earnings growth trajectory. The successful development and implementation of ADMAlytics aligns seamlessly with our overarching mission to continuously innovate production processes for specialty biologics, while also building on our reputation as a thought leader within the commercial specialty biologics markets, our therapy serve. We applaud the admin IT team for their execution and success, bringing this innovative software two real-world applications.
Turning to our 2024, 2025 corporate growth initiatives, all activities continue to progress as planned. We have successfully expanded incentive production to the 4,400 liter manufacturing scale, enhancing the product margin yield and capacity. We expect to realize these profitability benefits more materially as we progress into 2024.
Additionally, our tentative post marketing clinical study is progressing well. It may lead to label expansion for the potential pediatric age group. If successful further strengthening our product portfolio relative to competitive IG offerings. Our excitement continues to build as we see the potential impact of our manufacturing IG yield enhancement initiatives during the fourth quarter, we made significant strides in scaling up our processes and conducting laboratory bench scale runs and analyses. If ultimately successful, we believe enhance production yields will be transformative in providing increased finished goods output, which would substantially increase Atlas peak revenue earnings potential. This exciting project remains on track and we will provide updates as developments unfold.
Finally, earlier this year, we provided an update on our patented preclinical hyperimmune globulin program targeting strep pneumonia. While still in the early stages of preclinical development, we are excited to advance this program. Our interest in this potential new product opportunity stems from several key factors. Firstly, the market potential is significant and currently underserved streptococcus pneumonia is the primary cause of community acquired pneumonia in the United States. Ranking in the top 10 diseases for all-cause mortality. The growing prevalence of anti-infective resistance emphasizes the urgent need for both prophylactic and therapeutic intervention.
Secondly, ADMA holds a strong patent portfolio for this specific hyperimmune globulin, providing for the development of an F pneumo hyperimmune with IP defensible until at least 2037. Drawing from our successful development of ASCENIV through clinical and regulatory pathways as well as our demonstrated commercial launch capabilities. We believe we are positioned to potentially replicate this success with the strep pneumonia program.
If ultimately approved, we project this hyperimmune globulin to generate additional future peak revenue in the range of $300 million to $500 million annually. To reiterate, as evidenced by today's increased earnings guidance, we will remain highly cost disciplined in advancing this program through the preclinical development program.
On the plasma supply front, I'm pleased to highlight that all 10 of our plasma collection centers are now FDA license and collection volumes are trending at the upper bound of our internal estimates. Foot traffic on a same-center basis continues to grow and reach new highs. All told, we're confident in our ability to meet the increased production forecast for our commercial IG portfolio, reflecting on the journey of asthma, it's clear that our achievements stemmed directly from the unwavering commitment and hard work demonstrated by our outstanding and knowledgeable team members.
So a remarkable evolution from a young virtual biotech startup to a fully compliant end to end control supply chain and now advancing our position as one of the fastest growing and profitable biopharma companies in the US. It's truly rare and remarkable to our employees. We extend our heartfelt gratitude for your tenacity, perseverance and tireless dedication, which not only fuels our product progress, but also leaves a significant impact on those.
We serve the collaborative ethos and collective efforts that truly distinguish our workplace. We deeply value the dedication, enthusiasm and diligence exhibited by each team member of our team. It's the Steadfast devotion that drives our success and enables us to maintain firm control over our operations in line with our fundamental vision. We firmly believe this strong foundation paves the way for even greater accomplishments in the periods ahead. I'd now like to turn the call over to Brian for a review of the fourth quarter and full year 2023 financials.

