Kamada Ltd
NASDAQ:KMDA
Earnings Call Analysis
Q4-2023 Analysis
Kamada Ltd
The recent financial performance presents a positive picture, with revenues reaching $142.5 million, marking a 10% growth, and EBITDA climbing 35% to $24.1 million for the year 2023 compared to the prior year. This trend is bolstered by a key product, KEDRAB, which more than doubled its sales in the U.S. market and is expected to continue this trajectory.
Looking forward, the company is optimistic, expecting the upward momentum to carry into 2024 with projected revenues of $156 million to $160 million and adjusted EBITDA of $27 million to $30 million. This represents anticipated growth of approximately 11% in revenue and 18% in profitability. Moreover, the company foresees ongoing double-digit revenue and profitability growth beyond 2024, backed by a strong balance sheet with over $55 million in cash, providing financial flexibility for further expansions and business opportunities.
The company's U.S. team established in 2022 is advancing the promotion of specialty immunoglobulin products, contributing to the strong financial results in 2023 with expectation for continued impact. Additionally, a major milestone was achieved with an agreement for KEDRAB, ensuring minimum sales of approximately $180 million within the first four years of an eight-year term. Further major contributions are expected from sales of CYTOGAM and VARIZIG following focused promotional efforts.
Kamada is progressing with its pivotal Phase 3 InnovAATe clinical trial for Alpha-1 Antitrypsin deficiency, receiving positive feedback from the FDA. An open-label extension study is also set to begin in mid-2024, with a potential acceleration of the program based on the FDA's openness to a p-value smaller than 0.1 for the efficacy primary endpoint. The European Medicines Agency's previous confirmation of the study design adds further credibility.
The strategic acquisition of a plasma collection center in Texas is part of the company's growth strategy. With the construction nearing completion on a second center expected to open in the latter half of 2024, Kamada is set to increase its capacity and strengthen its plasma product business.
In spite of CYTOGAM sales being temporarily impacted due to short-dated inventory, the company managed to resume normal supply since October 2023 and is expecting to ramp up sales. Operating expenses are projected to increase modestly between 10% to 15% during 2024, while maintaining financial strength with operating cash flow of $4.3 million and a solid cash position of $55.6 million at the end of 2023.
The company remains engaged in the active search for new opportunities in the plasma space and transplantation, areas that synergize with its current expertise. As new partnerships and acquisitions are considered, Kamada maintains its commitment to delivering competitive products and creating long-term value for its stakeholders.
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Greetings. Welcome to Kamada Limited's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] 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.
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 12 months ended December 31, 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 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, 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?
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 momentum we experienced throughout our business during 2023, which allowed us to achieve our full year guidance. Importantly, we are well positioned for further 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% and EBITDA of $24.1 million, an increase of 35% as compared to the 12 months ended December 31, 2022. We achieved the top and the bottom line growth anticipated in our business during 2023. We continue to effectively leverage the growth drivers in our business, focusing on the significant increase in KEDRAB 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'd 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, KEDRAB, our anti-rabies 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 Kedrion, we fully expect this trend to continue in 2024 and beyond. The substantial market share growth demonstrated by KEDRAB is being driven by Kedrion'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 rabies immunoglobulin available in the U.S. to be clinically studied in children.
In 2023, Kamada generated approximately $32.8 million in revenues from sales of KEDRAB to Kedrion 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 KEDRAB, the amended and extended distribution agreement is a tremendous milestone for Kamada. In fact, this strategic agreement with Kedrion represent the largest commercial agreement since Kamada's inception. Specifically, within the first 4 years of the 8-year term, which began this past January, Kedrion will purchase minimum quantities of KEDRAB with revenues to Kamada of approximately $180 million. The revised financial terms reflect KEDRAB significant U.S. market share and forecasted continued growth throughout the 8-year term as well the potential expansion of KEDRAB 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 explore the U.S. business by allowing us to focus our own internal sales effort on the commercialization of our other specialized FDA-approved immunoglobulin products, primarily in transplant centers when Kedrion continues to promote KEDRAB 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 CYTOGAM and VARIZIG, represent the first time in over a decade that this hyper-immune specialty products are being supported by field-based activity in the U.S. Each of these products made important contribution to our financial results in 2023, and we expect further impact this year. Importantly, in October 2023, results from an investigator-initiated 5-year retrospective study consisting of 325 lung transplant patients evaluating the real-world use of CYTOGAM in combination with antiviral agents for the prevention of CMV disease in high-risk CMV mismatch lung transplant recipients were published by Dr. Fernando Torres, the Clinical Chief, Division of Pulmonary and Critical Care at University of Texas Southwestern Medical Center. And the results were also presented at IDWeek 2023 in Boston Massachusetts. The high-risk mismatch patients of CMV seronegative patients receiving along from a seropositive donor. Dr. Torres concluded that the use of proactive multimodality CMV prophylaxis consisting of antivirals and immune augmentation with CMV immunoglobulin may improve outcomes among high-risk CMV mismatch lung transplant recipients.
We are in the process of sharing these results with physicians and transplantation experts promoting the advantages of CYTOGAM. We have already been notified that 2 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 CYTOGAM Scientific Advisory Board, which was established last year and consists of 8 U.S.-based, already known 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 with future catalysts, enrollment continues in the ongoing pivotal Phase 3 InnovAATe clinical trial for inhaled Alpha-1 Antitrypsin therapy for the treatment of Alpha-1 deficiency of significance. We recently received positive feedback from the FDA in the meeting conducted with the agency. The FDA reconfirmed 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-label extension study, which is expected to be initiated in mid-2024. The Agency also expressed its willingness to potentially accept a p-value smaller than 0.1 alpha level in evaluating InnovAATe 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 InnovAATe study and seek FDA feedback by mid-2024. As a reminder, the European Medicine Agency, the EMA, previously also reconfirmed the overall design of ongoing InnovAATe study and acknowledged the statistically and clinically meaningful improvement in lung function measured by FEV1 demonstrated in our prior Phase 2/3 European studies.
