Kamada Ltd

NASDAQ:KMDA

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the Kamada Ltd. First Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, May 8, 2024. I would now like to turn the conference over to Mr. Brian Ritchie from LifeSci Advisors. Please go ahead, sir.

[Brian Ritchie]

Thank you. This is Brian Ritchie with LifeSci Advisors, and 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, 2024. 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 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 8, 2024. 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?

[Amir London, executive]

Thank you, Brian. And thanks also to our investors and analysts for your interest in Kamada and for participating in today's call. We are extremely pleased with the strong financial and operational start to 2024, including nearly doubling our profitability as compared to the first quarter of last year.

Importantly, based on our strong performance in the first quarter and our expectation for the continued momentum in our business throughout 2024, we are raising our full year 2024 revenue guidance to be between $158 million to $162 million, and we are also increasing our adjusted EBITDA guidance to be between $28 million to $32 million.

I will begin with a high-level review of our strong financial results for the first quarter of 2024. We generated total revenues of $37.7 million, which represented a robust year-over-year growth of 23% and recorded adjusted EBITDA of $7.5 million, a 96% increase compared to the first quarter of 2023, representing a 20% margin of revenues.

We are very pleased with this substantial increase in profitability. While we benefit from the strength of our entire portfolio of 6 FDA-approved products, we continue to effectively leverage the 2 most important growth drivers in our business, KEDRAB and CYTOGAM. We are encouraged by the continued growth demonstrated by KEDRAB in the U.S. market.

And with respect to the CYTOGAM, we are starting to see the benefit of a direct physician engagement and promotional activities being executed by our U.S. medical and commercial team. Multiple studies conducted by leading U.S. transplantation KOLs related to the benefit of CYTOGAM have been accepted for presentation at transplantation-related medical meetings this year, in addition to the presentation last October at IDWeek.

We expect continued steady growth in demand for this important product, which is the only one of its kind approved by the FDA and Health Canada. Moving on, I'd like to highlight our strong balance sheet. We ended the first quarter with approximately $48 million in cash, and we continue to have the financial strength to both accelerate the growth of existing business and pursue compelling business development opportunities, a process we remain actively engaged in and which could add one or more commercial products to our existing portfolio.

These opportunities are expected to support continued significant growth beyond 2024. I should also highlight that during the first quarter, we completed the successful launch in Israel, of BEVACIZUMAB KAMADA, the biosimilar to Avastin, which is indicated for the treatment of certain types of cancer, including colon cancer and metastatic breast cancer.

This represents the first biosimilar product to be launched and distributed by Kamada in Israel. We have several others in the pipeline to be launched in the coming years, and we expect biosimilars to become an increasingly important aspect of our distribution business.

Looking further ahead, the future catalysts. Enrollment continues in the ongoing pivotal Phase III InnovAATe clinical trial of our inhaled Alpha-1 antitrypsin therapy for the treatment of Alpha-1 deficiency. The following recent received of positive feedback from the FDA through which the agency expressed its willingness to potentially accept a p-value of 0.1 alpha level in evaluating InnovAATe for meeting the study efficacy primary endpoint for registration.

We recently filed an IND amendment with both a revised Statistical Analysis Plan and study protocol. We anticipate further FDA feedback in the second half of this year. If approved, these changes may allow for the acceleration of the program. In addition, to reiterate what we said on our last call, the FDA also previously reconfirmed overall design of our ongoing clinical program and endorsed the Data and Safety Monitoring Board unblinded positive safety assessment.

The agency also accepted our plan to conduct an open-label extension study, which is expected to be initiated already this month. As a reminder, the European Medicine Agency, the EMA, previously also reconfirmed the overall design of the ongoing InnovAATe study and acknowledged statistically and clinically meaningful improvement in lung function as measured by FEV1 demonstrated in our prior Phase II/III European study.

