Kamada Ltd. (KMDA) Earnings Call Transcript & Summary

Thank you, everyone, for joining us for the Global Plasma Summit here hosted by Jefferies. Up next, we're happy to introduce Amir London, CEO of Kamada. We have a 30-minute session. Amir will have a presentation for the entirety of the 30 minutes. If we have a few minutes toward the end, we can go to Q&A. Amir, thank you for joining us.

Of course. Thank you, Anthony, and thank you, all of you for joining us today. As Anthony mentioned, I will be presenting Kamada and I'm very honored for this invitation by Jefferies for the first Plasma Summit. Thank you very much for the opportunity. So Kamada is a global specialty plasma-derived biopharmaceutical company. We are doing trading on the NASDAQ and Tel Aviv Exchange. 2 FDA approved product, the first one, GLASSIA in 2010; second one, KEDRRAB of 2017, and I will go through this portfolio in a minute. In addition, we, of course, have products which are under clinical development. And in Israel, we are an exclusive distributor of 18 different companies that we represent them in the Israeli market, providing A2Z commercial services. The company has become profitable since 2017. You see on the chart here how we've been growing our business over the years compared to 2016, almost doubling our revenue. In terms of our overall financials, as I said, since 2017, the company became profitable with adjusted EBITDA of $11 million. And since then, $24 million, $28 million and $25 million in the year, which just ended. This slide is very -- the most important slide of my presentation. Basically, it gives an overview of the multiple growth channels that are ahead of us that we're working on. I will go through each one of that throughout the presentation, and then we'll go back to that slide at the end of the presentation as a summary to show how we've been able, over the last few years, in moving forward to develop new exciting opportunities for Kamada to grow in the next years to come. So as mentioned, the first product approved by FDA 2010 is an Alpha-1 antitrypsin liquid AAT product. The product was approved and then we signed a commercialization agreement back then it was with Baxter. Then it moved to Shire -- Baxalta, Shire and 2 years ago to Takeda. Our product last year was the first, and I think recently, the only liquid ready-to-infuse Alpha-1 product on the market. This, of course, gave us a significant competitive advantage. In 2016, we also got self infusion approved by the FDA and the self infusion allows patients which are independent enough to be administrating the treatment at the comfort of their home without the need to go to the clinic or to have a nurse coming to their home. This year, 2021, we are changing structure of the agreement with Takeda. Until now, for the last 11 years, we've been making the product, manufacturing it in our Israeli plant, and then selling it to Takeda in a transfer price, and they have been selling it in the U.S. market. This year is changing Takeda has -- is in the process of completing their own manufacturing site. And once approved, expected later this year, we will be transitioning into a royalty-based agreement. And the agreement will be continuing until 2040, meaning we have around 18 years of a long scale of royalties ahead of us. The royalties will be 12% until August of 2025 and then after 6% until the end of the agreement. Projected royalties based on GLASSIA sales in the market and expected growth is around $10 million to $20 million per year for the next 18 years. GLASSIA has also available and distributed in international market, currently, primarily in Israel, Argentina, Brazil and Russia. It's under registration in additional countries, primarily in Latin America, and we are working with a network of successful distributors in those countries to promote and sell the product. In that Alpha-1 space, alpha deficiency space, we are also developing the next-generation product, which is an Inhaled AAT. So having the liquid product allowed us to be the first and only company to develop an nebulizing Inhaled AAT, moving from the weekly infusion to a daily inhalation session. If you're looking on the main advantages of the Inhaled AAT compared to the current standard of care, which is the IV, we definitely look at it as a game changer. As you may know, the Alpha-1 market currently is over $1 billion market, around $800 million in the U.S. and $200 million in Europe. The market is growing around 8% a year. So we are expecting it to be around $1.8 billion, by 2025. And why I mentioned 2025 because this is the year that we're expecting health program in a product to be approved. So we are in a Phase III study, which started in late 2019. When we compare Inhaled to the IV, it has better cost effectiveness because we need only 1/8 of actual AAT quantity as dosing per patient. We've proven in the Phase II studies that was done in the U.S. and the Phase II/III study that was done in Europe, that this is the most effective way of delivering therapeutic amounts of AAT into the lungs. And I remind you all that the Alpha-1 deficiency manifests as a lung disease. So the lung is the target organ. So when you give it systematically, IV, only a small portion of the AAT gets into the lungs. But when you give it by the inhaler, the inhaled way of administration, majority of the AAT gets into the target organ. We've demonstrated statistically significant, slower decline of FEV1 lung function in a placebo-controlled study that we have done in Europe, and we've demonstrated acceptable tolerability and safety profile in mild-to-moderate patients. All of this is part of the design of a Phase III pivotal study, which is under an IND and a CTA. So we are able to harmonize a protocol between the FDA and the European authorities and initiate the Phase III study, as I mentioned, late 2019. There is, of course, a very strong support on the Alpha-1 community, patients and KOLs for being held route administration because it is expected to be a product of better ease of use and quality of life, having a patient sitting at the comfort of their home and having a 10-minute simulation session per day instead of a need to go to the clinic or have to -- a nurse coming to their home. In terms of competition in the clinical stage, so our program is the most advanced innovative Alpha-1 treatment in advanced clinical stage, a pivotal Phase III study, and we have an open designation, both in the U.S. and the EU, which will give us a the needed protection upon approval after a potential successful study, the one that we are currently running. Moving on from the Alpha-1 is Phase II of our next portfolio and our second platform, technology platform, which is the advanced immunoglobulin manufacturing. In that space, we have the anti-rabies immunoglobulin product, which was approved in 2017. This product is in collaboration with Kedrion, who are commercializing it in the U.S. markets. As you may know, the overall U.S. anti-rabies IgG market is around $150 million. Product launched