Brian Lenz

Thank you, Adam. We issued a press release earlier today outlining our fourth quarter and full year 2023 financial results. And we will be also issuing our full year 2023 10-K report later this afternoon, which we would encourage you to read in conjunction with our comments and discussion points we'll make during today's call. I'll now discuss some of the key highlights from the fourth quarter and full year.
As Adam mentioned earlier, total revenues were $73.9 million for the quarter ended December 31, 2023, as compared to $50 million for the quarter ended December 31, 2022. And this represents an increase of $23.9 million or approximately 48%.
Total revenues for the year ended December 31, 2023 were $258.2 million, and this represents 68% year-over-year growth. The increase is primarily related to increased sales of our immunoglobulin products, partially offset by a planned decrease in sales of plasma to third parties due to the increasing retention of plasma for our IVIG production decline in external plasma sales is consistent with our expectations as we are utilizing a greater percentage of our internally sourced plasma from our 10 FDA-licensed plasma collection facilities for our book of facilities, manufacturing of ASCENIV and began.
Our gross profit for the three months ended December 31st, 2023 was $31.1 million as compared to $14.2 million for the same period of a year ago. And this represents an increase of $16.9 million.
Gross profit for the year ended December 31, 2023 was $88.9 million, representing an increase of $53.7 million compared to fiscal year 2022. Expansion of gross margins is attributed to selling more of our higher margin product ASCENIV during 2023 as compared to 2022. As a result, admin achieved a corporate gross margin of 42% in the fourth quarter of 2023 as compared to 28% in the fourth quarter of 2022.
We believe the pathway is well paved to continue to grow gross profits over the coming periods. We are very pleased to report as I am as Adam mentioned earlier that for the first time in corporate history, ADMA achieved first time positive adjusted net income and positive cash flows from operations during 2023 on a full year basis.
During the fourth quarter alone, adjusted net income reached $8.5 million as compared to a net loss of $12.2 million for the fourth quarter of 2022. ADMA grew adjusted EBITDA to $40.3 million for the full year 2023 as compared to an adjusted EBITDA loss of $27.6 million for the full year 2022. For the three months ended December 31, 2023, ADMA generated 18.6 million of adjusted EBITDA as compared to an adjusted EBITDA loss of $3.5 million in the same period of a year ago.
The improvement is driven primarily by increased sales, gross profit and fiscal operating management of our business. Based on ADMA fourth quarter annualized adjusted EBITDA growth and cash and cash equivalents, the Company's current net leverage ratio has organically improved to approximately 1.1x. We anticipate the balance sheet will continue to strengthen over the coming periods, enabled by forecasted operating cash flow and growing adjusted EBITDA.
Lastly, it is with pleasure to note that all 10 of our plasma centers within our BioZ center network are now FDA licensed and collecting plasma. This milestone marks the successful conclusion of our multiyear investment initiative to establish plasma supply self-sufficiency, and we are now well positioned to support all of our growing internal production needs. Additionally, we remain encouraged by the real-time improvements in donor foot traffic and collection volumes, which continued to achieve record all-time highs and remained considerably above our organization's pre-pandemic levels.
With that, I will now turn the call back over to Adam for closing remarks.

Adam Grossman

Thank you, Brian. ADMA's business prospects and opportunities are vast. The company morale has never been higher. Our organization is energized and unified and the performance driven culture we have established with ADMA Biologics is bearing fruit.
Our portfolio of life-changing medicines is providing significant real-world benefits. To patients managing diseases, a critical unmet need in doing good for others. We've done well for our organization and our stockholders. Our business continues to strengthen, and we believe we are well positioned to generate significant growth and cash flow for years to come.
We anticipate 2024 being defined by top-tier revenue and earnings growth, significant cash generation, and the further development of transformative growth initiatives, which if successful, have the potential to significantly impact adverse peak revenue and earnings targets. We believe ADMA proven internal R&D capabilities, broad IP estate and successful establishment of our innovative commercial business model positions the Company for enduring success.
Thank you for your continued support and trust in the company. We appreciate those of you who have supported us through this journey, and we are committed to delivering for our stockholders in the periods to come here, investment and admin helps to advance our mission to save lives and make high-quality, safe and efficacious products and help our friends, family and neighbors.
Before opening the call for Q&A, we announced earlier this afternoon it dry and will be transitioning from his current role of Executive Vice President, CFO and General Manager of ADMA biocenters as part of a planned executive leadership change. To ensure a seamless transition for ion will continue supporting the company in a consulting role. Effective April 1.
Brian has served as CFO with distinction and dedication over the past 11 years. During his tenure, we've achieved significant milestones and navigated through various challenges with resilience. We wish Brian all the best and look forward to continuing to work with them during this transition period. With that, we'd like to open up the call for your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Anthony Petrone, Mizuho Americas.

