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spk03: Greetings. Welcome to Commodus Limited's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Brian Ritchie with LifeSci Advisors. Mr. Ritchie, you may now begin.
spk05: 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 Jaime Orlov, Chief Financial Officer. Earlier today, Kamada announced its financial results for the three and 12 months ended December 31st, 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 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 20F and 6K, 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, March 6, 2024. Kamada undertakes no obligation to revise or update any of the 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.
spk01: Thank you, Brian. My 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 momentum we experienced throughout our business during 2023, which allowed us to achieve our full year guidance. Importantly, we are well positioned for farther top and bottom line growth this year. I will begin with a high-level review of our robust financial results for full year 2023. With total revenues of $142.5 million, which represented year-over-year growth of 10%, an EBITDA of $24.1 million, an increase of 35% as compared to the 12 months ended December 31st, 2022, we achieved the top and the bottom line growth anticipated in our business during 2023. We continue to effectively leverage the growth and drivers in our business, focusing on a significant increase in CADRAB U.S. market share and the promotion of CytoGAM in the U.S. market. Looking ahead, we expect the momentum generated last year to extend through 2024, with full-year revenue and profitability to be meaningfully increased as compared to 2023. As such, we are introducing full-year 2024 revenue guidance of $156 million to $160 million and adjusted EBITDA guidance of $27 million to $30 million. The midpoint of these ranges would represent top-line and profitability growth of approximately 11% and 18% respectively, over 2023. To reiterate what we have said previously, we anticipate annual double-digit revenue and profitability growth in the foreseeable years beyond 2024 with significant upside potential and limited downside risk. Additionally, I would like to highlight our strong balance sheet. We ended the year with over $55 million in cash, and we continue to have the financial flexibility to both accelerate the growth of our existing business and pursue compelling business development opportunities, a process we are actively engaged in. In 2023, CADRAB, our anti-rabid immunoglobulin, was especially impactful, and throughout the year, we experienced a significant increase in demand for the product in the U.S. Following the recent amendment and extension of our distribution agreement with CADREON, we fully expect this trend to continue in 2024 and beyond. The substantial market share growth demonstrated by CADRAB is being driven by CADREON's extensive market coverage and robust commercial activity, as well as the FDA approval for a label expansion for the product obtained in 2021 that has differentiated it as the first and only human ribozemoglobulin available in the U.S. to be clinically studied in children. In 2023, Kamada generated approximately $32.8 million in revenues from sales of CADROB to CADREON for distribution in the U.S. market, which more than doubled our sales compared to 2022. Based on the new distribution agreement, further growth is expected in 2024. Looking ahead with CADROB, they amended and extended the distribution agreement is a tremendous milestone for Kamada. In fact, this strategic agreement with Kedron represents the largest commercial agreement since Kamada's inception. Specifically, within the first four years of the eight-year term, which began this past January, Kedron will purchase minimum quantities of Kedron with revenues to Kamada of approximately $180 million. The revised financial terms reflect Kedron's significant U.S. market share and focused continued growth throughout the eight-year term, as well as the potential expansion of Kedra, distribution by Kedrion to other territories beyond the U.S. We believe the continuation of this partnership maximizes the future growth and value potential of this important product. Moreover, this agreement must effectively exploit the U.S. business by allowing us to focus our own internal sales efforts on the commercialization of other specialized FDA-approved imoglobulin products, primarily in transplant centers. Well, CADREON continues to promote CADRAB in numerous hospitals and medical centers across the U.S. Moving on, our U.S. team established in 2022 continues to achieve steady progress in promoting our specialty IgG portfolio to physician and other healthcare practitioners through direct engagement and opportunities at medical meetings. As we