Kamada Ltd. (KMDA) CEO Amir London on Q1 2022 Results - Earnings Call Transcript

May 17, 2022 11:06 AM ETKamada Ltd. (KMDA)
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Kamada Ltd. (NASDAQ:KMDA) Q1 2022 Earnings Conference Call May 17, 2022 8:30 AM ET

Company Participants

Bob Yedid - LifeSci Advisors

Amir London - Chief Executive Officer

Chaime Orlev - Chief Financial Officer

Conference Call Participants


Greetings. Welcome to the Kamada Ltd. First Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Bob Yedid of LifeSci Advisors. You may begin.

Bob Yedid

Thank you, Shamali [ph]. This is Bob Yedid of LifeSci Advisors. Thank you all for participating in today’s call. Joining me from Kamada are Amir London, Chief Executive Officer; and Chaime Orlev, Chief Financial Officer.

Earlier today, Kamada announced its financial results for the 3 months ended March 31, 2022. If you have not received this news releases, please go to the Investors page of the company's website at www.kamada.com.

Before we begin, I'd like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Kamada. I encourage you to review the company's filings with the Securities and Exchange Commission, including without limitation the company's Forms 20-F and 6-K, which identifies specific risk factors which may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the live broadcast, Tuesday, May 17, 2022. Kamada undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. if you would like to ask questions, please feel free to register for the Q&A session live at the end of the call or feel free to email me Bob Yedid, bob@lifesciadvisors.com.

With that said, it's my pleasure to turn the call over to Amir London, CEO. Amir?

Amir London

Thank you, Bob, and thanks to all our investors and analysts who have interest in Kamada and for participating in today's call. Our business is off to a very strong start in 2022. During the first quarter of the year, we have effectively executed on our corporate strategy and continued advancing towards becoming a fully integrated global leader in the plasma derived specialty markets.

Our performance during recent months is a strong testimonial of Kamada's ability to concurrently execute on multiple fronts, developing and advancing our key growth catalysts. Those catalysts include commercialization of our IgG portfolio in the U.S market as well as in new territories, KEDRAB growth in the U.S., the Israeli distribution activity, our U.S plasma collection business, GLASSIA royalty income which started in March, and the Inhaled AAT clinical program, which is expanding. Moreover, during the first quarter, we generated $5.5 million of operating cash flow that supported the increase of our cash position to a total of $22 million.

Importantly, the first quarter represented the first full calendar quarter commercializing the portfolio of the four FDA-approved immunoglobulins required late last year. I'm pleased to report that these four products delivered solid initial sales and profitability for Kamada meeting our plans and expectations.

As a reminder, the acquired product generated collective revenues exceeding $40 million in 2021 with over 50% gross margins, and we anticipate to strongly grow the new portfolio revenue year-over-year to proactive promotional activities in the U.S with our newly established subsidiary Kamada Inc. is responsible for the commercialization and direct sales of the product.

Our recently appointed Vice President of U.S Commercial Operations, Jon Knight have begun building out our team with multiple senior staff members, all of them experienced sales and marketing professionals with established relationship with relevant U.S health care providers. We intend to actively promote this compelling product to hospitals and physicians throughout the U.S., mainly focusing on transplantation centers. We also intend to leverage our existing strong international distribution network to grow product revenue in new territories.

I'm very happy to report today that sales of the products have already been initiated during the first quarter in few additional new countries, mainly in the Middle East. I should also add that we continue to expect receipt of FDA-approval for the production of CYTOGAM, the largest of the four acquired products at our Israeli facility during the first half of 2023 after completion of the tech transfer activities, which are currently at an advanced stage.

Now let's turn to the performance of our overall business in the first quarter of 2022. We generated total revenues of $28.1 million, representing strong 13% growth over the first quarter of 2021. We also achieved gross profit of $11.3 million and gross margins of 40% in the first quarter, as compared to 36% in the prior year periods. This increase in our profitability was mainly driven by the four new IgG portfolio product, which generated gross margins of over 50%.

Based on a strong start to the year, we are reiterating our full year 2022 revenue guidance of between $125 million to $135 million with expected EBITDA margins of 12% to 15%. This guidance represents a 20% to 30% increase over 2021 revenue, and more than 2.5x over 2021 EBITDA. Moreover, we continue to project revenue growth at a double-digit rate in the foreseeable years ahead.

