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spk03: Greetings. Welcome to the Kamada Limited third quarter 2022 earnings conference call. This time, all participants are in listen-only mode. Any question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, we'll turn the conference over to Bob Yedid of LifeSci Advisors. Bob, you may now begin.
spk04: Rob, thank you very much. This is Bob Yadid from Westside 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 and nine months ended September 30th, 2022. If you have not received this news release, please go to the investors page of the company's website at www.comeda.com. If there are any questions at the end of this call, please feel free to email your questions to ir.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 Securities and Exchange Commission, including without limitation the company's forms 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 date of this live broadcast Tuesday, November 22nd, 2022. Comida 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's my pleasure to turn the call over to Amir Lundin, Chief Executive Officer. Amir.
spk01: Thank you, Bob. My thanks also to our investors and analysts for your interest in Kamada and for participating in today's call. I'm pleased to report Kamada's strong third quarter performance, which demonstrates the successful strategic transition of the company and is consistent with our previously communicated positive outlook. You will recall that we had forecasted that our financial results in the second half would meaningfully improve as compared to the last year and the first six months of this year. Our performance in the third quarter indicates that our business is beginning to realize the significant benefits of the acquired portfolio of four FDA-approved IGGs, consisting of Cytogam, Hepagam, Varizig, and Winro. In fact, I can now confidently say that we have completed our rapid transition from our past dependency on Glacier Cell to Takeda, into a diversified, fully integrated commercial company and a global leader in the plasma-derived specialty markets. On our last call, I laid out our expected key sales and profitability drivers for the second half of the year. This included our IGG portfolio, sales of CADRA to CADREON, and Glacier Royalty Income. All of these were indeed important contributors to our sales and profitability growth in the third quarter, in which we generated total revenues of $32.2 million, representing a 40% increase year-over-year, and growth margins of 40%, up from the 25% in the third quarter of 2021 and 31% in the second quarter of 2022. Our adjusted EBITDA for the third quarter was $6 million, representing a 19% margin. and for the first nine months of the year, adjusted EBITDA was $10.6 million, representing a 13% margin. This EBITDA level is consistent with our annual guidance, and it represents a 58% increase as compared to last year. We also continue to generate positive cash flow from operating activities for the third consecutive quarter, resulting in a cash position of $31.3 million as of September 30, 2022. This significant cash generation is indicative of our profitable commercial operations. We expect to report further sales growth and enhanced profitability in the fourth quarter, and as a result, we are reiterating our full-year 2022 revenue guidance of between $125 to $135 million, with expected EBITDA margins of 12% to 15%. This guidance represents a 20% to 30% increase over 2021 revenue. It will be more than 2.5 times 2021 EBITDA. Looking further ahead, we continue to forecast growth at a double-digit rate in the foreseeable years beyond 2022. The portfolio of the four FBA approved in the Global LIMS we acquired late last year continues to gain traction in multiple markets and again delivered strong sales and profitability for Kamada during the third quarter. As a reminder, the acquired product generated collective revenues of approximately $42 million in 2021 with over 50% gross margins and we anticipate that we will significantly grow the new portfolio revenues year over year, beginning already this year. I'm pleased to report that in recent months, as part of the establishment of our direct presence in the U.S. market, we deployed a team of U.S.-based experienced cells and medical affairs professionals who rapidly established our operation in this key market. The U.S. cells team is making good progress in promoting our portfolio of specialty plasma-derived to physician and other healthcare professionals to direct engagement and opportunities at medical meetings. Our medical affairs team is working to educate physicians while addressing the scientific and clinical inquiries. Throughout 2022, our team participated and presented at major medical conferences in the U.S., including International Society of Heart and Lung Transplants, American Transplant Congress, and the American Association for the Study of Liver Disease. This area of activities represents the first time in over a decade that these high premium products have been supported by field-based activity in the U.S. We are encouraged by the positive feedback received from key U.S. physicians who are seeking to publish new clinical data related to our portfolio while conducting educational symposium that we believe will have a positive impact on understanding of these products, contributing to continued growth in demand. Outside the U.S., we continue to generate meaningful sales growth from these products in the international markets. I would highlight the recently signed $11.4 million agreement to supply Varizig, one of the four products, to an international organization operating principally in Latin America. This agreement will be a key driver for us in the fourth quarter, as approximately half of the anticipated revenues to be