Kamada Ltd

NASDAQ:KMDA

Earnings Call Analysis

Kamada Reports Strong Revenue Growth and Expands Plasma Collection Operations

Kamada delivered impressive financial results with Q3 revenues of $41.7 million, up 10% year-over-year, and a 15% increase to $121.9 million for the first nine months. Adjusted EBITDA rose 43% to $25.4 million, prompting an increased guidance for 2024 EBITDA to $32-35 million. Key drivers included higher sales of profitable products KEDRAB and CYTOGAM, as well as new plasma collection centers. The Houston facility is expected to generate $8-10 million annually, with a San Antonio center set to open in 2025. Kamada aims for continued double-digit growth and is advancing its clinical trial for Inhaled AAT therapy targeting over a $2 billion market.

Strong Financial Performance in Q3 2024

Kamada Ltd. reported total revenues of approximately $41.7 million in the third quarter of 2024, marking a 10% increase compared to the same period in 2023. This growth is attributed primarily to increased sales of key products, KEDRAB and CYTOGAM. For the first nine months of 2024, total revenues reached $121.9 million, a robust 15% rise year-over-year. Notably, revenue for this period accounted for about 76% of the midpoint of the company's annual guidance, illustrating strong demand and market performance.

Improvements in Profitability and Margins

Kamada's gross profit for the third quarter was $17.2 million, yielding a gross margin of 41%, up from 39% in Q3 2023. The increase in gross margin can be credited to a favorable sales mix, with more revenue coming from higher-margin products. For the first nine months of 2024, the gross profit climbed to $52.9 million, reflecting a 43% margin, up from 39% for the prior-year period. This trend highlights the company's ability to enhance profitability amidst rising sales.

Continued Growth Initiatives and Future Prospects

The company's operational strategy is built around four key pillars aimed at fostering growth: expanding its product portfolio, pursuing M&A opportunities, increasing plasma collection capacity, and advancing its clinical trials. Kamada has launched a new plasma collection center in Houston, Texas, aimed to be one of the largest in the U.S., with each center expected to contribute $8-$10 million in revenues annually at full capacity. A second center in San Antonio is expected to commence operations in the first half of 2025.

Guided Earnings and Operating Cash Flow

For the current fiscal year, Kamada has upgraded its adjusted EBITDA guidance to between $32 million to $35 million, which represents a 12% increase from previous guidance. Total adjusted EBITDA for the first nine months of 2024 surged 43% to $25.4 million, maintaining a 21% margin. The company also generated $37.2 million in operating cash flow during this period, indicating solid cash generation capabilities that will support ongoing business growth and investments.

Market Expansion and Competitive Position

Kamada maintains a strong market position, particularly in the U.S. for KEDRAB, with an estimated market share of 40% to 50%. The company is optimistic about continued growth in this segment, with plans to explore opportunities outside North America as well, including markets in Latin America and Europe. The management also indicated that the performance of KEDRAB and CYTOGAM will remain pivotal as they plan for further increases in sales.

Innovations and Future Launches

On the innovation front, Kamada is progressing in its ongoing Phase III InnovAATe clinical trial. The company is approximately 50% enrolled in the trial and is optimistic about receiving positive feedback from the FDA on a revised study protocol that could further streamline operations. With several biosimilars in development, the company anticipates peak annual sales potential in this segment between $30 million to $34 million.

Strategic Focus on M&A and Pipeline Development

As part of Kamada's growth strategy, management is pursuing both licensing and mergers/acquisitions to broaden its commercial portfolio. The company remains proactive in identifying opportunities that align with its goal of sustained double-digit growth in both revenue and earnings, reinforcing a commitment to expanding its market presence in coming years. The strong cash balance of $72 million at the quarter-end lends additional flexibility to pursue these initiatives.

Earnings Call Transcript 2024-Q3

[Operator]

Greetings, and welcome to the Kamada Ltd. Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Brian Ritchie, LifeSci Advisors. Thank you. You may begin.

