Kamada Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 16, 2023

There are 5 speakers on the call.

Operator

Greetings. Welcome to the Combin Unlimited Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

Operator

At this time, I'll turn the conference over to Brian Ritchie, LifeSci Advisors. Brian, you may now begin.

Speaker 1

Thank you, and thank you all for participating in today's call. Joining me from Kamada are Amir London, Chief Executive Officer and Jaime Orlev, Chief Financial Officer, earlier today, MADA announced its financial results for the 3 6 months ended June 30, 2023. If you have not received this news release, please go to the Investors page of the company's website at www.kamada.com. Before we begin, I would 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 20F and 6 ks, which identify specific factors That may cause actual results or events to differ materially from those described in the forward looking statements.

Speaker 1

Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast, Wednesday, August 16, 2023. AMATA undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, it's my pleasure to turn the call over to Amir London, CEO. Amir?

Speaker 2

Thank you, Brian. My thanks also to our investors and analysts for your interest in Kamada and for participating in today's call. I'm pleased to report a strong start to 2023 continued in the Q2, both financially and operationally, And we are well positioned to achieve our 2023 full year guidance, which I will discuss momentarily. I will begin with a high level review of our strong financial results for the 1st 6 months of 2023. The total revenues of 68 $200,000 which represented year over year growth of 32% and adjusted EBITDA of $9,900,000 Importantly, we continue to effectively leverage our multiple growth drivers, including a significant increase in KedRAX sells to Kedrion for further distribution in the U.

Speaker 2

S, the portfolio of 4 FDA approved Hemoglobin, acquired in late 2021, Titogam, Hepagam, Varizig and Winro, and our Israeli distribution business. Looking ahead, we expect the momentum from the first half of the year to extend through the remainder of 2023 With annual profitability to be further meaningfully enhanced as compared to last year. As such, we are reiterating

Speaker 3

Our full

Speaker 2

year 2023 revenue guidance of $138,000,000 to $146,000,000 and adjusted EBITDA of $22,000,000 to $26,000,000 The midpoint of the range will represent profitability growth of approximately 30 5% over 2022. To reiterate what we have said previously, beyond 2023, continue to anticipate annual double digit revenue and profitability growth in the foreseeable years ahead of us with significant upside potential And limited downside risk. As previously reported, in May, we entered into a securities purchase agreement with Fini, the leading private equity firm in Israel and allows existing shareholder of Kamada, under which We repurchased an additional $60,000,000 of our ordinary shares in a private placement, an extra ordinary general meeting of the shareholders of the company to approve the private statement will be held later this month on August 29, 2023. As a reminder, under the terms of the purchase agreement, Kamada will issue an aggregate of approximately 12,600,000 ordinary shares to Fini at a price of $4.75 per share, which represents the average closing Upon the closing of the transaction, Fini is expected to beneficially own approximately 38% of Kamada's outstanding Order is shared and will become the controlling shareholder of the company within the meaning of the Israeli company's law.

Speaker 2

This strategic investment, if approved, will provide us with financial flexibility, allowing us to Accelerate the growth of our existing business and pursue compelling business development opportunities. A process that we have initiated is expected to be further ramped up Upon receipt of the shareholder approval and closing of the private placement. With respect to In business, let's begin with KedrOp, our anti rabies immunoglobulin. We were pleased to announce last month Kedrion as exercise its option To extend our distribution agreement for Kedron in the U. S.

Speaker 2

Through March 2026. Moreover, we remain in active discussions with Kedrion To potentially further expand the scope of our collaboration. During 2022, we generated approximately 16 $1,000,000 in revenues from Fed of Kedrion to Kedrion for further distribution in the U. S. Market, which is estimated to be a total of 150 During the 1st 6 months of this year, we experienced a significant increase in demand for the product in the U.

Speaker 2

S. And we anticipate even further momentum in the second half of the year that include the summer months. Also, as a reminder, this floater Continue to generate more than 50% gross margin for Kamada. Additionally, our U. S.

Speaker 2

Team Established during 2022 continues to achieve good progress in promoting our specialty in the growing portfolio As we have said previously, our activities promoting these important therapies, primarily Cytogam and Pharmacy, It's been the first time in over a decade that this hyper immune specialty product has been supported by field based activity in the U. S. Market. We remain encouraged by the positive feedback received from key U. S.