generated by this agreement are expected during this period, while the balance will be extended to the first half of 2023. From a strategic standpoint, this important supply agreement strongly validates our ability to grow the sales of our newly acquired portfolio in the different international markets. In addition, We recently secured a second significant tender with extension of an existing supply agreement from the Canadian Blood Services, CBS, for the supply of all four products for an additional three years for an approximate total value of $22 million. This award secures the ongoing sale of those products in the Canadian market. CBS manages the Canadian supply of blood products for all Canadian provinces and territories excluding QIPEC. The extension with CBS is for a three-year period, commencing on April 1, 2023, with an option to extend for up to two additional years. We are continuing to pursue additional commercial contracts in key strategic territories and are highly encouraged by the significant opportunities ahead of us. These supply agreements and our proactive selling efforts through our long-standing distribution relationship underscore Commodore's firm commitment to leveraging these new strategic assets. I should also add, as we continue to expect, receipt of FDA approval for the manufacture of Cytogram, the largest of the four acquired products, at our Israeli facility during the first half of 2023. Let's move on to CADRAP, our rabbit in the globally. Based on the continued moderation of the COVID pandemic in the U.S. and increased travel and outdoor activities, we remain encouraged by the product in-market sales by CADREON through the first nine months of the year, which again grew significantly during the third quarter in comparison to the pre-COVID pandemic sales levels. We believe the trend will continue and expect CADRAP 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. I should highlight that this product also generates more than 50% growth margins for Kamada. Next, we continue to receive royalty income on Glacier sales from Takeda. During the third quarter, we generated royalty income of $3.5 million. As a reminder, Royalty income from Takeda represents pure profit for Kamada, and our Galatia royalty agreement with Takeda extends out to 2040. Now let's look a little further ahead at future catalysts. I begin with Kamada Plasma, our U.S.-based plasma collection company. Our early 2021 acquisition of Plasma Collection Center near Houston, Texas, represented Kamada's entry into the U.S. plasma collection market and supported our strategic goal of becoming a fully integrated specialty plasma product company. We remain focused on expanding the high premium plasma collection capacity at this center and continue to advance our plans to open additional centers in the U.S. to further enhance our supply of specialty and normal source plasma. In fact, we're in the process of finalizing the selection of a site in Texas for our second collection center with construction and startup activities to be initiated in the near future. As we have said previously, the planned expansion of our plasma collection capabilities is expected to enhance our IGG competitive position in various markets, boost continued revenue growth, and strengthen our supply chain. Let's now turn to our ongoing Pivotal Phase III Innovate clinical trial that is evaluating the safety and efficacy of an innovative in-health AT product for the treatment of AT deficiency. You will recall that earlier this year, following the moderation of the COVID pandemic, the study was expanded and now includes six sites across Europe. I'm pleased to report that enrollment has recently begun to accelerate. To date, 30 patients were enrolled for treatment, including 14 patients who have already completed the two-year study treatment period at the initial trial site in Leiden, the Netherlands. Importantly, none of those patients discontinued treatment prematurely, and no drug-related serious adverse events were reported. This high level of patient adherence to the treatment is encouraging. Additionally, as part of a routine and planned monitoring process, and for the first time since study initiation, the Independent Data Safety Monitoring Board, the DSMB, recently recommended that the trial continue without modification. Moreover, based on the encouraging safety indicators observed to date, the DSMB supported an expansion of the inclusion criteria to also include subjects with severe airflow limitation. The previous inclusion criteria limited the trial to include only patients with FEV1 between 80 and 50%, but the extended criteria also allows us to include patients with FEV1 over 40%. This important change is expected to further expedite patient enrollment. Importantly, we intend to meet with the FDA and with the EMA through the first half of 2023 to discuss trial progress and explore potential opportunities to shorten the regulatory pathway. As the most advanced investigational product for AT deficiency, a substantial commercial opportunity exists for in-health AT to be a transformational next-generation augmentation therapy in the growing AAT market, which is already over a $1 billion market in annual sales in the U.S. and the EU. In summary, we continue to execute on our corporate strategy on all fronts and believe we have the appropriate catalyst to drive double-digit growth in the foreseeable years ahead of us. We're excited about our near-term prospects, as well as our longer-term outlook, as Canada is uniquely positioned for growth as a global leader in the specialty thousand industry with multiple value-creating milestones expected in the months and the quarters ahead. With that, I now turn the call over to Jaime for his review of our third quarter 2022 financial results. Jaime, please.