[Brian Ritchie]

Thank you. This is Brian Ritchie with 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 and 9 months ended September 30, 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, November 13, 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.

Let me start my talk by emphasizing that our 4 pillars of profitable growth strategy, which I described in our last call, have successfully reflected in the strong financial results we delivered in the third quarter and the first 9 months of 2024.

Our business continues to deliver robust profitable growth. During the third quarter, total revenues were $41.7 million, a 10% increase as compared to the same period in 2023; and adjusted EBITDA for the third quarter was $8.8 million, an 11% increase compared to the third quarter of 2023. Total revenues for the first 9 months of the year were up 15% to $121.9 million as compared to 2023; and adjusted EBITDA for the recently completed 9 months period was $25.4 million, up 43% over the prior year 9 months, representing a 21% margin of revenue.

Based on our continued strong performance and positive outlook for the remainder of 2024, we are increasing our adjusted EBITDA guidance to be between $32 million to $35 million, a 12% increase of the midpoint from the previous guidance. And we are reiterating our full year revenue guidance of $158 million to $162 million.

In addition, for the first 9 months of the year, we generated $37.2 million of cash provided by operating activities, which demonstrates our consistent ability to convert our reported adjusted EBITDA to operational cash flow.

Before turning the call over to Chaime to discuss the financial results in greater detail, I want to review our growth strategy and operational highlights. Kamada's 4-pillar profitable growth strategy includes organic growth of our existing commercial portfolio of 6 FDA-approved products marketed in over 30 countries; business development and M&A transaction which we expect to support and expedite our growth; the plasma collection centers we have and will continue to open; and the ongoing Phase III pivotal trial for Inhaled AAT product that is targeting an over $2 billion market. During the first 9 months we made significant progress advancing each and every of these growth catalysts, as I will shortly detail.

Our year-over-year profitable growth is driven by the strength of our diverse commercial portfolio as we continue to improve our overall sales mix to increase sales of our 2 most profitable growth drivers: KEDRAB and CYTOGAM. Moreover, earlier this year, we successfully launched our first biosimilar product in Israel, and expect to launch our next biosimilar products within a few weeks. We have several other biosimilar products in the pipeline to be launched in the coming years. We anticipate that biosimilars will become an increasingly important portion of our distribution business with peak potential annual sales of $30 million to $34 million.

We continue to maintain a very strong balance sheet and ended the third quarter with $72 million in cash and have the financial strength to both accelerate the growth of existing business and pursue compelling business development and M&A opportunities, a process we remain actively engaged in and would expand our commercial portfolio. These compelling opportunities are expected to support our continued double-digit growth beyond 2024.

We continue to progress Kamada's plasma operation in the U.S., and during the third quarter, we announced the opening of a new plasma collection center in Houston, Texas. This new 12,000 square-foot center is planned to support over 50 donor beds with an estimated total collection capacity of over 50,000 liters annually. The opening of this center is an important milestone for Kamada and it expands the collection capacity of specialty plasma for internal use beyond our existing site in Beaumont, Texas.

The new center in Houston is expected to be one of the largest sites for specialty plasma collection in the U.S. and will also collect normal source plasma to be sold to third parties. In addition to the new Houston center, we've begun construction of a third plasma collection site in San Antonio, Texas, which we expect to open during the first half of 2025. As a reminder, each collection center is expected to contribute annual revenues of between $8 million to $10 million in sales of normal source plasma at its full capacity.

Turning now to our Inhaled AAT therapy, a long-term growth catalyst for Kamada. Enrollment continues in the ongoing pivotal Phase III InnovAATe clinical trial. As a reminder, earlier this year we filed an IND amendment with the U.S. FDA that consisted of a revised statistical analysis trend and study protocol, which, if approved, may allow for the acceleration of the program. We continue to anticipate further FDA feedback before the end of this year.

As we have said previously, in parallel to the clinical and regulatory progress achieved here, we also continue to have discussions related to the potential partnering of these promising investigational late-stage product candidates.