Anthony Petrone

Thanks for getting us in here, and congratulations on another great quarter. And I'm showing outlook maybe on a couple on just the moving parts on on product mix and question on R&D and then one on margins. So some So maybe just in terms of the cadence between began an incentive, maybe just a little bit on the share landscape for traditional IG first, just considering that there seems to be some moving some moving pieces out there. Just on the competitive landscape, do you think more share comes up for bid as the year progresses? And could that be a tailwind for bid again? And then on incentive or maybe just an update on active prescribers and how sticky your existing prescriber bases. And I'll have one on margin for Brian.

Adam Grossman

Sure all great questions. I was just making some notes here. So on when you refer to share landscape. I mean, IG in 2023, I think it was one of the largest growth years in the last five plus years for the product on plasma supply has been good. Both IV and subcu products have been good. There were a couple of other approvals, I think for some for some other products during the year. So the market is pretty flush with product right now.
The landscape IV is about 80% up to about 20% from what we see. But you know, you made mention about Could there be some some some good tailwinds for began, Anthony, we're selling everything we make out of this plant. It is again the Essentis. Our products are well tolerated in the market. Patients like our products. There are good safe products. You know, we're the only manufacturer that I'm aware of that's still using centrifugation to make these products. And there have been some articles published about and how there could be some benefits there on the mix, I mean, look, we raised guidance.
I think it was three times last year. We've already raised guidance now once in 2024. What can I say about the mix? ASCENIV is really -- you know, we love the product, the patients love the product. I think payers love the product. The physicians certainly love the product and the drug is doing well in the refractive complex co-morbid immune deficient patient full-stop. I think the uptake is growing more rapidly than even our accelerated case our expectations.
And I think that that's what you're seeing in our in our guidance and on our in our financial performance, I mean, look, we on an adjusted basis being being net income positive for the first time. It was definitely a very pleasant pleasant surprise, lots of high fives around this office. We're really excited about it.
And all I can tell you, Anthony, is that as you make good products that help people in, there's good outcomes in the real-world setting, that's what really drives uptake here. And I think that's what you're seeing. So I think we have a lot of tailwinds. I think the people it out and we're making good, safe, efficacious products of all of our products. And we're going to continue to drive product penetration and uptake as fast as we can and that I hope that that answers your question there.

Anthony Petrone

But absolutely, maybe to pivot to Brian first congratulations on the 11 years and you'll be missed and thanks for all the help along the way here. So good luck in the next chapter.
In terms of margin, maybe a little bit, Brian, on how much yield enhancement are we seeing in gross margin? And it looks like the hyperimmune R & D portfolio is going to progress here. So should we be expecting an uptick in R&D expenses in the second half of the year? Thanks again, Bob.

Brian Lenz

Thank you, Anthony. And that has certainly been a long and overall successful 11 year run. So I appreciate the compliments and I still strongly believe in the Company and its products. And so we'll be continue to route the company on. As it relates to margin we're producing both products, incentive and BBM at the 4,400 level we have been for some time.
So we're going to be all we're selling is at the 4,400 higher margin scale. So the incentive closer to that 85%, where historically we're in that low 80%. So nice increase about 5% percentage from Pecem. We went from the high 10s, low 20s to now we're in that 25%, approaching 30%. So we think that there's still room there still upside to go. And as I mentioned about the product mix. We think that there's more opportunity for ASCENIV and going forward. That's how we've been able to revise guidance now several times over the last point.