have said previously, our activities promoting these important therapies, primarily Cytogem and Varizig, represent the first time in over a decade that these hyperimmune specialty products are being supported by field-based activity in the U.S. Each of these products made important contributions to our financial results in 2023, and we expect further impact this year. Importantly, in October 2023, results from an investigator-initiated five-year retrospective study consisting of 325 lung transplant patients evaluating the real-world use of cytogram in combination with antiviral agents for the prevention of CMV disease in high-risk CMV mismatched lung transplant recipients were published by Dr. Fernando Torres, the Chief the Clinical Chiefs Division of Pulmonary and Critical Care at the University of Texas Southwestern Medical Center, and the results were also presented at ID Week 2023 in Boston, Massachusetts. The high-risk mismatch patients are CMV seronegative patients receiving a lung from a seropositive donor. Dr. Torres concluded that the use of proactive multimodality CMV prophylactic consisting of antivirals and immune augmentation with CMV inoglobulin may improve outcomes among high-risk CMV mismatch lung transplant recipients. We are in the process of sharing this result with physicians and transplantation experts promoting the advantages of CytoGAM. We have already been notified that two additional studies related to the benefit of CytoGAM conducted by U.S. leading transplantation KOLs were accepted for presentation at transplantation-related medical meetings during this year. Of note, our Cytogram Scientific Advisory Board, which was established last year and consists of eight U.S.-based world-renowned thought leaders in the solid organ transplantation field, continues to evaluate new opportunities and future research and development possibilities for this important product. Moving on, looking further ahead at future catalyst, enrollment continues in the ongoing pivotal Phase III Innovate clinical trial for unhealed Alpha-1 anti-treatment therapy for the treatment of Alpha-1 deficiency. Of significance, we recently received positive feedback from the FDA in a meeting conducted with the agency. The FDA reconfirmed the overall design of our ongoing clinical program and endorsed the Data and Safety Monitoring Board unblinded positive safety assessment. The FDA also accepted our plan to conduct an open-level extension study, which is expected to be initiated in mid-2024. The agency also expressed its willingness to potentially accept a key value smaller than 0.1 alpha level in evaluating innovative for meeting the study efficacy primary endpoint for registration, which may allow for the acceleration of the program. As a result, we plan to present a revised statistical analysis plan, SAP, and study protocol for the Innovate Study and seek FDA feedback by mid-2024. As a reminder, the European Medicine Agency, the EMA, previously also reconciled the overall design of the ongoing Innovate Study and acknowledged the statistically and clinically meaningful improvements in lung function measured by FEV1 demonstrated in our prior Phase 2-3 European study. In parallel to the clinical and regulatory progress recently achieved, we also continue to have active discussions related to potential partnering of this promising late-stage product candidate. To reiterate what we have said previously, Kamada's investigational in-health AAT treatment is a non-invasive at-home treatment with an expected better ease of use and quality of life for Alpha-1 patients as compared to current IV standard of care. The inhaled product is a leading new innovative Alpha-1 treatment in advanced clinical stage, and it will present a substantial opportunity to be a transformational product in a market that is already over $1 billion in annual sales in the U.S. and the E.U. We also continue to be pleased with the progress achieved at Kamada Plasma, our U.S.-based plasma collection company. Our 2021 acquisition of a plasma collection center in New 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 continue to successfully expand the hyperunion plasma collection capacity at our first center, and construction is nearly completed at our second plasma collection center located in Houston, Texas, expected to be open during the second half of this year. Finally, I would like to note our new logo launched a few weeks ago, which, if you're currently viewing the webcast, you've hopefully noticed by now. This new logo represents the transformation Kamada is going through as a leading innovative vertically integrated technology profitable specialty plasma company. With that, I'll turn the call over to Jaime for a detailed discussion of our financial results for the fourth quarter and the full year 2023. Jaime, please go ahead.