spk02: Thank you, Amir, and good day, everyone. In the third quarter of 2022, total revenues were $32.2 million, a 40% increase from the third quarter of 2021. For the first nine months of 2022, total revenues were $83.9 million, an increase of 16% year-over-year. These quarterly results are indicative of the successful strategic transformation we achieved through the strategic acquisition occurred during 2021 and resulting in a vertically integrated global commercial biopharmaceutical company with multiple growth drivers. The year-over-year growth during the third quarter and first nine months of 2022 was primarily driven by continued strong sales of our recently acquired IgG products. As Amir mentioned, the previously forecasted strong second half of the year was driven by multiple factors, including the continued growth of the new IGG product sales in the U.S., fueled by the ongoing marketing efforts, as well as the expansion of ex-U.S. sales of these products, the continued growth of Kedrio in support of the product in-market sales growth, and full impact from royalty income from Glacier. In addition, fourth quarter revenue will be further aided by the Verizig Supply Agreement, which will include approximately half of the $11.4 million in total revenues to be generated from this contract. We recognize $3.5 million of royalty income from Takeda based on their sales of Glacier in the third quarter, which was in line with our anticipated quarterly projections. As a reminder, the second half of the year will include two full quarters of royalty income as compared to only four months in the first half. Total gross profit for the third quarter of 2022 was $12.9 million, representing 40% margins compared to $5.7 million or 25% margin in the third quarter of 2021. Gross profit for the first nine months of 2022 was $31.4 million, representing 37% margins up from the 33% last year. Let's turn to depreciation expenses. As previously discussed, the company is accounting for depreciation expenses associated with intangible assets which were generated through the recent acquisition of the four IGG products. In the third quarter and first nine months of 2022, Cost of goods sold in our proprietary segment included $1.3 million and $3.9 million, respectively, of depreciation expenses associated with these intangible assets. Research and development investments during the first nine months of the year increased to $10.2 million as compared to $7.9 million in the prior year period. primarily due to the expansion of our ongoing Pivotal Phase 3 Innovate trial for inhaled AAT. Selling and marketing expenses for the third quarter and first nine months of 2022 also increased. These increases are attributable to the establishment of our U.S. commercial operation to support the distribution and sales of the recently acquired portfolio for FDA-approved commercial products. In addition, these costs include pre-commercial activities associated with new product launches in the Israeli distribution sector. As we have since the beginning of the year, we continue to account for financing expenses with respect to revaluation of contingent consideration and long-term assumed liabilities, all of which are related to the recent acquisition. During the third quarter and first nine months of the year, these finances charges totaled $2 million and $5.9 million, respectively. For the third quarter, we recorded a net income of approximately $480,000, or 1% per share on a fully diluted basis. Our adjusted EBITDA was $6 million for the third quarter of 2022. Adjusted EBITDA for the first nine months of 2022 was $10.6 million, representing 13% margin, which is in line with our annual financial guidance and represent a substantial increase over the $6.7 million of adjusted EBITDA in the prior year period. Based on our expectation of significant revenue growth and enhanced profitability for the remainder of the year, we continue to expect revenue in the range of $125 to $135 million and anticipate generating adjusted EBITDA at a rate of 12% to 15% of total returns. Finally, for the third straight quarter, we generated positive operating cash flow, demonstrating the ability of the company's commercial operations to generate cash. During the third quarter of 2022, we generated $5.5 million of operating cash flows, which led to a cash position of approximately $31.3 million at the end of September. That concludes our prepared remarks. We will now open the call for questions.
spk03: Operator. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 from your telephone keypad and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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, so we poll for questions.
spk05: One second, that's star one. Thank you. Rob, thank you.
spk04: While we wait for some additional questions to queue up, I have some that have been emailed into us, so let me go through those. First is for Amir and Jaime. In order to meet your full year revenue guidance of $125 to $135 million, your fourth quarter revenue will have to be significantly stronger than the third quarter. So can you please provide us a breakdown of how that will be achieved?
