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spk02: Greetings. Welcome to the Kamada Limited First Quarter 2022 Earnings Conference Call. At this time, all participants are in ocean-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the star zero and the telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Bob Yiddish of Difestyle Advisors. You may begin.
spk01: Thank you, Shamali. This is Bob Yedid of LifeSci Advisors. Thank you all for participating in today's call. Joining me from Comida are Amir London, Chief Executive Officer, and Jaime Orlev, Chief Financial Officer. Earlier today, Comida announced its financial results for the three months ended March 31st, 2022. If you have not received this news release, please go to the investors page of the company's website, at www.comeda.com. Before we begin, I'd 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 Comeda. I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Form 20F, and 6K, which identify specific risk factors which 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 live broadcast Tuesday, May 17, 2022. Comida undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. If you would like to ask questions, please feel free to register for the Q&A session live at the end of the call, or feel free to email me, Bob Yeted, Bob at LifeSciAdvisors.com. With that said, it's my pleasure to turn the call over to Amir Lundin, CEO. Amir?
spk04: Thank you both. My thanks also to our investors and analysts for your interest in Kamada and for participating in today's call. Our business is off to a very strong start in 2022. During the first quarter of the year, we have effectively executed on our corporate strategy and continue advancing toward becoming a fully integrated global leader in the plasma-derived specialty market. Our performance during recent months is a strong testimonial of comrade's ability to concurrently execute on multiple fronts, developing and advancing our key growth catalysts. Those catalysts include commercialization of our IGG portfolio in the U.S. market, as well as in new territories, Kedra growth in the U.S., the Israeli distribution activity, our U.S. plasma collection business, the last year royalty income, which started in March, and the inhaled AAT clinical program, which is expanding. Moreover, during the first quarter, we generated $5.5 million of operating cash flow that supported the increase of our cash position to a total of $22 million. Importantly, the first quarter represented the first full calendar quarter commercializing the portfolio of the four FDA-approved immunoglobulins we acquired late last year. I'm pleased to report that these four products delivered solid initial sales and profitability for Kamada, meeting our plans and expectations. As a reminder, the acquired product generated collective revenues exceeding $40 million in 2021, with over 50% gross margins. And we anticipate to strongly grow the new portfolio revenues year over year through proactive promotional activities in the U.S., where our newly established subsidiary, Kamada Inc., is responsible for the commercialization and direct sales of the products. Our recently appointed Vice President of U.S. Commercial Operations, Joe Knight, has begun building out our team with multiple senior staff members. all of them experienced sales and marketing professionals with established relationships with relevant U.S. healthcare providers. We intend to actively promote these compelling products to hospitals and physicians throughout the U.S., mainly focusing on transplantation centers. We also intend to leverage our existing strong international distribution network to grow product revenue in new territories. I'm very happy to report today that sales of the products have already been initiated during the first quarter in few additional new countries, mainly in the Middle East. I should also add that we continue to expect receipt of FDA approval for the production of Cytoderm, the largest of the four required products, at our Israeli facility during the first half of 2023 after completion of the tech transfer activities which are currently at an advanced stage. Now, let's turn to the performance of our overall business in the first quarter of 2022. We generated total revenues of $28.1 million, representing strong 13% growth over the first quarter of 2021. We also achieved gross profit of $11.3 million and gross margins of 40% in the first quarter. as compared to 36% in the prior year period. This increase in our profitability was mainly driven by the four new IGG portfolio products, which generated gross margins of over 50%. Based on a strong start to the year, we are reiterating our full year 2022 revenue guidance of between $125 million to $135 million, with expected EBITDA margins of 12% to 15%. This guidance represents a 20% to 30% increase over 2021 revenue and more than 2.5x over 2021 EBITDA. Moreover, we continue to project revenue growth at a double-digit rate in the foreseeable years ahead. I would now like to discuss the recently established Kamada Plasma. our U.S.