spk04: Thank you, Amir. As previously highlighted, our business performed extremely well in 2023. Total revenues for the full year were approximately $142.5 million, a 10% increase from the $129.3 million recorded in fiscal year 2022. The year-over-year growth was primarily driven by increased sales of Kedrab to Kedrion due to increased demand for the product in the U.S. market. While our cytogram sales during 2023 were temporarily impacted, By the short-dated inventory we initially purchased as part of the product acquisition in 2021, the technology transfer approval and fresh product batches available since October 2023 ensure continuous long-term supply of the product to the US and Canadian markets without interruption. We believe that our promotion of the product will support revenue growth during 2024. Total gross profit for 2023 was $55.5 million, representing a 39% margin, up 19% compared to the $46.7 million, or a 36% margin in 2022. As previously discussed, the company is accounting for amortization expenses associated with intangible assets which were generated through the late 2021 acquisition of our IGG The company's COGS and sales and marketing included approximately $5.4 million and $1.7 million, respectively, of such amortization expenses for full year 2023. Operating expenses, including R&D, sales and marketing, G&A, and other expenses, total $45.4 million, an increase of approximately 8% over the prior year. The increase as compared to 2022 was below our original anticipation and was related to the advancement of our commercial activities, as well as our ongoing phase three Innovate Trust. We expect our overall operating expenses, including R&D, sales and marketing, and G&A, to increase between 10% to 15% during 2024 compared to 2023. As we continue to advance our commercial activities, as well as our Phase III Innovate trial. As we did throughout 2023 and 2022, we continue to account for financing expenses with respect to revaluation of contingent consideration and long-term assumed liability, all of which are related to the acquisition completed in 2021. Revaluation of contingent consideration and the long-term assumed liability total $1 million during 2023, significantly lower than in 2022. Such decrease was associated with a temporary reduction of cytogram sales during 2023. Net income for the fiscal year 2023 was $8.3 million or 15 cents per diluted share as compared to the net loss of 2.3 million or loss of 5 cents per share recorded in 2022. Adjusted EBITDA for the 12-month end of December 31, 2023, was $24.1 million, up 35% compared to the $17.8 million in the prior year. As Amir highlighted earlier, we anticipate continued momentum through 2024 with double-digit top and bottom line growth. Specifically, we're introducing full-year 2024 revenue guidance, of between $156 million to $160 million and adjusted EBITDA guidance of $27 million to $30 million. Finally, cash provided by operating activities was $4.3 million for the full year 2023 with total cash and cash equivalent of $55.6 million by the end of 2023. We maintain the financial strength and flexibility to accelerate the growth and profitability of our existing business beyond 2024 at double-digit rates and pursue compelling new business development opportunities. That concludes our prepared remarks, and we will now open the call for questions.
spk02: Thank you.
spk03: We'll now be conducting the question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad And a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants who are 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. Thank you. Thank you. And our first question is from the line of Annabelle Samimi with Stifel. Please proceed with your questions.
spk00: Hi, thanks for taking my questions. I have a few actually. So first on cytogam, what would the normalized growth rate have been for cytogam without the interruption? And what type of cytogam studies do you expect will be presented? If you could just give a little clarity on that. And then the second, I was wondering if, We could dig a little deeper on the potential changes to the AAT program to accelerate it. What are some of the changes you propose to ensure that p-value? And would this also hold with the EU authorities? And then while we're on that topic, I'd love your thoughts on Sanofi's acquisition of inhibirics and its implications for the AAT program in the market. And I'll probably get back into you after those questions. Thanks.
spk01: Thanks, Annabel. I'm not sure I understood the last question. Let me start with the first two, and then if you can just repeat it. So in regards to CytoGum, if it wasn't for the short-dated inventory, if I'm looking at end-user sales and user usage, 2023 numbers were similar to 2022, meaning that there is around $5 million gap between the two years in terms of our sales to the channel, to the wholesalers. So this is approximately the difference, the gap between the years. Moving into 2024, of course, with the fresh batches now available, we expect this to go back to at least where it was in 2022 and even beyond because we do have a lot of medical affairs and promotional activity in the market. We expect the in-market sales and in-market usage to start increasing. So that's, I hope this answers your question regarding if we try to kind of isolate the impact of the short-dated inventory on our sales.
spk00: Okay. And what type of studies are... are the investigators proposing and how do they plan on expanding this market? Or the SAB, how do they think that they can expand the market?
spk01: The two studies have already been accepted for presentation in 2024 in two different medical, transportation-related medical conferences. Those Confidence agendas, I believe, were not yet disclosed, so I cannot give the exact details of those two abstracts, but they have to do with the benefits of using CytoGAM in addition to standard of care in the reduction of the viral load of the patients and improve their transplantation outcome.
spk00: Okay, great. And if we can move over to the AAT program. I guess, what are some of the changes you propose to satisfy or accelerate the program? And is that going to be accepted by the EU as well?