Speaker 2

Physicians who are seeking to publish new clinical data related to our product We're conducting educational symposium that we believe will have a positive impact on the understanding of this medicines, contributing to continued growth in demand. Importantly, in May of this year, we announced FDA approval of application to manufacture Cytogarm at our Israeli facility After completing the technology transfer of the product manufacturing from its prior manufacturer, CSM bearing. I'm happy to report today that we recently obtained a similar approval from Health Canada, thereby successfully completing the test transfer of this product. This approval ensures continued supply of CycloGym to the U. S.

Speaker 2

And the Canadian markets with no interruption, and we expect to initiate sale of the product Moving on, looking further ahead with future catalysts, we continue to be pleased with the progress made at Kamada Plaza, Our U. S.-based plasma collection company. Our 2021 acquisition of the Plasma Collection Center in Houston, Texas We presented CAMAdat's entry into the U. S. Plasma collection market and supported our strategic goal of becoming a fully integrated specialty plasma product company.

Speaker 2

We are successfully expanding the Hyper Union Plasma collection capacity at our first center and return on opening our 2nd connection center in Houston, Texas in early 2024. On the development side, enrollment is ramping our ongoing pivotal Phase 3 INNOFATE clinical trial for the inhaled Alpha-one antithesis therapy for the treatment of Alpha-one deficiency. And the study has enrolled 62 patients through the end of July, which is approximately 30% of the overall required enrollment I'm happy to update today that we recently received positive scientific advice For the European Maritime Agency, the EMA, that reconfirm the overall design of the ongoing study and acknowledge The statistically and clinically meaningful improvement in lung function measured by FED1 demonstrated in our previous Phase twothree European study. As a reminder, the results of the previous study served as the basis for the design and the selection of the primary endpoint of our current pivotal Phase 3 study. We are planning to complete our discussion with the FDA Regarding the study progress by end of this year.

Speaker 2

As a reminder, Kamada's investigation in health AT treatment It's a non invasive at home treatment with an expected better ease of use and quality of life for IL-four-one patients as compared to the current IV standard of care. The HEV product is the leading new innovative alpha-one treatment in advanced clinical stage, And it will present a substantial opportunity to be a transformational product in the market that is already over $1,000,000,000 in annual sales In the U. S. And Europe. With that, I now turn the call over to Jaime for a detailed discussion of our 2nd quarter and first half twenty twenty three financial results.

Speaker 2

Hany, please go ahead.

Speaker 3

Thank you, Amir, and good day, everyone. Total revenues for the Q2 were approximately $37,400,000 And for the 6 months of 2023, total revenues were $68,200,000 an increase of 59% and 32% respectively. The year over year growth during the Q1 and half was primarily driven by increased sales of KedRAB to Kedrion due to increased demand for the product in the U. S. Market.

Speaker 3

As a reminder, Q2 of 2022, A portion of the sales were delayed due to a labor strike at the company's manufacturing facility in Israel. Total gross profit for the Q2 of 2023 was $14,400,000 representing 39% margins Compared to $7,200,000 or 31 percent margin in the Q2 of 2022. Total gross profits for the 6 months of 2023 were $26,300,000 representing 39% margin compared to $18,500,000 or 36% margin in the first half 2022. As a reminder, gross profit and gross margins for the Q2 of 2022 We're affected by a $3,300,000 loss as a result of the labor strike. As previously discussed, The company is accounting for depreciation expenses associated with intangible assets, which were generated through the late 2022 acquisition of our IGG product.

Speaker 3

The company's COGS and sales and marketing include approximately $1,300,000 and $400,000 respectively of such depreciation expenses per quarter. Operating expenses, Including R and D, sales and marketing, G and A and other expenses, totaled $11,800,000 in the Q2 of 2020 3 compared to $9,500,000 in the Q2 of 2022. Operating expenses for the first half The year totaled $23,400,000 an increase of approximately 14% over the first half of twenty twenty two. As we previously mentioned, we expect our overall operating expenditure to increase between 15% to 20% during 2023 as compared to 2022. This is as we continue to invest our commercial activities as well as our Phase 3 INNO2VATE trial.

