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Greetings and welcome to the Kamada Ltd. 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. [Operator Instructions]. As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Mr. Brian Ritchie with LifeSci Advisors. Thank you. You may begin.
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 three months ended March 31, 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 called by management will contain forward-looking statements that involves 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 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.
With that said, it is my pleasure to turn the call over to Amir London, CEO. Amir?
Thank you, Brian. Thanks also to our investors and analysts for their interest in Kamada and 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 million strategic private placement with FIMI Opportunity Funds, a 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 FIMI and we view it as indicative of the confidence this high quality investor has in Kamada's significant growth potential.
Let us just begin though with our impressive first quarter financial results, with total revenue in the first quarter of $30.7 million, which represented year-over-year growth of 9% and EBITDA of $3.8 million, an increase of 16% as compared to the first quarter of 2022. We achieved the top and bottom line growth anticipated in our business to begin the year with.
Importantly, we continue to effectively leverage multiple growth drivers, including KEDRAB sales in the US, the portfolio of the full FDA approved Immune Globulin acquired in late 2021, CYTOGAM, HEPAGAM, VARIZIG and WINRHO, which are marketed internationally, and our Israeli distribution business.
Looking ahead, we expect the momentum from the first quarter to extend throughout 2023, with profitability to be further meaningfully enhanced compared to last year. As such, we are reiterating our full-year 2023 revenue guidance of $138 million to $146 million and EBITDA of $22 million to $26 million. The midpoint of that range will represent profitability growth of approximately 35% over 2022.
Beyond 2023, we 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.
Our prospects were recently further significantly enhanced with the successful completion of multiple key achievements. Most importantly, we entered into a securities purchase agreement with FIMI to purchase $60 million of ordinary shares in a private placement. Under the terms of the purchase agreement, Kamada will issue an aggregate of approximately 12.6 million ordinary shares to FIMI at a price of $4.75 per share, which represents the average closing price of the company shares on NASDAQ during the 20 trading days prior to the date of the purchase agreement. Upon the closing the transaction, FIMI is expected to officially own approximately 38% of Kamada outstanding ordinary shares and will become a controlling shareholder of the company within the meaning of the Israeli Companies Law.
This strategic investment provides us with financial flexibility, allowing us to accelerate the growth of our existing business and pursue compelling business development opportunities. We are grateful for the continued support shown by FIMI 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 second quarter 2023 financial results.
With respect to existing business, we were pleased earlier this month to receive the FDA approval to manufacture CYTOGAM at our facility in Beit Kama, Israel. With the FDA approval, which was granted within the expected timeline, represented the successful conclusion of the technology transfer process for CYTOGAM from the previous manufacturer, CSL Behring. We have since initiated commercial manufacturing, which will positively impact our facility utilization and efficiency. CYTOGAM is the highest selling of the four Immune Globulin product acquired by Kamada in November 2021, generating approximately $23 million in sales in 2022, and it maintained gross margins of over 50%. I would like to highlight that CYTOGAM is the third 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 with clinically evident emphysema due to severe alpha-1 deficiency. Switzerland is the European country to approve GLASSIA for alpha-1 deficiency, representing a significant milestone for Kamada in a market which is currently estimated to be over $15 million 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've partnered with the Hydrogen Group, a company focused on the commercialization of specialty medicines for rare diseases across Europe.
Outside of the US, sales of GLASSIA were approximately $6 million in 2022 and we are focused on further expanding the commercialization of the product and its annual revenue to the international markets.
Let's move on to KEDRAB, our rabies immune globulin. In the past several months, and especially since the beginning of the year, KEDRAB marketed in the US as Kedrion, has continued to grow substantially and to gain share in the US market, which is estimated to be over $150 million annually. KEDRAB commercial team is successfully leveraging the advantages of the product as the only human rabies immune globulin available in the US to be clinically studied in children. We anticipate that some of the products will continue to grow significantly over the next few years. Also, to reiterate what we've said previously, I should highlight that this product generates more than 50% gross margin from Kamada.