Anthony Petrone

Regarding R&D spend, Anthony, you know, we we think it's really manageable yield enhancement. As we've said, it's a few million dollars. I mean, we are we're not getting over our skis in any way, shape and form, I mean being cash flow positive where we are net income positive the way we are I mean, certainly we're going to be opportunistic with that cash and use it to drive value for shareholders.
But I can tell you that our R&D expense, I mean, sure, it's going to pick up slightly, but it should not be in any material way, we're going to really be very responsible and our spending on the R&D for the strep pneumonia product is again in its early stages and though we're going to keep you apprised of both manufacturing yield enhancement R&D, which again, we think we we should have on file later this year or early next year, probably realizing those financial benefits sometime in the back half of '25 and today.

Operator

Kristen Kluska, Cantor Fitzgerald

Kristen Kluska

Congrats on a really strong 2023. I don't think I've seen a company raise guidance this many times consistently deliver. And Brian wishing you the very best should feel very proud of everything that you accomplished.
So I wanted to ask once upon a time, the company was talking about $300 million being the peak sales potential. And today you talk about your enthusiasm, but you also characterize it as early innings. So I just wanted to get a general sense of how you're thinking about, you know, maybe you want to give me a specific number, but why the peak sales could ultimately be you continue seeing the cadence and the demand that you are?