Speaker 3

As we did throughout 2022, we continue to account for financing expenses respect to the revaluation of contingent consideration and the long term assumed liability, all of which Related to the acquisition completed in 2021. Net income for the Q2 of 2023 was approximately $1,800,000 or $0.04 per share on a fully diluted basis as compared to a net loss of $3,900,000 or a loss of $0.09 per share In the prior year period, adjusted EBITDA was $6,000,000 for the Q2 of 2023 as compared to $1,300,000 In the Q2 of 2022, for the first half of the year, adjusted EBITDA was $9,900,000 as compared to $4,600,000 in the 1st 6 months of 2022. As a reminder, adjusted EBITDA for the 2nd for the 6 The adjusted EBITDA for the 1st 6 months of 2023 represents a 24% increase compared to the adjusted EBITDA, excluding labor strike related loss for the 1st 6 months of 2022. As Amir highlighted earlier, we are reiterating our full year 2023 revenue guidance of $138,000,000 to 146,000,000 And adjusted EBITDA guidance of $22,000,000 to $26,000,000 The midpoint of such range Represents approximately 35% growth as compared to fiscal year 2022. In the second half of the year, We anticipate continued growth of sales of KedRAB to Kedrion in support of the product in market sales growth.

Speaker 3

Continued growth of the new IgG product sales in the U. S. Fueled by the ongoing marketing efforts as well as the expansion of ex U. S. Sales of these products.

Speaker 3

In addition, we expect enhanced profitability in the second half of the year as compared to the first half. Finally, cash provided by operating activities was $1,800,000 in the Q2 of 2023 as compared to cash provided by operating activities of $10,900,000 in the $100,000 This figure does not include the expected net proceeds from the recently announced $60,000,000 financing, which is expected to close later this quarter. That concludes our prepared remarks. We will now open the call for questions.

Operator

Bob? Thank you. At this time, we'll be conducting a question and answer And our first question comes from the line of Annabel Samimy with Stifel. Please proceed with your questions.

Speaker 4

Hi, everyone. Thanks for taking my call. I have a couple of questions here. So, nNOVATE program, clearly, it's initiated in the EU and Progressing, I guess, good enrollment traction now. I want to ask I guess, I want to understand what the biggest sticking points are with the FDA that you still need to discuss with them Just wanted to move this program forward in the U.

Speaker 4

S, when you arrive at an endpoint,

Speaker 2

Annabel, I'm not sure that I heard you well enough. Operator, can you repeat the question maybe?

Operator

Ms. Mimi, could you repeat your questions, please?

Speaker 4

Sure. Can you hear me?

Speaker 2

Hello? Breaking up. Let's try again.

Speaker 4

Okay. So I was asking about the Innovate program that's initiated in EU. Obviously, they have sort of given you news that they continue to Support the endpoint that they've chosen, that you've chosen, and the EMA is good with this and they've accepted As an endpoint, can you just help us understand, the sticking points that you still have, with the FDA and what you're still Trying to navigate around in terms of the design of the study.

Speaker 2

Great. We thank you for the question. We don't have any challenges or issues with the FDA regarding the design of the study. The study was designed in a harmonized fashion between the EMA and the FDA. It's under an FDA IND.

Speaker 2

That's based on the sequence of the meetings that we plan to do today and generating ongoing data. We started with a meeting with EMA and we had a scientific advisory discussion with them and we plan on submitting the data to the FDA and I'm reporting the progress to date by end of this year, including getting the feedback. Both agencies, HEMA and FDA are supportive of the FEV1 Endpoint is our primary endpoint of the study. And what we've reiterated in today's Release is that we were very highly encouraged by the positive feedback received from the EMA That included reconfirmation of the overall design of the study and acknowledging the statistically and clinically meaningful improvement In the FEV1 data demonstrated in the previous European study. So we expect to receive similar feedback from the FDA Upon providing the data and the progress update later this year.

Speaker 4

Okay, great. And is there any learnings around the enrollment? This is obviously a rare disease and difficult Enroll, is there anything that you're learning from your experience in Europe that could facilitate enrollment in the U. S?

Speaker 2

Yes. So the study is under an IND. So basically everything we do currently, the same study, hormonal study That will meet requirements for both submission of a BLA and MAA, of course, Upon successful completion of the study, enrollment is primarily done in countries Well, there are naive Alpha-one patients, which are not currently treated with the To recruit patients, especially for an orphan disease with limited number of patients generally in places where the IV is not available All not reimbursed, and this is primarily in European countries. And that's why we are focused currently on recruitment in Europe. But again, I want to reemphasize, this is under a U.

Speaker 2

S. FDA IND fully acceptable by the FDA. It's not a European study. It's a European and an FDA unified study that if successful will be submitted for both Agency for marketing authorization.