As we have said previously, in parallel to the significant clinical and regulatory progress achieved, we also continue to have active discussions with multiple parties related to potential partnering of this promising late-stage product candidate.

We also continue to progress Kamada Plasma, plasma collection operation in the U.S. We continue to successfully expand the hyperimmune plasma collection capacity at our first center and construction is nearly completed at our second plasma center located in Houston, Texas, expected to be opened during the second half of this year. We recently also signed a lease agreement for our third site located in San Antonio, Texas.

With that, I'll now turn the call over to Chaime for a detailed discussion of our financial results for the first quarter of 2024. Chaime, please go ahead.

[Chaime Orlev, executive]

Thank you, Amir. As previously discussed by Amir, our business performed extremely well to begin 2024. Total revenues for the quarter were approximately $37.7 million, a 23% increase from the $30.7 million recorded in the first quarter of 2023.

The year-over-year growth was primarily driven by increased sales of both KEDRAB and CYTOGAM due to increased demand of the 2 products in the U.S. market. For CYTOGAM, as Amir indicated, our promotional activity and the availability of fresh product batches since October of 2023, are supporting the revenue growth during the first quarter and for the remainder of the year.

Nearly 70% of our revenues during the first quarter of 2024 were generated by sales in the U.S. market. Total gross profit for the first quarter of 2024 was $16.8 million, representing 44% margin, up 500 basis points when compared to the $11.8 million or 39% in the prior year period.

Operating expenses, including R&D, sales and marketing, G&A and other expenses, totaled $12.7 million, an increase of approximately 9% over the prior year period, which is in line with our expectations. Such increase is in support of our expanded commercial activities as well as our Phase III InnovAATe trial.

As we get throughout 2023 and 2022, we continue to account for financing expenses with respect to revaluation of contingent consideration and the long-term assumed liabilities all of which are related to the acquisition completed in 2021.

Net income for the first quarter was $2.3 million or $0.04 per diluted share as compared to a net loss of $1.8 million or a loss of $0.04 per share recorded in the first quarter of 2023. Adjusted EBITDA for the first quarter of 2024 was $7.5 million, nearly double that of the first quarter of 2023.

As Amir highlighted earlier, we anticipate continued momentum throughout 2024 with double-digit top and bottom line growth. As such, we're increasing our full year 2024 revenue guidance to between $158 million and $162 million and adjusted EBITDA guidance to between $28 million and $32 million.

Finally, our financial position remains strong and provides us the strength and flexibility to accelerate the growth and profitability of our existing business, pursue compelling new business development opportunities, all of which continue to support double-digit rates beyond 2024.

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

[Operator]

[Operator Instructions] Our first question comes from the line of Annabel Samimy from Stifel.

[Annabel Samimy, analyst]

Congratulations to a great start. I guess my first question is, I know it's a small raise, but what is the main driver of the raise? Is it KEDRAB versus CYTOGAM are benefiting from the dissemination of the data that you recently presented? And I also want to better understand some of the patterns of business.

I know there's seasonality to KEDRAB for obvious reasons. But how should we think about patterns for other parts of the business? For example, are you meaningfully impacted by plan resets at the beginning of the year or not so much?

So just a little bit of detail there. And I want to learn a little bit more about your biosimilar program and the extent to that -- to which that is going to be a driver this year. When do you think that's really going to start taking hold?

[Amir London, executive]

Thank you, Annabel, for your great questions. So the main driver for the increase in the focus for the year, has been primarily CYTOGAM for the first quarter. As mentioned, we feel very comfortable with the increase we've seen in CYTOGAM sales. We feel very comfortable with the results of our activity.

We basically kind of relaunched the product during 2023 after over a decade that it was not actively promoted. We have new medical information being collected. We have a very strong medical and commercial team, which is increasing the physician awareness of the product and its benefits.

And we see the fruits of those efforts and those activities, and this has been contributing to the growth in the first quarter and what we expect to be continued momentum for the rest of the year.

