Kamada Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 24, 2023

There are 4 speakers on the call.

Operator

Greetings, and welcome to the ComEd Unlimited First Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Operator

Brian Ritchie with LifeSci Advisors. Thank you. You may begin.

Speaker 1

Thank you. This is Brian Ritchie with LifeSci Advisors. Thank you all for participating in today's call. Joining me from Kamada is Amir London, Chief Executive Officer. Earlier today, Kamada Announced its financial results for the 3 months ended March 31, 2023.

Speaker 1

If you have not received this news release, Please go to the Investors page of the company's website at www.comada.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 20 F 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. Furthermore, the content of this conference call contains time sensitive information That is accurate only as of the date of the live broadcast, Wednesday, May 24, 2023. Kamada undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

Speaker 1

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

Speaker 2

Thank you, Brian. And thanks also to our investors and analysts Thank you for participating in today's call. We are off to an excellent start in 2023, both financially and operationally. Earlier today, we announced a $60,000,000 strategic private placement With Fini Opportunity Fund, the leading private equity firm in Israel and an existing significant Kamada shareholder. I will discuss this financing in further detail shortly, but we'll say upfront that we are thrilled with this additional substantial investment from Fini And we view it as indicative of the confidence this high quality investor has encountered significant growth potential.

Speaker 2

Let me first begin though with our impressive Q1 financial results. The total revenues in the Q1 of 30 point $7,000,000 which represented year over year growth of 9% and EBITDA of $3,800,000 An increase of 16% as compared to the Q1 of 2022, we achieved the top and bottom line growth Anticipating our business to begin the year with. Importantly, we continue to effectively leverage multiple growth drivers, Including KADROP sales in the U. S, the portfolio of the 4 FDA approved immunoglobulin acquired in late 2021, which are marketed internationally and our Israeli distribution business. Looking ahead, we expect the momentum from the Q1 to extend throughout 2023, with profitability to be further meaningfully enhanced as we compared to last year.

Speaker 2

As such, we are reiterating our full year 2023 revenue guidance of $138,000,000 $246,000,000 and EBITDA of $22,000,000 to $26,000,000 The midpoint of that range will represent profitability Growth of approximately 35% over 2022. Beyond 2023, we continue to expect annual double digit revenue and profitability growth to the foreseeable use ahead of us with significant upside potential Our prospects were recently further significantly enhanced For the successful completion of multiple key achievements, most importantly, we entered into a securities purchase agreement with Fimi to purchase $60,000,000 of ordinary shares in a private placement. 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 will prevent the average closing price of the company's shares on NASDAQ during the 20 trading days prior to the date of the purchase agreement. Upon the closing of the transaction, Fimi is expected to beneficially own approximately 38% of Kamada outstanding ordinary shares and will become a controlling shareholder of the company within the meaning of the Israeli company's law. This strategic investment provide us with financial flexibility, allowing us to accelerate the growth of our existing business and pursue compelling business development opportunities.

Speaker 2

We are grateful for the continued support shown by Fini, and we look forward to leveraging our significantly strengthened Cash position going forward. An extraordinary general meeting of the shareholders of the company to approve the private placement Will be held in August 2023 following the issuance of our Q2 of 2023 financial results. With respect to existing business, we were pleased earlier this month to receive the FDA approval to the manufacturer's Cytogram at our facility in Betkama, Israel. This FDA approval, which was granted within the expected timeline, Represented the successful conclusion of the technology transfer process for Cytogarm from the previous manufacturer CSL Behring. We have since initiated commercial manufacturing, which will positively impact our facility utilization and efficiency.

Speaker 2

Cytogarm is the highest selling of the 4 immunoglobulin products acquired by Canada in November 2021, Generating approximately $23,000,000 in sales in 2022 and it maintains gross margins of over 60%. I would like to highlight that Cytogarm is the 3rd product in addition to GLASSIA and KedRAB to be approved by the FDA for manufacturing at our Israeli facility. Also of note, Swissmedic recently granted marketing authorization for GLASSIA in Switzerland for chronic augmentation and maintenance therapy in adults The clinically evident in Tizema due to severe alpha-one deficiency. Switzerland is the 1st, we obtained currency to approve GLASSIA for all fund efficiency, representing a significant milestone for Canada in a market which is currently estimated to be over $15,000,000 annually. The commercial launch of the product in Switzerland is expected to occur during the second half of this year Upon obtaining the required reimbursement coverage, to ensure wide access to eligible patients, We have partnered with the iDOGEN Group, a company focused on the commercialization of specialty medicines for rare diseases across Europe.