I would now like to discuss the recently established Kamada plasma, our U.S based plasma collection company. You will recall our early 2021 acquisition of the plasma collection center in Texas that specializes in the collection of hyperimmune plasma used for the manufacturing of one of our specialty products. This acquisition represented Kamada entry into the U.S plasma collection market and supported our strategic goal of becoming a fully integrated specialty plasma company.

We remain focused on expanding the hyperimmune plasma collection capacity at this center and continue to advance our plans to open additional centers in the U.S to further enhance our supply of specialty and regular plasma. In fact, we are already in the process of selecting the site location for a second collection center to be followed by construction and startup activities later this year.

We are also planning to initiate the required activities for a third center by year-end. As a reminder, the plant expansion of our plasma collection capabilities is expected to enhance our IgG competitive position in various markets, support continued revenue growth and strengthen our supply chain.

Moving on to KEDRAB, our anti-rabies IgG. Based on the recent moderation of the COVID pandemic in the U.S., we are encouraged by the product in market sales by Kedrion during the first quarter, which has grown significantly in comparison to the pre-COVID pandemic sales level. And we believe this trend will continue. We expect KEDRAB to be an increasingly important growth driver for us over the next few years, as it continues to gain market share in the $150 million U.S market.

You will recall that the FDA approved a label-expansion for the product late last year, which differentiated KEDRAB at the first and only human rabies immunoglobulins available in the U.S to be clinically studied in children and confirm the safety and effectiveness of its use in the pediatric population. Moreover, we're also expanding sales of the product in additional important international markets, such as in Canada, Australia and Latin America.

As for GLASSIA, in March Takeda initiated sales of the product from its own production, generating worthy income to Kamada. Royalty for March were $1.4 million, meeting our expected monthly rate.

Turning to our Inhaled AAT clinical program. For the duration of the COVID pandemic allows us to expand our ongoing pivotal Phase 3 InnovAATe clinical trial that evaluate the safety and efficacy of our innovative Inhaled AAT product for the treatment of AAT deficiency to new European sites. Most recently, patient screening and recruitment began at three new sites in three European countries. In the coming week, three additional sites are expected to be initiated in three other European countries.

Moreover, the Independent Data Safety Monitoring Board, the DSMB, recently recommended that the trial continue without modification. To date, no patients have discontinued treatment prematurely and no drug-related serious adverse events have been reported. Additionally, to date, nine patients have already completed the full 2-year treatment period. Importantly, this is a unified study as the trial’s data are expected to qualify for regulatory submissions with both the FDA and the EMA.

A substantial opportunity exists for Inhaled AAT to be a transformational product in a market that is already over $1 billion in annual sales in the U.S and Europe and growing steadily. And we're excited to further advance this stride.

Moving to other commercial activities. In our Israel Distribution segment, we plan to launch a portfolio of 11 biosimilar products between this year 2022 and 2028. The products are expected to be launched upon the State of the Israeli regulatory approval. Collectively, this product has an annual anticipated peak sales achievable within several years of launch of more than $40 million. This anticipated revenues are in addition to our distribution segment sales. We look forward to the launch of the first of these biosimilar products later this year.

In closing, we continue to execute on our corporate strategy on all fronts. And we believe that we’ve the appropriate catalysts to drive double-digit growth in the years ahead. We are excited about our future prospects. Kamada is uniquely positioned for growth as a global leader in the specialty pharma industry, with multiple value creating upcoming catalysts.

With that, I'll now turn the call over to Chaime, for his review of the first quarter of 2022 financial results. Chaime, please.

Chaime Orlev

Thank you, Amir, and good day, everyone. Our revenues grew by 13% in the first quarter of 2022 and totaled $28.1 million. These revenue levels are in line with our expectations and represent a strong start of the year. This growth was led by strong initial sales of our newly acquired IgG product. This is the first full quarter of sales of this portfolio. And the sales and profitability levels generated by these products are in line with our expectations.

As previously mentioned by Amir, we recognized $1.4 million of royalty income during March on accounts of GLASSIA sales by Takeda. During the first 2 months of the year, Takeda sold remaining GLASSIA inventory supply by Kamada and initiated sales from its own production during March entitling us to royalty income. The royalty income for March 2022 is in line with our expected monthly rate and annual projections.

As a reminder, we will receive royalty payments from Takeda at a rate of 12% on net sales through August 2025 and at a rate of 6% thereafter until 2040. We continue to expect to receive royalty payments from Takeda in the range of $10 million to $20 million per year, enhancing our profitability and cash position.