Adam Grossman

Thank you, Kristian for those very kind of you to say your question has me smiling with all my notes and everything that I see here. I mean, look I think what I should say is that for those who followed our story and it's been a hell of a ride, right, hasn't had some sort of you know, we've we've had to bob and weave. And we've had regulatory challenges and we've had supply chain challenges and you name it. There have been some challenges.
But at the end of the day, we knew based on the Phase three data for our drug that we had a product that was unique. We had a product that provided very, very good results for the primary and all the secondary endpoints that were something special in what we were making. And you know, there were things that were not published with respect to some of the patient diaries and our and our clinical trial team would get feedback from the coordinators at these sites out the way patients were responding to the products.
We always knew there were something special, but how do you model that? How do you forecast this? And there are certain things that occur when the product gets into the real-world setting, which I know we've seen with other products on. And I really do believe that, you know, at that time we were looking at our ability to get our SE plasma, our ability to produce at one point in time, we were contract manufacturing. So how much capacity with our contract manufacturer gives to us.
So, you know, I think the $300 million was a very, very fair and honestly appropriate forecast back then with where we are today, I mean, I don't want to say that where we are, you know, producing as fast as we can. We can keep up with the demand, but that's the true. So we are producing as fast as we can. We are working on strategies for identifying additional ore as the plasma donors.
We're working with other third party collectors to augment our internal supply to collect as much plasma as we possibly can. I can tell you that the key guidance that we're giving for next year, we raised it to three $83 million, $80 million , my correct. And so we feel our time we're not factoring in any yield enhancement from there. We're not factoring in any contribution for BVMF and incentive with respect for yield enhance.
Our peak revenues don't factor in anything for us and the potential in the back half of the decade, say for the strep pneumonia, hyperkalemia. Hypothetically, I mean, if you can do the math, we have a 400,000, 500,000 liter plant, 600,000 liter plant. You're if you make it all incentive, you know what, what does that yield you have? If you're fractionating 0.5 million liters of plasma at 4 grams per liter, that's a lot of product will the payers pay for that much? Will the market absorb that much?
I don't have the answer, but what I do know is that where we are today, we've got patients waiting for therapy. You've got patients who are waiting for us to release drug to start therapy. We've got patients who have approvals from their payer to switch from whatever IG they're on to Essentis. We are making the product as fast as we can. We cannot change how fast it takes to make these products takes.
As we've said publicly in 6 to 9, 7, 12 months, depending upon how good our team is what we were working as fast as we can. And I stick to what I said on previous calls, we give conservative guidance. We contemplate this range. You know, if everything as we're operating remains intact, obviously, we're going to continue to beat and raise and even raise. That's our that's our MO.
If something changes, we're going to meet guidance and we're going to hit it and we're going to feel great about what we're doing. And if trends continue and we're able to accelerate certain programs here at the Company. I think that there an opportunity for us to remove lease manage these numbers. It's the same approach every year. And I just feel really proud our team proud of of the of the drug as a sedative that that we have.
We brought to market and persevered through all of these challenges, but it's really the way the patients are responding to the drug and these are sick people. These are people who have had the eye for years and who don't respond well on their current therapy and they have complex co-morbidities that are, you know, to the point of being unmanageable in certain instances and they switch to incentive and the patients thrive. And that's what we're most proud of here at ASCENIV when you can change and impact and improve a patient's life, the way that we see that we're doing it with incentive, that's why we say it's in the early innings. You know, I don't know what else to say, but with that, Kristen, but the drug is changing lives. It's changing the treatment regimen out there in the market.
And I think our medical education, marketing market access sales strategies. I think all of these things coming together are really measuring. And from my perspective, you know, there are very few companies, our size that really launch products and stay independent. I think what the market is seeing because they're seeing a real success story unfold right in front of their eyes there are they're seeing a company that is going at it alone, you know, playing in a market of very, very big players and we're differentiating ourselves. And we've done it in a way that has documented itself with 14 calendar quarterly deals and it's because the products we make are good because the people who come to work here every day really care about what they do.
And I mean, I'd like to take a little credit. You know, I care about what we do. You know, it's not just about this is where I get in trouble and the stock stuff that my son reached to me, you know, yes, it's about the financials. But first and foremost, you've got to take care of the FDA got to take care of the SEC, you got to be able to operate, then you got to make a good safe product. You got to give the doctors what they need and you got to help the patients and the rest falls into place. And I think that you're seeing our financials truly improve and the acceleration in the financial improvement has been dramatic.
Our expenses are down and we're controlling costs in the beginning of last year with our a realignment of resources. I mean, we've continued on that track and we're going to continue to deliver for shareholders. We're hyper focused on shareholder return here now and look, I think the stock is truly undervalued. I think the cash generation that we're going to develop from the pricing. The cash generation that we're going to see starting in Q1 of this year is going to be robust and it's going to allow us to do a lot of great things part of that response.

Kristen Kluska

And just the last question for me is maybe talk about the metrics you're seeing from a prescriber base that specifically, you know, is it more levered towards, sir, in prescribers adding more patients versus getting new prescribers entirely on board? Or is it a blend of the two?

Adam Grossman

The answer is it's both? It's yes. And it's yes, obviously, there are the doctors who have seen results. They're very, very quick to be able to identify new patients and get those patients on and you know, the number of prescribers grows every every month, every quarter. Three, we're smashing all of our internal estimates and our and our numbers, Christian, from the prescribers are pretty much strictly immunologists, the majority of our sales are in the outpatient setting.
I can tell you that existing prescribers on a buy-and-bill basis, once those physicians take titles of the product and know that they're going to get reimbursed. If you're comfortable about adding patients, certainly there is a cost outlay for sure, I-many IG that a doctor with an infusion practice in his office in in their office. They they do take some risks there.
But I think that folks are truly comfortable now at this point, and we've done a lot of green education out there, both on the market access side and on the medical side. So I think you're going to see that prescriber base continued to to increase. I think you're going to see same store sales increase and it's the drug. I mean, I like to think that it's our great marketing strategy, medical education stuff, it is, but the drug also there's a lot of the talking.

Skyler Bloom

Gary Nachman, Raymond James.