Speaker 2

Outside of the U. S, sales of GLASSIA were approximately $6,000,000 in 2022, And we are focused on further expanding the commercialization of the product and its annual revenues in the international markets. Let's move on to KedRAB, our rabbit in the global. In the past several months and especially since the beginning of the year, KedRAB marketed in the U. S.

Speaker 2

By Kedrion has continued to grow substantially and to gain share in the U. S. Market, which is estimated to be over $150,000,000 annually. CareDraft's commercial team is successfully leveraging The advantages of the product as the only human rabitinoglobulin available in the U. S.

Speaker 2

To be clinically studied in children. We anticipate that several products will continue to grow significantly over the next few years. Also to reiterate what we have said previously, I should highlight that this product generates more than 50% gross margin for Kamada. Additionally, our U. S.

Speaker 2

Team established June 2022 is making excellent progress in promoting our specialty IgG portfolio To physician and other healthcare practitioners through our direct engagement and opportunities at medical meetings. As As a reminder, our activities promoting this important therapy, primarily Cytogam and Varizik, represent the first time in over a decade This high premium specialty products have been supported by field based activity in the U. S. We are encouraged by the consistently positive feedback received from key opinion leaders who are seeking to publish new clinical data Related to our products, while conducting educational symposiums that we believe will have a positive impact on the understanding of these medicines, contributing to continued growth in demand. We've started seeing the impact of activity and expect to see increased demand for this portfolio of products in the quarters ahead.

Speaker 2

Moving on, looking further ahead at future catalysts, we are pleased by the progress made at Kamada Plasma, Our U. S.-based plasma collection company. Our 2021 acquisition of the plasma collection center near Houston, Texas We presented Kamala'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 Hyperimmune plasma collection capacity at our first center and are actively advancing our plan to open additional On the development side, we are encouraged by the most recent progress achieved in our ongoing pivotal Phase 3 INNO2VATE clinical trial For the ENEREL, alpha-one antitrystine therapy for the treatment of alpha-one deficiency. The study has enrolled 60 patients to date An independent Data Safety Monitoring Board recently recommended study continuation without modification for the 5th time Medicine Agency to discuss study progress and potential opportunities to shorten the regulatory pathway. As we expect previously, a substantial opportunity exists for inhaled Alpha-1 to be a transformational product in a market that is already Over $1,000,000,000 in annual sales in the U. S. And Europe.

Speaker 2

Before I read you our Q1 financial results, I would like to share some additional exciting news. Following the $60,000,000 investment from Feeny, Kamadat's CFO, Hany Olev, who has previously planned to transition out of its position to pursue other opportunities, Has withdrawn his resignation and will remain in his position. Jaime has served as CFO since December 2017, And you will be instrumental in supporting Kamada's continued growth and maximizing the strategic opportunities provided by the private placement. In addition, Pierre Lismet, who previously served as our General Counsel and Corporate Secretary from 2010 Until 2018, as we joined Kamada as Vice President, General Counsel and Corporate Secretary. Both Hai and Nir significantly strengthen our executive management team and they will play pivotal roles in our further advancement As a global leader in the specialty plasma industry.

Speaker 2

With that, I'll now discuss our Q1 financial results. Total revenues for the Q1 were approximately $30,700,000 A 9% increase from the $28,100,000 I repeat, dollars 28.1 $1,000,000 recorded in the Q1 of 2022. The year over year growth during the Q1 was primarily driven by strong sales of KedRAB, the contribution of our previously acquired immunoglobulin products and the Israeli distribution sales. Total gross profit for the Q1 of 2023 was $11,800,000 representing 39% margin Compared to $11,300,000 or 40% margin in the Q1 of 2022. Let's now turn to the explanation of our depreciation expenses.