Total gross profit for the first quarter of 2022 was $11.3 million, up 27% from the $8.2 million in the first quarter of 2021. Gross margin for the quarter were 40%, an increase from the 36% during the period -- during the prior year period. The increase in profitability was primarily driven by the four new FDA approved commercial product which generated gross margins of over 50%.

Cost of goods sold in our proprietary segment totaled $12.5 million in the first quarter of 2022 and included $1.3 million of depreciation expenses associated with intangible assets generated through the recent acquisition of these products. Gross margins, excluding such intangible assets depreciation would have been 45%.

Research and development investments during the first quarter of 2022 were $4.4 million. The increase as compared to the first quarter of 2021 is primarily driven by the expansion of our pivotal Phase 3 InnovAATe trial for Inhaled AAT through the opening of new clinical sites and the manufacturing of clinical supply for the study. Our projections for the overall trial costs did not change.

Selling and marketing expenses for the first quarter of 2022 were $3.3 million, an increase from $1.1 million during the prior period. This increase is attributable to the establishment of our U.S commercial operation to support the distribution and sale of the recently acquired portfolio of four FDA-approved commercial products.

In addition, these costs include pre-commercial activities associated with new product launches in the Israeli Distribution segment, including 1 of the 11 biosimilar products portfolio, which is planned to be launched this year.

Sales and marketing costs for the quarter included $400,000 of depreciation expenses associated with intangible assets generated through the recent acquisition of the new products. Our financial expenses for the quarter included a $2 million charge associated with the revaluation of contingent consideration, and the other long-term liabilities assumed as part of the acquisition of the four FDA-approved products.

As detailed in our 2021 annual financial statements included in the recently filed Annual Report on Form 20-F. These liabilities include deferred consideration payments due to the sellers subject to meeting certain milestone and royalty obligation to third parties on account of the CYTOGAM product.

For the first quarter, we posted a net loss of $1.8 million or $0.04 per share on a fully diluted basis. However, our adjusted EBITDA, which excludes financial expenses, depreciation and amortization, and stock-based compensation for the first quarter of 2022, was $3.3 million, compared to $3.7 million in the first 3 months of 2021.

During the first quarter of 2022, we generated $5.5 million of operating cash flow that supported the increase of our cash position to a total of $22 million. Kamada's working capital as of March 31, 2022 remain strong and totaled $52 million.

As for our full year guidance, we continue to expect to generate total revenue for fiscal year 2022 in the range of $125 million to $135 million and anticipate generating EBITDA at the rate of 12% to 15% of total revenue. While the ongoing labor strike impacting our production facility in Israel is expected to negatively affect our second quarter financial results, which we do not expect to be as strong as the first quarter.

Based on the diversification of our commercial operation, which includes multiple revenue generating sources, including the recently acquired portfolio of four FDA-approved commercial products, which are manufactured by an external contract manufacturer, the Israeli Distribution business, which operates independent of the production facility, the royalty income on GLASSIA sales by Takeda, as well as current sufficient inventory level of finished products. Our positive outlook for fiscal year remains unchanged.

Finally, I want to make investors aware that we plan to hold a virtual Investors and Analysts Day on Tuesday June 7, at approximately 12 P.M Eastern Time to highlight the dramatic transformation of our business over the past several months. Details will be -- details of the Investors Day will be announced shortly.

That concludes our prepared remarks. We will now open the call for questions. Operator?

Question-and-Answer Session


[Operator Instructions]

Bob Yedid

Shamali, this is Bob Yedid from LifeSci. I've gotten a few questions already emailed in to me. So I'll start with those.



Bob Yedid

The first one is asking about the sales trends of the rabies vaccine. And given the improved rates of travel in the U.S and other countries, for Amir and Chaime is, are you starting to see a recovery in the sales of KEDRAB and KEMRAB compared to last year?

Amir London

Thank you, Bob, and thank you for the people asking the questions. Yes, absolutely. So during the first quarter, we've seen that Kedrion in-market sales of the product in the U.S. have grown significantly compared to the first quarter of 2021. And basically, if I compare it then to pre-pandemic levels, we see a significant increase. We believe that we have not yet completed our penetration and winning market share of the products.

As a reminder, we got FDA approval in late 2017, we launched the product in the middle of 2018. So we had -- basically only 2019 was kind of the first full year of selling the product in the U.S. market, and then the pandemic started right after that. So 2020 and 2021, we were impacted by the pandemic.