-based plasma collection company. You will recall our early 2021 acquisition of a plasma collection center in Texas that specializes in the collection of hyperionium plasma used for the manufacturing of one of our specialty products. This acquisition represented common entry into the U.S. plasma collection market and supported our strategic goal of becoming a fully integrated specialty plasma company. We remain focused on expanding the high-terrain plasma collection capacity to this center and continue to advance our plans to open additional centers in the U.S. to further enhance our supply of specialty and regular plasma. In fact, we are already in the process of selecting the site location for a second collection center to be followed by construction and startup activities later this year. We are also planning to initiate the required activities for a third center by year-end. As a reminder, the planned expansion of our plasma collection capabilities is expected to enhance our IDG competitive position in various markets, support continued revenue growth, and strengthen our supply chain. Moving on to CADROG, our anti-rabies IDG. Based on the recent moderation of the COVID pandemic in the U.S., We are encouraged by the product in-market sales by Cadrion during the first quarter, which has grown significantly in comparison to the pre-COVID pandemic sales level, and we believe the trend will continue. We expect Cadrub to be an increasingly important growth driver for us over the next few years as it continues to gain market share in the $150 million U.S. market. You will recall that the FDA approved a label expansion for the product late last year, which differentiated CADRAB as the first and only human rabies hemoglobulin available in the U.S. to be clinically studied in children and confirm the safety and effectiveness of its use in the pediatric population. Moreover, we are also expanding sales of the product in additional important international markets, such as in Canada, Australia, and Latin America. As for Lasya, in March, Takeda initiated sales of the product from its own production, generating royalty income to Kamada. Royalty for March was $1.4 million, meeting our expected monthly rate. Turning to our in-health AET clinical program. The moderation of the COVID pandemic allows us to expand our ongoing pivotal Phase III Innovate clinical trial that evaluates the safety and efficacy over innovative in-health AAP products for the treatment of AAP deficiency to new European sites. Most recently, patient screening and recruitment began at three new sites in three European countries. In the coming weeks, three additional sites are expected to be initiated in three other European countries. Moreover, the Independent Data Safety Monitoring Board, the DSMB, recently recommended that the trial continue without modification. To date, no patients have discontinued treatment prematurely, and no drug-related serious adverse events have been reported. Additionally, to date, nine patients have already completed the full two-year treatment period. Importantly, this is a unified study, and the trial's data are expected to qualify for regulatory submissions with both the FDA and the EMA. A substantial opportunity exists for Inherit AAT to be a transformational product in a market that is already over $1 billion in annual sales in the U.S. and Europe and growing steadily. And we're excited to further advance this strike. Moving to other commercial activities. In our Israel distribution segment, we plan to launch a portfolio of 11 biosimilar products between this year 2022 and 2028. The products are expected to be launched upon receipt of the Israeli regulatory approval. Collectively, these products have an annual anticipated peak sales achievable within several years of launch of more than $40 million. These anticipated revenues are in addition to our current distribution segment sales. We look forward to the launch of the first of these biochemical products later this year. In closing, We continue to execute on our corporate strategy on all fronts, and we believe that we have the appropriate catalyst to drive double-digit growth in the years ahead. We're excited about our future prospects. Kamada is uniquely positioned for growth as a global leader in the specialty plasma industry with multiple value-creating upcoming catalysts. With that, I now turn the call over to Jaime for his review of the first quarter 2022 financial results. Jaime, please.