Speaker 2

As previously discussed, the company is accounting for depreciation expenses Associated with intangible assets, which were generated through the late 2020 acquisition of our IDG products. Gross profit and gross margins, excluding such intangible asset depreciation, would have been $13,200,000 and 43%, respectively, in the Q1 of this year compared to $12,600,000 45%, respectively, In the Q1 of 2022, operating expenses including R and D, sales and marketing, G and A and other expenses Total $11,600,000 in the Q1 of this year compared to $11,100,000 In the Q1 of 2022, sales and marketing costs for the Q1 included $400,000 of depreciation expenses intangible assets generated through the IGG product acquisition. During the Q1 of 2020 We conducted a planned work force downsizing at the Israeli plant, optimizing staff level to capacity needs. As a result of this downsizing, we incurred an expense of $600,000 for excess severance compensation provided to employees who were laid off. The downsizing is expected to result in a planned annualized reduction of approximately 6% in the overall Israeli labor cost.

Speaker 2

We continue to expect our overall operation expenses, including R and D, sales and marketing and G and A to increase between 15% to 20% during 2023 as compared to last year As we continue to advance our commercial activities as well as our Phase 3 innovative strike. As we did throughout 2022, we continue to account for financing expenses with respect to the reevaluation of contingent consideration And the long term assumed liability, all of which are related to the acquisition completed in 2021. For the Q1 of 2020 3 of these finance charges totaled $1,800,000 Net loss for the Q1 of 2023 was Approximately $1,800,000 or $0.04 per share on a fully diluted basis, consistent with the prior year period. Excluding the depreciation expenses of intangible assets and the finance expenses of the contingent consideration And other assumed long term liabilities associated with acquired products, the company would have recorded net income of $1,700,000 $0.04 per share in the Q1 of 2023. EBITDA was $3,800,000 for the Q3 of 2023 as compared to $3,300,000 in the Q1 of 2022, representing a significant 16% increase year over year.

Speaker 2

Excluding the $600,000 expense of the excess severance compensation paid to the employees who laid off, EBITDA would have been $4,400,000 in the Q1 of 2023, representing a significant 33% increase year over year. As I highlighted earlier, we are reiterating our Full year 2023 revenue guidance of $138,000,000 to $146,000,000 And EBITDA guidance of $22,000,000 to $26,000,000 The midpoint of such range represents approximately 35% growth as compared to the fiscal year 2022. Finally, cash used in operating activities It was $2,900,000 in the Q1 of 2023 as compared to cash provided by open activities of $5,500,000 in the Q1 of 2022. Our total cash position as of March 31, 2023 $27,100,000 as compared to $34,300,000 as of end of 2022. This figure does not include expected net profit from the recently announced $60,000,000 financing, which is expected to close in the second half of this year.

Speaker 2

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

Operator

Thank One moment please while we poll for questions. Thank you. Our first question comes from the line of David Valts with Zacks Small Cap Research. Please proceed with your question.

Speaker 3

Hey, Amir. How are you doing?

Speaker 2

Good. Thank you.

Speaker 3

Thanks for taking the questions. First one I'll start out with, were there any surprises either positive or negative that occurred during the quarter? Or do you think everything kind of played out as you thought it would?

Speaker 2

The quarter played out according to our plan, according to our budget. We are progressing Exactly as we've anticipated both top line and bottom line and based on that we've reiterated our annual guidance.

Speaker 3

All right. So for your guidance for the year, it looks like revenues are going to Kind of ramp up as the year goes along in order to hit that number. So I'm just kind of curious where do you think that growth is going to come from?

Speaker 2

So the result of the quarter meet the company expectations, as I said. And we started this strong, many aspects. We're reaffirming the forecast for the whole year. And as you've seen in previous years, the first half of the year is usually lower than The 2nd part of the year, a lot has to do with inventories at the distributors. So the growth will come from all aspects of the business from KedRA, From the new IGG portfolio, from distribution business in Israel, from royalties paid by Takeda for Glatios sales in the U.