in 2018, we had a 10% market share back day than 2019. It went up to 20% in 2020, already 23%. The 2020 sales have been affected by the COVID situation in the U.S. Less people were out in the nature, traveling, and this is, of course, affected a number of people that were exposed to potentially the pandemia, and as a result, the sales of the product have been lowered than previous year. We expect that as the COVID situation in the U.S. will improve, then the product sales and the market share will continue to grow. This year -- sorry, last year, 2020, we had positive results from a post-marketing commitment trial that we have done that have continued safety of casual in pediatric patients. The results were filed with the FDA, and we expect approval this year to add this to the label of the product. This will allow us to be the only product in the U.S. with a pediatric indication on labor. We've been selling the product out of the U.S. for many years. We've been leveraging the U.S. success to win additional tenders in different countries and the international markets. We have a kind of approval since 2018, and we launched the product in Canada in 2020. We're a key supplier of the WHO, primarily in the Pan American territory, mainly in Brazil. The anti-rabies product is part of a bigger portfolio of immunoglobulins. We have also an Anti-D product for -- to indication, ITP, administrated as IV product and for pregnant women as an IM product. In Israel, we have a partnership with Israeli Ministry of Health, where we manufacture 2 equine products as anti-snake venom for the local Israeli snakes. Recently, we've announced that we have acquired an FDA licensed plasma collection center, focused on hyper-immune plasma for bladder plasma research in Texas in the U.S. and we are planning to invest in growing that center and in leveraging, it's actually approval to open additional collection centers across the U.S. So this basically represents our entry into the U.S. plasma collection market for the first time. It also advances our strategic objective to evolve into a fully integrated specialty plasma company. So we definitely see this step as a significant strategic step for Kamada, and we will continue updating on the progress we make in that regard. Having FDA-approved IgG and advanced platform allowed us also when the COVID pandemic started a year ago, to move very fast, focus our efforts and resources on the development of an anti-COVID immunoglobulin product using convalescent plasma. So we were the first plasma company to actually complete the manufacturing of an anti-COVID IgG. We are the first to initiate the clinical trial, that was initiated already in August of last year. And in September, we've announced interim results of that study. The results were highly promising out of the 12 patients that were part of the first cohort of that study, we have observed since symptoms improvement in 11 out of the 12 patients within 24 to 48 hours of the treatment. Only 11 patients we discharge on the hospital within a median of 4.5 days from treatment. With that data, we have negotiated and signed an agreement with the Israeli Ministry of Health for the supply of initial quantity to treat 500 patients in Israel, hospital patients suffering from pneumonia caused by COVID within 10 days from symptoms start. We have upgraded our capacity. We've moved into greater quantities of manufacturing. And we started the supply of this product to Israeli Ministry as of end of 2020, beginning of 2021. This is a $3.4 million in revenue for Kamada, and we are increasing our capacity with anticipation to supply additional products throughout this year to the Israeli government, but we're also offering it to other international markets and other ministries of health. We are also leveraging our FDA-approved plant to offer contract manufacturing services. In that regard, we have signed in end of 2019, first of such agreements for the manufacturing of hyper-immune globulin product, similar in its technology to our anti-rabies and recent anti-COVID product, that a 12-year contract manufacturing agreement expected to yield approximately $8 million to $10 million in annual revenues to Kamada per year throughout the course of the agreement. We're offering similar services to other plasma companies. As I mentioned at the beginning of the presentation, in addition to our own proprietary products, we're also a distributor in the Israeli market. We are currently representing over 18 international pharmaceutical companies. Last year, 2020, sales were around $30 million of that segment. And recently, over the last 15 months, we've signed additional 3 agreements with international companies, to commercialize their portfolio of biosimilar products. The first of such product is expected to be launched in 2022. And this overall portfolio is expected to yield additional $25 million to $35 million annually to Kamada. You see here at the bottom, the logos of those companies, some of them are still confidential among these biosimilar companies. So going back to the slide that I showed at the beginning, which I said that basically emphasizes the multiple significant growth channels that Kamada is developing. So at the U.S. sales, which have been growing until the COVID situation, expected to grow $150 million market, which we expect to take a significant portion of it. With the Israel distribution segment, which is growing and will grow even faster with a biosimilar portfolio, first of the product to be launched in 2022, expected to add between $25 million to $35 million in addition to the $30 million current business. We have the GLASSIA U.S. royalties to be paid by Takeda once we move into the royalty agreement, and this will start in 2022. We are the first of the plasma-derived CMO services, as I mentioned, that was signed and will kick in soon and we're offering our experience, expertise and FDA-approved technologies to additional plasma-derived companies. We have the IgG for the COVID-19, which we've been the first company to sign a commercial agreement, and we expect to grow that business this year and in the next few years as pandemia continues. We are registering GLASSIA in our IgG portfolio in additional markets outside the U.S., and this business has been growing. And we expect it to continue growing in the years to come. We have been held AAT as a major game changer in the Alpha-1 deficiency space. And we are active and proactive in looking for additional new business development initiatives, including M&As, as the first one that we've done with the acquisition of the plasma collection center in Texas, and the development of Kamada Plasma. So we are in the process with a strategic plan to evolve into a fully integrated specialty plasma company, with over $100 million in the bank. We expect to utilize and to leverage those resources to continue our M&A opportunities in the near future. With that said, I will thank you now for taking part in this presentation, and I will open it for questions which you may hold.