spk03: Thank you, Amir, and good day, everyone. Our revenues grew by 13% in the first quarter of 2022 and totaled $28.1 million. These revenue levels are in line with our expectations and represent a strong start of the year. This growth was led by strong initial sales of our newly acquired IGG product. This is the first full quarter of sales of this portfolio, and the sales and profitability levels generated by these products are in line with our expectations. As previously mentioned by Amir, we recognized $1.4 million of royalty income during March on account of Glacia sales by Takeda. During the first two months of the year, Takeda sold remaining Glacia inventory supplied by Kamada and initiated sales from its own production during March entitling us to royalty income. The royalty income for March 2022 is in line with our expected monthly rate and annual projections. As a reminder, we will receive royalty payments from Takeda at a rate of 12% on net sales through August 2025 and at a rate of 6% thereafter until 2040. We continue to expect to receive royalty payments from Takeda in the range of $10 to $20 million per year enhancing our profitability and cash position. Total gross profit for the first quarter of 2022 was $11.3 million, up 27% from the $8.2 million in the first quarter of 2021. Gross margin for the quarter were 40%, an increase from the 36% during the prior year period. The increase in profitability was primarily driven by the four new FDA-approved commercial products, which generated gross margins of over 50%. Cost of goods sold in our proprietary segment totaled $12.5 million in the first quarter of 2022 and included $1.3 million of depreciation expenses associated with intangible assets generated through the recent acquisition of these products. Gross margins excluding such intangible assets depreciation would have been 45%. Research and development investments during the first quarter of 2022 were $4.4 million. The increase as compared to the first quarter of 2021 is primarily driven by the expansion of our pivotal Phase III Innovate trial for Herald A team, through the opening of new clinical sites and the manufacturing of clinical supply for the study. Our projections for the overall trial costs did not change. Selling and marketing expenses for the first quarter of 2022 were $3.3 million, an increase from $1.1 million during the prior period. This increase is attributable to the establishment of our U.S. commercial operation to support the distribution and sale of the recently acquired portfolio of four FDA-approved commercial products. In addition, these costs include pre-commercial activities associated with new product launches in the Israeli distribution segment, including one of the 11 biosimilar products portfolio, which is planned to be launched this year. The marketing cost for the quarter included $400,000 of depreciation expenses associated with the intangible assets generated through the recent acquisition of the new products. Our financial expenses for the quarter included a $2 million charge associated with the revaluation of contingent consideration and the other long-term liabilities assumed as part of the acquisition of the four FDA-approved products. As detailed in our 2021 annual financial statements included in the recently filed annual report on 420S, These liabilities include deferred consideration payments due to the sellers subject to meeting certain milestones and royalty obligation to third parties on account of the CypherGAN products. For the first quarter, we posted a net loss of $1.8 million or $0.04 per share on a fully diluted basis. However, our adjusted EBITDA, which excludes financial expenses, depreciation, amortization, and stock-based compensation for the first quarter of 2022 was $3.3 million compared to 3.7 million in the first three months of 2021. During the first quarter of 2022, we generated $5.5 million of operating cash flow that supported the increase of our cash position to a total of $22 million. Comida's working capital as of March 31st, 2022 remain strong and total $52 million. As for our full-year guidance, we continue to expect to generate total revenue for fiscal year 2022 in the range of $125 to $135 million and anticipate generating EBITDA at the range of 12% to 15% of total revenue. While the ongoing labor strike impacting our production facility in Israel is expected to negatively affect our second quarter financial results, which we do not expect to be as strong as the first quarter, based on the diversification of our commercial operation, which includes multiple revenue generating sources, including the recently acquired portfolio for FDA approved commercial products, which are manufactured by an external contract manufacturer, the Israeli distribution business, which operates independent of the production facility, the royalty income on Glacier sales by Takeda, as well as current sufficient inventory level of finished products, our positive outlook for the fiscal year remains unchanged. Finally, I want to make investors aware that we plan to hold a virtual Investors and Analyst Day on Tuesday, June 7th at approximately 12 p.m. Eastern Time to highlight the dramatic transformation of our business over the past several months. Details of the investor's day will be announced shortly. That concludes our prepared remarks. We will now open the call for questions. Operator.
spk02: Thank you. And at this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
spk01: Chamali, this is Bob Yeted from LifeSci. I've gotten a few questions already emailed in to me, so I'll start with those. Sure. The first one is asking about the sales trends of the rabies vaccine and given the improved rates of travel in U.S. and other countries for Amir and Jaime, are you starting to see a recovery in the sales of Kedrab and Kamrab compared to last year?
spk04: Thank you, Bob, and thank you for the people asking the questions. Yes, absolutely. So during the first quarter, we've seen that Kadrion in-market sales of the product in the U.S. have grown significantly compared to the first quarter of 2021. And basically, if I compare it even to pre-pandemic levels, we see a significant increase. We believe that we have not yet completed our penetration and winning market share of the product. As a reminder, we got happy approval in late 2017. We launched the product just middle of 2018. So we had basically only 2019 was the kind of the first full year of selling the product in the U.S. market, and then the pandemic started right after that. So 2020 and 2021 were impacted by the pandemic, but starting 2022, the product is continuing to gain a significant market share, to grow its market share, and we believe there is still a lot of room for growth for the product in the U.S. market, which is over $150 million. and we will continue to grow the business in the U.S., and we are also leveraging the growth in international markets. We are one of the few only suppliers of the anti-rabidine globulin products globally. We are an approved supplier of the WHO. We are supplying the Latin American tenders. We have an approval in Canada, in Australia, and we are supporting those local authorities globally. with this important life-saving product.