With that, I'll now turn the call over to Chaime for a detailed discussion of our financial results for the third quarter and first 9 months of 2024. Chaime, please go ahead.

[Chaime Orlev, executive]

Thank you, Amir. As Amir stated at the top of the call, our performance continues to be excellent through the first 9 months of 2024.

For the third quarter, total revenues were approximately $41.7 million, a 10% increase compared to the third quarter of 2023. For the first 9 months of the year, total revenues were $121.9 million, up 15% over the prior-year period. Sales for the first 9 months of the year represented approximately 76% of the midpoint of our annual guidance.

The increase in revenues was primarily attributable to increased sales of KEDRAB and CYTOGAM due to increased demand in the market. Approximately 60% of our revenues during the first 9 months of 2024 were generated by our sales in the U.S. market.

Total gross profit for the third quarter of 2024 was $17.2 million, representing a 41% margin, compared to $14.8 million or 39% margin in the prior-year period. Total gross profit for the first 9 months of 2024 was $52.9 million, representing a 43% margin, compared to $41.1 million and a margin of 39% for the first 9 months of 2023. The increase in gross profitability was due to our ability to improve the overall product sales mix through increased sales of the 2 most profitable products: KEDRAB and CYTOGAM.

Operating expenses for the first 9 months of 2024 totaled $38 million, compared to $33.8 million in the first 9 months of 2023, which was in line with our expectations. The planned increase was in support of our expanded commercial activities as well as our ongoing Phase III InnovAATe trial.

Net income for the third quarter was $3.9 million or $0.07 per diluted share, up 20% compared to the net income of $3.2 million or $0.06 per diluted share recorded in the third quarter of 2023. For the first 9 months of 2024, net income was $10.7 million or $0.18 per diluted share, 3x the net income of $3.2 million for the same period of 2023.

Adjusted EBITDA was $8.8 million in the third quarter of 2024, as compared to $7.9 million in the third quarter of 2023. Adjusted EBITDA was $25.4 million in the first 9 months of 2024, up 43% from the $17.7 million in the first 9 months of 2023. As Amir noted, we increased our full year 2024 EBITDA guidance to between $32 million to $35 million.

During the first 9 months of 2024, we generated $37.2 million of operating cash flows, which resulted in an available cash balance of $72 million as of September 30. Our financial position remains strong and provides us with the strength and flexibility to accelerate the growth and profitability of our existing business and pursue compelling new business development opportunities, which collectively will continue to support double-digit top and bottom line growth beyond 2024.

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

[Operator]

[Operator Instructions] Our first question comes from Annabel Samimy with Stifel.

[Annabel Samimy, analyst]

Thanks for taking my questions. I have a number, so I'm going to try to keep it under control. I guess first is, can you provide us with the breakdown of KEDRAB and CYTOGAM? And what is your expectation now for max share of KEDRAB? It keeps on expanding, but at what point does it max out? Do you think that you can start encroaching in the competitive share or you're going to tap out at some point?

And then maybe you can help us understand more granularly what is driving EBITDA expansion. Is it simply the mix? Is it more efficiency? Is it the plasma collection centers? Maybe you can just go into that a little bit.

[Amir London, executive]

Annabel, thanks for the questions. So we will, of course, report kind of detailed product-level revenues in our -- at the end of the year, not on a quarterly basis. What I can do comment is that both products are growing significantly compared to last year, double digits on both of them. And we believe this will continue forward.

In terms of KEDRAB market share, we believe we are anywhere between 40% to 50%. We still have some room to grow. Even if it will end up to around 50% for us and for the competitor, then still an opportunity to grow the business.

Also important to emphasize that we are a market leader -- a global leader in terms of anti-D immunoglobulin also outside of the U.S., where we have additional opportunities to grow the business in Latin America, in some European countries. And we are supplying the Canadian market, Australian market, the Israeli market. So there's still opportunities even ex U.S. or ex North America to continue growing the product.