Additionally, our US team established during 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 a reminder, our activities promoting this important therapy, particularly CYTOGAM and VARIZIG, represents the first time of a decade that this hyper-immune specialty products have been supported by field based activity in the US. We are encouraged by the consistently positive feedback received from key opinion leaders who are seeking to publish new clinical data related to our product, while conducting educational symposiums that we believe will have a positive impact on the expanding 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.
Moving on, looking further ahead at future catalysts, we are pleased by the progress made with Kamada Plasma, our US-based plasma collection company. Our 2021 acquisition of the plasma collection center in Houston, Texas represented Kamada's entry into the US plasma collection market and supported our strategic goal of becoming a fully integrated specialty plasma product company.
We are successfully expanding the high premium plasma collection capacity at our first center and are actively advancing our plan to open additional centers in the US to further enhance our supply of specialty and regular normal plasma.
On the development side, we are encouraged by the most recent progress achieved in our ongoing pivotal Phase 3 InnovAATe clinical trial for the inhaled alpha-1 antitrypsin therapy for the treatment of alpha-1 deficiency. The study has enrolled 60 patients to date, an independent Data Safety Monitoring Board recently recommended study continuation without modification for the fifth time since the study was initiated.
In the next few weeks, we'll continue to expedite trial recruitment. We intend to meet with FDA and the European Medicines Agency to discuss study progress and potential opportunities to show them the regulatory pathway.
As we've said previously, a substantial opportunity exists for inhaled alpha-1 to be a transformation product in a market that is already over $1 billion in annual sales in the US and Europe.
Before I read you our first quarter financial results, I'd like to share some additional exciting news. Following the $60 million investment from FIMI, Kamada's CFO, Chaime Orlev, who had previously planned to transition out of his position to pursue other opportunities, has withdrawn his resignation and will remain in his position. Chaime has served our CFO since December 2017 and he will be instrumental in supporting Kamada's continued growth and maximizing the strategic opportunities provided by the private placement.
In addition, Nir Livneh, who previously served as our General Counsel and Corporate Secretary from 2010 until 2018, has rejoined Kamada as Vice President, General Counsel and Corporate Secretary.
Both Chaime and Nir significantly strengthen our executive management team, and they will play a pivotal role in our further advancement as a global leader in the specialty plasma industry.
With that, I'll now discuss our first quarter financial results. Total revenues for the first quarter were approximately $30.7 million, a 9% increase from the $28.1 million recorded in the first quarter of 2022. The year-over-year growth during the first quarter was primarily driven by strong sales of KEDRAB, the contribution of our previously acquired immune globulin product, and the Israeli distribution sales.
Total gross profit for the first quarter of 2023 was $11.8 million, representing 39% margin compared to $11.3 million or 40% margin in the first quarter of 2022.
Let's now turn to the explanation of our depreciation expenses. As previously discussed, the company's accounting for depreciation expenses associated with intangible assets, which was generated through the late 2021 acquisition of our IgG products.
Gross profit and gross margins, excluding such intangible asset depreciation, would have been $13.2 million and 43%, respectively, in the first quarter of this year compared to $12.6 million and 45%, respectively, in the first quarter of 2022.
Operating expenses, including R&D, sales and marketing, G&A, and other expenses, totaled $11.6 million in the first quarter of this year compared to $11.1 million in the first quarter of 2022.
Sales and marketing costs for the first quarter included $0.4 million of depreciation expenses of intangible assets generated through the IgG product acquisition.
During the first quarter of 2023, we conducted planned workforce downsizing at the Israeli plant, optimizing staff level to capacity. As a result of this downsizing, we incurred an expense of $0.6 million for exit 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.
We continue to expect our overall operation expenses, including R&D, sales and marketing and G&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 InnovAATe trial.
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 first quarter of 2023, these finance charges totaled $1.8 million.
Net loss for the third quarter of 2023 was approximately $1.8 million 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 product, the company would have recorded net income of $1.7 million or $0.04 per share in the first quarter of 2023.