spk01: Great. Very helpful. The other question I've gotten emailed in to me is about your announcement today that you've expanded the number of clinical trial sites for your inhaled AAT phase three trial. The question is one of why now in terms of making that expansion from basically one site and adding up to six more sites this year.
spk04: Yes, so we're basically leveraging the opportunity now with the moderation of the COVID pandemic to expand the study. The study was initiated just a few weeks before the pandemic started, so we had the first patient in into the site in Leiden, the Netherlands, in November or December of 2019. This site continues to recruit patients throughout the pandemic, but it was hard, in some cases even impossible, to open new sites when everyone was focused only on COVID. In few countries, we couldn't initiate a new study which was not a COVID-related study. You need to remember, these are patients suffering from a severe lung disease, so for them to actually go into the hospital to initiate such a treatment as part of the study were very challenging during the pandemic. Now, with the improvement across Europe, we have the opportunity to leverage the work that has been done in preparing for that timing, and we are expanding the study. We're very encouraged by what we've seen so far. We had no dropouts from the study. All patients who started the study in Leiden continued. Nine of the patients already completed the two-year study. The data that we presented to the DSMB was well received. No modifications are needed to the study, so we are encouraged. That's what we've seen so far. And as a business opportunity, we remain highly confident in the significant opportunity ahead of us over a billion-dollar market of Alpha-1 treatments given currently by Infusion. And I think everyone understands significant superiority in terms of quality of life for the patients to use an inhaled product versus an IV product.
spk01: Great. Okay, that's helpful. And then the last question I have is one with regards to your sales and marketing of your new portfolio of IgG products. Is that sales and marketing principally focused on transplantation centers here in the U.S.? ?
spk04: So two of the products are focused on transplantation centers. These are the two lead products, which is Cytosam and Hepagam. Varizig is for unicompromised patients, not only transplanted patients, but also pregnant women and small infants. So it's a little bit more diverse than just transplantation centers. and WinRaw is focused on patients suffering from a rare blood disorder called ITT. So the main focus is consultation centers, but we're also selling to other medical institutions in the U.S. Outside of the U.S., similar, of course, focus, and we believe there is a great opportunity in the U.S. through promotional activities, Those products were not actively promoted in the last few years, so we have an opportunity to make a big difference in growing this business. And then leveraging our over 30 countries' distribution network to sell those products is definitely a big plus, and we're already seeing the results of it, as I mentioned during the call. primarily in the Middle East where we have seen new countries that we have initiated sales of the products.
spk01: Great. One other follow-up question to that is you've talked about transferring manufacturing of these products potentially, but definitely the first one, Cytogam, to your facility. That is dependent, I assume, for next year on the receipt of the regulatory approval in Israel. Is that correct?
spk04: Correct. So the tech transfer cytogram from its current manufacturer to our facility in Israel is well underway, and we expect to submit the file with our base command facility as a manufacturer later this year and to get an approval in 2023. And in regards to the other three products, this is something we plan to do in the future.
spk01: Great. Okay, good. That's the call. That's the questions that I have. Thank you. Thank you, Amir.
spk02: And it looks like we have, if there are no more questions, it looks like we have reached the end of the question and answer session. And I'll turn the call back over to Amir London for closing remarks.
spk04: Thank you. Thank you very much. So in closing, on behalf of the entire Commodore team, We look forward to continuing to provide clinicians and patients with an expanding portfolio of important, life-saving products that we develop, manufacture, and commercialize. We thank all of our investors for their support and remain firmly committed to creating long-term, sustainable shareholder value, leveraging our multiple catalysts of growth. We hope you all stay healthy and safe. Thank you very much.
spk02: And this concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.
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