Gary Nachman

Great. Good afternoon, guys, and congrats on all the progress and good luck to you, Brian. We will definitely miss you. And so Adam, maybe just talk more about your plans to explore developing a hyperimmune product to treat pneumonia. What led to that decision? And why do you think it could be a $300 million to $500 million opportunity? How you get there and just reiterating that there's no impact to profitability. So just explain how that's going to happen.
And then also just what are other hyper-immune products that you could potentially pursue when could we hear about those? So I'll also just getting a sense of your capacity as you potentially expand into these other products, while you still trying to obviously grow Essentis All great questions.

Adam Grossman

Thank you, Gary, very much. So on strep pneumonia, we actually checked this before we got on the call because I figured someone was going to ask me, but we've been publishing data about strep pneumonia since 2020 2021. And as we've said, I believe in our press release earlier this year, where we announced that we were going to embark on this program.
It's in the top 10 leading causes of death. It's the leading cause of community acquired pneumonia on. We look at the world very practically, Gary we look at this as there are vaccines for people who can receive vaccines. And when you look at immune-compromised patients and they do not respond well or they do not respond at all to vaccination.
So one of the leading issues and primary immune deficiency in cancer patients in post-surgical patients and the elderly that are hospitalized strep pneumonia. And we feel that there's an opportunity here to sort of bridge this gap. And again, we don't know if it's going to be treatment or if it's going to be a prevention, there's still work that we have to do. Again, it's very early.
I think that we've got no look, we built our plasma center network, Gary, so that and I think that this touches on your second part of the questions here, it goes as planned, the center network not only to secure our supply chain, but also because it allows us to evaluate novel things with plasma, and that's where everything starts from.
So we have evaluated and we've established a method it stimulate antibody using commercially available vaccine in our plasma donors. And we measure these antibody titers, and we see that they're developing protective oxide. That's the first step to ensure the control of the raw material and the make raw material as you can make raw materials and the rest, I want to say easy part, but we know deals to go put some product and to have a little bit earlier at at some point this year.
And we've got a team out there and we're going to evaluate and see roughly based on the data that I thought I recall it takes less than 10 days for immune competent person to develop on the share of protection when vaccinated with the commercially available vaccines on time, right?
And if I go on know to me, I think it takes about 10 days to sell or convert. So no, just on a very practical basis for a vaccine in the elderly patients whose immune compromised because they're older and you're hospitalized in the cardiac unit or you just had surgery because you own broker are hospitalized. And so for those reasons or anything petitions, their protocol is to provide a vaccine. We are not doing anything to protect the patient because take 10 days for immune competence to develop so protective antibodies to all the different serotypes.
So if you look at the way Raven's history, the Company's history and hepatitis B treated postexposure, and we provide globulin and a vaccine to protect that zero conversion period.
So we think that that could be an opportunity. It could be another opportunity to follow what we've done with ASCENIV. When you think about it, if you make a a high titer IG for the primary immune deficiency population that's easier to manufacture, let's just say because the plasma supply is a lot easier to obtain. You're not looking for these naturally occurring high titer RSV donors, which is what we do for ASCENIV. But if you're able to just stimulate lower your plasma donor with a vaccine against strep pneumonia. It's a lot easier to control the raw material supply there. So and we think that these hyperimmunes could have incentive like penetration. We think that these hyperimmunes could have utility even outside of the PI. population.
And with respect to your to your question about capacity, I mean, look, I love that again. I love Novvi. I love incentive. I love every product that generates revenue and has the gross margins that we're seeing. I mean, we have the best gross margin profile of any plasma fractionator globally. To the best of my knowledge, they can only improve Gary and I don't want to say, you know, I want to stop making began, but look at the biologics founding principles where to make the products that nobody else wants to make some a hyperimmune targeted at specific infectious diseases.
So you asked I think you asked what other pathogens from what's your favorite infectious disease of the day. And if we can generate antibodies through vaccination, if we can generate antibody through or being able to detect that naturally occurring antibodies using special testing methods. We can make anything in that if you dig deeper into our IP, we also have IP around what we can make hyperimmunes by making a call it a began plasma pool, a normal IgG and then spiking it with monoclonal antibodies. We've got IP around that as well.
So I think the sky's the limit for us.
You know, our our our small plants here and that can produce call it 2 million grams of IG annually. If it's all hyperimmune globulin, I mean the sky's the limit. To Christian's earlier question, how much revenue can you generate? I mean, in theory could be billions.
Are we there yet? No. Are we ready and prepared to give guidance in that arena. No, but the reason why I think that this could be a $300 million-plus product as you just looked at where Essentis today, it's easier for me to get the plasma and the market is a lot broader for our strep pneumonia type paper. I mean, there's billions of dollars of vaccine being sold.
If you just take that subsegment of how much vaccine is being used for patients that are going for surgery or entering the hospital? I wonder if you could give a Globul and on top of that we're picking up the crumbs and these are it's 60%, 70%, 80% gross margin products, maybe even more.

