Q1 2020 Earnings Call
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At this time I'll turn the conference over to Bob Yedid, but like I say advisors, Bob you may begin.
Thank you.
Good morning, Oh. This is Bob you need with like side advisors.
Thank you all for participating in today's call.
Joining me from commodities are Amir London, Chief Executive Officer.
I knew or like Chief financial officer role.
Earlier, this morning commodity announced financial results for the first quarter ended March 31st 2020.
You're not received this news release.
Ben Please check the Companys website, www dot Kamada dot com and go to the Investor section.
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 that future result of comedy.
I encourage you to review the company's filings experienced an exchange Commission.
I mean without limitation, the company's forms 20-F, and 6K, which identifies.
Exactly what they may cause actual results or events to differ materially footnote described in the forward looking statements.
Furthermore, the content in this conference call contains time sensitive information and it's accurate only as of the data Thislife broadcast 18 2020.
Kamada undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date is conference call.
That said, it's my pleasure to turn the call over to Amir, London, Chief Executive Officer Amir [noise].
Thank you Bob.
Thanks also to our investors and analysts <unk> interesting Amanda and to put participating in today's call.
I hope you all of keeping state and ads b and be challenging times.
As you know well the ongoing called was 19 global health endemic continues to call the meetings with complications to daily life in business operations.
Well focus on the safety and well being of our employees.
Do you need to find innovative solutions to support the with patients and Paul says.
We are grateful to the health care professionals around the world well selflessly caring for patients on the front lines of this does that make it our thoughts go out to all those who has been affected.
Let's now move onto our strong although results in the first quartile twentytwenty.
I'm pleased to recall that we didn't even though the robust financial and operational rebuilds do the sell through the month of the you.
The first quarter, but the revenue well there would be $3.3 million compared to 26.8 million dollar how well the first quarter of 2019, the presenting an increase of 24%.
These results were driven by 24% you over you increase itself.
Both our proprietary and distributed product.
We're on the profitability standpoint, I would talk a gross profit for the first well to well Twentytwenty was 11.5 million dollar and gross margins, where the 34%.
This compares to 11.2 million dollar overtook was well seat and 42% Biogen is the first quarter 2009 too.
As it relates to the coffee 19th and damage to date opened affecting plant remains operational north back. Some business continuity is then it makes the emergency regulations for Israel in recent months due to defend them a little over based on the most recently.
To that sounds as though a U.S. distribution partners God, if he's got the inventory levels available for distribution in the U.S. and our plan supply for the remainder of either we do not anticipate meaningful supply shortages in the foreseeable future in the U.S market.
Yeah, Okay drop in addition basin caliente available inventory levels and plan supply although distributed product is when we do not anticipate significant supply shortages in the foreseeable future.
Going forward or those surgeon coffee 19 endemic related the NAMIC may affect market demand and production could beach and conditions, we intend to maintain our constant affect your supply plan and we have increased inventory levels of raw material to our suppliers in service providers in order.
To appropriately manage any potential supply disruptions and secure continued manufacturing.
With all of these said we're maintaining our previously provided full you twentytwenty revenue guidance of between 132 million goal out in $137 million.
As we move forward interest coffee 19 environment.
Turning to highlight the to maintain an extremely strong balance sheet. In fact, we continue to grow our cash position, which increased to 96.4 million dollar as of March 31st went to 20.
Significant to increase as compared to the 73.9 billion dollar at the end of 2019.
These include the 25 million dollar private placement, we closed earlier this year, the feeney opportunity funds, the leading Israeli private equity investor, So which is our loves it just shown.
I'd now like to discuss with plasma derived hyper immune I did you therapy for coffee 19 development program.
As previously reported during the first quartile.
Evan to quickly focus so any thoughts on the development and manufacturing of the product, which leverages our propriety I did you thoughtful neurology.
As a potential treatment, so called like being patients.
We're pleased to report today between the Q adequate quantities of coffee 19 convalescent plasma for Israeli bonus. This has enabled us to me she has been affected the product.
Which is expected to be available within the next six weeks, but the end of the second quartile for compassionate use treatment in Israel.
Currently we have ongoing discussions easily emulates with regards to potentially initiation of related clinical trials.
In addition, we're excited to announce a global global lessons Cadreon bio pharma, which will allow us to develop the product more rapidly and broaden our international reach.
Based on the agreement Cajon will provide plasma collected as its CAD the plasma center from donors, who have recovered from the virus and upon receipt of regulatory approvals will be responsible for commercialization of the product in the U.S. Europe, Australia, and South Korea, we.