Speaker 2

S, For Glatiosales ex U. S, all our growth catalysts, all our lines of business are operating to our plan, according to our budget, and we will continue at that pace. And as I said, we're reiterating our guidance Based on everything that we see in the market.

Speaker 3

Okay. Now in regards to the INNOVATE trial, Are you happy with the pace of enrollment that's going on there? Is there anything else that can happen to maybe kind of speed up enrollment in that trial?

Speaker 2

So of course, we were not happy with the pace of enrollment during the pandemic, which delayed The ability to open new sites, the sites will open in 2nd part of 2022 and recruitment We are in the process of identifying those regional sites internationally, and that's our plan moving forward to

Operator

As we poll for more questions, I'll turn the floor back to Mr. Ritchie for any additional questions from the web.

Speaker 1

Thank you, Melissa. A couple of questions here from the web, Amir. Can you Please provide a bit more color on Fimi.

Speaker 2

Yes, of course. So Fimi was established in 1996 It's a leading Israeli private equity firm with excellent international reach, international success. It has acquired control in, I believe, around close to 100 companies Over the years, we've made over 60 exits. Total transaction value is over $7,000,000,000 They are known to be long term investor with superb return on investment between 2015 and 2022 over the course of those 7 years, they've deployed over $1,800,000,000 In acquiring Equity in its portfolio companies, they have been a major re investor in Kamada since End of 2019, early 2020. And as I said, we are very happy with the additional funding And the private placement, and we believe that that's Basically, a big trust in Canada.

Speaker 2

The company was interested in the investment offered by Finney as well as our Board and special committees was established by the Board To accelerate growth, both organically and by identifying and realizing new business development opportunities, And I believe that this kind of shared interest It's something that will drive Kamada and value to our shareholders significantly.

Speaker 1

Great. Thank you. Also, can you expand more on the potential use of Proceeds from the financing and are there any near term business development opportunities on the horizon?

Speaker 2

Thank you for the question. Good question. So as I said, the company is interested in its funding to accelerate growth, Both organically with our existing business, but also by identifying and realizing new business diverse opportunities. We are constantly examining opportunities for collaboration in licensing, acquisition, M and A in our areas of expertise. If we were to rely only on our organic profitability, it would have significantly The ability to execute on such transactions and of course, we delay the company's ability to exert growth.

Speaker 2

So the combination of our organic growth, which you've seen in our guidance for the year, with this additional funding Give us basically the ability to benefit or enjoy both organic growth and external growth Basically, by examining opportunities for in licensing or acquisition of additional assets.

Speaker 1

Great. Thank you, Amir. At this time, we've got No further questions. So I'll hand the call back over to you for any closing remarks.

Speaker 2

Thank you. Thank you, Brian. So in closing, we are very pleased with our to begin the year and we're excited about the potential opportunities that Lai had following the $60,000,000 financing by CIMIC. We look forward to continuing to support the initial patients with important life saving therapeutics that we develop, manufacture and commercialize. We thank all of our investors for their support, and we remain committed to create long term shareholder value.

Speaker 2

Thank you, everyone, and we hope you all stay healthy and safe.

Operator

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • Kamada secured a $60 million strategic private placement with Fini Opportunity Fund—issuing ~12.6 million shares at $4.75 each—giving Fini roughly 38% ownership and funding to accelerate growth.
  • Q1 revenues rose 9% year-over-year to $30.7 million and EBITDA grew 16% to $3.8 million, and management reiterated full-year 2023 guidance of $138–146 million in revenues and $22–26 million in EBITDA.
  • The FDA approved in-house manufacture of Cytogam at Kamada’s Israeli facility, and commercial production has begun—expected to improve plant utilization and gross margins above 60%.
  • Swissmedic granted marketing authorization for GLASSIA in Switzerland for severe alpha-1 deficiency (a $15 million market), with a H2 2023 launch planned in partnership with iDOGEN.
  • Operating cash flow turned negative, using $2.9 million in Q1 versus generating $5.5 million a year ago, leaving cash at $27.1 million before the pending $60 million financing.
AI Generated. May Contain Errors.
Earnings Conference Call
Kamada Q1 2023
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