Absolutely. Thank you, Amir, and we have a few moments left, so we could jump into the Q&A segment of the presentation. And so maybe a good place to start, Amir, would be to sort of look back in 2020 and as you look into 2021, there were certainly impacts to both the distributed side of the business as well as proprietary products. And so as you look at 2021 how do you quantify the overall impact to the business from COVID? And how do you see that playing out in 2021? Do you recapture a fair portion of that business? Or do you still have lingering headwinds at least through the first half of this year?

Thanks, Anthony, for the question. So 2020 was definitely a very interesting and challenging year. We met our projection for the year that we gave at the beginning of the year, and we had revenues of $133 million, $25 million EBITDA. So this was, in terms of the financials, this was definitely a good year for Kamada, adding to the fact that in parallel to meeting those objectives, we were able also to develop the anti-COVID IgG and to sign a supply agreement with Israeli Ministry of Health and to conduct the first inter trial and then to move into additional clinical trials that are now being managed by the Israeli government. I think that was a very significant move for Kamada in all aspects. In terms of 2021, the transition of GLASSIA from the -- us making the product and selling it to Takeda, to Takeda manufacturing the product and us moving into royalties, is going to lower our revenues and profitability for this year. But as you've seen, you and the audience, we have multiple growth channels ahead of us. We've been highly focused and we've been investing in generating new channels over the last few years, and we will continue walking in that route in the direction in the years to come. We didn't give a projection for this year, a target projection because of the COVID situation, as I mentioned, especially the KamRAB situation in the U.S. because the COVID has been affecting us. So we will need to wait and see when the pandemia situation is slowing down, improving, especially in the U.S. before we can start seeing the growth again this year.

And a couple in there. One would be on the co-development agreement with Kedrion as it relates to hyper-immune for SARS-CoV-2. Just as we look at 2021, what clinical highlights do you expect? And then in terms of the orders in Israel, that certainly expanded rapidly after the initial agreement was signed with Israeli Ministry of Health. How do you see that playing out specifically as well?

So currently, the way that this treatment is being managed in Israel, in the Israeli Ministry of Health is basically opened kind of a clinical trial, sponsored by the ministry, managed by the ministry. And we are supplying the product to the ministry, and they're using it under this umbrella clinical trial sponsored by them. In addition, there is something similar to emergency use authorization. It's not exactly the same term in Israel. It's more like a name patient basis for hospitals and patients, which are not part of the clinical trial. So the situation in Israel is that patients that need to be treated with this treatment, that meet the inclusion criteria are being treated. As mentioned, we are growing our capacity of the product. We have sufficient supply of the convalescent plasma through our strategic agreement relationship with Kedrion. Kedrion through the subsidiary plasma are collecting high titer plasma in the U.S., and this is being supplied to us. And we use this plasma in order to make the product, not only for the Israeli market, but it's available for international market, as I mentioned earlier.

Maybe transition to plasma collection. Beaumont, Texas, congratulations on that agreement. What should we be expecting as it relates to, a, expansion of that facility near-term, and then broader, the expectations for Kamada in its ambitions on the collection side in the U.S.? How does it expand? Does it build centers? Does it purchase more centers, et cetera?