Oh responsible for further development animal fetching utilizing our proprietary I did you platform technology.
Well its clinical developments with Cadreon suppose regulatory submissions.
We also distribution rights in all territories outside of those are the CAD beyond responsibility.
The initial probably focus of the calibration we'd be to provide the product the treatment to patients in Italy, Israel and the U.S. through various clinical programs and then spend development and commercialization efforts with this than markets.
We believe we haven't important opportunity to make significant the impact so covered 90 patients in need by leveraging both our strong walking lessons you 'cause cadreon and the unique capabilities of both companies.
We look forward to providing you with further updates as warranted or this important development program over the coming weeks.
I would now like to spend little more time discussing significant commercial progress we are making we though and you read these I did you product.
In the U.S. CAD market share increased from approximately 10% in 2018 to approximately 20% in 2018.
In Canada, where the product known under the brand name come Rob comedy and local partner for needs, though the well established vaccine come to me is commencing probably distribution following the recently awarded supply tender.
Moreover.
Camera sales in Latin America commenced lastly, you a growing through the 2019 to 2021 10 due from the Pan American Health organization BPO specialized international Health agency for the region.
Moving on I would like to also provide an update on the continent affection program, we've announced late last year.
As you May recall in December 2018, we entered into a binding term sheet with an undisclosed partner so consequent affecting have been S.J. approved commercialized hyper immune globulin product.
The problem is progressing according to the plan and we are working on the Tectrol. So the product to our manufacturing facility.
Commercial supply over the 12 year contract is expected to commence in early 2023, following the completion of the required tech transfer.
Based on current markets a volume new product is estimated to add approximately eight to 10 million dollar in annual revenues to come about its estimated gross level similar to average gross margin or the propriety products segment.
Disagreements supports our strategy to leverage our experience and available in the first capacity it though as we have proven affects that facility to receive the production of additional plasma derived products. Following the planned transition of glass him in affecting the case during 2021.
Moving on let's turn to the current status.
Of our innovate phase three clinical program for our proprietary inhaled 80 for the treatment of Alpha one deficiency.
You will recall the first patient who the phase three trial in Euro was randomize the fourth quarter last deal.
We're pleased with the rate of enrollment into the study through February 2020 hour Israel in March due to the fact is a coffee 19 pandemic on as the systems recruitment into the innovate study was temporarily halted.
Well the evolving healthcare environment makes it difficult to know when recruitment. We review our current expectation is that this will occur during the third quarter of this even pending appropriate conditions at clinical trial sites.
As a reminder, these studies being led by Dr. Yang Stone Department of Pulmonology member of the European reference network lung at the Leiden University Medical center in the Netherlands.
Innovate the randomized double blind placebo controlled pivotal phase three trial designed to assess the efficacy and safety will be held 80 patients with alpha one deficiency and moderate lung disease.
To be 250 patients will be randomized one to one to see you being held a team. It did those of 80 milligram once daily or placebo over two years of treatment.
The primary endpoint of the initially tried lung function measured by SPV one.
Secondary endpoints include changes like density measured by city skin is whereas other parameters of the disability such as additional luminary functions. This is a basins rate and six minute walk test.
In connection with the innovate study. We are also happy to provide an update that we obtain FDA acceptance for the protocol design of a 30 patient sub study, which is required with the agency designed to evaluate the effect although in held a team on the pharma.
Kinetics of Ivy 18, and collect safety and Immunogenicity data, including the effect of anti drug antibody on 80 levels in plasma.
Initiation of this up study is currently been delayed due to the funding.
With that I'll now ask Jaime to review our financial results I mean.
Thank you and beer and good day everyone.
Some of your mentioned earlier.
We're very pleased with our strong financial performance during the first quarter ended March 31st Twentytwenty.
Especially in light of the operating challenges posed by the covered 19 pandemic.
We grew the topline significantly with meaningful contributions from brought the proprietary and distribution product segments.
Total revenue was $33.3 million in the first quarter of Twentytwenty compare to the $26.8 million recorded in the first quarter 2090.
Total revenues were comprised of $25.3 million generated by the proprietary product segment and $8 million from the distribution segment, each representing a 24% increase compared to the prior year period.
Gross profits was 11.5 million in the first quarter Twentytwenty, a 2% increase from the 11.2 million reported in the first quarter of 2090.
Gross margin in the first quarter Twentytwenty.
Were 34% compared to 42% margin in the first quarter 2019.
This dress this difference.