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 candidates. To reiterate what we have said previously, Kamada's investigational inhaled AAT treatment is a noninvasive 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 the leading new innovative Alpha-1 treatment in advanced clinical stage and it will present a substantial opportunity to be a transformational product in the market that is already over $1 billion in annual sales in the U.S. and the EU.
We also continue to be pleased with the progress achieved with Kamada Plasma, our U.S.-based plasma collection company. Our 2021 acquisition of the plasma collection center in 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 hyperimmune plasma collection capacity at our first center and construction is nearly completed at our second plasma collecting center located in Houston, Texas expected to be opened during the second half of this year.
Finally, I would like to note our new logo launched few weeks ago, which if you're currently viewing the webcast, you will hopefully notice it by now. This new logo represent the transformation Kamada's going through as a leading innovative vertically integrated profitable specialty plasma company. With that, I'll now turn the call over to Chaime for a detailed discussion of our financial results for the fourth quarter and the full year 2023.
Chaime, please go ahead.
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 CYTOGAM 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 U.S. 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 product. 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 totaled $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 3 InnovAATe trial.
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 3 InnovAATe 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 liabilities, all of which are related to the acquisition completed in 2021. Revaluation of contingent consideration and the long-term assumed liabilities totaled $1 million during 2023, significantly lower than in 2022. Such a decrease was associated with a temporary reduction of CYTOGAM sales during 2023.
Net income for the fiscal year 2023 was $8.3 million or $0.15 per diluted share as compared to the net loss of $2.3 million or a loss of $0.05 per share recorded in 2022. Adjusted EBITDA for the 12 months ended 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 equivalents 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.
[Operator Instructions] Our first question is from the line of Annabel Samimy with Stifel.
I have a few, actually. So first on CYTOGAM, what would the normalized growth rates 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 holds with the EU authorities and then while we're on that topic, I'd love your thoughts on Sanofi's acquisition of Inhibrx and its implications for the AAT program in the market. And I'll probably get back on a few after this question.
Thanks, Annabel. I'm not sure I understood the last question. Let me start with the first 2, and then if you can just repeat it. So in regards to CYTOGAM, if it wasn't for the short-dated inventory, if I'm looking at end user sales, end user usage 2023 numbers were similar to 2022, meaning that there is around $5 million gap between the 2 years in terms of our sales to the channel to the wholesalers. So this is approximately the difference gapped between the years. Moving into 2024. Of course, the first batch is now available. We expect this to go back to at least where it was in 2022 and even beyond because we do a lot of medical fairs and promotional activities 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 isolate the impact of the short-dated inventory on our sales.
Okay. And then -- and what type of studies are the investigators proposing and how do they plan on extending this market or the [ SAP ] how they think that they can expand the market?
The 2 studies have already been accepted for presentation in 2024 in 2 different medical transplantation related medical conferences. Conferences agendas were, I believe were not yet disclosed. So I cannot give the exact details of those 2 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 the transportation outcome.
Okay. Great. And if we can move over to the AAT program. Or I guess, what are some of the changes you proposed to satisfy or accelerate the program? And is that going to be accepted by the EU as well?
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 that reconfirmed the overall study design, endorse 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 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 comparative and the direction we are evaluating and the agency is willing to potentially accept is agreeing that the key value will be [ 0.1 ]. There will be sufficient to prove efficacy 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 will be the case and then we thought we believe will be the case, then we were able to shorten the study duration due to quicker recruitment.
With that information, we will go back to the EMA to get their concern to that we have the same path forward.
Okay. Great. And then I just wanted to know if you had any comments about the Sanofi acquisition of Inhibrx and their AAT program, would you have any thoughts around that?
Yes. Absolutely. So the Sanofi acquisition of the Inhibrx program, which is a recombinant AAT, we think it's a very important trend, a very important transaction. It puts a lot of focus on us on the efficiency in general. We believe that if its 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 like 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 inhaled, we believe inhaled has significant advantages in general. It's a noninvasive 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 Inhibrx, Sanofi product although has advantages, it's still an IV treatment while we come with inhaled noninvasives, and we come with an efficacy study.
So we believe we have sufficient advantages, significant advantages that -- and actually the market is going to be a highly competitive product. Also the inhaled product because we go directly into the lungs versus IV treatment. We give 1/8 of the dose compared to the current standard of care and approximately 1/5 of the dose compared to the [ Inhibrx ] treatment. So in terms of cost of goods, and potential competitiveness. We also have a significant advantage.
At this time, I'll turn the call over to Brian Ritchie to see if we have any questions from the web.
Just a couple here, Amir and Chaime. First, what got a potential partnership or inhaled AAT look like?
Yes. So the 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 powerhouse like Sanofi, it will be a good move for Kamada to partner the program with a strategic partner that has a 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 a superior product.
Great. And then what -- maybe an update on sort of [ BD ] product acquisition opportunities and what might be available?
Yes. So we are proactively looking for products in the plasma space as well as in transplantation. This is a specialty we are covering, it will be 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 happily do so.
Great. That's all the questions have come in over the web. I ask you to maybe make some closing comments.
Yes. So in closing, we are very pleased with our exceptional performance during '23 and excited about the potential opportunity that I had based on the amended KEDRAB agreement, existing ongoing late stage inhaled Alpha-1 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, 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.
Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, have a wonderful day.