Right. So we try to leverage the license to open additional centers. Our current focus is on hyper-immune plasma for our needs. So with our international network and our expected growth of the hyper-immune portfolio and our strategic venue to become a fully integrated specialty plasma company, we are going to use this plasma for our needs. It will also improve our cost of goods, which will allow us a better competitive edge in the different markets. And yes, we definitely plan on leveraging that license and that center to open additional centers in the near future.

Is there an estimate? Ultimately, how large do you think Kamada's center base will be over time? Or is it a little bit too soon?

It's a little bit too soon. We have our internal plans. We did not make it publicly available. But our goal is to become much more independent in terms of sourcing our plasma for our growth expectation growth plans and needs in the years to come.

On the GLASSIA transition agreement with Takeda, it certainly will open up a fair amount of manufacturing capacity in Israel. Is there a way to quantify the amount that's opening up? And then, of course, you mentioned one of the initiatives is the CDMO service. And so when we think about that piece of the business, in particular, it sounds like there's an agreement in the works. What is the capacity to bring in agreements, CDMO agreements as the transition is executed?

So we have additional capacity that we can make, and we want to make it development for additional CMO agreement. But in parallel to that, we are growing other parts of the business, including the IgG immunoglobulin portfolio outside of the U.S. market. KEDRAB is expected to grow in the year to come. We are growing sales outside of the U.S. We are manufacturing the anti-COVID IgG. And we are, of course, in the transfer of that first CMO business. So we are building additional -- well, not building, bringing additional products, and we are growing our existing markets, which will compensate for the transition of the GLASSIA product to Takeda. So moving to the royalty phase has its advantages, but the fact that we are going to have 18 years of royalty ahead of us and we are looking forward to utilize this available capacity in order to basically benefit from both worlds to have highly utilized profitable plant and to have the royalties which are -- will be paid by Takeda. And if you add to that, the plasma collection business in the U.S. and the distribution business in Israel, which is almost independent from our plants, all of this gives Kamada very solid business from multiple channels in the years to come. So if I go back, I don't know, 3 years or 2018, from a company that was primarily focused or based on 1 product to 1 partner to 1 territory, last Takeda to best, Kamada is opening much broadened branches that we are developing in order to grow our business in the years to come.

A couple. We have a few moments left. So I want to touch on 2 topics. One would be the biosimilar portfolio, and then we could discuss a bit on GLASSIA inhaled. Maybe to start there on inhalable, the INNOVATE trial, Phase III in Europe, and then again, the U.S. inhaled program, just quick updates on how you think those 2 trials will play out in '21 and '22?

Yes. So the pivotal factory study and under IND and the CTA after we're able to harmonize a protocol between the 2 agencies was initiated end of 2019. We continue to recruit patients during 2020. The overall pace of that study slowed down because of the pandemia, primarily in Europe, where we are focused on the recruitment. And we are looking forward for the situation to improve before we open additional sites. We're happy that we had no dropouts during the pandemia. All patients were already reputed continued with treatment. This talks about in the benefits of having a home treatment, which is an Inhaled AAT without the need to go to the clinic I think the pandemia kind of proven the benefits of the home treatment, like the one that we are offering. As we mentioned on our last investment call, we are proactively looking for potential strategic partnerships in relate to the health program. So we are not ruling out any of those opportunities. And as the pandemia improves, we will kind of speed up the recruitment into the study.

And maybe shift to the biosimilar portfolio, lots of announcements in 2020. Alvotech in particular, for 6 products and then 3 additional products with undisclosed partners. On Alvotech, can you give us an update on generic Forteo, timing for that launch? And then maybe overall, how the $25 million to $30 million peak sales target, how do we -- should we expect that to play out in terms of progression?

Yes. So as you said the first product is going to be launched 2022 at the Forteo product. So it was already submitted to the Israeli this Ministry of Health. We expect approval even late this year and launch it soon after that. But with the first product of the 9 product 6 coming from Alvotech and 3 from the additional to undisclosed partners. Answering your second question, we expect this 25 to 30 -- $25 million to $35 million revenue to ramp up over time, and this will be the kind of the peak sales if I want to give some type of estimation, 2025, I think, will be a good year to expect this peak sales, but it would accumulate over time from $5 million to $10 million to $15 million and $20 million and above. So we are going to see the impact of this portfolio starting already in 2022, building up over the following 4 to 5 years.

With that, Amir, we are at the bottom of our time together, we want to thank you for participating this year. We wish you well. Stay healthy, and we'll check in soon.

Thank you, Anthony. Thank you. All of you stay healthy. Bye-bye.

Thank you.