But starting 2022, the product is continuing to gain a significant market share to grow its market share. And we believe there is still a lot of room for growth for the product in the U.S. market, which is over $150 million. And we will continue to grow the business in the U.S., and we are also leveraging the growth in international markets.

We are one of the few only suppliers of the anti-rabies immunoglobulin product globally. We are an approved supplier of the WHO. We are supplying the Latin American tenders. We have an approval in Canada and Australia, and we are supporting those local authorities with this important lifesaving product.

Bob Yedid

Great. Very helpful. The other question I've gotten emailed in to me is about your announcement today that you've expanded the number of clinical trial sites for your Inhaled AAT Phase 3 trial. The question is one of why now in terms of making that expansion from basically one site and adding up to six more sites this year?

Amir London

Yes. So as we are leveraging the opportunity now with the moderation of the COVID pandemic to expand the study, the study was initiated just a few weeks before the pandemic started. So we had the first patient in into the site and live into the Netherlands in November or December of 2019. This site continued to recruit patients throughout the pandemic, but it was hard, and in some cases, even impossible to open new sites when everyone was focused only on COVID. In few countries, we couldn't initiate a new study, which was not a COVID-related study. You need to remember, this a patient suffering from a severe lung disease, so for them to actually go into the hospital to meet such a treatment as part of the study was very challenging due in the pandemic.

Now with the improvement across Europe, we have the opportunity to leverage the work that has been done in preparing for that timing, and we are expanding the study. We are very encouraged with what we've seen so far. We had no dropouts in the study on patients who started a study in [indiscernible] continued 9 of the patients already completed the 2-year study. The data that we presented to the DSMB was well received, no modifications are needed to the studies. So we are encouraged by what we've seen so far. And as a business opportunity, we remain highly confident in the significant opportunity ahead of us, over $1 billion market of alpha-1 treatment, given currently by infusion and I think everyone understand the significant superiority in terms of quality of life for the patients to use an inhaled product versus an IV product.

Bob Yedid

Great. Okay. That's helpful. And then the last question I have is, one with regards to your sales and marketing of your new portfolio of IgG products. Is that sales and marketing principally focused on transplantation centers here in the U.S.?

Amir London

For two of the products we are focused on transplantation centers. These are the two lead products, which is CYTOGAM and HEPAGAM. VARIZIG is for immunocompromised patients, not only transplanted patients but also pregnant women and small infants. So it's a little bit more diverse than just transplantation centers. And WINRHO is focused on patient suffering from a rare blood disorder called ITP.

So main focus is transplantation centers, but we are also selling to other medical institutions in the U.S. Outside of the U.S., similar of course focus and we believe there is a great opportunity in the U.S. through promotional activities, those products will not proactively promoted in the last few years. So we have here an opportunity to make a big difference in growing this business and then leveraging our over 30 countries distribution network for the -- to sell the product is definitely a very big plus, and we’ve already seen the results of this, as I mentioned during the call, primarily in the Middle East where we have seen new countries that we have initiated sales of the product.

Bob Yedid

Great. One other follow-up question to that is, you've talked about transferring manufacturing of these products potentially. Definitely the first one, CYTOGAM to your facility. That is dependent, I assume, in -- for next year on the receipt of the regulatory approval in Israel. Is that correct?

Amir London

Correct. So the transfer of CYTOGRAM from its current manufacturer to our facility in Israel is well underway. And we expect to make the file with our [indiscernible] facility as a manufacturer later this year and to get an approval in 2023. And in regards to the other three products, this is something we plan to do in the future.

Bob Yedid

Great. Okay, good. That's the call -- that’s the questions that I have. Thank you. Thank you, Amir.


And it looks like we have -- if there are no more questions, it looks like we have reached the end of the question-and-answer session. I will now turn the call back over to Amir London for closing remarks.

Amir London

Thank you. Thank you very much. In closing, on behalf of the entire Kamada team, we look forward to continuing to provide clinicians and patients with an expanding portfolio of important lifesaving products that we develop, manufacture and commercialize. We thank all of our investors for their support and remain firmly committed to creating long-term sustainable shareholder value, leveraging our multiple catalyst growth. We hope you all stay healthy and safe. Thank you very much.


And this concludes today's conference, and you may disconnect lines at this time. Thank you for your participation.

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