In regards to seasonality, so we expect the momentum to continue. There is some seasonality of a few of the products, but because we have such a rich portfolio with a variety of products. So in general, we're just focusing continued steady growth throughout the year, quarter-by-quarter based on our performance.

In regards to the biosimilars, so as we said previously, we believe the total potential for the current portfolio is between $32 million to $36 million of revenues to Kamada in the Israeli distribution business.

This first product is one of -- around 10 to 11 products and its contribution will be around 10% of this, not necessarily this year, but upon kind of a maturity, I believe, sometime next year or the year after. And we expect another product to be launched towards the end of this year or early 2025, and that's going to be a similar size product.

So in general, each one of those products supposed to contribute between $2 million to $4 million, and this will be accumulated over time into a very significant business, increasing the top line and profitability of our distribution business in Israel. I hope I answered all your questions. Yes, sorry.

[Annabel Samimy, analyst]

Yes. And just to get a little bit more color on the biosimilar dynamic in Israel. We know how it's sort of proceeded in the U.S. But do you -- is there a different dynamic in Israel for how biosimilars are taken up by the market?

[Amir London, executive]

No, I think it's pretty similar to what we see in the U.S. We have currently agreement with 3 different biosimilar companies. Most of the portfolio is coming from [indiscernible] the Israel distribution -- the Israel registration, sorry, and marketing authorization is based on the product getting approved either in the U.S. or in Europe.

Once we get -- once the product is approved in one of those territories, we can file in Israel. It takes between 1 to 2 years to get the approval. And then we [indiscernible] first biosimilar. Of course, we get the majority of the market share, [indiscernible] the second or the third, we'll get a smaller market share. Very similar to what we see in other countries.

[Annabel Samimy, analyst]

Okay. Great. And any other color you can provide us on business development and where you might be -- what areas you might be pursuing?

[Amir London, executive]

Yes. So we are evaluating multiple opportunities in our areas of focus, which are plasma-derived and transplantation. We are looking for commercial stage product, which will fuel our growth. This search is ongoing. We have the funds to execute on such opportunities. And once we have something new to report, we'll gladly do so.

[Operator]

There seems to be no further questions at this time. I would now like to turn the call over to Mr. Brian Ritchie for the questions from the web.

[Brian Ritchie]

Just one additional question from the web, Amir. Perhaps you can provide some more detail on the revised statistical analysis plan and study protocol submitted recently for the Inhaled AAT program.

[Amir London, executive]

Yes. Sure. So based on the very positive meeting and positive feedback we received from the FDA earlier this year. We worked over the last few months to revise the statistical plan based on p-value of 0.1. We analyze different scenarios. It shows that a smaller sample size will be needed for the study.

This analysis was submitted to the FDA for their advice. We also had to do some small revisions in the protocol. And that -- all of that package was submitted a few weeks ago, and we expect feedback from the FDA during the second part of the year. It will take them, we believe, in a few weeks, maybe a few months to get back to us.

But the study is progressing according to the plan. And we are very encouraged by the regulatory clinical progress. And as I mentioned during the call, we're also in active discussions with potential partners for the program.

[Brian Ritchie]

Terrific. Thanks, Amir. That is it for the Q&A session. I'll ask you now to make some final remarks, if you could.

[Amir London, executive]

Yes, of course. So in closing, we are pleased with the exceptional performance during the first quarter of 2024, which was led by our diverse portfolio and commercial operation, specifically that of KEDRAB and CYTOGAM.

We're excited with the progress of our exciting ongoing late-stage Inhaled AAT clinical program and the strength of our balance sheet, generating potential business development opportunities.

We look forward to continuing to support clinicians and patients with important life saving products that we develop, manufacture and commercialize. We thank all of our investors for the support, remain committed to creating long-term shareholder value. We hope you all stay healthy and safe. Thank you for joining us today.

[Operator]

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.