spk01: Okay, great. So in general, I just want to start saying that we were very pleased with the positive feedback from the FDA. As mentioned during the call, the agency reconfirmed the overall study design, endorsed the safety data which was reviewed by the DSMB, and found it to be robust. So we presented the DSMB data up to date in terms of number of patients in the study which have completed a significant treatment duration. And we have a very robust safety data, which really satisfied the agency and waived additional requirements for safety evaluation. And they also accepted our open-label extension study, which is about to start in the middle of the year. We approached both agencies, the EMA and the FDA, with discussion questions related to potential ways to shorten the study duration, accelerate the program. We found the FDA team highly supportive and cooperative, and the direction we're evaluating and the agencies willing to potentially accept is agreeing that the T-value will be 0.1. It will be sufficient to prove a frequency of FEV1 instead of the traditional 0.05. We're preparing the revised statistical plan, which may show that we need less than 220 patients to be recruited to the study. this will indeed be the case, and if we believe it will be the case, then we will be able to shorten the study duration due to quicker recruitment. With that information, we will go back to the EU, to the EMA, sorry, and basically get their consent to basically have the same path forward.
spk00: Okay, great. And then I just wanted to know if you had any comments about the Sanofi acquisition of Inhibrix and their AET program. Any thoughts around that?
spk01: Yes, absolutely. So the Sanofi acquisition of the Inhibrix program, which is a recombinant AET, we think it's a very important trend, a very important transaction. It puts a lot of focus on alpha deficiency in general. We believe that if the product will make it to the market, Sanofi, with their significant marketing and promotional power will create better awareness and greater awareness to alpha-1 deficiency. As you may know, majority of the alpha-1 patients are still misdiagnosed or undiagnosed. So a powerhouse like Sanofi being active in the alpha-1 space will definitely going to significantly increase the market in general by better diagnostics and better coverage. So this is a very positive sign. In terms of Inherd, we believe Inherd has significant advantages in general. It's a non-invasive at-home treatment with a different mechanism of action. And we believe that if it makes it to the market, it's going to be a transformational product that is going to compete very well in the market. The Inhibrix Sanofi product, although it has advantages, it's still an IV treatment. when we come with inhaled non-invasive and we come with an efficacy study. So we believe we have sufficient advantages, significant advantages, that if we make it to the market, it's going to be a highly competitive product. Also, the inhaled product, because we go directly into the lungs versus IV treatment, we give one-eighth of the dose compared to the current standard of care and approximately one-fifth of the dose compared to the Nibrix treatment. So in terms of cost of goods and potential competitiveness, we also have a significant advantage.
spk00: Thank you. I'll get back in the queue.
spk02: Thank you. At this time, I'll turn the call over to Brian Ritchie to see if we have any questions from the web.
spk05: Thanks. Just a couple here, Amir and Jaime. First, what could a potential partnership for inhaled AAT look like?
spk01: Yes. So thank you, Brian. So building on what I just answered Annabel on the previous question, we believe that inhaled alpha-1 has significant advantages. We believe that in order to compete well in the market, especially with a powerhouse like Sanofi, It will be a good move for Karmada to partner the program with a strategic partner that has significant marketing and commercial capabilities and resources. And we're looking for such type of partnership that will allow us to bring the product to the market in the fastest way and to compete well with superior products.
spk05: Great. And then maybe an update on BD product acquisition opportunities and what might be available?
spk01: Yes. So we are proactively looking for products in the plasma space as well as in transplantation. This is a specialty we're covering. It's very highly synergetic with our expertise and staff. Our BD team is working proactively evaluating some opportunities. Once we have news to update the market, we'll be happy to do so.
spk05: Great. Thank you. That's all the questions that have come in over the web. May I ask you to maybe make some closing comments?
spk01: Yes. So in closing, we are very pleased with our exceptional performance during 23 and excited about the potential opportunities that Lye had based on the amended care job agreement, existing ongoing late-stage inhaled alpha and clinical program, and the strength of our commercial portfolio and balance sheet. We look forward to continuing to support clinicians and patients with important life-saving products that we develop and manufacture and commercialize. We thank you all for your support and remain committed in creating long-term shareholder value. We hope you all stay safe and healthy. Thank you very much.
spk03: Thank you. This will conclude today's conference. We disconnect your lines at this time. Thank you for your participation. Have a wonderful day.
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