Gary Nachman

Okay, great. That was very helpful. Thank you. And then just to follow up. I don't think you mentioned this before, but could you give us a better sense of what is implied in the revenue guidance in terms of the mix between incentives and began this year and next? And how aggressive can you be paying down the debt? And I'm curious how much that's factored into the net income guidance for this year and next year.

Adam Grossman

These are all great questions. I mean, look, Gary, we we reiterate that mix. I'm trying to stay away from from from from where this is. We always said in the beginning 80-20, 70-30. And you know, we do say that we're going to get to this 50-50 split, the timing of which you know -- we're doing really well, Gary, what can I tell you? We're doing very, very well.
Becaue we are seeing -- and it's not just from the Senate, I mean giving him is doing well. Also the fact that that that plasma collections are up and the fact that that plasma supply and the supply chain has opened up post COVID, I mean, we're just seeing we're seeing lots of efficiencies. And we're realizing lots of efficiencies and within our own operating organization here.
So but the game is contributing nicely as well. We will look at this as on you know the guidance that we're giving this year, I think is pretty straightforward and clear. I think it's what it's $330 million or more now. And we're saying $70 million or so in net income. I mean, that's but that's nice. My task is to beat it. And my request of all my employees and team members here listening is we we need to be it.
Again, we're hyper-focused on shareholder returns here. And you saw us use cash from our balance sheet to pay down some of the debt and reduce the interest expense and we were opportunistic with respect to your question about, you know, our guidance does not contemplate us paying down the debt. Certainly if we hit the forecast that we are presenting today or if we exceed it.
I mean, look, we have the ability, at least with the revolver portion of the loan where there's only a 50% minimum draw there. So we have some optionality as cash builds on the balance sheet that we can pay this down without any prepayment penalties, obviously reducing the interest expense and improving net income and so on. I'm not looking to onboard assets right now.
We are really confident in our ability to manage the R&D spend and where confident in our ability to effectively deliver on our internal R&D engine. But I can tell you that, you know, we're going to do the right things here. I'm a substantial stockholder. As you know, my family substantial stockholders on. We want to see this stock really achieve the value that we believe. Again, I think I said it earlier. I think the stock is truly undervalued based on what I've seen in the back half of 2023 and what I see in the beginning part of '24 here, we're on the right path and we're going to continue to generate cash, and we're going to be as opportunistic as possible to maximize shareholder value.

Gary Nachman

Great. Thanks so much.

Operator

Thank you. And ladies and gentlemen, this will conclude our question and answer portion of the call. I'd like to turn it back to Adam for additional closing remarks are.

Adam Grossman

Thank you, everybody. Thank you to the analysts for the good questions. Donate plasma help save lives. Again, stay safe and thank you for your interest in our Biologics and the products that we make to help save lives.

Operator

Ladies and gentlemen, this concludes the conference you may now disconnect.