In terms of what's driving the EBITDA, it's a combination of economy of scales, selling more and kind of being more efficient in the way that we operate. But also sales mix. The more we sell KEDRAB in the U.S. and CYTOGAM in the U.S., it improves our EBITDA because it's higher profitable products.

[Annabel Samimy, analyst]

Okay. Great. And if I can move to the development program. Any update on the percent of enrollment for InnovAATe trial? And is it getting easier or harder with multiple competitive programs? And any progress on a partnership discussion?

[Amir London, executive]

Yes. So we are at around 50% of recruitment. As you may remember, we are in discussion with the FDA on the p-value and what will be the implication on the overall sample size. So the exact percentage of enrollment depends also on how we kind of line up with the total number of sample size needed. But I think around 50%, it's a good number for now.

In terms of the FDA discussion, it's still ongoing. We're getting better clarity from the FDA regarding the p-value of 0.1. We are working on what are the implications in terms of the sample size.

And partnering discussions are ongoing. We're looking for the right transaction or the right partner for Kamada.

[Annabel Samimy, analyst]

Okay. And if I can squeeze 1 more in. I know you're focused on business development. Obviously, you're operating cash flow positive and you've got some cash building. So is there any progress, beyond the BD, is there any progress on the preclinical pipeline and building that out to get some more programs into the clinic?

[Amir London, executive]

Yes, on both sides of the development. So on the BD side, we are proactively searching for the right opportunities in licensing and/or M&A. We hope and we expect to have a commercial impact to commercial contribution already in 2025.

In terms of the pipeline, yes, one of our preclinical programs which is making progress. We are advancing our preclinical activities, specifically refer to the plasma eyedrops program, and we are making good progress on that one as well.

[Operator]

[Operator Instructions] At this time, I will pass the call to Brian Ritchie for web questions.

[Brian Ritchie]

Thank you, Latanya. Just a couple of questions that have come in off the web here, Amir. First, maybe talk about your sort of ultimate goal with the plasma collection business now that we've got a couple of months of the Houston center open.

[Amir London, executive]

Yes. So I must say that we are highly satisfied with the opening of the center in Houston and the rate of growth in plasma collection in the first 2 months of the center operation. We are also on track with the San Antonio center to be opened in beginning or early 2025.

We will be collecting specialty plasma in those centers in addition to the 1 in Beaumont, such as anti-rabies, anti-D. And this is going to be used for own specialty product requirements or inspection requirements. And the normal source plasma will be sold out to external clients, and discussions about those types of supply agreements already ongoing.

Right now the plan is to complete those 2 centers. Both of them are very large centers with expanded capacity. As I mentioned during the call, the Houston center is going to be one of the largest in the U.S. in terms of specialty plasma collection. And then we'll decide how many -- if and how many additional centers we are going to open over the next few years.

[Brian Ritchie]

Terrific. Maybe last question here from the web. Can you provide a high-level outlook for 2025?

[Amir London, executive]

So it's a little bit kind of premature right now. But in terms of high level, so we will, of course, share our guidance beginning of 2025. But as we've previously communicated, we expect the double-digit top line and bottom line growth to continue.

I think that all our investors that are following the company are saying that we are executing to the plan, or maybe even as demonstrated today in the increase of our EBITDA, we're even kind of executing beyond the plan. So as mentioned, we expect to continue the double-digit growth top line and bottom line next year and the years after.

[Brian Ritchie]

Terrific. And with that, Amir, I'll pass it off to you for any closing remarks.

[Amir London, executive]

Thank you, Brian. So in closing, the successful execution of our profitable growth strategy is reflected in the strong financial results we delivered in the third quarter and the first 9 months of 2024. We are excited about the opportunities to advance the 4 main pillars of our growth strategy. We look forward to continuing to support clinicians and patients with the important life-saving products that we develop, manufacture and commercialize.

We thank you all for your participation in today's call and your support. And we remain committed to creating long-term shareholder value. Thank you. We hope you all stay healthy and safe. Goodbye.

[Operator]

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.