Was driven by different product sales mix year over year, specifically during the first quarter of this year, our proprietary product sales weighted more towards glassia as compared to Kedra.
Well in the first quarter of 2019, the Sharon Kedra, our product with the highest margin significantly larger.
The different mix is a result of inventory management by our distributors and timing of our product shipments similar influences also affected distribution segment profitability this past quarter.
Operating expenses, including research and development sales and marketing DNA as well as other expenses totaled $6.6 million in the first quarter of Twentytwenty as compared to 6 million in the first quarter of 2000 of 29 team.
This increase which we guide to the market's toward was for primarily driven by increased research and development expenses, specifically related to the initiation of the company's pivotal phase three innovate clinical trial, which was discussed earlier brand here.
Moving on.
Net income was $5.2 million or 12 cents per share in the first quarter of twentytwenty as compared to net income of $4.9 million or.
12 cents per share in the first quarter 2019.
During the first quarter Twentytwenty.
Cash used in operating activities was $1.9 million operating cash flows were mainly affected by the timing of payments due to suppliers and services providers, mainly on account of inventories acquired during recent months, which are expected to be sold later this year.
At which point, we will recognize the cash flow generated by operating activities.
We maintained a strong balance sheet as of March 31st Twentytwenty. The company had cash cash equivalents in short term investments of $96.4 million compared to $73.9 million at December 31st 2019.
This includes the 25 million private placement close with FIMI opportunity fund in February Twentytwenty.
Overall, working capital increased by approximately $30 million during the quarter, which represents the secure private placement and quarterly earnings.
I would like to reiterate a point raised by a mere earlier well future development of Cobot 19 pandemic may have an effect on market demand raw material and employees availability.
As well as other operational factors based on action.
Taken thus far and our current available forecasts, we're maintaining our previously provided full year twentytwenty revenue guidance of between $132 million and $137 million.
That concludes our prepared remarks, we will now open the call for questions operator.
Thank you at this time will now be conducting the question and answer session. If you'd like to ask a question today. Please press star one from your telephone keypad and a confirmation total indicate your line is in the question Q.
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One moment please poll for questions.
Thank you.
First question is from the line of Raj Denhoy with Jefferies. Please proceed with your question.
Hi, good morning.
Well, just maybe I could ask a couple of clarification questions on that the hyper immune products, you're developing for cobot from the press release. It sounds like you have kind of parallel programs, you're doing one for Israel, where you've actually sourced plasma yourself, you're developing a product.
We'll start to market in Israel by the end in second quarter, but then you also have the agreement with.
With that Cadreon and so I'm curious how those two pads.
Worked side by side, Rick your direction the same product. So maybe just some clarification be helpful.
Thank you as Amir this so not too different program. This is one program that was initiated by comment though.
Soon after the pandemic you know kind of broke.
And is throughout the process of us developing the product. We have grow then the program and signed the agreement with cadre on which allows us to have greater access to plasma.
Yeah outside of Israel.
And all the global collaboration that we own leveraging and building on the successful partnership we've developed with cadre on over the last few years in regard to Kedra.
So this is one program.
First available products that will be available in a matter of no no more than six weeks will be for these really market because it is based on the Israeli plasma.
But as we get plasma receive plasma from a cadre on you know the product will be able to affected also so x. Israel territories, so again while product.
Is being developed by us in collaboration with Cadreon.
And is there any anything you can provide in terms of the timing on the international product. So that the a product that will be developed for the markets outside of Israel.
No no not yet so things up in the works and progressing once we have updates.
In regards to the global and progress we will definitely show to the public I think it's highly encouraging and we're very excited on them rapid pace, we were able to develop the product and to have it available as a final products for throughput.
Because you've already in less than six weeks.
That's helpful. Maybe just one last one on this there there is this a global consortium.
Being led by Takeda as I'm sure, you're where how does your program [noise].
Sort of drive with what's happening on that front.
Will you eventually joined will will they be separate programs have you really matching this plays out.
Currently it is separate programs. There's also a program developed by our the plasma companies, which are not part of the consulting we are happy for all the plasma companies I believe that all major plasma companies globally are actively involved in the developed.
Government over an anti coffee high premium product I think its emphasizes the importance of the plasma industry in general and now in this specific pandemic in finding the different cues for the disease, most likely the fastest product with the market will be.
The plasma derived hyper immune oncology. So we're very happy for the progress and we're moving fast very fast.
And we encourage all other public companies to also move fast and develop sufficient quantities that will help.