Speaker 4

Okay, great. And if I can just ask one last program question. So congratulations on the 1,000,000 that you're going to be closing soon. Maybe you can talk about, I guess, You're allocated potentially to business development, but can you talk about any of the potential preclinical programs that you might be moving forward or priorities that you're focused on?

Speaker 2

Yes. So first, I would like to answer kind of question related to the potential usage of the proceeds. So we are very satisfied with the result of the strategic position It is done in 2021 of the full FDA approval of GlobalLink and the establishment of our U. S. Commercial infrastructure as a result of this.

Speaker 2

And we believe this could be leveraged as a basis for a significant additional growth and that's our business development focus. So we are proactively looking for additional BD opportunities within our areas of expertise, Specifically, plasma derived products or transplant focused therapeutics. So as in regards to the BD efforts and being very proactive in searching and looking for the right asset To be added to our portfolio, especially in the U. S. Market, in regard to the preclinical activities, of course, our main efforts around Inezolpha-one being in a pivotal phase we study with a significant A massive opportunity, but in addition to that, we, I think, announced in previous discussions that we have 3 early stage preclinical Programs which are ongoing, one is around plasma hydrops Development, the second around immunoglobulin for TB and the third one is very unique innovative Approach for fast production of the hyperinium globulin in time of need, pandemic, we're better leveraging the experience that we've gained during COVID being the 1st company globally To develop plasma derived anti COVID-nineteen globulin and we'd like to be prepared for potential future similar requirements As well as kind of underserved areas that currently do not have sufficient in the government So that's the main focus, 3 preclinical programs, all of them are progressing nicely by our

Operator

Thank you. At this time, I'll turn the floor back to management so we may take additional questions from the web.

Speaker 1

Thank you. A couple of additional questions from the web here, Amir. First, based on your discussions with the EMA, is there an opportunity to shorten the regulatory pathway in Europe for inhaled AAT?

Speaker 2

Good question. So as part of our Scientific Device discussion with AIMA, We did inquire regarding potential acceleration of the study timelines through a potential reduction in sample size. The EMA feedback was that they confirm and they support the current plan, While they do not encourage or do not support such acceleration through a reduction of the sample size And the feedback we received is that the current sample size meets the study power requirements. So we are staying with the 2 20 patients that we plan to enroll. When earlier I mentioned We have over 60 patients already in the study and this accounts for 30% of enrollment.

Speaker 2

That's the feedback and that The acceleration will not come from a smaller sample size.

Speaker 1

Thank you, Amir. The final question from the web. Can you describe the market dynamics that are driving increased demand in the U. S. For KedRAB?

Speaker 2

Yes, excellent question. So first of all, as we mentioned in the call, we do There is significant increase in demand, significant increase in our supply to Cadion for further sales in the U. S. Market. We expect that those dynamics and that trend to continue moving forward for the rest of this year and into 2024, 2025.

Speaker 2

So we are taking significant market share in this $150,000,000 market. When we analyze the dynamics and What's leading to the significant expansion, significant increase? So first, I'd like to emphasize that we're very happy with the strong collaboration with the Kedrion team In the sales and marketing of the product in the U. S. Market, we believe and we actually say that the teams are doing very well Our marketing efforts are very effective in reaching clinicians and healthcare providers, increasing awareness In regard to the need of using anti rapid hemoglobin in case of Expected exposure to rabid animal.

Speaker 2

And secondly, our product has some clear advantages, Including its on label pediatric indication, which represents a clear differentiation Compared to the competing product. So with very effective further marketing efforts, very strong collaboration Between the Kamada and the Kedrion team and a very good differentiated product, which leads to the significant market share expansion And the growth that we are experiencing, the positive growth we are experiencing in the U. S. Market.

Speaker 1

Terrific. Thanks, Sameer. No further questions from the web. So with that, I'll turn the call back over to you for any closing remarks.

Speaker 2

So in closing, and thank you for the good questions that were posted on the web and by the listeners. We are pleased with our solid performance in the first half of the year. We're excited about the potential opportunities that lie ahead following the potential approval Of the $60,000,000 financing, we look forward to continuing to support clinicians and patients with the important life saving product We develop, manufacture and commercialize. We thank you all for your interest and your support, and we remain committed to creating long term So thank you again, and we hope all of you stay healthy and safe.

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Earnings Conference Call
Kamada Q2 2023
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