EBITDA was $3.8 million for the third quarter of 2023 as compared to $3.3 million in the first quarter of 2022, representing a significant 16% increase year-over-year. Excluding the $0.6 million expense of the exit severance compensation paid to the employees who were laid off, EBITDA would have been $4.4 million in the first quarter 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 million to $146 million and EBITDA guidance of $22 million to $26 million. The midpoint of such range represents approximately 35% growth as compared to the fiscal year 2022.
Finally, cash used in operating activities was $2.9 million in the first quarter of 2023 as compared to cash provided by operating activities of $5.5 million in the first quarter of 2022. Our total cash position as of March 31, 2023 was $27.1 million as compared to $34.3 million as of end of 2022. This figure does not include the expected net proceeds for the recently announced $60 million financing, which is expected to close in the second half of this year.
That concludes our prepared remarks. We will now open the call for questions. Operator?
[Operator Instructions]. Our first question comes from the line of David Bautz with Zacks Small Cap Research.
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?
The quarter played out according to our plan, according to budget. We are progressing exactly as we'd anticipated, both top line and bottom line. And based on that, we've reiterated our annual guidance.
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?
[indiscernible]. As I said, we started it strong, many aspect. We're reiterating 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 second 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 KEDRAB, from the new IgG portfolio, from the distribution business in Israel, from royalties paid by Takeda for GLASSIA sales in the US, for GLASSIA sales ex-US, all our growth catalysts, all our lines of business are operating according to our plan, according to our budget, and we will continue that pace. And as I said, we are reiterating our guidance based on everything that we've seen [indiscernible].
Now, in regards to the InnovAATe trial, are you happy with the 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?
Of course, we were not happy with the pace of enrollment during the pandemic, which delayed the ability to open new sites. The sites were opened in the second part of 2022 and recruitment has been since then accelerated. In order to speed up recruitment, we need to open additional sites. We are in the process of identifying those additional sites internationally. And that's our plan moving forward, to expedite recruitment by opening additional sites in other countries.
Congrats on the progress this quarter.
[Operator Instructions]. I'll turn the floor back to Mr. Ritchie for any additional questions from the web.
A couple of questions here from the web, Amir. Can you please provide a bit more color on FIMI?
Yes, of course. So, FIMI was established in 1996. [indiscernible] private equity firm with excellent international reach, international success. It has acquired control in, I believe, around close to 100 companies, over the years has made over 60 exits. The total transaction value is over $7 billion. They are known to be a long-term investor with superb return on investment. Between 2016 and 2022, over the course of those seven years, they've deployed over $1.8 billion in acquiring equity in its portfolio companies. They've been a major investor in Kamada since end of 2019, early 2020. And as I said, we are very happy with additional funding and the private placement and we believe that basically – big trust in Kamada.
The company was interested in the investment offered by FIMI as well as our board, and a special committee 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 is something that will drive Kamada and value for shareholders significantly.
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?
As I said, the company is interested in funding to accelerate growth, both organically with our existing business, but also by identifying and realizing new business development opportunities. We are constantly examining opportunities for cooperation in licensing, acquisition, M&A, areas of expertise. If we were to rely only on organic profitability, it would have significantly delay the ability to execute on such transactions and, of course, will delay the company's ability to accelerate growth. So the combination of our organic growth, which you see in our guidance for the year, with this additional funding, give us basically the ability to benefit or enjoy both worlds, organic growth and external growth, basically, by examining opportunities for in-licensing or acquisition of additional assets.
At this time, we've got no further questions. So I'll hand the call back over to you for any closing remarks.
Thank you. Thank you, Brian. In closing, we are very pleased with our performance to begin the year. And we're excited about the potential opportunities that lie ahead following the $60 million financing by FIMI. We look forward to continuing to support physicians and patients with important lifesaving therapeutics that we develop, manufacture and commercialize. We thank all of our investors for the support and we remain committed to create long-term shareholder value.
Thank you, everyone. And we hope you all stay healthy and safe.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.