spk01: Yes, thank you, Bob, for the question. As we said, we're reiterating our full year guidance based on the orders that we have and the sales that have already been executed since the beginning of the fourth quarter. Three things to take into consideration compared to the third quarter is one, the VARISIG supply agreement, the new supply agreement, around half of it, 50% of it, will be executed in this fourth quarter. So this is an additional around between $5 million to $6 million in comparison to the third quarter. Secondly, our distribution segment, we have significant orders which are pending and will be executed over the next few weeks before the end of the year. And in general, the new IGG portfolio products are growing and will continue to grow in the fourth quarter. So when we add all those items together, all those orders together, we reach the annual guidance that we've given.
spk05: Okay. That's helpful. Great.
spk04: The other question we have is just related, sort of a corollary to that, is should we expect increased operating expenses as we look out to 2023? as compared to this year? And if so, can you quantify how much higher those expenses might be?
spk01: So 2023 will be a full year of our further marketing activity in the U.S. This is something that, you know, this infrastructure and hiring the people is something that we've done gradually over 2022. So 2023 will be a full year in that regard. Of course, all of this activity greatly contributes to our top line performance and our profitability. So it's definitely a worthwhile investment, and we see this actually happening in the U.S. market. Adding to that, the INHALE-DAT study, which is going to run at an expedited rate in 2023, those two components add to our operational expenses, federal marketing and R&D, and we expect that next year, investments in those items will be approximately... increase of 10% to 12% compared to this year.
spk05: Okay, great.
spk04: The next question was, do you expect that sales growth from the acquired products will come from additional international contracts and or is that coming mainly from discussions, whether it be sales, promotions, contacts with by your new sales and medical fair schemes with physicians and transplant centers?
spk06: Both, basically.
spk01: It's actually already happening, and we see this. The VARISI contract for Latin America is one example. Extending the agreement in Canada is another example. we were starting to see the impact of our sales activity and medical affairs activity in the U.S. market. As I mentioned during the call, it's been over 10 years, over a decade, that those products were not supported by field activity. And as of a few months ago, we started to engage in discussion with the relevant physicians in the relevant transplant centers And we are highly encouraged by the feedback we're receiving from those healthcare providers. So all of that will contribute to increased sales, adding to that the fact that we are selling the new products through our existing distribution network across the world in many different countries. And then both items, or basically both aspects, are contributing to the growth that you already see and our expectation for continued growth in the years to come.
spk04: Great. And just with regards to the transplant centers, are there, you know, maybe you could help quantify that for us. Is there a certain set of transplant centers you'd like to see cover with that sales marketing force?
spk01: Yes. So, of course, we are focusing on the larger ones. We're focusing on the ones that are using our products and would like to increase usage. We are also talking to centers that have not used especially CytoGum in recent years. And as I said, those products were not supported by field activity. So now it's a good change in terms of the ability to grow the business and to promote it and to talk to physicians and to collect data and present this data to the physicians. So all of this is actually happening as we speak with our U.S. team. In terms of quantifying the quantities, we're talking about 150 to 200 centers that we're covering. It's a very focused effort with a focused team of experienced specialists, and it's going very well in terms of our coverage and our ability to talk to the right people.
spk04: Great. And just going back to we talked, obviously, about success of your acquired portfolio products. Does Comita have an ongoing business effort or, excuse me, business development effort to continue to look for products like this to continue to expand your portfolio for proprietary products?
spk01: We are building the right infrastructure, as I said, highly focused on specialty plasma products and transportation centers. And in part of that, we will be looking and we've started to look at what might be another synergetic product that, from a BD perspective, we can bring in. This is an effort that will take us through 2023, and we will be looking for the right opportunities.
spk05: Great. Okay, great.
spk04: That's all the questions we have from the various listeners, so that was very helpful. Rob, I'll turn it back to you.
spk03: Thank you.
spk05: At this time, if you'd like to ask a question, you can press star one. Thank you. Thank you.
spk03: At this time, I'll turn the floor over to Amir London for closing remarks.
spk01: Thank you very much. In closing, we begin to realize the significant benefits of our recent strategic transformation. Our strong third quarter performance is consistent with our forecasted positive outlook. Based on our expectation for continued revenue growth and enhanced profitability in the fourth quarter, we are reiterating our full year 2022 financial guidance. As discussed during the call, we continue to focus growth at a double-digit rate in the foreseeable years ahead of us, driven by proprietary product catalysts. We thank all our investors for their support and remain firmly committed to creating long-term sustainable shareholder value. Thank you very much. We hope you all stay healthy and safe.
spk03: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
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