No the pandemic globally.
Understood and I apologize to aspens on this as well so I appreciate it's probably not the main reason that you're doing this but.
How do you think about the economic impact to the company from this product and the second question to that is how do you imagine it plays out on an annual basis do you view this as being sort of a seasonal product few going forward and how do we think about the economic impact.
I think it's a little bit premature rods to to be able to give educated answers to those questions. We'll definitely working also on the economics of it in terms of what the this is what does it mean in terms overcapacity, how do we scale up reduction how those secure sufficient levels.
Plasma and that was like commencing a part of them calibration, we cadre on but I think it'd be premature. It's no. We don't know I think no one really knows yet.
Now how these coffee pandemic is going to evolve in terms of 2021 2022 moving forward, we will be equipped and we will have the capacity to support it as needed moving forward.
Understood. Thank you.
Thank you.
My question is from the line of Kay Mackay with Chardan capital markets. This is users.
[noise] Ah, yes, just a again some follow ups on your hyper immune.
For covered my team.
So.
With respect to making it available in Israel do you have a.
Clinical trial design that you propose a with the Israeli Ministry of health.
Hi, guys, yes. So.
Impart due to having the product available for compassionate use.
I can mention within the next six weeks in Israel. We're also working very closely with these early ministry of health on the protocol in the design of a clinical trial that we are planning to initiate and soon so these are two kind of panel avenues that we are taking.
Developing the product manufacturing the product having it available.
Very soon and then using it for compassionate use.
For the patient COPD patients and treating using it as part of clinical trials.
That we are progressing in the development.
In the clinical trial are you anticipating.
Testing different dose levels of the product.
Most likely it's different dose level and its different patient populations. So the two different things that are in discussion with the defense regulators.
Starting with the Israeli minister of helps.
And then would that also include your clinical trial would also include a cohort.
Who might be receiving the product on a prophylactic basis 'cause.
The passive immunity typically seems to be more effective.
As a prophylactic, but at the same time.
Do you.
With.
The to evaluate that so is that part of the plant [noise].
Like I mentioned, when I failed to different patient populations. So prophylactic treatment is one of the options of being in discussion.
So there is an option of treating the moderates patients a view patients prophylactic treatment all of it is currently.
Being assessed.
And once we have a defined a protocol will be happy to show to the public.
But definitely the significant opportunities and like I mentioned.
In my previous question in the previous answer we're very happy on the pace and the speed that we were able to develop the product and have it available for treatment as well as for clinical trials.
Okay. So.
Do you.
Is it fair to expect that you would have a [noise].
Confirmation of what the trial by it looks like before the end of an end of this quarter than.
Either we filed the quarter all into Q3, I think that the timeframe the timelines to have the design of the clinical trial and fully defined.
Okay, and then with respect to the collaboration with cadre on or is there certain geographies, where you feel like [noise].
You may be able to also initiated clinical study with the product that would be you know collects a topical us [noise].
Yes, we did not disclose it yet so I cannot show this information, but you know the the usual suspects.
All the different territories, where we will most likely focus on.
And as Weve mentioned in during the call. Our primary focus currently is on Eataly Israel in the U.S.
But the agreement that was signed with Cadreon is a global agreement.
I don't have the computer comments will rise in the U.S., Europe, Australia, and South Korea, While Canada has rights in all other territory for China, we are going to share the license the territory in terms of commercialization.
Okay, a very good jobs and very encouraging developments there so thanks.
Thank you very much.
Thank you.
At this time if reached into very question answer session and I'll hand, the call back to Amir London for closing remarks.
Thank you.
In summary, we are pleased with how our business performed in first quarter of Twentytwenty, especially at the global public 19 can damage with emerging.
We have an extremely strong balance sheet and the fundamentals of a business are intact.
With quickly focus on my thoughts on developing and I did you put the for the treatment of covered 19, which is expected to be available within the next six weeks for capacity you treatment in Israel.
And if expanded our development efforts with strategic global collaboration with Cadreon, bio pharma, which will allow us to more rapidly develop the product and broaden our international reach.
Overall, we continue to drive strategic growth from our core business unit, Glassia Khadra and our distributed product in Israel.
We're also very excited about the potential of our innovate pivotal phase three trial. So unique inhaled 80 program for which we look forward to view enrollment shortly.
We remain highly confident in comment as long term prospects for success.
Thank you for joining us on today's call and we look forward to providing you with further updates on our progress in the coming months. We hope you all stay healthy and safe. Thank you very much.
Thank you all this will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.